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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934. For the fiscal year ended July 31, 2002; or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from ___________ to
____________.
Commission file number: 000-26326
PROFESSIONAL VETERINARY PRODUCTS, LTD.
(Exact name of Registrant as specified in its charter)
Nebraska 5047 37-1119387
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
Incorporation or organization) Classification Code Number) Identification No.)
10077 South 134th Street
Omaha, Nebraska 68138
(402) 331-4440
(Address and telephone number of Registrant's principal executive offices)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the proceeding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes |X| No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations S-K (ss. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|
As of September 30, 2002, the aggregate market value of the voting and
non-voting Common Stock held by non-affiliates of the Registrant was $5,003,000.
Shares of Common Stock held by each executive officer and director of the
Registrant have been excluded in that such persons may be deemed to be
affiliates of the Registrant. This determination of affiliate status is not
necessarily a conclusive determination for other purposes. As of September 30,
2002, 1,691 shares of the Registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Registrant's 2002 Annual
Meeting of Stockholders to be filed within 120 days of the fiscal year ended
July 31, 2002 are incorporated by reference in Items 10, 11, 12 and 13 of Part
III of this Annual Report on Form 10-K.
PROFESSIONAL VETERINARY PRODUCTS, LTD.
INDEX TO 10-K FOR THE ANNUAL
PERIOD ENDED JULY 31, 2002
PART I
ITEM 1. BUSINESS ............................................ 1
ITEM 2. PROPERTIES .......................................... 4
ITEM 3. LEGAL PROCEEDINGS ................................... 4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . 4
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS ................................. 4
ITEM 6. SELECTED FINANCIAL DATA ............................. 5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION .................. 7
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK ................................................ 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......... 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND
FINANCIAL DISCLOSURE ................................ 11
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT ...... 12
ITEM 11. EXECUTIVE COMPENSATION .............................. 12
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT .......................................... 12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...... 13
PART IV
ITEM 14. FINANCIAL STATEMENT SCHEDULES ....................... 13
EXHIBITS REPORTS ON FORM 8-K ........................ II-1
REPORTS ON FORM 8-K ................................. II-2
SIGNATURES ...................................................... II-2
PART I
ITEM 1. BUSINESS
The Company is a leading wholesale distributor of animal health products to
practicing veterinarians. We also offer a broad array of prescription,
non-prescription and sundry items to assist veterinarians in their practice. The
Company does not sell pet foods. A small quantity of feed additive type products
are sold by the Company.
The Company distributes approximately 18,000 different items including
biologicals, pharmaceuticals, parasiticides, instruments and equipment.
Routinely some 11,000 items are inventoried for immediate shipment. The balance
of items are either drop-shipped from the manufacturer to the customer or are
special order items.
As of July 31, 2002, the Company had 1,544 shareholder veterinary clinics.
These shareholders are principally located from the Rocky Mountains to the
Atlantic Seaboard with some presence in the South.
Due to the geographical location of the majority of its shareholders,
nearly 65% of the Company's gross sales are related to products used for the
treatment and/or prevention of diseases in food animals. The balance of product
sales are for the treatment and/or prevention of diseases in companion animals
and equine.
The Company primarily sells branded products as marketed by the major
animal health manufacturers and suppliers. The Company does not currently
private label any products, but would consider a private label product agreement
if there was a decisive competitive advantage for doing such.
The Company's business strategy is to be the leading supplier of animal
health products to veterinary clinics by offering a complete assortment of items
at competitive prices which are supported by superior levels of customer
service. The Company believes that this strategy provides it with a competitive
advantage by combining the broad product selection with everyday low prices and
support from very efficient operations. The shareholder veterinary clinics are
able to lower their product acquisition costs which both increases profitability
and gives them a competitive market advantage.
The Company has heavily invested in electronic information systems to
maximize efficiencies. All phases of the transactional process are
electronically driven. The Company believes this advanced electronic technology
will assist in earlier adoption of electronic commerce through the internet by
both its customers and suppliers.
Value-Added Services
The Company offers its customers and suppliers a comprehensive menu of
value-added services. These services allow individual customers various
selections based on their individual needs. The Company manages a database of
all transactions so that its customers may maximize their participation in
promotions frequently offered by suppliers. The customer is periodically
apprised, either by phone or mailings, of their level of participation in these
promotions. This promotional tracking service gives the customer the option to
maximize their participation in a promotion which can ultimately increase their
profitability and allow them to more effectively compete in certain markets.
The Company has developed a multi-day inventory management and purchasing
techniques seminar for its customers. This seminar is held at the Company's
headquarters. The customer is trained to better use the Company's resources and
also be increasingly efficient in managing their product and inventory
activities.
The Company has Electronic Data Interchange (EDI) capability which provides
the supplier with product sales and movement. The supplier is able to monitor
sales activities, advertising effectiveness and market trends in an efficient
manner. The Company also assists the manufacturer in the design of effective
promotions. The historical transactional database and the promotional tracking
service are unique tools to assist the manufacturer in tailoring effective
promotions.
Rebates to Shareholders
The Company and its shareholders are in a contractual relationship
evidenced in the Company's Articles of Incorporation which requires that all
sales of Company products to Company shareholders be at no more than 5% over the
cost of the Company as determined by a certified public accountant. Based on
this requirement, a certified public accounting firm (not the same firm who was
appointed auditors of the Company) annually makes a determination of the
Company's product costs. This valuation of product costs is then multiplied by
105% and compared to the Company's product sales. Amounts in excess of the 105%
computation are overcharges which are then rebated back to shareholders by
credit memo. Such rebates are made on a pro rata basis to shareholders, based on
the aggregate amount of products purchased by each shareholder during the year
for which the rebate is made. Rebates are included in the Company's financial
statements and are netted against sales and accounts receivable on the Company's
financial statements.
The Animal Health Industry
A national veterinary organization lists over 22,000 veterinary practices
in the United States. There are some 45,000 veterinarians practicing in the
various disciplines of veterinary medicine. This survey indicated nearly 71% of
the veterinarians in private clinical practice predominately specialize in
companion animal medicine.
We believe, based on industry sources, the U.S. animal health manufacturer
sales of biologicals, pharmaceuticals, insecticides and other packaged goods was
over $4.2 billion for 2001. This segment of business in which the Company
participates is intended to meet the product and supply needs of the private
clinical practice.
Sundry items such as collars, leashes, cages, books, aquatic supplies and
equine tack are primarily sold through retail pet supply outlets. These products
typically are not purchased from veterinary practices. The Company makes a few
of these items available; however, annual sales are very minimal.
Consolidation is a primary force reshaping the animal health industry. We
believe, based on industry sources, sales by the top ten animal health product
manufacturers account for over 75% of the U.S. market. At this time, the top
five U.S. animal health product companies have a market share that exceeds 50%
of the total animal health business.
Livestock production continues the consolidation trend that started a
number of years ago. Agribusiness integrators continue to build larger livestock
raising facilities. Improved management systems coupled with new preventative
products have resulted in an ongoing reduction in food producing animal product
sales for the past several years. There also has been a loss of market share in
several key product groups due to generic competition. The generic products
generally sell for lower prices which causes a pricing deflation in the market.
The companion animal market is experiencing considerable growth. Several
new therapeutic and preventative products have contributed to most of this
increased sales volume. Nutraceuticals (nutritional pharmaceuticals) have an
increasing presence in the companion animal market. We believe, based on
industry sources, during the past five years companion animal product sales have
grown to nearly 50% of the total U.S. market.
2
Competition
Distribution of animal health products is characterized by either "ethical"
or "OTC" channels of product movement. Ethical distribution is defined as those
sales of goods to licensed veterinarians for use in their professional practice.
Many of these products are prescription and must only be sold to a licensed
professional. OTC (over-the-counter) distribution is the movement of
non-prescription goods to the animal owner and the end user. Many of these
products will also be purchased by the licensed veterinarian for professional
use or for resale to their client.
There are numerous ethical distribution companies operating in the same
geographical regions as the Company and competition in this distribution
industry is intense. Most of the competitors generally offer a similar range of
products at prices often comparable to the Company's. The Company seeks to
distinguish itself from its competitors by offering a higher level of customer
service as well as having its principal customers also as its
shareholders/owners. In addition to competition from other distributors, the
Company also faces existing and potentially increased competition from
manufacturers and suppliers who distribute some percentage of their products
directly to veterinarians. Although the Company competes against direct sales by
manufacturers and suppliers, it is often able to compete with such direct sales
by adding new value-added services and pricing differentiation.
The Company's customers, licensed practicing veterinarians, compete with
the OTC distributors for the sale of products to the animal owner. Several large
OTC distributors sell products directly to the large agribusiness integrator or
the livestock owner. Pet food and supplies are sold by a highly fragmented
industry which includes supermarkets, discount stores and other mass
merchandisers, specialty pet stores, direct mail houses and veterinarians. The
Company does not sell products directly to the animal owner and therefore does
not compete with its customer for the sale of such product.
