Attached files
file | filename |
---|---|
EX-32 - EX-32 - PROFESSIONAL VETERINARY PRODUCTS LTD /NE/ | c58656exv32.htm |
EX-10.1 - EX-10.1 - PROFESSIONAL VETERINARY PRODUCTS LTD /NE/ | c58656exv10w1.htm |
EX-31.1.B - EX-31.1.B - PROFESSIONAL VETERINARY PRODUCTS LTD /NE/ | c58656exv31w1wb.htm |
EX-31.1.A - EX-31.1.A - PROFESSIONAL VETERINARY PRODUCTS LTD /NE/ | c58656exv31w1wa.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 30, 2010
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.
(Exact name of registrant as specified in its charter)
Nebraska (State or other jurisdiction of incorporation or organization) |
37-1119387 (IRS Employer Identification No.) |
10077 South 134th Street
Omaha, Nebraska 68138
(402) 331-4440
(Address and telephone number of registrants principal executive offices)
Omaha, Nebraska 68138
(402) 331-4440
(Address and telephone number of registrants principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date (May 31, 2010).
Common Stock, $1.00 par value, 1,895
PROFESSIONAL VETERINARY PRODUCTS, LTD.
INDEX TO 10-Q FOR THE QUARTERLY
PERIOD ENDED APRIL 30, 2010
INDEX TO 10-Q FOR THE QUARTERLY
PERIOD ENDED APRIL 30, 2010
1
Table of Contents
ITEM 1: FINANCIAL STATEMENTS
PROFESSIONAL VETERINARY PRODUCTS, LTD.
Condensed Consolidated Balance Sheets
As of April 30, 2010 (unaudited) and July 31, 2009
(in thousands, except share data)
April 30, | July 31, | |||||||
2010 | 2009 | |||||||
ASSETS |
||||||||
CURRENT ASSETS |
||||||||
Cash |
$ | 4,865 | $ | 1,408 | ||||
Accounts receivable, net of allowance: $537 and $305, respectively |
32,476 | 24,227 | ||||||
Accounts receivable, related parties |
603 | 348 | ||||||
Inventory, net of allowance: $181 and $127, respectively |
35,780 | 37,107 | ||||||
Deferred tax asset |
494 | 952 | ||||||
Other current assets |
721 | 3,518 | ||||||
Total current assets |
74,939 | 67,560 | ||||||
NET PROPERTY AND EQUIPMENT |
8,068 | 8,718 | ||||||
OTHER ASSETS |
||||||||
Intangible assets, less accumulated amortization, $43 and $10, respectively |
187 | 30 | ||||||
Investment in unconsolidated affiliates |
144 | 144 | ||||||
Cash value of life insurance |
2,923 | 2,826 | ||||||
Deferred tax asset |
3,519 | 446 | ||||||
Other assets |
9 | 9 | ||||||
Total other assets |
6,782 | 3,455 | ||||||
TOTAL ASSETS |
$ | 89,789 | $ | 79,733 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
CURRENT LIABILITIES |
||||||||
Note payable, bank |
$ | 22,099 | $ | 20,287 | ||||
Current portion of long-term debt and capital lease obligation |
| 400 | ||||||
Current portion of accrued retirement benefits |
243 | 243 | ||||||
Accounts payable |
48,764 | 29,043 | ||||||
Accounts payable, related parties |
1,042 | 845 | ||||||
Interest rate swap |
| 111 | ||||||
Other current liabilities |
3,313 | 3,656 | ||||||
Total current liabilities |
75,461 | 54,585 | ||||||
LONG-TERM LIABILITIES |
||||||||
Long-term debt |
| 3,370 | ||||||
Accrued retirement benefits |
2,770 | 2,811 | ||||||
Total long-term liabilities |
2,770 | 6,181 | ||||||
TOTAL LIABILITIES |
78,231 | 60,766 | ||||||
COMMITMENTS AND CONTINGENT LIABILITIES SEE NOTE 10 |
||||||||
STOCKHOLDERS EQUITY |
||||||||
Common stock, $1 par value; authorized 30,000 shares; issued and
outstanding, 1,898 and 1,948, respectively shares |
2 | 2 | ||||||
Additional paid-in capital |
5,631 | 5,779 | ||||||
Retained earnings |
6,219 | 13,562 | ||||||
Accumulated other comprehensive loss |
(294 | ) | (376 | ) | ||||
Total stockholders equity |
11,558 | 18,967 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 89,789 | $ | 79,733 | ||||
See notes to the condensed consolidated financial statements.
2
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Condensed Consolidated Statements of Loss and Comprehensive Loss
Three and Nine month Periods Ended April 30, 2010 and 2009
(unaudited)
(in thousands, except per share data)
Three Months Ended | Nine months Ended | |||||||||||||||
April 30, | April 30, | April 30, | April 30, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
NET SALES AND OTHER REVENUE |
$ | 88,744 | $ | 75,291 | $ | 245,841 | $ | 225,813 | ||||||||
COST OF SALES |
80,727 | 67,376 | 222,534 | 199,774 | ||||||||||||
Gross profit |
8,017 | 7,915 | 23,307 | 26,039 | ||||||||||||
OPERATING GENERAL AND ADMINISTRATIVE EXPENSES |
12,899 | 9,662 | 32,409 | 30,009 | ||||||||||||
Operating loss |
(4,882 | ) | (1,747 | ) | (9,102 | ) | (3,970 | ) | ||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||
Interest income |
64 | 98 | 181 | 292 | ||||||||||||
Interest expense |
(361 | ) | (250 | ) | (1,092 | ) | (854 | ) | ||||||||
Other expense net |
(297 | ) | (152 | ) | (911 | ) | (562 | ) | ||||||||
Loss before income taxes |
(5,179 | ) | (1,899 | ) | (10,013 | ) | (4,532 | ) | ||||||||
Income tax benefit |
(1,533 | ) | (753 | ) | (2,670 | ) | (1,593 | ) | ||||||||
NET LOSS |
$ | (3,646 | ) | $ | (1,146 | ) | $ | (7,343 | ) | $ | (2,939 | ) | ||||
LOSS PER COMMON SHARE |
$ | (1,915.92 | ) | $ | (581.43 | ) | $ | (3,824.48 | ) | $ | (1,471.71 | ) | ||||
Weighted average common shares outstanding |
1,903 | 1,971 | 1,920 | 1,997 | ||||||||||||
COMPREHENSIVE LOSS |
||||||||||||||||
Net loss |
$ | (3,671 | ) | $ | (1,146 | ) | $ | (7,368 | ) | $ | (2,939 | ) | ||||
Other comprehensive income (loss): |
||||||||||||||||
Adjustment for net periodic pension benefit
cost, net of tax |
5 | 6 | 15 | 18 | ||||||||||||
Adjustment for mark-to-market value of swap,
net of tax |
| 29 | 67 | (97 | ) | |||||||||||
Total comprehensive loss |
$ | (3,666 | ) | $ | (1,111 | ) | $ | (7,286 | ) | $ | (3,018 | ) | ||||
SUPPLEMENTAL INFORMATION |
||||||||||||||||
Net sales and other revenue related parties |
$ | 1,139 | $ | 716 | $ | 3,168 | $ | 3,566 | ||||||||
Purchases related parties |
$ | 4,580 | $ | 2,032 | $ | 8,226 | $ | 8,587 |
See notes to the condensed consolidated financial statements.
3
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Condensed Consolidated Statement of Stockholders Equity
Nine month Period Ended April 30, 2010
(unaudited)
(in thousands, except per share data)
Accumulated | ||||||||||||||||||||||||
Common | Additional | Other | ||||||||||||||||||||||
Shares | Common | Paid-in | Retained | Comprehensive | ||||||||||||||||||||
Issued | Stock | Capital | Earnings | Loss | Total | |||||||||||||||||||
BALANCE AT
AUGUST 1, 2009 |
1,948 | $ | 2 | $ | 5,779 | $ | 13,562 | $ | (376 | ) | $ | 18,967 | ||||||||||||
Redemption of stock |
(50 | ) | | (148 | ) | | | (148 | ) | |||||||||||||||
Change in
unrecognized
pension cost, net
of tax of $10 |
| | | | 15 | 15 | ||||||||||||||||||
Change in
mark-to-market
interest rate swap,
net of tax of $44 |
| | | | 67 | 67 | ||||||||||||||||||
Net loss |
| | | (7,343 | ) | (7,343 | ) | |||||||||||||||||
BALANCE AT APRIL
30, 2010 |
1,898 | $ | 2 | $ | 5,631 | $ | 6,219 | $ | (294 | ) | $ | 11,558 | ||||||||||||
See notes to the condensed consolidated financial statements.
