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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 FORM 10-Q/A
 (Amendment No. 1)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended April 30, 2005
 or
 o
    
    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.
  Nebraska
    
    37-1119387(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 th
  o þ
  o þ




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PAGEEXPLANATORY NOTE
    
    iiPART I
    
    FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSIndependent Accountant's Report (as revised)
    
    
    1Consolidated Balance Sheets as of April 30, 2005 (unaudited)(Restated) and July 31, 2004 (Restated)
    
    
    2Consolidated Statements of Income for the three and nine month periods ended April 30, 2005 and 2004 (unaudited)
    
    
    3Consolidated Statements of Cash Flows for the nine month periods ended April 30, 2005 and 2004  (unaudited)
    
    
    4Notes to Condensed, Consolidated Financial Statements (unaudited)(Restated)
    
    
    5ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    12ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    30ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    30PART II
    
    OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    31ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    31ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    32ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    32ITEM 5.
    
    OTHER INFORMATION
    
    
    32ITEM 6.
    
    EXHIBITS
    
    
    32SIGNATURES
    
    
    34ConsentCertificationCertificationCertification




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EXPLANATORY NOTE




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##### Table of Contents



ITEM 1: FINANCIAL STATEMENTS
 
 
 INDEPENDENT ACCOUNTANTS REPORT
      
 1




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
    April 30,
    
    July 31,2005
    
    2004(Restated)
    
    (Restated)ASSETSCURRENT ASSETSCash
    
    $
    1,680
    
    
    $
    2,545Accounts receivable, less allowance for doubtful
accounts $1,012 and $821, respectively
    
    
    36,443
    
    
    
    22,117Accounts receivable, related party
    
    
    4,800
    
    
    
    3,248Inventory, less allowance for obsolete inventory $152 and $129, respectively
    
    
    40,316
    
    
    
    40,682Deferred tax asset
    
    
    1,192
    
    
    
    952Other current assets
    
    
    524
    
    
    
    836Total current assets
    
    
    84,955
    
    
    
    70,380NET PROPERTY AND EQUIPMENT
    
    
    10,690
    
    
    
    10,564OTHER ASSETSIntangible assets, less accumulated amortization $14 and $12, respectively
    
    
    11
    
    
    
    13Intangible asset
    
    
    939
    
    
    
    1,326Investment in unconsolidated affiliates
    
    
    1,720
    
    
    
    1,720Cash value life insurance
    
    
    1,178
    
    
    
    728Other assets
    
    
    1
    
    
    
    20Total other assets
    
    
    3,849
    
    
    
    3,807TOTAL ASSETS
    
    $
    99,494
    
    
    $
    84,751LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESNote payable, bank
    
    $
    17,725
    
    
    $
    10,174Current portion of long-term debt and capital lease obligation
    
    
    1,839
    
    
    
    2,000Accounts payable
    
    
    49,392
    
    
    
    45,216Accounts payable, related parties
    
    
    1,102
    
    
    
    840Other current liabilities
    
    
    4,608
    
    
    
    3,815Total current liabilities
    
    
    74,666
    
    
    
    62,045LONG-TERM LIABILITIESLong-term debt and capital lease obligation, less current portion
    
    
    5,362
    
    
    
    5,982Accrued retirement benefits, less current portion
    
    
    939
    
    
    
    1,326Deferred tax liability
    
    
    466
    
    
    
    457Shares subject to mandatory redemption
    
    
    2,164
    
    
    
    2,110Total long-term liabilities
    
    
    8,931
    
    
    
    9,875TOTAL LIABILITIES
    
    
    83,597
    
    
    
    71,920COMMITMENTS AND CONTINGENT LIABILITIES  SEE NOTE 8REDEEMABLE COMMON STOCK  SEE NOTE 6
    
    
    3,735
    
    
    
    3,636STOCKHOLDERS EQUITYRetained earnings
    
    
    12,162
    
    
    
    9,195Total stockholders equity
    
    
    12,162
    
    
    