The role of the animal health distributor has changed dramatically during
the last decade. Successful distributors have shifted from a selling mentality
to providing products and services in a consultative environment. Declining
profit margins typify current financial trends. Currently there is an over
capacity in the animal health distribution network, although there have been few
animal health distributor mergers or acquisitions. We believe the Company must
continue to add value to the distribution channel, and reduce the redundancies
that exist, while removing unnecessary costs associated with product movement.
Government Regulation
Both state and federal government agencies regulate the distribution of
certain animal health products. The Company is subject, either directly or
indirectly, to regulation by the US Department of Agriculture and the Drug
Enforcement Administration. Our suppliers are subject to regulation by the
Department of Agriculture, the Food and Drug Administration, the Environmental
Protection Agency, and several state agencies. Several states and the Drug
Enforcement Administration require the Company to be registered or otherwise
keep a current permit or license to handle controlled substances. Manufacturers
of vaccines are required by the Department of Agriculture to comply with various
storage and shipping criteria and requirements for the vaccines. To the extent
Company distributes such vaccines, Company must comply with the same Department
of Agriculture storage and shipping requirements.
Several State Boards of Pharmacy require the Company to be licensed in
their state for the sale of animal health products with their jurisdiction. Each
state (as well as certain cities and counties) requires the Company to collect
sales taxes/use taxes on differing types of animal health products.
The Company is subject to laws governing its relationship with employees,
including minimum wage requirements, overtime, working conditions and
citizenship requirements.
3
Environmental Considerations
The Company does not manufacture, re-label or in any way alter the
composition or packaging of products. All products are distributed in compliance
with the relevant rules and regulations as approved by various State and Federal
regulatory agencies. The Company's distribution business practices create no or
minimal impact on the environment.
Employees
As of July 31, 2002 the Company had 244 employees. We are not subject to
any collective bargaining agreements and have not experienced any work
stoppages. We consider our relationship with our employees to be good.
ITEM 2. PROPERTIES
The Company owns its building, which contains nearly 100,000 square feet of
open warehouse space and 30,000 square feet of finished office area. The
building is a facility the Company constructed and completed in late 1999 and is
located on 9.6 acres of land in a newly developed industrial subdivision of
Omaha, Nebraska. The latest in technology was incorporated into the design of
the new facility to maximize distribution efficiencies. The building is subject
to a first and second mortgage held by US Bank. The Company signed a lease
agreement in March 2002 with Kinsley Equities II Limited Partnership for 70,000
square feet of warehouse space in York, Pennsylvania. The initial term of the
lease is five years. The Company uses this facility to ship products to its
customers in that geographical area of the United States.
ITEM 3. LEGAL PROCEEDINGS
The Company has not been informed of any legal matters that would have a
material adverse effect on its financial condition, results of operation or cash
flow.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the quarter
ended July 31, 2002.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There is no established public trading market for the Company's common
stock. Ownership of the Company's stock is limited to licensed, practicing
veterinarians (or businesses comprised of veterinarians such as a partnership or
corporation). Each veterinarian shareholder is limited to ownership of one share
of stock, which is purchased at the fixed price of $3,000. The share of stock
may not be sold or transferred, except back to the Company at the same $3,000
price. On July 31, 2002, there were 1,544 record holders of the Company's common
stock.
The Company has never declared or paid any cash dividends on the common
stock. The Company intends to retain any future earnings for funding growth of
the Company's business and therefore does not currently anticipate paying cash
dividends in the foreseeable future.
4
ITEM 6. SELECTED FINANCIAL DATA
The historical selected financial data set forth below for the five years
ended July 31, 2002 are derived from the Company's Financial Statements included
elsewhere in this report and should be read in conjunction with those financial
statements and notes thereto. The financial data for the periods ended July 31,
2002 and July 31, 2001 is consolidated and includes accounts of Exact Logistics,
LLC and ProConn, LLC from December 6, 2000, the date the Company became the sole
member of Exact Logistics, LLC and ProConn, LLC. All amounts are in thousands
except per share data. No cash dividends were declared.
At the Year Ended July 31,
1998 1999 2000 2001 2002
(Restated) (Restated) (Restated)
For the Year:
-------------
Net sales and other revenues ....... 94,245 120,536 176,275 197,523 239,922
Operating income ................... 258 11 1,410 1,320 2,143
Net income ......................... 102 141 547 387 1,109
Basic income per share:
Operating income ................ 257.63 9.57 1,109.40 912.08 1,386.42
Net Income ...................... 101.44 128.52 430.55 267.58 717.14
Basic common shares
outstanding used in the
calculation .................... 1,001 1,095 1,271 1,447 1,546
At Year End:
------------
Total assets ....................... 20,008 28,358 59,612 50,737 68,634
Total long-term obligations ........ 1,225 - 6,013 5,565 5,076
5
The following table presents selected financial data for the Company for
each of the quarters in the two-year period ended July 31, 2002. The financial
data for the periods ended July 31, 2002 and July 31, 2001 is consolidated and
includes accounts of Exact Logistics, LLC and ProConn, LLC from December 6,
2000, the date the Company became the sole member of Exact Logistics, LLC and
ProConn, LLC. The historical selected financial data are derived from the
Company's Financial Statements included elsewhere in this report and should be
read in conjunction with those financial statements and notes thereto. All
amounts are in thousands except per share data.
Quarters Ended Year Ended
October 31, 2000 January 31, 2001 April 30, 2001 July 31, 2001 July 31, 2001
(Restated) (Restated) (Restated) (Restated) (Restated)
Revenues ........... $ 49,755 46,345 50,774 50,648 197,523
Gross profit ....... 3,500 3,698 3,751 4,915 15,863
Operating income ... 697 19 (120) 724 1,320
Net income ......... 254 (148) (82) 363 387
Net income per share $ 183.00 (104.39) (56.33) 240.23 267.58
Weighted average
common shares
outstanding .... 1,388 1,420 1,465 1,515 1,447
Quarters Ended Year Ended
October 31, 2001 January 31, 2002 April 30, 2002 July 31, 2002 July 31, 2002
Revenues ........... $ 59,153 $ 55,483 $ 63,131 $ 62,156 $ 239,923
Gross profit ....... 4,336 4,308 6,425 5,002 20,071
Operating income... 738 418 1,643 (656) 2,143
Net income ......... 342 110 1,111 (454) 1,109
Net income per share $ 222.40 $ 70.43 $ 717.93 $(293.83) $ 717.14
Weighted average
common shares
outstanding .... 1,536 1,557 1,548 1,544 1,546
6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains forward-looking statements that involve risks and
uncertainties. Actual events or results may differ materially from those
indicated in such forward-looking statements. The following discussion of the
financial conditions and results of operations should be read in conjunction
with the Financial Statements and related notes thereto included elsewhere in
this report.
Overview
The Company was chartered on August 2, 1982 as a Missouri corporation.
Since January 1, 1983 the Company has operated from various facilities in Omaha,
Nebraska. The Company shareholders approved Amended and Restated Articles of
Incorporation at the Company's Annual Meeting held in August, 1999 to permit the
Company to become a Nebraska corporation. The Company surrendered its Missouri
charter and became a Nebraska corporation on September 22, 1999. The Company's
fiscal year begins on August 1 and concludes on July 31 of the following year.
The Company is one of the largest distributors of animal health products to
veterinarians who practice food producing animal medicine in the United States.
The Company was founded in 1982 by veterinarians whose primary interests were
"food animal" related. The changing trends of veterinary medicine has resulted
in a gradual shift toward the sale of more "companion animal" products.
The Company's revenues have increased from $63.5 million in fiscal year
1995 to $239.9 million in fiscal year 2002. To date, sales to non-shareholders
have had a minimal impact on the Company's net income.
We expect the trend of increases in sales to continue as we continue to
increase the number and type of customer accounts. We will continue our strategy
of supporting the food producing animal veterinarian with a broad range of
products and value-added services. However, sales in the food producing animal
sector are subject to very low margins. In view of the increasing maturity of
the food producing animal market the Company must continue to look for future
growth in the companion animal sector.
Historically companion animal product related transactions have enjoyed
higher margins than sales of food producing animal products. However, as
competition increases in the companion animal sector it is likely that margins
will begin to erode. We believe there is likely to be consolidation of the many
small privately owned veterinary clinics, which will result in an increasing
number of larger veterinary practice business units. As a result, the larger
veterinary practices will have increased purchasing leverage and will negotiate
for lower product costs which will reduce margins at the distribution level and
impact Company revenue and net income.
There are two major types of transactions that affect the flow of products
to the Company's customers. Traditional "buy/sell" transactions account for
approximately ninety percent of the Company's business. In this type of
transaction the customer places an order with the Company, which is then picked,
packed, shipped, invoiced to the customer, followed by payment from the customer
to the Company. In most traditional buy/sell transactions the Company, rather
than the manufacturer, sets the price of the products. There are a few product
lines where the Company provides all transactional activities described above,
except that the manufacturer retains title to the product. The manufacturer
retains title in accordance with the distribution agreements for these products.