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Condensed Consolidated Statements of Cash Flows
Nine month Periods Ended April 30, 2010 and 2009
(unaudited)
(in thousands, except per share data)
April 30, | April 30, | |||||||
2010 | 2009 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net loss |
$ | (7,343 | ) | $ | (2,939 | ) | ||
Adjustments to reconcile net loss to net cash from operating
activities: |
||||||||
Depreciation and amortization |
1,174 | 1,370 | ||||||
Loss on sale of assets |
| 26 | ||||||
Retirement benefits |
(15 | ) | 166 | |||||
Deferred income tax |
(2,670 | ) | (257 | ) | ||||
Allowance for doubtful accounts |
232 | 413 | ||||||
Allowance for obsolete inventory |
54 | (53 | ) | |||||
(Increase) decrease in: |
||||||||
Receivables |
(8,736 | ) | (4,519 | ) | ||||
Inventory |
1,273 | (5,359 | ) | |||||
Other current assets |
2,797 | (1,176 | ) | |||||
Other assets |
| 2 | ||||||
Increase (decrease) in: |
||||||||
Accounts payable |
19,920 | 9,636 | ||||||
Other current liabilities |
(345 | ) | 207 | |||||
Total adjustments |
13,684 | 456 | ||||||
Net cash provided by (used in) operating activities |
6,341 | (2,483 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Purchase of property and equipment |
(481 | ) | (337 | ) | ||||
Increase in cash value of life insurance |
(97 | ) | (453 | ) | ||||
Purchase of intangible assets |
(200 | ) | | |||||
Net cash used in investing activities |
(778 | ) | (790 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Net short-term borrowings |
1,812 | 5,141 | ||||||
Principal payments on long-term debt and capital lease obligations |
(3,770 | ) | (274 | ) | ||||
Payments for redemption of common stock |
(148 | ) | (218 | ) | ||||
Net cash provided by (used in) financing activities |
(2,106 | ) | 4,649 | |||||
Net increase in cash |
3,457 | 1,376 | ||||||
Cash at beginning of period |
1,408 | 1,985 | ||||||
Cash at end of period |
$ | 4,865 | $ | 3,361 | ||||
Supplemental disclosure of cash flow information: |
||||||||
Interest paid |
$ | 996 | $ | 877 | ||||
Income taxes refunded |
$ | (2,544 | ) | $ | (182 | ) | ||
Non-cash periodic pension cost |
$ | 25 | $ | 18 | ||||
Non-cash unrealized (loss) gain on interest rate swap |
$ | 111 | $ | (97 | ) | |||
See notes to the condensed consolidated financial statements.
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
April 30, 2010 (unaudited)
(in thousands, except per share data)
NOTE 1 BASIS OF PRESENTATION:
The accompanying condensed consolidated financial statements of Professional Veterinary
Products, Ltd., and its wholly owned subsidiaries (the Company) have been prepared in accordance
with accounting principles generally accepted in the United States of America for interim financial
information and in accordance with the rules and regulations of the United States Securities and
Exchange Commission (the SEC). Accordingly, these condensed consolidated financial statements do
not include all of the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statements.
The statements reflect all normal and recurring adjustments which, in the opinion of
management, are necessary for a fair presentation of the results for the interim periods presented.
All significant intercompany accounts and transactions have been eliminated.
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
These condensed consolidated financial statements should be read in conjunction with the
Companys consolidated financial statements and notes thereto included in the Companys Annual
Report on Form 10-K for the year ended July 31, 2009 filed with the SEC. The Company follows the
same accounting policies in preparation of interim financial statements. These policies are
presented in Note 1 to the Consolidated Financial Statements included on Form 10-K referred to
above. The condensed consolidated balance sheet of the Company as of July 31, 2009 has been
derived from the audited consolidated balance sheet of the Company as of that date.
The results of operations and cash flows for the nine months ended April 30, 2010 are not
necessarily indicative of the results to be expected for the fiscal year ending July 31, 2010 or
any other period.
NOTE 2 RECENT ACCOUNTING PRONOUNCEMENTS:
In June 2009, the Financial Accounting Standards Board (FASB) issued FASB ASC 105, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles,
which established the FASB Accounting Standards Codification (Codification) as the only source of
authoritative generally accepted accounting principles (GAAP) in the United States, except that
rules and interpretive releases issued by the Securities and Exchange Commission (SEC) also are
sources of authoritative GAAP for SEC registrants. Subsequent to the issuance of FASB ASC 105, the
FASB will no longer issue Statements, Staff Positions, or Emerging Issues Task Force Abstracts, but
will issue Accounting Standards Updates (ASU) which will amend the Codification. The adoption of
this statement did not impact the Companys consolidated financial position, results of operations
or cash flows.
In February 2010, the FASB issued ASU 2010-09, Subsequent Events Amendments to Certain
Recognition and Disclosure Requirements. This update removes the requirement for an SEC filer to
disclose either the date through which subsequent events were reviewed or that subsequent events
were evaluated through the date the financial statements were issued in both issued and revised
financial statements. This update became effective for the Company upon its issuance, and upon
adoption, did not impact the Companys consolidated financial position, results of operations or
cash flows.
6
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
NOTE 3 PROPERTY AND EQUIPMENT:
Major classes of property and equipment consist of the following:
April 30, | July 31, | |||||||
2010 | 2009 | |||||||
Land |
$ | 1,762 | $ | 1,762 | ||||
Buildings |
5,217 | 5,217 | ||||||
Leasehold improvements |
606 | 606 | ||||||
Equipment |
11,505 | 11,140 | ||||||
19,090 | 18,725 | |||||||
Less Accumulated depreciation |
11,327 | 10,196 | ||||||
7,763 | 8,529 | |||||||
Construction in progress |
305 | 189 | ||||||
Net property, plant, and equipment |
$ | 8,068 | $ | 8,718 | ||||
NOTE 4 LINE OF CREDIT:
Until January 29, 2010, the Company had a revolving line of credit with First National Bank of
Omaha (FNB) that provided for borrowings up to $37,500. The short-term borrowing amount outstanding
under this credit facility was $20,287 at July 31, 2009. The credit agreement expired on December
1, 2010, but was extended until February 1, 2010. Prior to the extension, interest was payable at
1.25% or 1.50% over the London InterBank Offered Rate (LIBOR), depending on the Companys cash flow
leverage ratio, and under the extension, interest was payable at 1.5% plus LIBOR or 5%, whichever
was higher. The line of credit was secured by substantially all of the assets of the Company and its
subsidiaries. The credit agreement contained certain covenants related to financial ratios and
restricted the Company from paying dividends.
On January 29, 2010, the Company executed a Credit and Security Agreement (Credit Agreement)
with Wells Fargo Bank, National Association (Lender). The Lender may loan up to forty million
dollars ($40,000), in accordance with the terms of the Revolving Note, which is secured by
substantially all of the assets of the Company and its subsidiaries. Under the Revolving Note, the
Lender shall provide advances to the Company, which may be used as needed by the Company through
the maturity date of January 31, 2013. The initial proceeds of the revolving loan facility were
used to payoff the Companys indebtedness to its prior lender, including a prepayment penalty on
the term-debt portion, and the remaining proceeds were used to provide working capital support. At
April 30, 2010, the Company has $22,100 outstanding under the revolving loan facility. From
January 29, 2010 to February 28, 2010, interest was paid at a variable rate, reset daily, equal to
the daily three month LIBOR rate plus a margin of 3.50% (see below). Availability on the revolving
loan facility is limited based on certain advance rates for inventory and accounts receivable and
is further reduced by reserves as established by the Lender. The Credit Agreement includes a
lock-box arrangement, requires an unused line fee of 0.50% per annum payable monthly and includes a
minimum interest charge of $300 per annum. The Company also incurred a non-refundable origination
fee of $200 upon the execution of the agreement. The Credit Agreement imposes certain financial
covenants, which require that the Company achieve certain net loss thresholds for designated
periods through and including October 31, 2010. These loss thresholds are ($2,500) as of January
31, 2010; ($1,600) as of April 30, 2010; zero as of July 31, 2010 and ($500) as of October 31,
2010. The Credit Agreement also requires that the Company maintain, as of its fiscal year ending
July 31, 2010, a debt service coverage ratio of 1.25 to 1, and that the Company not incur or
contract to incur capital expenditures exceeding a specified amount during any fiscal year.
On March 15, 2010, the Company, its wholly-owned subsidiaries, and Lender executed the First
Amendment and Waiver to Credit and Security Agreement (the Amendment). The Company and Lender
amended the Credit Agreement to, among other things, waive the Companys default under the Credit
Agreement at January 31, 2010 and amend the floating interest rate. Effective March 1, 2010,
interest is paid at a variable rate, reset
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
daily, equal to the daily three month London Interbank Offered Rate (LIBOR) rate plus a margin of
5.50%. The Company also agreed to retain a management consultant to evaluate and assess the
business of the Company.
