UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

xþ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 32, ~~2004~~ 2005


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 0-27818

Doane Pet Care Company

(Exact name of registrant as specified in its charter)

Delaware (State or ~~Other~~other ~~Jurisdiction~~jurisdiction of ~~Incorporation or Organization~~incorporation) 43-1350515 (IRS Employer Identification No.)

210 Westwood Place South, Suite 400 Brentwood, TN 37027 ~~(Address of principal executive office, including zip code)~~

(~~615) 373-7774 (Registrant’s~~Address ~~telephone~~of ~~number~~principal executive office, including ~~area~~zip code)

~~Indicate by check mark whether the registrant~~ (1615) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 x No o 373-7774

~~Indicate by check mark whether the registrant is an accelerated filer~~ (~~as defined~~Registrant’s intelephone ~~Rule 12b-2~~number, ofincluding ~~the~~area ~~Exchange Act~~code)~~. Yes o No x~~

As Indicate ofby ~~August 12,~~check ~~2004,~~mark whether the registrant ~~had~~(1) has ~~outstanding~~filed ~~1,000~~all ~~shares~~reports ofrequired to be filed ~~common~~by ~~stock,~~Section 13 ~~all~~or 15(d) of ~~which~~the ~~were~~Securities ~~held~~Exchange byAct ~~its~~of ~~parent,~~1934 ~~Doane~~during ~~Pet~~the ~~Care~~preceding ~~Enterprises~~12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been ~~Inc~~subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of August 22, 2005, the registrant had outstanding 1,000 shares of common stock, all of which were held by its parent, Doane Pet Care Enterprises, Inc.

TABLE OF CONTENTS

		Page
PART I. Financial Information
Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of the end of the second quarter of fiscal 2004 and the end of fiscal 2003		1
	Unaudited Condensed Consolidated Statements of Operations for the second quarter and the first six months of fiscal 2004 and 2003		2
	Unaudited Condensed Consolidated Statement of Stockholder’s Equity and Comprehensive Loss as of the end of and for the first six months of fiscal 2004		3
	Unaudited Condensed Consolidated Statements of Cash Flows for the first six months of fiscal 2004 and 2003		4
	Notes to Unaudited Condensed Consolidated Financial Statements		5
	Report of Independent Registered Public Accounting Firm		17
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		31
Item 4.	Controls and Procedures		33
PART II. Other Information
Item 1.	Legal Proceedings		34
Item 6.	Exhibits and Reports on Form 8-K		34
Signatures			36
Change in Control Severance Agmt - Douglas J. Cahill
Change in Control Severance Agmt - David H. Horton
Change in Control Severance Agmt - Joseph J. Meyers
Change in Control Severance Agmt - Philip K. Woodlief
Letter from KPMG LLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I. Financial Information


	Page
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of the end of the second quarter of fiscal 2005 and the end of fiscal 2004		1
Unaudited Condensed Consolidated Statements of Operations for the second quarter and first six months of fiscal 2005 and 2004		2
Unaudited Condensed Consolidated Statement of Stockholder’s (Deficit) Equity and Comprehensive Loss as of the end of and for the first six months of fiscal 2005		3
Unaudited Condensed Consolidated Statements of Cash Flows for the first six months of fiscal 2005 and 2004		4
Notes to Unaudited Condensed Consolidated Financial Statements		5
Report of Independent Registered Public Accounting Firm		17
Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures about Market Risk		25
Item 4. Controls and Procedures		26

PART II. Other Information


Item 1. Legal Proceedings			28
Item 6. Exhibits			28
Signatures			29
Letter from KPMG LLP
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I. Financial Information


ITEM 1.		Financial Statements

DOANE PET CARE COMPANY AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and par value amounts)

(In thousands, except share and par value amounts)


	End of
	Second quarter			Fiscal
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	37,031		$	28,847
Accounts receivable, net		91,491			112,445
Inventories, net		67,657			68,321
Deferred tax assets		1,935			2,414
Prepaid expenses and other current assets		11,080			7,038

Total current assets		209,194			219,065
Property, plant and equipment, net		236,837			258,070
Goodwill and other intangible assets		376,373			390,471
Other assets		29,388			34,300

Total assets	$	851,792		$	901,906

LIABILITIES AND STOCKHOLDER’S (DEFICIT) EQUITY
Current liabilities:
Current maturities of long-term debt	$	3,516		$	3,673
Accounts payable		84,058			102,149
Accrued liabilities		50,698			59,239

Total current liabilities		138,272			165,061

Long-term debt:
Long-term debt, excluding current maturities		577,260			580,090
Senior Preferred Stock (Redeemable), 3,000,000 shares authorized, 1,200,000 shares issued and outstanding, $118,987 current redemption value		114,874			106,421

Total long-term debt		692,134			686,511
Deferred tax liabilities		34,868			33,641
Other long-term liabilities		9,842			9,567

Total liabilities		875,116			894,780


Commitments and contingencies

Stockholder’s (deficit) equity:
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding		—			—
Additional paid-in-capital		115,674			115,674
Accumulated other comprehensive income		32,571			62,650
Accumulated deficit		(171,569	)		(171,198	)

Total stockholder’s (deficit) equity		(23,324	)		7,126

Total liabilities and stockholder’s (deficit) equity	$	851,792		$	901,906

	End of
	Second quarter			Fiscal
	2004			2003
ASSETS
Current assets:
Cash and cash equivalents	$	10,062		$	29,293
Accounts receivable, net		93,340			91,569
Inventories, net		71,309			68,619
Deferred tax assets		2,362			1,898
Prepaid expenses and other current assets		11,634			14,390
Total current assets		188,707			205,769
Property, plant and equipment, net		250,889			266,457
Goodwill and trademarks		377,500			380,418
Other assets		34,053			33,270
Total assets	$	851,149		$	885,914
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Current maturities of long-term debt	$	10,763		$	13,185
Accounts payable		88,079			100,512
Accrued liabilities		54,968			51,719
Total current liabilities		153,810			165,416
Long-term debt:
Long-term debt, excluding current maturities		558,078			560,861
Senior Preferred Stock (Redeemable)		98,487			—
Total long-term debt		656,565			560,861
Deferred tax liabilities		30,994			28,524
Other long-term liabilities		9,033			8,863
Total liabilities		850,402			763,664
Senior Preferred Stock (Redeemable)		—			91,052
Commitments and contingencies
Stockholder’s equity:
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding		—			—
Additional paid-in-capital		115,674			115,674
Accumulated other comprehensive income		45,278			50,185
Accumulated deficit		(160,205	)		(134,661	)
Total stockholder’s equity		747			31,198
Total liabilities and stockholder’s equity	$	851,149		$	885,914

See accompanying notes to the unaudited condensed consolidated financial statements and
accompanying report of independent registered public accounting firm.

~~See accompanying notes to the unaudited condensed consolidated financial statements and accompanying report of~~1 ~~independent registered public accounting firm.~~

1 Table of Contents

~~Table~~DOANE ofPET ~~Contents~~CARE COMPANY AND SUBSIDIARIES

~~DOANE~~UNAUDITED ~~PET~~CONDENSED ~~CARE~~CONSOLIDATED ~~COMPANY~~STATEMENTS ~~AND~~OF ~~SUBSIDIARIES~~OPERATIONS (In thousands)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


	Second quarter						First six months
	2005			2004			2005			2004
Net sales	$	243,872		$	258,338		$	511,008		$	529,218
Cost of goods sold		201,151			225,201			416,184			455,263

Gross profit		42,721			33,137			94,824			73,955
Operating expenses:
Promotion and distribution		14,729			13,767			29,159			27,994
Selling, general and administrative		12,811			12,803			25,930			25,986
Amortization		1,024			1,134			2,190			2,363
Other operating expense (income), net		1,805			3,938			(1,711	)		5,161

Income from operations		12,352			1,495			39,256			12,451
Interest expense, net		19,031			18,186			37,677			36,163
Other income, net		(448	)		(331	)		(693	)		(738	)

(Loss) income before income taxes		(6,231	)		(16,360	)		2,272			(22,974	)
Income tax expense		1,316			1,377			2,643			2,570

Net loss	$	(7,547	)	$	(17,737	)	$	(371	)	$	(25,544	)

~~(In~~See ~~thousands)~~accompanying notes to the unaudited condensed consolidated financial statements and accompanying report of independent registered public accounting firm.

	Second quarter						First six months fiscal
	2004			2003			2004			2003
Net sales	$	258,338		$	234,476		$	529,218		$	494,425
Cost of goods sold		225,201			195,967			455,263			410,556
Gross profit		33,137			38,509			73,955			83,869
Operating expenses:
Promotion and distribution		13,767			12,797			27,994			27,207
Selling, general and administrative		12,803			12,373			25,986			24,481
Amortization		1,134			1,163			2,363			2,317
Other operating expenses		3,938			—			5,161			—
Income from operations		1,495			12,176			12,451			29,864
Interest expense, net		18,186			14,857			36,163			28,872
Debt extinguishments		—			—			—			11,113
Other income, net		(331	)		(414	)		(738	)		(585	)
Loss before income taxes		(16,360	)		(2,267	)		(22,974	)		(9,536	)
Income tax expense		1,377			1,137			2,570			1,742
Net loss		(17,737	)		(3,404	)		(25,544	)		(11,278	)
Preferred stock dividends and accretion		—			(3,319	)		—			(6,534	)
Net loss available to common shares	$	(17,737	)	$	(6,723	)	$	(25,544	)	$	(17,812	)

SeeTable accompanying notes to the unaudited condensed consolidated financial statements and accompanying report of independent registered public accounting firm. Contents

2DOANE PET CARE COMPANY AND SUBSIDIARIES

~~Table~~UNAUDITED ofCONDENSED ~~Contents~~CONSOLIDATED STATEMENT OF STOCKHOLDER’S (DEFICIT) EQUITY AND COMPREHENSIVE LOSS (In thousands, except share amounts)

DOANE PET CARE COMPANY AND SUBSIDIARIES


							Accumulated
					Additional		other
	Common stock				paid-in		comprehensive			Accumulated
	Shares		Amount		capital		income (loss)			deficit			Total
Balances at end of fiscal 2004		1,000	$	—	$	115,674	$	62,650		$	(171,198	)	$	7,126
Comprehensive loss:
Net loss		—		—		—		—			(371	)		(371	)
Foreign currency translation		—		—		—		(30,079	)		—			(30,079	)
Total comprehensive loss														(30,450	)

Balances at end of second quarter 2005		1,000	$	—	$	115,674	$	32,571		$	(171,569	)	$	(23,324	)

~~UNAUDITED~~See ~~CONDENSED~~accompanying ~~CONSOLIDATED~~notes ~~STATEMENT~~to OFthe unaudited condensed consolidated financial statements and accompanying report of independent registered public accounting firm.

~~STOCKHOLDER’S EQUITY AND COMPREHENSIVE LOSS~~3

(InTable thousands,of except share amounts)Contents

							Accumulated
	Common stock				Additional		other
					paid-in		comprehensive			Accumulated
	Shares		Amount		capital		income			deficit			Total
Balances at end of fiscal 2003		1,000	$	—	$	115,674	$	50,185		$	(134,661	)	$	31,198
Comprehensive loss:
Net loss		—		—		—		—			(25,544	)		(25,544	)
Foreign currency translation		—		—		—		(4,907	)		—			(4,907	)
Total comprehensive loss														(30,451	)
Balances at end of second quarter 2004		1,000	$	—	$	115,674	$	45,278		$	(160,205	)	$	747

DOANE PET CARE COMPANY AND SUBSIDIARIES

~~See~~UNAUDITED ~~accompanying~~CONDENSED ~~notes~~CONSOLIDATED toSTATEMENTS ~~the~~OF ~~unaudited~~CASH ~~condensed~~FLOWS (In ~~consolidated financial statements and accompanying report of independent registered public accounting firm.~~thousands)


	First six months
	2005			2004
Cash flows from operating activities:
Net loss	$	(371	)	$	(25,544	)
Items not requiring (providing) cash:
Depreciation		17,825			17,303
Amortization		2,258			2,860
Deferred income tax expense		2,042			2,065
Non-cash interest expense		11,099			9,713
Equity in joint ventures		(151	)		(457	)
Asset impairments		1,129			420
Changes in current assets and liabilities		(12,557	)		(12,674	)

Net cash provided by (used in) operating activities		21,274			(6,314	)

Cash flows from investing activities:
Capital expenditures		(10,132	)		(5,126	)
Other, net		(743	)		(404	)

Net cash used in investing activities		(10,875	)		(5,530	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		—			13,078
Principal payments on long-term debt		(1,768	)		(17,276	)
Payments for debt issuance costs		(22	)		(3,002	)

Net cash used in financing activities		(1,790	)		(7,200	)
Effect of exchange rate changes on cash and cash equivalents		(425	)		(187	)

Increase (decrease) in cash and cash equivalents		8,184			(19,231	)
Cash and cash equivalents, beginning of period		28,847			29,293

Cash and cash equivalents, end of period	$	37,031		$	10,062

~~Table~~See accompanying notes to the unaudited condensed consolidated financial statements and accompanying report of ~~Contents~~independent registered public accounting firm.

~~DOANE PET CARE COMPANY AND SUBSIDIARIES~~4

UNAUDITEDTable CONDENSEDof CONSOLIDATED STATEMENTS OF CASH FLOWSContents

~~(In~~DOANE ~~thousands)~~PET CARE COMPANY AND SUBSIDIARIES

	First six months fiscal
	2004			2003
Cash flows from operating activities:
Net loss	$	(25,544	)	$	(11,278	)
Items not requiring (providing) cash:
Depreciation		17,303			15,120
Amortization		2,860			2,814
Deferred income tax expense		2,065			757
Non-cash interest expense		9,713			2,961
Equity in joint ventures		(457	)		(298	)
Debt extinguishments		—			11,113
Asset impairments		420			—
Changes in current assets and liabilities		(12,674	)		(6,527	)
Net cash provided by (used in) operating activities		(6,314	)		14,662
Cash flows from investing activities:
Capital expenditures		(5,126	)		(9,616	)
Proceeds from sale of assets		400			193
Other, net		(804	)		(1,915	)
Net cash used in investing activities		(5,530	)		(11,338	)
Cash flows from financing activities:
Net repayments under revolving credit agreements		—			(15,000	)
Proceeds from issuance of long-term debt		13,078			210,444
Principal payments on long-term debt		(17,276	)		(191,215	)
Payments for debt issuance costs		(3,002	)		(7,771	)
Net cash used in financing activities		(7,200	)		(3,542	)
Effect of exchange rate changes on cash and cash equivalents		(187	)		535
Increase (decrease) in cash and cash equivalents		(19,231	)		317
Cash and cash equivalents, beginning of period		29,293			7,596
Cash and cash equivalents, end of period	$	10,062		$	7,913

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~See~~(1) ~~accompanying~~Basis ~~notes to the unaudited condensed consolidated financial statements and accompanying report~~ of ~~independent registered public accounting firm.~~ Presentation

4 The accompanying unaudited condensed consolidated financial statements of Doane Pet Care Company and its consolidated subsidiaries, or the Company, do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The year-end condensed consolidated balance sheet data was derived from audited financial statements. In the opinion of management, all material adjustments, consisting of normal and recurring adjustments, have been made which were considered necessary to present fairly the financial position and the results of operations and cash flows at the dates and for the periods presented. Certain reclassifications have been made to previously reported consolidated financial statements and notes to conform with the current presentation.

~~Table~~ The ofunaudited ~~Contents~~condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes contained in the Company’s 2004 annual report on Form 10-K for the fiscal year ended January 1, 2005, or the 2004 10-K, including related exhibits. The accounting policies used in preparing these financial statements are the same as those summarized in the 2004 10-K.

~~DOANE~~ In ~~PET~~conformity ~~CARE~~with ~~COMPANY~~U.S. ~~AND~~generally ~~SUBSIDIARIES~~accepted accounting principles, preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements; therefore, actual results could ultimately differ from those estimates.

~~NOTES~~ The TOCompany’s ~~UNAUDITED~~fiscal ~~CONDENSED~~year ~~CONSOLIDATED~~ends ~~FINANCIAL~~on ~~STATEMENTS~~the Saturday nearest to the end of December. Each quarter ends on the Saturday nearest to the end of the calendar month with the second quarters of fiscal 2005 and 2004 ending on July 2, 2005 and July 3, 2004, respectively.

(12) ~~Basis~~ ofRecent ~~Presentation~~ Accounting Pronouncements

~~The~~In ~~accompanying~~December 2004, ~~unaudited~~the ~~condensed~~Financial ~~consolidated~~Accounting ~~financial~~Standards ~~statements~~Board, or FASB, issued Statement of ~~Doane~~Financial ~~Pet~~Accounting ~~Care~~Standards ~~Company~~No. 123 ~~and~~(revised ~~its~~2004), ~~consolidated~~Share ~~subsidiaries~~Based Payment, or ~~the~~SFAS ~~Company,~~123 do— Revised. ~~not~~SFAS ~~include~~123 ~~all~~— Revised eliminates the ~~information~~alternative ~~and~~to ~~footnotes~~use ~~required~~the byintrinsic value method of accounting and ~~principles~~requires ~~generally~~entities ~~accepted~~to inrecognize the ~~United~~cost ~~States~~of services received in exchange for ~~complete~~awards ~~financial~~of ~~statements~~equity instruments, or compensation cost, based on the fair value of those awards at the grant date. ~~The~~SFAS 123 — Revised is effective as of the beginning of the Company’s next fiscal ~~2003~~ year~~-end~~, ~~condensed~~or ~~consolidated~~January 1, 2006, ~~balance~~for ~~sheet~~all ~~data~~awards ~~was~~granted ~~derived~~after ~~from~~the ~~audited~~effective date and for all awards modified, repurchased or ~~financial~~cancelled ~~statements~~after that date. In the opinion of management, ~~all~~the ~~material~~Company ~~adjustments,~~meets the nonpublic entity ~~consisting~~criteria ofunder ~~normal~~SFAS ~~and~~123 ~~recurring~~— ~~adjustments~~Revised. Accordingly, ~~have~~upon ~~been~~adoption, ~~made~~the ~~which~~grant-date ~~were~~fair value of awards ~~considered~~of ~~necessary~~equity toshare ~~present~~options ~~fairly~~and ~~the~~similar ~~financial~~instruments ~~position~~is ~~and~~to be calculated using the ~~results~~historical volatility of ~~operations~~an ~~and~~appropriate ~~cash~~industry ~~flows~~sector atindex ~~the~~rather ~~dates~~than ~~and~~expected ~~for~~volatility of the ~~periods~~Company’s ~~presented.~~share ~~Certain~~price. ~~reclassifications~~The ~~have~~Company ~~been~~will ~~made~~evaluate tothe ~~previously~~impact ~~reported~~on ~~consolidated financial~~its ~~statements~~results toof ~~conform~~operations ~~with~~and financial position upon the ~~fiscal~~adoption ~~2004~~of ~~presentation~~SFAS 123 — Revised.

~~The~~In ~~unaudited~~May 2005, ~~condensed~~the ~~consolidated~~FASB ~~financial~~issued ~~statements~~SFAS ~~should~~No. 154, beAccounting ~~read in~~Changes ~~conjunction~~and ~~with~~Error ~~the~~Corrections, ~~audited~~or ~~consolidated financial statements and notes~~SFAS ~~contained~~154. inThis ~~the~~new ~~Company’s~~standard ~~2003~~replaces ~~annual~~APB ~~report~~Opinion onNo. 20, ~~Form~~Accounting ~~10-K~~Changes, ~~for~~and ~~the~~SFAS ~~fiscal year ended January~~No. 3, ~~2004,~~Reporting Accounting orChanges ~~the~~in ~~2003~~Interim ~~10-K,~~Financial ~~including~~Statements ~~related~~and ~~exhibits.~~is ~~The~~ effective for accounting ~~policies~~changes ~~used~~and correction inof ~~preparing~~errors ~~these~~made ~~financial~~in ~~statements~~fiscal ~~are~~years ~~the~~beginning ~~same as~~after ~~those~~December 15, ~~summarized~~2005. inThe ~~the~~Company ~~2003~~does ~~10-K~~not anticipate ~~with~~that the ~~exception~~adoption of ~~the~~SFAS ~~Company’s accounting~~154 ~~for~~will ~~its~~have ~~Senior~~a ~~Preferred~~material ~~Stock~~impact ~~(Redeemable)~~on asthe ~~discussed~~Company’s inresults ~~Note 3,~~of ~~Change~~operations inor ~~Accounting~~financial ~~Principle~~position.

~~The Company’s fiscal year ends on the Saturday nearest to the end of~~5 ~~December. Each quarter also ends on a Saturday with the second quarters of fiscal 2004 and 2003 ending on July 3, 2004 and June 28, 2003, respectively.~~

(2) RecentTable Accountingof Pronouncements Contents

InDOANE ~~December 2003,~~PET ~~the~~CARE ~~Financial Accounting Standards Board, or FASB,~~COMPANY ~~issued~~AND ~~FASB Interpretation No. 46 Revised December 2003, Consolidation of~~SUBSIDIARIES Variable Interest Entities, or FIN 46R. FIN 46R addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and, if so, whether it should consolidate the entity. The Company adopted FIN 46R as of the beginning of fiscal 2004 and is required to apply FIN 46R to variable interests in variable interest entities created after December 31, 2003, if any. The adoption of FIN 46R did not have an impact on the Company’s condensed consolidated financial statements.