Within these agreements the manufacturer determines if any promotional funds or
rebates will be given to the Company. Animal health manufacturers create and
implement sales promotions for the products they manufacture for the
veterinarian. These promotions reward the veterinarian for their purchase of
certain products or volume of products. The Company submits the relevant
purchase data to the manufacturer. The Company is paid or reimbursed by the
manufacturer, and the veterinarian receives value pursuant to the terms of the
7
promotion. The "consignment" transactions account for approximately five percent
of the Company's business. The Company inventories these products for the
manufacturer but does not pay the manufacturer until the product is sold to the
customer and reported to the manufacturer. The Company is responsible for
maintaining insurance on the products but the value of the product is not
included in the inventory for accounting purposes.
A second transaction model used by the Company is termed the "agency
agreement". Under this approach, the Company receives orders for products from
its customer. The Company transmits the order to the manufacturer who then
picks, packs, ships, invoices and collects payment from the customer. The
Company receives a commission payment for soliciting the order as well as other
customer service activities. The Company's operating expenses associated with
this type of sale may be lower than the traditional buy/sell transaction. Agency
selling allows the manufacturer and the Company to immediately react to market
conditions. This arrangement allows the manufacturer to establish and
standardize price of its products in the market. This current information often
is used by the Company and the various manufacturers to develop data based
marketing programs.
The mode of selling products to veterinarians is dictated by the
manufacturer. There has been a recent slight shift away from agency agreements
returning to the traditional buy/sell transactional business model.
Product returns from our customers and to our suppliers occur in the
ordinary course of business. The Company extends to its customers the same
return of goods policies as extended to the Company by the various
manufacturers. The Company does not believe its operations will be adversely
impacted due to the return of products.
The Company has two direct subsidiaries: Exact Logistics, LLC and ProConn,
LLC. Exact Logistics, LLC was organized in the State of Nebraska on December 6,
2000. The limited liability company is a single member entity and is 100% owned
by the Company. The purpose of Exact Logistics, LLC is to act as a contract
logistics partner to warehouse and ship products.
ProConn, LLC was organized in the State of Nebraska on December 6, 2000.
The limited liability company is a single member entity and is 100% owned by the
Company. The purpose of ProConn, LLC is to act as a supplier of animal health
products to the producer and/or consumer.
Results of Operations
The following discussion is based on the historical results of operations
for fiscal 2000, 2001 and 2002.
Fiscal 2000 Compared to Fiscal 1999:
- ------------------------------------
Net sales and other revenue for the fiscal year ending July 31, 2000
increased by 46.2% or $55.8 million. Net sales and other revenue for the 2000
fiscal year totaled $176.3 million compared to $120.5 million for the previous
fiscal year. The growth was principally attributable to increased sales to
existing customers of $37.0 million and to new customers of $18.8 million.
During the year the number of total shareholders increased by 193 veterinary
practices. On July 31, 2000 there were 1,381 shareholders of the Company.
Gross profit increased by $5.6 million to $14.3 million compared to $8.7
million for the previous fiscal year. This increase was primarily due to
the increase in revenue. Gross profit as a percentage of total revenue was 8.1%
for fiscal 2000 compared to 7.2% for fiscal 1999. This increase in percentage
was primarily due to higher vendor rebates.
8
Operating, general and administrative expenses increased by $4.2 million to
$12.9 million for fiscal year 2000 compared to $8.7 million for the previous
year. This increase was primarily due to support the increase in revenue. Such
operating, general and administrative expenses as a percentage of total revenue
for fiscal 2000 was 7.3% vs. 7.2% in fiscal 1999.
Operating income increased by $1.4 million to $1.4 million for fiscal year
2000 compared to $11 thousand for the previous year. This increase is primarily
attributable to the increase in gross profit as a percentage of total revenue
while maintaining the percentage of operating, general and administrative
expenses.
For fiscal year 2000, other income (expense) was $542 thousand of expenses
as compared to $223 thousand of income for the previous year. Principally as a
result of an increase in a higher average balance on the revolving line of
credit and debt resulting from the Company's new facility, interest expense for
the period ending July 31, 2000 was $862 thousand as compared to $263 thousand
for the same period the previous fiscal year. In addition, as a result of an
increase in the amount of monthly financial charges on past due account
receivable balances, interest income increased by $124 thousand.
Fiscal 2001 Compared to Fiscal 2000:
- ------------------------------------
Net sales and other revenue for the fiscal year ending July 31, 2001
increased by 12.1% or $21.2 million. Net sales and other revenue for the 2001
fiscal year totaled $197.5 million compared to $176.3 million for the previous
fiscal year. The growth was principally attributable to increased sales to
existing customers of $13.6 million and to new customers of $7.6 million. During
the year the number of total shareholders increased by 153 veterinary practices.
On July 31, 2001 there were 1,534 shareholders of the Company.
Gross profit increased by $1.6 million to $15.9 million compared to $14.3
million for the previous fiscal year. This increase was primarily due to the
increase in revenue. Gross profit as a percentage of total revenue was 8.0% for
fiscal 2001 compared to 8.1% for fiscal 2000. This decrease in percentage was
primarily due to higher freight costs.
Operating, general and administrative expenses increased by $1.6 million to
$14.5 million for fiscal year 2001 compared to $12.9 million for the previous
year. This increase was primarily due to support the increase in revenue. Such
operating, general and administrative expenses as a percentage of total revenue
for fiscal 2001 was 7.4% vs. 7.3% for fiscal 2000.
Operating income decreased by $90 thousand to $1.3 million for fiscal year
2001 compared to $1.4 million for the previous year. This decrease is primarily
attributable to the decrease in gross profit as a percentage of total revenue
while also decreasing the percentage of operating, general and administrative
expenses.
Company's other income (expense) was $626 thousand (expense) for fiscal
year 2001 as compared to $542 thousand (expense) for the previous year. In
addition, interest expense for the period ending July 31, 2001 increased to $1.0
million as compared to $862 thousand for the same period of the previous year -
an increase of $144 thousand. The increase was due to increased borrowing on the
Company's revolving line of credit. These increased expenses were partially
offset by an increase in interest income of $131 thousand which was due
principally to a greater amount of monthly finance charges on past due accounts
receivable balances.
Fiscal 2002 Compared to Fiscal 2001:
- ------------------------------------
Net sales and other revenue for the fiscal year ending July 31, 2002
increased by 21.5% or $42.4 million. Net sales and other revenue for the 2002
fiscal year totaled $239.9 million compared to $197.5
9
million for the previous fiscal year. The growth was principally attributable to
increased sales to existing customers of $27.1 million and to new customers of
$15.3 million.
Gross profit increased by $4.2 million to $20.1 million compared to $15.9
million for the previous fiscal year. This increase was primarily due to the
increase in revenue. Gross profit as a percentage of total revenue was 8.4% for
fiscal 2002 compared to 8.0% for fiscal 2001.
Operating, general and administrative expenses increased by $3.4 million to
$17.9 million for fiscal year 2002 compared to $14.5 million for the previous
year. This increase was primarily due to support the increase in revenue. Such
operating, general and administrative expenses as a percentage of total revenue
for fiscal 2002 was 7.4% vs. 7.4% for fiscal 2001.
Operating income increased by $823 thousand to $2.1 million for fiscal year
2002 compared to $1.3 million for the previous year. This increase is primarily
attributable to the increase in gross profit as a percentage of total revenue
while maintaining the percentage of operating, general and administrative
expenses.
Company's other income (expense) was $395 thousand (expense) for fiscal
year 2002 as compared to $626 thousand (expense) for the previous year. In
addition, interest expense for the period ending July 31, 2002 decreased to $850
thousand as compared to $1.0 million for the same period of the previous year -
a decrease of $156 thousand. The reduction was due to a decrease in the interest
rate charged on the Company's revolving line of credit.
Seasonality in Operating Results
The Company's quarterly sales and operating results have varied
significantly in the past and will likely continue to do so in the future.
Historically, the Company's sales are seasonal with peak sales in the late
spring and early fall. The cyclical nature is directly tied to the significant
amount of business the Company does in the livestock sector. Product use cycles
are directly related to certain medical procedures performed by veterinarians on
livestock during the late spring and early fall.
In the last few years the Company has been selling more companion animal
related products. These products tend to have a seasonal nature which minimally
overlaps the livestock business cycles. The net result is a reduction of the
cyclical seasonal nature of the business. Minimizing the cyclical nature of the
Company's business has allowed for more efficient utilization of all resources.
Liquidity and Capital Resources
The Company expends capital primarily to fund day-to-day operations and
expand those operations to accommodate sales growth. It is necessary for the
Company to expend necessary funds to maintain significant inventory levels in
order to fulfill its commitment to its customers. Historically, the Company has
financed its cash requirements primarily from short term bank borrowings and
cash from operations. The short term bank borrowings are accomplished through a
fifteen million dollar revolving line of credit at U.S. Bank, Omaha, Nebraska.
