##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-Q


|                                                  |  |                                                                                             
|------------------------------------------------- |  | --------------------------------------------------------------------------------------------
|þ                                                 |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934 
|                                                 
|For the quarterly period ended September 30, 2005
|                                                 
|OR                                               
|                                                 
|o                                                 |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 333-64641


Phibro Animal Health Corporation


(Exact name of registrant as specified in its charter)


|                                |  |                    
|------------------------------- |  | -------------------
|New York                        |  | 13-1840497         
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

65 Challenger Road, Ridgefield Park, New Jersey 07660


(Address of principal executive offices) (Zip Code)


(201) 329-7300


(Registrants telephone number, including area code)


þ o


o þ


o þ




Class A Common Stock, $.10 par value: 12,600.00


Class B Common Stock, $.10 par value: 11,888.50










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PHIBRO ANIMAL HEALTH CORPORATION


TABLE OF CONTENTS


|                                                        |  |                                                                                           |    |      |    | 
|------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                        |  |                                                                                           |    | Page |   
|                                                        |  |                                                                                           |    |      |   
|PART I                                                 
|                                                       
|FINANCIAL INFORMATION                                  
|Item 1.                                                 |  | Condensed Consolidated Financial Statements
    (Unaudited)                               |    |      | 3  | 
|                                                        |  | Condensed Consolidated Balance Sheets                                                     |    |      | 4  | 
|                                                        |  | Condensed Consolidated Statements of
    Operations and Comprehensive Income (Loss)       |    |      | 5  | 
|                                                        |  | Condensed Consolidated Statements of
    Changes in Stockholders Deficit                 |    |      | 6  | 
|                                                        |  | Condensed Consolidated Statements of Cash
    Flows                                       |    |      | 7  | 
|                                                        |  | Notes to Condensed Consolidated Financial
    Statements                                  |    |      | 8  | 
|Item 2.                                                 |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations |    |      | 24 | 
|Item 3.                                                 |  | Quantitative and Qualitative Disclosures
    About Market Risk                            |    |      | 32 | 
|Item 4.                                                 |  | Controls and Procedures                                                                   |    |      | 32 | 
|                                                       
|PART II                                                
|                                                       
|OTHER INFORMATION                                      
|Item 5.                                                 |  | Other Information                                                                         |    |      | 33 | 
|Item 6.                                                 |  | Exhibits                                                                                  |    |      | 33 | 
|SIGNATURES                                              |  |                                                                                           | 34 |     
|EX-10.27.5: AMENDMENT #5 TO LOAN AND SECURITY AGREEMENT
|EX-10.27.6: AMENDMENT #6 TO LOAN AND SECURITY AGREEMENT
|EX-31.1: CERTIFICATION                                 
|EX-31.2: CERTIFICATION                                 
|EX-31.3: CERTIFICATION                                 
|EX-32: CERTIFICATION                                   



2



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##### Table of Contents








PART I  FINANCIAL INFORMATION







|        |                                                            
|------- | -----------------------------------------------------------
|Item 1. | Condensed Consolidated Financial Statements
    (Unaudited)

3



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##### Table of Contents



PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES





CONDENSED CONSOLIDATED BALANCE SHEETS


|                                      |                                                                                                                             |                                                                             |                             |         |          |         |         |         |       |         |  
|------------------------------------- | --------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------- | ------- | -------- | ------- | ------- | ------- | ----- | ------- | -
|                                      |                                                                                                                             | September 30,                                                               |                             |         | June 30, |        
|                                      |                                                                                                                             | 2005                                                                        |                             |         | 2005     |        
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|                                      |                                                                                                                             | (Unaudited)                                                                 |                            
|                                      |                                                                                                                             | (In thousands)                                                              |                            
|ASSETS                               
|CURRENT ASSETS:                       |                                                                                                                             |                                                                             |                             |         |          |         |         |        
|                                      | Cash and cash equivalents                                                                                                   |                                                                             | $                           | 10,154  |          |         | $       | 13,001  |      
|                                      | Trade receivables, less allowance for doubtful accounts of
    $1,359 at September 30, 2005 and $1,372 at June 30,
    2005 |                                                                             |                             | 51,120  |          |         |         | 52,806  |      
|                                      | Other receivables                                                                                                           |                                                                             |                             | 4,295   |          |         |         | 3,611   |      
|                                      | Inventories                                                                                                                 |                                                                             |                             | 99,261  |          |         |         | 96,621  |      
|                                      | Prepaid expenses and other current assets                                                                                   |                                                                             |                             | 12,653  |          |         |         | 12,787  |      
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|                                      |                                                                                                                             |                                                                             | TOTAL CURRENT ASSETS        |         |          | 177,483 |         |         |       | 178,826 |  
|PROPERTY, PLANT AND EQUIPMENT, net    |                                                                                                                             |                                                                             | 48,709                      |         |          |         | 49,960  |        
|INTANGIBLES, net                      |                                                                                                                             |                                                                             | 9,829                       |         |          |         | 10,201  |        
|OTHER ASSETS                          |                                                                                                                             |                                                                             | 12,886                      |         |          |         | 14,070  |        
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|                                      |                                                                                                                             | $                                                                           | 248,907                     |         |          | $       | 253,057 |        
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|                                     
|LIABILITIES AND STOCKHOLDERS DEFICIT
|CURRENT LIABILITIES:                  |                                                                                                                             |                                                                             |                             |         |          |         |         |        
|                                      | Cash overdraft                                                                                                              |                                                                             | $                           | 413     |          |         | $       | 190     |      
|                                      | Loans payable to banks                                                                                                      |                                                                             |                             | 4,325   |          |         |         | 8,038   |      
|                                      | Current portion of long-term debt                                                                                           |                                                                             |                             | 1,000   |          |         |         | 1,625   |      
|                                      | Accounts payable                                                                                                            |                                                                             |                             | 32,506  |          |         |         | 36,347  |      
|                                      | Accrued expenses and other current liabilities                                                                              |                                                                             |                             | 59,769  |          |         |         | 53,815  |      
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|                                      |                                                                                                                             |                                                                             | TOTAL CURRENT LIABILITIES   |         |          | 98,013  |         |         |       | 100,015 |  
|LONG-TERM DEBT                        |                                                                                                                             |                                                                             | 176,411                     |         |          |         | 176,501 |        
|OTHER LIABILITIES                     |                                                                                                                             |                                                                             | 20,058                      |         |          |         | 21,465  |        
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|                                      |                                                                                                                             |                                                                             | TOTAL LIABILITIES           |         |          | 294,482 |         |         |       | 297,981 |  
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|COMMITMENTS AND CONTINGENCIES         |                                                                                                                             |                                                                             |                             |         |          |         |         |        
|STOCKHOLDERS DEFICIT:                |                                                                                                                             |                                                                             |                             |         |          |         |         |        
|                                      | Preferred stock                                                                                                             |                                                                             |                             | 521     |          |         |         | 521     |      
|                                      | Common stock                                                                                                                |                                                                             |                             | 2       |          |         |         | 2       |      
|                                      | Paid-in capital                                                                                                             |                                                                             |                             | 27,260  |          |         |         | 27,260  |      
|                                      | Accumulated deficit                                                                                                         |                                                                             |                             | (77,170 | )        |         |         | (74,379 | )    
|                                      | Accumulated other comprehensive income (loss):                                                                              |                                                                             |                             |         |          |         |         |         |      
|                                      |                                                                                                                             | Gain on derivative instruments, net of income taxes                         |                             |         | 223      |         |         |         | 123   |        
|                                      |                                                                                                                             | Cumulative foreign currency translation adjustment, net of
    income taxes |                             |         | 3,589    |         |         |         | 1,549 |        
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|                                      |                                                                                                                             |                                                                             | TOTAL STOCKHOLDERS DEFICIT |         |          | (45,575 | )       |         |       | (44,924 | )
|                                      |                                                                                                                             |                                                                             |                             |         |          |        
|                                      |                                                                                                                             | $                                                                           | 248,907                     |         |          | $       | 253,057 |        
|                                      |                                                                                                                             |                                                                             |                             |         |          |        



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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND


COMPREHENSIVE INCOME (LOSS)


|                                                                                                                          |                                                                            |                    |        |        |      |   |        |        |  
|------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ------------------ | ------ | ------ | ---- | - | ------ | ------ | -
|                                                                                                                          |                                                                            | Three Months Ended |       
|                                                                                                                          |                                                                            | September 30,      |       
|                                                                                                                          |                                                                            |                    |       
|                                                                                                                          |                                                                            | 2005               |        |        | 2004 |  
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          |                                                                            | (Unaudited)        |       
|                                                                                                                          |                                                                            | (In thousands)     |       
|NET SALES                                                                                                                 |                                                                            | $                  | 92,571 |        |      | $ | 86,897 |       
|COST OF GOODS SOLD (includes Belgium Plant Transaction costs of
    $3,503 for the three months ended September 30, 2005) |                                                                            |                    | 73,411 |        |      |   | 64,727 |       
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          | GROSS PROFIT                                                               |                    |        | 19,160 |      |   |        | 22,170 |  
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                                                              |                                                                            |                    | 15,065 |        |      |   | 15,838 |       
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          | OPERATING INCOME                                                           |                    |        | 4,095  |      |   |        | 6,332  |  
|OTHER:                                                                                                                    |                                                                            |                    |        |        |      |   |        |       
|                                                                                                                          | Interest expense                                                           |                    |        | 6,591  |      |   |        | 5,837  |  
|                                                                                                                          | Interest (income)                                                          |                    |        | (90    | )    |   |        | (25    | )
|                                                                                                                          | Other (income) expense, net                                                |                    |        | (673   | )    |   |        | 24     |  
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          | INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES               |                    |        | (1,733 | )    |   |        | 496    |  
|                                                                                                                          | PROVISION FOR INCOME TAXES                                                 |                    |        | 1,058  |      |   |        | 844    |  
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          | (LOSS) FROM CONTINUING OPERATIONS                                          |                    |        | (2,791 | )    |   |        | (348   | )
|DISCONTINUED OPERATIONS:                                                                                                  |                                                                            |                    |        |        |      |   |        |       
|                                                                                                                          | Income from discontinued operations, net of income taxes                   |                    |        |       |      |   |        | 207    |  
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          | NET (LOSS)                                                                 |                    |        | (2,791 | )    |   |        | (141   | )
|OTHER COMPREHENSIVE INCOME:                                                                                               |                                                                            |                    |        |        |      |   |        |       
|                                                                                                                          | Change in derivative instruments, net of income taxes                      |                    |        | 100    |      |   |        | 75     |  
|                                                                                                                          | Change in foreign currency translation adjustment, net of income
    taxes |                    |        | 2,040  |      |   |        | 3,007  |  
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          | COMPREHENSIVE INCOME (LOSS)                                                |                    | $      | (651   | )    |   | $      | 2,941  |  
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          | NET (LOSS)                                                                 |                    |        | (2,791 | )    |   |        | (141   | )
|Dividends and equity value accreted on Series C preferred
    stock                                                       |                                                                            |                    |       |        |      |   | (682   | )     
|                                                                                                                          |                                                                            |                    |        |        |      |  
|                                                                                                                          | NET (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS                             |                    | $      | (2,791 | )    |   | $      | (823   | )
|                                                                                                                          |                                                                            |                    |        |        |      |  



