UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the fiscal year ended July 31, 2009, 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
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  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
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  DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS
 PagePART IITEM 1.
    
    BUSINESS
    
    
    1ITEM 1A.
    
    RISK FACTORS
    
    
    6ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
    
    
    13ITEM 2.
    
    PROPERTIES
    
    
    13ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    14ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    14PART IIITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY
SECURITIES
    
    
    15ITEM 6.
    
    SELECTED FINANCIAL DATA
    
    
    16ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    17ITEM 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 (T).
    
    CONTROLS AND PROCEDURES
    
    
    29ITEM 9B.
    
    OTHER INFORMATION
    
    
    31PART IIIITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
    
    
    31ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    31ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED SHAREHOLDER MATTERS
    
    
    31ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE
    
    
    31ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    31PART IVITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
    
    
    32SIGNATURES
  -i-




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PART I
  
 ITEM 1.
    
    BUSINESS
 Overview
     Background
   Value-Added Services
  1




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New Facility and Services
  Our Shareholders
  Rebates to Shareholders
  2




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Company Subsidiaries
   Operating Segments
  Financial Information About Geographic Areas
  Customers and Suppliers
   3




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The Animal Health Industry
     4




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Competition
    Government Regulation
    Environmental Considerations
  5




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Employees
  Trademarks
  
 ITEM 1A.
    
    RISK FACTORS
 Risk Factors That May Affect Future Results
  Our Operating Results May Fluctuate Due to Factors Outside of Managements Control
  
    
    vendor rebates;
    
    seasonality;
    
    the impact of economic factors on the national veterinary practices;
    
    the timing and effectiveness of marketing programs offered by our vendors;
    
    the timing of the introduction of new products and services;
    
    exclusivity requirements with vendors that may prohibit distribution of competing
products;
    
    the recall of a significant product by one of our vendors;
    
    extended shortage or backorder of a significant product by one of our vendors;
    
    the timing and effectiveness of capital expenditures;
    
    a disruption caused by adverse weather or other natural conditions;
    
    inability to ship products to the customer as a result of technological or shipping
disruptions;
    
    changes in manufacturer contracts; and
    
    competition.
 6




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The Market is Evolving, and If We Fail to Implement Our Business Plan, Our Profit May Be Negatively
Impacted.
  
    
    Sales and marketing programs;
    
    Customer support programs;
    
    Current and new product and service lines;
    
    Technical support which equals or exceeds our competitors;
    
    Vendor relationships;
    
    Recruitment and training of new personnel; and
    
    Operational and financial control systems.
  Loss of Key Personnel Could Harm Our Business
   There is No Market for Our Stock and the Value of the Stock Will Not Increase
  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.
 7




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Performance or Security Problems With Our Systems Could Damage Our Business
  The outbreak of an infectious disease within either the production animal or companion animal
population could have a significant adverse effect on our business and our results of operations.
  We Face Significant Competition
    8




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It is Unlikely We Will Pay Dividends
  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
  
    
    it may limit our and our subsidiaries 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
  9




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We Rely Substantially On Third-Party Suppliers, and the Loss Of Products or Delays In Product
Availability From One Or More Third-Party Suppliers 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 or new sources of supply 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 also
could require us to seek new sources of supplies.
 
    
    We may not be able to control or adequately monitor the quality of products we
receive from our suppliers. Poor quality products 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, Environmental Protection
Agency (EPA) 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.
 
    
    If any of our vendors is unable to obtain the necessary credit to manage its
business, it may not be able to deliver its products to us.
  We Rely Upon Third Parties to Ship Products to Our Customers and Interruptions in Their Operations
Could Harm Our Business, Financial Condition and Results of Operations
  10




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We Are Exposed To Potential Risks From Legislation Requiring Companies To Evaluate Controls Under
Section 404 Of The Sarbanes-Oxley Act Of 2002
  Changes in the Veterinary Distribution Industry Could Adversely Affect Our Business
   Consolidation in the Veterinary Distribution Business and Veterinary Practices May Decrease Our
Revenues and Profitability
  Consolidation Among Animal Health Product Vendors may Decrease our Sales and Profitability
  11




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The General Economic Downturn may Adversely Affect our Business
  Exclusivity Requirements and Failures to Continue Relationships With Vendors May Cause Us to Lose
Access to Certain Products and Erode Our Market Share
   Our Business, Financial Condition And Results of Operations Depend Upon Maintaining Our
Relationships With Vendors
     An Adverse Change in Vendor Rebates Could Negatively Affect Our Results of Operation
  12




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Our Quarterly Operating Results May Fluctuate Significantly
  If We Fail to Comply With or Become Subject to More Onerous Government Regulations, Our Business
Could be Adversely Affected
    
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
 Headquarters in Omaha, Nebraska
  13




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York, Pennsylvania
  Quincy, Illinois
  Mankato, Minnesota
  Spicer, Minnesota
   
 ITEM 3.
    
    LEGAL PROCEEDINGS
   
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  14




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PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES
OF EQUITY SECURITIES
       Total Number of
    
    MaximumShares
    
    Number ofPurchased as
    
    Shares ThatPart of Publicly
    
    May Yet BeTotal Number
    
    
    
    
    
    Announced
    
    Purchasedof Shares
    
    Average Price
    
    Plans or
    
    Under the PlansPeriod
    
    Purchased
    
    Paid Per Share
    
    Programs
    
    or Programs(1)May 1  May 31, 2009
    
    
    6
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,958June 1  June 30, 2009
    
    
    8
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,950July 1  July 31, 2009
    
    
    2
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,948Total:
    
    
    16
    
    
    $
    3,000
    
    
    
    
    
    
    
    1,948
 
 (1)
    
    The maximum number of shares that may be purchased by the Company varies from time to time due
to the on-going redemption of shares. 15




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ITEM 6.
    
    SELECTED FINANCIAL DATA
  2005
    
    2006
    
    2007
    
    2008
    
    2009Net sales and other revenues
    
    $
    387,249
    
    
    $
    368,926
    
    
    $
    342,699
    
    
    $
    339,838
    
    
    $
    299,729Operating income (loss)
    
    $
    4,610
    
    
    $
    5,089
    
    
    $
    5,500
    
    
    $
    3,808
    
    
    $
    (6,409
    )Net income (loss)
    
    $
    2,536
    
    
    $
    2,392
    
    
    $
    2,384
    
    
    $
    1,428
    
    
    $
    (4,373
    )Income per share:Operating income (loss)
    
    $
    3,677
    
    
    $
    3,612
    
    
    $
    2,697
    
    
    $
    1,861
    
    
    $
    (3,227
    )Net income (loss)
    
    $
    2,023
    
    
    $
    1,698
    
    
    $
    1,169
    
    
    $
    698
    
    
    $
    (2,202
    )Redeemable common shares
outstanding used in the
calculation
    
    
    1,254
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common shares outstanding
used in the calculation
    