At the year end, July 31, 2002, there were no additional material commitments
for capital expenditures. There was however discussion to purchase approximately
10 acres of land adjoining the current building in Omaha.
Net cash provided by operating activities of $1.9 million in fiscal year
ending July 1999 was primarily attributable to an increase of $6.6 million in
accounts receivable. It was partially offset by increases of $418 thousand in
inventories and $7.7 million in accounts payable. In the fiscal year ending July
2000, net cash used by operating activities of $5.7 million was primarily
attributable to increases of $10.2 million in accounts receivable and $15.8
million in inventories. These were partially offset by an increase of $19.1
million in accounts payable. For the fiscal year ending July 2001, net cash
provided by operating activities of $5.3 million was primarily attributable to
decreases of $2.4 million in accounts
10
receivable and $6.1 million in inventories. These were partially offset by a
decrease of $4.8 million in accounts payable. For the fiscal year ending July
2002, net cash provided by operating activities of $219 thousand was primarily
attributable to increases of $1.4 million in accounts receivable and $14.6
million in inventories. These were partially offset by an increase of $13.2
million in accounts payable.
Net cash used by investing activities of $1.0 million in fiscal year ending
July 1999 was primarily attributable to investments in property, which included
the purchase of land for future construction of the building, and investments in
equipment, such as the purchase of computer equipment. Net cash used by
investing activities of $6.7 million in fiscal year ending July 2000 was
primarily attributable to investments in property, including the construction of
our new building, and investments in equipment, such as the purchase of office
and warehouse equipment for use in the new building. Net cash used by investing
activities of $287 thousand in fiscal year ending July 2001 was primarily
attributable to investments in equipment, including the purchase of office,
warehouse and computer equipment. Net cash used by investing activities of $1.8
million in fiscal year ending July 2002 was primarily attributable to
investments in equipment, including the purchase of office, warehouse and
computer equipment. These investments in equipment were mainly in the new
distribution center in York, Pennsylvania.
Net cash provided by financing activities of $263 thousand in fiscal year
ending July 1999 was primarily attributable to increases of $1.0 million in loan
proceeds and $360 thousand from net proceeds from issuance of common stock less
$1.1 million from bank overdraft. In the fiscal year ending July 2000, net cash
provided by financing activities of $11.3 million was primarily attributable to
increases of $10.2 million in loan proceeds and $641 thousand from net proceeds
from issuance of common stock. In the fiscal year ending July 2001, net cash
used by financing activities of $4.3 million was primarily attributable to a
decrease of $4.3 million in loan proceeds, a bank overdraft of $399 thousand,
and an increase of $422 thousand from net proceeds from issuance of common
stock. In the fiscal year ending July 2002, net cash provided by financing
activities of $2.3 million was primarily attributable to an increase of $2.2
million in loan proceeds, and $132 thousand from net proceeds from issuance of
common stock.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks primarily from changes in U.S.
interest rates. The Company does not engage in financial transactions for
trading or speculative purposes.
The interest payable on the Company's revolving line of credit is based on
variable interest rates and is therefore affected by changes in market interest
rates. If interest rates on variable rate debt rose .45 percentage points (a 10%
change from the interest rate as of July 31, 2002), assuming no change in the
Company's outstanding balance under the line of credit (approximately $6.9
million as of July 31, 2002), the Company's annualized income before taxes and
cash flows from operating activities would decline by approximately $31
thousand.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K" for the Company's Financial Statements, and the notes thereto,
Supplementary Data, and the financial statement schedules filed as part of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On March 20, 2002, Marvin E. Jewell & Co., P.C. resigned as the Company's
independent auditor. This action was approved by the Company's Audit Committee.
During its tenure, Marvin E. Jewell & Co., P.C. did not issue a report on the
Company's financial statements that either contained an adverse opinion or
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or
11
accounting principles. There were no disagreements with Marvin E. Jewell & Co.,
P.C. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which disagreements, if not resolved
to the satisfaction of Marvin E. Jewell & Co., P.C., would have caused Marvin E.
Jewell & Co., P.C. to make reference to the subject matter of the disagreement
in connection with their report.
Effective March 20, 2002, Quick & McFarlin, P.C. was retained as
independent auditor of the Company for the fiscal year ending July 31, 2002, and
Quick & McFarlin, P.C. accepted the appointment. Prior to the engagement, the
Company did not consult with Quick & McFarlin, P.C. regarding any of the matters
or events set forth in Item 304 (a)(2)(i) or (ii) of Regulation S-K.
PART III
Incorporated by reference in Items 10 to 13 below are certain sections
of the Company's definitive proxy statement, to be filed pursuant to Regulation
14A within 120 days after July 31, 2002.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Incorporated by reference in this Annual Report is the information
required by this Item 10 contained in the sections entitled "Proposal: Election
of Directors", "Information About Directors and Executive Officers" and "Section
16(b) Beneficial Ownership Reporting Compliance" of the Company's definitive
proxy statement, to be filed pursuant to Regulation 14A with the SEC within 120
days after July 31, 2002.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference in this Annual Report is the information
required by this Item 11 contained in the section entitled "Information About
Directors and Executive Officers - Executive Compensation", of the Company's
definitive proxy statement, to be filed pursuant to Regulation 14A with the SEC
within 120 days after July 31, 2002.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company's Articles and Bylaws specifically provide that each
shareholder is entitled to own only a single share of stock. Thus, there is no
shareholder that has more than one share currently or will own more than one
share in the future and no shareholder owns less than or a fractional portion of
the single share. No single shareholder owns more than 5 percent of the
outstanding common stock. As described below, each director, except Dr. Lionel
Reilly, is a holder of one share of stock.
Name of Beneficial Owner Shares Nature of Beneficial Ownership Percentage of
Beneficially Class
Owned
Dr. Buddy D. Ray 1 By Mayfield Veterinary Clinic *
Dr. Steven E. Wright 1 By Millard Veterinary Clinic *
Dr. Chester L. Rawson 1 By Veterinary Associates *
Dr. Raymond C. Ebert II 1 By Pleasant Hill Animal Clinic, Inc. *
Dr. Michael L. Whitehair 1 By Abilene Animal Hospital *
Dr. Michael B. Davis 1 By Carroll Veterinary Clinic, P.C. *
Dr. Amy Lynne Hinton 1 By Best Friends Animal Hospital *
Dr. Fred G. Garrison 1 By Fred G. Garrison *
* Less than one percent
12
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference in this Annual Report is the information
required by this Item 13 contained in the section entitled the "Information
About Directors and Executive Officers--Certain Transactions" of the Company's
definitive proxy statement, to be filed pursuant to Regulation 14A with the SEC
within 120 days after July 31, 2002.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
(a)(3) Exhibits
(b) Reports on Form 8-K
(a) (1) Financial Statements
--------------------
The following financial statements are filed as part of this report:
Independent Auditor's Report F-1
Consolidated Balance Sheets as of July 31, 2002 and July 31,
2001 (Restated) F-2
Consolidated Statements of Income years ended July 31, 2002,
2001 (Restated) and 2000 (Restated) F-3
Consolidated Statements of Stockholders' Equity years ended July 31,
2002, 2001 (Restated) and 2000 (Restated) F-4
Consolidated Statements of Cash Flows years ended July 31, 2002,
2001 (Restated) and 2000 (Restated) F-5
Notes to Financial Statements F-6
13
QUICK & MCFARLIN, P.C.
Certified Public Accountants Letterhead
Independent Auditor's Report
To the Board of Directors and Stockholders
Professional Veterinary Products, Ltd.
Omaha, Nebraska
We have audited the accompanying consolidated balance sheets of
Professional Veterinary Products, Ltd. and subsidiaries as of July 31, 2002 and
2001, and the related consolidated statements of income, stockholders' equity,
and cash flows for the three years ended July 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Professional
Veterinary Products, Ltd. and subsidiaries as of July 31, 2002 and 2001, and the
results of their operations and their cash flows for the three years ended July
31, 2002, in conformity with accounting principles generally accepted in the
United States of America.
As discussed in Note 14 to the financial statements, these consolidated
financial statements for the periods ended July 31, 2001 and 2000 have been
restated for the change in accounting for the investment in an affiliate, for
stock subscriptions receivable, and for certain reclassifications relating to
sales promotion revenue.
/s/ Quick & McFarlin, P.C.