    9,195TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    99,494
    
    
    $
    84,751
  2




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
     Three Months Ended
    
    Nine Months EndedApril 30,
    
    April 30,
    
    April 30,
    
    April 30,2005
    
    2004
    
    2005
    
    2004NET SALES AND OTHER REVENUE
    
    $
    102,689
    
    
    $
    85,075
    
    
    $
    292,379
    
    
    $
    246,963COST OF SALES
    
    
    92,071
    
    
    
    76,648
    
    
    
    261,867
    
    
    
    220,450Gross Profit
    
    
    10,618
    
    
    
    8,427
    
    
    
    30,512
    
    
    
    26,513OPERATING, GENERAL AND
ADMINISTRATIVE EXPENSES
    
    
    8,771
    
    
    
    7,362
    
    
    
    25,262
    
    
    
    21,323Operating income
    
    
    1,847
    
    
    
    1,065
    
    
    
    5,250
    
    
    
    5,190OTHER INCOME (EXPENSE):Interest income
    
    
    149
    
    
    
    120
    
    
    
    418
    
    
    
    364Interest expense
    
    
    (359
    )
    
    
    (342
    )
    
    
    (917
    )
    
    
    (835
    )Other
    
    
    
    
    
    
    (24
    )
    
    
    
    
    
    
    (24
    )Other expense, net
    
    
    (210
    )
    
    
    (246
    )
    
    
    (499
    )
    
    
    (495
    )Income before taxes
    
    
    1,637
    
    
    
    819
    
    
    
    4,751
    
    
    
    4,695Income tax expense
    
    
    620
    
    
    
    316
    
    
    
    1,784
    
    
    
    1,752NET INCOME
    
    $
    1,017
    
    
    $
    503
    
    
    $
    2,967
    
    
    $
    2,943EARNINGS PER REDEEMABLE COMMON SHARE
    
    $
    807.67
    
    
    $
    417.94
    
    
    $
    2,383.46
    
    
    $
    2,479.97Weighted average redeemable common
shares outstanding
    
    
    1,260
    
    
    
    1,202
    
    
    
    1,245
    
    
    
    1,187SUPPLEMENTAL INFORMATION:Net sales and other revenue, related parties
    
    $
    10,039
    
    
    $
    8,932
    
    
    $
    29,137
    
    
    $
    24,373Purchases, related parties
    
    $
    2,279
    
    
    $
    3,602
    
    
    $
    10,109
    
    
    $
    13,582
  3




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
     April 30,
    
    April 30,2005
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    2,967
    
    
    $
    2,943Adjustments to reconcile net income to net cash from
operating activities:Depreciation and amortization
    
    
    948
    
    
    
    826Accrued retirement benefits
    
    
    387
    
    
    
    314Loss on sale of equipment

    
    
    
    
    
    
    24(Increase) decrease in:Receivables
    
    
    (15,878
    )
    
    
    (7,090
    )Inventory
    
    
    366
    
    
    
    (12,954
    )Deferred tax asset
    
    
    (240
    )
    
    
    (265
    )Other assets
    
    
    332
    
    
    
    (316
    )Cash value life insurance
    
    
    (449
    )
    
    
    (424
    )Increase (decrease) in:Accounts payable
    
    
    4,438
    
    
    
    10,143Other current liabilities
    
    
    406
    
    
    
    (1,442
    )Deferred tax liability
    
    
    9
    
    
    
    160Total adjustments
    
    
    (9,681
    )
    
    
    (11,024
    )Net cash consumed by operating activities
    
    
    (6,714
    )
    
    
    (8,081
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (1,073
    )
    
    
    (1,177
    )Net cash consumed by investing activities
    
    
    (1,073
    )
    
    
    (1,177
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net short-term borrowings
    
    
    7,551
    
    
    
    7,591Proceeds from capital lease obligation
    
    
    208
    
    
    
    Payments on long-term debt and capital lease obligation
    
    
    (989
    )
    
    
    (1,005
    )Net proceeds from issuance of shares subject
to mandatory redemption
    
    
    54
    
    
    
    56Net proceeds from issuance of redeemable common stock
    
    
    98
    
    
    
    205Net cash provided by financing activities
    
    
    6,922
    
    
    
    6,847Net decrease in cash
    
    
    (865
    )
    
    
    (2,411
    )Cash at beginning of period
    
    
    2,545
    
    
    
