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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K/A
 (Amendment No. 2)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the fiscal year ended July 31, 2004; or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
 For the transition period fromto.
 Commission file number: 000-26326
 PROFESSIONAL VETERINARY PRODUCTS, LTD.
  Nebraska
(State or other jurisdiction of
incorporation or organization)
    
    37-1119387
(IRS Employer
Identification No.)
 th   (402) 331-4440
 Common Stock, par value $1.00 per share
 þ  ̈
 þ
  ̈ þ
  DOCUMENTS INCORPORATED BY REFERENCE




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PROFESSIONAL VETERINARY PRODUCTS, LTD.
INDEX TO 10-K/A FOR THE FISCAL
YEAR ENDED JULY 31, 2004
  
 PageEXPLANATORY NOTE
    
    iiPART IITEM 1.
    
    BUSINESS
    
    
    1ITEM 2.
    
    PROPERTIES
    
    
    7ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    7ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    7PART IIITEM 5.
    
    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    8ITEM 6.
    
    SELECTED FINANCIAL DATA
    
    
    9ITEM 7.
    
    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
    
    
    9ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    28ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    29ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    29ITEM 9A.
    
    CONTROLS AND PROCEDURES
    
    
    29ITEM 9B.
    
    OTHER INFORMATION
    
    
    31PART IIIITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
    
    
    31ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    31ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
    
    
    31ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    31ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    32PART IVITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    32SIGNATURES
    
    II-3Consent of Quick & McFarlin, P.C.Certifications Pursuant to Section 302Certifications Pursuant to Section 906




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EXPLANATORY NOTE




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##### Table of Contents



PART I
  
 ITEM 1. BUSINESS
 Overview
     Background
   1




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Value-Added Services
    Our Shareholders
   Rebates to Shareholders
   2




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Company Subsidiaries
  Operating Segments
    Financial Information About Operating Segments
  3




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Financial Information About Geographic Areas
  MARKETLink
     Customers and Suppliers
   4




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The Animal Health Industry
    5




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Competition
    Government Regulation
  6




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Environmental Considerations
  Employees
  
 ITEM 2. PROPERTIES
    
 ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  7




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##### Table of Contents



PART
II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
      (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)August 1 - August 31, 2003
    
    
    4
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,842September 1 - September 30, 2003
    
    
    3
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,850October 1 - October 31, 2003
    
    
    6
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,857November 1 - November 30, 2003
    
    
    3
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,863December 1 - December 31, 2003
    
    
    4
    
    
    $
    2,500
    
    
    
    
    
    
    
    1,872January 1 - January 31, 2004
    
    
    3
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,876February 1 - February 29, 2004
    
    
    7
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,876March 1 - March 31, 2004
    
    
    2
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,889April 1 - April 30, 2004
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    1,904May 1, 2004 - May 31, 2004
    
    
    1
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,916June 1, 2004 - June 30, 2004
    
    
    1
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,929July 1, 2004 - July 31, 2004
    
    
    3
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,952Total:
    
    
    37
    
    
    $
    2,946
    
    
    
    
    
    
    
    1,952
 
 (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 stock, 8




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and under the Articles of Incorporation, the Company may repurchase shares 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 6. SELECTED FINANCIAL DATA
  2000
    
    2001
    
    2002
    
    2003
    
    2004(Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)
    
    (Restated)For the Fiscal Year:Net sales and other revenues
    
    
    176,275
    
    
    
    197,523
    
    
    
    239,922
    
    
    
    298,919
    
    
    
    335,421Operating income
    
    
    1,410
    
    
    
    1,320
    
    
    
    2,143
    
    
    
    5,177
    
    
    
    5,292Net income
    
    
    547
    
    
    
    387
    
    
    
    1,109
    
    
    
    3,214
    
    
    
    2,978Income per share:Operating income
    
    
    1,109.40
    
    
    
    912.08
    
    
    
    1,386.42
    
    
    
    2,987.10
    
    
    
    4,421.11Net Income
    
    
    430.55
    
    
    
    267.58
    
    
    
    717.14
    
    
    
    1,854.47
    
    
    
    2,487.77Redeemable Common shares
outstanding used in the
calculation
    
    
    1,271
    
    
    
    1,447
    
    
    
    1,546
    
    
    
    1,733
    
    
    
    1,197At Fiscal Year End:Total assets
    
    
    59,612
    
    
    
    50,737
    
    
    
    68,634
    
    
    
    84,402
    
    
    
    84,751Total long-term obligations
    
    
    6,013
    
    
    
    5,565
    
    
    
    5,076
    
    
    
    7,972
    
    
    
    5,982
 
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  9




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Forward-Looking Statements
 This Amendment of the Annual Report on Form 10-K/A contains forward-looking statements.
Forward-looking statements are contained principally in the sections entitled Business, 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;
    
    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 Annual Report on Form 10-K/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 Annual Report on Form 10-K, and we undertake no
obligation to publicly update or revise these forward-looking statements.
 Restatement of Previously Reported Financial Statements
   10




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Year
    
    
    
    
    
    YearEnded
    
    Year
    
    Ended
    
    YearJuly 31, 2004
    
    Ended
    
    July 31, 2003
    
    Ended(in thousands)
    
    July 31, 2004
    
    (in thousands)
    
    July 31, 2003(as previously
    
    (in thousands)
    
    (as previously
    
    (in thousands)reported)
    
    (Restated)
    
    reported)
    
    (Restated)REDEEMABLE COMMON STOCK
    
    
    
    
    
    
    3,636
    (1)
    
    
    
    
    
    
    5,346
    (2)STOCKHOLDERS EQUITYCommon stock, $1 par value;
authorized 30,000 shares; issued
and outstanding 1,266 shares and
1,236, respectively
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    Paid-in capital
    
    
    3,635
    
    
    
    
    
    
    
    5,344
    
    
    
    Retained earnings
    
    
    9,195
    
    
    
    9,195
    
    
    
    6,217
    
    
    
    6,217Total stockholders equity
    
    
    12,831
    
    
    