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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS DEFICIT


For the Three Months Ended September 30, 2005


|                            |                                                              |                |     |  |              |   |   |         |  |             |             |       |  |               |        |  |               |   |         |        |   |   |       |       |  |   |         |        |  
|--------------------------- | ------------------------------------------------------------ | -------------- | --- |  | ------------ | - | - | ------- |  | ----------- | ----------- | ----- |  | ------------- | ------ |  | ------------- | - | ------- | ------ | - | - | ----- | ----- |  | - | ------- | ------ | -
|                            |                                                              |                |     |  |              |   |   |         |  | Accumulated |             |       | 
|                            |                                                              | Preferred      |     |  | Common Stock |   |   |         |  |             |             | Other |  |               |       
|                            |                                                              | Stock          |     |  |              |   |   | Paid-in |  |             | Accumulated |       |  | Comprehensive |        |  |              
|                            |                                                              | Series A       |     |  | Class A      |   |   | Class B |  |             | Capital     |       |  | Deficit       |        |  | Income (Loss) |   |         | Total  |  
|                            |                                                              |                |     |  |              |   |   |         |  |             |             |       |  |               |        |  |               |   |         |        |  
|                            |                                                              | (Unaudited)    |    
|                            |                                                              | (In thousands) |    
|BALANCE, JUNE 30, 2005      |                                                              | $              | 521 |  |              | $ | 1 |         |  | $           | 1           |       |  | $             | 27,260 |  |               | $ | (74,379 | )      |   | $ | 1,672 |       |  | $ | (44,924 | )     
|                            | Change in derivative instruments, net of income taxes        |                |     |  |              |   |   |         |  |             |             |       |  |               |        |  |               |   |         |        |   |   |       | 100   |  |   |         | 100    |  
|                            | Foreign currency translation adjustment, net of income taxes |                |     |  |              |   |   |         |  |             |             |       |  |               |        |  |               |   |         |        |   |   |       | 2,040 |  |   |         | 2,040  |  
|                            | Net (loss)                                                   |                |     |  |              |   |   |         |  |             |             |       |  |               |        |  |               |   |         | (2,791 | ) |   |       |       |  |   |         | (2,791 | )
|                            |                                                              |                |     |  |              |   |   |         |  |             |             |       |  |               |        |  |               |   |         |        |  
|BALANCE, SEPTEMBER 30, 2005 |                                                              | $              | 521 |  |              | $ | 1 |         |  | $           | 1           |       |  | $             | 27,260 |  |               | $ | (77,170 | )      |   | $ | 3,812 |       |  | $ | (45,575 | )     
|                            |                                                              |                |     |  |              |   |   |         |  |             |             |       |  |               |        |  |               |   |         |        |  



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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |        |       |        |       |        |  
|------------------------------------------------ | ------------------------------------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | -
|                                                 |                                                                                                              | Three Months Ended                                                                                                                                                    |                                                     
|                                                 |                                                                                                              | September 30,                                                                                                                                                         |                                                     
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                     
|                                                 |                                                                                                              | 2005                                                                                                                                                                  |                                                      |        | 2004  |       
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|                                                 |                                                                                                              | (Unaudited)                                                                                                                                                           |                                                     
|                                                 |                                                                                                              | (In thousands)                                                                                                                                                        |                                                     
|OPERATING ACTIVITIES:                            |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |        |       |       
|                                                 | Net (loss)                                                                                                   |                                                                                                                                                                       | $                                                    | (2,791 | )     |        | $     | (141   | )    
|                                                 | Adjustment for discontinued operations                                                                       |                                                                                                                                                                       |                                                      |       |       |        |       | (207   | )    
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|                                                 | (Loss) from continuing operations                                                                            |                                                                                                                                                                       |                                                      | (2,791 | )     |        |       | (348   | )    
|                                                 | Adjustments to reconcile (loss) from continuing operations to
    net cash provided by operating activities: |                                                                                                                                                                       |                                                      |        |       |        |       |        |      
|                                                 |                                                                                                              | Depreciation and amortization (includes accelerated depreciation
    from the Belgium Plant Transactions of $2,747 for the three
    months ended September 30, 2005) |                                                      |        | 5,362 |        |       |        | 2,664 |       
|                                                 |                                                                                                              | Amortization of deferred financing costs                                                                                                                              |                                                      |        | 828   |        |       |        | 591   |       
|                                                 |                                                                                                              | Deferred income taxes                                                                                                                                                 |                                                      |        |      |        |       |        | 68    |       
|                                                 |                                                                                                              | Net gain from sales of assets                                                                                                                                         |                                                      |        | (531  | )      |       |        | (1    | )     
|                                                 |                                                                                                              | Effects of changes in foreign currency                                                                                                                                |                                                      |        | (473  | )      |       |        | (122  | )     
|                                                 |                                                                                                              | Other                                                                                                                                                                 |                                                      |        | (2    | )      |       |        | 48    |       
|                                                 |                                                                                                              | Changes in operating assets and liabilities:                                                                                                                          |                                                      |        |       |        |       |        |       |       
|                                                 |                                                                                                              |                                                                                                                                                                       | Accounts receivable                                  |        |       | 1,912  |       |        |       | 5,115  |  
|                                                 |                                                                                                              |                                                                                                                                                                       | Inventories                                          |        |       | (1,627 | )     |        |       | (4,836 | )
|                                                 |                                                                                                              |                                                                                                                                                                       | Prepaid expenses and other current assets            |        |       | (297   | )     |        |       | 1,192  |  
|                                                 |                                                                                                              |                                                                                                                                                                       | Other assets                                         |        |       | 304    |       |        |       | (1     | )
|                                                 |                                                                                                              |                                                                                                                                                                       | Accounts payable                                     |        |       | (4,055 | )     |        |       | (8,480 | )
|                                                 |                                                                                                              |                                                                                                                                                                       | Accrued expenses and other liabilities               |        |       | 4,784  |       |        |       | 7,646  |  
|                                                 |                                                                                                              |                                                                                                                                                                       | Accrued costs of non-completed transaction           |        |       |       |       |        |       | (1,100 | )
|                                                 |                                                                                                              |                                                                                                                                                                       | Accrued costs of the Belgium Plant Transactions      |        |       | (479   | )     |        |       |       |  
|                                                 | Cash provided (used) by discontinued operations                                                              |                                                                                                                                                                       |                                                      |       |       |        |       | (51    | )    
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|                                                 |                                                                                                              |                                                                                                                                                                       | NET CASH PROVIDED BY OPERATING ACTIVITIES            |        |       | 2,935  |       |        |       | 2,385  |  
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|INVESTING ACTIVITIES:                            |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |        |       |       
|                                                 | Capital expenditures                                                                                         |                                                                                                                                                                       |                                                      | (2,399 | )     |        |       | (1,723 | )    
|                                                 | Proceeds from sales of assets                                                                                |                                                                                                                                                                       |                                                      | 738    |       |        |       | 9      |      
|                                                 | Discontinued operations                                                                                      |                                                                                                                                                                       |                                                      |       |       |        |       | (22    | )    
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|                                                 |                                                                                                              |                                                                                                                                                                       | NET CASH (USED) BY INVESTING ACTIVITIES              |        |       | (1,661 | )     |        |       | (1,736 | )
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|FINANCING ACTIVITIES:                            |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |        |       |       
|                                                 | Net increase (decrease) in cash overdraft                                                                    |                                                                                                                                                                       |                                                      | 223    |       |        |       | (237   | )    
|                                                 | Net increase (decrease) in short-term debt                                                                   |                                                                                                                                                                       |                                                      | (3,713 | )     |        |       | 272    |      
|                                                 | Proceeds from long-term debt                                                                                 |                                                                                                                                                                       |                                                      | 55     |       |        |       | 445    |      
|                                                 | Payments of long-term debt                                                                                   |                                                                                                                                                                       |                                                      | (717   | )     |        |       | (872   | )    
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|                                                 |                                                                                                              |                                                                                                                                                                       | NET CASH (USED) BY FINANCING ACTIVITIES              |        |       | (4,152 | )     |        |       | (392   | )
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH          |                                                                                                              |                                                                                                                                                                       | 31                                                   |        |       |        | (47   | )     
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|                                                 |                                                                                                              |                                                                                                                                                                       | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |        |       | (2,847 | )     |        |       | 210    |  
|CASH AND CASH EQUIVALENTS at beginning of period |                                                                                                              |                                                                                                                                                                       | 13,001                                               |        |       |        | 5,568 |       
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|CASH AND CASH EQUIVALENTS at end of period       |                                                                                                              | $                                                                                                                                                                     | 10,154                                               |        |       | $      | 5,778 |       
|                                                 |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |       
|Supplemental Cash Flow Information:              |                                                                                                              |                                                                                                                                                                       |                                                      |        |       |        |       |       
|                                                 | Interest paid                                                                                                |                                                                                                                                                                       | $                                                    | 364    |       |        | $     | 284    |      
|                                                 | Income taxes paid                                                                                            |                                                                                                                                                                       |                                                      | 1,136  |       |        |       | 320    |      



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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES





NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)


(In thousands)




|   |        
|-- | -------
|1. | General



| |                                                           
| | ----------------------------------------------------------
| | Principles of Consolidation and Basis of
    Presentation:













| |                                    
| | -----------------------------------
| | Risks, Uncertainties and Liquidity:

7 8




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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)












| |             
| | ------------
| | Inventories:



|                |  |                    |        |  |               |   |        | 
|--------------- |  | ------------------ | ------ |  | ------------- | - | ------ | 
|                |  | As of              |       
|                |  |                    |       
|                |  | September 30, 2005 |        |  | June 30, 2005 |  
|                |  |                    |        |  |               |  
|Raw materials   |  | $                  | 26,428 |  |               | $ | 23,703 | 
|Work-in-process |  |                    | 456    |  |               |   | 434    | 
|Finished goods  |  |                    | 72,377 |  |               |   | 72,484 | 
|                |  |                    |        |  |               |  
|Total inventory |  | $                  | 99,261 |  |               | $ | 96,621 | 
|                |  |                    |        |  |               |  



| |             
| | ------------
| | Intangibles:





| |                               
| | ------------------------------
| | New Accounting Pronouncements:





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Statement of Financial Accounting Standards No. 151,
    Inventory Costs, an amendment to Accounting Research
    Bulletin No. 43, Chapter 4
    (SFAS No. 151). SFAS No. 151
    amends the guidance in ARB No. 43, Chapter 4,
    Inventory Pricing to clarify the accounting for
    abnormal amounts of idle facility expense, freight, handling
    costs, and wasted material (spoilage). Paragraph 5 of ARB
    No. 43, Chapter 4, previously stated ...under
    some circumstances, items such as idle facility expense,
    excessive spoilage, double freight, and rehandling costs may be
    so abnormal as to require treatment as

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | current period charges.... SFAS No. 151 requires
    that those items be recognized as current period charges
    regardless of whether they meet the criterion of so
    abnormal. In addition, SFAS No. 151 requires
    that allocation of fixed production overheads to the costs of
    conversion be based on the normal capacity of the production
    facilities. SFAS No. 151 is effective for inventory
    costs incurred during fiscal years beginning after June 30,
    2005 and the provisions of this statement shall be applied
    prospectively. The adoption of SFAS No. 151 did not
    impact the Companys financial statements.                                                                                                                                                                                                                      
|
| | Statement of Financial Accounting Standards No. 153,
    Exchanges of Nonmonetary Assets, an amendment of APB
    Opinion No. 29 (SFAS No. 153).
    SFAS No. 153 amends APB Opinion No. 29 to
    eliminate the exception for nonmonetary exchanges of similar
    productive assets and replaces it with a general exception for
    exchanges of nonmonetary assets that do not have commercial
    substance. A nonmonetary exchange has commercial substance if
    the future cash flows of the entity are expected to change
    significantly as a result of the exchange.
    SFAS No. 153 is effective for nonmonetary asset
    exchanges occurring in fiscal periods beginning after
    June 15, 2005. The provisions of this statement shall be
    applied prospectively. The adoption of SFAS No. 153
    did not impact the Companys financial statements.