Omaha, Nebraska
October 14, 2002
F-1
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Consolidated Balance Sheets
As of July 31, 2002 and July 31, 2001 (Restated)
(in thousands, except share data)
(Restated)
July 31, July 31,
2002 2001
-------- ----------
ASSETS
CURRENT ASSETS
Cash $ 1,324 $ 657
Accounts receivable, trade - net of allowance for doubtful
accounts of $353 in 2002 and $0 in 2001 16,817 15,783
Accounts receivable, related parties 2,875 2,490
Inventory 36,991 22,342
Deferred tax asset 146 37
Prepaid expenses and other current assets 36 251
-------- -------
Total Current Assets 58,189 41,560
-------- -------
NET PROPERTY AND EQUIPMENT 8,719 7,483
-------- -------
OTHER ASSETS
Intangible assets - net of accumulated amortization
of $83 in 2002 and $66 in 2001 168 185
Investment in unconsolidated affiliates 1,491 1,513
Cash value life insurance 67 33
-------- -------
Total Other Assets 1,726 1,731
-------- -------
TOTAL ASSETS $68,634 $50,774
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable, bank $ 6,897 $ 4,294
Current portion of long-term debt 496 456
Accounts payable, trade 44,007 31,950
Accounts payable, related parties 1,680 535
Other current liabilites 2,583 1,532
-------- -------
Total Current Liabilities 55,663 38,767
-------- -------
LONG-TERM LIABILITIES
Long-term debt 5,076 5,565
Deferred tax liability 343 131
-------- -------
Total Long-Term Liabilities 5,419 5,696
-------- -------
Total Liabilities 61,082 44,463
-------- -------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized 30,000 shares; issued
and outstanding 1,544 shares in 2002 and 1,534 shares in 2001 2 2
Paid-in capital 4,547 4,415
Retained earnings 3,003 1,894
-------- -------
Total Stockholders' Equity 7,552 6,311
-------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $68,634 $50,774
======== =======
F-2
See accompanying notes to consolidated financial statements.
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Consolidated Statements of Income
Years ended July 31, 2002, 2001 (Restated) - 2000 (Restated)
(in thousands, except per share amounts)
(Restated) (Restated)
July 31, July 31, July 31,
2002 2001 2000
--------- ---------- ----------
NET SALES AND OTHER REVENUE $239,922 $197,523 $176,275
COST OF SALES 219,851 181,660 161,934
--------- --------- ---------
Gross profit 20,071 15,863 14,341
OPERATING, GENERAL AND
ADMINISTRATIVE EXPENSES 17,928 14,543 12,931
--------- --------- ---------
Operating income 2,143 1,320 1,410
--------- --------- ---------
OTHER INCOME (EXPENSE)
Interest income 477 504 373
Interest expense (850) (1,006) (862)
Other - (3) (44)
Equity in loss of affiliate (22) (121) (9)
--------- --------- ---------
Total other income (expense) (395) (626) (542)
--------- --------- ---------
Income before taxes 1,748 694 868
Income tax expense 639 307 321
--------- --------- ---------
NET INCOME $ 1,109 $ 387 $ 547
========= ========= =========
NET EARNINGS PER SHARE
OF COMMON STOCK $ 717.14 $ 267.58 $ 430.55
========= ========= =========
Weighted average common
shares outstanding 1,546 1,447 1,271
========= ========= =========
F-3
See accompanying notes to consolidated financial statements.
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except Common Shares Issued)
Common Additional
Shares Common Paid-in Retained
Issued Stock Capital Earnings Total
------ ------ ---------- -------- -------
BALANCE AT JULY 31, 1999 1,188 $1 $3,352 $ 960 $4,313
Issuance of stock 211 - 633 - 633
Redemption of stock (18) - (54) - (54)
Net change in
Accounts receivable, stock - - 62 - 62
Net income - - - 547 547
------ ------ ---------- -------- -------
BALANCE AT JULY 31, 2000 1,381 1 3,993 1,507 5,501
(Restated)
Issuance of stock 172 1 515 - 516
Redemption of stock (19) - (57) - (57)
Net change in
Accounts receivable, stock - - (36) - (36)
Net income - - - 387 387
------ ------ ---------- -------- -------
BALANCE AT JULY 31, 2001 1,534 2 4,415 1,894 6,311
(Restated)
Issuance of stock 36 - 108 - 108
Redemption of stock (26) - (77) - (77)
Net change in
Accounts receivable, stock - - 101 - 101
Net income - - - 1,109 1,109
------ ------ ---------- -------- -------
BALANCE AT JULY 31, 2002 1,544 $2 $4,547 $3,003 $7,552
====== ====== ========== ======== =======
F-4
See accompanying notes to consolidated financial statements.
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands)
(Restated) (Restated)
July 31, July 31, July 31,
2002 2001 2000
-------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,109 $ 387 $ 547
-------- ---------- ----------
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation and amortization 619 563 443
Loss on sale of property - 3 43
Equity in loss of affiliate 22 121 9
(Increase) decrease in:
Receivables (1,419) 2,362 (10,175)
Inventories (14,649) 6,084 (15,839)
Prepaid expenses and other 215 805 (255)
Deferred tax asset (109) (37) -
Cash value life insurance (34) (2) (30)
Increase (decrease) in:
Accounts payable 13,202 (4,751) 19,059
Other current liabilities 1,051 (416) 512
Deferred tax liability 212 137 (6)
-------- ---------- ----------
Total adjustments (890) 4,869 (6,239)
-------- ---------- ----------
Net cash from operating activities 219 5,256 (5,692)
-------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (1,839) (287) (5,292)
Purchase of investments - - (1,500)
Proceeds from sale of property - - 115
-------- ---------- ----------
Net cash from investing activities (1,839) (287) (6,677)
-------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net loan proceeds (reduction) 2,155 (4,335) 10,236
Bank overdraft - (399) 399
Net proceeds from issuance of
common stock 132 422 641
-------- ---------- ----------
Net cash from financing activities 2,287 (4,312) 11,276
-------- ---------- ----------
Net increase (decrease) in cash 667 657 (1,093)
Cash at beginning of year 657 - 1,093
-------- ---------- ----------
Cash at end of year $ 1,324 $ 657 $ -
======== ========== ==========
Supplemental disclosure of cash flow information:
Interest paid $ 859 $ 1,052 $ 774
======== ========== ==========
Income taxes paid $ 86 $ 560 $ 106
======== ========== ==========
F-5
See accompanying notes to consolidated financial statements.
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
Professional Veterinary Products, Ltd. was incorporated in the State of
Missouri in 1982. The corporation was domesticated in Nebraska on September
22, 1999. The corporation was formed to buy, sell, and warehouse
pharmaceuticals and other veterinary related items. The purpose of the
corporation is to act as a wholesale distributor primarily to shareholders.
Shareholders are limited to the ownership of one share of stock and must be
a licensed veterinarian or business entity comprised of licensed
veterinarians.
Exact Logistics, LLC was organized in the State of Nebraska on December 6,
2000. This limited liability company is 100% owned by Professional
Veterinary Products, Ltd. The purpose of the LLC is to act as a logistics
partner for warehousing and shipping products to other distributors.
ProConn, LLC was organized in the State of Nebraska on December 6, 2000.
This limited liability company is 100% owned by Professional Veterinary
Products, Ltd. The purpose of the LLC is to act as a supplier of animal
health products to the producer or consumer.
Professional Veterinary Products, Ltd., Exact Logistics, LLC and ProConn,
LLC are presented as consolidated financial statements because they are
related through common ownership and control. Their accounting policies
follow generally accepted accounting principles and conform to the common
practices of the industry in which they are engaged. Exact Logistics, LLC
and ProConn, LLC are single member limited liability companies with
Professional Veterinary Products, Ltd. as their only corporate member. They
have elected to be treated as an unincorporated branch of the parent entity
for financial and income tax purposes. All income taxes of the
unincorporated branches are reflected on these financial statements and are
the responsibility of the parent entity.
Summary of significant accounting policies:
(a) Principles of consolidation:
The consolidated financial statements include the accounts of
Professional Veterinary Products, Ltd. and its wholly owned
subsidiaries. The term "Company" used herein means Professional
Veterinary Products, Ltd. and its subsidiaries, unless otherwise
indicated by the context. All material intercompany accounts and
transactions have been eliminated in consolidation. Investments
in companies in which the Company exercises significant
influence, but not control, are accounted for using the equity
method of accounting. Investments in companies in which the
Company has less than a 20% ownership interest, and does not
exercise significant influence, are accounted for at cost.
(b) Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. While actual results could differ from these estimates,
management believes these estimates are reasonable.
(c) Concentration of cash balances:
The Company's cash funds are located in a single financial
institution. The bank accounts, at times, exceeded the $100,000
federally insured limit.
F-6
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(d) Accounts receivable:
Accounts receivable are reported net of an allowance for
doubtful accounts. The allowance is based on management's
estimate of the amount of receivables that will actually be
collected. The Company writes off an account when it is
considered to be uncollectible. The allowance for doubtful
accounts was $353 and $0 at July 31, 2002 and 2001,
respectively.
(e) Inventory:
Inventories are stated at the lower of cost or market using the
first-in, first-out (FIFO) method of valuation. All products
included in inventory are finished goods held for resale.
(f) Property, equipment and depreciation:
Property and equipment are stated at cost. Depreciation expense
was $604, $537, and $426 for the years ended July 31, 2002,
2001, and 2000, respectively. Depreciation has been calculated
using primarily the straight-line method over the estimated
useful lives of the respective classes of assets as follows:
Building 40 years
Furniture, Fixtures and Equipment 7 years
Computer Equipment 5 years
Software 3 years
Leasehold improvements are amortized over the shorter of the
remaining term of the lease or the useful life of the
improvement utilizing the straight-line method.