    12,831
    
    
    
    11,563
    
    
    
    11,653
 
 (1)
    
    Reflects reclassification of $3,636 from Common Stock of $1 and Paid-in Capital of $3,635.(2)
    
    Reflects reclassification of $5,346 from Common Stock of $2 and Paid-in Capital of $5,344. Note on Common Stock
  Overview
     11




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Results of Operations
  Summary Consolidated Results of Operations Table
 July 31, 2004
    
    
    July 31, 2003
    
    
    July 31, 2002(Restated)
    
    
    (Restated)
    
    
    (Restated)Net sales and other revenue
    
    $
    335,421
    
    
    $
    298,919
    
    
    $
    239,922Cost of sales
    
    
    301,393
    
    
    
    268,008
    
    
    
    219,851Gross profit
    
    
    34,028
    
    
    
    30,911
    
    
    
    20,071Operating, general and
administrative expenses
    
    
    28,736
    
    
    
    25,734
    
    
    
    17,928Operating income
    
    
    5,292
    
    
    
    5,177
    
    
    
    2,143Interest expense, net
    
    
    (678
    )
    
    
    (308
    )
    
    
    (373
    )Other income (expense)
    
    
    113
    
    
    
    119
    
    
    
    (22
    )Income before taxes
    
    
    4,727
    
    
    
    4,988
    
    
    
    1,748Income tax expense
    
    
    1,749
    
    
    
    1,774
    
    
    
    639Net income
    
    
    2,978
    
    
    
    3,214
    
    
    
    1,109Beginning retained earnings
    
    
    6,217
    
    
    
    3,003
    
    
    
    1,894Ending retained earnings
    
    $
    9,195
    
    
    $
    6,217
    
    
    $
    3,003
 Fiscal 2004 Compared to Fiscal 2003
    12




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Fiscal 2003 Compared to Fiscal 2002
      Fiscal 2002 Compared to Fiscal 2001
  13




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Contractual obligations and commitments
  PAYMENTS DUE BY PERIODLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsLoans payable to banks
    
    $
    10,174
    
    
    $
    10,174
    
    
    $
    
    
    
    $
    
    
    
    
    Capital lease commitments
    
    
    187
    
    
    
    117
    
    
    
    70
    
    
    
    
    
    
    
    Operating lease commitments
    
    
    2,478
    
    
    
    979
    
    
    
    1,488
    
    
    
    11
    
    
    
    Long-term debt obligations
(including current
portion)(1)
    
    
    7,795
    
    
    
    1,883
    
    
    
    2,928
    
    
    
    2,984
    
    
    
    Total contractual
obligations(2)
    
    $
    20,634
    
    
    $
    13,153
    
    
    $
    4,486
    
    
    $
    2,995
    
    
    
    
 
 (1)
    
    Interest payments due on long-term debt for less than 1 year are $1,000, 1-3 years are $900,
3-5 years are $200, and after 5 years is $0.(2)
    
    See Note 8 of the Notes to Financial Statements for additional information.  Operating Segments
  14




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Year EndedJuly 31, 2004
    
    
    July 31, 2003
    
    
    July 31, 2002(in thousands)NET SALES AND OTHER REVENUEWholesale Distribution
    
    $
    333,290
    
    
    $
    297,007
    
    
    $
    239,778Logistics Services
    
    
    1,246
    
    
    
    2,076
    
    
    
    2,578Direct Customer Services
    
    
    31,479
    
    
    
    24,223
    
    
    
    954Eliminations
    
    
    (30,594
    )
    
    
    (24,387
    )
    
    
    (3,388
    )Consolidated Total
    
    $
    335,421
    
    
    $
    298,919
    
    
    $
    239,922COST OF SALESWholesale Distribution
    
    
    303,248
    
    
    
    269,582
    
    
    
    219,841Logistics Services
    
    
    1,190
    
    
    
    1,955
    
    
    
    2,542Direct Customer Services
    
    
    27,325
    
    
    
    20,842
    
    
    
    882Eliminations
    
    
    (30,370
    )
    
    
    (24,371
    )
    
    
    (3,414
    )Consolidated Total
    
    $
    301,393
    
    
    $
    268,008
    
    
    $
    219,851OPERATING, GENERAL AND
ADMINISTRATIVE EXPENSESWholesale Distribution
    
    
    24,692
    
    
    
    22,245
    
    
    
    17,794Logistics Services
    
    
    
    
    
    
    1
    
    
    
    1Direct Customer Services
    
    
    4,044
    
    
    
    3,488
    
    
    
    133Eliminations
    
    
    
    
    
    
    
    
    
    
    Consolidated Total
    
    $
    28,736
    
    
    $
    25,734
    
    
    $
    17,928BUSINESS SEGMENT ASSETSWholesale Distribution
    
    $
    84,128
    
    
    $
    83,842
    
    
    $
    68,597Logistics Services
    
    
    248
    
    
    
    192
    
    
    
    640Direct Customer Services
    
    
    666
    
    
    
    394
    
    
    
    2,401Eliminations
    
    
    (291
    )
    
    
    (26
    )
    
    
    (3,004
    )Consolidated Total
    
    $
    84,751
    
    
    $
    84,402
    
    
    $
    68,634
 15




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Wholesale Distribution
      Logistics Services
     16




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Direct Customer Services
      Seasonality in Operating Results
   17




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Liquidity and Capital Resources
      18




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Inflation
  19




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Off-Balance Sheet Arrangements
  Critical Accounting Policies
   Use of Estimates
  Revenue Recognition
  Inventories
  Major Customer, Major Suppliers and Credit Concentrations
  20




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Income Taxes
  Goodwill and Other Intangible Assets
   New Accounting Pronouncements
 Consolidation of Variable
Interest Entities and Interpretation of ARB No. 51,
  21




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Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and Equity
 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;
    
    competition.
  22




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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
    
    Operational and financial control systems
   Loss of Key Personnel Could Hurt Our Business
   23




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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
    
    Generate revenue
   Performance or Security Problems With Our Systems Could Damage Our Business
  24




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We Face Significant Competition
   
    
    Walco International, Inc.
    