At April 30, 2010, the Company failed to comply with the net loss covenant, and under the
terms of the Credit Agreement, is in default. As a result of the default, the Lender may declare
all amounts owed under the Credit Agreement immediately due and payable. Should the Lender demand
payment, the Company currently would be unable to repay the amounts due. As a result, the Lender
could, among other remedies, foreclose on the Companys collateral, which would have a material
adverse effect on the Companys business, results of operations, and ability to continue as a going
concern. Although the Lender has the right to demand payment, the Company has not received any
indication from the Lender that it intends to take such action. The Company is currently in discussions
with the Lender and on or before June 30, 2010, expects to enter into a forbearance agreement covering periods after January
31, 2010.
NOTE 5 EARNINGS PER SHARE:
FASB ASC 260-10, Earnings per Share, promulgates accounting standards for the computation and
manner of presentation of the Companys earnings per share data. Under this Section, the Company is
required to present basic and diluted earnings per share. Basic earnings per share is computed by
dividing net income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflect the potential dilution that
could occur if securities or other contracts to issue common stock were exercised or converted into
common stock. There are no securities that are convertible to common stock that would cause further
dilution. The weighted average number of common shares outstanding was 1,903 and 1,971 for the
three month periods ended April 30, 2010 and 2009, respectively, and 1,920 and 1,997 for the nine
month periods then ended, respectively.
NOTE 6 COMMON STOCK:
The Company is authorized to issue 30,000 shares of common stock with a par value of $1.00.
There were 1,898 and 1,964 issued and outstanding shares at April 30, 2010 and July 31, 2009,
respectively. Holders of common stock are entitled to one vote for each share. They are also
entitled to their pro rata share of dividends, if and when, declared and in the event of
liquidation or dissolution, their pro rata share of monies after liabilities. Shareholders are not
permitted to sell, transfer or otherwise dispose of their stock except by a sale back to the
Company.
NOTE 7 INCOME TAXES:
The Company accounts for income taxes in accordance with FASB ASC 740, Income Taxes. FASB ASC
740 prescribes the use of the liability method whereby deferred tax asset and liability account
balances are determined based on differences between the financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. The Company provides a valuation allowance, if
necessary, to reduce deferred tax assets to their estimated realizable value. As of April 30,
2010, the Company recorded a valuation allowance of approximately $1,000. No valuation allowance
was recorded as of July 31, 2009.
FASB ASC 740 clarifies the accounting for income taxes, by prescribing a minimum recognition
threshold a tax position is required to meet before being recognized in the financial statements.
This section also contains guidance on derecognition, measurement and classification of amounts
relating to uncertain tax positions, accounting for and disclosure of interest and penalties and
accounting in interim periods.
The Company files income tax returns in the U.S. federal jurisdiction and various state and
local jurisdictions. A number of years may elapse before an uncertain tax position is audited and
finally resolved. While it is often difficult to predict the final outcome or the timing of a
resolution of any particular uncertain tax position,
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
management believes the accrual for income taxes reflects the most probable outcome. With few
exceptions, the Company is no longer subject to U.S. federal, state and local income tax
examinations by tax authorities for fiscal years prior to July 31, 2006.
The Companys policy is to classify interest expense and any penalties related to income tax
uncertainties as a component of income tax expense. There was no interest expense, net of tax
benefits, or penalty relating to tax uncertainties recognized in the Condensed Consolidated
Statements of Loss and Comprehensive Loss for the nine months ended April 30, 2010 or 2009. There
were no accrued interest and penalties related to income tax uncertainties reported on the
Condensed Consolidated Balance Sheet at April 30, 2010 and July 31, 2009.
NOTE 8 POST RETIREMENT BENEFITS:
For the nine months ended April 30, 2010 and 2009, benefits accrued and expensed were $171 and
$243, respectively, for the Companys Supplemental Executive Retirement Plan (SERP). The plan is
an unfunded supplemental executive retirement plan and is not subject to the minimum funding
requirements of the Employee Retirement Income Security Act (ERISA). Although the SERP is an
unfunded plan, the Company is informally funding the plan through life insurance contracts on the
participants. The life insurance contracts had cash surrender values of $2,807 and $2,709 at April
30, 2010 and July 31, 2009, respectively.
Net periodic benefit costs for the Companys SERP for the three and nine month periods ended
April 30, 2010 and April 30, 2009, include the following components:
Three Months Ended | Nine months Ended | |||||||||||||||
April 30, | April 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Service Cost |
$ | 8 | $ | 24 | $ | 24 | $ | 73 | ||||||||
Interest Cost |
41 | 46 | 122 | 139 | ||||||||||||
Amortization of prior losses |
| 2 | | 5 | ||||||||||||
Amortization of unrecognized prior service costs |
8 | 9 | 25 | 26 | ||||||||||||
Net periodic benefit cost |
$ | 57 | $ | 81 | $ | 171 | $ | 243 | ||||||||
NOTE 9 DERIVATIVE FINANCIAL INSTRUMENTS:
As a temporary strategy to maintain acceptable levels of exposure to the risk of changes in
future cash flows due to interest rate fluctuations, the Company entered into an interest rate swap
agreement for a portion of its floating rate debt. Under this agreement, the Company received
interest from the counterparty at LIBOR and paid interest to the counterparty at a fixed rate of
3.09% on notional amounts of $10,000 until December 1, 2009. Under the agreement, the Company paid
or received the net interest monthly, with the monthly settlements included in interest expense.
The interest rate swap agreement terminated on December 1, 2009.
Management designated the interest rate swap agreement as a cash flow hedging instrument. For
derivative instruments that are designated and qualify as a cash flow hedge, the effective portion
of the gain or loss on the derivative is reported as a component of other comprehensive income or
loss. Gains and losses on the valuation of the derivative representing either hedge fund
ineffectiveness or hedge components excluded from the assessment of effectiveness are recognized in
current earnings.
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Notes to Condensed Consolidated Financial Statements
January 31, 2010 (unaudited)
(in thousands, except per share data)
Notes to Condensed Consolidated Financial Statements
January 31, 2010 (unaudited)
(in thousands, except per share data)
NOTE 9 DERIVATIVE FINANCIAL INSTRUMENTS (continued):
The table below presents certain information about the Companys interest rate swap agreement
designated as a cash flow hedge. The Company did not have any derivative instruments at April 30,
2010, that were not designated as hedging instruments under FASB ASC 815-25, Derivative Instruments
and Hedging Activities.
April 30, 2010 | July 31, 2009 | |||||||||||||||
Fair Value of interest rate swap agreement |
N/A | $ | (111 | ) | ||||||||||||
Balance sheet location of fair value amount |
N/A | Current Liabilities | ||||||||||||||
Gain (loss) recognized in other comprehensive
income (effective portion-net of tax) |
$ | (67 | ) | $ | (67 | ) | ||||||||||
Loss reclassified from accumulated other
comprehensive income into income (effective
portion) |
$ | (96 | ) | $ | (162 | ) | ||||||||||
Location of loss reclassified from accumulated
other comprehensive income into income |
Interest Expense | 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 10 COMMITMENTS AND CONTINGENT LIABILITIES:
Stock Redemption The Bylaws grant the Company discretion to repurchase shares of common
stock at the time of the shareholders request for redemption. The Company may, but is not
obligated to, repurchase such shares. See Note 6 for additional information.
Major Customers, Major Suppliers and Credit Concentrations Other financial assets and
liabilities, which potentially subject the Company to concentrations of credit risk, are trade
accounts receivable and trade payables. Two vendors comprised 52.8% and 54.1% of all purchases for
the nine month periods ended April 30, 2010 and April 30, 2009, respectively.
Litigation On April 7, 2009, IVESCO Holdings, LLC (IVESCO) filed a lawsuit in the United
States District Court for the Northern District of Iowa, Case No. 1:09CV52, against the Company and
its wholly owned subsidiary, ProConn LLC (ProConn). IVESCO alleged that the Company conspired with
certain departing IVESCO employees to take over or steal the IVESCO swine business through the
simultaneous departure of most of the employees in the swine division. IVESCO also alleged a
conspiracy to unfairly compete, tortious interference with business expectancies between IVESCO and
its customers and employee relationships, aiding and abetting an alleged breach of duty by former
IVESCO employees, and unjust enrichment by the receipt of sales revenue without payment of fair
value. IVESCO sought damages in an unstated amount, the imposition of a constructive trust upon
earnings of the Companys swine product sales, restitution by disgorgement of profits, interest,
punitive damages, costs and attorney fees. The Company filed a responsive pleading denying the
allegations and vigorously defended against IVESCOs claims. On May 12, 2010 the lawsuit was
resolved pursuant to the terms of a confidential settlement agreement and on May 20, 2010, the
lawsuit was dismissed by the court.
In addition to IVESCO litigation, the Company is subject to claims and other actions arising
in the ordinary course of business. Some of these claims and actions may result in lawsuits where
the Company is a defendant. Management believes that the ultimate obligations if any, which may
result from unfavorable outcomes of such lawsuits, will not have a material adverse effect on the
financial position, results of operations or cash flows of the Company and such obligations, if
any, would be adequately covered by insurance.