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | FASB Interpretation No. 47, Accounting for
    Conditional Asset Retirement Obligations
    (FIN No. 47). FIN No. 47
    clarifies that the term conditional asset retirement
    obligation as used in FASB Statement No. 143,
    Accounting for Asset Retirement Obligations
    (ARO) refers to a legal obligation to perform
    an asset retirement activity in which the timing and/or method
    of settlement are conditional on a future event that may or may
    not be within the control of the entity. The obligation to
    perform the asset retirement activity is unconditional even
    though uncertainty exists about the timing and/or method of
    settlement. Thus, the timing and/or method of settlement may be
    conditional on a future event. Accordingly, an entity is
    required to recognize a liability for the fair value of a
    conditional ARO if the fair value of the liability can be
    reasonably estimated. The fair value of a liability for the
    conditional ARO should be recognized when incurred; generally
    upon acquisition, construction, or development and/or through
    the normal operation of the asset. Uncertainty about the timing
    and/or method of settlement of a conditional ARO should be
    factored into the measurement of the liability when sufficient
    information exists. FIN No. 47 also clarifies when an
    entity would have sufficient information to reasonably estimate
    the fair value of an ARO. FIN No. 47 is effective no
    later than the end of fiscal years ending after
    December 15, 2005. The Company anticipates that the
    adoption of FIN No. 47 will not result in a material
    impact on the Companys financial statements.





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Statement of Financial Accounting Standards No. 123,
    Share-Based Payment (revised 2004)
    (SFAS No. 123). This Statement is a
    revision of Statement of Financial Accounting Standards
    No. 123, Accounting for Stock-Based
    Compensation and supercedes Accounting Principles Board
    Opinion No. 25, Accounting for Stock Issued to
    Employees, and its related implementation guidance. This
    Statement establishes standards for the accounting for
    transactions in which an entity exchanges its equity instruments
    for goods or services. It also addresses transactions in which
    an entity incurs liabilities in exchange for goods or services
    that are based on the fair value of the entitys equity
    instruments or may be settled by the issuance of those equity
    instruments. This Statement focuses primarily on accounting for
    transactions in which an entity obtains employee services in
    share-based payment transactions. This Statement does not change
    the accounting guidance for share-based payment transactions
    with parties other than employees provided in
    SFAS No. 123 as originally issued, and it does not
    address the accounting for employee share ownership plans. This
    Statement applies to all awards granted after the effective date
    and to awards modified, repurchased, or cancelled after that
    date. The cumulative effect of initially applying this
    Statement, if any, is recognized as of the required effective
    date. SFAS No. 123, as

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)




| |                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | revised, is effective as of the beginning of the first annual
    reporting period that begins after December 31, 2005. The
    Company anticipates that the adoption of this revision of
    SFAS No. 123 will not result in a material impact on
    the Companys financial statements.



|   |                           
|-- | --------------------------
|2. | Belgium Plant Transactions















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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)












|   |                        
|-- | -----------------------
|3. | Discontinued Operations



| |        
| | -------
| | Wychem:



|                   |                                              |                    |   |       | 
|------------------ | -------------------------------------------- | ------------------ | - | ----- | 
|                   |                                              | Three Months Ended |  
|                   |                                              | September 30, 2004 |  
|                   |                                              |                    |  
|OPERATING RESULTS: |                                              |                    |   |      
|                   | Net sales                                    |                    | $ | 1,378 | 
|                   | Cost of goods sold                           |                    |   | 926   | 
|                   | Selling, general and administrative expenses |                    |   | 165   | 
|                   |                                              |                    |  
|                   | Income before income taxes                   |                    |   | 287   | 
|                   | Provision for income taxes                   |                    |   | 80    | 
|                   |                                              |                    |  
|                   | Income from operations                       |                    | $ | 207   | 
|                   |                                              |                    |  
|                   | Depreciation and amortization                |                    | $ | 100   | 
|                   |                                              |                    |  



|   |     
|-- | ----
|4. | Debt



| |                       
| | ----------------------
| | Loans Payable to Banks





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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)










| |               
| | --------------
| | Long-Term Debt

|                                           |  |                    |         |  |               |   |         | 
|------------------------------------------ |  | ------------------ | ------- |  | ------------- | - | ------- | 
|                                           |  | As of              |        
|                                           |  |                    |        
|                                           |  | September 30, 2005 |         |  | June 30, 2005 |  
|                                           |  |                    |         |  |               |  
|Senior secured notes due December 1, 2007  |  | $                  | 127,491 |  |               | $ | 127,491 | 
|Senior subordinated notes due June 1, 2008 |  |                    | 48,029  |  |               |   | 48,029  | 
|Foreign bank loans                         |  |                    | 1,891   |  |               |   | 2,606   | 
|                                           |  |                    |         |  |               |  
|                                           |  |                    | 177,411 |  |               |   | 178,126 | 
|Less: current maturities                   |  |                    | 1,000   |  |               |   | 1,625   | 
|                                           |  |                    |         |  |               |  
|                                           |  | $                  | 176,411 |  |               | $ | 176,501 | 
|                                           |  |                    |         |  |               |  





|   |                       
|-- | ----------------------
|5. | Employee Benefit Plans



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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)




|                                               |  |               |      |   |      |   |      |  
|---------------------------------------------- |  | ------------- | ---- | - | ---- | - | ---- | -
|                                               |  | Three Months  |     
|                                               |  | Ended         |     
|                                               |  | September 30, |     
|                                               |  |               |     
|Domestic Pension Expense                       |  | 2005          |      |   | 2004 |  
|                                               |  |               |      |   |      |  
|Service cost  benefits earned during the year |  | $             | 392  |   |      | $ | 287  |  
|Interest cost on benefit obligation            |  |               | 252  |   |      |   | 164  |  
|Expected return on plan assets                 |  |               | (240 | ) |      |   | (150 | )
|Amortization of prior service costs            |  |               | (36  | ) |      |   | (17  | )
|Amortization of net actuarial loss             |  |               | 34   |   |      |   | 2    |  
|                                               |  |               |      |   |      |  
|Net periodic pension cost  domestic           |  | $             | 402  |   |      | $ | 286  |  
|                                               |  |               |      |   |      |  

|                                               |  |               |     |   |      |   |     |  
|---------------------------------------------- |  | ------------- | --- | - | ---- | - | --- | -
|                                               |  | Three Months  |    
|                                               |  | Ended         |    
|                                               |  | September 30, |    
|                                               |  |               |    
|International Pension Expense                  |  | 2005          |     |   | 2004 |  
|                                               |  |               |     |   |      |  
|Service cost  benefits earned during the year |  | $             | 126 |   |      | $ | 122 |  
|Interest cost on benefit obligation            |  |               | 112 |   |      |   | 98  |  
|Expected return on plan assets                 |  |               | (96 | ) |      |   | (79 | )
|Amortization of net actuarial loss             |  |               |    |   |      |   | 6   |  
|                                               |  |               |     |   |      |  
|Net periodic pension cost  international      |  | $             | 142 |   |      | $ | 147 |  
|                                               |  |               |     |   |      |  



|   |              
|-- | -------------
|6. | Contingencies



| |            
| | -----------
| | Litigation:





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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)


















| |                           
| | --------------------------
| | Environmental Remediation:



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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)














|   |                  
|-- | -----------------
|7. | Business Segments





|                                      |  |           |        |  |            |   |        |              |  |   |           |  |  |       |        |   |  |   |        | 
|------------------------------------- |  | --------- | ------ |  | ---------- | - | ------ | ------------ |  | - | --------- |  |  | ----- | ------ | - |  | - | ------ | 
|                                      |  | Animal    |        |  |            |   |        |              |  |   |          
|                                      |  | Health &  |        |  | Industrial |   |        |              |  |   |           | 
|                                      |  | Nutrition |        |  | Chemicals  |   |        | Distribution |  |   | Corporate |  |  | Total |       
|                                      |  |           |        |  |            |   |        |              |  |   |           |  |  |       |       
|Three Months Ended September 30, 2005 |  |           |        |  |            |   |        |              |  |   |           |  |  |       |        |   |  |   |        | 
|Net sales                             |  | $         | 72,229 |  |            | $ | 11,834 |              |  | $ | 8,508     |  |  | $     |       |   |  | $ | 92,571 | 
|Operating income (loss)               |  |           | 4,571  |  |            |   | 1,289  |              |  |   | 1,435     |  |  |       | (3,200 | ) |  |   | 4,095  | 
|Depreciation and amortization         |  |           | 4,889  |  |            |   | 393    |              |  |   | 6         |  |  |       | 74     |   |  |   | 5,362  | 

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)




|                                      |  |   |         |  |  |   |        |  |  |   |       |  |  |   |        |   |  |   |         | 
|------------------------------------- |  | - | ------- |  |  | - | ------ |  |  | - | ----- |  |  | - | ------ | - |  | - | ------- | 
|Three Months Ended September 30, 2004 |  |   |         |  |  |   |        |  |  |   |       |  |  |   |        |   |  |   |         | 
|Net sales                             |  | $ | 65,342  |  |  | $ | 13,430 |  |  | $ | 8,125 |  |  | $ |       |   |  | $ | 86,897  | 
|Operating income (loss)               |  |   | 7,625   |  |  |   | 1,191  |  |  |   | 1,054 |  |  |   | (3,538 | ) |  |   | 6,332   | 
|Depreciation and amortization         |  |   | 2,195   |  |  |   | 403    |  |  |   | 2     |  |  |   | 64     |   |  |   | 2,664   | 
|Identifiable Assets                   |  |   |         |  |  |   |        |  |  |   |       |  |  |   |        |   |  |   |         | 
|At September 30, 2005                 |  | $ | 204,303 |  |  | $ | 22,864 |  |  | $ | 7,568 |  |  | $ | 14,172 |   |  | $ | 248,907 | 
|At June 30, 2005                      |  |   | 204,799 |  |  |   | 21,473 |  |  |   | 8,092 |  |  |   | 18,693 |   |  |   | 253,057 | 



|   |                                   
|-- | ----------------------------------
|8. | Consolidating Financial Statements









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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)