    
    
    
    
    
    1,409
    
    
    
    2,039
    
    
    
    2,046
    
    
    
    1,986Total assets
    
    $
    85,266
    
    
    $
    76,399
    
    
    $
    88,244
    
    
    $
    81,194
    
    
    $
    79,733Total long-term obligations
    
    $
    5,109
    
    
    $
    5,375
    
    
    $
    6,761
    
    
    $
    6,620
    
    
    $
    6,181Total number of shares
subject to mandatory
redemption(1)
    
    
    731
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total number of common shares
    
    
    
    
    
    
    2,042
    
    
    
    2,068
    
    
    
    2,037
    
    
    
    1,948Total number of redeemable
common shares(1)
    
    
    1,288
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    For additional information on the Companys shares, see Note 5 to the 2009 Consolidated
Financial Statements. 16




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ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Forward-Looking Statements
  
    
    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.
  Overview
    17




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Current Assets
  Current Liabilities
  Results of Operations
   July 31, 2009
    
    
    July 31, 2008
    
    
    July 31, 2007(In Thousands)Net sales and other revenue
    
    $
    299,729
    
    
    $
    339,838
    
    
    $
    342,699Cost of sales
    
    
    266,334
    
    
    
    295,596
    
    
    
    301,122Gross profit
    
    
    33,395
    
    
    
    44,242
    
    
    
    41,577Operating, general and administrative
expenses
    
    
    39,804
    
    
    
    40,434
    
    
    
    36,077Operating income (loss)
    
    
    (6,409
    )
    
    
    3,808
    
    
    
    5,500Interest expense, net
    
    
    (735
    )
    
    
    (1,061
    )
    
    
    (1,676
    )Equity in earnings of unconsolidated affiliate
    
    
    
    
    
    
    53
    
    
    
    116Loss on the sale of unconsolidated affiliate
    
    
    
    
    
    
    (571
    )
    
    
    Other income (expense)
    
    
    
    
    
    
    1
    
    
    
    (81
    )Income (loss) before taxes
    
    
    (7,144
    )
    
    
    2,230
    
    
    
    3,859Income tax expense (benefit)
    
    
    (2,771
    )
    
    
    802
    
    
    
    1,475Net income (loss)
    
    $
    (4,373
    )
    
    $
    1,428
    
    
    $
    2,384Beginning retained earnings
    
    
    17,935
    
    
    
    16,507
    
    
    
    14,123Ending retained earnings
    
    $
    13,562
    
    
    $
    17,935
    
    
    $
    16,507
  18




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19




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Contractual Obligations and Commitments
  PAYMENTS DUE BY PERIODLess than 1
    
    
    
    
    
    
    
    
    More than 5Total
    
    
    Year
    
    
    1-2 Years
    
    
    3-5 Years
    
    
    YearsLoans payable to banks
    
    $
    20,287
    
    
    $
    20,287
    
    
    $
    
    
    
    $
    
    
    
    $
    Operating lease commitments
    
    
    1,881
    
    
    
    1,047
    
    
    
    657
    
    
    
    177
    
    
    
    Supplemental Executive
Retirement Plan
    
    
    2,427
    
    
    
    243
    
    
    
    486
    
    
    
    729
    
    
    
    969Long-term debt obligations (including
current portion)(1)
    
    
    3,770
    
    
    
    400
    
    
    
    893
    
    
    
    1,034
    
    
    
    1,443Total contractual obligations(2)
    
    $
    28,365
    
    
    $
    21,977
    
    
    $
    2,036
    
    
    $
    1,940
    
    
    $
    2,412
 
 (1)
    
    Interest payments due on long-term debt for less than 1 year are $284 thousand, 1-2 years
are $428 thousand, 3-5 years are $554 thousand, and after 5 years are $107 thousand.(2)
    
    See Notes 7 and 10 of the Consolidated Financial Statements for additional information.  Operating Segments
     20




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Year EndedJuly 31, 2009
    
    
    July 31, 2008
    
    
    July 31, 2007(in thousands)NET SALES AND OTHER REVENUEWholesale Distribution
    
    $
    294,377
    
    
    $
    338,376
    
    
    $
    338,535Logistics Services
    
    
    284
    
    
    
    1,452
    
    
    
    306Direct Customer Services
    
    
    55,566
    
    
    
    63,532
    
    
    
    57,085Eliminations
    
    
    (50,498
    )
    
    
    (63,522
    )
    
    
    (53,227
    )Consolidated Total
    
    $
    299,729
    
    
    $
    339,838
    
    
    $
    342,699COST OF SALESWholesale Distribution
    
    
    268,275
    
    
    
    301,511
    
    
    
    303,949Logistics Services
    
    
    240
    
    
    
    1,495
    
    
    
    258Direct Customer Services
    
    
    50,733
    
    
    
    55,780
    
    
    
    50,001Eliminations
    
    
    (52,914
    )
    
    
    (63,190
    )
    
    
    (53,086
    )Consolidated Total
    
    $
    266,334
    
    
    $
    295,596
    
    
    $
    301,122OPERATING, GENERAL AND
ADMINISTRATIVE EXPENSESWholesale Distribution
    
    
    32,459
    
    
    
    33,045
    
    
    
    29,106Logistics Services
    
    
    
    
    
    
    
    
    
    
    Direct Customer Services
    
    
    7,345
    
    
    
    7,389
    
    
    
    6,971Eliminations
    
    
    
    
    
    
    
    
    
    
    Consolidated Total
    
    $
    39,804
    
    
    $
    40,434
    
    
    $
    36,077BUSINESS SEGMENT ASSETSWholesale Distribution
    
    $
    79,017
    
    
    $
    80,392
    
    
    $
    87,297Logistics Services
    
    
    395
    
    
    
    351
    
    
    
    394Direct Customer Services
    
    
    11,823
    
    
    
    14,906
    
    
    
    13,075Eliminations
    
    
    (11,502
    )
    
    
    (14,455
    )
    
    
    (12,522
    )Consolidated Total
    
    $
    79,733
    
    
    $
    81,194
    
    
    $
    88,244
 Wholesale Distribution
   21




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Logistics Services
     22




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Direct Customer Services
       Seasonality in Operating Results
   23




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Liquidity and Capital Resources
        24




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Operating Activities
 Investing Activities
 Financing Activities.
 Inflation
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
   25




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Use of Estimates
  Revenue Recognition
  Inventories
  Major Customers, Major Suppliers and Credit Concentrations
  Income Taxes
  Other Intangible Assets
  Pension
Accounting
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
 26




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New Accounting Pronouncements
 Fair Value Measurements
 Disclosures about Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No. 133.
 Subsequent Events
 The FASB Accounting Standards Codification  and the
Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162.
 27




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ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Liquidity and Capital Resources
   28




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ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 Report of Independent Registered Public Accounting Firm
    
    
    F-1Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of July 31, 2009 and
July 31, 2008
    
    
    F-3Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
Years Ended July 31, 2009, 2008 and 2007
    
    
    F-4Consolidated Statements of Stockholders Equity Years Ended
July 31, 2009, 2008 and 2007
    
    
    F-5Consolidated Statements of Cash Flows Years Ended July 31, 2009, 2008
and 2007
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-7
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    ITEM 9A. CONTROLS AND PROCEDURES
 The following report shall not be deemed to be filed for purposes of Section 18 of the Exchange Act
or otherwise subject to the liabilities of that section, unless the registrant specifically states
that the report is to be considered filed under the Exchange Act or incorporates it by reference
into a filing under the Securities Act or the Exchange Act:
 Managements Report on Internal Control over Financial Reporting
    Internal Control  Integrated Framework
  Evaluation of Disclosure Controls and Procedures
  29




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Changes in Internal Controls
       Limitations on the Effectiveness of Controls
  30




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ITEM 9B.
    