    4,346Cash at end of period
    
    $
    1,680
    
    
    $
    1,935SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    902
    
    
    $
    817Income taxes paid
    
    $
    1,760
    
    
    $
    3,661
  4




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
     NOTE 1  BASIS OF PRESENTATION:
      NOTE 2  RECENT ACCOUNTING PRONOUNCEMENTS:
 Inventory Costs  an amendment of ARB No. 43, Chapter
4
 Accounting for Real Estate Time-Sharing
Transactions  an amendment of FASB Statement No. 66, Exchanges of Nonmonetary Assets
 an amendment of APB Opinion No. 29, Share-Based Payment.
 5




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 NOTE 3  PROPERTY AND EQUIPMENT:
  April 30,
    
    July 31,2005
    
    2004Land
    
    $
    1,762
    
    
    $
    1,762Buildings
    
    
    5,045
    
    
    
    5,045Leasehold improvements
    
    
    550
    
    
    
    188Equipment
    
    
    8,021
    
    
    
    7,12015,378
    
    
    
    14,115Less  Accumulated depreciation
    
    
    4,740
    
    
    
    3,79410,638
    
    
    
    10,321Construction in progress
    
    
    52
    
    
    
    243Net property, plant, and equipment
    
    $
    10,690
    
    
    $
    10,564
 NOTE 4  LINE OF CREDIT:
   NOTE 5  EARNINGS PER SHARE:
 Earnings per Share
 6




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 NOTE 6 
    
    SHARES SUBJECT TO MANDATORY REDEMPTION AND REDEEMABLE COMMON STOCK:
   NOTE 7  POSTRETIREMENT BENEFITS:
  Employers Disclosures About
Pensions and Other Postretirement Benefits. Employers Accounting for Pensions, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits Employers Accounting for Postretirement Benefits Other than
Pensions.
 7




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 NOTE 7  POSTRETIREMENT BENEFITS (continued):
  April 30,2005
    
    2004Service cost
    
    $
    144
    
    
    $
    114Interest cost
    
    
    129
    
    
    
    98Amortization of prior losses
    
    
    12
    
    
    
    Amortization of unrecognized prior service cost
    
    
    102
    
    
    
    102Net periodic benefit cost
    
    $
    387
    
    
    $
    314
  NOTE 8  COMMITMENTS AND CONTINGENT LIABILITIES:
 Stock Redemption 
 Major Customer, Major Suppliers and Credit Concentrations 
 Estimated Rebate 
 Other 
 Agreements
 8




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 NOTE 9  SEGMENT INFORMATION:
    9




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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 NOTE 9  SEGMENT INFORMATION (continued):
  DirectWholesale
    
    
    Logistics
    
    
    Customer
    
    
    
    
    
    
    ConsolidatedDistribution
    
    
    Services
    
    
    Services
    
    
    Eliminations
    
    
    TotalThree months ended April 30, 2005Net sales and other revenue
    
    $
    102,149
    
    
    $
    188
    
    
    $
    9,044
    
    
    $
    (8,692
    )
    
    $
    102,689Cost of sales
    
    
    92,624
    
    
    
    169
    
    
    
    8,031
    
    
    
    (8,753
    )
    
    
    92,071Operating, general and
administrative expenses
    
    
    7,659
    
    
    
    1
    
    
    
    1,111
    
    
    
    
    
    
    
    8,771Operating income
    
    
    1,866
    
    
    
    18
    
    
    
    (98
    )
    
    
    61
    
    
    
    1,847Income before taxes
    
    
    1,637
    
    
    
    18
    
    
    
    (79
    )
    
    
    61
    
    
    
    1,637Three months ended April 30, 2004Net sales and other revenue
    
    $
    84,495
    
    
    $
    219
    
    
    $
    6,320
    
    
    $
    (5,959
    )
    
    $
    85,075Cost of sales
    
    
    76,990
    
    
    
    201
    
    
    
    5,175
    
    
    
    (5,718
    )
    
    
    76,648Operating, general and
administrative expenses
    
    
    6,419
    
    
    
    
    
    
    
    943
    
    
    
    
    
    
    
    7,362Operating income
    
    
    1,085
    
    
    