~~In May 2004,~~NOTES ~~the~~TO ~~FASB~~UNAUDITED ~~issued~~CONDENSED ~~Staff~~CONSOLIDATED ~~Position~~FINANCIAL ~~106-2,~~STATEMENTS ~~Accounting~~— and Disclosure Requirements Related to the Medicare Prescription Drug Improvement and Modernization Act of 2003, or FSP 106-2. FSP 106-2 superceded the FASB's previously released guidance contained in FSP 106-1. FSP 106-2 allows companies to recognize, or defer recognizing, the effects of the prescription-drug provisions of the new Medicare Act, effectively suspending the application of guidance currently required by the FASB. The Company has elected to defer accounting for the economic effects of the Medicare Act. As a result, amounts and disclosures relating to the post-retirement benefit obligation or net periodic post-retirement benefit costs in the condensed consolidated financial statements and in Note 9, Benefit Plans, do not reflect these effects. Future authoritative guidance may require the Company to change previously reported amounts and disclosures. (Continued)

(3) ~~Change~~ ~~in Accounting Principle~~ Inventories

InA ~~May 2003,~~summary ~~the FASB issued Statement~~ of ~~Financial~~inventories ~~Accounting~~follows Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity, or SFAS 150. SFAS 150 required companies to classify mandatorily redeemable financial instruments as liabilities and was effective for the first fiscal period beginning after December 15, 2003 for nonpublic entities. The Company adopted SFAS 150 as of the beginning of fiscal 2004 and reclassified its Senior Preferred Stock (~~Redeemable) as long-term debt~~ in ~~its condensed consolidated balance sheet and the related accretion and~~thousands): ~~dividends as interest expense in its condensed consolidated statement of operations for the second quarter and the first six months of fiscal 2004.~~


	End of
	Second quarter			Fiscal
	2005			2004
Raw materials	$	16,107		$	16,041
Packaging materials		21,441			20,564
Finished goods		32,385			34,573

		69,933			71,178
Less: Allowances		(2,276	)		(2,857	)

Total	$	67,657		$	68,321

~~Table~~(4) ofProperty, ~~Contents~~Plant and Equipment

~~DOANE~~ A ~~PET~~summary ~~CARE~~of ~~COMPANY~~property, ~~AND~~plant ~~SUBSIDIARIES~~and equipment follows (in thousands):

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	End of
	Second quarter			Fiscal
	2005			2004
Land	$	11,210		$	11,601
Buildings and improvements		99,331			104,778
Machinery and equipment		309,644			320,097
Construction-in-progress		9,679			6,727

		429,864			443,203
Less: Accumulated depreciation		(193,027	)		(185,133	)

Total	$	236,837		$	258,070

(45) ~~Inventories~~ Long-Term Debt and Liquidity

A summary of ~~inventories~~long-term debt follows (in thousands):

	End of
	Second quarter			Fiscal
	2004			2003
	2005			2004
Raw materials	$	15,671		$	14,726
Revolving credit facility	$	—		$	—
Packaging materials		23,541			23,551
Term loan facility		193,538			194,513
Finished goods		37,069			34,703
Senior notes		211,323			211,144
		76,281			72,980
Senior subordinated notes		149,326			149,147
Allowances		(4,972	)		(4,361	)
Industrial development revenue bonds		14,499			14,493
Total	$	71,309		$	68,619
Debt of foreign subsidiaries		12,090			14,466
		580,776			583,763
Less: Current maturities		(3,516	)		(3,673	)
		577,260			580,090
Senior preferred stock		114,874			106,421
Total	$	692,134		$	686,511

~~(5) Long-Term Debt~~6

ATable summary of long-term debt follows (in thousands): Contents

	End of
	Second quarter			Fiscal
	2004			2003
Revolving Credit Facility	$	16,000		$	16,000
Term Loan Facilities		165,078			169,322
Senior notes		210,961			210,779
Senior subordinated notes		148,968			148,789
Debt of foreign subsidiaries		13,346			14,674
Industrial development revenue bonds		14,488			14,482
		568,841			574,046
Less: Current maturities		(10,763	)		(13,185	)
Subtotal		558,078			560,861
Senior Preferred Stock (Redeemable)		98,487			—
Total	$	656,565		$	560,861

DOANE PET CARE COMPANY AND SUBSIDIARIES

AsNOTES ofTO ~~the~~UNAUDITED ~~end~~CONDENSED ofCONSOLIDATED ~~the~~FINANCIAL ~~second~~STATEMENTS ~~quarter~~— ~~of fiscal 2004, the Company’s senior credit facility provided for total commitments of a Euro 30.1 million Euro Term Loan Facility~~ (~~$36.6 million assuming a Euro to USD exchange rate of approximately 1.22~~Continued) ~~and $178.5 million, consisting of a $128.5 million USD Term~~ ~~Loan Facility and a $50 million Revolving Credit Facility, with a $20 million sub-limit for the issuance of letters of credit.~~

As of the end of the second quarter of fiscal ~~2004~~2005, the Company’s ~~had~~senior credit facility provided for total commitments of $16230.0 million, consisting of ~~borrowings~~a ~~outstanding~~$195.0 million ~~under~~Term ~~its~~Loan Facility and a $35.0 million Revolving Credit Facility, ~~and~~with a $620.7 0 million sub-limit for issuance of stand-by letters of credit. ~~outstanding~~The Term Loan Facility bears interest, ~~resulting~~at inthe ~~$27.3 million~~option of the Company, ~~availability~~of ~~under~~adjusted ~~its~~LIBOR plus 4.00%, or ABR, as defined in the senior credit facility agreement, plus 3.00%. The Revolving Credit Facility. ~~Availability~~bears interest, at the option of ~~funds~~the ~~under~~Company, of adjusted LIBOR plus 4.50%, or ABR plus 3.50%. As of the ~~senior~~end ~~credit~~of ~~facility~~the issecond ~~subject~~quarter toof ~~certain~~fiscal ~~customary~~2005, ~~terms~~the ~~and~~Term ~~conditions~~Loan Facility bore interest at 7.41%.

~~All~~As ~~loans~~of ~~under~~ the ~~senior~~end ~~credit~~of ~~facility~~the ~~bear~~second ~~interest~~quarter atof ~~the~~fiscal ~~higher~~2005, of the ~~Euro~~Company ~~dollar~~had ~~rate~~no ~~plus~~borrowings ~~5.00%,~~outstanding under orits ~~the~~Revolving ~~prime~~Credit ~~rate~~Facility ofand ~~the administrative agent plus~~ $4.~~00%.~~8 million As of ~~the~~stand-by ~~end~~letters of ~~the~~credit ~~second~~outstanding, resulting ~~quarter~~in $30.2 million of ~~fiscal~~availability ~~2004,~~under ~~the~~its ~~Euro~~Revolving ~~Term Loan~~Credit Facility. ~~bore~~Availability ~~interest~~of funds atunder ~~7.09% and~~ the ~~USD~~senior ~~Term~~credit ~~Loan~~facility ~~and~~is ~~Revolving~~subject ~~Credit Facilities~~to ~~bore~~certain ~~interest~~customary atterms 6and conditions.~~22%.~~

~~Effective~~As ~~March 9,~~of ~~2004,~~ the ~~Company~~end ~~amended~~of ~~its~~the ~~senior~~second ~~credit~~quarter ~~facility~~of ~~to (1) extend~~fiscal 2005, the ~~maturity~~principal ofamounts due under the Company’s ~~existing~~long-term ~~Revolving~~debt ~~Credit~~and ~~Facility~~the ~~from~~respective ~~March 31,~~final ~~2005~~maturity todates ~~December 29,~~were ~~2005;~~as follows (~~2) permanently~~in ~~reduce the~~thousands):


		Maturities by fiscal year
												2010 and
	Final maturity	2005		2006		2007		2008		2009		thereafter		Total
Term loan facility	February 13, 2007¹	$	975	$	1,950	$	190,613	$	—	$	—	$	—	$	193,538
Senior notes	March 1, 2010		—		—		—		—		—		211,323		211,323
Senior subordinated notes	May 15, 2007		—		—		149,326		—		—		—		149,326
Other	Various		756		1,572		2,005		2,141		2,282		17,833		26,589

			1,731		3,522		341,944		2,141		2,282		229,156		580,776
Senior preferred stock	September 30, 2007		—		—		114,874		—		—		—		114,874

Total		$	1,731	$	3,522	$	456,818	$	2,141	$	2,282	$	229,156	$	695,650

~~Table~~1 The Company’s senior credit facility matures on the earlier of ~~Contents~~November 5, 2009 or 91 days prior to the maturity of the senior subordinated notes due May 15, 2007 (as may be refinanced, extended, or renewed), unless terminated sooner upon an event of default.

~~DOANE~~ The ~~PET~~Company ~~CARE~~is ~~COMPANY~~highly ~~AND~~leveraged ~~SUBSIDIARIES~~and has significant cash requirements for debt service ~~NOTES~~relating TOto ~~UNAUDITED~~its ~~CONDENSED~~senior ~~CONSOLIDATED~~credit ~~FINANCIAL~~facility, ~~STATEMENTS~~senior —notes, ~~(Continued)~~senior subordinated notes, industrial development revenue bonds and foreign debt. The Company’s ability to borrow is limited by its senior credit facility, including compliance with the financial covenants therein, and the limitations on the incurrence of additional indebtedness in the indentures governing the Company’s senior notes and senior subordinated notes. The Company was in compliance with the financial covenants in its senior credit facility as of the end of the second quarter of fiscal 2005.

~~borrowing capacity under the Revolving Credit Facility from $60.0 million to $50.0 million;~~ (36) ~~waive~~ ~~non-compliance~~Restructuring with certain financial covenants as of the end of fiscal 2003; (4) simplify the financial covenants to include only minimum consolidated EBITDA, maximum senior secured leverage and capital expenditure limits; and (5) increase the interest rates on all facilities by 0.25% as of March 9, 2004, an additional 0.25% on all facilities as of September 30, 2004 and a final 1.00% on all facilities as of March 31, 2005. Activities

~~The~~In ~~Senior Preferred Stock (Redeemable) has~~ an ~~initial~~effort ~~liquidation preference~~to ofreduce ~~$25~~manufacturing ~~per~~costs ~~share (aggregate initial liquidation preference is $30.0 million) with 3.0 million shares authorized~~ and ~~1.2 million~~increase ~~shares~~operating ~~issued~~efficiencies, ~~and~~the ~~outstanding.~~Company ~~Dividends~~closed onits ~~the~~Cartersville, ~~Senior~~Georgia ~~Preferred~~manufacturing ~~Stock~~facility ~~(Redeemable) accrue quarterly~~ at the ~~rate~~end of ~~14.25% per annum on~~ the ~~most recent quarterly~~ ~~liquidation~~second ~~value~~quarter of ~~each~~fiscal ~~share~~2005. ~~and~~In ~~accrete~~connection towith the ~~liquidation~~plant ~~value~~closure, of the ~~Senior~~ ~~Preferred~~Company ~~Stock~~recorded ~~(Redeemable). See Note 3, Change in Accounting~~non-cash ~~Principle,~~asset ~~for~~impairments ~~a discussion~~ of ~~the~~$1.1 million ~~reclassification~~in ofother ~~the~~operating ~~Company’s~~expense ~~Senior Preferred Stock~~ (~~Redeemable~~income), asnet. ~~long-term~~In ~~debt~~addition, ~~as of~~ the ~~beginning of fiscal~~ ~~2004~~Company ~~and~~expects ~~Note~~to 7,incur ~~Senior~~total ~~Preferred~~cash ~~Stock~~charges ~~(Redeemable),~~of inapproximately ~~the~~$0.2 million ~~2003~~related ~~10-K~~to ~~for~~severance and ~~additional~~carrying ~~disclosures~~costs.

~~As of the end of the second quarter of fiscal 2004, the principal amounts~~7 ~~due under the Company’s long-term debt and the respective final maturity dates were as follows (in thousands):~~

		Maturities by fiscal year
												2009 and
	Final maturity	2004		2005		2006		2007		2008		thereafter		Total
Revolving Credit Facility	December 29, 2005	$	—	$	16,000	$	—	$	—	$	—	$	—	$	16,000
Term Loan Facilities:
Euro Term Loan Facility	December 30, 2005		—		36,589		—		—		—		—		36,589
USD Term Loan Facility:
Tranche A	March 31, 2005		5,732		4,587		—		—		—		—		10,319
Tranche B	December 31, 2005		—		79,102		—		—		—		—		79,102
Tranche C	December 31, 2006		—		—		39,068		—		—		—		39,068
Subtotal			5,732		120,278		39,068		—		—		—		165,078
Senior notes	March 1, 2010		—		—		—		—		—		210,961		210,961
Senior subordinated notes	May 15, 2007		—		—		—		148,968		—		—		148,968
Other	Various		441		1,501		1,581		2,016		2,152		20,143		27,834
Senior Preferred Stock (Redeemable)	September 30, 2007		—		—		—		98,487		—		—		98,487
Total		$	6,173	$	137,779	$	40,649	$	249,471	$	2,152	$	231,104	$	667,328

~~The Company is highly leveraged and has significant cash requirements for~~DOANE ~~debt~~PET ~~service~~CARE ~~relating~~COMPANY toAND ~~its senior credit facility, senior notes, senior~~SUBSIDIARIES subordinated notes, industrial development revenue bonds and foreign debt. The Company’s ability to borrow is limited by its senior credit facility, including compliance with the financial covenants therein, and the limitations on the incurrence of additional indebtedness in the indentures governing the Company’s senior notes and senior subordinated notes.

~~The~~NOTES ~~Company~~TO ~~has~~UNAUDITED ~~experienced~~CONDENSED ~~difficulty~~CONSOLIDATED inFINANCIAL ~~the~~STATEMENTS ~~past~~— satisfying financial covenants in its senior credit facility and negotiated amendments and obtained waivers for fiscal 2000, 2001 and 2003 due to covenant non-compliance. The Company’s senior credit facility, including the financial covenants, was last amended effective March 9, 2004. The Company’s ability to satisfy these covenants is determined based on the Company’s cash flows, senior secured debt and capital expenditures. The Company may experience difficulty satisfying these amended covenants in the future. It is possible that, if domestic commodity prices increase beyond recent levels and the Company is unable to recover such increased costs through price increases, the Company may face additional challenges in satisfying its debt covenants. In addition, the Company may face covenant challenges if its price increases adversely affect sales volume or if its price increases are not sustainable. If the Company is unable to negotiate an amendment or secure a waiver from its lenders for any potential default, it could result in an event of default under its senior credit facility and permit a majority of the lenders to accelerate outstanding debt under its senior credit facility and permit a majority of its lenders under its Revolving Credit Facility to terminate the Company’s revolving credit commitment (~~without acceleration of such debt~~Continued) ~~and seize the cash in its operating~~ ~~accounts. Such acceleration would result in a cross-default under the Company’s senior notes and senior subordinated notes.~~

7 A rollforward of the Company’s accrued restructuring costs for the first six months of fiscal 2005 follows (in thousands):


	First six months
	2005
Balance at end of fiscal 2004	$	722
Severance		36
Revisions to estimates		(15	)
Cash payments		(415	)

Balance at end of second quarter 2005	$	328

~~DOANE~~ During ~~PET~~the ~~CARE~~first ~~COMPANY~~six ~~AND~~months ~~SUBSIDIARIES~~of fiscal 2005, the Company made payments of $0.4 million for ~~NOTES~~severance TOcosts ~~UNAUDITED~~related ~~CONDENSED~~to ~~CONSOLIDATED~~the ~~FINANCIAL~~European ~~STATEMENTS~~restructuring —plan ~~(Continued)~~which was completed in fiscal 2004.

~~(6) Accruals~~ As ~~for~~of ~~Restructuring~~the ~~Costs~~end of the second quarter of fiscal 2005, the future expected payout of the Company’s accrued restructuring costs, which consist primarily of severance associated with European restructuring, follows (in thousands):

A rollforward of the Company’s accrued restructuring costs for the first six months of fiscal 2004 follows (in thousands):


Fiscal years ending	Payout
2005	$	269
2006		59

Total	$	328

	First six months
	fiscal 2004
Balance at end of fiscal 2003	$	1,154
Plant closure costs		2,547
Severance		3,028
Cash payments		(5,120	)
Balance at end of second quarter 2004	$	1,609

(7) Comprehensive Loss

The ~~Company~~components ~~expects to incur total restructuring costs~~ of ~~approximately~~comprehensive ~~$6 million,~~loss ~~excluding~~were ~~asset~~as ~~impairments,~~follows ~~related to its European restructuring efforts consisting of approximately~~ (1)in ~~$3 million for severance; (2~~thousands) $2: million for the installation of transferred equipment; and (3) $1 million relating to manufacturing inefficiencies through the transition period. For the second quarter of fiscal 2004, the Company recognized $3.9 million consisting of $2.0 million of installation costs for the transferred equipment, $1.3 million of severance costs and $0.6 million of manufacturing inefficiencies as other operating expenses. The Company recognized $5.6 million for the first six months of fiscal 2004 including additional severance in the first quarter.

The future expected payout of the Company’s accrued restructuring costs, consisting primarily of severance, as of the end of the second quarter of fiscal 2004 follows (in thousands):


	Second quarter						First six months
	2005			2004			2005			2004
Net loss	$	(7,547	)	$	(17,737	)	$	(371	)	$	(25,544	)
Foreign currency translation		(17,625	)		(873	)		(30,079	)		(4,907	)

Total	$	(25,172	)	$	(18,610	)	$	(30,450	)	$	(30,451	)

Fiscal years ending	Payout
2004	$	1,154
2005		390
2006		65
Total	$	1,609

(8) Stock Option Plan of Parent

~~(7) Comprehensive~~ The ~~Income~~Company ~~(Loss)~~and its Parent, Doane Pet Care Enterprises, Inc., have elected to continue to follow APB 25 to account for fixed stock awards granted to employees. However, if the Company and its Parent adopted SFAS 123 to account for fixed stock awards granted to employees, the Company’s net loss for the second quarter and first six months of fiscal 2005 and 2004 would have been adjusted as follows (in thousands):

~~The components of comprehensive income (loss) were as follows (in~~8 ~~thousands):~~

	Second quarter						First six months fiscal
	2004			2003			2004			2003
Comprehensive income (loss):
Net loss	$	(17,737	)	$	(3,404	)	$	(25,544	)	$	(11,278	)
Foreign currency translation		(873	)		9,027			(4,907	)		20,411
Unrealized gain on interest rate swap, net of deferred tax expense of $209 and $396, respectively		—			328			—			621
Total	$	(18,610	)	$	5,951		$	(30,451	)	$	9,754

~~(8) Stock~~DOANE PET ~~Option~~CARE ~~Plan~~COMPANY ofAND ~~Parent~~SUBSIDIARIES

~~The~~NOTES ~~Company~~TO ~~and~~UNAUDITED ~~its~~CONDENSED ~~Parent,~~CONSOLIDATED ~~Doane~~FINANCIAL ~~Pet~~STATEMENTS ~~Care~~— ~~Enterprises, Inc., have elected~~(Continued) ~~to continue to follow Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25, to account for fixed stock~~


	Second quarter						First six months
	2005			2004			2005			2004
Net loss, as reported	$	(7,547	)	$	(17,737	)	$	(371	)	$	(25,544	)
Less: Stock-based employee compensation expense determined based on the fair value method for all awards		—			(1	)		(1	)		(2	)

Pro forma net loss	$	(7,547	)	$	(17,738	)	$	(372	)	$	(25,546	)

~~Table~~ At the end of ~~Contents~~the second quarter of fiscal 2005 and 2004, Parent had total options outstanding of 3,685,960 and 4,048,850, respectively, under its stock option plans. There were no new stock options granted during the first six months of fiscal 2005.

~~DOANE~~(9) Pension ~~PET~~and ~~CARE~~Postretirement ~~COMPANY AND SUBSIDIARIES~~Plans ~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~awards~~ The ~~granted~~Company tohas ~~employees.~~a ~~However~~defined benefit, ifnon-contributory ~~the~~inactive ~~Company~~pension ~~adopted~~plan ~~SFAS~~which ~~No.~~was ~~123,~~frozen ~~Accounting~~on ~~for~~May 28, ~~Stock~~1998. ~~Based~~As ~~Compensation~~a result, orfuture ~~SFAS~~benefits ~~123,~~no tolonger ~~account~~accumulate ~~for~~and ~~fixed~~the Company no longer ~~stock~~incurs ~~awards~~service ~~granted~~cost related to ~~employees,~~ the plan. The Company’s ~~net~~funding ~~loss~~policy for this inactive plan is to make the ~~second~~minimum annual contribution required by applicable regulations. The Company’s only active ~~quarter~~pension ~~and~~plan ~~the~~covers ~~first~~42 ~~six~~union ~~months~~employees at one of ~~fiscal~~its ~~2004~~facilities. The Company also has a postretirement healthcare plan that provides medical coverage for eligible retirees and ~~2003~~their dependents. ~~would~~The ~~have~~Company ~~been~~pays benefits under this plan when due and does not fund its plan ~~adjusted~~obligations as ~~follows~~they ~~(in~~accrue; ~~thousands):~~therefore, there are no plan assets. The information below has been determined based on the six months ending June 30, 2005 and 2004, respectively.

	Second quarter						First six months fiscal
	2004			2003			2004			2003
Net loss available to common shares	$	(17,737	)	$	(6,723	)	$	(25,544	)	$	(17,812	)
Less: Total stock-based employee compensation expense determined based on the fair value method for all awards, net of income tax benefit		(1	)		(2	)		(2	)		(4	)
Pro forma net loss available to common shares	$	(17,738	)	$	(6,725	)	$	(25,546	)	$	(17,816	)

A summary of net periodic cost follows (in thousands):

Pro forma information regarding net loss has been determined as if the Company had accounted for its employee stock options under the minimum value method of SFAS 123 under the assumptions of a risk free rate of return of 3.70% for the second quarter and first six months of fiscal 2004 and 2003, and an expected life of options ranging from 3 to 10 years. The Company has no present plans to pay dividends on its common stock. The effect of applying SFAS 123, as calculated above, may not be representative of the effect on reported net income (loss) for future years.