    The Butler Company
    
    Lextron Animal Health, Inc.
    
    MWI Veterinary Supply Co.
    
    J. A. Webster, Inc. d/b/a Webster Veterinary Supply
  
    
    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
   25




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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
  Our Substantial Leverage Could Harm Our Business By Limiting Our Available Cash and Our Access To
Additional Capital
  26




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
    
    it may limit our and our subsidiaries ability to obtain additional financial 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 a 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
  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
 27




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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.
  
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    28




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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
  29




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
    
    Added additional personnel to the finance department to assist with internal
controls over financial reporting;
    
    Provided an independent consultant with financial expertise to advise the Companys
board of directors; and
    
    Improved process for documentation and review of significant accounting entries.
  Changes in Internal Controls
   30




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Limitations on the Effectiveness of Controls
  
 ITEM 9B. OTHER INFORMATION
  
 PART III
  
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
  
 ITEM 11. EXECUTIVE COMPENSATION
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  
 31




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##### Table of Contents



ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
  
 PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    Financial StatementsThe following financial statements are filed as part of this report:
 Report of Independent Registered Public Accounting Firm, as revised
    
    
    F-1Consolidated Balance Sheets as of July 31, 2004 (Restated) and
July 31, 2003 (Restated)
    
    
    F-2Consolidated Statements of Income and Retained Earnings Years Ended
July 31, 2004 (Restated), 2003 (Restated), and 2002 (Restated)
    
    
    F-3Consolidated Statements of Cash Flows Years Ended July 31, 2004, 2003,
and 2002
    
    
    F-4Notes to Consolidated Financial Statements (Restated)
    
    
    F-5
 
 32




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     
 F-1




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
July 31, 2004 (Restated) and 2003 (Restated)
(in thousands, except share data)
 July 31,
    
    July 31,2004
    
    2003(Restated)
    
    (Restated)ASSETSCURRENT ASSETSCash
    
    $
    2,545
    
    
    $
    4,346Accounts receivable, less allowance for doubtful
accounts $821 and $760, respectively
    
    
    22,117
    
    
    
    22,718Accounts receivable, related parties
    
    
    3,248
    
    
    
    4,133Inventory, less allowance for obsolete inventory $129 and $0, respectively
    
    
    40,682
    
    
    
    38,817Deferred tax asset
    
    
    952
    
    
    
    343Other current assets
    
    
    836
    
    
    
    489Total current assets
    
    
    70,380
    
    
    
    70,846NET PROPERTY AND EQUIPMENT
    
    
    10,321
    
    
    
    10,298OTHER ASSETSIntangible assets, less accumulated
amortization $12 and $10, respectively
    
    
    13
    
    
    
    15Intangible retirement asset
    
    
    1,326
    
    
    
    1,334Investment in unconsolidated affiliates
    
    
    1,720
    
    
    
    1,583Cash value life insurance
    
    
    728
    
    
    
    295Deposits on property and equipment
    
    
    263
    
    
    
    31Total other assets
    
    
    4,050
    
    
    
    3,258TOTAL ASSETS
    
    $
    84,751
    
    
    $
    84,402LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESNote payable, bank
    
    $
    10,174
    
    
    $
    9,765Current portion of long-term debt and capital lease obligation
    
    
    2,000
    
    
    
    1,363Accounts payable
    
    
    45,216
    
    
    
    46,154Accounts payable, related parties
    
    
    840
    
    
    
    1,022Other current liabilities
    
    
    3,815
    
    
    
    4,897Total current liabilities
    
    
    62,045
    
    
    
    63,201LONG-TERM LIABILITIESLong-term debt and capital lease obligation, less current portion
    
    
    5,982
    
    
    
    7,972Accrued retirement benefits, less current portion
    
    
    1,326
    
    
    
    1,334Deferred tax liability
    
    
    457
    
    
    
    332Shares subject to mandatory redemption
    
    
    2,110
    
    
    
    Total long-term liabilities
    
    
    9,875
    
    
    
    9,638TOTAL LIABILITIES
    
    
    71,920
    
    
    
    72,839COMMITMENTS AND CONTINGENT LIABILITIES  SEE NOTE 11REDEEMABLE COMMON STOCK  SEE NOTE 6
    
    
    3,636
    
    
    
    5,346STOCKHOLDERS EQUITYRetained earnings
    
    
    9,195
    
    
    
    6,217Total stockholders equity
    
    
    9,195
    
    
    
    6,217TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    84,751
    
    
    $
    84,402
  F-2




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share amounts)
 July 31,
    
    July 31,
    
    July 31,2004
    
    2003
    
    2002(Restated)
    
    (Restated)
    
    (Restated)NET SALES AND OTHER REVENUE
    
    $
    335,421
    
    
    $
    298,919
    
    
    $
    239,922COST OF SALES
    
    
    301,393
    
    
    
    268,008
    
    
    
    219,851Gross profit
    
    
    34,028
    
    
    
    30,911
    
    
    
    20,071OPERATING, GENERAL AND
ADMINISTRATIVE EXPENSES
    
    
    28,736
    
    
    
    25,734
    
    
    
    17,928Operating income
    
    
    5,292
    
    
    
    5,177
    
    
    
    2,143OTHER INCOME (EXPENSE)Interest income
    
    
    471
    
    
    
    767
    
    
    
    477Interest expense
    
    
    (1,149
    )
    
    
    (1,075
    )
    
    
    (850
    )Equity in earnings of unconsolidated affiliate
    
    
    137
    
    
    
    92
    
    
    
    (22
    )Other
    
    
    (24
    )
    
    
    27
    
    
    
    Other expense  net
    
    
    (565
    )
    
    
    (189
    )
    
    
    (395
    )Income before taxes
    
    
    4,727
    
    
    
    4,988
    
    
    
    1,748Income tax expense
    
    
    1,749
    
    
    