    OTHER INFORMATION
  
 PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER
MATTERS
  
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTING FEES AND SERVICES
  31




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##### 



PART IV
 
 ITEM 15.
    
    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
  1)
    
    Consolidated Financial Statements: See Index to Consolidated Financial
Statements at item 8 on page 29 of this report.2)
    
    Financial Statement Schedule: Schedule II  Consolidated Valuation and
Qualifying Accounts.3)
    
    Exhibits are incorporated herein by reference or are filed with this
report as set forth in the Index to Exhibits on pages II-1 through II-2
hereof.
 PROFESSIONAL VETERINARY PRODUCTS, LTD.  SCHEDULE II-CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)
 Balance at
    
    Charged to
    
    
    
    
    
    Balance atbeginning of
    
    costs and
    
    
    
    
    
    end ofperiod
    
    expenses
    
    Deductions
    
    periodAllowance for doubtful accounts (in thousands)Year ended July 31, 2009
    
    $
    501
    
    
    $
    521
    
    
    $
    717
    
    
    $
    305Year ended July 31, 2008
    
    
    515
    
    
    
    190
    
    
    
    204
    
    
    
    501Year ended July 31, 2007
    
    
    569
    
    
    
    (13
    )
    
    
    41
    
    
    
    515Year ended July 31, 2006
    
    
    970
    
    
    
    76
    
    
    
    477
    
    
    
    569Year ended July 31, 2005
    
    
    821
    
    
    
    656
    
    
    
    507
    
    
    
    970Allowance for obsolete inventory (in thousands)Year ended July 31, 2009
    
    $
    182
    
    
    $
    291
    
    
    $
    346
    
    
    $
    127Year ended July 31, 2008
    
    
    127
    
    
    
    55
    
    
    
    
    
    
    
    182Year ended July 31, 2007
    
    
    63
    
    
    
    64
    
    
    
    
    
    
    
    127Year ended July 31, 2006
    
    
    152
    
    
    
    
    
    
    
    89
    
    
    
    63Year ended July 31, 2005
    
    
    129
    
    
    
    23
    
    
    
    
    
    
    
    152
 32




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        
 F-1




---



##### 



Report of Independent Registered Public Accounting Firm
 
    
 F-2




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
 
 CONSOLIDATED BALANCE SHEETS
 July 31, 2009 and 2008
 (in thousands, except share data)
 July 31,
    
    
    July 31,2009
    
    
    2008ASSETSCURRENT ASSETSCash
    
    $
    1,408
    
    
    $
    1,985Accounts receivable, net of allowance:2009 - $305, 2008 - $501
    
    
    24,227
    
    
    
    27,782Accounts receivable, related parties
    
    
    348
    
    
    
    663Inventory
    
    
    37,107
    
    
    
    35,906Deferred tax asset
    
    
    952
    
    
    
    599Other current assets
    
    
    3,518
    
    
    
    1,271Total current assets
    
    
    67,560
    
    
    
    68,206NET PROPERTY AND EQUIPMENT
    
    
    8,718
    
    
    
    10,200OTHER ASSETSIntangible
assets, less accumulated amortization, $10 and $7, respectively
    
    
    30
    
    
    
    33Investment in unconsolidated affiliates
    
    
    144
    
    
    
    144Cash value of life insurance
    
    
    2,826
    
    
    
    2,351Deferred tax asset
    
    
    446
    
    
    
    257Other assets
    
    
    9
    
    
    
    3Total other assets
    
    
    3,455
    
    
    
    2,788TOTAL ASSETS
    
    $
    79,733
    
    
    $
    81,194LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESNote payable, bank
    
    $
    20,287
    
    
    $
    12,860Current portion of long-term debt
    
    
    400
    
    
    
    371Current portion of accrued retirement benefits
    
    
    243
    
    
    
    115Accounts payable
    
    
    29,043
    
    
    
    32,801Accounts payable, related parties
    
    
    845
    
    
    
    738Interest rate swap
    
    
    111
    
    
    
    Other current liabilities
    
    
    3,656
    
    
    
    4,093Total current liabilities
    
    
    54,585
    
    
    
    50,978LONG-TERM LIABILITIESLong-term debt
    
    
    3,370
    
    
    
    3,767Accrued retirement benefits
    
    
    2,811
    
    
    
    2,853Total long-term liabilities
    
    
    6,181
    
    
    
    6,620TOTAL LIABILITIES
    
    
    60,766
    
    
    
    57,598STOCKHOLDERS EQUITYCommon stock, $1 par value; authorized 30,000 shares; issued
and outstanding 2009 - 1,948 shares, 2008 - 2,037 shares
    
    
    2
    
    
    
    2Additional paid-in capital
    
    
    5,779
    
    
    
    6,044Retained earnings
    
    
    13,562
    
    
    
    17,935Accumulated other comprehensive loss
    
    
    (376
    )
    
    
    (385
    )Total stockholders equity
    
    
    18,967
    
    
    
    23,596TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    79,733
    
    
    $
    81,194
  F-3




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
 
 CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
 Years Ended July 31, 2009, 2008 and 2007
 (in thousands)
 July 31,
    
    
    July 31,
    
    
    July 31,2009
    
    
    2008
    
    
    2007NET SALES AND OTHER REVENUE
    
    $
    299,729
    
    
    $
    339,838
    
    
    $
    342,699COST OF SALES
    
    
    266,334
    
    
    
    295,596
    
    
    
    301,122Gross profit
    
    
    33,395
    
    
    
    44,242
    
    
    
    41,577OPERATING, GENERAL AND ADMINISTRATIVE
EXPENSES
    
    
    39,804
    
    
    
    40,434
    
    
    
    36,077OPERATING INCOME (LOSS)
    
    
    (6,409
    )
    
    
    3,808
    
    
    
    5,500OTHER INCOME (EXPENSE)Interest income
    
    
    360
    
    
    
    318
    
    
    
    260Interest expense
    
    
    (1,095
    )
    