CONDENSED CONSOLIDATING BALANCE SHEET


As of September 30, 2005


|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |        |       |          |          |          |         |         |         |         |         |  
|---------------------------------------------- | ---------------------------------------------- | --------------------------------------------------------------- | ------------------------------------ | -------------- | ------------ | ------- | ------- | ------- | ------ | ------- | --------- | ------- | ------------- | ------------ | ------ | ------------- | ----------- | ------- | ------- | ------------ | ------ | ----- | -------- | -------- | -------- | ------- | ------- | ------- | ------- | ------- | -
|                                               |                                                |                                                                 |                                      | U.S. Guarantor |              |         | Dutch   |         |        | Belgium |           |         | Non-Guarantor |              |        | Consolidation |             |         | PAHC    |             
|                                               |                                                | PAHC                                                            |                                      |                | Subsidiaries |         |         | Issuer  |        |         | Guarantor |         |               | Subsidiaries |        |               | Adjustments |         |         | Consolidated |       
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|ASSETS                                        
|CURRENT ASSETS:                                |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |        |       |          |          |          |         |         |        
|                                               | Cash and cash equivalents                      |                                                                 | $                                    | 422            |              |         | $       | 1,554   |        |         | $         |        |               |              | $      | 1,390         |             |         | $       | 6,788        |        |       | $        |         |          |         | $       | 10,154  |        
|                                               | Trade receivables                              |                                                                 |                                      | 3,144          |              |         |         | 24,234  |        |         |           |        |               |              |        | 2,879         |             |         |         | 20,863       |        |       |          |         |          |         |         | 51,120  |        
|                                               | Other receivables                              |                                                                 |                                      | 590            |              |         |         | 1,250   |        |         |           |        |               |              |        | 893           |             |         |         | 1,562        |        |       |          |         |          |         |         | 4,295   |        
|                                               | Inventory                                      |                                                                 |                                      | 2,522          |              |         |         | 38,384  |        |         |           |        |               |              |        | 29,104        |             |         |         | 29,251       |        |       |          |         |          |         |         | 99,261  |        
|                                               | Prepaid expenses and other                     |                                                                 |                                      | 3,448          |              |         |         | 793     |        |         |           |        |               |              |        | 1,547         |             |         |         | 6,865        |        |       |          |         |          |         |         | 12,653  |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                | TOTAL CURRENT ASSETS                                            |                                      |                | 10,126       |         |         |         | 66,215 |         |           |         |              |              |        |               | 35,813      |         |         |              | 65,329 |       |          |          |         |         |         |         | 177,483 |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|Property, plant & equipment, net               |                                                |                                                                 | 1,142                                |                |              |         | 13,757  |         |        |         |          |         |               |              | 4,889  |               |             |         | 28,921  |              |        |       |         |          |          |         | 48,709  |        
|Intangibles, net                               |                                                |                                                                 |                                     |                |              |         | 3,721   |         |        |         |          |         |               |              | 1,282  |               |             |         | 4,826   |              |        |       |         |          |          |         | 9,829   |        
|Other assets                                   |                                                |                                                                 | 11,171                               |                |              |         | 755     |         |        |         |          |         |               |              |       |               |             |         | 960     |              |        |       |         |          |          |         | 12,886  |        
|Investment in subsidiaries                     |                                                |                                                                 | 99,845                               |                |              |         |        |         |        |         | (18,618   | )       |               |              |       |               |             |         |        |              |        |       | (81,227  | )        |          |         |        |        
|Intercompany                                   |                                                |                                                                 | 13,845                               |                |              |         | 91,096  |         |        |         | 31,899    |         |               |              | 1,181  |               |             |         | (17,553 | )            |        |       | (120,468 | )        |          |         |        |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                | $                                                               | 136,129                              |                |              | $       | 175,544 |         |        | $       | 13,281    |         |               | $            | 43,165 |               |             | $       | 82,483  |              |        | $     | (201,695 | )        |          | $       | 248,907 |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|                                              
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|CURRENT LIABILITIES:                           |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |        |       |          |          |          |         |         |        
|                                               | Cash overdraft                                 |                                                                 | $                                    |               |              |         | $       | 413     |        |         | $         |        |               |              | $      |              |             |         | $       |             |        |       | $        |         |          |         | $       | 413     |        
|                                               | Loan payable to banks                          |                                                                 |                                      | 4,285          |              |         |         |        |        |         |           |        |               |              |        |              |             |         |         | 40           |        |       |          |         |          |         |         | 4,325   |        
|                                               | Current portion of long-term debt              |                                                                 |                                      |               |              |         |         |        |        |         |           |        |               |              |        |              |             |         |         | 1,000        |        |       |          |         |          |         |         | 1,000   |        
|                                               | Accounts payable                               |                                                                 |                                      | 997            |              |         |         | 18,469  |        |         |           |        |               |              |        | 932           |             |         |         | 12,108       |        |       |          |         |          |         |         | 32,506  |        
|                                               | Accrued expenses and other                     |                                                                 |                                      | 14,732         |              |         |         | 7,457   |        |         |           | 2,584   |               |              |        | 22,160        |             |         |         | 12,836       |        |       |          |         |          |         |         | 59,769  |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                | TOTAL CURRENT LIABILITIES                                       |                                      |                | 20,014       |         |         |         | 26,339 |         |           |         | 2,584         |              |        |               | 23,092      |         |         |              | 25,984 |       |          |          |         |         |         |         | 98,013  |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|Long-term debt                                 |                                                |                                                                 | 151,236                              |                |              |         |        |         |        |         | 24,284    |         |               |              |       |               |             |         | 891     |              |        |       |         |          |          |         | 176,411 |        
|Other liabilities                              |                                                |                                                                 | 10,454                               |                |              |         | 5,460   |         |        |         |          |         |               |              | 1,998  |               |             |         | 2,146   |              |        |       |         |          |          |         | 20,058  |        
|Intercompany debt                              |                                                |                                                                 |                                     |                |              |         | 28,536  |         |        |         | 5,044     |         |               |              | 36,693 |               |             |         | 50,195  |              |        |       | (120,468 | )        |          |         |        |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                | TOTAL LIABILITIES                                               |                                      |                | 181,704      |         |         |         | 60,335 |         |           |         | 31,912        |              |        |               | 61,783      |         |         |              | 79,216 |       |          |          | (120,468 | )       |         |         | 294,482 |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|STOCKHOLDERS EQUITY (DEFICIT):                |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |        |       |          |          |          |         |         |        
|                                               | Preferred stock                                |                                                                 |                                      | 521            |              |         |         |        |        |         |           |        |               |              |        |              |             |         |         |             |        |       |          |         |          |         |         | 521     |        
|                                               | Common stock                                   |                                                                 |                                      | 2              |              |         |         | 33      |        |         |           |        |               |              |        |              |             |         |         |             |        |       |          | (33      | )        |         |         | 2       |        
|                                               | Paid-in capital                                |                                                                 |                                      | 27,260         |              |         |         | 108,383 |        |         |           | 21      |               |              |        | 52            |             |         |         | 1,537        |        |       |          | (109,993 | )        |         |         | 27,260  |        
|                                               | Retained earnings (accumulated deficit)        |                                                                 |                                      | (77,170        | )            |         |         | 6,880   |        |         |           | (22,576 | )             |              |        | (22,594       | )           |         |         | 1,754        |        |       |          | 36,536   |          |         |         | (77,170 | )      
|                                               | Accumulated other comprehensive income (loss): |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |        |       |          |          |          |         |         |         |        
|                                               |                                                | Gain on derivative instruments, net of income taxes             |                                      |                | 223          |         |         |         | 223    |         |           |         |              |              |        |               |            |         |         |              |       |       |          |          | (223     | )       |         |         | 223     |        
|                                               |                                                | Cumulative currency translation adjustment, net of income taxes |                                      |                | 3,589        |         |         |         | (310   | )       |           |         | 3,924         |              |        |               | 3,924       |         |         |              | (24    | )     |          |          | (7,514   | )       |         |         | 3,589   |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                |                                                                 | TOTAL STOCKHOLDERS EQUITY (DEFICIT) |                |              | (45,575 | )       |         |        | 115,209 |           |         |               | (18,631      | )      |               |             | (18,618 | )       |              |        | 3,267 |          |          |          | (81,227 | )       |         |         | (45,575 | )
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                | $                                                               | 136,129                              |                |              | $       | 175,544 |         |        | $       | 13,281    |         |               | $            | 43,165 |               |             | $       | 82,483  |              |        | $     | (201,695 | )        |          | $       | 248,907 |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |        |         |           |         |               |              |        |               |             |         |         |              |       

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS


For The Three Months Ended September 30, 2005


|                                                                             |                                   |      |       |                |              |   |        |        |   |         |           |        |               |              |        |               |             |   |        |              |   |   |         |        |   |   |        |        |  
|---------------------------------------------------------------------------- | --------------------------------- | ---- | ----- | -------------- | ------------ | - | ------ | ------ | - | ------- | --------- | ------ | ------------- | ------------ | ------ | ------------- | ----------- | - | ------ | ------------ | - | - | ------- | ------ | - | - | ------ | ------ | -
|                                                                             |                                   |      |       | U.S. Guarantor |              |   | Dutch  |        |   | Belgium |           |        | Non-Guarantor |              |        | Consolidation |             |   | PAHC   |             
|                                                                             |                                   | PAHC |       |                | Subsidiaries |   |        | Issuer |   |         | Guarantor |        |               | Subsidiaries |        |               | Adjustments |   |        | Consolidated |  
|                                                                             |                                   |      |       |                |              |   |        |        |   |         |           |        |               |              |        |               |             |   |        |              |  
|NET SALES                                                                    |                                   | $    | 7,329 |                |              | $ | 55,814 |        |   | $       |          |        |               | $            | 2,937  |               |             | $ | 26,491 |              |   | $ |        |        |   | $ | 92,571 |       
|NET SALES  INTERCOMPANY                                                     |                                   |      | 50    |                |              |   | 48     |        |   |         |          |        |               |              | 12,839 |               |             |   | 2,165  |              |   |   | (15,102 | )      |   |   |       |       
|COST OF GOODS SOLD (includes Belgium Plant Transactions costs of
    $3,503) |                                   |      | 5,180 |                |              |   | 42,528 |        |   |         |          |        |               |              | 15,292 |               |             |   | 25,513 |              |   |   | (15,102 | )      |   |   | 73,411 |       
|                                                                             |                                   |      |       |                |              |   |        |        |   |         |           |        |               |              |        |               |             |   |        |              |  
|                                                                             | GROSS PROFIT                      |      |       | 2,199          |              |   |        | 13,334 |   |         |           |       |               |              |        | 484           |             |   |        | 3,143        |   |   |         |       |   |   |        | 19,160 |  
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                 |                                   |      | 4,192 |                |              |   | 6,562  |        |   |         | 19        |        |               |              | 582    |               |             |   | 3,710  |              |   |   |        |        |   |   | 15,065 |       
|                                                                             |                                   |      |       |                |              |   |        |        |   |         |           |        |               |              |        |               |             |   |        |              |  
|                                                                             | OPERATING INCOME (LOSS)           |      |       | (1,993         | )            |   |        | 6,772  |   |         |           | (19    | )             |              |        | (98           | )           |   |        | (567         | ) |   |         |       |   |   |        | 4,095  |  
|OTHER:                                                                       |                                   |      |       |                |              |   |        |        |   |         |           |        |               |              |        |               |             |   |        |              |   |   |         |        |   |   |        |       
|                                                                             | Interest expense                  |      |       | 5,595          |              |   |        |       |   |         |           | 789    |               |              |        | 4             |             |   |        | 203          |   |   |         |       |   |   |        | 6,591  |  
|                                                                             | Interest (income)                 |      |       | (44            | )            |   |        | (5     | ) |         |           |       |               |              |        |              |             |   |        | (41          | ) |   |         |       |   |   |        | (90    | )
|                                                                             | Other (income) expense, net       |      |       | 1              |              |   |        | (142   | ) |         |           | (1     | )             |              |        | (77           | )           |   |        | (454         | ) |   |         |       |   |   |        | (673   | )
|                                                                             | Intercompany interest and other   |      |       | (6,206         | )            |   |        | 5,128  |   |         |           | (797   | )             |              |        | 1,096         |             |   |        | 779          |   |   |         |       |   |   |        |       |  
|                                                                             | Loss relating to subsidiaries     |      |       | 1,272          |              |   |        |       |   |         |           | 1,121  |               |              |        |              |             |   |        |             |   |   |         | (2,393 | ) |   |        |       |  
|                                                                             |                                   |      |       |                |              |   |        |        |   |         |           |        |               |              |        |               |             |   |        |              |  
|                                                                             | INCOME (LOSS) BEFORE INCOME TAXES |      |       | (2,611         | )            |   |        | 1,791  |   |         |           | (1,131 | )             |              |        | (1,121        | )           |   |        | (1,054       | ) |   |         | 2,393  |   |   |        | (1,733 | )
|PROVISION FOR INCOME TAXES                                                   |                                   |      | 180   |                |              |   | 99     |        |   |         |          |        |               |              |       |               |             |   | 779    |              |   |   |        |        |   |   | 1,058  |       
|                                                                             |                                   |      |       |                |              |   |        |        |   |         |           |        |               |              |        |               |             |   |        |              |  
|                                                                             | NET INCOME (LOSS)                 |      | $     | (2,791         | )            |   | $      | 1,692  |   |         | $         | (1,131 | )             |              | $      | (1,121        | )           |   | $      | (1,833       | ) |   | $       | 2,393  |   |   | $      | (2,791 | )
|                                                                             |                                   |      |       |                |              |   |        |        |   |         |           |        |               |              |        |               |             |   |        |              |  