    1,774
    
    
    
    639NET INCOME
    
    
    2,978
    
    
    
    3,214
    
    
    
    1,109BEGINNING RETAINED EARNINGS
    
    
    6,217
    
    
    
    3,003
    
    
    
    1,894ENDING RETAINED EARNINGS
    
    $
    9,195
    
    
    $
    6,217
    
    
    $
    3,003EARNINGS PER REDEEMABLE COMMON SHARE
    
    $
    2,487.77
    
    
    $
    1,854.47
    
    
    $
    717.14Weighted average redeemable common shares outstanding
    
    
    1,197
    
    
    
    1,733
    
    
    
    1,546SUPPLEMENTAL INFORMATIONNet sales and other revenue  related parties
    
    $
    33,718
    
    
    $
    27,325
    
    
    $
    17,782Purchases  related parties
    
    $
    15,616
    
    
    $
    14,908
    
    
    $
    14,890
  F-3




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended July 31, 2004, 2003 and 2002
(in thousands)
 July 31,
    
    July 31,
    
    July 31,2004
    
    2003
    
    2002CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    2,978
    
    
    $
    3,214
    
    
    $
    1,109Adjustments to reconcile net income to net cash
from operating activities:Depreciation and amortization
    
    
    1,105
    
    
    
    1,105
    
    
    
    619(Gain) loss on sale of property
    
    
    24
    
    
    
    (27
    )
    
    
    Equity in loss (income) from affiliate
    
    
    (137
    )
    
    
    (92
    )
    
    
    22(Increase) decrease in:Receivables
    
    
    1,486
    
    
    
    (7,158
    )
    
    
    (1,419
    )Inventory
    
    
    (1,865
    )
    
    
    (1,826
    )
    
    
    (14,649
    )Deferred tax asset
    
    
    (609
    )
    
    
    (118
    )
    
    
    (109
    )Other current assets
    
    
    (347
    )
    
    
    (453
    )
    
    
    216Cash value life insurance
    
    
    (433
    )
    
    
    (227
    )
    
    
    (35
    )Other assets
    
    
    (4
    )
    
    
    (16
    )
    
    
    Increase (decrease) in:Accounts payable
    
    
    (1,120
    )
    
    
    1,488
    
    
    
    13,202Other current liabilities
    
    
    (1,082
    )
    
    
    2,314
    
    
    
    1,051Deferred tax liability
    
    
    125
    
    
    
    (90
    )
    
    
    212Total adjustments
    
    
    (2,857
    )
    
    
    (5,100
    )
    
    
    (890
    )Net cash provided (consumed) by operating activities
    
    
    121
    
    
    
    (1,886
    )
    
    
    219CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (1,150
    )
    
    
    (2,546
    )
    
    
    (1,839
    )Proceeds from sale of assets
    
    
    
    
    
    
    41
    
    
    
    Deposits on property and equipment
    
    
    (228
    )
    
    
    (15
    )
    
    
    Net cash consumed by investing activities
    
    
    (1,378
    )
    
    
    (2,520
    )
    
    
    (1,839
    )CASH FLOWS FROM FINANCING ACTIVITIESNet short-term borrowings
    
    
    409
    
    
    
    2,868
    
    
    
    2,603Proceeds from long-term debt
    
    
    
    
    
    
    4,000
    
    
    
    Proceeds from capital lease obligation
    
    
    
    
    
    
    343
    
    
    
    Payments of long-term debt and capital lease obligation
    
    
    (1,353
    )
    
    
    (580
    )
    
    
    (449
    )Net proceeds from issuance of shares
subject to mandatory redemption
    
    
    117
    
    
    
    
    
    
    
    Net proceeds from issuance of redeemable common stock
    
    
    283
    
    
    
    797
    
    
    
    133Net cash provided (consumed) by financing activities
    
    
    (544
    )
    
    
    7,428
    
    
    
    2,287Net increase (decrease) in cash
    
    
    (1,801
    )
    
    
    3,022
    
    
    
    667Cash at beginning of year
    
    
    4,346
    
    
    
    1,324
    
    
    
    657Cash at end of year
    
    $
    2,545
    
    
    $
    4,346
    
    
    $
    1,324Supplemental disclosure of cash flow information:Interest paid
    
    $
    1,139
    
    
    $
    1,045
    
    
    $
    859Income taxes paid
    
    $
    3,866
    
    
    $
    876
    
    
    $
    86
  F-4




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 1  BUSINESS DESCRIPTION:
  NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 Basis of Consolidation 
 Use of Estimates 
 Revenue Recognition 
 Cash and Cash Equivalents 
 Accounts Receivable 
 Inventory 
 F-5




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 Property, Equipment and Depreciation 
 Building
    
    40 yearsFurniture, fixtures and equipment
    
    7   yearsComputer equipment
    
    5   yearsSoftware
    
    3-5years
  Capitalized Leases 
 Goodwill and Other Intangible Assets  Goodwill and Other Intangible Assets
  F-6




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
  2004
    
    2003
    
    2002Net income as reported
    
    $
    2,978
    
    
    $
    3,214
    
    
    $
    1,109Impairment charge
    
    
    
    
    
    
    151
    
    
    
    Amortization, net of taxes
    
    
    
    
    
    
    
    
    
    
    79Pro forma net income
    
    $
    2,978
    
    
    $
    3,365
    
    
    $
    1,188Earnings per share as reported
    
    $
    2,487.77
    
    
    $
    1,854.47
    
    
    $
    717.14Impairment charge
    
    
    
    
    
    
    87.21
    
    
    
    Amortization, net of taxes
    
    
    
    
    
    
    
    
    
    
    50.88Pro forma net earnings per share
    
    $
    2,487.77
    
    
    $
    1,941.68
    
    
    $
    768.02
 Long-Lived Assets  Accounting for the Impairment or Disposal of Long-Lived
Assets
 Income Taxes  
 Advertising 
 Direct Shipping and Handling Costs 
 Fair Value of Financial Instruments 
 Concentrations of Credit Risk 
 F-7