	Pension benefits
	Second quarter						First six months
	2005			2004			2005			2004
Service cost	$	9		$	9		$	18		$	18
Interest cost		254			270			507			540
Expected return on plan assets		(344	)		(347	)		(689	)		(693	)
Recognition of actuarial loss		168			169			336			338
Amortization of prior service cost		2			3			5			5
Amortization of transition obligation		1			1			2			2

Net periodic pension cost	$	90		$	105		$	179		$	210

(9) Benefit Plans


	Postretirement benefits
	Second quarter						First six months
	2005			2004			2005			2004
Service cost	$	5		$	3		$	8		$	7
Interest cost		45			75			103			150
Recognition of actuarial loss		28			27			63			54
Amortization of prior service benefit		(61	)		(13	)		(122	)		(26	)

Net periodic postretirement cost	$	17		$	92		$	52		$	185

~~Pension Plans~~9

TheTable Company has an inactive defined benefit, non-contributory pension plan covering certain hourly and salaried employees. As a result, future benefits no longer accumulate and the Company’s service cost ceased. The Company’s funding policy for this plan is to make the minimum annual contribution required by applicable regulations. The Company also has an active defined benefit, non-contributory pension plan covering approximately 50 union employees at one of its facilities. The information below for both pension plans has been determined based on the six months ending June 30, 2004 and 2003, respectively. Contents

~~Under federal law, the Company was not required to make any cash~~DOANE ~~contributions~~PET toCARE ~~its~~COMPANY ~~inactive~~AND ~~plan in fiscal 2003 or the first six months of~~SUBSIDIARIES ~~fiscal 2004.~~

ANOTES ~~summary~~TO ofUNAUDITED ~~net~~CONDENSED ~~periodic~~CONSOLIDATED ~~cost~~FINANCIAL ~~for~~STATEMENTS ~~the~~— ~~Company’s pension plans follows~~ (~~in thousands~~Continued):

	Second quarter						First six months fiscal
	2004			2003			2004			2003
Service cost	$	9		$	7		$	18		$	14
Interest cost		270			268			540			536
Expected income on plan assets		(347	)		(311	)		(693	)		(623	)
Recognition of actuarial loss		—			—			—			—
Amortization		173			187			345			375
Net periodic pension cost	$	105		$	151		$	210		$	302

(10)

Major Customer

9 For both the first six months of fiscal 2005 and 2004, the same customer accounted for 44% of the Company’s net sales in the accompanying unaudited condensed consolidated statements of operations. The Company does not have a long-term contract with this customer. Trade accounts receivable with this customer were 34% and 35% of consolidated accounts receivable, net, in the accompanying unaudited condensed consolidated balance sheets as of the end of the second quarter of fiscal 2005 and the end of fiscal 2004, respectively. The loss of this customer, or a significant decrease or change in business with this customer, would have a material adverse impact on the Company’s financial position, results of operations and liquidity.

~~Table~~(11) ofCommitments ~~Contents~~and Contingencies

~~DOANE~~ The ~~PET~~Company ~~CARE~~is ~~COMPANY~~a ~~AND~~party, ~~SUBSIDIARIES~~in the ordinary course of business, to claims and litigation. In ~~NOTES~~management’s TOopinion, ~~UNAUDITED~~the ~~CONDENSED~~resolution ~~CONSOLIDATED~~of ~~FINANCIAL~~such ~~STATEMENTS~~matters —is ~~(Continued)~~not expected to have a material impact on the future financial condition, results of operations or cash flows of the Company.

~~Post-retirement~~(12) ~~Plan~~ Financial Information Related to Guarantor Subsidiaries

The Company’s ~~has~~guarantor asubsidiaries ~~post~~are wholly-~~retirement~~owned ~~healthcare~~domestic ~~plan~~subsidiaries ~~that~~who ~~provides medical~~have ~~coverage~~jointly ~~for~~and ~~eligible~~severally ~~retirees~~guaranteed on a full and ~~their~~unconditional ~~dependents~~basis all of the Company’s senior notes and senior subordinated notes. The ~~Company~~guarantor ~~pays~~subsidiaries ~~benefits under~~are minor subsidiaries of the Company’s ~~plan~~domestic ~~when~~operations ~~due~~that ~~and~~have ~~does~~no ~~not~~material ~~fund~~operations ~~its~~of ~~plan~~their ~~obligations~~own; astherefore, no separate ~~they~~information ~~accrue~~for these subsidiaries is presented. The financial information presented below in the ~~post-retirement~~guarantor ~~plan~~columns is substantially that of the Company, excluding its European operations. The financial information presented below ~~has~~in ~~been~~the ~~determined~~non-guarantor ~~based~~columns onconsist of the ~~six~~Company’s ~~months~~non-guarantor ~~ending~~subsidiaries, ~~June 30~~which are its wholly-owned European subsidiaries. See Note 8, Long-Term ~~2004~~Debt and ~~2003~~Liquidity, ~~respectively~~in the Company’s 2004 10-K.

AUnaudited ~~summary~~condensed ofconsolidated ~~net~~financial ~~periodic~~information ~~cost~~ for the ~~Company’s~~guarantor ~~post-retirement~~and ~~plan~~non-guarantor subsidiaries follows (in thousands, except share and par value amounts):

	Second quarter				First six months fiscal
	2004		2003		2004		2003
Service cost	$	3	$	5	$	7	$	10
Interest cost		75		78		150		156
Amortization		14		6		28		13
Net periodic post-retirement cost	$	92	$	89	$	185	$	179

(10) CommitmentsTable andof Contingencies Contents

InDOANE ~~the~~PET ~~first~~CARE ~~quarter~~COMPANY ofAND ~~fiscal 2004, the Company won an arbitration award~~SUBSIDIARIES from Merrick Petfoods, Inc., or Merrick, after Merrick terminated the joint venture agreement with the Company related to a manufacturing facility in Hereford, Texas. The award consisted of an initial payment and monthly royalty payments. Under the arbitration agreement, the royalty payments will continue for approximately nine years and are based on Merrick’s future sales volumes of certain products. In the first quarter of fiscal 2004, the Company recorded $1.0 million relating to the award, consisting of both the initial payment of $0.8 million, recorded as an offset to other operating expenses, and royalty payments of $0.2 million, recorded as other expense (income), net. Royalty payments made subsequent to the initial payment in the first six months of fiscal 2004 did not have a material impact on the Company’s results of operations, nor does the Company expect future payments to have a material impact.

~~The~~NOTES ~~Company~~TO isUNAUDITED ~~also~~CONDENSED aCONSOLIDATED ~~party~~FINANCIAL toSTATEMENTS ~~other~~— ~~legal proceedings in the ordinary~~(Continued) ~~course of business. The resolution of such matters is not expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows.~~

~~(11) Financial~~Unaudited ~~Information~~Condensed ~~Related~~Consolidated toBalance Sheets For The Guarantor and Non-Guarantor Subsidiaries

Unaudited condensed consolidated financial information related to the Company and its guarantor subsidiaries and non-guarantor subsidiaries as of the end of the second quarter of fiscal 2004 and the end of fiscal 2003 and for the second quarter and first six months of fiscal 2004 and 2003 is disclosed to comply with the reporting requirements of the Company’s guarantor subsidiaries. The guarantor subsidiaries are wholly-owned domestic subsidiaries of the Company which have fully and unconditionally guaranteed the Company’s 10 3/4% Senior Notes due March 1, 2010 and the Company’s 9 3/4% Senior Subordinated Notes due May 15, 2007. The non-guarantor subsidiaries are wholly-owned foreign subsidiaries of the Company which have not fully and unconditionally guaranteed the Company’s 10 3/4% Senior Notes due March 1, 2010 or the Company’s 9 3/4% Senior Subordinated Notes due May 15, 2007. See Note 6, Long-Term Debt and Liquidity, in the Company’s 2003 10-K. Unaudited condensed consolidated financial information follows (in thousands, except share and par value amounts):


	End of second quarter 2005
				Non-			Intercompany
	Guarantor			guarantor			eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	33,177		$	3,854		$	—		$	37,031
Accounts receivable, net		40,781			50,710			—			91,491
Inventories, net		40,004			27,653			—			67,657
Deferred tax assets		1,935			—			—			1,935
Prepaid expenses and other current assets		9,880			1,200			—			11,080

Total current assets		125,777			83,417			—			209,194
Property, plant and equipment, net		142,346			94,491			—			236,837
Goodwill and other intangible assets		267,780			108,593			—			376,373
Other assets		273,378			12,565			(256,555	)		29,388

Total assets	$	809,281		$	299,066		$	(256,555	)	$	851,792

LIABILITIES AND STOCKHOLDER’S (DEFICIT) EQUITY
Current liabilities:
Current maturities of long-term debt	$	1,950		$	1,566		$	—		$	3,516
Accounts payable		48,848			35,210			—			84,058
Accrued liabilities		36,950			13,748			—			50,698

Total current liabilities		87,748			50,524			—			138,272

Long-term debt:
Long-term debt, excluding current maturities		566,736			154,495			(143,971	)		577,260
Senior Preferred Stock (Redeemable), 3,000,000 shares authorized, 1,200,000 shares issued and outstanding, $118,987 current redemption value		114,874			—			—			114,874

Total long-term debt		681,610			154,495			(143,971	)		692,134

Deferred tax liabilities		32,333			2,535			—			34,868
Other long-term liabilities		9,842			—			—			9,842

Total liabilities		811,533			207,554			(143,971	)		875,116

Commitments and contingencies
Stockholder’s (deficit) equity:
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding		—			—			—			—
Additional paid-in-capital		115,674			95,861			(95,861	)		115,674
Accumulated other comprehensive (loss) income		(24,555	)		73,849			(16,723	)		32,571
Accumulated deficit		(93,371	)		(78,198	)		—			(171,569	)

Total stockholder’s (deficit) equity		(2,252	)		91,512			(112,584	)		(23,324	)

Total liabilities and stockholder’s (deficit) equity	$	809,281		$	299,066		$	(256,555	)	$	851,792

1011

DOANE PET CARE COMPANY AND SUBSIDIARIES ~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)~~

~~Unaudited~~NOTES ~~Condensed~~TO ~~Consolidated~~UNAUDITED ~~Balance~~CONDENSED ~~Sheets For~~CONSOLIDATED ~~The~~FINANCIAL ~~Guarantor~~STATEMENTS ~~and~~— ~~Non-Guarantor Subsidiaries~~(Continued)

	End of second quarter 2004
							Intercompany
	Guarantor			Non-guarantor			eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	6,559		$	3,503		$	—		$	10,062
Accounts receivable, net		41,079			52,261			—			93,340
Inventories, net		43,550			27,759			—			71,309
Deferred tax assets		2,362			—			—			2,362
Prepaid expenses and other current assets		9,268			2,366			—			11,634
Total current assets		102,818			85,889			—			188,707
Property, plant and equipment, net		149,984			100,905			—			250,889
Goodwill and trademarks		267,780			109,720			—			377,500
Other assets		258,496			13,026			(237,469	)		34,053
Total assets	$	779,078		$	309,540		$	(237,469	)	$	851,149
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Current maturities of long-term debt	$	10,319		$	444		$	—		$	10,763
Accounts payable		47,412			40,667			—			88,079
Accrued liabilities		38,371			16,597			—			54,968
Total current liabilities		96,102			57,708			—			153,810
Long-term debt:
Long-term debt, excluding current maturities		545,176			167,297			(154,395	)		558,078
Senior Preferred Stock (Redeemable)		98,487			—			—			98,487
Total long-term debt		643,663			167,297			(154,395	)		656,565
Deferred tax liabilities		28,626			2,368			—			30,994
Other long-term liabilities		9,033			—			—			9,033
Total liabilities		777,424			227,373			(154,395	)		850,402
Commitments and contingencies
Stockholder’s equity:
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding		—			—			—			—
Additional paid-in-capital		115,674			83,984			(83,984	)		115,674
Accumulated other comprehensive income (loss)		(14,538	)		58,906			910			45,278
Accumulated deficit		(99,482	)		(60,723	)		—			(160,205	)
Total stockholder’s equity		1,654			82,167			(83,074	)		747
Total liabilities and stockholder’s equity	$	779,078		$	309,540		$	(237,469	)	$	851,149

Unaudited Condensed Consolidated Balance Sheets
For The Guarantor and Non-Guarantor Subsidiaries


	End of fiscal 2004
				Non-			Intercompany
	Guarantor			guarantor			eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	24,963		$	3,884		$	—		$	28,847
Accounts receivable, net		48,660			63,785			—			112,445
Inventories, net		39,406			28,915			—			68,321
Deferred tax assets		2,414			—			—			2,414
Prepaid expenses and other current assets		6,128			910			—			7,038

Total current assets		121,571			97,494			—			219,065
Property, plant and equipment, net		147,293			110,777			—			258,070
Goodwill and other intangible assets		267,780			122,691			—			390,471
Other assets		267,224			14,436			(247,360	)		34,300

Total assets	$	803,868		$	345,398		$	(247,360	)	$	901,906

LIABILITIES AND STOCKHOLDER’S (DEFICIT) EQUITY
Current liabilities:
Current maturities of long-term debt	$	1,950		$	1,723		$	—		$	3,673
Accounts payable		52,131			50,018			—			102,149
Accrued liabilities		46,623			12,616			—			59,239

Total current liabilities		100,704			64,357			—			165,061

Long-term debt, excluding current maturities		567,347			165,574			(152,831	)		580,090
Senior Preferred Stock (Redeemable), 3,000,000 shares authorized, 1,200,000 shares issued and outstanding, $110,942 current redemption value		106,421			—			—			106,421

Total long-term debt		673,768			165,574			(152,831	)		686,511
Deferred tax liabilities		30,714			2,927			—			33,641
Other long-term liabilities		9,567			—			—			9,567

Total liabilities		814,753			232,858			(152,831	)		894,780

Commitments and contingencies
Stockholder’s (deficit) equity:
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding		—			—			—			—
Additional paid-in-capital		115,674			95,861			(95,861	)		115,674
Accumulated other comprehensive (loss) income		(24,555	)		85,873			1,332			62,650
Accumulated deficit		(102,004	)		(69,194	)		—			(171,198	)

Total stockholder’s (deficit) equity		(10,885	)		112,540			(94,529	)		7,126

Total liabilities and stockholder’s (deficit) equity	$	803,868		$	345,398		$	(247,360	)	$	901,906

~~Table of Contents~~12

DOANETable PETof CARE COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued) Contents

~~Unaudited~~DOANE ~~Condensed~~PET ~~Consolidated~~CARE ~~Balance~~COMPANY ~~Sheets For~~AND ~~The Guarantor and Non-Guarantor Subsidiaries~~SUBSIDIARIES

	End of fiscal 2003
							Intercompany
	Guarantor			Non-guarantor			eliminations			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	25,939		$	3,354		$	—		$	29,293
Accounts receivable, net		35,639			55,930			—			91,569
Inventories, net		43,616			25,003			—			68,619
Deferred tax assets		1,898			—			—			1,898
Prepaid expenses and other current assets		10,727			3,663			—			14,390
Total current assets		117,819			87,950			—			205,769
Property, plant and equipment, net		156,697			109,760			—			266,457
Goodwill and trademarks		267,780			112,638			—			380,418
Other assets		241,749			12,396			(220,875	)		33,270
Total assets	$	784,045		$	322,744		$	(220,875	)	$	885,914
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Current maturities of long-term debt	$	8,952		$	4,233		$	—		$	13,185
Accounts payable		52,006			48,506			—			100,512
Accrued liabilities		39,921			11,798			—			51,719
Total current liabilities		100,879			64,537			—			165,416
Long-term debt, excluding current maturities		550,420			165,251			(154,810	)		560,861
Deferred tax liabilities		26,161			2,363			—			28,524
Other long-term liabilities		8,863			—			—			8,863
Total liabilities		686,323			232,151			(154,810	)		763,664
Senior Preferred Stock (Redeemable)		91,052			—			—			91,052
Commitments and contingencies
Stockholder’s equity:
Common stock, $0.01 par value; 1,000 shares authorized, issued and outstanding		—			—			—			—
Additional paid-in-capital		115,674			67,040			(67,040	)		115,674
Accumulated other comprehensive income (loss)		(15,562	)		64,772			975			50,185
Accumulated deficit		(93,442	)		(41,219	)		—			(134,661	)
Total stockholder’s equity		6,670			90,593			(66,065	)		31,198
Total liabilities and stockholder’s equity	$	784,045		$	322,744		$	(220,875	)	$	885,914

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12Unaudited Condensed Consolidated Statements of Operations For The Guarantor and Non-Guarantor Subsidiaries


	Second quarter 2005
				Non-
	Guarantor			guarantor			Consolidated
Net sales	$	172,506		$	71,366		$	243,872
Cost of goods sold		144,383			56,768			201,151

Gross profit		28,123			14,598			42,721
Operating expenses:
Promotion and distribution		6,177			8,552			14,729
Selling, general and administrative		8,723			4,088			12,811
Amortization		816			208			1,024
Other operating expense (income), net		1,816			(11	)		1,805

Income from operations		10,591			1,761			12,352
Interest expense, net		12,617			6,414			19,031
Other (income) expense, net		(791	)		343			(448	)

Loss before income taxes		(1,235	)		(4,996	)		(6,231	)
Income tax expense		1,049			267			1,316

Net loss	$	(2,284	)	$	(5,263	)	$	(7,547	)

DOANE PET CARE COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	Second quarter 2004
				Non-
	Guarantor			guarantor			Consolidated
Net sales	$	192,502		$	65,836		$	258,338
Cost of goods sold		173,380			51,821			225,201

Gross profit		19,122			14,015			33,137
Operating expenses:
Promotion and distribution		6,580			7,187			13,767
Selling, general and administrative		8,673			4,130			12,803
Amortization		935			199			1,134
Other operating expenses		—			3,938			3,938

Income from operations		2,934			(1,439	)		1,495
Interest expense, net		12,205			5,981			18,186
Other (income) expense, net		(521	)		190			(331	)

Loss before income taxes		(8,750	)		(7,610	)		(16,360	)
Income tax expense		1,070			307			1,377

Net loss	$	(9,820	)	$	(7,917	)	$	(17,737	)

~~Unaudited Condensed Consolidated Statements of Operations~~13 ~~For The Guarantor and Non-Guarantor Subsidiaries~~

	Second quarter 2004
	Guarantor			Non-guarantor			Consolidated
Net sales	$	192,502		$	65,836		$	258,338
Cost of goods sold		173,380			51,821			225,201
Gross profit		19,122			14,015			33,137
Operating expenses:
Promotion and distribution		6,580			7,187			13,767
Selling, general and administrative		8,673			4,130			12,803
Amortization		935			199			1,134
Other operating expenses		—			3,938			3,938
Income from operations		2,934			(1,439	)		1,495
Interest expense, net		12,205			5,981			18,186
Other expense (income), net		(521	)		190			(331	)
Loss before income taxes		(8,750	)		(7,610	)		(16,360	)
Income tax expense		1,070			307			1,377
Net loss	$	(9,820	)	$	(7,917	)	$	(17,737	)

	Second quarter 2003
	Guarantor			Non-guarantor			Consolidated
Net sales	$	175,882		$	58,594		$	234,476
Cost of goods sold		149,489			46,478			195,967
Gross profit		26,393			12,116			38,509
Operating expenses:
Promotion and distribution		6,470			6,327			12,797
Selling, general and administrative		8,064			4,309			12,373
Amortization		982			181			1,163
Income from operations		10,877			1,299			12,176
Interest expense, net		8,363			6,494			14,857
Other income, net		(405	)		(9	)		(414	)
Income (loss) before income taxes		2,919			(5,186	)		(2,267	)
Income tax expense		900			237			1,137
Net income (loss)		2,019			(5,423	)		(3,404	)
Preferred stock dividends and accretion		(3,319	)		—			(3,319	)
Net loss available to common shares	$	(1,300	)	$	(5,423	)	$	(6,723	)

DOANE PET CARE COMPANY AND SUBSIDIARIES

13NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~Table~~Unaudited Condensed Consolidated Statements of ~~Contents~~Operations For The Guarantor and Non-Guarantor Subsidiaries

DOANE PET CARE COMPANY AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)


	First six months 2005
				Non-
	Guarantor			guarantor			Consolidated
Net sales	$	367,127		$	143,881		$	511,008
Cost of goods sold		302,270			113,914			416,184

Gross profit		64,857			29,967			94,824
Operating expenses:
Promotion and distribution		12,734			16,425			29,159
Selling, general and administrative		17,590			8,340			25,930
Amortization		1,765			425			2,190
Other operating income, net		(1,439	)		(272	)		(1,711	)

Income from operations		34,207			5,049			39,256
Interest expense, net		24,605			13,072			37,677
Other (income) expense, net		(1,129	)		436			(693	)

Income (loss) before income taxes		10,731			(8,459	)		2,272
Income tax expense		2,098			545			2,643

Net income (loss)	$	8,633		$	(9,004	)	$	(371	)

Unaudited Condensed Consolidated Statements of Operations For The Guarantor and Non-Guarantor Subsidiaries


	First six months 2004
				Non-
	Guarantor			guarantor			Consolidated
Net sales	$	391,940		$	137,278		$	529,218
Cost of goods sold		346,716			108,547			455,263

Gross profit		45,224			28,731			73,955
Operating expenses:
Promotion and distribution		13,355			14,639			27,994
Selling, general and administrative		17,106			8,880			25,986
Amortization		1,956			407			2,363
Other operating (income) expense, net		(415	)		5,576			5,161