    
    (1,379
    )
    
    
    (1,936
    )Equity in earnings of unconsolidated affiliate
    
    
    
    
    
    
    53
    
    
    
    116Loss on the sale of unconsolidated affiliate
    
    
    
    
    
    
    (571
    )
    
    
    Other
    
    
    
    
    
    
    (1
    )
    
    
    (81
    )Other expense  net
    
    
    (735
    )
    
    
    (1,578
    )
    
    
    (1,641
    )INCOME (LOSS) BEFORE INCOME TAXES
    
    
    (7,144
    )
    
    
    2,230
    
    
    
    3,859PROVISION FOR INCOME TAXES
    
    
    (2,771
    )
    
    
    802
    
    
    
    1,475NET INCOME (LOSS)
    
    
    (4,373
    )
    
    
    1,428
    
    
    
    2,384EARNINGS (LOSS) PER COMMON SHARE
    
    $
    (2,201.91
    )
    
    $
    697.92
    
    
    $
    1,169.27Weighted average common shares outstanding
    
    
    1,986
    
    
    
    2,046
    
    
    
    2,039OTHER COMPREHENSIVE INCOME (LOSS)Net income (loss)
    
    $
    (4,373
    )
    
    $
    1,428
    
    
    $
    2,384Other comprehensive income (loss):Adjustment for net periodic pension cost, net of taxes
    
    
    76
    
    
    
    3
    
    
    
    (388
    )Adjustment for mark- to-market value of swap, net of taxes
    
    
    (67
    )
    
    
    
    
    
    
    COMPREHENSIVE INCOME (LOSS)
    
    $
    (4,364
    )
    
    $
    1,431
    
    
    $
    1,996SUPPLEMENTAL INFORMATIONNet sales and other revenue  related parties
    
    $
    4,360
    
    
    $
    37,209
    
    
    $
    43,583Purchases  related parties
    
    $
    12,068
    
    
    $
    13,752
    
    
    $
    13,728
  F-4




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
 
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 Years Ended July 31, 2009, 2008 and 2007
 (in thousands)
 AccumulatedCommon
    
    
    
    
    
    
    Additional
    
    
    OtherShares
    
    
    Common
    
    
    Paid-in
    
    
    Comprehensive
    
    
    RetainedIssued
    
    
    Stock
    
    
    Capital
    
    
    Loss
    
    
    Earnings
    
    
    TotalBALANCE AT AUGUST 1, 2006
    
    
    2,042
    
    
    $
    2
    
    
    $
    6,039
    
    
    $
    0
    
    
    $
    14,123
    
    
    $
    20,164Issuance of stock
    
    
    56
    
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    
    
    
    
    168Redemption of stock
    
    
    (30
    )
    
    
    
    
    
    
    (90
    )
    
    
    
    
    
    
    
    
    
    
    (90
    )Net change in accounts receivable, stock
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    (5
    )Adjustment to initially apply FASB
Statement No.
158
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (388
    )
    
    
    
    
    
    
    (388
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,384
    
    
    
    2,384BALANCE AT JULY 31, 2007
    
    
    2,068
    
    
    
    2
    
    
    
    6,112
    
    
    
    (388
    )
    
    
    16,507
    
    
    
    22,233Issuance of stock
    
    
    7
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Redemption of stock
    
    
    (38
    )
    
    
    
    
    
    
    (114
    )
    
    
    
    
    
    
    
    
    
    
    (114
    )Net change in accounts receivable, stock
    
    
    
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    25Change in unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    3Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,428
    
    
    
    1,428BALANCE AT JULY 31, 2008
    
    
    2,037
    
    
    
    2
    
    
    
    6,044
    
    
    
    (385
    )
    
    
    17,935
    
    
    
    23,596Issuance of stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Redemption of stock
    
    
    (89
    )
    
    
    
    
    
    
    (265
    )
    
    
    
    
    
    
    
    
    
    
    (265
    )Net change in accounts receivable, stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Change in unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    76Change in mark-to-market interest rate swap
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (67
    )
    
    
    
    
    
    
    (67
    )Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,373
    )
    
    
    (4,373
    )BALANCE AT JULY 31, 2009
    
    
    1,948
    
    
    
    2
    
    
    
    5,779
    
    
    
    (376
    )
    
    
    13,562
    
    
    
    18,967
  F-5




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Years Ended July 31, 2009, 2008 and 2007
 (in thousands)
 July 31,
    
    
    July 31,
    
    
    July 31,2009
    
    
    2008
    
    
    2007OPERATING ACTIVITIESNet income (loss)
    
    $
    (4,373
    )
    
    $
    1,428
    
    
    $
    2,384Items not requiring (providing) cashDepreciation and amortization
    
    
    1,829
    
    
    
    1,702
    
    
    
    1,427(Gain) loss on sale of property
    
    
    51
    
    
    
    (1
    )
    
    
    81Retirement benefits
    
    
    212
    
    
    
    342
    
    
    
    602Deferred income tax
    
    
    (548
    )
    
    
    (181
    )
    
    
    (573
    )Allowance for doubtful accounts
    
    
    (196
    )
    
    
    (14
    )
    
    
    (55
    )Allowance for obsolete inventory
    
    
    (55
    )
    
    
    55
    
    
    
    64Equity in income from affiliate
    
    
    
    
    
    
    (53
    )
    
    
    (116
    )Loss on the sale of unconsolidated affiliate
    
    
    
    
    
    
    571
    
    
    
    Changes in:Receivables
    
    
    4,066
    
    
    
    200
    
    
    
    (7,053
    )Inventory
    
    
    (1,146
    )
    
    
    7,122
    
    
    
    (7,387
    )Other current assets
    
    
    (2,247
    )
    
    
    (716
    )
    
    
    1,066Other assets
    
    
    (6
    )
    
    
    (1
    )
    
    
    (37
    )Accounts payable
    
    
    (3,651
    )
    
    
    (8,567
    )
    
    
    3,310Other current liabilities
    
    
    (437
    )
    
    
    (703
    )
    
    
    1,537Total adjustments
    
    
    (2128
    )
    
    
    (244
    )
    
    
    (7,134
    )Net cash provided by (used in) operating activities
    
    
    (6,501
    )
    
    
    1,184
    
    
    
    (4,750
    )INVESTING ACTIVITIESPurchase of property and equipment
    
    
    (505
    )
    
    
    (1,726
    )
    
    
    (1,550
    )Proceeds from sale of assets
    
    
    110
    
    
    
    1
    
    
    
    2Proceeds from the sale of unconsolidated affiliate
    
    
    
    
    
    
    1,400
    
    
    
    Purchase of investments
    
    
    
    
    
    
    (9
    )
    
    
    (30
    )Cash value of life insurance
    
    
    (475
    )
    
    
    (466
    )
    
    
    (418
    )Sale of investments
    
    
    
    
    
    
    40
    
    
    