Major additions and betterments that extend the useful lives of
property and equipment are capitalized and depreciated over
their estimated useful lives. Expenditures for maintenance and
repairs are charged to expense as incurred. Property, plant and
equipment are reviewed annually for impairment in accordance
with SFAS No. 121.
(g) Cash and cash equivalents:
The corporation considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
(h) Intangible assets and goodwill:
Amortization expense for goodwill and other intangibles was $84,
$87, and $25 for 2002, 2001 and 2000, respectively. Management
periodically evaluates the recoverability of goodwill and other
intangible assets which would be adjusted for a permanent
decline in value, if any, as measured by the recoverability from
projected future cash flows from the acquired businesses. These
analyses necessarily involve significant management judgment.
Amortization has been computed on intangible assets as follows:
Goodwill 15 and 20 years, straight-line
Loan fees term of the related note, straight-line (amortized
expense is included in interest)
Trademark 15 years, straight-line
F-7
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(i) Income taxes:
Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes
currently due plus deferred taxes. Deferred taxes are recognized
for differences between the basis of assets and liabilities for
financial statement and income tax purposes. The differences
relate primarily to depreciable assets (use of different
depreciation methods and lives for financial statement and
income tax purposes), and the Uniform Capitalization Rules of
IRS Code Sec. 263A (capitalization of direct and indirect costs
associated with resale activities). The deferred tax asset and
liability represent the future tax return consequences of those
differences, which will either be deductible or taxable when the
assets and liabilities are recovered or settled.
(j) Revenue recognition:
In accordance with generally accepted accounting principles,
revenue is recognized when the transaction is both realized or
realizable and earned. The Company recognizes revenue when the
customer receives the product. Shipping terms are generally FOB
customer. The Company and/or its shipper have the risk of loss
until delivery to the customer. Upon receipt of the product by
the customer, title and risk of loss passes to that customer.
The Company sells animal health products which constitute all of
its gross sales.
There are two major types of transactions that affect the flow
of products to the Company's customers. Traditional "buy/sell"
transactions account for approximately ninety percent of the
Company's business. In this type of transaction the customer
places an order with the Company, which is then picked, packed,
shipped, and invoiced to the customer, followed by payment from
the customer to the Company. In most traditional "buy/sell"
transactions the Company, rather than the manufacturer, sets the
price of the products.
There are a few product lines where the Company provides all
transactional activities described above, except that the
manufacturer retains title to the product. The manufacturer
retains title in accordance with the distribution agreements for
these products. Within these agreements the manufacturer
determines if any promotional funds or rebates will be given to
the Company. These "consignment" transactions account for
approximately five percent of the Company's business. The
Company inventories these products for the manufacturer but does
not pay the manufacturer until the product is sold to the
customer and reported to the manufacturer. The Company is
responsible for maintaining insurance on the products, but the
value of the product is not included in the inventory for
accounting purposes.
(k) Advertising:
The Company expenses advertising costs as incurred. Advertising
expense was $32, $30 and $25 for the years ended 2002, 2001 and
2000, respectively.
F-8
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(l) Direct shipping and handling costs:
Freight and other direct shipping costs are included in "Cost of
sales" on the Consolidated Statements of Income. Direct handling
costs are reflected in "Operating, general and administrative
expenses." Such costs represent direct compensation costs of
employees who pick, pack, and otherwise prepare merchandise for
shipment to the Company's customers.
(m) Fair value of financial instruments:
The carrying amounts reported on the balance sheets approximate
the fair value for cash, short-term borrowings, and all other
variable rate debt (including borrowings under credit
agreements). The carrying amounts reported for long-term debt
approximate fair value because the interest approximates current
market rates for financial instruments with similar maturities
and terms.
(n) Assets - Recognition and measurement of impairment:
The Company's policy is to recognize an impairment loss in
accordance with SFAS No. 121 if the sum of the expected future
cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset. The Company reviews
long-lived assets and identifiable intangibles to be held and
used for impairment whenever events or changes in circumstances
indicated that the carrying amount of an asset may not be
recoverable. An impairment loss recognized would be measured as
the amount by which the carrying amount of the asset exceeds the
fair value of the asset. No current impairment exists and none
have been recognized.
(o) Earnings per share:
Financial Accounting Standards Board Statement No. 128, Earnings
per Share ("SFAS No. 128") promulgates accounting standards for
the computation and manner of presentation of the Company's
earnings per share data. Under SFAS No. 128 the Company is
required to present basic and diluted earnings per share. Basic
earnings per share is computed by dividing net income available
to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share
reflect the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or
converted into common stock. There are no securities that are
convertible to common stock that would cause further dilution.
The weighted average number of common shares outstanding was
1,546, 1,447 and 1,271 at July 31, 2002, 2001 and 2000,
respectively.
(p) Reclassifications:
Certain prior year amounts have been reclassified to conform to
the July 31, 2002 presentation.
F-9
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(1) ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
(q) New accounting pronouncements:
In June 2001, the Financial Accounting Standards Board issued
FASB Statement No. 142, Goodwill and Other Intangible Assets
("SFAS No.142"). SFAS No.142 requires, among other things, that
companies no longer amortize goodwill, but instead test goodwill
for impairment at least annually. In addition, SFAS No. 142
requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill,
reassess the useful lives of other existing recognized
intangible assets, and cease amortization of intangible assets
with an indefinite useful life. An intangible asset with an
indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS No. 142. SFAS No. 142 is
required to be applied in fiscal years beginning after December
15, 2001 to all goodwill and other intangible assets recognized
at that date, regardless of when those assets were initially
recognized. SFAS No. 142 also requires the Company to complete a
transitional goodwill impairment test within six months from the
date of adoption. The Company is also required to reassess the
useful lives of other intangible assets within the first interim
quarter after adoption of SFAS No. 142. The Company will adopt
SFAS No. 142 in the first quarter of the fiscal year ending July
31, 2003. The Company believes that the adoption of SFAS No.142
will not have a material impact on the Company's financial
position or results of operation.
In August 2001, the Financial Accounting Standards Board issued
FASB Statement No. 144, Accounting for the Impairment or Disposal
of Long-Lived Assets ("SFAS No. 144"). This statement superceded
FASB Statement No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of
("SFAS No. 121") and amends Accounting Principles Board Opinion
No. 30, Reporting Results of Operations - Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions. SFAS
No. 144 retains the fundamental provisions of SFAS No. 121 for
recognition and measurement of impairment, but amends the
accounting and reporting standards for segments of a business to
be disposed of. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001, and interim periods within
those fiscal years, with early application encouraged. The
provisions of SFAS No. 144 generally are to be applied
prospectively. The Company will adopt SFAS No. 144 in the first
quarter of the fiscal year ending July 31, 2003. The Company
believes that the adoption of SFAS No. 144 will not have a
material impact on the Company's financial position or results of
operations.
(2) CONCENTRATION OF CREDIT RISK:
Financial instruments, which potentially subject the Company to
concentrations of credit risk, include trade receivables. There were no
significant individual receivables at July 31, 2002. One customer
comprised 12.5% of the Company's receivables at July 31, 2001.
(3) REBATES:
At each fiscal year end, the Company nets rebates due to stockholders
against accounts receivable. Rebates are paid in the form of credits
against future purchases, never in cash. The Company offsets accounts
receivable for overcharges on sales in excess of an agreed upon profit
margin as follows:
2002 2001
-------- --------
Accounts receivable, net allowance
for doubtful accounts $ 26,712 $ 23,141
Less rebates (7,020) (4,868)
-------- --------
Accounts receivable, net $ 19,692 $ 18,273
======== ========
F-10
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(3) REBATES (continued):
Net sales and other revenue reported on the Consolidated Statements of
Income were reduced by rebates as follows:
2002 2001 2000
-------- -------- --------
Gross sales and other revenue $246,942 $202,391 $182,389
Less rebates (7,020) (4,868) (6,114)
-------- -------- --------
Net sales and other revenue $239,922 $197,523 $176,275
======== ======== ========
(4) PROPERTY AND EQUIPMENT:
Major classes of property and equipment consist of the following:
2002 2001
-------- --------
Land $ 954 $ 954
Building 4,715 4,715
Leasehold improvements 167 -
Equipment 4,920 3,247
-------- --------
10,756 8,916
Less - Accumulated
depreciation (2,037) (1,433)
-------- --------
Net property and equipment $ 8,719 $ 7,483
======== ========
(5) INVESTMENT IN UNCONSOLIDATED AFFILIATES:
The Company purchased a 20% interest in AAHA Services Corp. in June,
2000 for $1,500. The remaining 80% is owned by American Animal Hospital
Association (AAHA). The Company determined that it has significant
influence over AAHA Services Corp. and accordingly should account for
its 20% ownership interest using the "equity method" of accounting for
investments. The excess of purchase price over underlying equity in the
amount of $1,500 (which represents goodwill) is being amortized by the
straight-line method over 20 years. The Company purchased less than a
5% interest in Agri-Laboratories, Ltd., which is carried at cost. The
amounts presented on the balance sheet consisted of:
2002 2001
------- -------
Investment in AAHA Services Corp (equity method),
net of amortization and 20% equity method profit or loss $ 1,347 $ 1,369
Investment in Agri-Laboratories, Ltd. (cost method) 144 144
------- -------
$ 1,491 $ 1,513
======= =======
(6) COMMON STOCK:
The Company is authorized to issue 30,000 shares of common stock with a
par value of $1.00. Issued and outstanding shares amounted to 1,544 at
July 31, 2002 and 1,534 at July 31, 2001. Holders of common stock are
entitled to a) one vote for each share held on matters submitted to a
vote of stockholders, b) a ratable share of dividends declared and c)
in the event of liquidation or dissolution, a ratable share of earnings
after liabilities. Shareholders are not permitted to dispose of their
stock except by a sale back to the Company. The shareholder must give
the Company written notice of the proposed sale and the Company must
redeem for cash the share of stock within ninety days of receiving such
notice, at the price the shareholder paid for the share.