Income (loss) from operations		13,222			(771	)		12,451
Interest expense, net		23,956			12,207			36,163
Other (income) expense, net		(1,134	)		396			(738	)

Loss before income taxes		(9,600	)		(13,374	)		(22,974	)
Income tax expense		2,001			569			2,570

Net loss	$	(11,601	)	$	(13,943	)	$	(25,544	)

	First six months fiscal 2004
	Guarantor			Non-guarantor			Consolidated
Net sales	$	391,940		$	137,278		$	529,218
Cost of goods sold		346,716			108,547			455,263
Gross profit		45,224			28,731			73,955
Operating expenses:
Promotion and distribution		13,355			14,639			27,994
Selling, general and administrative		17,106			8,880			25,986
Amortization		1,956			407			2,363
Other operating expenses		(415	)		5,576			5,161
Income from operations		13,222			(771	)		12,451
Interest expense, net		23,956			12,207			36,163
Other expense (income), net		(1,134	)		396			(738	)
Loss before income taxes		(9,600	)		(13,374	)		(22,974	)
Income tax expense		2,001			569			2,570
Net loss	$	(11,601	)	$	(13,943	)	$	(25,544	)

	First six months fiscal 2003
	Guarantor			Non-guarantor			Consolidated
Net sales	$	377,727		$	116,698			$	494,425
Cost of goods sold		320,739			89,817				410,556
Gross profit		56,988			26,881				83,869
Operating expenses:
Promotion and distribution		14,506			12,701				27,207
Selling, general and administrative		16,103			8,378				24,481
Amortization		1,942			375				2,317
Income from operations		24,437			5,427				29,864
Interest expense, net		14,704			14,168				28,872
Debt extinguishments		11,113			—				11,113
Other expense (income), net		(723	)		138				(585	)
Loss before income taxes		(657	)		(8,879	)			(9,536	)
Income tax expense		900			842				1,742
Net loss		(1,557	)		(9,721	)			(11,278	)
Preferred stock dividends and accretion		(6,534	)		—				(6,534	)
Net loss available to common shares	$	(8,091	)	$	(9,721	)		$	(17,812	)

14DOANE PET CARE COMPANY AND SUBSIDIARIES

~~Table~~NOTES ofTO ~~Contents~~UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

~~DOANE~~Unaudited ~~PET~~Condensed ~~CARE~~Consolidated ~~COMPANY~~Statements ~~AND~~of ~~SUBSIDIARIES~~Cash Flows ~~NOTES~~For TOThe ~~UNAUDITED~~Guarantor ~~CONDENSED~~and ~~CONSOLIDATED~~Non-Guarantor ~~FINANCIAL STATEMENTS — (Continued)~~Subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows For The Guarantor and Non-Guarantor Subsidiaries


	First six months 2005
				Non-
	Guarantor			guarantor			Consolidated
Cash flows from operating activities:
Net income (loss)	$	8,633		$	(9,004	)	$	(371	)
Items not requiring (providing) cash:
Depreciation and amortization		11,395			8,688			20,083
Deferred income tax expense (benefit)		2,098			(56	)		2,042
Asset impairments		1,129			—			1,129
Other non-cash expense (income), net		11,120			(172	)		10,948
Changes in current assets and liabilities		(18,339	)		5,782			(12,557	)

Net cash provided by operating activities		16,036			5,238			21,274

Cash flows from investing activities:
Capital expenditures		(6,044	)		(4,088	)		(10,132	)
Other, net		(781	)		38			(743	)

Net cash used in investing activities		(6,825	)		(4,050	)		(10,875	)

Cash flows from financing activities:
Principal payments on long-term debt		(975	)		(793	)		(1,768	)
Payments for debt issuance costs		(22	)		—			(22	)

Net cash used in financing activities		(997	)		(793	)		(1,790	)
Effect of exchange rate changes on cash and cash equivalents		—			(425	)		(425	)

Increase (decrease) in cash and cash equivalents		8,214			(30	)		8,184
Cash and cash equivalents, beginning of period		24,963			3,884			28,847

Cash and cash equivalents, end of period	$	33,177		$	3,854		$	37,031

	First six months fiscal 2004
	Guarantor			Non-guarantor			Consolidated
Cash flows from operating activities:
Net loss	$	(11,601	)	$	(13,943	)	$	(25,544	)
Items not requiring (providing) cash:
Depreciation and amortization		11,640			8,523			20,163
Deferred income tax expense		2,001			64			2,065
Asset impairments		420			—			420
Other non-cash charges (income), net		9,359			(103	)		9,256
Changes in current assets and liabilities		(21,535	)		8,861			(12,674	)
Net cash provided by (used in) operating activities		(9,716	)		3,402			(6,314	)
Cash flows from investing activities:
Capital expenditures		(2,990	)		(2,136	)		(5,126	)
Proceeds from sale of assets		2			398			400
Other, net		(454	)		(350	)		(804	)
Net cash used in investing activities		(3,442	)		(2,088	)		(5,530	)
Cash flows from financing activities:
Proceeds from the issuance of long-term debt		—			13,078			13,078
Principal payments on long-term debt		(3,220	)		(14,056	)		(17,276	)
Payments for debt issuance costs		(3,002	)		—			(3,002	)
Net cash used in financing activities		(6,222	)		(978	)		(7,200	)
Effect of exchange rate changes on cash and cash equivalents		—			(187	)		(187	)
Increase (decrease) in cash and cash equivalents		(19,380	)		149			(19,231	)
Cash and cash equivalents, beginning of period		25,939			3,354			29,293
Cash and cash equivalents, end of period	$	6,559		$	3,503		$	10,062

15 Table of Contents

~~Table~~DOANE ofPET ~~Contents~~CARE COMPANY AND SUBSIDIARIES

~~DOANE PET CARE COMPANY AND SUBSIDIARIES~~ NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Unaudited Condensed Consolidated Statements of Cash Flows For The Guarantor and Non-Guarantor Subsidiaries

	First six months fiscal 2003
	First six months 2004
	Guarantor			Non-guarantor			Consolidated
				Non-
	Guarantor			guarantor			Consolidated
Cash flows from operating activities:
Net loss	$	(111,~~557~~601	)	$	(913,~~721~~943	)	$	(1125,~~278~~544	)
Items not requiring (providing) cash:
Depreciation and amortization		1011,~~627~~640			78,~~307~~523			1720,~~934~~163
Deferred income tax expense (benefit)		900			(143	)		757
Deferred income tax expense		2,001			64			2,065
Debt extinguishments		11,113			—			11,113
Asset impairments		420			—			420
Other non-cash charges (income), net		2,778			(115	)		2,663
Other non-cash expense (income), net		9,359			(103	)		9,256
Changes in current assets and liabilities		(2021,~~310~~185	)		138,~~783~~511			(612,~~527~~674	)
Net cash provided by operating activities		3,551			11,111			14,662
Net cash (used in) provided by operating activities		(9,366	)		3,052			(6,314	)
Cash flows from investing activities:
Capital expenditures		(42,~~766~~990	)		(42,~~850~~136	)		(95,~~616~~126	)
Proceeds from sale of assets		27			166			193
Other, net		(802	)		398			(404	)
Other, net		2,631			(4,546	)		(1,915	)
Net cash used in investing activities		(3,792	)		(1,738	)		(5,530	)
Net cash used in investing activities		(2,108	)		(9,230	)		(11,338	)
Cash flows from financing activities:
Net repayments under revolving credit agreements		(15,000	)		—			(15,000	)
Proceeds from the issuance of long-term debt		—			13,078			13,078
Proceeds from issuance of long-term debt		210,444			—			210,444
Principal payments on long-term debt		(3,220	)		(14,056	)		(17,276	)
Principal payments on long-term debt		(189,092	)		(2,123	)		(191,215	)
Payments for debt issuance costs		(3,002	)		—			(3,002	)
Payments for debt issuance costs		(7,771	)		—			(7,771	)
Net cash used in financing activities		(6,222	)		(978	)		(7,200	)
Net cash used in financing activities		(1,419	)		(2,123	)		(3,542	)
Effect of exchange rate changes on cash and cash equivalents		—			(187	)		(187	)
Effect of exchange rate changes on cash and cash equivalents		—			535			535
(Decrease) increase in cash and cash equivalents		(19,380	)		149			(19,231	)
Increase in cash and cash equivalents		24			293			317
Cash and cash equivalents, beginning of period		25,939			3,354			29,293
Cash and cash equivalents, beginning of period		57			7,539			7,596
Cash and cash equivalents, end of period	$	6,559		$	3,503		$	10,062
Cash and cash equivalents, end of period	$	81		$	7,832		$	7,913

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors Doane Pet Care Company:

We have reviewed the accompanying condensed consolidated balance sheet of Doane Pet Care Company and subsidiaries as of July 32, ~~2004~~2005, the related condensed consolidated statements of operations for the three-month and six-month periods ended July 32, ~~2004~~2005 and ~~June~~July 283, ~~2003~~2004, the related condensed consolidated statement of stockholder’s (deficit) equity and comprehensive loss as of and for the six-month period ended July 32, ~~2004~~2005 and the related condensed consolidated statements of cash flows for the six-month periods ended July 32, ~~2004~~2005 and ~~June 28~~July 3, ~~2003~~2004. These condensed consolidated financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Doane Pet Care Company and subsidiaries as of January 31, ~~2004~~2005, and the related consolidated statements of operations, stockholder’s equity and ~~comprehensive~~ (comprehensive income (loss) ~~loss~~ and cash flows for the year then ended (not presented herein); and in our report dated ~~February 25, 2004, except as to Note 6, which was as of~~ March 930, ~~2004~~2005, we expressed an unqualified opinion on those consolidated financial statements. Our report refers to athe ~~change~~restatement inof ~~accounting~~previously ~~for~~issued ~~goodwill~~fiscal 2003 ~~and~~consolidated ~~other~~financial ~~intangible~~statements ~~assets~~and a change in ~~fiscal~~accounting ~~2002~~for senior preferred stock. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 31, ~~2004~~ 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

As/s/ ~~discussed~~KPMG ~~in Note 3 to the accompanying condensed consolidated financial~~LLP statements, effective January 4, 2004, Doane Pet Care Company and subsidiaries adopted Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.

~~/s/ KPMG LLP~~ Nashville,~~Tennessee~~ ~~July 27~~Tennessee August 20, ~~2004~~2005


ITEM 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The reader is encouraged to refer to the accompanying unaudited condensed ~~consolidated~~ consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and our audited consolidated financial statements and related notes in our ~~annual report on Form 10-K for the fiscal year ended January 3,~~ 2004, ~~or the 2003~~ 10-K.

Forward-Looking Statements

Certain of the statements in this quarterly report on Form 10-Q are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Some of these statements can be identified by terms and phrases such as “anticipate,” “believe,” “assume,” “intend,” “estimate,” “expect,” “continue,” “could,” “may,” “plan,” “project,” “predict,” “will” and similar expressions. These statements appear in a number of places and include statements regarding our plans, beliefs or current expectations, including those plans, beliefs and expectations of our officers and directors, with respect to, among other things:

• reliance on a few customers for a large portion of our sales and our ability to maintain our relationships with these customers; • our exposure to, and our ability to manage, market risk relating to commodity, oil and natural gas prices, interest rates and foreign currency exchange rates; • future capital expenditures and our ability to finance these capital expenditures; • our ability to finance our debt service requirements under our senior credit facility and other indebtedness and to comply with the financial covenants under our debt agreements; • our future results of operations or financial condition; • our business strategies and other plans and objectives for future operations; • general economic and business conditions; • business opportunities that may be presented to and pursued by us from time to time; • risks related to our international operations; • the impact of existing or new accounting pronouncements; and • the outcome of any legal proceedings to which we or any of our subsidiaries may be a party.

• These forward-looking statements are based on our ~~exposure~~assumptions ~~to,~~and analyses and are not guarantees of our ~~ability~~future performance. These statements are subject to ~~manage~~risks, many of which are beyond our ~~market~~control, ~~risks~~that ~~relating~~could cause our actual results to ~~commodity~~differ ~~prices~~materially from those contained in our forward-looking statements. Factors that could cause results to differ materially include without limitation: decreases or changes in demand for our products, ~~interest~~changes ~~rates~~in market trends, general competitive pressures from existing and new competitors, price volatility of commodities, oil, natural gas, other raw materials and packaging, foreign currency exchange ~~rates;~~rate fluctuations, future investment returns on our pension plans, changes in laws and regulations, adverse changes in operating performance, adverse economic conditions and other factors described under “Risk Factors” in our 2004 10-K.

~~• future capital expenditures and our ability to finance these capital expenditures;~~18

•Table ourof ability to finance our debt service requirements under our senior credit facility and our other debt and to comply with the financial covenants under our debt agreements;Contents

• We ~~our~~undertake ~~future~~no ~~results~~obligation ofto ~~operations~~revise these forward-looking statements to reflect any future events or ~~financial~~circumstances. ~~condition;~~All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement.

•Second ~~our~~Quarter ~~business~~Fiscal ~~strategies~~2005 ~~and~~in ~~other plans and objectives for future operations;~~Review

• In ~~general~~the ~~economic~~second quarter of fiscal 2005, net sales decreased 5.6% to $243.9 million from $258.3 million in the second quarter of fiscal 2004. The decrease in our net sales was primarily due to our cost-sharing arrangements and ~~business~~the ~~conditions;~~related impact of passing through a portion of our lower commodity costs and, to a lesser extent, lower domestic sales volume, partially offset by favorable foreign currency exchange rate fluctuations. Our gross profit increased $9.6 million from the second quarter of fiscal 2004 primarily as a result of lower global commodity costs, partially offset by the above factors affecting net sales.

• In an ~~business~~effort ~~opportunities~~to ~~that~~reduce ~~may~~manufacturing becosts ~~presented~~and increase operating efficiencies, we closed our Cartersville, Georgia manufacturing facility at the end of the second quarter of fiscal 2005. In connection with the plant closure, we recorded non-cash asset impairments of $1.1 million in other operating expense (income), net. In addition, we expect to ~~and~~incur ~~pursued~~total bycash charges usof ~~from~~approximately ~~time~~$0.2 million related to ~~time;~~severance and carrying costs.

•Results ~~risks~~of ~~related to our international operations;~~Operations

• We manufacture pet food, primarily private label, in the ~~impact~~United ofStates ~~existing~~and orEurope ~~new~~using 27 ~~accounting~~combined ~~pronouncements;~~manufacturing and distribution facilities. We manufacture pet food products primarily for dogs and cats, including dry, wet, semi-moist, soft dry, soft treats and dog biscuits. We sell our products to various types of retailers.

• Historically, approximately 75% of our cost of goods sold has been comprised of raw material and packaging costs with the ~~outcome~~remainder primarily comprised of ~~any~~salaries, ~~legal~~wages ~~proceedings~~and torelated ~~which~~fringe benefits, weutilities orand ~~any~~depreciation. Our operating expenses generally consist of ~~our~~promotion ~~subsidiaries~~and distribution ~~may~~expenses, beselling, ageneral ~~party~~and administrative expenses, amortization and other operating (income) expense. Promotion and distribution expenses are primarily comprised of promotions, freight, brokerage fees and warehousing expenses. Selling, general and administrative expenses primarily include salaries and related fringe benefits, depreciation and other corporate overhead costs, which typically do not increase proportionately with increases in net sales and sales volumes.

~~These~~We ~~forward-looking~~have ~~statements~~foreign ~~are~~currency ~~based~~exposure onrelating to our ~~assumptions~~business ~~and~~transactions ~~analyses~~in currencies other ~~and~~than ~~are~~the ~~not~~U.S. ~~guarantees~~dollar. ofIn ~~our~~addition, ~~future~~the ~~performance.~~timing ~~These~~and ~~statements~~extent ~~are~~of ~~subject~~foreign currency exchange rate fluctuations may have a material impact on our operations due to ~~risks,~~the ~~many~~translations of ~~which~~the ~~are~~financial statements ~~beyond~~of our ~~control,~~foreign ~~that~~subsidiaries ~~could~~into ~~cause~~U.S. dollars. Although our ~~actual~~functional currencies other ~~results~~than the U.S. dollar include the Euro, Danish Krona and British Pound Sterling, the Euro to ~~differ~~U.S. dollar ~~materially~~exchange ~~from~~rate ~~those~~approximates ~~contained~~the impact of movements in our ~~forward-looking~~individual functional foreign ~~statements~~currency exchange rates. ~~Factors~~For ~~that~~the ~~could~~purpose ~~cause~~of analyzing our results toof ~~differ~~operations, ~~materially~~the ~~include~~average Euro ~~without~~to ~~limitation:~~U.S. ~~decreases~~dollar orexchange ~~changes~~rates for the three months ending in ~~demand~~the ~~for~~second ~~our~~quarter ~~products,~~of ~~changes~~fiscal in2005 and ~~market~~2004 ~~trends,~~were ~~general~~approximately ~~competitive~~1.26 ~~pressures~~and ~~from~~1.20, ~~existing~~respectively, and ~~new~~for ~~competitors, price~~the ~~volatility~~six ofmonths ~~commodities,~~ending ~~natural~~in ~~gas,~~the ~~other~~second quarter ~~raw~~of ~~materials~~fiscal 2005 and ~~packaging,~~ ~~foreign~~2004 ~~currency~~were ~~exchange~~approximately ~~rate~~1.28 ~~fluctuations~~and 1.23, ~~future~~respectively. ~~investment returns~~For onthe purpose of analyzing our ~~pension~~financial ~~plans~~position, ~~changes~~the inEuro ~~laws~~to ~~and~~U.S. ~~regulations,~~dollar ~~adverse~~exchange ~~changes in~~rates ~~operating~~as ~~performance,~~of ~~adverse~~the ~~economic~~end ~~conditions~~of the second quarter of fiscal 2005 and ~~other~~the ~~factors described~~end ~~under~~of ~~“Risk~~fiscal ~~Factors”~~2004 inwere ~~our~~approximately ~~2003~~1.21 ~~10-K~~and 1.36, respectively.

18 Our fiscal year ends on the Saturday nearest to the end of December; therefore, fiscal 2004 ended on January 1, 2005. Each quarter ends on the Saturday nearest to the end of the calendar month with the second quarters of fiscal 2005 and 2004 ending on July 2, 2005 and July 3, 2004, respectively.

~~Table of Contents~~19

WeTable undertakeof no obligation to revise these forward-looking statements to reflect any future events or circumstances. All forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary statement. Contents

~~Second~~ Statement ~~Quarter~~of ~~Fiscal~~operations ~~2004~~data. inThe ~~Review~~following table sets forth our statement of operations derived from the accompanying unaudited condensed consolidated financial statements expressed as a percentage of net sales for the second quarter and first six months of fiscal 2005 and 2004 as indicated (in thousands, except percentages):

In the second quarter of fiscal 2004, net sales increased 10.2% to $258.3 million from $234.5 million in the second quarter of fiscal 2003. Excluding the impact of foreign currency exchange rate fluctuations, net sales increased 8.5%. The favorable impact of the Company’s 2004 domestic price increases, as well as European volume growth, was partially offset by lower domestic volume due to reduced shipments to Mexico and the impact of the 2004 domestic price increases on volume. The $5.4 million decrease in our gross profit was a result of higher global commodity costs, partially offset by the above factors impacting net sales. Our net loss of $17.7 million was further impacted by two factors. First, we recognized additional European restructuring costs in the amount of $3.9 million primarily relating to our consolidation of the Vrä, Denmark facility. Second, we recognized $3.8 million of accretion and dividends relating to our Senior Preferred Stock (Redeemable) as interest expense in connection with our adoption of Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liability and Equity, or SFAS 150.


	Second quarter										First six months
	2005					2004					2005					2004
Net sales	$	243,872		100.0	%	$	258,338		100.0	%	$	511,008		100.0	%	$	529,218		100.0	%
Cost of goods sold:
Commodity costs		116,495		47.8			134,152		51.9			240,307		47.0			270,476		51.1
Other		84,656		34.7			91,049		35.3			175,877		34.4			184,787		34.9

Total cost of goods sold		201,151		82.5			225,201		87.2			416,184		81.4			455,263		86.0

Gross profit		42,721		17.5			33,137		12.8			94,824		18.6			73,955		14.0
Operating expenses:
Promotion and distribution		14,729		6.0			13,767		5.3			29,159		5.7			27,994		5.3
Selling, general and administrative		12,811		5.3			12,803		5.0			25,930		5.1			25,986		4.9
Amortization		1,024		0.4			1,134		0.4			2,190		0.4			2,363		0.4
Other operating expense (income), net		1,805		0.7			3,938		1.5			(1,711	)	(0.3	)		5,161		1.0

Income from operations		12,352		5.1			1,495		0.6			39,256		7.7			12,451		2.4
Interest expense, net		19,031		7.8			18,186		7.0			37,677		7.4			36,163		6.8
Other income, net		(448	)	(0.2	)		(331	)	—			(693	)	(0.1	)		(738	)	(0.1	)

(Loss) income before income taxes		(6,231	)	(2.5	)		(16,360	)	(6.4	)		2,272		0.4			(22,974	)	(4.3	)
Income tax expense		1,316		0.6			1,377		0.5			2,643		0.5			2,570		0.5

Net loss	$	(7,547	)	(3.1	)%	$	(17,737	)	(6.9	)%	$	(371	)	(0.1	)%	$	(25,544	)	(4.8	)%

~~Due~~Second toQuarter ~~higher than expected commodity costs and the volatility~~ of ~~domestic commodity~~Fiscal ~~prices,~~2005 weCompared ~~implemented a broad price increase in January 2004 of approximately 7.5%~~ to ~~9.5%~~Second ~~followed~~Quarter ~~by additional price increases in the second quarter~~ of ~~2004~~Fiscal ~~of approximately 6.0% to 8.0% for most of our domestic~~2004 products. In addition, we have cost-sharing arrangements with certain of our domestic customers such that we now have approximately 80% of our domestic volume under some form of cost-sharing arrangement. In the aggregate, these arrangements enable us to pass through to our domestic customers approximately half of any commodity movements, whether up or down. Because we generally do not have long-term contracts with our customers, our recent price increases and our cost-sharing arrangements are subject to change.