    Net cash used in investing activities
    
    
    (870
    )
    
    
    (760
    )
    
    
    (1,996
    )FINANCING ACTIVITIESNet borrowings under line-of-credit agreement
    
    
    7,427
    
    
    
    914
    
    
    
    5,843Proceeds from long-term debt
    
    
    
    
    
    
    
    
    
    
    4,666Payments of long-term debt and capital lease obligation
    
    
    (368
    )
    
    
    (396
    )
    
    
    (5,246
    )Proceeds from issuance of common stock
    
    
    
    
    
    
    46
    
    
    
    163Payments from redemption of common stock
    
    
    (265
    )
    
    
    (114
    )
    
    
    (90
    )Net cash provided by financing activities
    
    
    6,794
    
    
    
    450
    
    
    
    5,336Increase (Decrease) in Cash
    
    
    (577
    )
    
    
    874
    
    
    
    (1,410
    )Cash at beginning of year
    
    
    1,985
    
    
    
    1,111
    
    
    
    2,521Cash at end of year
    
    $
    1,408
    
    
    $
    1,985
    
    
    $
    1,111Supplemental cash flows information:Non-cash periodic pension cost, net of taxes
    
    $
    76
    
    
    $
    
    
    
    $
    Non-cash unrealized loss on interest rate swap, net of taxes
    
    $
    (67
    )
    
    $
    
    
    
    $
    Interest paid
    
    $
    1,112
    
    
    $
    1,451
    
    
    $
    1,880Income taxes paid (refunded)
    
    $
    (168
    )
    
    $
    1,967
    
    
    $
    935
  F-6




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 1  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 Nature of Operations 
 Principles of Consolidation 
 Use of Estimates 
 Revenue Recognition 
 Cash 
 Accounts Receivable 
  Inventory 
 F-7




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 1  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 Property and Equipment 
 Buildings
    
    40 yearsFurniture, fixtures and equipment
    
    7 yearsComputer equipment
    
    5 yearsSoftware
    
    3-5 years
  Capitalized Leases 
 Other
Intangible Assets 
 F-8




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 1  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 Income Taxes 
 Direct Shipping and Handling Costs 
 Subsequent Events 
 Fair Value of Financial Instruments 
 Major Customer, Major Suppliers and Credit Concentrations 
 Common Stock 
 F-9




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 1  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 Earnings (Loss) Per Share 
 Taxes Collected from Customers and Remitted to Governmental Authorities 
 Recent Accounting Pronouncements  Fair Value
Measurements
 Disclosures about Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No. 133.
 Subsequent Events
 The FASB Accounting Standards Codification  and the
Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB Statement No. 162.
 F-10




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 1  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued):
 Reclassifications 
 NOTE 2  REBATES:
  2009
    
    
    2008Accounts receivable, net of allowance
    
    $
    25,225
    
    
    $
    28,445Less  rebates
    
    
    650
    
    
    
    Accounts receivable, net
    
    $
    24,575
    
    
    $
    28,445
  2009
    
    
    2008
    
    
    2007Gross sales and other revenues
    
    $
    300,379
    
    
    $
    339,838
    
    
    $
    345,699Less  rebates
    
    
    650
    
    
    
    
    
    
    
    3,000Net sales and other revenue
    
    $
    299,729
    
    
    $
    339,838
    
    
    $
    342,699
 NOTE 3  PROPERTY AND EQUIPMENT:
  2009
    
    
    2008Land
    
    $
    1,762
    
    
    $
    1,762Buildings
    
    
    5,217
    
    
    
    5,217Leasehold improvements
    
    
    606
    
    
    
    636Equipment
    
    
    11,140
    
    
    
    10,98218,725
    
    
    
    18,597Less  accumulated depreciation
    
    
    10,196
    
    
    
    8,6988,529
    
    
    
    9,899Construction in progress
    
    
    189
    
    
    
    301Net property, plant, and equipment
    
    $
    8,718
    
    
    $
    10,200
 NOTE 4  INVESTMENT IN UNCONSOLIDATED AFFILIATES:
   2009
    
    
    2008Investment in Agri-Laboratories, Ltd. (cost method)
    
    
    144
    
    
    
    144$
    144
    
    
    $
    144
 F-11




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 5  COMMON STOCK:
  NOTE 6  INCOME TAXES:
   2009
    
    
    2008
    
    
    2007CurrentFederal
    
    $
    (2,268
    )
    
    $
    850
    
    
    $
    1,561State
    
    
    45
    
    
    
    133
    
    
    
    229(2,223
    )
    
    
    983
    
    
    
    1,790DeferredFederal
    
    
    (157
    )
    
    
    (154
    )
    
    
    (268
    )State
    
    
    (391
    )
    
    
    (27
    )
    
    
    (47
    )(548
    )
    
    
    (181
    )
    
    
    (315
    )Total
    
    $
    (2,771
    )
    
    $
    802
    
    
    $
    1,475
  2009
    
    
    2008
    
    
    2007Expected tax at U.S. statutory rate
    
    $
    (2,429
    )
    
    $
    758
    
    
    $
    1,340State taxes, net of federal effect
    
    
    (363
    )
    
    
    65
    
    
    
    96Other, net
    
    
    21
    
    
    
    (21
    )
    
    
    39$
    (2,771
    )
    
    $
    802
    
    
    $
    1,475
 F-12




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 6  INCOME TAXES (continued):
  2009
    
    
    2008Current deferred tax asset (liability):Uniform capitalization
    
    $
    330
    
    
    $
    326Interest rate swap
    
    
    44
    
    
    
    Allowance for doubtful accounts
    
    
    122
    
    
    
    200Legal fees
    
    
    40
    
    
    
    Net operating loss carryforward
    
    
    365
    
    
    
    Inventory valuation
    
    
    51
    
    
    
    73$
    952
    
    
    $
    599Noncurrent deferred tax asset (liability):Excess of tax over book depreciation
    
    $
    (833
    )
    
    $
    (994
    )Amortization
    
    
    18
    
    
    
    24Deferred compensation
    
    
    1,221
    
    
    
    1,187Capital loss in SERVCO
    
    
    40
    
    
    
    40$
    446
    
    
    $
    257
  NOTE 7  NOTE PAYABLE AND LONG-TERM DEBT:
  2009
    
    
    2008Note payable, maturing in 2016, secured by certain
assets, 7.35% interest
    
    
    3,770
    
    
    
    4,1383,770
    
    
    
    4,138Less  current portion
    
    
    400
    
    
    
    371$
    3,370
    
    
    $
    3,767
 F-13




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 7  NOTE PAYABLE AND LONG-TERM DEBT (continued):
  2010
    
    $
    4002011
    
    
    4332012
    
    
    4652013
    
    
    5012014
    
    
    539Thereafter
    
    
    1,432$
    3,770
    NOTE 8  RELATED PARTY TRANSACTIONS:
  2009
    
    
    2008Board of Directors
    
    
    319
    
    
    