    18
    
    
    
    202
    
    
    
    (240
    )
    
    
    1,065Income before taxes
    
    
    819
    
    
    
    18
    
    
    
    222
    
    
    
    (240
    )
    
    
    819Nine months ended April 30, 2005Net sales and other revenue
    
    $
    291,799
    
    
    $
    1,825
    
    
    $
    32,085
    
    
    $
    (33,330
    )
    
    $
    292,379Cost of sales
    
    
    264,894
    
    
    
    1,777
    
    
    
    27,966
    
    
    
    (32,770
    )
    
    
    261,867Operating, general and
administrative expenses
    
    
    21,609
    
    
    
    1
    
    
    
    3,652
    
    
    
    
    
    
    
    25,262Operating income
    
    
    5,297
    
    
    
    47
    
    
    
    467
    
    
    
    (561
    )
    
    
    5,250Income before taxes
    
    
    4,751
    
    
    
    47
    
    
    
    514
    
    
    
    (561
    )
    
    
    4,751Nine months ended April 30, 2004Net sales and other revenue
    
    $
    245,584
    
    
    $
    464
    
    
    $
    24,638
    
    
    $
    (23,723
    )
    
    $
    246,963Cost of sales
    
    
    222,129
    
    
    
    433
    
    
    
    21,299
    
    
    
    (23,411
    )
    
    
    220,450Operating, general and
administrative expenses
    
    
    18,222
    
    
    
    
    
    
    
    3,101
    
    
    
    
    
    
    
    21,323Operating income
    
    
    5,233
    
    
    
    31
    
    
    
    237
    
    
    
    (311
    )
    
    
    5,190Income before taxes
    
    
    4,695
    
    
    
    31
    
    
    
    280
    
    
    
    (311
    )
    
    
    4,695Business segment assetsApril 30, 2005
    
    $
    98,823
    
    
    $
    295
    
    
    $
    9,157
    
    
    $
    (8,781
    )
    
    $
    99,494July 31, 2004
    
    
    84,128
    
    
    
    372
    
    
    
    6,291
    
    
    
    (6,040
    )
    
    
    84,751
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PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 NOTE 10  RESTATEMENT OF FINANCIAL STATEMENTS:
  NOTE 11  RECLASSIFICATIONS:
  11




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ITEM 2:
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
 This Amendment to the Quarterly Report on Form 10-Q/A contains forward-looking statements.
Forward-looking statements are contained principally in the sections entitled Risk Factors That
May Affect Future Results and Managements Discussion and Analysis of Financial Condition and
Results of Operations. These statements involve known and unknown risks, uncertainties and other
factors which may cause our actual results, performance or achievements to be materially different
from any future results, performances or achievements expressed or implied by the forward-looking
statements. Forward-looking statements include, but are not limited to, statements about:
 
    
    the current economic environment affecting the Company and the markets it serves;
    
    sources of revenues and anticipated revenues, including the contribution from the growth
of new products and markets;
    
    estimates regarding the Companys capital requirements and its need for additional financing;
    
    the Companys ability to attract customers and the market acceptance of its products;
    
    our ability to establish relationships with suppliers of products; and
    
    plans for future products and services and for enhancements of existing products and services.
 In some cases, you can identify forward-looking statements by terms such as may, intend,
might, will, should, could, would, expect, believe, estimate, predict,
potential, or the negative of these terms, and similar expressions intended to identify
forward-looking statements. These statements reflect our current views with respect to future
events and are based on assumptions and subject to risks and uncertainties. Given these
uncertainties, you should not place undue reliance on these statements. We discuss many of these
risks in this Amendment to the Quarterly Report on Form 10-Q/A in greater detail under the heading
Risk Factors That May Affect Future Results. Also, these statements represent our estimates and
assumptions only as of the date of the original Quarterly Report on Form 10-Q , and we undertake no
obligation to publicly update or revise these forward-looking statements.
 These statements are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations
of our management and are subject to significant risks and uncertainties. Actual results may differ
from those set forth in the forward-looking statements. The following factors, among others, could
cause actual results to differ materially from those in forward-looking statements: decreased
demand for our services; loss of one or more of our major customers; surplus inventories; loss of
one or more of our major vendors; recessionary economic cycles; strikes, work slow downs, or work
stoppages at our vendors facilities; increases in interest rates; and increases in the prices paid
for goods. Readers should review and consider these factors along with the various disclosures we
make in public filings with the Securities and Exchange Commission.
 Restatement of Previously Reported Financial Statements
  12