~~The~~Net ~~first~~sales. ~~domestic case~~Net ofsales ~~Bovine Spongiform Encephalopathy, or BSE, resulted~~ in ~~limitations on~~ the ~~export~~second quarter of ~~pet~~fiscal ~~food~~2005 ~~from~~decreased ~~the~~5.6%, ~~United~~or ~~States~~$14.4 million, to ~~Mexico which~~$243.9 million ~~lingered~~from ~~into~~$258.3 million in the second quarter of fiscal 2004. ~~Net~~The ~~sales~~decrease ~~to Mexico~~in ~~were~~our ~~lower~~net sales inwas ~~the~~primarily ~~second~~due ~~quarter~~to ofour ~~fiscal~~cost-sharing ~~2004~~arrangements ~~compared~~and to the ~~2003~~related ~~period~~impact byof ~~$1.7 million,~~passing ~~primarily~~through a ~~related~~portion toof ~~the~~our ~~limitations imposed~~lower onU.S. ~~exports~~commodity ~~from~~costs ~~the~~and, ~~United~~to ~~States.~~a ~~The~~lesser ~~border~~extent, lower isdomestic ~~currently~~sales ~~open~~volume, topartially ~~the~~offset by favorable foreign ~~export~~currency ofexchange ~~our~~rate ~~products~~fluctuations.

WeGross ~~continued~~profit. toGross ~~implement~~profit ~~phases of our European restructuring plan~~ in the second quarter of fiscal ~~2004~~2005 ~~and~~increased ~~recognized $3~~28.9 ~~million~~%, ofor ~~other operating~~$9.6 ~~expenses~~million, ~~consisting~~to of$42.7 million from $233.01 million ~~for~~in the ~~reinstallation~~second quarter of ~~transferred equipment,~~fiscal $12004.~~3 million~~ ~~for~~This ~~severance~~increase ~~costs~~was primarily ~~and~~due ~~$0.6 million~~to ~~relating~~lower ~~to manufacturing~~global ~~inefficiencies.~~commodity ~~Our~~costs, ~~European~~which ~~restructuring~~decreased ~~plan~~as isa ~~comprised~~percentage of ~~two~~ ~~major~~net ~~components:~~sales ~~(1)~~ to 47.8% in the ~~consolidation~~second quarter of ~~our~~fiscal ~~wet~~2005 ~~pet~~from ~~food~~51.9% ~~operation~~ in ~~Vrä,~~ ~~Denmark~~the ~~into~~second ~~our~~quarter ~~facility~~of infiscal ~~Esbjerg~~2004, partially ~~Denmark~~offset ~~and~~by ~~our~~the ~~recently~~above ~~expanded facility~~factors inaffecting ~~Carat~~net sales. In addition, ~~Austria;~~other ~~and~~cost (of goods sold included a $3.2) ~~the~~million ~~reorganization~~favorable ofperiod-over-period ~~certain~~change related to the volatility of ~~our~~commodity ~~European~~prices ~~subsidiaries~~combined towith ~~more~~the ~~efficiently~~fair ~~manage~~value accounting for our ~~foreign~~commodity ~~operations~~derivative ~~and reduce~~instruments ~~selling~~under SFAS No. 133, ~~general~~Accounting for Derivative Instruments and ~~administrative~~Hedging ~~expenses.~~Activities, Weor ~~anticipate~~SFAS ~~that~~133. ~~this project~~Other ~~will~~cost ~~result~~of goods sold in ~~lower~~the ~~labor~~second ~~and~~quarter ~~administrative~~of ~~costs~~fiscal ~~and~~2005 ~~other~~also ~~operating~~ included increased manufacturing efficiencies primarily ~~estimated~~related to beour ~~approximately~~European ~~$4 million~~restructuring, partially offset by increased packaging costs due to ~~$5 million~~higher onoil ~~an annual~~and ~~basis~~steel prices.

AsPromotion ofand ~~the~~distribution. ~~beginning~~Promotion ofand ~~fiscal~~distribution ~~2004,~~expenses wefor ~~adopted~~the ~~SFAS~~second ~~150,~~quarter ~~which required us~~of tofiscal ~~reclassify~~2005 ~~our~~increased ~~Senior~~7.0%, ~~Preferred~~or ~~Stock~~$0.9 million, ~~(Redeemable)~~ to ~~long-term debt and to~~ ~~recognize~~$14.7 million ~~the~~from ~~related accretion and dividends of~~ $313.8 million ~~for~~in the second quarter of fiscal 2004. asThis ~~interest~~increase ~~expense~~was ~~rather~~primarily ~~than~~due asto ahigher ~~component~~global offreight ~~stockholder’s~~costs ~~equity.~~resulting ~~SFAS~~from ~~150~~both ~~explicitly~~rising ~~prohibits~~gas ~~restatement~~prices ofand ~~prior periods.~~resumed ~~See~~shipments ~~Note~~to ~~3, Change in Accounting Principle, in the accompanying unaudited condensed consolidated financial statements~~Mexico.

1920

~~Financial~~ Other ~~Covenant~~operating ~~Compliance~~expense (income), net. Other operating expense of $1.8 million in the second quarter of fiscal 2005 consisted primarily of $1.1 million of asset impairments and $0.6 million in transaction costs. Other operating expense of $3.9 million in the second quarter of fiscal 2004 related to our European restructuring plan and consisted of installation costs of $2.0 million, severance costs of $1.3 million and manufacturing inefficiencies of $0.6 million.

~~One~~Interest ofexpense, ~~our~~net. ~~major~~Interest ~~risks~~expense, isnet ~~our~~of ~~ability~~interest toincome, ~~finance~~in ~~our~~the ~~cash~~second ~~requirements~~quarter ~~for~~of ~~debt~~fiscal ~~service~~2005 ~~under~~increased ~~our~~4.6%, ~~senior~~or ~~credit~~$0.8 million, ~~facility and our other debt and~~ to ~~comply with~~$19.0 million ~~the~~from ~~financial covenants under our senior credit facility~~$18.2 million ~~Our~~in ~~senior credit~~the ~~facility requires us to maintain specified financial ratios and satisfy~~second ~~certain~~quarter ~~financial~~of ~~tests~~fiscal ~~which,~~2004 ifprimarily ~~violated,~~due ~~could~~to ~~place~~the usincrease inof ~~default, and~~ our ~~lenders~~ ~~could~~senior ~~then accelerate our debt and prohibit us from borrowing~~preferred ~~additional~~stock ~~funds from this facility to meet our liquidity needs~~dividends.

~~Our~~Income ~~ability~~tax ~~to meet the financial ratios and tests required under our senior credit facility can be affected by events beyond our control, such as prevailing economic, financial or industry conditions~~expense. ~~The~~We ~~occurrence~~recognized ofincome ~~any such~~tax ~~event~~expense may prevent us from meeting these financial ratios and tests. In particular, if domestic commodity prices increase beyond recent levels and we are unable to recover such increased costs through price increases, we may face additional challenges in satisfying our debt covenants. In addition, we may face covenant challenges if any of ~~our price increases adversely affect our sales volume or if our price increases are not sustainable~~$1.3 million ~~We have experienced difficulty~~ in the ~~past~~second ~~satisfying~~quarter ~~the financial covenants in our~~of ~~senior credit facility and have negotiated amendments and obtained waivers from our lenders for~~ fiscal ~~2000,~~2005 ~~2001~~compared ~~and 2003 due~~ to ~~covenant non-compliance~~$1.4 million ~~Our senior~~for ~~credit facility, including~~ the ~~financial~~second ~~covenants,~~quarter ~~was~~of ~~last~~fiscal ~~amended effective March 9,~~ 2004. IfThe weoverall ~~violate~~effective tax ~~these~~rate ~~amended~~for ~~covenants~~both ~~and~~periods ~~are~~differs ~~unable to~~from ~~either~~the ~~negotiate~~expected ~~amendments~~combined orfederal ~~obtain~~and ~~waivers~~state ~~from~~rate ~~our~~of ~~lenders,~~38.9% wedue ~~could be~~to inthe ~~default~~valuation ~~under~~allowances ~~our~~against ~~debt agreements,~~ our ~~lenders~~deferred ~~may~~tax ~~accelerate~~assets ~~our~~that ~~debt,~~are ~~and we would~~ not berecoverable ~~able~~through ~~to draw upon additional availability under our senior~~known ~~credit~~reversals ~~facility~~of todeferred ~~meet~~tax ~~our liquidity needs~~liabilities.

~~Results~~First Six Months of ~~Operations~~Fiscal 2005 Compared to First Six Months of Fiscal 2004

WeNet ~~manufacture~~sales. ~~pet~~Net ~~food,~~sales ~~primarily~~for ~~private~~the ~~label~~first six months of fiscal 2005 decreased 3.4%, inor $18.2 million, to $511.0 million from $529.2 million for the ~~United~~first ~~States~~six ~~and~~months of fiscal 2004. The decrease in our net sales was primarily due to our ~~Europe~~cost-sharing ~~using~~arrangements 29and ~~combined~~the ~~manufacturing~~related impact of passing through a portion of our lower U.S. commodity costs and, ~~distribution~~to ~~facilities~~a ~~that~~lesser weextent, ~~own~~lower domestic sales volume, orpartially ~~lease.~~offset Weby ~~manufacture~~favorable ~~pet~~foreign ~~food~~currency ~~products~~exchange ~~primarily~~rate fluctuations.

Gross profit. Gross profit for the first six months of fiscal 2005 increased 28.2%, or $20.8 million, to $94.8 million from $74.0 million for the first six months of fiscal 2004. This increase was primarily due to lower global commodity costs, which decreased as a percentage of net sales to 47.0% in the first six months of fiscal 2005 from 51.1% in the first six months of fiscal 2004, partially offset by the above factors affecting net sales. In addition, other cost of goods sold included a $7.4 million favorable period-over-period change related to the volatility of commodity prices combined with the fair value accounting for our commodity derivative instruments under SFAS 133. Other cost of goods sold in the first six months of fiscal 2005 also included increased manufacturing efficiencies primarily related to our European restructuring, partially offset by increased packaging costs due to higher oil and steel prices.

~~Table~~ Promotion and distribution. Promotion and distribution expenses for the first six months of fiscal ~~Contents~~2005 increased 4.2%, or $1.2 million, to $29.2 million from $28.0 million for the first six months of fiscal 2004. This increase was primarily due to higher global freight costs resulting from both rising gas prices and resumed shipments to Mexico.

~~for~~ Other ~~dogs~~operating ~~and~~expense ~~cats~~(income), ~~including~~net. ~~dry~~Other operating income, ~~wet~~net, ~~semi-moist~~of $1.7 million in the first six months of fiscal 2005 included $3.2 million of favorable litigation settlements, partially ~~soft~~offset ~~dry~~by $1.1 million of asset impairments and $0.6 million in transaction costs. Other operating expense, ~~soft~~net, ~~treats~~of $5.2 million in the first six months of fiscal 2004 consisted of: European restructuring costs of $5.6 million including severance costs of $3.0 million, installation costs of $2.0 million and ~~biscuits~~manufacturing inefficiencies of $0.6 million; Weasset impairments ~~sell~~of ~~our~~$0.4 million ~~products~~related to ~~various~~the ~~types~~closure of ~~retailers~~our distribution center in Alexandria, Louisiana; and $0.8 million of income related to an arbitration award.

~~Historically~~Interest expense, ~~approximately~~net. ~~75%~~Interest ofexpense, ~~our~~net ~~cost~~ of ~~goods~~interest ~~sold~~income, ~~has~~for ~~been comprised of raw material and packaging costs with~~ the ~~remainder~~first ~~primarily comprised~~six ofmonths ~~salaries, wages and related fringe benefits, utilities and depreciation. Our operating expenses generally consist~~ of ~~promotion and~~ ~~distribution~~fiscal ~~expenses~~2005 ~~and~~increased ~~selling~~4.2%, ~~general~~or ~~and administrative expenses~~$1. ~~Promotion and distribution expenses are primarily comprised of promotions~~5 million, ~~freight,~~ ~~brokerage~~to ~~fees~~$37.7 million ~~and~~from ~~warehousing expenses~~$36.2 million ~~Selling,~~for ~~general~~the ~~and administrative~~first ~~expenses primarily include salaries and related fringe benefits,~~six ~~depreciation~~months ~~and~~of ~~other~~fiscal ~~corporate~~2004 ~~overhead~~primarily ~~costs,~~due ~~which~~to ~~typically~~the ~~do not~~ increase ~~proportionately~~of ~~with~~our ~~increases~~senior inpreferred stock ~~volume and product sales~~dividends.

WeIncome ~~have~~tax ~~foreign currency exposure related to foreign-denominated revenues and costs translated into U~~expense.S. ~~dollars,~~We orrecognized ~~USD,~~income ~~primarily~~tax ~~related~~expense toof ~~the Euro to USD exchange rate~~$2.6 million ~~Our results of operations were impacted by foreign currency exchange rate fluctuations~~ for the ~~three~~first ~~and~~ six~~-month~~ ~~periods ending~~months ~~in the second quarter~~ of ~~fiscal~~both ~~2004 and 2003. For the purpose of evaluating our results of operations, the average Euro to USD exchange rates for the three months ending in the second quarter of~~ fiscal ~~2004~~2005 and ~~2003 were approximately 1.20 and 1.13, respectively, and for the six months ending in the second quarter of~~ fiscal 2004 ~~and 2003 were approximately 1~~.23 ~~and~~The ~~1.10,~~overall ~~respectively. For~~effective ~~the~~tax ~~purpose~~rate offor ~~evaluating~~both ~~our~~periods ~~financial~~differs ~~position, the Euro to USD exchange~~from ~~rates as of end of~~ the ~~second quarter of fiscal 2004 and the end of fiscal 2003~~expected ~~were approximately 1.22 and 1.25, respectively.~~

~~Our fiscal year ends on the Saturday nearest to the end of December; and~~21 ~~therefore, fiscal 2003 ended on January 3, 2004. Each quarter also ends on a Saturday with the second quarter of fiscal 2004 and 2003 ending on July 3, 2004 and June 28, 2003, respectively.~~

StatementTable of operations data. The following table sets forth our statement of operations derived from the accompanying unaudited condensed consolidated financial statements expressed as a percentage of net sales for the second quarter and first six months of fiscal 2004 and 2003 as indicated (table in thousands, except percentages): Contents

	Second quarter										First six months fiscal
	2004					2003					2004					2003
Net sales	$	258,338		100.0	%	$	234,476		100.0	%	$	529,218		100.0	%	$	494,425		100.0	%
Cost of goods sold:
Commodity costs		134,152		51.9			111,631		47.6			270,476		51.1			237,126		47.9
Other		91,049		35.3			84,336		36.0			184,787		34.9			173,430		35.1
Total cost of goods sold		225,201		87.2			195,967		83.6			455,263		86.0			410,556		83.0
Gross profit		33,137		12.8			38,509		16.4			73,955		14.0			83,869		17.0
Operating expenses:
Promotion and distribution		13,767		5.3			12,797		5.4			27,994		5.3			27,207		5.5
Selling, general and administrative		12,803		5.0			12,373		5.3			25,986		4.9			24,481		5.0
Amortization		1,134		0.4			1,163		0.5			2,363		0.4			2,317		0.5
Other operating expenses		3,938		1.5			—		—			5,161		1.0			—		—
Income from operations		1,495		0.6			12,176		5.2			12,451		2.4			29,864		6.0
Interest expense, net		18,186		7.0			14,857		6.4			36,163		6.8			28,872		5.8
Loss from debt extinguishment		—		—			—		—			—		—			11,113		2.2
Other income, net		(331	)	—			(414	)	(0.2	)		(738	)	(0.1	)		(585	)	(0.1	)
Loss before income taxes		(16,360	)	(6.4	)		(2,267	)	(1.0	)		(22,974	)	(4.3	)		(9,536	)	(1.9	)
Income tax expense		1,377		0.5			1,137		0.5			2,570		0.5			1,742		0.4
Net loss	$	(17,737	)	(6.9	)%	$	(3,404	)	(1.5	)%	$	(25,544	)	(4.8	)%	$	(11,278	)	(2.3	)%

combined federal and state rate of 38.9% due to the valuation allowances against our deferred tax assets that are not recoverable through known reversals of deferred tax liabilities.

~~Second~~Liquidity ~~quarter~~and ofCapital ~~fiscal 2004 compared to second quarter of fiscal 2003~~Resources

~~Net~~We ~~sales.~~have ~~Net~~historically ~~sales~~funded ~~for~~our ~~the~~operations, ~~second~~capital ~~quarter~~expenditures ofand ~~fiscal~~working ~~2004 increased~~capital ~~10.2%~~requirements towith ~~$258.3 million~~cash flows from ~~$234.5 million~~operations, inbank ~~the~~borrowings ~~second~~and ~~quarter of fiscal 2003. Excluding~~ the ~~impact~~issuance of ~~foreign currency exchange fluctuations in the~~other ~~second quarter of fiscal 2004, net sales increased 8~~indebtedness.~~5%, or $20.0 million. The~~ ~~increase in~~

21Cash and Cash Flows

~~Table~~ Net cash provided by our operating activities was $21.3 million for the first six months of fiscal ~~Contents~~2005 compared to net cash used in operating activities of $6.3 million for the first six months of fiscal 2004. The improvement was primarily due to higher earnings.

~~net~~ Net ~~sales~~cash used in ~~the~~our ~~second~~investing ~~quarter~~activities ~~of fiscal 2004~~ was ~~primarily~~$10.9 million ~~due~~for ~~to our~~the ~~domestic~~first ~~price~~six ~~increases~~months ~~and~~of ~~European~~fiscal 2005 ~~sales~~compared ~~volume~~to ~~growth,~~$5.5 million ~~partially~~for ~~offset by~~the afirst ~~decrease~~six inmonths ~~domestic~~of ~~sales~~fiscal ~~volume~~2004. The ~~decrease~~change inresulted from ~~domestic~~increased ~~sales~~capital ~~volume~~expenditures, iswhich ~~due~~were to$10.1 million for the ~~impact~~first six months of ~~our~~fiscal ~~domestic~~2005 ~~price~~compared ~~increases~~to on$5.1 million ~~volume~~for ~~and~~ the ~~limitations~~first ~~imposed~~six bymonths ~~Mexico on the export~~ of ~~pet~~fiscal ~~food from the United States~~2004.

~~Gross~~Net ~~profit.~~cash ~~Gross~~used ~~profit~~ in ~~the~~our ~~second~~financing ~~quarter~~activities ofwas ~~fiscal 2004 decreased 13.9% to~~ $~~33.~~1 ~~million from $38~~.58 million infor the ~~second~~first ~~quarter~~six months of fiscal ~~2003.~~ ~~Excluding~~2005 ~~the~~compared ~~impact~~to ~~of foreign currency exchange fluctuations in the second quarter of fiscal 2004, gross profit decreased 16.1%, or~~ $67.2 million. ~~This decrease~~for ~~was~~the ~~primarily~~first ~~due~~six tomonths ~~higher global commodity costs, which increased as a percentage~~ of ~~net sales to 51.9% in the second quarter of~~ fiscal 2004 ~~from 47~~.6% inIn the ~~second~~first ~~quarter~~six ofmonths of fiscal ~~2003~~2005, ~~and~~we ~~lower~~made ~~consolidated~~scheduled ~~sales volume,~~payments ~~offset~~on byour ~~the~~current ~~positive~~senior ~~impact~~credit offacility ~~the~~and ~~2004~~debt ~~domestic~~of ~~price increases.~~our ~~Other~~foreign ~~costs of goods sold included a $2~~subsidiaries.~~9 million~~ ~~loss~~In in the ~~second~~first ~~quarter~~six months of fiscal 2004, ~~compared~~we tomade ascheduled ~~$3.0 million~~principal ~~gain for the same period of fiscal 2003~~payments ~~related~~on toour ~~fair~~previous ~~value~~senior ~~accounting~~credit ~~under SFAS 133~~facility, ~~Accounting~~paid ~~for~~transaction ~~Derivative Instruments~~fees and ~~Hedging~~expenses ~~Activities,~~associated orwith ~~SFAS~~a ~~133, for the Company’s commodity~~first ~~derivative~~quarter ~~instruments.~~amendment ~~Remaining~~to ~~other~~our ~~costs~~previous ofsenior ~~goods~~credit ~~sold~~facility ~~were~~and ~~consistent~~refinanced ~~in the~~certain ~~second quarter~~ of ~~fiscal~~our ~~2004 compared to the second quarter of fiscal~~European ~~2003~~loans.

~~Promotion and distribution. Promotion and distribution expenses for the~~Debt second quarter of fiscal 2004 increased 7.6% to $13.8 million from $12.8 million in the second quarter of fiscal 2003. Excluding the impact of foreign currency exchange fluctuations in the second quarter of fiscal 2004, promotion and distribution expenses increased 4.3%, or $0.6 million. This increase is due to the growth in net sales as promotion and distribution expenses were consistent as a percentage of net sales in the second quarter of fiscal 2004 compared to the second quarter of fiscal 2003.