F-11
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(7) INCOME TAXES:
Significant components of income tax expense are as follows:
2002 2001 2000
----- ----- -----
Current
Federal $ 498 $ 198 $ 315
State 38 9 12
----- ----- -----
536 207 327
----- ----- -----
Deferred
Federal 96 96 (6)
State 7 4 -
----- ----- -----
103 100 (6)
----- ----- -----
Total $ 639 $ 307 $ 321
===== ===== =====
A reconciliation of income tax expense computed using the U.S. federal
statutory income tax rate of 34% of income before income taxes to the
actual provision for income taxes is as follows:
2002 2001 2000
----- ----- -----
Expected tax at U.S.
statutory rate $ 594 $ 236 $ 296
State taxes, net of federal effect 26 6 8
Amortization of goodwill 22 24 3
Nondeductible and other items (3) 41 14
----- ----- -----
Total $ 639 $ 307 $ 321
===== ===== =====
Deferred tax assets and liabilities reflect the future tax consequences of
events that have already been recognized in the consolidated financial
statements or income tax returns. At July 31, the deferred tax asset and
liability consisted of the following:
2002 2001
------ -----
Current deferred tax asset:
Uniform capitalization $ 146 $ 37
Noncurrent deferred tax liability:
Excess of tax over book depreciation (343) (131)
------ -----
Deferred tax liability, net $ (197) $ (94)
====== =====
F-12
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(8) LONG-TERM DEBT:
Long-term debt at July 31 is summarized as follows:
2002 2001
------- -------
Note payable, maturing in 2009, secured
by certain assets, 7.42% interest $ 3,764 $ 3,860
Note payable, maturing in 2005, secured
by certain assets, 9.10% interest 1,030 1,115
Note payable, maturing in 2005, secured
by certain assets, 8.66% interest 778 1,046
------- -------
5,572 6,021
Less current portion (496) (456)
------- -------
$ 5,076 $ 5,565
======= =======
The aggregate scheduled maturities of long-term debt obligations for the
five years subsequent to July 31, 2002 are as follows:
2003 $ 496
2004 538
2005 1,126
2006 136
2007 146
Thereafter 3,130
--------
$ 5,572
========
At July 31, 2002, the Company had in place a revolving line of credit that
provides for borrowings up to $15,000. This agreement is scheduled to
expire in December 2002. The short-term borrowing amounts outstanding under
this credit facility were $6,897 and $4,294 at July 31, 2002 and 2001,
respectively. Interest is payable at .25% under the U.S. Bank National
Association Reference Rate. The weighted average interest rates of
borrowings outstanding under the revolving credit agreement were 5.00% and
8.35% for 2002 and 2001, respectively. The line of credit is secured by
substantially all of the Company's assets.
Under these debt and credit agreements, the Company is required to maintain
certain net worth and leverage ratios. The Company was in compliance with
all covenants under the borrowing agreements at July 31, 2002 and 2001.
(9) COMMITMENTS AND CONTINGENT LIABILITIES - LEASES:
The Company has operating leases covering certain property, equipment,
and computer hardware and software expiring at various dates through
2007. The following is a schedule of future minimum rental payments
required under non-cancelable operating leases at July 31, 2002:
2003 $ 544
2004 447
2005 420
2006 380
2007 382
-------
$ 2,173
=======
Total lease expense was $443, $399 and $275 for 2002, 2001 and 2000,
respectively.
F-13
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(10) COMMITMENTS AND CONTINGENT LIABILITIES - OTHER:
The Company is required by its Articles of Incorporation to repurchase
stock within 90 days of receiving written notice from the shareholder
requesting redemption of their stock. The redemption amount is the
original purchase price of the stock paid by the shareholder. The
Company was contingently liable for $4.5 million as of July 31, 2002.
The Company is subject to claims and other actions arising in the
ordinary course of business. Some of these claims and actions have
resulted in lawsuits where the Company is a defendant. Management
believes that the ultimate obligations if any, which may result from
unfavorable outcomes of such lawsuits, will not have a material adverse
effect on the financial position, results of operations or cash flows
of the Company and that such obligations, if any, would be adequately
covered by insurance.
(11) RELATED PARTY TRANSACTIONS:
In the normal course of business the Company sells to its affiliate,
board of directors, and key employees under normal terms and
conditions. Accounts receivable, related parties on the balance sheet
include amounts receivable on demand as of July 31 from the following:
2002 2001
------- -------
Affiliate (AAHA) $ 2,683 $ 2,286
Board of Directors 189 197
Officer and employees 3 7
------- -------
$ 2,875 $ 2,490
======= =======
Net sales on the Consolidated Statements of Income include sales to related
parties as follows:
2002 2001 2000
-------- -------- -------
Affiliate (AAHA) $ 14,433 $ 8,761 $ 4,080
Board of Directors 3,292 2,857 3,238
Officer and employees 57 103 25
-------- -------- -------
$ 17,782 $ 11,721 $ 7,343
======== ======== =======
Accounts payable, related parties on the balance sheet consist of $1,680
and $535 due to Agri-Laboratories as of July 31, 2002 and 2001,
respectively. Purchases from Agri-Laboratories were $14,890, $10,518, and
$6,894 for 2002, 2001, and 2000, respectively.
(12) PROFIT-SHARING AND 401(K) RETIREMENT PLAN:
The Company provides a non-contributory profit-sharing plan covering all
full-time employees who qualify as to age and length of service. It has
been the Company's policy to make contributions to the plan as provided
annually by the Board of Directors. The total provision for the
contribution to the plan was $490, $341 and $348 for 2002, 2001 and 2000,
respectively.
The Company also provides a contributory 401(k) retirement plan covering
all full-time employees who qualify as to age and length of service. It is
the Company's policy to match a maximum 15% employee contribution with a 3%
contribution. The total provision to the plan was $94, $142 and $115 for
the years ended July 31, 2002, 2001 and 2000, respectively.
F-14
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(13) SEGMENT INFORMATION:
The Company has one reportable segment which buys, sells, and warehouses
animal health related items. The Company does not have separate strategic
business units that offer different products or services. The Company did
not receive over 10% of revenues from any single external customer.
(14) RESTATEMENT OF FINANCIAL STATEMENTS:
Subsequent to the issuance of the Company's 2001 consolidated financial
statements and the filing of its 2001 Annual Report on Form 10-K with the
SEC, the Company's management determined that the accounting related to the
equity method investment in AAHA Services Corp. and the accounting for
sales promotion monies received from various manufacturers would require
restatement of the financial statements.
The Company's restatement reflects the change of accounting for the
investment in AAHA Services Corp. from the cost method to the equity
method. It also reflects the reclassification of promotion monies received
from manufacturers. Formerly, the Company had recorded promotion monies as
revenue. The restatement reflects the change to record promotion monies as
a reduction of operating, general and administrative expenses. The
restatement of promotion monies had no effect on operating income or net
income for the periods presented.