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Notes to Condensed Consolidated Financial Statements
January 31, 2010 (unaudited)
(in thousands, except per share data)
Notes to Condensed Consolidated Financial Statements
January 31, 2010 (unaudited)
(in thousands, except per share data)
At April 30, 2010, the Company accrued a liability of $2,500 for estimated loss contingencies,
including any outstanding litigation.
Other The Company is currently involved in discussions with its Lender and on or before June 30, 2010, expects to enter
into a forbearance agreement covering periods after January 31, 2010. The financial statements have
been prepared assuming the Company will continue as a going concern, realizing assets and
liquidating liabilities under existing contractual terms and in the ordinary course of business.
Any requirement to realize assets and satisfy liabilities in other than the ordinary course of
business in order to provide liquidity could result in losses not reflected in these financial
statements.
NOTE 11 SEGMENT INFORMATION:
The Company has three reportable segments: Wholesale Distribution, Logistics Services and
Direct Customer Services. The Wholesale Distribution segment is a wholesaler of animal health
products. This segment distributes products primarily to licensed veterinarians or business
entities comprised of licensed veterinarians. The Logistics Services segment provides logistics and
distribution service operations for vendors of animal health products and business-to-business type
transactions. The Logistics Services segment distributes products primarily to other animal health
companies. The Direct Customer Services segment acts as a supplier of animal health products to the
producer or consumer. Animal health products are shipped to locations closer to the final
destination. The segments trucking operations transport the products directly to the producer or
consumer.
The accounting policies of the segments are the same as those described in the summary of
significant accounting policies as detailed in the Companys consolidated financial statements and
footnotes thereto included in the Annual Report on Form 10-K for the year ended July 31, 2009,
filed with the SEC. The Company evaluates performance based on profit or loss from operations
before income taxes. The Companys reportable segments are strategic business units that serve
different types of customers in the animal health industry. The separate financial information of
each segment is presented consistent with the way results are regularly evaluated by the chief
operating decision maker in deciding how to allocate resources and in assessing performance.
Since the Companys reportable segments all provide essentially the same products and
services, the Company believes it would be impracticable to report the revenue from external
customers for each product and service or each group of similar products and services in accordance
with FASB ASC 280-10-50, Segment Reporting.
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
The following table summarizes the Companys operations by business segment:
Direct | Condensed | |||||||||||||||||||
Wholesale | Logistics | Customer | Consolidated | |||||||||||||||||
Distribution | Services | Services | Eliminations | Total | ||||||||||||||||
Three months ended April 30, 2010 |
||||||||||||||||||||
Net sales and other revenue |
$ | 81,947 | $ | 58 | $ | 29,644 | $ | (22,905 | ) | $ | 88,744 | |||||||||
Cost of sales |
79,593 | 49 | 27,874 | (26,789 | ) | 80,727 | ||||||||||||||
Operating, general and
administrative expenses |
7,239 | | 5,660 | | 12,899 | |||||||||||||||
Operating income (loss) |
(4,885 | ) | 9 | (3,890 | ) | (3,884 | ) | (4,882 | ) | |||||||||||
Income (loss) before taxes |
$ | (5,179 | ) | $ | 9 | $ | (3,893 | ) | $ | (3,884 | ) | $ | (5,179 | ) | ||||||
Three months ended April 30, 2009 |
||||||||||||||||||||
Net sales and other revenue |
$ | 74,489 | $ | 84 | $ | 9,863 | $ | (9,145 | ) | $ | 75,291 | |||||||||
Cost of sales |
68,109 | 72 | 9,022 | (9,827 | ) | 67,376 | ||||||||||||||
Operating, general and
administrative expenses |
8,114 | | 1,548 | | 9,662 | |||||||||||||||
Operating income (loss) |
(1,735 | ) | 12 | (708 | ) | 684 | (1,747 | ) | ||||||||||||
Income (loss) before taxes |
$ | (1,899 | ) | $ | 12 | $ | (696 | ) | $ | 684 | $ | (1,899 | ) | |||||||
Nine months ended April 30, 2010 |
||||||||||||||||||||
Net sales and other revenue |
$ | 237,765 | $ | 180 | $ | 80,590 | $ | (72,694 | ) | $ | 245,841 | |||||||||
Cost of sales |
225,278 | 154 | 75,263 | (78,161 | ) | 222,534 | ||||||||||||||
Operating, general and
administrative expenses |
21,586 | | 10,823 | | 32,409 | |||||||||||||||
Operating income (loss) |
(9,099 | ) | 26 | (5,496 | ) | (5,467 | ) | (9,102 | ) | |||||||||||
Income (loss) before taxes |
$ | (10,013 | ) | $ | 26 | $ | (5,493 | ) | $ | (5,467 | ) | $ | (10,013 | ) | ||||||
Business segment assets |
$ | 89,542 | $ | 421 | $ | 12,791 | $ | (12,965 | ) | $ | 89,789 | |||||||||
Nine months ended April 30, 2009 |
||||||||||||||||||||
Net sales and other revenue |
$ | 221,584 | $ | 208 | $ | 37,639 | $ | (33,618 | ) | $ | 225,813 | |||||||||
Cost of sales |
200,425 | 176 | 33,928 | (34,755 | ) | 199,774 | ||||||||||||||
Operating, general and
administrative expenses |
25,088 | | 4,921 | | 30,009 | |||||||||||||||
Operating income (loss) |
(3,929 | ) | 32 | (1,210 | ) | 1,137 | (3,970 | ) | ||||||||||||
Income (loss) before taxes |
$ | (4,532 | ) | $ | 32 | $ | (1,169 | ) | $ | 1,137 | $ | (4,532 | ) | |||||||
Business segment assets |
$ | 92,206 | $ | 382 | $ | 11,570 | $ | (11,161 | ) | $ | 92,997 |
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PROFESSIONAL VETERINARY PRODUCTS, LTD.
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
Notes to Condensed Consolidated Financial Statements
April 30, 2010 (unaudited)
(in thousands, except per share data)
NOTE 12 SIGNIFICANT ESTIMATES AND CONCENTRATIONS
Current Economic Conditions The current protracted economic decline continues to present
distributors with difficult circumstances and challenges, which in some cases have resulted in
large and unanticipated declines in the fair value of investments and other assets, declines in the
volume of business, constraints on liquidity and difficulty obtaining financing. The financial
statements have been prepared using values and information currently available to the Company.
Current economic and financial market conditions could adversely affect our results of
operation in future periods. The current instability in the financial markets may make it difficult
for the Company or certain of its customers to obtain financing, which may significantly impact the
volume of future sales which could have an adverse impact on the Companys future operating results
and the Companys liquidity.
In addition, given the volatility of current economic conditions, the values of assets and
liabilities recorded in the financial statements could change rapidly, resulting in material future
adjustments in investment values, allowances for accounts and notes receivable, net realizable
value of inventory, realization of deferred tax assets and valuation of intangibles that could
negatively impact the Companys ability to meet debt covenants or maintain sufficient liquidity.
13
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ITEM 2: | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of the Companys financial condition and results of
operations should be read in conjunction with the condensed consolidated financial statements and
accompanying notes that are included in this quarterly report.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking
statements are contained principally in the section entitled Managements 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 its serves; | ||
| the sources of revenues and anticipated revenues, including the contribution from the growth of new products and markets; | ||
| estimates regarding the Companys capital requirements and its need for additional financing; | ||
| the Companys ability to attract customers and the market acceptance of its products; | ||
| our ability to establish relationships with suppliers of products; and | ||
| plans for future products and services and for enhancements of existing products and services. |
In some cases, you can identify forward-looking statements by terms such as may, intend,
might, will, should, could, would, expect, believe, estimate, predict,
potential, or the negative of these terms, and similar expressions intended to identify
forward-looking statements. These statements reflect our current views with respect to future
events and are based on assumptions and subject to risks and uncertainties. Given these
uncertainties, you should not place undue reliance on these statements. Also, these statements
represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q,
and we undertake no obligation to publicly update or revise these forward-looking statements.
These statements are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such statements are based upon the current beliefs and expectations
of our management and are subject to significant risks and uncertainties. Actual results may differ
from those set forth in the forward-looking statements. The following factors, among others, could
cause actual results to differ materially from those in forward-looking statements: decreased
demand for our services or loss of one or more of our major customers; surplus inventories; loss of
one or more of our major vendors; recessionary economic cycles; strikes, work slowdowns, or work
stoppages at our vendors facilities; increases in interest rates; and increases in the prices paid
for goods. Readers should review and consider these factors along with the various disclosures we
make in public filings with the Securities and Exchange Commission.
Overview
Professional Veterinary Products, Ltd. provides distribution services of animal health
products through three business segments: Wholesale Distribution (PVP), Logistics Services (Exact
Logistics), and Direct Customer Services (ProConn) which are further described on page 16.
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We generate a significant portion of our net sales and other revenue by providing
pharmaceuticals, vaccines, supplies, equipment and other animal health related items to our
customers through our wholesale distribution segment. The main factor that impacts our net sales
and other revenue is the Companys ability to offer a broad product line combined with our
excellent and knowledgeable customer service. For the three month period ending April 30, 2010, a
majority of our sales and other revenue was derived from the Wholesale Distribution Segment, and
approximately 33.5% were derived from Direct Customer Services segment.