~~Selling,~~We ~~general~~are ~~and~~highly ~~administrative.~~leveraged ~~Selling, general~~ and ~~administrative expenses~~have insignificant ~~the~~cash ~~second~~requirements ~~quarter~~for ofdebt ~~fiscal~~service ~~2004~~relating ~~increased 3.5%~~ to ~~$12.8 million~~ ~~from~~our ~~$12.4 million~~senior incredit ~~the~~facility, ~~second~~senior ~~quarter~~notes, ofsenior ~~fiscal~~subordinated ~~2003.~~notes, ~~Excluding~~industrial ~~the~~development ~~impact~~revenue ofbonds and foreign ~~currency~~debt. ~~exchange~~Our ~~fluctuations~~ability into ~~the~~borrow ~~second~~is ~~quarter~~limited ofby ~~fiscal~~our ~~2004~~senior credit facility, including ~~selling,~~compliance ~~general~~with ~~and~~the ~~administrative~~financial ~~expenses~~covenants ~~were~~therein, ~~consistent~~and asthe ~~these~~limitations ~~expenses increased~~on ~~1.2%,~~the orincurrence ~~$0.2 million~~of additional ~~from~~indebtedness in the ~~second~~indentures ~~quarter~~governing ofour ~~2003~~senior notes and senior subordinated notes.

~~Other~~Our ~~operating~~senior ~~expenses~~credit facility provides for total commitments of $230.0 million, ~~Other~~consisting ~~operating~~of ~~expenses~~a $195.0 million term loan facility, of which $31.95 million inhas been repaid as of the end of the second quarter of fiscal ~~2004~~2005, ~~consisted~~and ofa ~~installation~~$35.0 million ~~costs~~revolving ofcredit facility, with a $220.0 million sub-limit for issuance of stand-by letters of credit. The term loan facility bears interest, at ~~severance~~the ~~costs~~option of $1the Company, of adjusted LIBOR plus 4.00%, or ABR, as defined in the senior credit facility agreement, plus 3 ~~million~~.00%. ~~and~~The ~~manufacturing~~revolving ~~inefficiency~~credit ~~costs~~facility bears interest, at the option of $0the Company, of adjusted LIBOR plus 4.650%, or ABR plus 3.50%. As of the end of the second quarter of ~~million~~fiscal ~~related~~2005, the term loan facility bore interest at 7.41%. We are required to ~~our~~make ~~European~~annual principal ~~restructuring~~payments ~~plan~~on the senior credit facility calculated as 1% of $195.0 million, payable in equal quarterly installments of each year. The loans under our senior credit facility may be prepaid and commitments may be reduced; however, payments on the term loan facility may not be reborrowed.

~~Interest expense, net. Interest expense, net of interest income, in the~~Liquidity second quarter of fiscal 2004 increased 22.4% to $18.2 million from $14.9 million in the second quarter of fiscal 2003. The increase was primarily due to $3.8 million of accretion and dividends relating to our Senior Preferred Stock (Redeemable). See Note 3, Change in Accounting Principle, in the accompanying unaudited condensed consolidated financial statements.

~~Debt~~As ~~extinguishments.~~of ~~Debt~~the ~~extinguishments~~end of ~~$11.1 million in~~ the second quarter of fiscal ~~2003~~2005, ~~related to~~ our ~~refinancing~~principal insources ~~February 2003~~of ~~and~~liquidity ~~included:~~consisted ~~(1) a $4.0 million write-off~~ of ~~deferred~~working ~~financing~~capital ~~costs, primarily related to our senior credit facility; (2) a charge~~ of $770.69 million, ~~for~~including ~~the accretion~~cash of ~~our sponsor facility to face value; (3)~~$37.0 amillion, ~~charge~~and of $630.2 million ~~realized foreign currency translation loss as a result~~ of ~~retiring~~availability aunder ~~portion of~~ our ~~Euro~~revolving ~~term loan facility with a corresponding~~ credit ~~to accumulated other comprehensive income; and (4) a credit of $6~~facility.~~7 million for the reversal of an~~ ~~excess leverage fee accrual.~~

~~Income tax expense.~~ We ~~recognized~~believe ~~income~~that ~~tax~~cash ~~expense~~flows ofgenerated ~~$1.4 million~~from ~~in the~~our ~~second~~business, ~~quarter~~together ofwith ~~fiscal~~available ~~2004~~cash ~~compared to $1.1 million in the second~~balances ~~quarter~~and offuture ~~fiscal~~borrowings, ~~2003.~~will Webe ~~recorded~~sufficient ~~valuation allowances against deferred tax assets of $0.8 million and $4.6 million~~ in the ~~second~~near ~~quarter~~term ofto ~~fiscal~~enable ~~2004 and~~us ~~2003, respectively. Due primarily~~ to ~~the~~make ~~magnitude~~interest ~~of our operating losses~~and inrequired ~~fiscal~~principal ~~2003,~~payments on our ~~losses~~debt ~~through the second quarter of fiscal 2004~~ and ~~the variability~~to ofprovide ~~our~~us ~~historical~~with ~~earnings, we do not believe that we meet~~ the ~~“more~~ ~~likely than not” recoverability criteria~~ necessary toliquidity ~~recognize our~~for ~~deferred~~operational ~~tax~~and ~~assets,~~capital ~~except~~requirements ~~for~~in ~~those~~our ~~assets~~current ~~which~~operating ~~will be recovered through known reversals of deferred tax liabilities~~environment. ~~The~~However, ~~overall~~as ~~effective~~shown ~~tax rate~~below ~~for~~in ~~both periods differs from~~ the ~~expected~~annual ~~combined~~maturities ~~federal and state rate~~ of ~~38.9% due to~~

~~the~~long-term ~~valuation~~debt ~~allowances~~summary, ~~described~~we ~~above~~have significant debt and ~~the~~redemption ~~tax~~obligations ~~benefit~~that mature in ~~arising~~2007. ~~from~~We ~~certain~~may ~~items~~be ~~being~~required ~~deductible~~to inrefinance all or a portion of the ~~United~~principal ~~States~~amount ~~and~~of ~~also~~our outstanding obligations, including those that mature in 2007, on or prior to maturity or a mandatory redemption ~~certain~~date. ~~foreign~~In ~~jurisdictions~~addition, we may not have sufficient capital available to us for any future acquisitions, joint ventures or similar transactions. We believe that offerings of additional debt securities are possible, or other sources of capital are available, if the need arises, although any such capital may not be available on terms acceptable to us or at all.

~~First~~ Although ~~six~~we ~~months~~believe ~~fiscal~~that ~~2004~~future ~~compared~~borrowings under our revolving credit facility will be available to ~~first~~fund ~~six~~our ~~months~~liquidity needs, availability of these funds is subject to our satisfaction of certain customary terms and conditions, including our ability to satisfy the financial covenants in our senior credit facility. Refer to our 2004 10-K for a summary of these financial covenants. We were in compliance with the financial covenants in our senior credit facility as of the end of the second quarter of fiscal 2005; however, we have experienced difficulty in the past satisfying financial covenants in our previous senior credit facility, and negotiated amendments and obtained waivers for fiscal 2000, 2001 and 2003 due to covenant non-compliance. Our ability to satisfy the covenants contained in our senior credit facility is determined based on our cash flows, outstanding senior secured debt and capital expenditures. We may experience difficulty satisfying these covenants in the future. If we are unable to negotiate an amendment or secure a waiver from our lenders for any potential default, it could result in an event of default under the senior credit facility and permit a majority of the lenders to accelerate outstanding debt under the senior credit facility, terminate our revolving credit commitment and seize the cash in our operating accounts. Such acceleration would result in cross-defaults under our senior notes and senior subordinated notes. In that event, we may not have sufficient liquidity to make interest and required principal payments on our debt and to fund operational and capital requirements.

~~Net~~We ~~sales.~~believe ~~Net~~the ~~sales~~capital ~~for~~expenditures ~~the~~permitted ~~first~~under ~~six~~our ~~months~~senior ofcredit ~~fiscal~~facility ~~2004~~are ~~increased~~sufficient ~~7.0%~~ to ~~$529.2 million~~provide ~~from~~us ~~$494.4 million~~with ~~for~~ the ~~first~~necessary ~~six~~flexibility ~~months~~to ofspend ~~fiscal 2003.~~required ~~Excluding~~maintenance ~~the~~capital ~~impact~~and ofat ~~foreign~~the ~~currency~~same time ~~exchange~~fund ~~fluctuations~~any inplanned ~~the first~~expansion, ~~six~~cost ~~months~~reduction ofprojects ~~2004,~~and ~~net~~customer ~~sales~~requirements ~~increased~~for ~~4.2%,~~fiscal ~~or $20~~2005.~~9 million. The~~ ~~increase~~We inanticipate ~~net~~that ~~sales~~our incapital ~~the~~expenditures ~~first~~for ~~six months of~~ fiscal ~~2004~~2005 ~~was~~will ~~primarily~~approximate ~~due~~ $25 million to ~~our domestic price increases and European sales volume growth~~$30 million, ~~partially offset~~with byapproximately a$10 million ~~decrease~~to in$12 million ~~domestic~~required ~~sales volume. The decrease in domestic sales volume was due~~ to ~~the~~maintain ~~impact of~~ our ~~domestic~~current ~~price increases on~~business. ~~volume~~Our ~~and~~capital ~~the initial~~expenditures ~~prohibition~~were ~~and~~$10.1 million ~~subsequent~~in ~~limitations~~the ~~imposed~~first bysix ~~Mexico~~months ~~on the export~~ of ~~pet~~fiscal ~~food from the United States to Mexico~~2005.

~~Gross~~Annual ~~profit.~~Maturities ~~Gross profit for the first six months~~ of ~~fiscal~~Long-Term ~~2004~~Debt decreased 11.8% to $74.0 million from $83.9 million for the first six months of fiscal 2003. Excluding the impact of foreign currency exchange fluctuations, gross profit decreased 15.3%, or $12.8 million. This decrease was primarily due to higher global commodity costs, which increased as a percentage of net sales to 51.1% in the first six months of fiscal 2004 from 47.9% in the first six months of fiscal 2003, and lower consolidated sales volume, partially offset by the positive impact of the 2004 domestic price increases. Other costs of goods sold were consistent in the first six months of fiscal 2004 compared to the first six months of fiscal 2003 as a percentage of net sales. However, other costs of goods sold for the first six months of fiscal 2004 included two significant but offsetting changes. First, other costs of goods sold included a $4.3 million loss in the second quarter of fiscal 2004 compared to a $3.5 million gain for the same period of fiscal 2003 related to SFAS 133 fair value accounting for the Company’s commodity derivative instruments. Second, offsetting the fair value change, other costs of goods sold included increased manufacturing efficiencies in the first six months of 2004 compared to the same period of 2003.

~~Promotion~~A ~~and~~summary ~~distribution.~~of ~~Promotion and distribution expenses for~~ the ~~first~~ ~~six~~maturities ~~months~~by of fiscal ~~2004~~year ~~increased 2.9% to $28.0 million from $27.2 million for the first six months~~ of ~~2003.~~our ~~Excluding~~long-term ~~the~~debt ~~impact~~as of ~~foreign currency exchange fluctuations in~~ the ~~first~~end ~~six months~~ of ~~fiscal 2004, promotion and distribution expenses decreased 2.5% or $0.7 million. As a percent of sales, promotion and distribution decreased from 5.5% for~~ the ~~first~~second ~~six~~quarter ~~months~~ of ~~2003~~fiscal to2005 ~~5.3%~~follows ~~for~~(in ~~the first six months of 2004 as a result of~~thousands): ~~lower distribution costs associated with reduced shipments to Mexico.~~

Selling, general and administrative. Selling, general and administrative expenses for the first six months of fiscal 2004 increased 6.1% to $26.0 million from $24.5 million for the first six months of 2003. Excluding the impact of foreign currency exchange fluctuations in the first six months of fiscal 2004, selling, general and administrative expenses increased 2.5%, or $0.6 million from the first six months of fiscal 2003.


Fiscal	Maturities
2005	$	1,731
2006		3,522
2007		456,818
2008		2,141
2009		2,282
2010 and thereafter		229,156

	$	695,650

Other operating expenses. Other operating expenses of $5.2 million in the first six months of fiscal 2004 consisted of: (1) severance costs of $3.0 million, installation costs of $2.0 million and manufacturing inefficiency costs of $0.6 million related to our European restructuring plan; (2) asset impairments of $0.4 million related to the closure of our distribution center in Alexandria, Louisiana; and (3) $0.8 million of income related to the arbitration award we received from Merrick. See Note 10, Commitments and ~~Contingencies,~~ ~~in the accompanying unaudited condensed consolidated financial~~Contingencies ~~statements.~~

~~Interest~~We ~~expense,~~believe ~~net.~~our ~~Interest~~operations ~~expense,~~are ~~net~~in ofcompliance ~~interest~~in ~~income,~~all ~~for~~material ~~the first~~respects ~~six~~with ~~months~~environmental, safety ofand ~~fiscal~~other ~~2004~~regulatory ~~increased~~requirements; ~~25.3%~~however, tothese ~~$36.2 million~~requirements ~~from~~may ~~$28.9 million~~change ~~for~~in the ~~first~~future, which ~~six~~may ~~months~~cause ofus ~~2003. The increase was primarily due~~ to ~~$7.4 million~~ ofincur ~~accretion~~material ~~and~~costs ~~dividends relating~~ to ~~our~~comply ~~Senior~~with ~~Preferred~~these ~~Stock (Redeemable).~~requirements ~~See~~or ~~Note 3, Change~~ in ~~Accounting~~connection ~~Principle,~~with the ineffect ~~the~~of ~~accompanying unaudited~~these ~~condensed~~matters ~~consolidated~~on ~~financial~~our ~~statements~~business.

~~Loss from debt extinguishment. We incurred a loss from debt~~23 ~~extinguishment of $11.1 million in the first six months of fiscal 2003. This pre-tax charge included: (1) a $4.0 million write-off of deferred~~

23 Table of Contents

~~Table~~Inflation ofand ~~Contents~~Changes in Prices

~~financing costs,~~ Our ~~primarily~~financial ~~related~~results depend to ~~our~~a ~~senior~~large ~~credit~~extent ~~facility;~~on ~~(2) a~~the ~~charge~~costs of $7raw materials and packaging and our ability to pass through increased costs to our customers.6 Historically, market ~~million~~prices for ~~the~~commodity ~~accretion~~grains ofand ~~our~~food ~~sponsor~~stocks ~~facility~~have tofluctuated ~~face~~in ~~value;~~response ~~(3)~~ to a ~~charge~~ number of $6factors, including changes in U.~~2 million~~S. ~~realized~~government ~~foreign~~farm ~~currency~~support ~~translation~~programs, ~~loss~~changes asin ainternational ~~result~~agricultural trading policies, impacts of disease outbreaks on protein sources and the potential effect on ~~retiring~~supply aand ~~portion~~demand, ofchanges ~~our~~in ~~Euro~~international ~~term~~demand, ~~loan~~trading ~~facility~~activity ~~with~~in acommodity ~~corresponding~~markets, ~~credit~~as well toas ~~accumulated~~weather conditions during the growing and harvesting seasons. Our costs for packaging materials are affected by fluctuations in paper, steel and oil prices resulting from changes in supply and demand, general economic conditions and other ~~comprehensive~~factors. ~~income;~~In addition, our manufacturing costs are impacted by changes in natural gas prices and our ~~(4) a~~freight ~~credit~~costs ofare $6affected by changes in gas prices.~~7 million~~ ~~for~~Our results of operations have been exposed to volatility in the commodity and natural gas markets in the past. We have cost-sharing ~~reversal~~arrangements with certain of our domestic customers to reduce the ~~excess~~impact ~~leverage~~of ~~fee~~volatile ~~accrual.~~commodity costs; however, these arrangements only reduce our exposure to such volatility in the future and are subject to change.

~~Income tax expense. We recognized income tax expense of $2.6 million for~~In the ~~first~~event ~~six months~~ of ~~fiscal~~any ~~2004~~increases ~~compared~~in toraw ~~$1.7 million~~materials, ~~for~~packaging, ~~the~~natural ~~first six~~gas ~~months~~and offreight ~~2003.~~costs, Wewe ~~recorded~~may ~~valuation~~be required ~~allowances~~to ~~against~~seek ~~deferred~~increased ~~tax~~selling ~~assets that~~prices ~~were~~for ~~generated~~our ~~during~~products ~~these~~to ~~periods~~avoid ofmargin $5deterioration.~~1 million~~ inWe ~~the 2004 period and~~cannot ~~$8.7 million~~provide inany ~~the~~assurances ~~2003~~as ~~period. Due primarily~~ to the ~~magnitude~~timing ofor ~~our operating~~extent ~~losses~~of ~~in fiscal 2003,~~ our ~~losses~~ability ~~for~~to ~~the~~implement ~~first~~future ~~six~~selling ~~months of fiscal~~price ~~2004~~increases ~~and~~in the ~~variability~~event of ~~our~~increased ~~historical~~raw ~~earnings~~materials, ~~we do not believe that we meet the “more likely than not” recoverability criteria necessary to recognize our deferred tax assets~~packaging, ~~except for those assets which will be recovered~~natural ~~through~~gas ~~known~~or ~~reversals~~freight ofcosts ~~deferred~~or ~~tax~~whether ~~liabilities. The overall effective tax~~any ~~rate~~selling ~~for~~price ~~both~~increases ~~periods~~implemented ~~differs~~by ~~from~~us ~~the~~may ~~expected~~affect ~~combined~~future ~~federal~~sales ~~and~~volumes ~~state rate of 38.9% due~~ to ~~the~~our ~~valuation allowances described above and the tax benefit arising from certain items being deductible in the United States and also in certain foreign jurisdictions~~customers.

~~Liquidity and Capital Resources~~Seasonality

~~General~~ Our sales are moderately seasonal. We normally experience an increase in net sales during the first and fourth quarters of each year, which is typical in the pet food industry. Generally, cooler weather results in increased dog food consumption.

WeRecently ~~have~~Issued ~~historically~~Accounting ~~funded our operations, capital expenditures and~~Pronouncements working capital requirements with cash flows from operations, bank borrowings and the issuance of other long-term indebtedness. We are highly leveraged and have significant cash requirements for debt service relating to our senior credit facility, senior notes, senior subordinated notes, industrial development revenue bonds and foreign debt.

AsSee ofNote ~~the end of the second quarter of fiscal 2004~~2, ~~our~~Recent ~~principal~~Accounting ~~sources of liquidity consisted of cash of $10.1 million~~Pronouncements, ~~working~~in ~~capital~~the ~~excluding~~accompanying ~~cash of~~unaudited ~~$24.8 million, and available borrowing capacity of $27.3 million under our~~condensed ~~revolving~~consolidated ~~credit~~financial ~~facility~~statements.

WeCritical ~~anticipate~~Accounting ~~that our capital expenditures will not exceed $25 million~~Policies for fiscal 2004 and that approximately $10 million to $12 million is required for maintenance of our business. We believe that we have sufficient flexibility under our senior credit facility to meet these needs.

WeAccounts ~~believe~~receivable ~~that~~allowances. ~~offerings~~As of ~~additional~~the ~~debt~~end ~~securities~~of ~~are~~the ~~possible~~second ifquarter of fiscal 2005 and the ~~need~~end ~~arises,~~of ~~although~~fiscal ~~such~~2004, ~~offerings~~our ~~may~~gross ~~not~~accounts bereceivable ~~available~~were to$94.4 million usand on$116.3 million, ~~acceptable~~respectively. ~~terms~~We ~~based~~had onallowances ~~market~~of ~~conditions~~$2.9 million ~~that~~and ~~exist~~$3.9 million atas of the ~~time~~end of ~~any~~the ~~such~~second ~~offering.~~quarter ~~Moreover,~~of ~~our~~fiscal ~~ability~~2005 toand ~~borrow~~the isend ~~limited~~of byfiscal ~~our~~2004, ~~senior~~respectively, ~~credit~~consisting of reserves for ~~facility~~doubtful accounts, ~~including~~outstanding ~~compliance~~deductions with ~~the~~customers ~~financial~~and ~~covenants~~cash ~~therein,~~discounts. ~~and~~We estimate the ~~limitations~~allowances onby ~~the~~applying ~~incurrence~~a ofrecovery ~~additional~~percentage ~~indebtedness~~based inon ~~the~~historical ~~indentures~~collection experience. We accrue ~~governing~~additional ~~our~~allowances ~~senior~~based ~~notes~~on ~~and~~a ~~senior~~specific ~~subordinated~~identification ~~notes.~~review Wefor ~~may~~amounts deemed to be ~~required~~at risk. toReceivables ~~refinance~~are ~~all~~written oroff aagainst ~~portion~~the ofallowances at the ~~principal~~point ~~amount~~in ofwhich ~~our~~an ~~outstanding~~amount ~~debt~~is deemed onuncollectible orby ~~prior~~us. toWe ~~maturity~~may orrevise aour ~~mandatory~~allowances ~~redemption~~against ~~date,~~accounts ~~and~~receivable as we ~~may~~receive ~~not have~~more ~~sufficient~~information ~~capital~~or ~~available~~as towe usassess ~~for~~other ~~any~~factors ~~future~~impacting ~~acquisitions,~~the ~~joint~~realizability ~~ventures or~~of ~~similar~~our ~~transactions~~accounts receivable.