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Three Months
    
    Three Months
    
    Year
    
    YearEnded
    
    Ended
    
    Ended
    
    EndedApril 30, 2005
    
    April 30, 2005
    
    July 31, 2004
    
    July 31, 2004(in thousands)
    
    (in thousands)
    
    (in thousands)
    
    (in thousands)(as previously
    
    (Restated)
    
    (as previously
    
    (Restated)reported)
    
    
    
    reported)REDEEMABLE COMMON STOCK
    
    
    
    
    
    $
    3,735
    (1)
    
    
    
    
    
    $
    3,636
    (2)STOCKHOLDERS EQUITYCommon stock, $1 par value;
authorized 30,000 shares; issued
and outstanding 1,266 shares and
1,236, respectively
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Paid-in capital
    
    
    3,734
    
    
    
    
    
    
    
    3,635
    
    
    
    Retained earnings
    
    
    12,162
    
    
    
    12,162
    
    
    
    9,195
    
    
    
    9,195Total stockholders equity
    
    $
    15,897
    
    
    $
    12,162
    
    
    $
    12,831
    
    
    $
    9,195
 
 (1)
    
    Reflects reclassification of $3,735 from Common Stock of $1 and Paid-in Capital of $3,734.(2)
    
    Reflects reclassification of $3,636 from Common Stock of $1 and Paid-in Capital of $3,635. Note on Common Stock
  Overview
   13




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Current Assets
  Current Liabilities
  Results of Operations
  Summary Consolidated Results of Operations Table For Three Months Ended April 30, 2005
 Three Months EndedApril 30(in thousands)2005
    
    2004Net sales and other revenue
    
    $
    102,689
    
    
    $
    85,075Cost of sales
    
    
    92,071
    
    
    
    76,648Gross profit
    
    
    10,618
    
    
    
    8,427Operating, general and administrative
expenses
    
    
    8,771
    
    
    
    7,362Operating income
    
    
    1,847
    
    
    
    1,065Interest expense, net
    
    
    (210
    )
    
    
    (222
    )Other income (expense)
    
    
    
    
    
    
    (24
    )Income before taxes
    
    
    1,637
    
    
    
    819Income tax expense
    
    
    620
    
    
    
    316Net income
    
    $
    1,017
    
    
    $
    503
 Three months ended April 30, 2005 as compared to three months ended April 30, 2004
  14




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Operating Segments  three months ended April 30, 2005 as compared to three months ended April 30,
2004
     Wholesale Distribution
  15




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Logistics Services
     Direct Customer Services
  16




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##### Table of Contents



Summary Consolidated Results of Operations Table For Nine Months Ended April 30, 2005
 Nine Months EndedApril 30,(in thousands)2005
    
    2004Net sales and other revenue
    
    $
    292,379
    
    
    $
    246,963Cost of sales
    
    
    261,867
    
    
    
    220,450Gross profit
    
    
    30,512
    
    
    
    26,513Operating, general and administrative
expenses
    
    
    25,262
    
    
    
    21,323Operating income
    
    
    5,250
    
    
    
    5,190Interest expense, net
    
    
    (499
    )
    
    
    (471
    )Other income (expense)
    
    
    
    
    
    
    (24
    )Income before taxes
    
    
    4,751
    
    
    
    4,695Income tax expense
    
    
    1,784
    
    
    
    1,752Net income
    
    $
    2,967
    
    
    $
    2,943
 Nine months ended April 30, 2005 as compared to nine months ended April 30, 2004
   17




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Operating Segments  nine months ended April 30, 2005 as compared to nine months ended April 30,
2004
 Wholesale Distribution
     18




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Logistics Services
     Direct Customer Services
     19




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Seasonality in Operating Results
   Liquidity and Capital Resources
     20