During the quarter ended April 30, 2010, the Companys net sales and other revenues increased
by $13.5 million or 17.9% and cost of sales increased by $13.4 million or 19.9%, resulting in an
increase of gross profit of $0.1 million, or 0.8% of gross profit. The increase of cost of sales
is primarily attributed an increase in sales for ProConn of $20.1 million. For the quarter, net
loss was $3.6 million compared to net loss of $1.1 million in the prior comparative period. The net
loss resulted primarily from an increase of litigation expenses and costs of $2.6 million.
Vendor sales and purchase incentives range from one-time opportunities to programs that last a
month, a quarter, a trimester, or an entire year. Vendor sales and purchase incentives are recorded
as a reduction of cost of sales. Incentives are recognized when goals are achieved or when they are
estimated and are likely to be achieved.
Looking forward, management believes that cost of sales and labor expense will continue to be
the most pressing issues facing the industry and us in the foreseeable future and will continue to
impact our profitability. We remain focused on maximizing shareholders value through utilization
of technology and enhancing the Companys product lines.
Current Assets
During the nine month period ending April 30, 2010, the Companys current assets increased
$7.4 million primarily due to an additional $3.5 million of cash and an increase to accounts
receivable of $8.2 million. These increases were offset by a decrease in inventory of $1.3 million
and a decrease of $2.8 million in other current assets. Other current assets include prepaid
insurance, prepaid income tax and sales tax receivable. The increase in accounts receivable is
related to the increase in sales.
Current Liabilities
During the nine month period ending April 30, 2010, the Companys current liabilities
increased $20.9 million due to an increase in accounts payable of $19.8 million and an increase in
notes payable of $1.8 million.
Results of Operations
The following discussion is based on the historical results of operations for the three month
periods ended April 30, 2010 and 2009.
Summary Condensed Consolidated Results of Operations Table for Three Months Ended April 30, 2010
Three Months Ended | ||||||||
April 30, | ||||||||
(in thousands) | ||||||||
2010 | 2009 | |||||||
Net sales and other revenue |
$ | 88,744 | $ | 75,291 | ||||
Cost of sales |
80,727 | 67,376 | ||||||
Gross profit |
8,017 | 7,915 | ||||||
Operating, general and administrative expenses |
12,899 | 9,662 | ||||||
Operating income (loss) |
(4,882 | ) | (1,747 | ) | ||||
Interest expense, net |
(297 | ) | (152 | ) | ||||
Other expense |
| | ||||||
Loss before taxes |
(5,179 | ) | (1,899 | ) | ||||
Income tax benefit |
(1,533 | ) | (753 | ) | ||||
Net loss |
$ | (3,646 | ) | $ | (1,146 | ) | ||
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Three months ended April 30, 2010 as compared to three months ended April 30, 2009
Net sales and other revenue for the three month period ending April 30, 2010 increased $13.4
million to $88.7 million compared to $75.3 million for the same period the previous year. The
increase in net sales and other revenue resulted primarily from an increase in volume of sales to
new customers.
Cost of sales for the three month period ending April 30, 2010 increased $13.3 million to
$80.7 million compared to $67.4 million for the same period the previous year. This increase is
primarily attributable to an increase in overall revenues. Cost of sales includes the Companys
inventory product cost plus freight costs less vendor sales and purchase incentives. Vendor
purchase and sales incentives are described above on page 15.
Gross profit for the three month period ending April 30, 2010 increased $0.1 million to $8.0
million compared to $7.9 million for the same period the previous year. Gross profit as a
percentage of net sales and other revenue was 9.0% compared to 10.5% for the same period the
previous year. This increase is primarily attributable to an increase in net sales and other
revenue.
Operating, general and administrative expenses for the three month period ending April 30,
2010 increased $3.2 million to $12.9 million compared to $9.7 million for the same period the
previous year. The increase in operating, general and administrative expenses resulted primarily
from an increase in payroll and payroll taxes of $1.0 million due to the opening of distribution
centers in Quincy, Illinois, Mankato, Minnesota, Iowa Falls, Iowa, and Fort Smith, Arkansas and
legal and other costs associated with the IVESCO litigation. The Companys long-term strategy is to
utilize competitive pricing with operational efficiencies to compete in todays marketplace. To
further this strategy, the Company is developing a pricing strategy with forecasting and predictive
modeling capabilities, which the Company anticipates will allow it to respond to the continually
changing market conditions. These expenses as a percentage of net sales and other revenue were
14.6% compared to 12.8% for the same period the previous year.
Operating loss for the three month period ending April 30, 2010 was $4.9 million compared to
operating loss of $1.7 million for the same period the previous year. The loss was primarily
attributable to the increase in operating, general and administrative expenses as noted above.
Net loss was $3.6 million compared to $1.1 million loss for the same period the previous year.
The net income loss increase was primarily due to an increase in operating loss of $3.1 million.
Operating Segments three months ended April 30, 2010 as compared to three months ended April 30,
2009
The Company has three reportable segments: Wholesale Distribution (PVP), Logistics Services
(Exact Logistics), and Direct Customer Services (ProConn). The Wholesale Distribution segment is a
wholesaler of animal health products to veterinarians. This segment distributes products primarily
to Company shareholders, who are licensed veterinarians or business entities comprised of licensed
veterinarians. The Logistics Services segment provides animal health products to other animal
health wholesalers. The Logistic Services segment serves business-to-business type transactions.
The Direct Customer Services segment is a supplier of animal health products to the producer or
consumer. Animal health products are shipped to locations closer to the final destination. The
segments trucking operations transport the products directly to the producer or consumer.
The Companys reportable segments are strategic business units that serve different types of
customers in the animal health industry. The separate financial information of each segment is
presented consistent with the way results are regularly evaluated by the Companys management, who
decides how to allocate resources and assesses performance. For additional quantitative segment
information, see Note 12 of the Companys Condensed Consolidated Financial Statements at April 30,
2010.
Wholesale Distribution
Net sales and other revenue for the three month period ending April 30, 2010 increased by
10.0% or $7.4 million. Net sales and other revenue for the three month period ending April 30, 2010
totaled $81.9 million
16
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compared to $74.5 million for the same three month period in the prior fiscal year. The increase in
net sales and other revenue resulted primarily from an increase in sales volume to existing
customers and new customers.
Cost of sales for the three month period ending April 30, 2010 increased $11.5 million to
$79.6 million compared to $68.1 million for the same period the previous year. As a percentage of
revenue, cost of sales increased from 91.4% at April 30, 2009 compared to 97.2% at April 30, 2010. This
increase is directly attributable to an increase in net sales and a decrease in vendor sales
margins and incentives. Cost of sales includes the Companys inventory product cost plus freight
costs less vendor purchase and sales incentives.
Gross profit decreased by $4.0 million to $2.3 million compared to $6.4 million for the same
three month period in the prior fiscal year. This decrease is primarily attributable to an increase
in cost of sales of $11.5 million and offset by the increase in net sales and revenue of $7.4
million. Gross profit as a percentage of total revenue was 2.9% for the three month period ending
April 30, 2010 compared to 8.6% for the same three month period in the previous year.
Operating, general and administrative expenses decreased by $0.9 million to $7.2 million for the
three month period ending April 30, 2010 compared to $8.1 million for the previous year. This
decrease in operating, general and administrative expenses resulted primarily from a decrease in
pharmacy fees of $0.2 million,and a decrease in marketing expense of $0.2 million, and a decrease in
other marketing income of $0.2 million. Such operating, general and administrative expenses as a
percentage of total revenue for the three month period ending April 30, 2010 was 8.9% compared to
10.9% for the three month period ended April 30, 2009.
Operating loss was $4.9 million for the three month period ending April 30, 2010 compared to
operating loss of $1.7 million for the previous year. This increase is primarily attributable to a
decrease in gross profit of $4.0 million and offset by a decrease in operating, general and
administrative expense of $0.9 million.
Logistics Services
The Company provides logistics and distribution services as an added value to its customers.
This segment represents a nominal portion of the Companys revenue and expenses. Net sales and
other revenue for the three month period ending April 30, 2010 decreased by $0.03 million. Net
sales and other revenue for the three month period ending April 30, 2010 totaled $0.06 million
compared to $0.08 million for the same period in the previous fiscal year.
Cost of sales for the three month period ending April 30, 2010 decreased $0.02 million to
$0.05 million compared to $0.07 million from the same period the previous year. This decrease is
primarily attributable to a decrease in cost of goods sold of $0.02 million. The cost of goods sold
includes the Companys inventory product cost. Gross profit decreased by $0.003 million to $0.01
million during the three month period ending April 30, 2010 compared to $0.01 million for the same
period during the previous fiscal year. Operating, general and administrative expenses are nominal
for this segment and do not materially impact income.