~~Although~~Inventories weallowances. ~~believe~~As ~~that~~of ~~future~~the ~~borrowings~~end ~~under our revolving credit facility will be available to fund our liquidity needs, availability~~ of ~~these funds~~the issecond ~~subject~~quarter ~~to our satisfaction~~ of ~~certain~~fiscal ~~terms~~2005 and ~~conditions, including our ability to satisfy~~ the ~~financial~~end ~~covenants in our senior credit facility.~~of Asfiscal ~~discussed below~~2004, weour ~~have~~gross ~~experienced~~inventories ~~difficulty in the past generating sufficient operating revenues and cash flows to satisfy these financial covenants and~~ were ~~required~~$69.9 million ~~to negotiate amendments~~ and ~~obtain~~$71.2 million, ~~waivers from our lenders~~respectively. We ~~may experience difficulty in the future satisfying these financial~~had ~~covenants and~~allowances, ~~absent~~primarily anfor ~~amendment~~obsolescence orof ~~waiver~~packaging ~~from our lenders~~inventories, ~~it could result in an event~~ of ~~default~~$2.3 million ~~under our senior credit facility~~ and ~~permit a majority~~$2.9 million as of the ~~lenders~~end toof ~~accelerate~~the ~~outstanding~~second ~~debt~~quarter ~~under~~of ~~our~~fiscal ~~senior~~2005 ~~credit facility~~ and ~~permit~~the aend ~~majority~~ of ~~our~~fiscal ~~lenders~~2004, ~~under~~respectively. We estimate our ~~revolving~~allowances ~~credit~~against ~~facility~~inventories ~~to terminate~~based ~~our~~on ~~revolving~~a ~~credit~~specific ~~commitment~~identification ~~(without~~review ~~acceleration~~ of ~~such debt)~~obsolete ~~and~~stock ~~seize~~keeping ~~the~~units, ~~cash~~or inSKUs, ~~our~~or ~~operating~~probable ~~accounts.~~SKUs ~~Such~~to ~~acceleration~~be ~~would~~rationalized. ~~result in~~We ~~cross-defaults~~may ~~under~~revise our ~~senior~~allowance against ~~notes~~inventories ~~and~~as ~~senior~~we ~~subordinated~~receive ~~notes.~~more ~~In that~~information ~~event,~~on wethis ~~may~~matter ~~not~~or ~~have~~as ~~sufficient~~we ~~liquidity~~assess toother ~~make interest payments on~~factors ~~our~~impacting ~~debt~~the ~~and~~realizability ~~for~~of ~~operational~~our ~~and capital requirements~~inventories. ~~See “Financial Covenant~~ ~~Compliance” above.~~

~~Statement~~ Deferred tax assets. As of ~~Cash~~the ~~Flows~~end ~~Review~~of the second quarter of fiscal 2005 and the end of fiscal 2004, our federal net operating loss, or NOL, carryforwards were $163.2 million and $142.2 million, respectively, and our foreign NOL carryforwards were $0.5 million and $0.9 million, respectively. Our gross deferred tax assets, including federal, foreign, state and local NOL carryforwards, were $87.7 million and $79.0 million as of the end of the second quarter of fiscal 2005 and the end of fiscal 2004, respectively, and our gross deferred tax liabilities were $56.5 million and $54.8 million, respectively.

~~Net~~We ~~cash~~have ~~used~~concluded inthat it is more likely than not that we will not generate sufficient future taxable income to realize our ~~operating~~deferred ~~activities~~tax assets and that a valuation allowance is necessary. Our consolidated valuation allowance was $664.31 million ~~for~~and ~~the~~$55.4 million ~~first six~~as ~~months~~ of ~~fiscal~~the ~~2004~~end ~~compared~~of tothe ~~net~~second quarter ~~cash~~of ~~provided~~fiscal by2005 ~~operating~~and ~~activities~~ the end of ~~$14~~fiscal 2004, respectively.~~7 million~~ ~~for~~During the first six months of fiscal ~~2003~~2005, we increased the valuation allowance against our U.S. ~~The~~federal ~~change~~and isstate deferred tax ~~primarily~~assets ~~due~~and toforeign ~~the~~deferred ~~required~~tax ~~working~~assets by $6.9 million and $1.8 million, respectively. We ~~capital~~currently ~~associated~~expect ~~with~~that ~~the~~future ~~higher~~years’ ~~commodity~~deferred ~~costs~~income ~~and~~tax ~~the~~expense ~~related~~(benefit) will ~~sales~~include ~~price~~deferred tax ~~increases,~~expense ~~cash~~approximating ~~deposits~~the ~~for~~growth in our ~~hedging~~deferred ~~contacts~~tax ~~and~~liabilities ~~European~~related ~~restructuring~~to ~~costs~~the amortization of goodwill for tax purposes.

~~Net~~Goodwill ~~cash~~and ~~used~~other inintangible ~~our~~assets. ~~investing~~As ~~activities~~of ~~was~~the ~~$5.5 million~~end ~~for~~of the ~~first~~second quarter of fiscal 2005 and ~~six~~the ~~months~~end of fiscal 2004, ~~compared~~our togoodwill and other intangible assets were $11376.34 million ~~for~~and ~~the~~$390.5 million, ~~first~~respectively. ~~six~~The ~~months~~$14.1 million decrease is due to the impact of foreign currency ~~fiscal~~exchange ~~2003~~rate fluctuations. ~~Capital~~We ~~expenditures~~test the carrying value of our goodwill and other intangible assets for ~~the~~impairment ~~first~~annually ~~six~~in ~~months~~the fourth quarter of each fiscal ~~2004~~year ~~were~~and upon the occurrence of $5certain events.~~1 million~~ ~~compared~~Our toimpairment $9test includes quantitative analyses of discounted future cash flows, market multiples of earnings and comparable transactions, if available.~~6 million~~ ~~for~~If the ~~first~~estimated fair ~~six~~value ~~months~~of goodwill and other intangible assets of ~~fiscal~~either ~~2003~~our domestic or European reporting unit is less than the carrying value, an impairment loss will be recognized. In the fourth quarter of fiscal 2004, we performed our annual assessment of impairment and determined no impairment was evident at that date.

~~Net~~ITEM ~~cash used in our financing activities was $7.2 million for the first six months of fiscal 2004 compared to $~~3.~~5 million~~ ~~for~~Quantitative ~~the first six months of fiscal 2003. In the first six months of fiscal 2004, we paid $3.0 million in transaction fees~~ and ~~expenses~~Qualitative ~~relating~~Disclosures toAbout ~~our~~Market March 9, 2004 amendment to our senior credit facility and made scheduled payments in the amount of $3.2 million on the USD term loan facility of our senior credit facility. Additionally in June 2004, we refinanced our European loans and borrowed $13.1 million, of which we used $11.8 million to repay the previous loans. The purpose of the refinancing was to consolidate multiple loans. In the second quarter of fiscal 2003, we received $210.4 million of gross proceeds from the issuance of our senior notes that was used to repay a portion of the outstanding debt under our senior credit facility, repay our sponsor facility in full, and pay related transaction fees and expenses. Risk

~~Senior~~ We ~~Credit~~are ~~Facility~~exposed to market risks, which may give rise to losses from adverse changes in market prices and rates. Our market risks could arise from changes in commodity prices, interest rates and foreign currency exchange rates.

Commodity price risk. We are ~~highly~~exposed ~~leveraged~~to ~~and~~market ~~have~~risk ~~significant~~related ~~cash~~to ~~requirements~~changes ~~for~~in ~~debt~~commodity prices. ~~service~~We ~~relating~~may seek to manage our ~~senior~~commodity ~~credit~~price ~~facility~~risk associated with market fluctuations by using derivative instruments for portions of our corn, ~~senior~~soybean ~~notes~~meal, ~~senior subordinated~~alternative ~~notes~~proteins and natural gas purchases, ~~industrial~~principally ~~development~~through ~~revenue~~exchange ~~bonds~~traded futures and ~~foreign~~options ~~debt~~contracts. ~~Our~~The terms of such ~~ability~~contracts toare ~~borrow~~generally isless ~~limited~~than byone ~~our~~year. ~~senior~~During ~~credit~~the ~~facility~~term of a contract, ~~including~~we balance positions ~~compliance~~daily with cash payments to or from the ~~financial~~exchanges. ~~covenants~~At ~~therein~~the termination of a contract, ~~and~~we have the ability ~~limitations~~to onsettle financially or by exchange for the physical commodity, in which case, we would ~~incurrence~~deliver ofthe ~~additional~~contract ~~indebtedness~~against inthe acquisition of the ~~indentures~~physical ~~governing~~commodity. ~~our~~Our ~~senior notes~~policy ~~and~~does ~~senior~~not ~~subordinated~~permit speculative ~~notes~~commodity trading.

WeAlthough ~~entered~~we ~~into~~may anseek ~~amended~~to ~~and~~manage ~~restated~~the ~~senior~~price ~~credit~~risk ~~facility~~of ~~dated~~market asfluctuations by hedging portions of ~~May 8,~~our ~~2000~~primary ~~with~~commodity aproduct ~~syndicate~~purchases, our results of ~~banks~~operations ~~and~~have ~~other~~been ~~institutional~~adversely ~~investors,~~affected asin ~~lenders,~~the past by these fluctuations and ~~JPMorgan~~may ~~Chase~~in ~~Bank~~the future. Moreover, asthe ~~administrative~~use ~~agent~~of hedging instruments also reduces our ability to take advantage of short-term reductions in raw material prices. ~~Our~~If ~~senior~~one or ~~credit~~more of our competitors is able to reduce their manufacturing costs by taking advantage of any ~~facility~~reductions ~~was~~in ~~subsequently~~raw ~~amended~~material prices, we may face pricing pressures from these competitors and may be forced to reduce our selling prices or face a decline in ~~March 2001~~net sales, ~~March 2002~~either of which could have a material adverse effect on our business, ~~February 2003~~results of operations and ~~March 2004~~ financial condition.

~~The~~Our ~~facilities~~commodity derivative instruments are measured at fair value under SFAS 133 in our accompanying unaudited condensed consolidated financial statements. AsOur results of operations for particular periods have been adversely affected in the ~~end~~past under SFAS 133 fair value accounting of our commodity derivative instruments due to the ~~second~~volatility ~~quarter~~in ofcommodity ~~fiscal~~prices ~~2004~~and, similarly, our ~~senior~~results ~~credit~~of ~~facility~~operations ~~provides~~may ~~for~~be ~~total~~adversely ~~commitments~~affected asin ~~follows:~~the future by SFAS 133 accounting.

~~• a Euro 30.1 million ($36.6 million assuming a Euro to USD exchange rate of approximately 1.22) Euro term loan facility; and~~25

•Table $178.5 million, consisting of Contents

— As of the end of the second quarter of fiscal 2005, we had open commodity contracts with a fair value gain of $~~128~~3.5 6 million. ~~USD~~Based ~~term~~upon ~~loan~~an ~~facility;~~analysis we completed at the end of the second quarter of fiscal 2005 in which we utilized our actual derivative contractual volumes and —assumed a 5% ~~$50.0~~adverse ~~million~~movement ~~revolving~~in ~~credit~~commodity ~~facility~~prices, ~~with~~we adetermined ~~$20.0~~the ~~million~~potential ~~sub-limit~~decrease ~~for~~in ~~issuance~~the offair ~~letters~~value of our ~~credit~~commodity derivative instruments would be approximately $1.0 million.

AsInterest ofrate risk. We are exposed to market risk related to changes in interest rates. We have in the ~~end~~past ofand may in the ~~second~~future ~~quarter~~enter ofinto ~~fiscal~~interest ~~2004,~~rate weswap ~~had~~and ~~$16.0 million~~cap contracts to limit our ofexposure ~~borrowings~~to ~~outstanding~~the ~~under~~interest rate risk associated with our ~~revolving~~floating ~~credit~~rate ~~facility~~debt, ~~and~~which totaled $6193.~~7 million~~5 million at the end of ~~letters~~the second quarter of ~~credit~~fiscal ~~outstanding,~~2005. ~~resulting~~Changes in ~~$27.3 million~~market values of ~~availability~~these ~~under~~financial ~~our~~instruments ~~revolving~~are ~~credit~~highly ~~facility~~correlated with changes in market values of the hedged item both at inception and over the life of the contract. ~~Availability~~At the end of ~~funds~~the ~~under~~second ~~our~~quarter ~~senior~~of fiscal 2005, ~~credit~~we ~~facility~~had isno ~~subject~~outstanding tointerest ~~certain~~rate ~~customary~~swap ~~terms~~or ~~and~~cap ~~conditions~~contracts.

25 Our results of operations may be adversely affected by changes in interest rates. Assuming a 100 basis point increase in the interest rates on our floating rate debt as of the end of the second quarter of fiscal 2005, interest expense would have increased by approximately $0.5 million and $1.0 million for the second quarter and first six months of fiscal 2005. In addition, such a change would have resulted in a decrease of approximately $12.3 million in the fair value of our fixed rate debt at the end of the second quarter of fiscal 2005. In the event of an adverse change in interest rates, we could take action to mitigate our exposure; however, due to the uncertainty of these potential actions and the possible adverse effects, our analysis assumes no such actions. Furthermore, our analysis does not consider the effect of any changes in the level of overall economic activity that may exist in such an environment.

~~Table~~ Foreign currency exchange risk. We have foreign currency exposure relating to the translation of ~~Contents~~the financial statements of our foreign operations into U.S. dollars. Our functional currencies, other than the U.S. dollar, include the Euro, Danish Krona and British Pound Sterling. The cumulative translation adjustment for the net investment in our European operations is recognized in accumulated other comprehensive income in the accompanying unaudited condensed consolidated financial statements included herein. At the end of the second quarter of fiscal 2005, we had a cumulative translation gain of $37.7 million, which included a $19.2 million cumulative loss for the translation of our previously extinguished Euro-denominated debt to U.S. dollars through the final repayment date.

~~Senior~~We ~~credit~~also ~~facility~~have ~~amendments.~~foreign ~~Effective~~currency ~~March 9~~exposure, ~~2004,~~to wea ~~amended~~lesser ~~our senior~~extent, ~~credit~~relating ~~facility~~ to ~~(1) extend~~transacting ~~the~~business in ~~maturity~~countries ofwith ~~the~~foreign ~~revolving~~currencies ~~credit facility~~other ~~from~~than ~~March 31,~~our ~~2005~~functional tocurrencies. ~~December 29,~~From ~~2005;~~time ~~(2) permanently~~to ~~reduce~~time, ~~the~~we ~~borrowing~~may ~~capacity~~enter ~~under~~into ~~the~~foreign ~~revolving~~currency ~~credit~~options ~~facility~~or ~~from~~forward ~~$60.0 million~~contracts ~~to $50.0 million;~~for ~~(3) waive~~the ~~non-compliance~~purchase ~~with~~or ~~certain~~sale ~~financial~~of ~~covenants~~a ~~as of~~foreign ~~the~~currency ~~end~~to ofmitigate ~~fiscal 2003; (4) simplify~~ the ~~financial~~risk ~~covenants~~from toforeign ~~include~~currency ~~only minimum~~exchange ~~consolidated~~rate ~~EBITDA,~~fluctuations ~~maximum~~in ~~senior secured leverage and capital~~those ~~expenditure~~transactions ~~limits;~~ and ~~(5) increase~~translations. ~~our~~As ~~interest~~of ~~rates~~the onend ~~all~~of ~~facilities~~the ~~by 0.25%~~second asquarter of ~~March 9,~~fiscal ~~2004~~2005, anwe ~~additional~~had ~~0.25% on all facilities as of~~open ~~September 30,~~foreign ~~2004~~currency ~~and~~contracts with a ~~final~~fair ~~1.00%~~value ongain ~~all facilities as~~ of ~~March~~$0.8 ~~31, 2005~~million.

~~Interest~~ITEM rates. As of the end of the second quarter of fiscal 2004, all loans under our senior credit facility bore interest at the higher of the Euro dollar rate plus 5.00%, or the prime rate of the administrative agent plus 4.~~00%.~~ AsControls ~~of the end of the second quarter of fiscal 2004, our Euro term loan facility bore interest at 7.09%,~~ and ~~our USD term loan and revolving credit facilities bore interest at 6.22%.~~ Procedures

~~Prepayments.~~Evaluation ~~The~~of ~~loans~~disclosure ~~under~~controls ~~our~~and ~~senior~~procedures. ~~credit~~Our ~~facility~~disclosure ~~may~~controls beand ~~prepaid~~procedures ~~and~~are ~~commitments~~designed ~~may~~to ensure that information required to be ~~reduced~~disclosed in ~~certain~~the ~~specified~~reports ~~minimum~~that ~~amounts.~~we ~~Optional~~file or ~~prepayments~~furnish ofunder the ~~term~~Securities ~~loans~~Exchange ~~are~~Act ~~generally~~of ~~applied~~1934, ~~ratably~~as toamended, is recorded, processed, summarized and reported within the ~~four~~time periods specified in the Securities and Exchange Commission’s rules ~~tranches~~and forms. Disclosure controls and ~~ratably~~procedures include, without limitation, controls and procedures designed to ~~the~~ensure ~~respective~~that ~~installments.~~information ~~Optional~~required ~~prepayments~~to ofbe disclosed by us in the reports that we file under the ~~term~~Exchange ~~loans~~Act ~~may~~is ~~not~~accumulated beand ~~reborrowed.~~communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

~~Our~~Under ~~senior~~the ~~credit~~supervision ~~facility~~and ~~also~~with ~~provides~~the ~~for~~participation ~~mandatory~~of ~~prepayments~~management, including our Chief Executive Officer and Chief Financial Officer, we performed an evaluation of the ~~borrowings~~ ~~upon~~design ~~certain~~and ~~specified~~operation ~~events~~of our disclosure controls and inprocedures ~~certain~~as ~~specified~~of ~~percentages~~the end of the quarterly period ending July 2, 2005, ~~including:~~pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

• 100% of the net cash proceeds received by our parent, us or any of our restricted subsidiaries from the issuance of indebtedness not currently expressly permitted by our senior credit facility; • 100% of the net cash proceeds of any sale or other disposition of any assets, subject to certain exceptions; • 100% of excess cash flow; and • 100% of the net proceeds of any sale or issuance of equity, subject to certain exceptions.26

Guarantees;Table collateral. We, our parent and certain of our domestic subsidiaries are required to guarantee amounts outstanding under our senior credit facility. To secure the indebtedness and obligations under our senior credit facility, we, our parent and certain of our domestic subsidiaries have pledged the following U.S. assets: Contents

• Changes ~~substantially~~in ~~all~~internal ofcontrol ~~our~~over ~~personal~~financial ~~property~~reporting. ~~assets,~~There ~~subject~~were tono ~~certain~~changes ~~exceptions;~~in ~~• substantially all of~~ our ~~real~~internal controls ~~property~~over ~~assets~~financial ~~and~~reporting ~~any~~(as ~~subsequently~~defined ~~acquired real property having a fair market value~~ in ~~excess~~Rule 13a-15(f) ofunder ~~$0.5~~the ~~million,~~Exchange ~~subject~~Act) tothat occurred ~~certain~~during ~~exceptions; • substantially all of~~ our ~~intellectual~~last ~~property~~fiscal ~~assets;~~quarter ~~and~~that •have ~~substantially~~materially ~~all~~affected ~~of the stock owned~~ or ~~subsequently~~are ~~acquired~~reasonably bylikely ~~each~~to materially ofaffect ~~us in each of~~ our ~~respective~~internal ~~domestic~~controls ~~subsidiaries~~over ~~and~~financial ~~65% of the foreign subsidiaries owned directly by us or a domestic subsidiary~~reporting.

~~In addition, pursuant to the pledge agreement between DPC Investment Corp.~~27 ~~and Doane Pet Care Europe (ApS), 65% of the capital stock of Doane Pet Care Europe (ApS) is pledged to secure the obligations under our senior credit facility.~~

26 Table of Contents

~~Table~~PART ofII. ~~Contents~~Other Information

~~Covenants~~ITEM 1. ~~Our~~Legal senior credit facility, as last amended on March 9, 2004, contains financial and other covenants that we believe are usual and customary for a secured credit agreement, including covenants that limit our and certain of our subsidiaries’ abilities to, among other things: Proceedings

• See ~~incur~~Note ~~indebtedness~~11, orCommitments ~~issue~~and ~~guarantees;~~Contingencies, •in ~~grant~~the ~~liens;~~accompanying •unaudited ~~make~~condensed consolidated ~~investments;~~financial •statements ~~make~~included ~~certain~~in ~~capital~~Part I, ~~expenditures;~~Item 1 •of ~~make~~this ~~certain~~quarterly ~~restricted~~report ~~payments;~~on ~~and~~Form •10-Q, which ~~enter~~is ~~into~~incorporated ~~certain~~by ~~lines~~reference ofin ~~business~~this Part II, Item 1.

~~Our~~ITEM ~~senior~~6. ~~credit facility also contains the following financial covenant requirements:~~ Exhibits

	•		Minimum Consolidated EBITDA. Our consolidated EBITDA, as defined in the senior credit facility, must exceed the following amounts in the respective periods: $16.2 million for the second quarter of fiscal 2004; $33.5 million for the first two quarters of fiscal 2004; $56.0 million for the first three quarters of fiscal 2004; $85.0 million for the full year fiscal 2004; $90.0 million for the twelve-month period ending in the first quarter of fiscal 2005; $95.0 million for the twelve-month period ending in the second quarter of fiscal 2005; $97.0 million for the twelve-month period ending in the third quarter of fiscal 2005; and $100.0 million for the full year fiscal 2005.
Exhibit
			Our senior credit facility defines consolidated EBITDA for any period as consolidated net income for such period plus, without duplication and to the extent reflected as a charge in the statement of such consolidated net income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with indebtedness (including the loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs, (e) any extraordinary, unusual, transition or non-recurring expenses or losses (including, whether or not otherwise includable as a separate item in the statement of such consolidated net income for such period, non-cash losses on sales of assets outside of the ordinary course of business), and (f) any other non-cash charges (including any dividends or accretion on the existing preferred stock or any replacement preferred stock to the extent not actually paid in cash during such period) and minus, to the extent included in the statement of such consolidated net income for such period, the sum of (x) interest income, (y) any extraordinary, unusual or non-recurring non-cash income or non-cash gains (including, whether or not otherwise includable as a separate item in the statement of such consolidated net income for such period, gains on the sales of assets outside of the ordinary course of business) and (z) any other non-cash income, all as determined on a consolidated basis.
Number		Description
	•		Senior Secured Leverage. Our consolidated senior secured debt ratio as of certain specified periods must not exceed ratios as set forth below:
15.1*		Letter from KPMG LLP dated August 20, 2005 regarding unaudited interim financial information.
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1†		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2†		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Fiscal quarter ending on or
nearest to	Ratio
June 30, 2004		2.60:1.00
September 30, 2004		2.50:1.00
December 31, 2004 and thereafter until maturity		2.00:1.00


*	Filed herewith.