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PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS


For the Three Months Ended September 30, 2005


|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |        |      |   |       |   |        |        |        |        |        |  
|---------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------- | -------------- | ------------ | ----- | ----- | ------ | ---- | ------- | --------- | ------ | ------------- | ------------ | ----- | ------------- | ----------- | ------ | ------ | ------------ | ------ | ---- | - | ----- | - | ------ | ------ | ------ | ------ | ------ | -
|                                                     |                                                                                                     |                                                                                                                     |                                                 | U.S. Guarantor |              |       | Dutch |        |      | Belgium |           |        | Non-Guarantor |              |       | Consolidation |             |        | PAHC   |             
|                                                     |                                                                                                     | PAHC                                                                                                                |                                                 |                | Subsidiaries |       |       | Issuer |      |         | Guarantor |        |               | Subsidiaries |       |               | Adjustments |        |        | Consolidated |       
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|OPERATING ACTIVITIES:                                |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |        |      |   |       |   |        |        |       
|                                                     | Net income (loss)                                                                                   |                                                                                                                     | $                                               | (2,791         | )            |       | $     | 1,692  |      |         | $         | (1,131 | )             |              | $     | (1,121        | )           |        | $      | (1,833       | )      |      | $ | 2,393 |   |        | $      | (2,791 | )     
|                                                     | Adjustments to reconcile net income (loss) to net cash provided
    (used) by operating activities: |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |        |      |   |       |   |        |        |        |       
|                                                     |                                                                                                     | Depreciation and amortization (includes accelerated depreciation
    from the Belgium Plant Transactions of $2,747) |                                                 |                | 74           |       |       |        | 702  |         |           |        |              |              |       |               | 3,416       |        |        |              | 1,170  |      |   |       |  |        |        |        | 5,362  |       
|                                                     |                                                                                                     | Amortization of deferred financing costs                                                                            |                                                 |                | 828          |       |       |        |     |         |           |        |              |              |       |               |            |        |        |              |       |      |   |       |  |        |        |        | 828    |       
|                                                     |                                                                                                     | Net gain from sales of assets                                                                                       |                                                 |                |             |       |       |        |     |         |           |        |              |              |       |               | (529        | )      |        |              | (2     | )    |   |       |  |        |        |        | (531   | )     
|                                                     |                                                                                                     | Effects of changes in foreign currency                                                                              |                                                 |                |             |       |       |        | (190 | )       |           |        |              |              |       |               | 106         |        |        |              | (389   | )    |   |       |  |        |        |        | (473   | )     
|                                                     |                                                                                                     | Other                                                                                                               |                                                 |                | 1            |       |       |        | 25   |         |           |        |              |              |       |               |            |        |        |              | (28    | )    |   |       |  |        |        |        | (2     | )     
|                                                     |                                                                                                     | Changes in operating assets and liabilities:                                                                        |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |        |      |   |       |   |        |        |        |       |       
|                                                     |                                                                                                     |                                                                                                                     | Accounts receivable                             |                |              | (317  | )     |        |      | 349     |           |        |               |             |       |               |             | 1,128  |        |              |        | 752  |   |       |   |       |        |        |        | 1,912  |  
|                                                     |                                                                                                     |                                                                                                                     | Inventory                                       |                |              | 147   |       |        |      | (1,529  | )         |        |               |             |       |               |             | 565    |        |              |        | (810 | ) |       |   |       |        |        |        | (1,627 | )
|                                                     |                                                                                                     |                                                                                                                     | Prepaid expenses and other                      |                |              | 629   |       |        |      | (71     | )         |        |               |             |       |               |             | (617   | )      |              |        | (238 | ) |       |   |       |        |        |        | (297   | )
|                                                     |                                                                                                     |                                                                                                                     | Other assets                                    |                |              | 304   |       |        |      | (7      | )         |        |               |             |       |               |             |       |        |              |        | 7    |   |       |   |       |        |        |        | 304    |  
|                                                     |                                                                                                     |                                                                                                                     | Accounts payable                                |                |              | (686  | )     |        |      | (1,675  | )         |        |               |             |       |               |             | (2,433 | )      |              |        | 739  |   |       |   |       |        |        |        | (4,055 | )
|                                                     |                                                                                                     |                                                                                                                     | Accrued expenses and other                      |                |              | 4,198 |       |        |      | (1,874  | )         |        |               | 789          |       |               |             | 1,492  |        |              |        | 179  |   |       |   |       |        |        |        | 4,784  |  
|                                                     |                                                                                                     |                                                                                                                     | Accrued costs of the Belgium Plant Transactions |                |              |      |       |        |      |        |           |        |               |             |       |               |             | (479   | )      |              |        |     |   |       |   |       |        |        |        | (479   | )
|                                                     |                                                                                                     |                                                                                                                     | Intercompany                                    |                |              | (702  | )     |        |      | 2,826   |           |        |               | 325          |       |               |             | (980   | )      |              |        | 924  |   |       |   | (2,393 | )      |        |        |       |  
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|                                                     |                                                                                                     | NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                                                    |                                                 |                | 1,685        |       |       |        | 248  |         |           |        | (17           | )            |       |               | 548         |        |        |              | 471    |      |   |       |  |        |        |        | 2,935  |       
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|INVESTING ACTIVITIES:                                |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |        |      |   |       |   |        |        |       
|                                                     | Capital expenditures                                                                                |                                                                                                                     |                                                 | (38            | )            |       |       | (704   | )    |         |           |       |               |              |       | (108          | )           |        |        | (1,549       | )      |      |   |      |   |        |        | (2,399 | )     
|                                                     | Proceeds from sale of assets                                                                        |                                                                                                                     |                                                 |               |              |       |       |       |      |         |           |       |               |              |       | 716           |             |        |        | 22           |        |      |   |      |   |        |        | 738    |       
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|                                                     |                                                                                                     | NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                                                    |                                                 |                | (38          | )     |       |        | (704 | )       |           |        |              |              |       |               | 608         |        |        |              | (1,527 | )    |   |       |  |        |        |        | (1,661 | )     
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|FINANCING ACTIVITIES:                                |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |        |      |   |       |   |        |        |       
|                                                     | Net increase (decrease) in cash overdraft                                                           |                                                                                                                     |                                                 |               |              |       |       | 223    |      |         |           |       |               |              |       |              |             |        |        |             |        |      |   |      |   |        |        | 223    |       
|                                                     | Net increase (decrease) in short-term debt                                                          |                                                                                                                     |                                                 | (3,715         | )            |       |       |       |      |         |           |       |               |              |       |              |             |        |        | 2            |        |      |   |      |   |        |        | (3,713 | )     
|                                                     | Proceeds from long-term debt                                                                        |                                                                                                                     |                                                 |               |              |       |       |       |      |         |           |       |               |              |       |              |             |        |        | 55           |        |      |   |      |   |        |        | 55     |       
|                                                     | Payments of long-term debt                                                                          |                                                                                                                     |                                                 |               |              |       |       |       |      |         |           |       |               |              |       |              |             |        |        | (717         | )      |      |   |      |   |        |        | (717   | )     
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|                                                     |                                                                                                     | NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                                                    |                                                 |                | (3,715       | )     |       |        | 223  |         |           |        |              |              |       |               |            |        |        |              | (660   | )    |   |       |  |        |        |        | (4,152 | )     
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|EFFECT OF EXCHANGE RATE CHANGES ON CASH              |                                                                                                     |                                                                                                                     |                                                |                |              |       |      |        |      |         |          |        |               |              | (21   | )             |             |        | 52     |              |        |      |   |       |   |        | 31     |       
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                                     |                                                                                                                     | (2,068                                          | )              |              |       | (233  | )      |      |         | (17       | )      |               |              | 1,135 |               |             |        | (1,664 | )            |        |      |  |       |   |        | (2,847 | )     
|CASH AND CASH EQUIVALENTS at beginning of period     |                                                                                                     |                                                                                                                     | 2,490                                           |                |              |       | 1,787 |        |      |         | 17        |        |               |              | 255   |               |             |        | 8,452  |              |        |      |  |       |   |        | 13,001 |       
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       
|CASH AND CASH EQUIVALENTS at end of period           |                                                                                                     | $                                                                                                                   | 422                                             |                |              | $     | 1,554 |        |      | $       |          |        |               | $            | 1,390 |               |             | $      | 6,788  |              |        | $    |  |       |   | $      | 10,154 |       
|                                                     |                                                                                                     |                                                                                                                     |                                                 |                |              |       |       |        |      |         |           |        |               |              |       |               |             |        |        |              |       

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##### Table of Contents



PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)