Operating income was $0.01 million and $0.01 million for the quarters ended April 30, 2010 and
April 30, 2009, respectively.
Direct Customer Services
For the three month period ending April 30, 2010, net sales and other revenue increased by
199.0% or $19.7 million. Net sales and other revenue for the three month period ending April 30,
2010 totaled $29.6 million compared to $9.9 million for the same period the previous year. The
increase in net sales and other revenues is due to continuing growth in sales and new customers.
Cost of sales for the three month period ending April 30, 2010 increased by $18.9 million to
$27.9 million compared to $9.0 million for the same period the previous year. This increase is
primarily attributable to additional sales for the new distribution centers in Quincy, Illinois,
Mankato, Minnesota, Iowa Falls, Iowa, and Fort Smith, Arkansas. Cost of sales includes the
Companys inventory product cost plus freight costs less vendor purchase and sales incentives.
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Gross profit increased by $1.0 million to $1.8 million in the three month period ending April
30, 2010 compared to $0.8 million for the same period the previous fiscal year. This increase was
primarily attributable due to the increase in net sales and other revenue and offset by the
decrease in cost of sales. Gross profit as a percentage of total revenue was 6.0% for the three
month period ending April 30, 2010 compared to 8.5% for the three month period ended April 30,
2009.
Operating, general and administrative expenses increased by $4.1 million to $5.6 million for
the three month period ending April 30, 2010 compared to $1.5 million for the previous year. The
increase in operating, general and administrative expenses resulted primarily from an increase in
labor costs and associated taxes of $1.1 million and the operating expenses for the opening of
distribution centers in Quincy, Illinois, Mankato, Minnesota, Iowa Falls, Iowa, and Fort Smith,
Arkansas, an increase in legal and other costs related to litigation. Such operating, general and
administrative expenses as a percentage of total revenue for the three month period ending April
30, 2010 were 19.1% compared to 15.7% during the same three month period ending April 30, 2009.
Operating loss was $3.9 million for the three month period ending April 30, 2010 compared to
operating loss of $0.7 million for the same period in the previous year. This change is primarily
attributable to the increase in operating, general and administrative expense of $4.1 million.
Summary Consolidated Results of Operations Table for nine months ended April 30, 2010
Nine months Ended | ||||||||
April 30, | ||||||||
(in thousands) | ||||||||
2010 | 2009 | |||||||
Net sales and other revenue |
$ | 245,841 | $ | 225,813 | ||||
Cost of sales |
222,534 | 199,774 | ||||||
Gross profit |
23,307 | 26,039 | ||||||
Operating, general and administrative expenses |
32,409 | 30,009 | ||||||
Operating loss |
(9,102 | ) | (3,970 | ) | ||||
Other expense, net |
(911 | ) | (562 | ) | ||||
Loss before taxes |
(10,013 | ) | (4,532 | ) | ||||
Income tax benefit |
(2,670 | ) | (1,593 | ) | ||||
Net loss |
$ | (7,343 | ) | $ | (2,939 | ) | ||
Nine months ended April 30, 2010 as compared to nine months ended April 30, 2009
Net sales and other revenue for the nine month period ending April 30, 2010 increased $20.0
million to $245.8 million compared to $225.8 million for the same period the previous year. The
increase in net sales and other revenue resulted primarily due to an increase in the volume of
sales to new customers.
Cost of sales for the nine month period ending April 30, 2010 increased $22.7 million to
$222.5 million compared to $199.8 million for the same period the previous year. This increase is
primarily attributable to additional sales for the new distribution centers in Quincy, Illinois;
Mankato, Minnesota; Iowa Falls, Iowa; and Fort Smith, Arkansas. Cost of sales includes the
Companys inventory product cost plus freight costs less vendor sales and purchase incentives.
Gross profit for the nine month period ending April 30, 2010 decreased $2.7 million to $23.3
million compared to $26.0 million for the same period the previous year. This decrease is primarily
attributable to a decrease in vendor sales and purchase incentives earned by the Company. Gross
profit as a percentage of net sales and other revenue was 9.5% compared to 11.5% for the same
period the previous year.
Operating, general and administrative expenses for the nine month period ending April 30, 2010
increased $2.4 million to $32.4 million compared to $30.0 million for the same period the previous
year. The increase in operating, general and administrative expenses resulted primarily from an
increase in salaries expense of $1.6 million, an increase in lease expense of $0.4 million and an
increase in legal fees of $0.4 million.
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Operating loss for the nine month period ending April 30, 2010 increased to $9.1 million
compared to a loss of $4.0 million for the same period the previous year. The Companys other
expense was $(0.9) million for the nine month period ending April 30, 2010, compared to $(0.6)
million for the same period the previous year. Interest expense increased to $1.1 million for the
nine month period ending April 30, 2010, from $0.9 million for the same period in the previous year
while interest income decreased to $0.2 million compared to $0.3 million in the prior period. The
increase in the Companys other expense resulted primarily from wages and other costs related to
new facilities and legal and other costs related to litigation.
Net loss increased by $4.4 million to $7.3 million compared to a $2.9 million loss for the
same period the previous year. The net loss increase was primarily due to an increase in cost of
sales and a decrease in gross profit.
Operating Segments Nine months ended April 30, 2010 compared to nine months ended April 30, 2009
Wholesale Distribution
Net sales and other revenue for the nine month period ending April 30, 2010 increased by 7.3%
or $16.2 million. Net sales and other revenue for the nine month period ending April 30, 2010
totaled $237.8 million compared to $221.6 million for the same nine month period in the prior
fiscal year. The increase in net sales and other revenue resulted primarily due to an increase in
sales volume to existing customers.
Cost of sales for the nine month period ending April 30, 2010 increased $24.8 million to
$225.2 million compared to $200.4 million for the same period the previous year. This increase is
primarily attributable to an increase in net sales and a decrease in vendor sales margins and
incentives. Cost of sales includes the Companys inventory product cost plus freight costs less
vendor purchase and sales incentives.
Gross profit decreased by $8.6 million to $12.6 million for the nine month period ending April
30, 2010 compared to $21.2 million for the same nine month period in the prior fiscal year. This
decrease is primarily attributable to an increase in cost of sales and offset by an increase in
sales and other revenue. Gross profit as a percentage of total revenue was 5.3% for the nine month
period ending April 30, 2010 compared to 9.5% for the same nine month period in the previous year.
Decreased gross profit as a percentage of total revenues is primarily attributed to a decrease in
vendor sales margins and incentives.
Operating, general and administrative expenses decreased by $3.5 million to $21.6 million for
nine month period ending April 30, 2010 compared to $25.1 million for the previous year. This
decrease in operating, general and administrative expenses resulted primarily from decreases in
professional services of $0.8 million, salaries expense of $0.8 million, medical expense of $0.4
million, pharmacy fees of $0.4 million, marketing expense of $0.4 million, credit card fees of $0.2
million, and a decrease in marketing income of $0.5 million. Such operating, general and
administrative expenses as a percentage of total revenue for the nine month period ending April 30,
2010 was 9.1% compared to 11.3% for the nine month period ended April 30, 2009.
Operating loss increased by $5.2 million to $9.1 million for the nine month period ending
April 30, 2010 compared to a loss of $3.9 million for the previous year.
Logistics Services
Net sales and other revenue for the nine month period ending April 30, 2010 decreased by $0.03
million. For the nine month periods ending April 30, 2010 and 2009, net sales and other revenue
totaled $0.2 million. This decrease is primarily attributable to decreased sales to other animal
health wholesalers. Cost of sales for the nine month period ending April 30, 2010 decreased by
$0.02 million.
Gross profit decreased by $0.06 million to $0.03 million during the nine month period ending
April 30, 2010 compared to $0.03 million for the same period during the previous fiscal year.
Operating, general and administrative expenses are nominal for this segment and for the nine month
periods ended April 30, 2010 and 2009. Operating income decreased by $0.06 million to $0.03
million for the nine month period ending April 30, 2010 compared to $0.03 million for the same
period the previous year.
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Direct Customer Services
Net sales and other revenue for the nine month period ending April 30, 2010 increased by
114.1% or $43.0 million. Net sales and other revenue for the nine month period ending April 30,
2010 totaled $80.6 million compared to $37.6 million for the same period the previous year. The
increase in net sales and other revenue resulted primarily from an increase in sales to new
customers.
Cost of sales for the nine month period ending April 30, 2010 increased by $41.3 million to
$75.2 million compared to $33.9 million for the same period the previous year. This increase is
directly attributable to the increase of cost of goods sold and decrease in vendor sales margins
and incentives. The cost of goods sold includes the Companys inventory product cost and freight
costs less vendor purchase and sales incentives.
Gross profit increased by $1.6 million to $5.3 million in the nine month period ending April
30, 2010 compared to $3.7 million for the same period the previous fiscal year. This increase was
directly attributable to the increase in sales to new customers. Gross profit as a percentage of
total revenue was 6.6% for the nine month period ending April 30, 2010 compared to 9.9% for the
nine month period ended April 30, 2009. The decrease in gross profit as a percentage of revenue is
primarily attributable to a decrease in vendor sales margins and incentives.