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Operating Activities.
 21




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Investing Activities.
 Financing Activities
 Off-Balance Sheet Arrangements
  Critical Accounting Policies
   Use of Estimates
  22




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##### Table of Contents



Revenue Recognition
  Inventories
  Major Customer, Major Suppliers and Credit Concentrations
  Income Taxes
  Goodwill and Other Intangible Assets
   Recent Accounting Changes
  23




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##### Table of Contents



Risk Factors That May Affect Future Results
  Fluctuation of Future Results Due to Factors Outside of Managements Control
  
    
    seasonality;
    
    the impact of economic factors on the national veterinary practices;
    
    the timing and effectiveness of marketing programs;
    
    the timing of the introduction of new products and services;
    
    the timing and effectiveness of capital expenditures;
    
    changes in manufacturer contracts; and
    
    competition.
  Failure to Manage Growth Could Impair Our Business
   
    
    Sales and marketing programs;
    
    Customer support programs;
    
    Current product and service lines;
    
    Technological support which equals or exceeds our competitors;
    
    Recruitment and training of new personnel; and
    
    Operational and financial control systems.
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Loss of Key Personnel Could Hurt Our Business
   There is No Market for Our Stock and the Value of the Stock Will Not Increase
  It is Unlikely We Will Pay Dividends
  We Rely on Strategic Relationships to Generate Revenue
  
    
    Extend the reach of our distribution and services to the various participants in the
veterinary industry;
    
    Obtain specialized expertise; and
    
    Generate revenue.
  25




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##### Table of Contents



Performance or Security Problems With Our Systems Could Damage Our Business
  We Face Significant Competition
    
    
    price reductions, decreased revenue, and lower profit margins;
    
    loss of market share; and
    
    increased marketing expectations.
  Changes in the Veterinary Distribution Industry Could Adversely Affect Our Business
  26




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##### Table of Contents



You May be Forced to Sell Your Shares Back to the Company
  We May Lack the Funds to Repurchase all of the Shares
   Investors May Fail to Pay the Installment Payments
  We May Not Be Able To Raise Needed Capital In the Future
  27




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Our Substantial Leverage Could Harm Our Business By Limiting Our Available Cash and Our Access To
Additional Capital
  
    
    it may limit our ability to obtain additional funds for working capital, capital
expenditures, debt service requirements, or other purposes on favorable terms or at
all;
    
    a substantial portion of our cash flows from operations must be dedicated to the
payment of principal and interest on our indebtedness and thus will not be available
for other purposes, including operations, capital expenditures and future business
opportunities;
    
    it may limit our ability to adjust to changing market conditions and place us at a
competitive disadvantage compared to those of our competitors that are less leveraged;
    
    we may be more vulnerable than a less leveraged company to a downturn in general
economic conditions or in our business; or
    
    we may be unable to carry out capital spending that is important to our growth.
  Our Variable Rate Indebtedness Subjects Us To Interest Rate Risk, Which Could Cause Our Debt
Service Obligations To Increase Significantly
  28




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##### Table of Contents



We Rely Substantially On Third-Party Suppliers, and the Loss Of Products Or Delays In Product
Availability From One Or More Third-Party Supplier Could Substantially Harm Our Business
   
    
    If an existing agreement expires or a certain product line is discontinued, then we
would not be able to continue to offer our customers the same breadth of products and
our sales and operating results would likely suffer unless we are able to find an
alternate supply of a similar product.
    
    Current agreements, or agreements we may negotiate in the future, may commit us to
certain minimum purchase or other spending obligations. It is possible we will not be
able to create the market demand to meet such obligations, which would create an
increased drain on our financial resources and liquidity.
    
    If market demand for our products increases suddenly, our current suppliers might
not be able to fulfill our commercial needs, which would require us to seek new
manufacturing arrangements and may result in substantial delays in meeting market
demand. If we consistently generate more demand for a product than a given supplier is
capable of handling, it could lead to large backorders and potentially lost sales to
competitive products that are readily available. This could require us to seek or fund
new sources of supply.
    
    We may not be able to control or adequately monitor the quality of products we
receive from our suppliers. Poor quality items could damage our reputation with our
customers.
    