The effect on net income from these restatements is shown in the following
table:
2001 2000
----- ----
Net income as previously reported $ 509 $556
Impact of restatement for
equity in loss of affiliate (122) (9)
----- ----
Net income as restated $ 387 $547
===== ====
The principal effect of these items on the accompanying financial
statements is set forth below:
Consolidated Statements of Income
------------------------------------------------------------------------------
Year Ended July 31, 2001 Year Ended July 31, 2000
------------------------ ------------------------
Previously Effect of As Previously Effect of As
Reported Restatement Restated Reported Restatement Restated
---------- ----------- -------- ---------- ----------- --------
Net sales and other revenue $199,340 $(1,817) $197,523 $178,547 $(2,272) $176,275
Cost of sales 181,660 - 181,660 161,934 - 161,934
-------- ------- -------- -------- ------- --------
Gross profit 17,680 (1,817) 15,863 16,613 (2,272) 14,341
Operating, general &
administrative expenses 16,360 (1,817) 14,543 15,203 (2,272) 12,931
-------- ------- -------- -------- ------- --------
Operating income 1,320 - 1,320 1,410 - 1,410
Other income (504) - (504) (533) - (533)
Equity in loss of affiliate - (122) (122) - (9) (9)
-------- ------- -------- -------- ------- --------
Income before taxes 816 (122) 694 877 (9) 868
Income tax expense 307 - 307 321 - 321
-------- ------- -------- -------- ------- --------
Net Income $ 509 $ (122) $ 387 $ 556 $ (9) $ 547
======== ======= ======== ======== ======= ========
Net income per share $ 351.55 $(83.97) $ 267.58 $ 437.93 $ (7.38) $ 430.55
======== ======= ======== ======== ======= ========
F-15
PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended July 31, 2002, 2001 (Restated) and 2000 (Restated)
(in thousands, except share data)
(14) RESTATEMENT OF FINANCIAL STATEMENTS (continued):
For the fiscal year ended 2001, accounts receivable - stock was
reclassified to paid-in capital.
Consolidated Balance Sheet
As of July 31, 2001
--------------------------
Previously
Reported As Restated
---------- -----------
Investments in
unconsolidated affiliate $ 1,644 $ 1,513
Total assets 50,982 50,737
Paid-in capital 4,529 4,415
Retained earnings 2,025 1,894
Total stockholders' equity 6,557 6,311
(15) SELECTED QUARTERLY FINANCIAL DATA:
The following presents certain unaudited quarterly financial data and
certain audited, restated year-end financial data:
Quarters ended Year ended
October 31, 2000 January 31, 2001 April 30, 2001 July 31, 2001 July 31, 2001
(Restated) (Restated) (Restated) (Restated) (Restated)
---------------- ---------------- -------------- ------------- -------------
Revenues $49,755 $ 46,345 $50,774 $ 50,648 $197,523
Gross profit 3,500 3,698 3,751 4,914 15,863
Operating income 697 19 (120) 724 1,320
Net income 254 (148) (82) 363 387
Net income per share $183.00 $(104.39) $(56.33) $ 240.23 $ 267.58
Weighted average common
shares outstanding 1,388 1,420 1,465 1,515 1,447
Quarters ended
October 31, 2001 January 31, 2002 Year ended
(Restated) (Restated) April 30, 2002 July 31, 2002 July 31, 2002
---------------- ---------------- -------------- ------------- -------------
Revenues $59,153 $55,483 $63,131 $ 62,156 $239,923
Gross profit 4,336 4,308 6,425 5,002 20,071
Operating income 738 418 1,643 (656) 2,143
Net income 342 110 1,111 (454) 1,109
Net income per share $222.40 $ 70.43 $717.93 $(293.83) $ 717.14
Weighted average common
shares outstanding 1,536 1,557 1,548 1,544 1,546
F-16
(a) (3) Exhibits
Regulation S-K Document
Exhibit Number
3.1 Articles of Incorporation of Professional Veterinary Products, Ltd. (1)
3.2 Bylaws of Professional Veterinary Products, Ltd. (1)
4.1 Certificate of Professional Veterinary Products, Ltd. (1)
4.2 Article V of the Articles of Incorporation of Professional Veterinary
Products, Ltd., which defines the rights of holders of the securities
being registered (1)
4.3 Article II of the Bylaws of Professional Veterinary Products, Ltd., which
defines the rights of holders of the securities being registered (1)
5.1 Form of Opinion of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim LLP
(6)
10.1 Warranty Deed for real estate at 10100 J Street, Omaha, Nebraska from
Professional Veterinary Products, Ltd. to Duane E. and Barbara G. Miller
(1)
10.2 Warranty Deed for real estate at 10077 South 134th Street, Omaha,
Nebraska from Hilltop Industrial Park to Professional Veterinary Products,
Ltd. (1).
10.3 Lease of building located at 10100 J Street, Omaha, Nebraska between
Professional Veterinary Products, Ltd. and Duane E. and Barbara G. Miller
(1).
10.4 Construction Agreement for building at 10077 South 134th Street, Omaha,
Nebraska between Professional Veterinary Products, Ltd. and Mudra
Construction, Ltd. (1).
10.5 Sales Agency Agreement between Professional Veterinary Products, Ltd. and
Bayer Corporation (1).*
10.6 Sales Agency Agreement between Professional Veterinary Products, Ltd. and
Merial LLC (1).*
10.7 Select Distributors Marketing Agreement between Professional Veterinary
Products, Ltd. and the Animal Health Group of Pfizer, Inc. (1).*
10.8 Supply and Distribution Agreement between Professional Veterinary
Products, Ltd. and Schering-Plough Animal Health Corporation (1).*
10.9 Distributor Agreement between Professional Veterinary Products, Ltd. and
The Upjohn Company (1).*
10.10 Distribution Agreement between Professional Veterinary Products, Ltd. and
Fort Dodge Animal Health (1).
10.11 Purchase and Sale Agreement between Professional Veterinary Products,
Ltd., AAHA Services Corporation and American Animal Hospital Association
(3).
10.12 Lease of building located in York, Pennsylvania between Professional
Veterinary Products, Ltd. and Kinsley Equities II Limited Partnership (8).
11.1 Statement re Computation of Per Share Earnings (8).
15.1 Letter re Unaudited Interim Financial Information (1).
16 Letter dated March 20, 2002 from Marvin E. Jewell & Co., P.C. to the
Securities and Exchange Commission (5)
21 Subsidiaries (4).
23.1 Consent of Quick & McFarlin, P.C. (8).
23.2 Form of consent of Baird, Holm, McEachen, Pedersen, Hamann & Strasheim
(1).
II-1
24.1 Power of Attorney executed by Buddy D. Ray (8).
24.2 Power of Attorney executed by Chester L. Rawson (8).
24.3 Power of Attorney executed by Amy Lynne Hinton (8).
24.4 Power of Attorney executed by Steven E. Wright(8).
24.5 Power of Attorney executed by Michael B. Davis(8).
24.6 Power of Attorney executed by Raymond Ebert II (8).
24.7 Power of Attorney executed by Michael L. Whitehair(8).
24.8 Power of Attorney executed by Fred Garrison (8).
99.1 No Action letter issued by Securities and Exchange Commission on July 12,
1996 (1).
99.2 Form 8-K filed March 26, 2002 (7).
99.3 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(8).
99.4 Schedule of Allowances (8).
(1) Previously filed as exhibits to the Form S-1 Registration Statement
filed on September 7, 1999.
(2) Previously filed as exhibits to the Pre-Effective Amendment No. 1 to
the Form S-1 Registration Statement filed on October 19, 1999.
(3) Previously filed as exhibits to the Post-Effective Amendment No. 1 to
the Form S-1 Registration Statement No. 333-86629 filed on November 3,
2000.
(4) Previously filed as exhibits to the Form S-1 Registration Statement
No. 333-72962 filed on November 8, 2001.
(5) Previously filed as exhibits to the Pre-Effective Amendment No. 2 to
the Form S-1 Registration Statement No. 333-72962 filed on June 5,
2002.
(6) Previously filed as exhibits to the Pre-Effective Amendment No. 6 to
the Form S-1 Registration Statement No. 333-72962 filed on
September 9, 2002
(7) Incorporated by reference to the Form 8-K filed March 26, 2002.
(8) Filed herewith.
(*) Portions of these exhibits have been redacted pursuant to a request
for confidential treatment which was granted by the Securities and
Exchange Commission.
All of such previously filed documents are hereby incorporated herein
by reference in accordance with Item 601 of Regulation S-K.
(b) Reports of Form 8-K
No reports on Form 8-K were filed during the fourth quarter.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 29, 2002
PROFESSIONAL VETERINARY PRODUCTS, LTD.
By: /s/ Dr. Lionel L. Reilly
----------------------------------
Dr. Lionel L. Reilly
II-2
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Capacity
- --------- --------
/s/ Dr. Lionel L. Reilly President
- ------------------------------------
Dr. Lionel L. Reilly
/s/ Neal B. Soderquist Chief Financial Officer
- ------------------------------------
Neal B. Soderquist
*
- ------------------------------------ Director
Dr. Buddy D. Ray
*
- ------------------------------------ Director
Dr. Raymond C. Ebert II
*
- ------------------------------------ Director
Dr. Fred G. Garrison
*
- ------------------------------------ Director
Dr. Steven E. Wright
*
- ------------------------------------ Director
Dr. Michael B. Davis
*
- ------------------------------------ Director
Dr. Amy Lynne Hinton
*
- ------------------------------------ Director
Dr. Chester L. Rawson
*
- ------------------------------------ Director
Dr. Michael L. Whitehair
*By: /s/ Dr. Lionel L. Reilly
------------------------------
Dr. Lionel L. Reilly
As: Attorney-in-fact
II-3