CONDENSED CONSOLIDATING BALANCE SHEET


As of June 30, 2005


|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |        |        |          |          |        |          |         |         |       |         |  
|---------------------------------------------- | ---------------------------------------------- | --------------------------------------------------------------- | ------------------------------------ | -------------- | ------------ | ------- | ------- | ------- | ---- | ------- | --------- | ------- | ------------- | ------------ | ------ | ------------- | ----------- | ------- | ------- | ------------ | ------ | ------ | -------- | -------- | ------ | -------- | ------- | ------- | ----- | ------- | -
|                                               |                                                |                                                                 |                                      | U.S. Guarantor |              |         | Dutch   |         |      | Belgium |           |         | Non-Guarantor |              |        | Consolidation |             |         | PAHC    |             
|                                               |                                                | PAHC                                                            |                                      |                | Subsidiaries |         |         | Issuer  |      |         | Guarantor |         |               | Subsidiaries |        |               | Adjustments |         |         | Consolidated |       
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|ASSETS                                        
|CURRENT ASSETS:                                |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |        |        |          |          |        |          |         |        
|                                               | Cash and cash equivalents                      |                                                                 | $                                    | 2,490          |              |         | $       | 1,787   |      |         | $         | 17      |               |              | $      | 255           |             |         | $       | 8,452        |        |        | $        |         |        |          | $       | 13,001  |      
|                                               | Trade receivables                              |                                                                 |                                      | 2,828          |              |         |         | 24,791  |      |         |           |        |               |              |        | 3,980         |             |         |         | 21,207       |        |        |          |         |        |          |         | 52,806  |      
|                                               | Other receivables                              |                                                                 |                                      | 549            |              |         |         | 971     |      |         |           |        |               |              |        | 804           |             |         |         | 1,287        |        |        |          |         |        |          |         | 3,611   |      
|                                               | Inventory                                      |                                                                 |                                      | 2,669          |              |         |         | 36,289  |      |         |           |        |               |              |        | 29,691        |             |         |         | 27,972       |        |        |          |         |        |          |         | 96,621  |      
|                                               | Prepaid expenses and other                     |                                                                 |                                      | 4,118          |              |         |         | 921     |      |         |           |        |               |              |        | 1,203         |             |         |         | 6,545        |        |        |          |         |        |          |         | 12,787  |      
|                                               |                                                |                                                                 | TOTAL CURRENT ASSETS                 |                |              | 12,654  |         |         |      | 64,759  |           |         |               | 17           |        |               |             | 35,933  |         |              |        | 65,463 |          |          |        |         |         |         |       | 178,826 |  
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|Property, plant & equipment, net               |                                                |                                                                 | 1,178                                |                |              |         | 13,564  |         |      |         |          |         |               |              | 8,122  |               |             |         | 27,096  |              |        |        |         |          |        |          | 49,960  |        
|Intangibles, net                               |                                                |                                                                 |                                     |                |              |         | 3,827   |         |      |         |          |         |               |              | 1,339  |               |             |         | 5,035   |              |        |        |         |          |        |          | 10,201  |        
|Other assets                                   |                                                |                                                                 | 12,303                               |                |              |         | 796     |         |      |         |          |         |               |              |       |               |             |         | 971     |              |        |        |         |          |        |          | 14,070  |        
|Investment in subsidiaries                     |                                                |                                                                 | 101,464                              |                |              |         |        |         |      |         | (17,469   | )       |               |              |       |               |             |         |        |              |        |        | (83,995  | )        |        |          |        |        
|Intercompany                                   |                                                |                                                                 | 9,384                                |                |              |         | 93,463  |         |      |         | 31,103    |         |               |              | (1,427 | )             |             |         | (14,325 | )            |        |        | (118,198 | )        |        |          |        |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                | $                                                               | 136,983                              |                |              | $       | 176,409 |         |      | $       | 13,651    |         |               | $            | 43,967 |               |             | $       | 84,240  |              |        | $      | (202,193 | )        |        | $        | 253,057 |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|                                              
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)
|CURRENT LIABILITIES:                           |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |        |        |          |          |        |          |         |        
|                                               | Cash overdraft                                 |                                                                 | $                                    |               |              |         | $       | 190     |      |         | $         |        |               |              | $      |              |             |         | $       |             |        |        | $        |         |        |          | $       | 190     |      
|                                               | Loan payable to banks                          |                                                                 |                                      | 8,000          |              |         |         |        |      |         |           |        |               |              |        |              |             |         |         | 38           |        |        |          |         |        |          |         | 8,038   |      
|                                               | Current portion of long-term debt              |                                                                 |                                      |               |              |         |         |        |      |         |           |        |               |              |        |              |             |         |         | 1,625        |        |        |          |         |        |          |         | 1,625   |      
|                                               | Accounts payable                               |                                                                 |                                      | 1,683          |              |         |         | 20,137  |      |         |           |        |               |              |        | 3,320         |             |         |         | 11,207       |        |        |          |         |        |          |         | 36,347  |      
|                                               | Accrued expenses and other                     |                                                                 |                                      | 10,910         |              |         |         | 9,222   |      |         |           | 248     |               |              |        | 21,195        |             |         |         | 12,240       |        |        |          |         |        |          |         | 53,815  |      
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                |                                                                 | TOTAL CURRENT LIABILITIES            |                |              | 20,593  |         |         |      | 29,549  |           |         |               | 248          |        |               |             | 24,515  |         |              |        | 25,110 |          |          |        |         |         |         |       | 100,015 |  
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|Long-term debt                                 |                                                |                                                                 | 151,236                              |                |              |         |        |         |      |         | 24,284    |         |               |              |       |               |             |         | 981     |              |        |        |         |          |        |          | 176,501 |        
|Other liabilities                              |                                                |                                                                 | 10,078                               |                |              |         | 5,364   |         |      |         |          |         |               |              | 1,856  |               |             |         | 4,167   |              |        |        |         |          |        |          | 21,465  |        
|Intercompany debt                              |                                                |                                                                 |                                     |                |              |         | 28,047  |         |      |         | 6,591     |         |               |              | 35,065 |               |             |         | 48,495  |              |        |        | (118,198 | )        |        |          |        |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                |                                                                 | TOTAL LIABILITIES                    |                |              | 181,907 |         |         |      | 62,960  |           |         |               | 31,123       |        |               |             | 61,436  |         |              |        | 78,753 |          |          |        | (118,198 | )       |         |       | 297,981 |  
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|STOCKHOLDERS EQUITY (DEFICIT):                |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |        |        |          |          |        |          |         |        
|                                               | Preferred stock                                |                                                                 |                                      | 521            |              |         |         |        |      |         |           |        |               |              |        |              |             |         |         |             |        |        |          |         |        |          |         | 521     |      
|                                               | Common stock                                   |                                                                 |                                      | 2              |              |         |         | 33      |      |         |           |        |               |              |        |              |             |         |         |             |        |        |          | (33      | )      |          |         | 2       |      
|                                               | Paid-in capital                                |                                                                 |                                      | 27,260         |              |         |         | 108,383 |      |         |           | 21      |               |              |        | 52            |             |         |         | 1,537        |        |        |          | (109,993 | )      |          |         | 27,260  |      
|                                               | Retained earnings (accumulated deficit)        |                                                                 |                                      | (74,379        | )            |         |         | 5,188   |      |         |           | (21,445 | )             |              |        | (21,473       | )           |         |         | 6,074        |        |        |          | 31,656   |        |          |         | (74,379 | )    
|                                               | Accumulated other comprehensive income (loss): |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |        |        |          |          |        |          |         |         |      
|                                               |                                                | Gain on derivative instruments, net of income taxes             |                                      |                | 123          |         |         |         | 123  |         |           |         |              |              |        |               |            |         |         |              |       |        |          |          | (123   | )        |         |         | 123   |        
|                                               |                                                | Cumulative currency translation adjustment, net of income taxes |                                      |                | 1,549        |         |         |         | (278 | )       |           |         | 3,952         |              |        |               | 3,952       |         |         |              | (2,124 | )      |          |          | (5,502 | )        |         |         | 1,549 |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                |                                                                 | TOTAL STOCKHOLDERS EQUITY (DEFICIT) |                |              | (44,924 | )       |         |      | 113,449 |           |         |               | (17,472      | )      |               |             | (17,469 | )       |              |        | 5,487  |          |          |        | (83,995  | )       |         |       | (44,924 | )
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       
|                                               |                                                | $                                                               | 136,983                              |                |              | $       | 176,409 |         |      | $       | 13,651    |         |               | $            | 43,967 |               |             | $       | 84,240  |              |        | $      | (202,193 | )        |        | $        | 253,057 |        
|                                               |                                                |                                                                 |                                      |                |              |         |         |         |      |         |           |         |               |              |        |               |             |         |         |              |       

21



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##### Table of Contents



PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)


CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS


For the Three Months Ended September 30, 2004


|                                             |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |        |   |        |        |        |   |        |        |      |  
|-------------------------------------------- | ------------------------------------------------------------ | ----------------- | ----- | -------------- | ------------ | - | ------ | ------ | ----- | ------- | --------- | ------ | -------------- | ------------ | ----- | ------------- | ----------- | - | ------ | ------------ | ------ | - | ------ | ------ | ------ | - | ------ | ------ | ---- | -
|                                             |                                                              |                   |       | U.S. Guarantor |              |   | Dutch  |        |       | Belgium |           |        | Non-Guarantors |              |       | Consolidation |             |   | PAHC   |             
|                                             |                                                              | PAHC              |       |                | Subsidiaries |   |        | Issuer |       |         | Guarantor |        |                | Subsidiaries |       |               | Adjustments |   |        | Consolidated |       
|                                             |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |       
|NET SALES                                    |                                                              | $                 | 6,393 |                |              | $ | 56,211 |        |       | $       |          |        |                | $            | 1,668 |               |             | $ | 22,625 |              |        | $ |       |        |        | $ | 86,897 |       
|NET SALES  INTERCOMPANY                     |                                                              |                   | 56    |                |              |   | 93     |        |       |         |          |        |                |              | 6,204 |               |             |   | 1,075  |              |        |   | (7,428 | )      |        |   |       |       
|COST OF GOODS SOLD                           |                                                              |                   | 4,738 |                |              |   | 41,516 |        |       |         |          |        |                |              | 4,699 |               |             |   | 21,202 |              |        |   | (7,428 | )      |        |   | 64,727 |       
|                                             |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |       
|                                             | GROSS PROFIT                                                 |                   |       | 1,711          |              |   |        | 14,788 |       |         |           |       |                |              |       | 3,173         |             |   |        | 2,498        |        |   |        |       |        |   |        | 22,170 |     
|SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |                                                              |                   | 4,468 |                |              |   | 6,800  |        |       |         | 6         |        |                |              | 553   |               |             |   | 4,011  |              |        |   |       |        |        |   | 15,838 |       
|                                             |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |       
|                                             | OPERATING INCOME (LOSS)                                      |                   |       | (2,757         | )            |   |        | 7,988  |       |         |           | (6     | )              |              |       | 2,620         |             |   |        | (1,513       | )      |   |        |       |        |   |        | 6,332  |     
|OTHER:                                       |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |        |   |        |        |        |   |        |       
|                                             | Interest expense                                             |                   |       | 4,943          |              |   |        | (2     | )     |         |           | 650    |                |              |       | 11            |             |   |        | 235          |        |   |        |       |        |   |        | 5,837  |     
|                                             | Interest (income)                                            |                   |       | (1             | )            |   |        |       |       |         |           |       |                |              |       |              |             |   |        | (24          | )      |   |        |       |        |   |        | (25    | )   
|                                             | Other (income) expense, net                                  |                   |       | 1              |              |   |        | (228   | )     |         |           |       |                |              |       | (59           | )           |   |        | 310          |        |   |        |       |        |   |        | 24     |     
|                                             | Intercompany interest and other                              |                   |       | (7,527         | )            |   |        | 5,449  |       |         |           | (660   | )              |              |       | 939           |             |   |        | 1,799        |        |   |        |       |        |   |        |       |     
|                                             | (Profit) relating to subsidiaries                            |                   |       | (135           | )            |   |        |       |       |         |           | (1,567 | )              |              |       |              |             |   |        |             |        |   |        | 1,702  |        |   |        |       |     
|                                             |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |       
|                                             | INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |                   |       | (38            | )            |   |        | 2,769  |       |         |           | 1,571  |                |              |       | 1,729         |             |   |        | (3,833       | )      |   |        | (1,702 | )      |   |        | 496    |     
|PROVISION FOR INCOME TAXES                   |                                                              |                   | 310   |                |              |   | 104    |        |       |         |          |        |                |              | 162   |               |             |   | 268    |              |        |   |       |        |        |   | 844    |       
|                                             |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |       
|                                             | INCOME (LOSS) FROM CONTINUING OPERATIONS                     |                   |       | (348           | )            |   |        | 2,665  |       |         |           | 1,571  |                |              |       | 1,567         |             |   |        | (4,101       | )      |   |        | (1,702 | )      |   |        | (348   | )   
|DISCONTINUED OPERATIONS:                     |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |        |   |        |        |        |   |        |       
|                                             | Income from discontinued operations, net of income taxes     |                   |       |               |              |   |        |       |       |         |           |       |                |              |       |              |             |   |        | 207          |        |   |        |       |        |   |        | 207    |     
|                                             | Profit relating to discontinued operations                   |                   |       | 207            |              |   |        |       |       |         |           |       |                |              |       |              |             |   |        |             |        |   |        | (207   | )      |   |        |       |     
|                                             |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |       
|                                             |                                                              | NET INCOME (LOSS) |       | $              | (141         | ) |        | $      | 2,665 |         |           | $      | 1,571          |              |       | $             | 1,567       |   |        | $            | (3,894 | ) |        | $      | (1,909 | ) |        | $      | (141 | )
|                                             |                                                              |                   |       |                |              |   |        |        |       |         |           |        |                |              |       |               |             |   |        |              |       