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 Major Customer, Major Suppliers and Credit Concentrations 
 Earnings Per Share  Earnings per Share
 Accounting Changes  Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity
 Recent Accounting Pronouncements  Employers
Disclosures about Pensions and Other Postretirement Benefits
 F-8




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 Consolidation of Variable
Interest Entities and Interpretation of ARB No. 51,
 Amendment of Statement 133 on Derivative
Instruments and Hedging Activities Accounting for Derivative
Instruments and Hedging Activities
 Reclassifications 
 NOTE 3  REBATES:
  2004
    
    2003Accounts receivable, net of allowance
    
    $
    30,625
    
    
    $
    33,132Less  rebates
    
    
    5,260
    
    
    
    6,281Accounts receivable, net
    
    $
    25,365
    
    
    $
    26,851
  2004
    
    2003
    
    2002Gross sales and other revenues
    
    $
    340,681
    
    
    $
    305,200
    
    
    $
    246,942Less  rebates
    
    
    5,260
    
    
    
    6,281
    
    
    
    7,020Net sales and other revenue
    
    $
    335,421
    
    
    $
    298,919
    
    
    $
    239,922
 F-9




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 4  PROPERTY AND EQUIPMENT:
  2004
    
    2003Land
    
    $
    1,762
    
    
    $
    1,762Buildings
    
    
    5,045
    
    
    
    5,018Leasehold improvements
    
    
    188
    
    
    
    188Equipment
    
    
    7,120
    
    
    
    6,15714,115
    
    
    
    13,125Less  accumulated depreciation
    
    
    3,794
    
    
    
    2,827$
    10,321
    
    
    $
    10,298
 NOTE 5  INVESTMENT IN UNCONSOLIDATED AFFILIATES:
  2004
    
    2003Investment in SERVCO (equity method)
    
    $
    1,576
    
    
    $
    1,439Investment in Agri-Laboratories, Ltd. (cost method)
    
    
    144
    
    
    
    144$
    1,720
    
    
    $
    1,583
  NOTE 6  SHARES SUBJECT TO MANDATORY REDEMPTION AND REDEEMABLE COMMON STOCK:
  F-10




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 6  SHARES SUBJECT TO MANDATORY REDEMPTION AND REDEEMABLE COMMON STOCK (continued):
  Shares SubjectRedeemable
    
    to MandatoryCommon Stock
    
    Redemption
    
    TotalNumber of shares issued and outstanding July 31, 2001
(restated)
    
    
    1,534
    
    
    
    
    
    
    
    1,534Issuance of redeemable common stock
    
    
    36
    
    
    
    
    
    
    
    36Redemption of redeemable common stock
    
    
    (26
    )
    
    
    
    
    
    
    (26
    )Number of shares issued and outstanding July 31, 2002
    
    
    1,544
    
    
    
    
    
    
    
    1,544Issuance of redeemable common stock
    
    
    330
    
    
    
    
    
    
    
    330Redemption of redeemable common stock
    
    
    (29
    )
    
    
    
    
    
    
    (29
    )Number of shares issued and outstanding July 31, 2003
    
    
    1,845
    
    
    
    
    
    
    
    1,845Issuance of redeemable common stock
    
    
    144
    
    
    
    
    
    
    
    144Redemption of redeemable common stock
    
    
    (37
    )
    
    
    
    
    
    
    (37
    )Recognition of liability per SFAS No. 150
    
    
    (716
    )
    
    
    716
    
    
    
    Number of shares issued and outstanding July 31, 2004
    
    
    1,236
    
    
    
    716
    
    
    
    1,952Carrying amount/redemption amount  July 31, 2001
(restated)
    
    $
    4,417
    
    
    $
    
    
    
    $
    4,417Issuance of redeemable common stock
    
    
    108
    
    
    
    
    
    
    
    108Redemption of redeemable common stock
    
    
    (77
    )
    
    
    
    
    
    
    (77
    )Net change in accounts receivable, stock
    
    
    101
    
    
    
    
    
    
    
    101Carrying amount/redemption amount  July 31, 2002
    
    
    4,549
    
    
    
    
    
    
    
    4,549Issuance of redeemable common stock
    
    
    990
    
    
    
    
    
    
    
    990Redemption of redeemable common stock
    
    
    (87
    )
    
    
    
    
    
    
    (87
    )Net change in accounts receivable, stock
    
    
    (106
    )
    
    
    
    
    
    
    (106
    )Carrying amount/redemption amount  July 31, 2003
    
    
    5,346
    
    
    
    
    
    
    
    5,346Issuance of redeemable common stock
    
    
    432
    
    
    
    
    
    
    
    432Redemption of redeemable common stock
    
    
    (109
    )
    
    
    
    
    
    
    (109
    )Net change in accounts receivable, stock
    
    
    77
    
    
    
    
    
    
    
    77Recognition of liability per SFAS No. 150
    
    
    (2,110
    )
    
    
    2,110
    
    
    
    Carrying amount/redemption amount  July 31, 2004
    
    $
    3,636
    
    
    $
    2,110
    
    
    $
    5,746
  F-11




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 6  SHARES SUBJECT TO MANDATORY REDEMPTION AND REDEEMABLE COMMON STOCK (continued):
  NOTE 7  INCOME TAXES:
  2004
    
    2003
    
    2002CurrentFederal
    
    $
    1,931
    
    
    $
    1,855
    
    
    $
    498State
    
    
    302
    
    
    
    127
    
    
    
    382,233
    
    
    
    1,982
    
    
    
    536DeferredFederal
    
    
    (420
    )
    
    
    (195
    )
    
    
    96State
    
    
    (64
    )
    
    
    (13
    )
    
    
    7(484
    )
    
    
    (208
    )
    
    
    103Total
    
    $
    1,749
    
    
    $
    1,774
    
    
    $
    639
  2004
    
    2003
    
    2002Expected tax at U.S. statutory rate
    
    $
    1,607
    
    
    $
    1,696
    
    
    $
    594State taxes, net of federal effect
    
    
    199
    
    
    