    649Officer and employees
    
    
    29
    
    
    
    14$
    348
    
    
    $
    663
  2009
    
    
    2008
    
    
    2007Affiliate (SERVCO)
    
    $
    
    
    
    $
    32,452
    
    
    $
    39,062Board of Directors
    
    
    4,284
    
    
    
    4,676
    
    
    
    4,457Officer and employees
    
    
    76
    
    
    
    81
    
    
    
    64$
    4,360
    
    
    $
    37,209
    
    
    $
    43,583
 F-14




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 8  RELATED PARTY TRANSACTIONS (continued):
  2009
    
    
    2008Jelecos
    
    
    175
    
    
    
    154Agri-Laboratories
    
    
    670
    
    
    
    584$
    845
    
    
    $
    738
  NOTE 9  PROFIT-SHARING, 401(k) AND RETIREMENT PLAN:
   Employers Accounting for Defined Benefit Pension and Other Postretirement Plans
  F-15




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 9  PROFIT-SHARING, 401(k) AND RETIREMENT PLAN (continued):
  2009
    
    
    2008Change in Benefit Obligation:Projected benefit obligation  July 31
    
    $
    2,968
    
    
    $
    2,628Service cost
    
    
    97
    
    
    
    138Interest cost
    
    
    186
    
    
    
    164Actuarial (gain)/loss
    
    
    (85
    )
    
    
    38Benefits paid
    
    
    (112
    )
    
    
    Plan Amendments
    
    
    
    
    
    
    Projected benefit obligation  July 31
    
    $
    3,054
    
    
    $
    2,968Fair Value of Plan Assets  July 31
    
    $
    
    
    
    $
    Funded Status:Funded status
    
    $
    (3,054
    )
    
    $
    (2,968
    )Unrecognized actuarial loss
    
    
    
    
    
    
    Unrecognized prior service cost
    
    
    
    
    
    
    Net amount recognized as accrued retirement
benefits
    
    $
    (3,054
    )
    
    $
    (2,968
    )Current liability
    
    $
    (243
    )
    
    $
    (115
    )Noncurrent liability
    
    
    (2,811
    )
    
    
    (2,853
    )$
    (3,054
    )
    
    $
    (2,968
    )
  July 31, 2009
    
    
    July 31, 2008Unrecognized prior service cost
    
    $
    (240
    )
    
    $
    (275
    )Unrecognized actuarial losses
    
    $
    (276
    )
    
    $
    (367
    )Deferred taxes
    
    
    207
    
    
    
    257Recognized in other comprehensive income (loss), net of tax
    
    $
    (309
    )
    
    $
    (385
    )
  F-16




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 9  PROFIT-SHARING AND 401(k) RETIREMENT PLAN (continued):
  2009
    
    
    2008
    
    

2007Service cost
    
    $
    97
    
    
    $
    138
    
    
    $
    144Interest cost
    
    
    186
    
    
    
    164
    
    
    
    149Amortization of prior losses
    
    
    7
    
    
    
    7
    
    
    
    12Amortization of unrecognized prior service costs
    
    
    34
    
    
    
    35
    
    
    
    38Net periodic cost
    
    $
    324
    
    
    $
    344
    
    
    $
    343
   NOTE 10  COMMITMENTS AND CONTINGENT LIABILITIES:
 Operating Leases 
 F-17




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 10  COMMITMENTS AND CONTINGENT LIABILITIES (continued):
  Operating2010
    
    $
    1,0472011
    
    
    4062012
    
    
    2512013
    
    
    126Thereafter
    
    
    51Total minimum payments
    
    $
    1,881
  Stock Redemption 
 Other 
 Agreements 
     F-18




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 10  COMMITMENTS AND CONTINGENT LIABILITIES (continued):
       F-19




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 10  COMMITMENTS AND CONTINGENT LIABILITIES (continued):
    F-20




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 11  DERIVATIVE FINANCIAL INSTRUMENTS:
    July 31,
    
    July 31,2009
    
    2008Fair value of interest rate swap agreement
    
    $
    (111
    )
    
    $
    Balance sheet location of fair value amount
    
    Current Liabilities
    
    
    Loss recognized in other comprehensive
income (effective portion-net of tax)
    
    $
    (67
    )
    
    $
    Loss reclassified from accumulated other
comprehensive income into income
(effective portion)
    
    $
    (162
    )
    
    $
    Location of loss reclassified from
accumulated other comprehensive income
into income
    
    Interest Expense
    
    
    Gain or loss recognized in income
(ineffective portion and amount excluded
from effectiveness testing)
    
    $
    
    
    
    $
    Location of gain (loss) recognized in
income (ineffective portion and amount
excluded from effectiveness testing)
    
    
    
    
    
    
    
 NOTE 12  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
  F-21




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 12  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (continued):
  Level 1
    
    Quoted prices in active markets for identical assets or liabilitiesLevel 2
    
    Observable inputs other than Level 1 prices, such as quoted prices for similar
assets or liabilities; quoted prices in markets that are not active; or other inputs that
are observable or can be corroborated by observable market data for substantially the full
term of the assets or liabilitiesLevel 3
    
    Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities
  Interest Rate Swap Agreement
   Fair Value Measurements UsingQuoted Pricesin Active
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Interest rate swap agreement
    
    $
    (111
    )
    
    $
    
    
    
    $
    (111
    )
    
    $
    
 F-22




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 13  SIGNIFICANT ESTIMATES AND CONCENTRATIONS
 Current Economic Conditions 
   F-23




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 14  SEGMENT INFORMATION:
   Disclosures About Segments of an Enterprise and Related
Information.
 F-24




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 14  SEGMENT INFORMATION (continued):
  DirectWholesale
    
    Logistics
    
    Customer
    
    
    
    
    
    ConsolidatedDistribution
    
    Services
    
    Services
    
    Eliminations
    
    TotalFor the year ended
July 31, 2009Net sales and other revenue
    
    $
    294,377
    
    
    $
    284
    
    
    $
    55,566
    
    
    $
    (50,498
    )
    
    $
    299,729Cost of sales
    
    
    268,275
    
    
    
    240
    
    
    
    50,733
    
    
    
    (52,914
    )
    
    
    266,334Operating, general and
administrative expenses
    
    
    32,459
    
    
    
    
    
    
    
    7,345
    
    
    
    
    
    
    
    39,804Operating income (loss)
    
    
    (6,358
    )
    
    
    44
    
    
    
    (2,512
    )
    
    
    2,417
    
    
    
    (6,409
    )Income before taxes
    
    $
    (7,143
    )
    
    $
    44
    
    
    $
    (2,462
    )
    
    $
    2,417
    
    
    $
    (7,144
    )Business segment assets
    
    $
    79,017
    
    
    $
    395
    
    
    $
    11,823
    
    
    $
    (11,502
    )
    