22



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##### Table of Contents



PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (Continued)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS


For the Three Months Ended September 30, 2004


|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |       |        |   |        |   |       |       |        |        |        |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------ | ------------------------------------------ | -------------- | ------------ | ------ | ----- | ------ | ---- | ------- | --------- | ----- | ------------- | ------------ | --- | ------------- | ----------- | ------ | ----- | ------------ | ----- | ------ | - | ------ | - | ----- | ----- | ------ | ------ | ------ | -
|                                                     |                                                                                                                                |                                                  |                                            | U.S. Guarantor |              |        | Dutch |        |      | Belgium |           |       | Non-Guarantor |              |     | Consolidation |             |        | PAHC  |             
|                                                     |                                                                                                                                | PAHC                                             |                                            |                | Subsidiaries |        |       | Issuer |      |         | Guarantor |       |               | Subsidiaries |     |               | Adjustments |        |       | Consolidated |      
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|OPERATING ACTIVITIES:                                |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |       |        |   |        |   |       |       |       
|                                                     | Net income (loss)                                                                                                              |                                                  | $                                          | (141           | )            |        | $     | 2,665  |      |         | $         | 1,571 |               |              | $   | 1,567         |             |        | $     | (3,894       | )     |        | $ | (1,909 | ) |       | $     | (141   | )     
|                                                     | Adjustment for discontinued operations                                                                                         |                                                  |                                            | (207           | )            |        |       |       |      |         |           |      |               |              |     |              |             |        |       | (207         | )     |        |   | 207    |   |       |       | (207   | )     
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|                                                     | Income (loss) from continuing operations                                                                                       |                                                  |                                            | (348           | )            |        |       | 2,665  |      |         |           | 1,571 |               |              |     | 1,567         |             |        |       | (4,101       | )     |        |   | (1,702 | ) |       |       | (348   | )     
|                                                     | Adjustments to reconcile income (loss) from continuing
    operations to net cash provided (used) by operating
    activities: |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |       |        |   |        |   |       |       |        |       
|                                                     |                                                                                                                                | Depreciation and amortization                    |                                            |                | 64           |        |       |        | 703  |         |           |       |              |              |     |               | 713         |        |       |              | 1,184 |        |   |        |  |       |       |        | 2,664  |       
|                                                     |                                                                                                                                | Amortization of deferred financing costs         |                                            |                | 591          |        |       |        |     |         |           |       |              |              |     |               |            |        |       |              |      |        |   |        |  |       |       |        | 591    |       
|                                                     |                                                                                                                                | Deferred income taxes                            |                                            |                |             |        |       |        |     |         |           |       |              |              |     |               |            |        |       |              | 68    |        |   |        |  |       |       |        | 68     |       
|                                                     |                                                                                                                                | Net gain from sales of assets                    |                                            |                |             |        |       |        |     |         |           |       |              |              |     |               |            |        |       |              | (1    | )      |   |        |  |       |       |        | (1     | )     
|                                                     |                                                                                                                                | Effects of changes in foreign currency           |                                            |                |             |        |       |        | (227 | )       |           |       |              |              |     |               | (59         | )      |       |              | 164   |        |   |        |  |       |       |        | (122   | )     
|                                                     |                                                                                                                                | Other                                            |                                            |                | 3            |        |       |        | 31   |         |           |       |              |              |     |               |            |        |       |              | 14    |        |   |        |  |       |       |        | 48     |       
|                                                     |                                                                                                                                | Changes in operating assets and liabilities:     |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |       |        |   |        |   |       |       |        |        |       
|                                                     |                                                                                                                                |                                                  | Accounts receivable                        |                |              | (161   | )     |        |      | 216     |           |       |               |             |     |               |             | 618    |       |              |       | 4,442  |   |        |   |      |       |        |        | 5,115  |  
|                                                     |                                                                                                                                |                                                  | Inventory                                  |                |              | (1,322 | )     |        |      | 3,251   |           |       |               |             |     |               |             | (5,409 | )     |              |       | (1,356 | ) |        |   |      |       |        |        | (4,836 | )
|                                                     |                                                                                                                                |                                                  | Prepaid expenses and other                 |                |              | 896    |       |        |      | (267    | )         |       |               |             |     |               |             | 107    |       |              |       | 456    |   |        |   |      |       |        |        | 1,192  |  
|                                                     |                                                                                                                                |                                                  | Other assets                               |                |              | (175   | )     |        |      | 173     |           |       |               |             |     |               |             |       |       |              |       | 1      |   |        |   |      |       |        |        | (1     | )
|                                                     |                                                                                                                                |                                                  | Accounts payable                           |                |              | (749   | )     |        |      | (4,435  | )         |       |               |             |     |               |             | (724   | )     |              |       | (2,188 | ) |        |   |      |       |        |        | (8,096 | )
|                                                     |                                                                                                                                |                                                  | Accrued expenses and other                 |                |              | 4,913  |       |        |      | 780     |           |       |               | 650          |     |               |             | 997    |       |              |       | (78    | ) |        |   |      |       |        |        | 7,262  |  
|                                                     |                                                                                                                                |                                                  | Accrued costs of non-completed transaction |                |              | (1,100 | )     |        |      |        |           |       |               |             |     |               |             |       |       |              |       |       |   |        |   |      |       |        |        | (1,100 | )
|                                                     |                                                                                                                                |                                                  | Intercompany                               |                |              | (2,781 | )     |        |      | (1,958  | )         |       |               | (2,238       | )   |               |             | 2,450  |       |              |       | 2,825  |   |        |   | 1,702 |       |        |        |       |  
|                                                     | Cash provided (used) by discontinued operations                                                                                |                                                  |                                            |               |              |        |       |       |      |         |           |      |               |              |     |              |             |        |       | (51          | )     |        |   |       |   |       |       | (51    | )     
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|                                                     |                                                                                                                                | NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES |                                            |                | (169         | )      |       |        | 932  |         |           |       | (17           | )            |     |               | 260         |        |       |              | 1,379 |        |   |        |  |       |       |        | 2,385  |       
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|INVESTING ACTIVITIES:                                |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |       |        |   |        |   |       |       |       
|                                                     | Capital expenditures                                                                                                           |                                                  |                                            | (55            | )            |        |       | (834   | )    |         |           |      |               |              |     | (274          | )           |        |       | (560         | )     |        |   |       |   |       |       | (1,723 | )     
|                                                     | Proceeds from sale of assets                                                                                                   |                                                  |                                            |               |              |        |       |       |      |         |           |      |               |              |     |              |             |        |       | 9            |       |        |   |       |   |       |       | 9      |       
|                                                     | Discontinued operations                                                                                                        |                                                  |                                            |               |              |        |       |       |      |         |           |      |               |              |     |              |             |        |       | (22          | )     |        |   |       |   |       |       | (22    | )     
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|                                                     |                                                                                                                                | NET CASH (USED) BY INVESTING ACTIVITIES          |                                            |                | (55          | )      |       |        | (834 | )       |           |       |              |              |     |               | (274        | )      |       |              | (573  | )      |   |        |  |       |       |        | (1,736 | )     
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|FINANCING ACTIVITIES:                                |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |       |        |   |        |   |       |       |       
|                                                     | Net increase (decrease) in cash overdraft                                                                                      |                                                  |                                            |               |              |        |       | (237   | )    |         |           |      |               |              |     |              |             |        |       |             |       |        |   |       |   |       |       | (237   | )     
|                                                     | Net increase (decrease) in short-term debt                                                                                     |                                                  |                                            | 272            |              |        |       |       |      |         |           |      |               |              |     |              |             |        |       |             |       |        |   |       |   |       |       | 272    |       
|                                                     | Proceeds from long-term debt                                                                                                   |                                                  |                                            |               |              |        |       |       |      |         |           |      |               |              |     |              |             |        |       | 445          |       |        |   |       |   |       |       | 445    |       
|                                                     | Payments of long-term debt                                                                                                     |                                                  |                                            |               |              |        |       | (99    | )    |         |           |      |               |              |     |              |             |        |       | (773         | )     |        |   |       |   |       |       | (872   | )     
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|                                                     |                                                                                                                                | NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES |                                            |                | 272          |        |       |        | (336 | )       |           |       |              |              |     |               |            |        |       |              | (328  | )      |   |        |  |       |       |        | (392   | )     
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|EFFECT OF EXCHANGE RATE CHANGES ON CASH              |                                                                                                                                |                                                  |                                           |                |              |        | 5     |        |      |         |          |       |               |              | 4   |               |             |        | (56   | )            |       |        |  |        |   |       | (47   | )     
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                                                                |                                                  | 48                                         |                |              |        | (233  | )      |      |         | (17       | )     |               |              | (10 | )             |             |        | 422   |              |       |        |  |        |   |       | 210   |       
|CASH AND CASH EQUIVALENTS at beginning of period     |                                                                                                                                |                                                  | 136                                        |                |              |        | 801   |        |      |         | 17        |       |               |              | 212 |               |             |        | 4,402 |              |       |        |  |        |   |       | 5,568 |       
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      
|CASH AND CASH EQUIVALENTS at end of period           |                                                                                                                                | $                                                | 184                                        |                |              | $      | 568   |        |      | $       |          |       |               | $            | 202 |               |             | $      | 4,824 |              |       | $      |  |        |   | $     | 5,778 |       
|                                                     |                                                                                                                                |                                                  |                                            |                |              |        |       |        |      |         |           |       |               |              |     |               |             |        |       |              |      

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations



General






| |                           
| | --------------------------
| | Belgium Plant Transactions









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Other Risks and Uncertainties