    83
    
    
    
    25Other, net
    
    
    (57
    )
    
    
    (5
    )
    
    
    20$
    1,749
    
    
    $
    1,774
    
    
    $
    639
 F-12




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 7  INCOME TAXES (continued):
  2004
    
    2003Current deferred tax asset (liability):Uniform capitalization
    
    $
    311
    
    
    $
    264Allowance for doubtful accounts
    
    
    329
    
    
    
    Inventory valuation
    
    
    52
    
    
    
    Deferred compensation
    
    
    260
    
    
    
    79$
    952
    
    
    $
    343Noncurrent deferred tax asset (liability):Excess of tax over book depreciation
    
    $
    (475
    )
    
    $
    (378
    )Amortization
    
    
    48
    
    
    
    46Profit in SERVCO
    
    
    (30
    )
    
    
    $
    (457
    )
    
    $
    (332
    )
 NOTE 8  LONG-TERM DEBT:
  2004
    
    2003Note payable, maturing in 2005, secured by certain
assets, 9.10% interest
    
    $
    836
    
    
    $
    937Note payable, maturing in 2005, secured by certain
assets, 8.66% interest
    
    
    169
    
    
    
    487Note payable, maturing in 2008, secured by certain
assets, 5.77% interest
    
    
    3,244
    
    
    
    3,955Note payable, maturing in 2009, secured by certain
assets, 7.42% interest
    
    
    3,546
    
    
    
    3,658Capital lease obligation, expiring in 2006, secured by
computer equipment, 4.58% interest
    
    
    187
    
    
    
    2987,982
    
    
    
    9,335Less  current portion
    
    
    2,000
    
    
    
    1,363$
    5,982
    
    
    $
    7,972
  2005
    
    $
    2,0002006
    
    
    1,0062007
    
    
    9932008
    
    
    9992009
    
    
    2,984$
    7,982
 F-13




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 8  LONG-TERM DEBT (continued):
   NOTE 9  RELATED PARTY TRANSACTIONS:
  2004
    
    2003Affiliate (SERVCO)
    
    $
    2,966
    
    
    $
    3,864Board of Directors
    
    
    276
    
    
    
    263Officer and employees
    
    
    6
    
    
    
    6$
    3,248
    
    
    $
    4,133
  2004
    
    2003
    
    2002Affiliate (SERVCO)
    
    $
    31,725
    
    
    $
    24,289
    
    
    $
    14,433Board of Directors
    
    
    1,914
    
    
    
    2,959
    
    
    
    3,292Officer and employees
    
    
    79
    
    
    
    77
    
    
    
    57$
    33,718
    
    
    $
    27,325
    
    
    $
    17,782
  NOTE 10  PROFIT-SHARING AND 401(k) RETIREMENT PLAN:
   F-14




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##### Table of Contents



PROFESSIONAL
VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 10  PROFIT-SHARING AND 401(k) RETIREMENT PLAN (continued):
  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.
  F-15




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 10  PROFIT-SHARING AND 401(k) RETIREMENT PLAN (continued):
 2004
    
    2003Change in Benefit Obligation:Projected benefit obligation  July 31
    
    $
    2,094
    
    
    $
    1,837Service cost
    
    
    151
    
    
    
    80Interest cost
    
    
    131
    
    
    
    72Actuarial loss
    
    
    367
    
    
    
    105Benefit Payments
    
    
    0
    
    
    
    0Projected benefit obligation  July 31
    
    $
    2,743
    
    
    $
    2,094Fair Value of Plan Assets  July 31
    
    $
    0
    
    
    $
    0Funded Status:Funded status
    
    
    ($2,743
    )
    
    
    ($2,094
    )Unrecognized actuarial loss
    
    
    472
    
    
    
    105Unrecognized prior service cost
    
    
    1,621
    
    
    
    1,757Net amount recognized
    
    
    ($650
    )
    
    
    ($232
    )Balance Sheet Amounts:Accrued retirement benefits
    
    
    ($1,976
    )
    
    
    ($1,566
    )Intangible retirement asset
    
    
    1,326
    
    
    
    1,334Net amount recognized
    
    
    ($650
    )
    
    
    ($232
    )
  2004
    
    2003Service cost
    
    $
    151
    
    
    $
    80Interest cost
    
    
    131
    
    
    
    72Amorti zation of unrecognized prior service costs
    
    
    136
    
    
    
    80Net periodic cost
    
    $
    418
    
    
    $
    232
  F-16




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 11  COMMITMENTS AND CONTINGENT LIABILITIES:
 Operating and Capital Leases 
 Operating
    
    Capital2005
    
    $
    979
    
    
    $
    1232006
    
    
    799
    
    
    
    712007
    
    
    662
    
    
    
    02008
    
    
    27
    
    
    
    02009
    
    
    11
    
    
    
    0Total minimum payments
    
    $
    2,478
    
    
    
    194Less  interest on capital leases
    
    
    
    
    
    
    7Present value of net minimum lease payments (incl. in Note 8)
    
    
    
    
    
    $
    187
  Stock Redemption 
 Other 
 NOTE 12  GOODWILL IMPAIRMENT:
   F-17




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 12  GOODWILL IMPAIRMENT (continued):
  DirectWholesale
    
    Logistics
    
    CustomerDistribution
    
    Services
    
    Services
    
    TotalBalance as of August 1, 2003
    
    $
    15
    
    
    $
    0
    
    
    $
    0
    
    
    $
    15Goodwill acquired during the year
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Impairment loss
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Amortization of other intangible assets
    
    
    (2
    )
    
    
    0
    
    
    
    0
    
    
    
    (2
    )Balance as of July 31, 2004
    
    $
    13
    
    
    $
    0
    
    
    $
    0
    
    
    $
    13
 NOTE 13  SEGMENT INFORMATION:
     F-18




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 13  SEGMENT INFORMATION (continued):
  DirectWholesale
    