    $
    79,733For the year ended
July 31, 2008Net sales and other revenue
    
    $
    338,376
    
    
    $
    1,452
    
    
    $
    63,532
    
    
    $
    (63,522
    )
    
    $
    339,838Cost of sales
    
    
    301,511
    
    
    
    1,495
    
    
    
    55,780
    
    
    
    (63,190
    )
    
    
    295,596Operating, general and
administrative expenses
    
    
    33,045
    
    
    
    
    
    
    
    7,389
    
    
    
    
    
    
    
    40,434Operating income
    
    
    3,820
    
    
    
    (43
    )
    
    
    363
    
    
    
    (332
    )
    
    
    3,808Income before taxes
    
    $
    2,230
    
    
    $
    (43
    )
    
    $
    375
    
    
    $
    (332
    )
    
    $
    2,230Business segment assets
    
    $
    80,392
    
    
    $
    351
    
    
    $
    14,906
    
    
    $
    (14,455
    )
    
    $
    81,194For the year ended
July 31, 2007Net sales and other revenue
    
    $
    338,535
    
    
    $
    306
    
    
    $
    57,085
    
    
    $
    (53,227
    )
    
    $
    342,699Cost of sales
    
    
    303,949
    
    
    
    258
    
    
    
    50,001
    
    
    
    (53,086
    )
    
    
    301,122Operating, general and
administrative expenses
    
    
    29,106
    
    
    
    
    
    
    
    6,971
    
    
    
    
    
    
    
    36,077Operating income
    
    
    5,480
    
    
    
    48
    
    
    
    113
    
    
    
    (141
    )
    
    
    5,500Income before taxes
    
    $
    3,860
    
    
    $
    48
    
    
    $
    92
    
    
    $
    (141
    )
    
    $
    3,859Business segment assets
    
    $
    87,297
    
    
    $
    394
    
    
    $
    13,075
    
    
    $
    (12,522
    )
    
    $
    88,244
 F-25




---



##### 



PROFESSIONAL VETERINARY PRODUCTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended July 31, 2009, 2008 and 2007
(in thousands, except per share data)
 NOTE 15  SELECTED QUARTERLY FINANCIAL DATA:
  Quarters ended
    
    
    
    
    Year endedOctober 31,
    
    January 31,
    
    April 30,
    
    July 31,
    
    July 31,2006
    
    2007
    
    2007
    
    2007
    
    2007Revenues
    
    $
    89,816
    
    
    $
    87,478
    
    
    $
    78,520
    
    
    $
    86,885
    
    
    $
    342,699Gross profit
    
    
    10,048
    
    
    
    10,797
    
    
    
    9,362
    
    
    
    11,370
    
    
    
    41,577Operating income
    
    
    992
    
    
    
    1,300
    
    
    
    684
    
    
    
    2,524
    
    
    
    5,500Net income
    
    
    419
    
    
    
    468
    
    
    
    85
    
    
    
    1,412
    
    
    
    2,384Net income per
common share
    
    $
    205.18
    
    
    $
    229.79
    
    
    $
    41.78
    
    
    $
    689.59
    
    
    $
    1,169.27Common shares
Outstanding
    
    
    2,043
    
    
    
    2,036
    
    
    
    2,030
    
    
    
    2,048
    
    
    
    2,039
 Quarters ended
    
    
    
    
    Year endedOctober 31,
    
    January 31,
    
    April 30,
    
    July 31,
    
    July 31,2007
    
    2008
    
    2008
    
    2008
    
    2008Revenues
    
    $
    89,601
    
    
    $
    91,016
    
    
    $
    82,683
    
    
    $
    76,538
    
    
    $
    339,838Gross profit
    
    
    9,564
    
    
    
    12,895
    
    
    
    11,003
    
    
    
    10,780
    
    
    
    44,242Operating income
    
    
    234
    
    
    
    2,704
    
    
    
    644
    
    
    
    226
    
    
    
    3,808Net income (loss)
    
    
    (34
    )
    
    
    1,511
    
    
    
    248
    
    
    
    (297
    )
    
    
    1,428Net income (loss) per
common share
    
    $
    (16.52
    )
    
    $
    737.29
    
    
    $
    121.87
    
    
    $
    (145.73
    )
    
    $
    697.92Common shares
outstanding
    
    
    2,058
    
    
    
    2,049
    
    
    
    2,040
    
    
    
    2,038
    
    
    
    2,046
 Quarters ended
    
    
    
    
    Year endedOctober 31,
    
    January 31,
    
    April 30,
    
    July 31,
    
    July 31,2008
    
    2009
    
    2009
    
    2009
    
    2009Revenues
    
    $
    85,795
    
    
    $
    64,727
    
    
    $
    75,291
    
    
    $
    73,916
    
    
    $
    299,729Gross profit
    
    
    8,187
    
    
    
    9,937
    
    
    
    7,915
    
    
    
    7,356
    
    
    
    33,395Operating income (loss)
    
    
    (2,206
    )
    
    
    12
    
    
    
    (1,747
    )
    
    
    (2,468
    )
    
    
    (6,409
    )Net income (loss)
    
    
    (1,760
    )
    
    
    (33
    )
    
    
    (1,146
    )
    
    
    (1,434
    )
    
    
    (4,373
    )Net income (loss) per
common share
    
    $
    (868.64
    )
    
    $
    (16.54
    )
    
    $
    (581.43
    )
    
    $
    (820.70
    )
    
    $
    (2,196.65
    )Common shares
outstanding
    
    
    2,026
    
    
    
    1,995
    
    
    
    1,971
    
    
    
    1,952
    
    
    
    1,948
 F-26




---



##### 



Regulation S-KExhibit Number
    
    Document3.1
    
    Second Amended and Restated Articles of Incorporation of Professional
Veterinary Products (1)3.2
    
    Second Amended and Restated Bylaws of Professional Veterinary Products, Ltd. (2)3.3
    
    Amendment to Second Amended and Restated Bylaws of Professional Veterinary
Products, Ltd. (3)4.1
    
    Certificate of Professional Veterinary Products, Ltd. (4)4.2
    
    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)4.4
    
    Amendment to Second Amended and Restated Bylaws of Professional Veterinary
Products, Ltd. (3)10.1
    
    Sales Agency Agreement between Professional Veterinary Products, Ltd. and Bayer
Corporation (4)*10.2
    
    Sales Agent Agreement between Professional Veterinary Products, Ltd. and Merial
LLC (4)*10.3
    
    Supply and Distribution Agreement between Professional Veterinary Products,
Ltd. and Schering-Plough Animal Health Corporation (4)*10.4
    
    Distribution Agreement between Professional Veterinary Products, Ltd. and Fort
Dodge Animal Health (4)10.5
    
    Purchase and Sale Agreement between Professional Veterinary Products, Ltd.,
AAHA Services Corporation and American Animal Hospital Association (5)10.6
    