7 8






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Summary Consolidated Results of Continuing Operations


|                                     |  |                    |        |   |      |   |        |  
|------------------------------------ |  | ------------------ | ------ | - | ---- | - | ------ | -
|                                     |  | Three Months Ended |       
|                                     |  | September 30,      |       
|                                     |  |                    |       
|                                     |  | 2005               |        |   | 2004 |  
|                                     |  |                    |        |   |      |  
|                                     |  | (Thousands)        |       
|Net sales                            |  | $                  | 92,571 |   |      | $ | 86,897 |  
|Gross profit                         |  |                    | 19,160 |   |      |   | 22,170 |  
|Selling, general and administrative  |  |                    | 15,065 |   |      |   | 15,838 |  
|Operating income                     |  |                    | 4,095  |   |      |   | 6,332  |  
|Interest expense, net                |  |                    | 6,501  |   |      |   | 5,812  |  
|Other expense (income), net          |  |                    | (673   | ) |      |   | 24     |  
|Provision (benefit) for income taxes |  |                    | 1,058  |   |      |   | 844    |  
|(Loss) from continuing operations    |  | $                  | (2,791 | ) |      | $ | (348   | )

Comparison of Three Months Ended September 30, 2005 and
2004


Net Sales


Gross Profit


Selling, General and Administrative Expenses


Operating Income


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Interest Expense, Net


Other (Income) Expense, Net


Income Taxes


Operating Segments




|          |                           |                    |        |        |      |   |        |        | 
|--------- | ------------------------- | ------------------ | ------ | ------ | ---- | - | ------ | ------ | 
|          |                           | Three Months Ended |       
|          |                           | September 30,      |       
|          |                           |                    |       
|          |                           | 2005               |        |        | 2004 |  
|          |                           |                    |        |        |      |  
|          |                           | (Thousands)        |       
|Net Sales |                           |                    |        |        |      |   |        |       
|          | Animal Health & Nutrition |                    | $      | 72,229 |      |   | $      | 65,342 | 
|          | Industrial Chemicals      |                    |        | 11,834 |      |   |        | 13,430 | 
|          | Distribution              |                    |        | 8,508  |      |   |        | 8,125  | 
|          |                           |                    |        |        |      |  
|          |                           | $                  | 92,571 |        |      | $ | 86,897 |       
|          |                           |                    |        |        |      |  

|                 |                                    |                    |       |        |      |   |       |        |  
|---------------- | ---------------------------------- | ------------------ | ----- | ------ | ---- | - | ----- | ------ | -
|                 |                                    | Three Months Ended |      
|                 |                                    | September 30,      |      
|                 |                                    |                    |      
|                 |                                    | 2005               |       |        | 2004 |  
|                 |                                    |                    |       |        |      |  
|                 |                                    | (Thousands)        |      
|Operating Income |                                    |                    |       |        |      |   |       |       
|                 | Animal Health & Nutrition          |                    | $     | 4,571  |      |   | $     | 7,625  |  
|                 | Industrial Chemicals               |                    |       | 1,289  |      |   |       | 1,191  |  
|                 | Distribution                       |                    |       | 1,435  |      |   |       | 1,054  |  
|                 | Corporate expenses and adjustments |                    |       | (3,200 | )    |   |       | (3,538 | )
|                 |                                    |                    |       |        |      |  
|                 |                                    | $                  | 4,095 |        |      | $ | 6,332 |       
|                 |                                    |                    |       |        |      |  

Operating Segments Comparison of Three Months Ended
September 30, 2005 and 2004




| |                            
| | ---------------------------
| | Animal Health and Nutrition

Net Sales


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Operating Income




| |                    
| | -------------------
| | Specialty Chemicals

Industrial Chemicals


Distribution


Discontinued Operations




|                                                          |  |                    |       | 
|--------------------------------------------------------- |  | ------------------ | ----- | 
|                                                          |  | Three Months ended |      
|                                                          |  | September 30, 2004 |      
|                                                          |  |                    |      
|Net Sales                                                 |  | $                  | 1,378 | 
|                                                          |  |                    |      
|Operating Income                                          |  | $                  | 287   | 
|Provision for income taxes                                |  |                    | 80    | 
|                                                          |  |                    |      
|Income from discontinued operations , net of income taxes |  | $                  | 207   | 
|                                                          |  |                    |      
|Depreciation and Amortization                             |  | $                  | 100   | 
|                                                          |  |                    |      

Liquidity and Capital Resources


Net Cash Provided by Operating Activities.


Net Cash (Used) by Investing Activities.


Net Cash (Used) by Financing Activities.


Working Capital and Capital Expenditures.


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Liquidity.








7 8


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|                                           |                               |                       |      |      |             |   |       |             |  |   |        |     |  |       |     |     |  |   |       |       | 
|------------------------------------------ | ----------------------------- | --------------------- | ---- | ---- | ----------- | - | ----- | ----------- |  | - | ------ | --- |  | ----- | --- | --- |  | - | ----- | ----- | 
|                                           |                               | Years                 |      |      |            
|                                           |                               |                       |      |      |            
|                                           |                               | Within 1              |      |      | Over 1 to 3 |   |       | Over 3 to 5 |  |   | Over 5 |     |  | Total |    
|                                           |                               |                       |      |      |             |   |       |             |  |   |        |     |  |       |    
|                                           |                               | (Dollars in millions) |     
|Loans payable to banks                     |                               | $                     | 4.3  |      |             | $ |      |             |  | $ |       |     |  | $     |    |     |  | $ | 4.3   |      
|Long-term debt (including current portion) |                               |                       | 1.0  |      |             |   | 176.4 |             |  |   |       |     |  |       |    |     |  |   | 177.4 |      
|Interest payments                          |                               |                       | 22.1 |      |             |   | 36.4  |             |  |   |       |     |  |       |    |     |  |   | 58.5  |      
|Lease commitments                          |                               |                       | 1.5  |      |             |   | 2.6   |             |  |   | 1.8    |     |  |       | 1.5 |     |  |   | 7.4   |      
|Acquisition of rights                      |                               |                       | 0.4  |      |             |   | 0.6   |             |  |   | 0.1    |     |  |       |    |     |  |   | 1.1   |      
|                                           |                               |                       |      |      |             |   |       |             |  |   |        |     |  |       |    
|                                           | Total contractual obligations |                       | $    | 29.3 |             |   | $     | 216.0       |  |   | $      | 1.9 |  |       | $   | 1.5 |  |   | $     | 248.7 | 
|                                           |                               |                       |      |      |             |   |       |             |  |   |        |     |  |       |    



Critical Accounting Policies






New Accounting Pronouncements




Quantitative and Qualitative Disclosure About Market Risk






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Certain Factors Affecting Future Operating Results




| |                           
| | --------------------------
| | Forward-Looking Statements







| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our substantial leverage and potential inability to service our
    debt                                                                                                                      
|
| |  | our dependence on distributions from our subsidiaries                                                                                                                                         
|
| |  | risks associated with our international operations and
    significant foreign assets                                                                                                         
|
| |  | our dependence on our Israeli operations                                                                                                                                                      
|
| |  | competition in each of our markets                                                                                                                                                            
|
| |  | potential environmental liability                                                                                                                                                             
|
| |  | potential legislation affecting the use of medicated feed
    additives                                                                                                                       
|
| |  | extensive regulation by numerous government authorities in the
    United States and other countries                                                                                          
|
| |  | our reliance on the continued operation and sufficiency of our
    manufacturing facilities, including the transition of
    virginiamycin production from our Belgium to our Brazil facility.
|
| |  | our reliance upon unpatented trade secrets                                                                                                                                                    
|
| |  | the risks of legal proceedings and general litigation expenses                                                                                                                                
|
| |  | potential operating hazards and uninsured risks                                                                                                                                               
|
| |  | the risk of work stoppages                                                                                                                                                                    
|
| |  | our dependence on key personnel                                                                                                                                                               





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|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market
    Risk








|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures







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PART II  OTHER INFORMATION







|        |                  
|------- | -----------------
|Item 5. | Other Information








|        |         
|------- | --------
|Item 6. | Exhibits

|            |    |             |  |                                                                                                                                                                                                                                                                                                                           
|----------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 10 | .27.5       |  | Amendment Number Five dated February 9, 2005 to Loan and
    Security Agreement, dated October 21, 2003, by and among,
    the lenders identified on the signature pages thereto, Wells
    Fargo Foothill, Inc., and Registrant, and each of
    Registrants Subsidiaries identified on the signature pages
    thereto.
|            | 10 | .27.6       |  | Amendment Number Six dated October 28, 2005 to Loan and
    Security Agreement dated October 21, 2003, by and among,
    the lenders identified on the signature pages thereto, Wells
    Fargo Foothill, Inc., and Registrant, and each of
    Registrants Subsidiaries identified on the signature pages
    thereto.  
|            | 31 | .1          |  | Certification of Gerald K. Carlson, Chief Executive Officer
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                    
|            | 31 | .2          |  | Certification of Jack C. Bendheim, Chairman of the Board
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                       
|            | 31 | .3          |  | Certification of Richard G. Johnson, Chief Financial Officer
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                   
|            | 32 |             |  | Section 1350 Certifications of Phibro Animal Health
    Corporation.                                                                                                                                                                                                                                                      

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SIGNATURES


Pursuant to the requirements 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.




| |                                 
| | --------------------------------
| | PHIBRO ANIMAL HEALTH CORPORATION



| |     |                     
| | --- | --------------------
| | By: | /s/ JACK C. BENDHEIM

| |                      
| | ---------------------
| |                      
| | Jack C. Bendheim     
| | Chairman of the Board





| |     |                      
| | --- | ---------------------
| | By: | /s/ GERALD K. CARLSON

| |                        
| | -----------------------
| |                        
| | Gerald K. Carlson      
| | Chief Executive Officer





| |     |                       
| | --- | ----------------------
| | By: | /s/ RICHARD G. JOHNSON

| |                                 
| | --------------------------------
| |                                 
| | Richard G. Johnson              
| | Chief Financial Officer         
| | (Principal Financial Officer and
| | Principal Accounting Officer)   



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EXHIBIT INDEX


|            |    |             |  |                                                                                                                                                                                                                                                                                                                           
|----------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 10 | .27.5       |  | Amendment Number Five dated February 9, 2005 to Loan and
    Security Agreement, dated October 21, 2003, by and among,
    the lenders identified on the signature pages thereto, Wells
    Fargo Foothill, Inc., and Registrant, and each of
    Registrants Subsidiaries identified on the signature pages
    thereto.
|            | 10 | .27.6       |  | Amendment Number Six dated October 28, 2005 to Loan and
    Security Agreement dated October 21, 2003, by and among,
    the lenders identified on the signature pages thereto, Wells
    Fargo Foothill, Inc., and Registrant, and each of
    Registrants Subsidiaries identified on the signature pages
    thereto.  
|            | 31 | .1          |  | Certification of Gerald K. Carlson, Chief Executive Officer
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                    
|            | 31 | .2          |  | Certification of Jack C. Bendheim, Chairman of the Board
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                       
|            | 31 | .3          |  | Certification of Richard G. Johnson, Chief Financial Officer
    required by Rule 15d-14(a) of the Act.                                                                                                                                                                                                                   
|            | 32 |             |  | Section 1350 Certifications of Phibro Animal Health
    Corporation.