Operating, general and administrative expenses increased by $5.9 million to $10.8 million for
the nine month period ending April 30, 2010 compared to $4.9 million for the previous year. The
increase in operating, general and administrative expenses resulted in part from an increase in
labor costs and associated taxes of $2.5 million and the operating expenses for the opening of
distribution centers in Quincy, Illinois; Mankato, Minnesota; Iowa Falls, Iowa; and Fort Smith,
Arkansas, and an increase in legal and other costs related to litigation. Such operating, general
and administrative expenses as a percentage of total revenue for the nine month period ending April
30, 2010 were 13.4% and compared to 13.1% during the same nine month period ending April 30, 2009.
Operating loss increased by $4.3 million to $5.5 million for the nine month period ending
April 30, 2010 compared to an operating loss of $1.2 million for the same period in the previous
year. This increase is primarily attributable to an increase in operating expenses of $5.9 million
and offset by an increase of gross profit of $1.6 million.
Seasonality in Operating Results
The Companys quarterly sales and operating results have varied in the past and will likely
continue to do so in the future. Historically, the Companys livestock sales are seasonable with
peak sales in the spring and fall. The cyclical nature is directly tied to certain medical
procedures performed by veterinarians on livestock during these seasons. Companion animal products
have a different seasonal nature which minimally overlaps the livestock business cycles. The net
result is a reduction of the cyclical seasonal nature of the business. Minimizing the cyclical
nature of the Companys business has allowed for more efficient utilization of all resources.
Liquidity and Capital Resources
The Company expends capital primarily to fund day-to-day operations and expand those
operations to accommodate sales growth. It is necessary for the Company to expend funds to maintain
significant inventory levels in order to fulfill its commitment to its customers. Historically, the
Company has financed its cash requirements primarily from short term bank borrowings and cash from
operations. At April 30, 2010, there were no additional material commitments for capital
expenditures other than as noted below.
Under its Bylaws, the Company may, in its discretion, decide to repurchase shares of common
stock upon request for redemption by a shareholder.
The Company also intends to pay a settlement
amount to IVESCO pursuant to the terms of the settlement agreement.
Operating Activities. Net cash provided by operating activities of $6.3 million for the
nine months ending April 30, 2010, was primarily attributable to an increase in accounts payable of
$19.9 million. This was partially offset by an increase of $8.7 million in accounts receivable and
an increase in deferred income tax of $2.7 million.
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The increase in accounts payable was primary attributed to the increase in purchase of
inventory. Net cash consumed by operating activities of $2.5 million for the nine months ending
April 30, 2009, was primarily attributable to an increase in accounts receivable of $4.5 million,
an increase in inventory of $5.4 million, which was partially offset by an increase in accounts
payable of $9.6 million which is due to an increase in inventory purchases related to meet the new
demand for swine sales. The increase in accounts receivable was primarily attributable to extended
promotional terms.
Investing Activities. Net cash consumed by investing activities was $0.8 million for the nine
months ending April 30, 2010 compared to $0.8 million for the nine months ending April 30, 2009.
During both periods, the Company purchased office, warehouse, and computer equipment and paid
premiums for life insurance on the Companys officers.
Financing Activities. Net cash consumed by financing activities of $2.1 million for the
period ending April 30, 2010 was primarily attributable to net loan proceeds of $3.8 million. Net
cash provided by financing activities of $4.7 million for the period ending April 30, 2009 was
primarily attributable to net loan proceeds of $5.1 million.
Off-Balance Sheet Arrangements
At April 30, 2010, the Company did not have any off-balance sheet arrangements.
Critical Accounting Policies
The SEC issued disclosure guidance for critical accounting policies. The SEC defines
critical accounting policies as those that require application of managements most difficult,
subjective or complex judgments, often as a result of the need to make estimates about the effect
of matters that are inherently uncertain and may change in subsequent periods.
The Companys significant accounting policies are described in Note 1 to the Companys
consolidated financial statements and notes thereto included in the Companys Annual Report on Form
10-K for the year ended July 31, 2009 filed with the SEC. Not all of these significant accounting
policies require management to make difficult, subjective or complex judgments or estimates.
However, management of the Company is required to make certain estimates and assumptions during the
preparation of consolidated financial statements in accordance with accounting principles generally
accepted in the United States of America. These estimates and assumptions impact the reported
amount of assets and liabilities and disclosures of contingent assets and liabilities as of the
date of the consolidated financial statements. Estimates and assumptions are reviewed periodically
and the effects of revisions are reflected in the period they are determined to be necessary.
Actual results could differ from those estimates. Following are some of the Companys critical
accounting policies impacted by judgments, assumptions and estimates.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ from those estimates.
Revenue Recognition
The Company derives its revenue primarily from the sale of products and agency agreements.
Revenues are recognized as product is received by the customer and related services are performed
in accordance with all applicable revenue recognition criteria. For these transactions, the Company
applies the provisions of SEC Staff Accounting Bulletin No. 104, Revenue Recognition. Agency
sales are transactions presented on a net basis. The Company recognizes revenue when there is
pervasive evidence of an arrangement, title and risk of loss have passed, delivery has occurred or
the contractual obligations are met, the sales price is fixed or determinable and collection of
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the related receivable is reasonably assured.
Inventories
Inventories consist substantially of finished goods held for resale and are valued at the
lower of cost or market, not in excess of net realizable value. Cost is determined primarily by the
weighted average cost method.
Major Customers, Major Suppliers and Credit Concentrations
Other financial assets and liabilities, which potentially subject the Company to
concentrations of credit risk, are trade accounts receivable and trade payables. Two vendors
comprised 52.8% and 54.1% of all purchases for the nine month periods ending April 30, 2010 and at
April 30, 2009, respectively.
Income Taxes
Deferred tax assets and liabilities are recognized for the tax effects of differences between
financial statement and tax bases of assets and liabilities. A valuation allowance is established
to reduce deferred tax assets if it is more likely than not that a deferred tax asset will not be
realized. The Company files consolidated income tax returns with its subsidiaries. See Note 7
Income Taxes for additional details.
Other Intangible Assets
Annually, the Company subjects other identifiable intangible assets with indefinite lives to
an impairment test, in accordance with accounting procedures generally accepted in the United
States. Other intangible assets continue to be amortized over their useful lives.
Other identifiable intangible assets consist of the Company trademark and loan origination
fees. Trademarks have an indefinite life and therefore are not amortized. Loan origination fees
constitute the Companys identifiable intangible asset subject to amortization. Amortization of the
loan origination fees is computed on a straight-line basis over the term of the related note.
Amortization expense is included in operating, general, and administrative expenses on the
Condensed Consolidated Statements of Loss and Comprehensive Loss.
Pension Accounting
For the nine months ended April 30, 2010 and 2009, benefits accrued, paid and expensed net to
$0.04 million and $0.2 million, respectively. The plan is an unfunded supplemental executive
retirement plan and is not subject to the minimum funding requirements of the Employee Retirement
Income Security Act (ERISA). Although the SERP is an unfunded plan, the Company is informally
funding the plan through life insurance contracts on the participants. The life insurance contracts
had cash surrender values of $2.8 million and $2.7 million at April 30, 2010 and July 31, 2009,
respectively.
Recent Accounting Changes
In June 2009, the FASB issued FASB ASC 105, Generally Accepted Accounting Principles, which
establishes the FASB Accounting Standards Codification as the sole source of authoritative
generally accepted accounting principles. Pursuant to the provisions of FASB ASC 105, the Company
has updated references and GAAP in its financial statements issued for the period ended April 30,
2010. The adoption of FASB ASC 105 did not impact the Companys financial position or results of
operations.
In February 2010, the FASB issued ASU 2010-09, Subsequent Events Amendments to Certain
Recognition and Disclosure Requirements. This update removes the requirement for an SEC filer to
disclose either the date through which subsequent events were reviewed or that subsequent events
were evaluated through the date the financial statements were issued in both issued and revised
financial statements. This update became effective for the Company upon its issuance, and upon
adoption, did not impact the Companys consolidated financial position, results of operations or
cash flows.
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ITEM 3: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The Company is exposed to market risks primarily from changes in interest rates. The Company
does not engage in financial transactions for trading or speculative purposes.
On January 29, 2010, the Company executed a Credit and Security Agreement with Wells Fargo
Bank, National Association with a maturity date of January 31, 2013. The Company may borrow up to
$40.0 million pursuant to the Revolving Note. The initial advance was used to repay the Term and
Revolving Notes with the prior lender. Going forward, advances will be used by the Company for
working capital. From January 29, 2010 through February 28, 2010, interest was paid at a variable
rate, reset daily, equal to the daily three month London Interbank Offered Rate (LIBOR) rate plus a
margin of 3.50%. Effective March 1, 2010, the lender increased the margin to 5.5%. Upon an event of
default, the Revolving Note shall bear interest at the daily three month LIBOR rate plus the margin
plus 3.00% per annum. As of April 30, 2010, the variable interest rate at which the Revolving Note
accrued interest was 5.5% and the Company had approximately $22.1 million outstanding there under.