^†	Furnished herewith.

2728

Consolidated senior secured debt as of any day is the then outstanding principal balance of the loans under the senior credit facility. • Capital Expenditures. Capital expenditures must not exceed $27.0 million for each fiscal year commencing on or after January 3, 2004.SIGNATURES

WePursuant ~~have experienced difficulty in the past satisfying financial covenants in our senior credit facility and negotiated amendments and obtained waivers for fiscal 2000, 2001 and 2003 due~~ to ~~covenant non-compliance. Our senior credit facility, including~~ the ~~financial~~requirements ~~covenants,~~of was last amended on March 9, 2004. Our ability to satisfy these covenants is determined based on our cash flows, outstanding senior secured debt and capital expenditures. We may experience difficulty satisfying these amended covenants in the ~~future.~~Securities ItExchange ~~is possible~~Act that, if domestic commodity prices increase beyond recent levels and we are unable to recover such increased costs through price increases, we may face additional challenges in satisfying our debt covenants. In addition, we may face covenant challenges if any of our price increases adversely affect our sales volume or if our price increases are not sustainable. If we are unable to negotiate an amendment or secure a waiver from our lenders for any potential default1934, ~~it could result in an event of default under our senior credit facility and permit a majority of~~ the ~~lenders~~registrant tohas ~~accelerate~~duly ~~outstanding debt~~caused ~~under~~this ~~our~~report ~~senior credit facility and permit a majority of our lenders under our revolving credit facility~~ to ~~terminate~~be ~~our~~signed ~~revolving~~on ~~credit~~its ~~commitment~~behalf ~~(without acceleration~~by ~~of such debt) and seize~~ the ~~cash~~undersigned inthereunto ~~our~~duly ~~operating accounts~~authorized. ~~Such~~ ~~acceleration would result in cross-defaults under our senior notes and senior subordinated notes.~~

~~Events~~DOANE ofPET ~~default.~~CARE ~~Our~~COMPANY ~~senior~~By: ~~credit~~/s/ ~~facility~~PHILIP ~~contains~~K. ~~default~~WOODLIEF ~~provisions that~~Philip weK. ~~believe~~Woodlief ~~are~~Vice ~~customary~~President, ~~for~~Finance ~~facilities~~ and ~~transactions~~Chief ofFinancial ~~this type, including default provisions relating to:~~ Officer

•By: ~~our~~/s/ ~~failure~~STEPHEN toP. ~~pay~~HAVALA ~~principal~~Stephen orP. ~~interest~~Havala ~~when~~Corporate ~~and~~Controller as due or any other amount under our senior credit facility within five days after such amount becomes due; • representations or warranties being inaccurate in any material respect when made; • cross-default to certain other indebtedness and ~~agreements~~Principal ~~including~~Accounting our senior notes and senior subordinated notes; • bankruptcy or insolvency; • actual invalidity, or invalidity asserted by us, of any security document; • material judgments; • certain ERISA events; and • change of control or ownership.Officer

~~Liquidity~~Date: August 22, 2005

~~As of the end of the second quarter of fiscal 2004, our principal sources~~29 of liquidity consisted of cash of $10.1 million, working capital excluding cash of $24.8 million, and $27.3 million of remaining availability under the revolving credit facility out of a total availability of $50.0 million. Availability of funds under the revolving credit facility is subject to our satisfaction of certain terms and conditions, including our ability to satisfy the financial covenants in our senior credit facility. See “Covenants” above. We may be required to refinance all or a portion of the principal amount of our outstanding debt on or prior to maturity or a mandatory redemption date. We believe the capital expenditures permitted under our senior credit facility are sufficient to provide us with the necessary flexibility to spend required capital for fiscal 2004.

28 Table of Contents

~~Table~~EXHIBIT ~~of Contents~~INDEX

Any future acquisitions, joint ventures or similar transactions will likely require additional capital and we may not have such capital available to us on commercially reasonable terms, on terms acceptable to us, or at all. Our business may not generate sufficient cash flows or future borrowings may not be available in an amount sufficient to enable us to make principal and interest payments on our debt, including our senior notes and senior subordinated notes, or to fund our other liquidity needs. In addition, our business may not generate sufficient operating results and cash flows to allow us to comply with the financial covenants in our senior credit facility. In the event of a default under our senior credit facility, absent an amendment or a waiver from our lenders, a majority of our lenders could accelerate outstanding debt under our senior credit facility and a majority of our lenders under our revolving credit facility could terminate our revolving credit commitment (without acceleration of such debt) and seize the cash in our operating accounts. In that event, we may not have sufficient liquidity to make interest payments on our debt and for operational and capital requirements.


Exhibit
Number		Description
15.1*		Letter from KPMG LLP dated August 20, 2005, regarding unaudited interim financial information.

31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.

32.1^†		Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2^†		Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

~~Annual~~* ~~Maturities~~Filed ofherewith. ~~Long-Term~~† ~~Debt~~ Furnished herewith.

A summary of the annual maturities of our long-term debt, including our Senior Preferred Stock (Redeemable), as of the end of the second quarter of fiscal 2004 follows (in thousands):

End of fiscal	Maturities
2004	$	6,173
2005		137,779
2006		40,649
2007		249,471
2008		2,152
2009 and thereafter		231,104
	$	667,328

Commitments and Contingencies

We believe our operations are in compliance in all material respects with environmental, safety and other regulatory requirements. However, these requirements may change in the future, which may cause us to incur material costs to comply with these requirements or in connection with the effect of these matters on our business.

Inflation and Changes in Prices

Our financial results depend to a large extent on the costs of raw materials and packaging and our ability to pass through increased costs to our customers. Historically, market prices for commodity grains and food stocks have fluctuated in response to a number of factors, including changes in U.S. government farm support programs, changes in international agricultural trading policies, impacts of disease outbreaks on protein sources and the potential effect on supply and demand, changes in international demand, as well as weather conditions during the growing and harvesting seasons. Fluctuations in paper prices, which affect our costs for packaging materials, have resulted from changes in supply and demand, general economic conditions and other factors. In addition, we have exposure to changes in pricing of natural gas, which affects our manufacturing costs. Our results of operations have been exposed to volatility in the commodity and natural gas markets in the past. We have cost-sharing arrangements with certain of our domestic customers to reduce the impact of volatile commodity costs; however, these arrangements only reduce our exposure to such volatility in the future, and only as long as these agreements continue in effect.

In the event of any increases in raw materials, packaging and natural gas costs, we may be required to seek additional sales price increases for our products to avoid margin deterioration. For instance, because of the increases in our raw material costs during fiscal 2003 and 2004, we implemented a price increase in

January 2004 and additional price increases in the second quarter of fiscal 2004 for most of our domestic products. We cannot provide any assurances as to the timing or extent of our ability to implement future price adjustments in the event of increased raw materials, packaging or natural gas costs or of whether any price increases implemented by us may affect future sales volumes to our customers.

Seasonality

Our sales are moderately seasonal. We normally experience an increase in net sales during the first and fourth quarters of each year, which is typical in the pet food industry. Generally, cooler weather results in increased dog food consumption.

Recently Issued Accounting Pronouncements

See Note 2, Recent Accounting Pronouncements, in the accompanying unaudited condensed consolidated financial statements.

Critical Accounting Policies

Accounts receivable allowances. As of the end of the second quarter of fiscal 2004 and the end of fiscal 2003, our gross accounts receivable were $96.0 and $94.2 million, respectively. We had allowances of $2.6 million as of the end of both the second quarter of fiscal 2004 and the end of fiscal 2003, primarily for doubtful accounts and outstanding deductions with customers. Our policy is to estimate our allowances by applying a recovery percentage based on historical collection experience and performing a specific identification review of customer account balances. We may revise our allowances against accounts receivable as we receive more information or as we assess other factors impacting the realizability of our accounts receivable.

Inventories allowances. As of the end of the second quarter of fiscal 2004 and the end of fiscal 2003, our gross inventories were $76.3 and $73.0 million, respectively. We had allowances of $5.0 million and $4.4 million as of the end of the second quarter of fiscal 2004 and the end of fiscal 2003, respectively, primarily related to obsolescence of packaging inventories. Our policy is to estimate our allowances based on specific identification of obsolete stock keeping units, or SKUs, or probable SKUs to be rationalized. We may revise our allowances against inventories as we receive more information or as we assess other factors impacting the realizability of our inventories.

Deferred tax assets. As of the end of the second quarter of fiscal 2004 and the end of fiscal 2003, our federal net operating loss, or NOL, carryforwards were $141.2 million and $126.5 million, respectively, and our foreign NOL carryforwards were $1.5 million and $2.2 million, respectively. Our gross deferred tax assets, including federal, foreign, state and local NOL carryforwards, were $77.0 million and $72.3 million as of the end of the second quarter of fiscal 2004 and the end of fiscal 2003, respectively, and our gross deferred tax liabilities were $57.4 million and $55.8 million, respectively. We assess the realization of our deferred tax assets dependent upon our ability to generate sufficient taxable income during the periods in which our deferred tax assets may be utilized. This assessment incorporates a determination of whether it is “more likely than not” that we will realize the benefit of our existing deferred tax assets in future periods. When we determine that we do not meet this probability criteria, we record valuation allowances that take into consideration tax planning strategies, historical and projected earnings, and the future reversal of taxable temporary differences.

Due primarily to the magnitude of our operating losses in fiscal 2003, our loss in the first six months of fiscal 2004 and the variability of our historical earnings, we do not believe that we currently meet the “more likely than not” recoverability criteria necessary to recognize our deferred tax assets, except for those assets which will be recovered through known reversals of deferred tax liabilities. Our consolidated valuation allowance was $48.2 million and $43.1 million as of the end of the second quarter of fiscal 2004 and the end of fiscal 2003, respectively. During the first six months of fiscal 2004 and for the full year fiscal 2003, we recorded valuation allowances against our U.S. federal and state deferred tax assets in the amounts of $7.2 million and $35.2 million, respectively. We reduced our valuation allowances against

foreign deferred tax assets in the amount of $2.1 million in the first six months of fiscal 2004, while for the full year fiscal 2003, we recorded valuation allowances in the amount of $7.3 million. The reduction to the valuation allowance against foreign deferred tax assets in the first six months of fiscal 2004 related to a tax law change in one of the foreign jurisdictions in which we operate. The tax law change eliminated a deferred tax asset in the amount of $6.3 million against which we had previously recorded a valuation allowance in the full amount. Accordingly, we wrote off the deferred tax asset and made a corresponding reduction to the associated valuation allowance. The offsetting increase of $4.2 million was recorded against deferred tax assets generated in foreign jurisdictions during the first six months of 2004 resulting in a net reduction of $2.1 million to the valuation allowance against deferred tax assets in foreign jurisdictions in the first six months of fiscal 2004. Due to these recent changes, we are in the process of evaluating our foreign corporate tax strategies, and plan to have that evaluation completed by the end of fiscal 2004. We do not expect any adverse changes in our effective tax rate in the near term. We currently expect that future years’ deferred income tax expense (benefit) will include deferred income tax expense in an amount approximating the growth in our deferred tax liabilities related to the tax amortization of goodwill and other intangible assets recognized on our income tax return.

Goodwill and trademarks. As of the end of the second quarter of fiscal 2004 and the end of fiscal 2003, our goodwill and trademarks were $377.5 million and $380.4 million, respectively. Our policy is to test the fair value of goodwill and trademarks for impairment annually in the fourth quarter of each fiscal year and upon the occurrence of certain events. Our impairment test includes quantitative analyses of discounted future cash flows, market multiples of earnings and comparable transactions. If the estimated fair value of goodwill or trademarks of either the domestic or international reporting unit is less than the carrying value, an impairment loss will be recognized. In the fourth quarter of fiscal 2003, we performed our annual assessment of impairment and determined no impairment was evident at this date.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks, which may give rise to losses from adverse changes in market prices and rates. Our market risks could arise from changes in commodity prices, interest rates and foreign currency exchange rates.

Commodity price risk. We are exposed to market risk related to changes in commodity prices. We have in the past and may continue to seek to manage our commodity price risk associated with market fluctuations by using derivative instruments for portions of our corn, soybean meal, alternative proteins and natural gas purchases, principally through exchange traded futures and options contracts. The terms of such contracts are generally less than one year. During the term of a contract, we balance positions daily with cash payments to or from the exchanges. At the termination of a contract, we have the ability to settle financially or by exchange for the physical commodity, in which case, we would deliver the contract against the acquisition of the physical commodity. Our policy does not permit speculative commodity trading.

Although we seek to manage the price risk of market fluctuations by hedging portions of our primary commodity product purchases, our results of operations have been adversely affected in the past by these fluctuations and may in the future. It is possible that, if domestic commodity prices increase beyond recent levels and we are unable to recover such increased costs through price increases, we may face additional challenges in satisfying our debt covenants. In addition, we may face covenant challenges if any of our price increases adversely affect our sales volume or if our price increases are not sustainable. See Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Senior Credit Facility” and “Financial Covenant Compliance.” Moreover, the use of futures contracts also reduces our ability to take advantage of short-term reductions in raw material prices. If one or more of our competitors is able to reduce their costs by taking advantage of any reductions in raw material prices, we may face pricing pressures from these competitors and may be forced to reduce our prices or face a decline in net sales, either of which could have a material adverse effect on our business, results of operations and financial condition.

Our commodity derivative instruments are measured at fair value under SFAS 133, in our accompanying unaudited condensed consolidated financial statements. Our results of operations have been adversely affected in the past by volatility in commodity prices under the SFAS 133 fair value accounting of our commodity derivative instruments and our results of operations may be adversely affected in the future by SFAS 133 accounting.

As of the end of the second quarter of fiscal 2004, we had open commodity contracts with a fair value loss of $4.1 million. Based upon an analysis we completed at the end of the second quarter of fiscal 2004 in which we utilized our actual derivative contractual volumes and assumed a 5% adverse movement in commodity prices, we determined the potential decrease in the fair value of our commodity derivative instruments would be approximately $1.2 million.

With the changes in our pricing strategy resulting from reaching cost-sharing arrangements, we have and will continue to collaborate with our customers on any hedging strategies we may pursue.

Interest rate risk. We are exposed to market risk related to changes in interest rates. We periodically use interest rate swap and cap contracts to limit our exposure to the interest rate risk associated with our domestic floating rate debt, which totaled $181.1 million at the end of the second quarter of fiscal 2004. Changes in market values of these financial instruments are highly correlated with changes in market values of the hedged item both at inception and over the life of the contract. As of the end of the second quarter of fiscal 2004, we had no open interest rate swap or cap contracts.

Our net loss is affected by changes in interest rates. Assuming a 100 basis point increase in interest rates on our floating rate debt, our net income would decrease by approximately $0.5 million and $0.9 million for the second quarter and first six months of fiscal 2004, respectively. In addition, such a change would result in a decrease of approximately $14.3 million in the fair value of our fixed rate debt at the end of the second quarter of fiscal 2004. In the event of an adverse change in interest rates, we could take action to mitigate our exposure; however, due to the uncertainty of these potential actions and their possible effects, our analysis assumes no such actions. Furthermore, our analysis does not consider the effect of any changes in the level of overall economic activity that may exist in such an environment.

Foreign currency exchange risk. Our financial position and results of operations are affected by foreign currency exchange rate fluctuations. Our European operations sell pet food products throughout Europe. In connection with our fiscal 2000 acquisition of Arovit, we funded a portion of the acquisition with Euro-denominated debt and designated our Euro-denominated debt as a hedge of our net investment in Europe. The cumulative translation adjustment for the net investment in our foreign operations is recorded in accumulated other comprehensive income (loss) in the accompanying unaudited condensed consolidated financial statements. As of the end of the second quarter of fiscal 2004, we had a cumulative translation gain of $50.3 million, which included an unrealized cumulative loss of $9.5 million for the translation of our Euro-denominated debt to U.S. dollars, that has been recognized in the accompanying unaudited condensed consolidated financial statements.

We are exposed to foreign currency exchange risk arising from transactions in the normal course of business in Europe as well as the translation of the results of our European operations. From time to time, we may enter into foreign currency forward contracts for the purchase or sale of a currency to mitigate the risk from foreign currency exchange rate fluctuations in those transactions. Accordingly, changes in market values of these financial instruments are highly correlated with changes in the market values of the hedged items both at inception and over the life of the contracts. Changes in fair value of foreign currency forward contracts that qualify for hedge accounting are recorded in accumulated other comprehensive income (loss), net of deferred taxes, in our consolidated balance sheet until they are realized, at which point, they are recognized in other income, net, in the accompanying consolidated statements of income. All other gains and losses on foreign currency forward contracts are recorded as an increase or decrease in net sales in our consolidated statements of income as they occur. As of the end of the second quarter of fiscal 2004, we had no material open foreign currency forward or option contracts.

ITEM 4. Controls and Procedures

Evaluation of disclosure controls and procedures. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarterly period ending July 3, 2004, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

Changes in internal controls. There were no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in our internal controls. As a result, no corrective actions were required or undertaken.

PART II. Other Information

ITEM 1. Legal Proceedings

See Note 10, Commitments and Contingencies, in the accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q, which is incorporated by reference in this Part II, Item 1.

ITEM 6. Exhibits and Reports on Form 8-K

(a) Exhibits
Exhibit
Number		Description
10.1		Amendment No. 5 to Amended and Restated Credit Agreement dated as of March 9, 2004 among Doane Pet Care Enterprises, Inc., Doane Pet Care Company, as borrower, Doane/Windy Hill Joint Venture L.L.C., DPC Investment Corp. and JPMorgan Chase Bank, as administrative agent, and the lenders party thereto (incorporated by reference to Doane Pet Care Company’s Annual Report on Form 10-K for the year ended January 3, 2004).
10.2	*††	Change in Control Severance Agreement dated April 22, 2004, between Doane Pet Care Company and Douglas J. Cahill.
10.3	*††	Change in Control Severance Agreement dated April 22, 2004, between Doane Pet Care Company and David L. Horton.
10.4	*††	Change in Control Severance Agreement dated April 22, 2004, between Doane Pet Care Company and Joseph J. Meyers.
10.5	*††	Change in Control Severance Agreement dated April 22, 2004, between Doane Pet Care Company and Philip K. Woodlief.
15.1	*	Letter from KPMG LLP dated July 27, 2004 regarding unaudited interim financial information.
31.1	*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1	†	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	†	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*		Filed herewith.
†		Not consider to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.
††		Management contracts or compensatory plans or arrangements.

(b) Reports on Form 8-K

The following report on Form 8-K was furnished during the second quarter of fiscal 2004: Report on Form 8-K dated May 17, 2004 was furnished pursuant to Item 9 and Item 12 of Form 8-K in connection with our issuance of a press release announcing our first quarter of fiscal 2004 results and discussing other matters set forth therein. We also announced that we had provided the Securities and Exchange Commission with certifications of our Chief Executive Officer and Chief Financial Officer on May 17, 2004 in accordance with Section 906 of the Sarbanes-Oxley Act of 2002. Information in Form 8-K furnished pursuant to Item 9 and Item 12 is not considered to be “filed” for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, except if Doane specifically states that the information is to be considered “filed” under the Exchange Act or incorporates it by reference into a filing under the Securities Act or the Exchange Act.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DOANE PET CARE COMPANY
	By:	/s/ PHILIP K. WOODLIEF
		Philip K. Woodlief
		Vice President, Finance and
		Chief Financial Officer
	By:	/s/ STEPHEN P. HAVALA
		Stephen P. Havala
		Corporate Controller and
		Principal Accounting Officer
Date: August 12, 2004

EXHIBIT INDEX

Exhibit
Number		Description
10.1		Amendment No. 5 to Amended and Restated Credit Agreement dated as of March 9, 2004 among Doane Pet Care Enterprises, Inc., Doane Pet Care Company, as borrower, Doane/Windy Hill Joint Venture L.L.C., DPC Investment Corp. and JPMorgan Chase Bank, as administrative agent, and the lenders party thereto (incorporated by reference to Doane Pet Care Company’s Annual Report on Form 10-K for the year ended January 3, 2004).
10.2	*††	Change in Control Severance Agreement dated April 22, 2004, between Doane Pet Care Company and Douglas J. Cahill.
10.3	*††	Change in Control Severance Agreement dated April 22, 2004, between Doane Pet Care Company and David L. Horton.
10.4	*††	Change in Control Severance Agreement dated April 22, 2004, between Doane Pet Care Company and Joseph J. Meyers.
10.5	*††	Change in Control Severance Agreement dated April 22, 2004, between Doane Pet Care Company and Philip K. Woodlief.
15.1	*	Letter from KPMG LLP dated July 27, 2004, regarding unaudited interim financial information.
31.1	*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) / 15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
31.2	*	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) / 15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
32.1	†	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	†	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*		Filed herewith.
†		Not consider to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section.
††		Management contracts or compensatory plans or arrangements.

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