    Logistics
    
    Customer
    
    
    
    
    
    ConsolidatedDistribution
    
    Services
    
    Services
    
    Eliminations
    
    TotalFor the year ended
July 31,2004Net sales and other revenue
    
    $
    333,290
    
    
    $
    1,246
    
    
    $
    31,479
    
    
    $
    (30,594
    )
    
    $
    335,421Cost of sales
    
    
    303,248
    
    
    
    1,190
    
    
    
    27,325
    
    
    
    (30,370
    )
    
    
    301,393Operating, general and
administrative expenses
    
    
    24,692
    
    
    
    
    
    
    
    4,044
    
    
    
    
    
    
    
    28,736Operating income
    
    
    5,350
    
    
    
    56
    
    
    
    111
    
    
    
    (225
    )
    
    
    5,292Income before taxes
    
    $
    4,727
    
    
    $
    56
    
    
    $
    169
    
    
    $
    (225
    )
    
    $
    4,727Business segment assets
    
    $
    84,128
    
    
    $
    248
    
    
    $
    666
    
    
    $
    (291
    )
    
    $
    84,751For the year ended
July 31, 2003Net sales and other revenue
    
    $
    297,007
    
    
    $
    2,076
    
    
    $
    24,223
    
    
    $
    (24,387
    )
    
    $
    298,919Cost of sales
    
    
    269,582
    
    
    
    1,955
    
    
    
    20,842
    
    
    
    (24,371
    )
    
    
    268,008Operating, general and
administrative expenses
    
    
    22,245
    
    
    
    1
    
    
    
    3,488
    
    
    
    
    
    
    
    25,734Operating income
    
    
    5,180
    
    
    
    120
    
    
    
    (108
    )
    
    
    (15
    )
    
    
    5,177Income before taxes
    
    $
    4,988
    
    
    $
    120
    
    
    $
    (105
    )
    
    $
    (15
    )
    
    $
    4,988Business segment assets
    
    $
    83,842
    
    
    $
    192
    
    
    $
    394
    
    
    $
    (26
    )
    
    $
    84,402For the year ended
July 31, 2002Net sales and other revenue
    
    $
    239,778
    
    
    $
    2,578
    
    
    $
    954
    
    
    $
    (3,388
    )
    
    $
    239,922Cost of sales
    
    
    219,841
    
    
    
    2,542
    
    
    
    882
    
    
    
    (3,414
    )
    
    
    219,851Operating, general and
administrative expenses
    
    
    17,794
    
    
    
    1
    
    
    
    133
    
    
    
    
    
    
    
    17,928Operating income
    
    
    2,143
    
    
    
    35
    
    
    
    (61
    )
    
    
    26
    
    
    
    2,143Income before taxes
    
    $
    1,748
    
    
    $
    35
    
    
    $
    (61
    )
    
    $
    26
    
    
    $
    1,748Business segment assets
    
    $
    68,597
    
    
    $
    640
    
    
    $
    2,401
    
    
    $
    (3,004
    )
    
    $
    68,634
 F-19




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 14  RESTATEMENT OF FINANCIAL STATEMENTS:
  F-20




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##### Table of Contents



PROFESSIONAL VETERINARY PRODUCTS, LTD. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2004 (Restated), 2003 (Restated) and 2002 (Restated)
(in thousands, except per share data)
 NOTE 15  SELECTED QUARTERLY FINANCIAL DATA:
  Quarters ended
    
    Year endedOctober 31,
    
    January 31,
    
    April 30,
    
    July 31,
    
    July 31,2001
    
    2002
    
    2002
    
    2002
    
    2002(restated)
    
    (restated)
    


    

    
    (restated)Revenues
    
    $
    59,153
    
    
    $
    55,483
    
    
    $
    63,131
    
    
    $
    62,155
    
    
    $
    239,922Gross profit
    
    
    4,336
    
    
    
    4,308
    
    
    
    6,425
    
    
    
    5,002
    
    
    
    20,071Operating income
    
    
    738
    
    
    
    418
    
    
    
    1,643
    
    
    
    (656
    )
    
    
    2,143Net income
    
    
    342
    
    
    
    110
    
    
    
    1,111
    
    
    
    (454
    )
    
    
    1,109Net income per
redeemable common
share
    
    $
    222.40
    
    
    $
    70.43
    
    
    $
    717.93
    
    
    $
    (293.83
    )
    
    $
    717.14Redeemable common
shares outstanding
    
    
    1,536
    
    
    
    1,557
    
    
    
    1,548
    
    
    
    1,544
    
    
    
    1,546
 Quarters ended
    
    Year endedOctober 31,
    
    January 31,
    
    April 30,
    
    July 31,
    
    July 31,2002
    
    2003
    
    2003
    
    2003
    
    2003(restated)Revenues
    
    $
    75,236
    
    
    $
    68,025
    
    
    $
    74,624
    
    
    $
    81,034
    
    
    $
    298,919Gross profit
    
    
    6,723
    
    
    
    8,107
    
    
    
    8,887
    
    
    
    7,194
    
    
    
    30,911Operating income
    
    
    301
    
    
    
    1,730
    
    
    
    2,601
    
    
    
    545
    
    
    
    5,177Net income
    
    
    114
    
    
    
    964
    
    
    
    1,723
    
    
    
    413
    
    
    
    3,214Net income per
redeemable common
share
    
    $
    69.66
    
    
    $
    560.45
    
    
    $
    980.33
    
    
    $
    227.66
    
    
    $
    1,854.47Redeemable common
shares outstanding
    
    
    1,641
    
    
    
    1,721
    
    
    
    1,757
    
    
    
    1,812
    
    
    
    1,733
 Quarters ended
    
    Year endedOctober 31,
    
    January 31,
    
    April 30,
    
    July 31,
    
    July 31,2003
    
    2004
    
    2004
    
    2004
    
    2004(restated)Revenues
    
    $
    88,442
    
    
    $
    73,446
    
    
    $
    85,075
    
    
    $
    88,458
    
    
    $
    335,421Gross profit
    
    
    8,624
    
    
    