    Some of our third party suppliers are subject to ongoing periodic unannounced
inspection by regulatory authorities, including the FDA, DEA and other federal and
state agencies for compliance with strictly enforced regulations, and we do not have
control over our suppliers compliance with these regulations and standards. Violations
could potentially lead to interruptions in supply that could cause us to lose sales to
readily available competitive products.
  We Are Exposed To Potential Risks From Recent Legislation Requiring Companies To Evaluate Their
Internal Control Over Financial Reporting
  29




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##### Table of Contents



ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
      
 ITEM 4: CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  30




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##### Table of Contents



Changes in Internal Controls
   Limitations on the Effectiveness of Controls
  
 PART II
OTHER INFORMATION
 
 ITEM 1: LEGAL PROCEEDINGS
  
 ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
   31




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##### Table of Contents



(1)
 Total Number
    
    Maximumof Shares
    
    Number ofPurchased as
    
    Shares ThatPart of
    
    May Yet BePublicly
    
    PurchasedTotal Number
    
    Average
    
    Announced
    
    Under theof Shares
    
    Price Paid
    
    Plans or
    
    Plans orPeriod
    
    Purchased
    
    Per Share
    
    Programs(2)
    
    Programs(3)February 1 - February 28, 2005
    
    
    2
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,981March 1 - March 31, 2005
    
    
    3
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,985April 1 - April 30, 2005
    
    
    2
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,995Total:
    
    
    7
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,995
 
 (1)
    
    The Companys Bylaws require the Company to repurchase stock within ninety (90) days
of receiving written notice from a shareholder requesting redemption of his, her, or its share of
stock, and under the Articles of Incorporation, the Company may repurchase the share of common
stock of any shareholder who is no longer a veterinarian or veterinary clinic or owes money to the
Company and fails to make required payments. The redemption amount is the original purchase price
of the stock paid by the shareholder. Currently, the price of each share is fixed at $3,000 as
provided in the Articles of Incorporation. There is no expiration date.(2)
    
    Since inception, each shareholder of the Company has been entitled to have his, her, or
its share redeemed in accordance with the Articles of Incorporation and Bylaws.(3)
    
    The maximum number of shares that may be purchased by the Company varies from time to
time due to the addition of new shareholders and on-going redemption of shares. Each shareholder

of the Company may have his, her, or its share redeemed in accordance with the Articles of
Incorporation and Bylaws. 
 ITEM 3: DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5: OTHER INFORMATION
  
 ITEM 6: EXHIBITS
  Exhibit No.
    
    Description3.1
    
    Second Amended and Restated Articles of Incorporation of Professional Veterinary
Products, Ltd. (1)3.2
    
    Second Amended and Restated Bylaws of Professional Veterinary Products, Ltd. (2)4.1
    
    Certificate of Professional Veterinary Products, Ltd. (3)
 32




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##### Table of Contents



Exhibit No.
    
    Description4.2
    
    Second Amended and Restated Articles of Incorporation of Professional
Veterinary Products, Ltd. (1)4.3
    
    Second Amended and Restated Bylaws of Professional Veterinary Products, Ltd.
(2)23
    
    Consent of Independent Certified Public Accountants #31(i)(a)
    
    Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, by Dr. Lionel L. Reilly, the Companys
Chief Executive Officer #31(i)(b)
    
    Certification pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, by Neal Soderquist, the Companys Chief
Financial Officer #32
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, by Dr. Lionel L. Reilly, the Companys
Chief Executive Officer, and Neal Soderquist, the Companys Chief Financial Officer #
 
 #
    
    Filed herewith.  (1)
    
    Form 10-Q Quarterly Report for the period ended January 31,
2005 filed March 17, 2005.(2)
    
    Form 8-K Current Report dated March 7, 2005 and filed March 11,
2005.(3)
    
    Form S-1 Registration Statement No. 333-86629 filed on
September 7, 1999.
 33




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##### Table of Contents



SIGNATURES
  Date: July 28, 2005
    PROFESSIONAL VETERINARY PRODUCTS, LTD./s/ Dr. Lionel L. ReillyDr. Lionel L. ReillyPresident and Chief Executive Officer /s/ Neal B. SoderquistNeal B. SoderquistChief Financial Officer 34