    Lease of building located in York, Pennsylvania between Professional Veterinary
Products, Ltd. and Kinsley Equities II Limited Partnership (6)10.7
    
    Supplemental Executive Retirement Plan (7)10.8
    
    Lease dated October 1, 2005 among Professional Veterinary Products, Ltd. and
Steve Lewis and Mike Mimms (8)10.9
    
    Lease Agreement dated November 8, 2005 between Professional Veterinary
Products, Ltd. and Independent Veterinary Group, LLC (8)10.10
    
    Supplemental Executive Retirement Plan (effective January 1, 2006) (9)10.11
    
    Commercial Lease Extension and Addendum between Professional Veterinary
Products, Ltd, and The Independent Veterinary Group LLC and ACH BRO LLC (10)10.12
    
    Separation Agreement with Cheryl Miller (11)10.13
    
    Loan Agreement with First National Bank of Omaha dated November 14, 2006 (12)10.14
    
    Revolving Note dated November 14, 2006, to First National Bank of Omaha (12)10.15
    
    Term Note dated November 14, 2006, to First National Bank of Omaha (12)10.16
    
    Form of Security Agreement dated November 14, 2006, with First National Bank of
Omaha (12)10.17
    
    Deed of Trust, Security Agreement, Assignment of Leases and Rents and Fixture
Filing dated November 14, 2006, in favor of First National Bank of Omaha (12)10.18
    
    Assignment of Rents and Leases dated November 14, 2006, in favor of First
National Bank of Omaha (12)10.19
    
    Amendment No. 1 to Lease Agreement between Professional Veterinary Products,
Ltd. and Kinsley Equities II Limited Partnership (13)10.20
    
    Amendment No. 2 to Lease Agreement between Professional Veterinary Products,
Ltd. and Kinsley Equities II Limited Partnership (13)10.21
    
    Amendment No. 3 to Lease Agreement between Professional Veterinary Products,
Ltd. and Kinsley Equities II Limited Partnership (13)10.22
    
    Amendment No. 1 dated September 17, 2007 to the Loan Agreement with First
National Bank of Omaha dated November 14, 2006 (14)10.23
    
    Stock Purchase Agreement among the Company, American Animal Hospital
Association, and AAHA Services Corporation dated July 14, 2008 (15)10.24
    
    Amendment No. 2 dated November 19, 2008 to the Loan Agreement by and among
Professional Veterinary Products, Ltd., its subsidiaries and First National
Bank of Omaha (16)10.25
    
    2009 Livestock Products Distribution Agreement effective January 1, 2009 by and
between Professional Veterinary Products, Ltd. and Pfizer Inc. (17)*10.26
    
    Amended and Restated Supplemental Executive Retirement Plan effective January
1, 2009 (17)
 II-1




---



##### 



Regulation S-KExhibit Number
    
    Document10.27
    
    Consulting Agreement dated January 30, 2009 between Professional Veterinary
Products, Ltd. and Reico, Inc. (17)10.28
    
    Employment Agreement effective February 1, 2009, between Professional
Veterinary Products, Ltd. And Stephen J. Price (18)10.29
    
    Severance Agreement dated April 1, 2009 between Professional Veterinary
Products, Ltd. and Neal Soderquist (18)11
    
    Statement re Computation of Per Share Earnings (#)12
    
    Computation of Ratio of Earnings to Fixed Charges (#)21
    
    List of Subsidiaries (19)31.1(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 the Companys CEO
(#)31.1(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 the Companys CFO
(#)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 (#)
  
 (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 8-K Current Report dated May 26, 2006 and filed June 2, 2006.(4)
    
    Form S-1 Registration Statement No. 333-86629 filed on September 7, 1999.(5)
    
    Post-Effective Amendment No. 1 to the Form S-1 Registration Statement No. 333-86629 filed on November 3, 2000.(6)
    
    Form 10-K for the fiscal year ended July 31, 2002 filed on October 29, 2002.(7)
    
    Post-Effective Amendment No. 1 to the Form S-1 Registration Statement No. 333-72962 filed on August 29, 2003.(8)
    
    Post-Effective Amendment No. 2 to the Form S-1 Registration Statement No. 333-120426 filed on December 13, 2005.(9)
    
    Form 8-K Current Report dated October 19, 2006 and filed October 25, 2006.(10)
    
    Form 8-K Current Report dated August 2, 2006 and filed October 25, 2006.(11)
    
    Form S-1 Registration Statement filed on November 28, 2006.(12)
    
    Form 8-K Current Report dated November 14, 2006 and filed November 20, 2006.(13)
    
    Form 8-K Current Report dated January 3, 2007 and filed January 9, 2007.(14)
    
    Form 8-K Current Report dated September 17, 2007 and filed September 21, 2007.(15)
    
    Form 8-K Current Report dated July 14, 2008 and filed July 18, 2008.(16)
    
    Form 8-K Current Report dated November 19, 2008 and filed November 25, 2008.(17)
    
    Form 10-Q Quarterly Report for the period ended January 31, 2009 filed March 16, 2009(18)
    
    Form 10-Q Quarterly Report for the period ended April 30, 2009 filed June 12, 2009(19)
    
    Form S-1 Registration Statement No. 333-72962 filed on November 8, 2001.  (#)
    
    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




---



##### 



SIGNATURES
   PROFESSIONAL VETERINARY PRODUCTS, LTD.By:
    
    /s/ Stephen J. Price

Stephen J. Price, CEO
  Signature
    
    Capacity
    
    Date/s/ Stephen J. Price

Stephen J. Price
    
    CEO 
(principal executive officer)
    
    October 29, 2009/s/ Tara Chicatelli

Tara Chicatelli
    
    Chief Financial Officer 
(principal financial officer)
    
    October 29, 2009/s/ Rhonda Lee Pierce

Rhonda Lee Pierce, D.V.M.
    
    Director
    
    October 28, 2009/s/ Donald R. Fogle

Donald R. Fogle, D.V.M.
    
    Director
    
    October 26, 2009/s/ James Alan Hoffmann

James Alan Hoffmann, D.V.M.
    
    Director
    
    October 27, 2009/s/ Eileen Sam Holly Morris

Eileen Sam Holly Morris, D.V.M.
    
    Director
    
    October 27, 2009/s/ Scott A. Shuey

Scott A. Shuey, D.V.M.
    
    Director
    
    October 26, 2009/s/ Charles W. Luke

Charles W. Luke, D.V.M.
    
    Director
    
    October 26, 2009/s/ Thomas E. Wakefield

Thomas E. Wakefield, D.V.M.
    
    Director
    
    October 24, 2009/s/ Vicky Wilkey

Vicky Wilkey, D.V.M.
    
    Director
    
    October 29, 2009/s/ Donald Janezic, Jr.

A. Donald Janezic, Jr.
    
    Director
    
    October 27, 2009
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