    9,462
    
    
    
    8,427
    
    
    
    7,515
    
    
    
    34,028Operating income
    
    
    1,310
    
    
    
    2,815
    
    
    
    1,065
    
    
    
    102
    
    
    
    5,292Net income
    
    
    778
    
    
    
    1,662
    
    
    
    503
    
    
    
    35
    
    
    
    2,978Net income per
redeemable common
share
    
    $
    662.00
    
    
    $
    1,403.25
    
    
    $
    417.94
    
    
    $
    27.86
    
    
    $
    2,487.77Weighted average
redeemable common
shares outstanding
    
    
    1,176
    
    
    
    1,185
    
    
    
    1,202
    
    
    
    1,225
    
    
    
    1,197
 F-21




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##### Table of Contents



Exhibits
 Regulation S-KExhibit Number
    
    Document3.1
    
    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)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 (2)10.12
    
    Lease of building located in York, Pennsylvania between Professional Veterinary
Products, Ltd. and Kinsley Equities II Limited Partnership (4)10.13
    
    Amended and Restated Loan Agreement dated May 12, 2003 between Professional
Veterinary Products, Ltd., ProConn, LLC, Exact Logistics, LLC and U.S. Bank,
N.A.(5)10.14
    
    Revolving Promissory Note dated May 12, 2003 between Professional Veterinary
Products, Ltd., ProConn, LLC, Exact Logistics, LLC and U.S. Bank, N.A.(5)10.15
    
    Term Promissory Note dated May 12, 2003 between Professional Veterinary Products,
Ltd., ProConn, LLC, Exact Logistics, LLC and U.S. Bank, N.A.(5)10.16
    
    Security Agreement (PA Equipment) dated May 12, 2003 between Professional
Veterinary Products, Ltd. and U.S. Bank, N.A.(5)10.17
    
    Security Agreement (Blanket) dated May 12, 2003 between Professional Veterinary
Products, Ltd. and U.S. Bank, N.A. (5)10.18
    
    Security Agreement dated May 12, 2003 between ProConn, LLC and U.S. Bank, N.A.(5)10.19
    
    Security Agreement dated May 12, 2003 between Exact Logistics and U.S. Bank, N.A.(5)10.20
    
    Assignment of Lease and Rents dated May 12, 2003 between Professional Veterinary
Products, Ltd. and U.S. Bank, N.A. (5)10.21
    
    Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture
Filing dated May 12, 2003 between Professional Veterinary Products, Ltd. and U.S.
Bank, N.A. (5)10.22
    
    Supplemental Executive Retirement Plan(5)11
    
    Statement re Computation of Per Share Earnings (6)12
    
    Computation of Ratio of Earnings to Fixed Charges (6)21
    
    List of Subsidiaries (3)
 II-1




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##### Table of Contents



Regulation S-KExhibit Number
    
    Document23
    
    Consent of Quick & McFarlin, P.C. (7)24.1
    
    Power of Attorney executed by Buddy D. Ray (6)24.2
    
    Power of Attorney executed by Chester L. Rawson (6)24.3
    
    Power of Attorney executed by Amy Lynne Hinton (6)24.4
    
    Power of Attorney executed by Steven E. Wright (6)24.5
    
    Power of Attorney executed by Michael B. Davis (6)24.6
    
    Power of Attorney executed by G.W. Buckaloo, Jr. (6)24.7
    
    Power of Attorney executed by Tom Latta (6)24.8
    
    Power of Attorney executed by William Swartz (6)31
    
    Certifications pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002, by the Companys CEO and CFO (7)32
    
    Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, by the Companys CEO and CFO (7)99
    
    Schedule of Allowances (6)
  
 (1)
    
    Form S-1 Registration Statement filed on September 7, 1999.(2)
    
    Post-Effective Amendment No. 1 to the Form S-1 Registration Statement No.
333-86629 filed on November 3, 2000.(3)
    
    Form S-1 Registration Statement No. 333-72962 filed on November 8, 2001.(4)
    
    Form 10-K for the fiscal year ended July 31, 2002
filed on October 29, 2002.(5)
    
    Post-Effective Amendment No. 1 to the Form S-1
Registration Statement No. 333-72962
filed on August 29, 2003.(6)
    
    Form 10-K for the fiscal year ended July 31, 2004
filed on October 29, 2004.   (7)
    
    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. 
 II-2




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##### Table of Contents



SIGNATURES
   PROFESSIONAL VETERINARY PRODUCTS, LTD.By:
    
    /s/ Lionel L. ReillyDr. Lionel L. Reilly, President and CEO
  Signature
    
    Capacity
    
    Date/s/ Lionel L. Reilly
    
    President & CEO
    
    September 7, 2005Dr. Lionel L. Reilly/s/ Neal B. Soderquist
    
    Chief Financial Officer
    
    September 7, 2005Neal B. Soderquist/s/
Buddy D.
Ray*
    
    Director
    
    September 7, 2005Dr. Buddy D. Ray/s/
G.W. Buckaloo,
Jr.*

    
    Director
    
    September 7, 2005Dr. G.W. Buckaloo, Jr./s/
Tom Latta*
    
    Director
    
    September 7, 2005Dr. Tom Latta/s/
Steven E. Wright*

    
    Director
    
    September 7, 2005Dr. Steven E. Wright/s/
Amy Lynne
Hinton*

    
    Director
    
    September 7, 2005Dr. Amy Lynne Hinton/s/
Chester L.
Rawson*

    
    Director
    
    September 7, 2005Dr. Chester L. Rawson
 II-3




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##### Table of Contents



Signature
    
    Capacity
    
    Date/s/
William Swartz*
    
    Director
    
    September 7, 2005Dr. William Swartz
 *By:
    
    /s/ Lionel L. ReillyDr. Lionel L. ReillyAs: Attorney-in-fact
 II-4