At April 30, 2010, the Company was not compliant with the minimum net income covenant. The
Company is currently in discussions with the Lender and on or before June 30, 2010, expects to enter into a forbearance
agreement covering periods after January 31, 2010. See Note 4 to the Condensed Consolidated Financial Statements for
additional information.
The interest payable on the Companys revolving line of credit is based on variable interest
rates and is therefore affected by changes in the market interest rates. If interest rates on
variable debt rose 0.55 percentage points (a 10% change from the interest rate as of April 30,
2010), assuming no change in the Companys outstanding balance under the line of credit
(approximately $22.1 million as of April 30, 2010), the Companys annualized income before taxes
and cash flows from operating activities would decline by approximately $0.1 million.
ITEM 4 T: | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures
An evaluation of the effectiveness of the design and operation of the Companys disclosure controls
and procedures (as defined in Section 13a-15(e) of the Securities Exchange Act of 1934 (the
Exchange Act)) was carried out under the supervision and with the participation of our Chief
Executive Officer and Principal Financial Officer as of the end of the period covered by this
quarterly report. Based on that evaluation, our Chief Executive Officer and Principal Financial
Officer concluded that our disclosure controls and procedures are effective in ensuring that the
information required to be disclosed by us in the reports that we file or submit under the Exchange
Act is (i) accumulated and communicated to Company management (including the Chief Executive
Officer and Principal Financial Officer) and to allow timely decisions regarding disclosures, and
(ii) recorded, processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms.
The Company intends to continue to monitor its disclosure controls and procedures, and if further
improvements or enhancements are identified, the Company will take steps to implement such
improvements or enhancements. It should be noted that the design of any system of controls is based
upon certain assumptions about the likelihood of future events, and there can be no assurance that
such design will succeed in achieving its stated objective under all potential future conditions,
regardless of how remote. However, the Companys Chief Executive Officer and Principal Financial
Officer believe the Companys disclosure controls and procedures provide reasonable assurance that
the disclosure controls and procedures are effective.
Changes in Internal Controls
During the quarter ended April 30, 2010, there were no changes in our internal control over
financial reporting that have materially affected or are reasonably likely to materially affect the
Companys internal control over financial reporting. Subsequent to April 30, 2010, the Company
strengthened its internal control over financial reporting by implementing additional levels of
approval required for expenditures, resulting in stricter scrutiny of all Company expenditures.
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Limitations on the Effectiveness of Controls
The Company has confidence in its internal controls and procedures. Nevertheless, the
Companys management (including the Chief Executive Officer) believes that a control system, no
matter how well designed and operated can provide only reasonable assurance and cannot provide
absolute assurance that the objectives of the internal control system are met, and no evaluation of
internal controls can provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected. Further, the design of an internal control system must
reflect the fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitation in all internal control
systems, no evaluation of controls can provide absolute assurance that all control issues and
instances of fraud, if any, within the Company have been detected.
PART II
OTHER INFORMATION
OTHER INFORMATION
ITEM 1: | LEGAL PROCEEDINGS |
The Company previously reported the litigation with IVESCO Holdings, LLC in its Form 10-Q for
the period ended April 30, 2009 and its Form 10-K for the year ended July 31, 2009. On May 12,
2010 the lawsuit was resolved pursuant to the terms of a confidential settlement agreement and on
May 20, 2010, the lawsuit was dismissed by the court. The Company is subject to claims and other
actions arising in the ordinary course of business. Some of these claims and actions may result in
lawsuits where the Company is a defendant. Management believes that the ultimate obligations if
any, which may result from unfavorable outcomes of such lawsuits, will not have a material adverse
effect on the financial position, results of operations or cash flows of the Company and such
obligations, if any, would be adequately covered by insurance.
ITEM 1A: | RISK FACTORS |
If the Companys primary lender demands immediate payment of all amounts due and payable under
the Credit Agreement, the Company currently does not have the ability to such amounts.
The Company currently is in violation of certain financial covenants under its Credit and
Security Agreement (Credit Agreement) with Wells Fargo Bank, National Association (Lender). As a result of the Companys default, the Lender may immediately declare all amounts owed under the
Credit Agreement due and payable. Should the Lender make such demand, the Company currently would
be unable to repay the amounts due. As a result, the Lender could, among other remedies, foreclose
on the Companys collateral, which would have a material adverse effect on the Companys business,
results of operations, and ability to continue as a going concern. Although the Lender has the
right to demand payment, the Company has not received any indication from the Lender that it
intends to take such action, and is currently in discussions with the Lender and expects to enter
into a forbearance agreement.
ITEM 2: | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
There is no established public trading market for the Companys common stock. Ownership of the
Companys stock is limited to licensed, practicing veterinarians or any entity established to
deliver veterinary services and/or products in which all medical decisions are made by licensed
veterinarians such as a partnership or corporation. Each veterinarian shareholder is limited to
ownership of one share of stock, which is purchased at the fixed price of $3,000. The share of
stock may not be sold, assigned, or otherwise transferred, except back to the Company at the same
$3,000 price. On April 30, 2010, there were 1,898 record holders of the Companys common stock.
Shareholders have no preemptive rights or rights to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the common stock other
than optional redemption by the Company set forth in the Articles of Incorporation and Bylaws. The
Company does not have any preferred
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stock authorized and has not issued any stock options, stock option plans, warrants, or other
outstanding rights or entitlements to common stock.
The Company has never declared or paid any cash dividends on the common stock. The Company
intends to retain any future earnings for funding growth of the Companys business and therefore
does not currently anticipate paying cash dividends in the foreseeable future. The Company has not
sold any common stock which was not registered under the Securities Act of 1933, as amended, within
the past three fiscal years ended July 31, 2009.
Since the Companys inception, each shareholder has been entitled to request that his, her, or
its share be redeemed in accordance with the Articles of Incorporation and Bylaws. Pursuant to the
Articles of Incorporation, the Company may also 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. In any of these situations, the Company may, but is not obligated to repurchase the
stock. The redemption amount is the original purchase price of the stock paid by the shareholder.
There is no expiration date for repurchase.
During the quarter ended April 30, 2010, the Company repurchased 18 shares of its common stock
as set forth in the following table:
Purchases of Equity Securities by the Company and Affiliated Purchasers:
Total Number | Maximum | |||||||||||||||
of Shares | Number of | |||||||||||||||
Purchased as | Shares That | |||||||||||||||
Part of | May Yet Be | |||||||||||||||
Publicly | Purchased | |||||||||||||||
Total Number | Average Price | Announced | Under the | |||||||||||||
Of Shares | Paid Per | Plans or | Plans or | |||||||||||||
Period | Purchased | Share | Programs | Programs(1) | ||||||||||||
February 1 February 28, 2010 |
5 | $ | 3,000 | | 1,911 | |||||||||||
March 1 March 31, 2010 |
11 | $ | 3,000 | | 1,900 | |||||||||||
April 1 April 30, 2010 |
2 | $ | 3,000 | | 1,898 | |||||||||||
Total: |
18 | $ | 3,000 |
(1) | The maximum number of shares that may be purchased by the Company varies from time to time because of the on-going redemption of shares. |
ITEM 3: | DEFAULTS UPON SENIOR SECURITIES |
None.
ITEM 4: | [REMOVED AND RESERVED] |
ITEM 5: | OTHER INFORMATION |
The following disclosure is provided pursuant to Item 5.02 (Departure of Directors or Certain
Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers) of Form 8-K:
On March 19, 2010, the Company made a bonus payment totaling $69,000 to Tara Chicatelli, the
Companys former Chief Financial Officer.
As previously reported, on May 10, 2010, the employment of Ms. Chicatelli ceased.
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ITEM 6: | EXHIBITS |
Exhibit No. | Description | |
3.1
|
Second Amended and Restated Articles of Incorporation of Professional Veterinary Products, Ltd.(1) | |
3.2
|
Second Amended and Restated Bylaws of Professional Veterinary Products, Ltd. (2) | |
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
|
First Amendment and Wavier to Credit and Security Agreement (#) | |
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 Companys Principal Executive Officer (#) | |
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 Companys Principal Financial Officer (#) | |
32
|
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by the Companys Chief Executive Officer and Principal Financial Officer (#) |
(#) | Filed herewith. |
The following footnotes indicate a document previously filed as an exhibit to and incorporated by
reference from the following:
(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. |
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: June 21, 2010 | PROFESSIONAL VETERINARY PRODUCTS, LTD. |
|||
By: | /s/ Stephen J. Price | |||
Stephen J. Price, President and Chief Executive Officer |
||||
(principal executive officer) | ||||
By: | /s/ Vicky Winkler | |||
Vicky Winkler, Director of Finance |
||||
(principal financial officer) | ||||
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