October 15, 2010


 Veterinary distributor flounders in bad economy

Posted Oct. 1, 2010

An Omaha, Neb.-based veterinary supply distributor's future is up for grabs, as are its shareholders' investments.

Professional Veterinary Products Ltd. reported Aug. 20 that it had filed for bankruptcy protection and notified employees that their jobs would be eliminated Oct. 11. The company employs 300 people, most of them at its headquarters.

According to the company's filing with the Securities and Exchange Commission, PVP will continue to operate under Chapter 11 bankruptcy protection as a "debtor-in-possession."

The company listed up to $100 million in assets and $100 million in debt in its Chapter 11 filing in U.S. Bankruptcy Court for the District of Nebraska.

Sales and other revenues were $88.7 million during the quarter ending April 30, compared with $75.3 million during the same period this past year, according to the SEC filing. However, the cost of sales increased by $13 million to $80.7 million.

For the first three quarters of the company's 2010 fiscal year, from August 2009 until April 2010, Professional Veterinary Products reported to the SEC a loss of $7.3 million compared with a loss of $3 million in the same period the previous year.

"The company has encountered significant and material financial challenges during recent times, primarily as a result of macroeconomic factors and a general downturn in the economy," PVP officials said in the bankruptcy filing. They noted "sales have declined in core business segments."

On Aug. 20, the company issued a document providing answers to frequently asked questions on its bankruptcy filing. Officials said the company's ability to generate profits has been negatively affected by lower margins from vendors, the general downturn in the economy, and direct sales efforts of certain of its suppliers and vendors.

The FAQ mentioned that proceeds from the sale of assets and collecting on accounts in connection with the bankruptcy will be paid out in the following order: secured creditors; administrative claims, including professional advisers for their fees and expenses related to the bankruptcy; unsecured creditors; and shareholders.

Essentially, the company's 1,900 shareholders, most of whom are veterinary clinic or hospital owners, will be paid last if there is any money left, according to the FAQ. In fact, the company has said that any distribution to shareholders at the conclusion of the bankruptcy will depend on whether proceeds remain from the sale of assets after paying creditors and administrative claims.

According to PVP's latest SEC filing, the company has outstanding obligations of $5.9 million.

Shareholders do not have many options as this point, given that the company is unable to redeem shares during the bankruptcy process. PVP said in the FAQ that it expected a sale of all the company's assets by the end of September 2010 and that the bankruptcy proceedings would be finalized in the first quarter of 2011.