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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   ----------
                                    FORM 10-Q
                                   ----------

      (Mark One)

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

                  For the quarterly period ended March 31, 2004

                                       OR

            |_|   TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

             For the transition period from _________ to __________.

                        Commission File Number 333-64641
                 -----------------------------------------------

                        Phibro Animal Health Corporation
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

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

                  One Parker Plaza, Fort Lee, New Jersey 07024
               (Address of principal executive offices) (Zip Code)

                                 (201) 944-6020
              (Registrant's telephone number, including area code)

                 -----------------------------------------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                              Yes |X|*     No |_|

Indicate  by check mark  whether  the  Registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).

                              Yes | |      No |X|

Number of shares of each class of common stock outstanding as of March 31, 2004:


                 Class A Common Stock, $.10 par value: 12,600.00
                 Class B Common Stock, $.10 par value: 11,888.50

*     By virtue of Section 15(d) of the  Securities  Act of 1934, the Registrant
      is not subject to such filing  requirements  and not required to file this
      Quarterly  Report,  but has  provided  all such  reports as if so required
      during the preceding 12 months.

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<PAGE>

                        PHIBRO ANIMAL HEALTH CORPORATION

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
PART I    FINANCIAL INFORMATION (UNAUDITED)

          Item 1. Condensed Consolidated Financial Statements...............   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.......................  31

          Item 3. Quantitative and Qualitative Disclosures About
                    Market Risk.............................................  41

          Item 4. Controls and Procedures...................................  42

PART II   OTHER INFORMATION

          Item 5. Other Information.........................................  42

          Item 6.  Exhibits and Reports on Form 8-K.........................  42

SIGNATURES..................................................................  43


                                       2
<PAGE>

This Form 10-Q  contains  "forward-looking  statements"  within  the  meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  The Company's actual results could
differ  materially  from  those  set  forth in the  forward-looking  statements.
Certain  factors  that  might  cause  such a  difference  are  discussed  in the
Company's  Annual  Report on Form 10-K for its fiscal  year ended June 30,  2003
and/or  throughout  this Form 10-Q and in particular in Item 2 of Part I of this
Form  10-Q  under  the  caption  "Certain  Factors  Affecting  Future  Operating
Results." Unless the context  otherwise  requires,  references in this report to
the  "Company" or to "we" or "our" refers to Phibro  Animal  Health  Corporation
and/or one or more of its subsidiaries, as applicable.

PART I -- FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements


                                       3
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
                                 (In Thousands)

                                                           March 31,    June 30,
                                                             2004         2003
                                                           --------     --------

                                     ASSETS

CURRENT ASSETS:
    Cash and cash equivalents                            $   6,190    $  11,179
    Trade receivables, less allowance for doubtful
      accounts of $1,369 at March 31, 2004 and $1,445
      at June 30, 2003                                      57,548       55,671
    Other receivables                                        3,363        3,642
    Inventories                                             88,443       88,767
    Prepaid expenses and other current assets               10,202       10,188
    Current assets from discontinued operations                 --        4,942
                                                         ---------    ---------
        TOTAL CURRENT ASSETS                               165,746      174,389

PROPERTY, PLANT AND EQUIPMENT, net                          62,687       66,440
INTANGIBLES                                                  7,477        8,669
OTHER ASSETS                                                17,001       14,199
OTHER ASSETS FROM DISCONTINUED OPERATIONS                       --       10,650
                                                         ---------    ---------
                                                         $ 252,911    $ 274,347
                                                         =========    =========

                     LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
    Cash overdraft                                       $   4,040    $   1,686
    Loans payable to banks                                  10,302       38,914
    Current portion of long-term debt                        1,945       24,124
    Accounts payable                                        40,354       56,915
    Accrued expenses and other current liabilities          45,676       41,609
    Current liabilities from discontinued operations            --        2,051
                                                         ---------    ---------
        TOTAL CURRENT LIABILITIES                          102,317      165,299

LONG-TERM DEBT                                             158,348      102,391
OTHER LIABILITIES                                           19,142       22,088
OTHER LIABILITIES FROM DISCONTINUED OPERATIONS                  --          198
                                                         ---------    ---------
        TOTAL LIABILITIES                                  279,807      289,976
                                                         ---------    ---------
COMMITMENTS AND CONTINGENCIES

REDEEMABLE SECURITIES:
    Series B and C preferred stock                          21,288       68,881
                                                         ---------    ---------
STOCKHOLDERS' DEFICIT:
    Series A preferred stock                                   521          521
    Common stock                                                 2            2
    Paid-in capital                                            860          860
    Accumulated deficit                                    (45,279)     (79,489)
    Accumulated other comprehensive income (loss):
      Gain on derivative instruments                           117           81
      Cumulative currency translation adjustment            (4,405)      (6,485)
                                                         ---------    ---------
        TOTAL STOCKHOLDERS' DEFICIT                        (48,184)     (84,510)
                                                         ---------    ---------
                                                         $ 252,911    $ 274,347
                                                         =========    =========

       See notes to unaudited Condensed Consolidated Financial Statements


                                       4
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                                   (Unaudited)

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                              Three Months Ended        Nine Months Ended
                                                                  March 31,                 March 31,
                                                              2004         2003         2004         2003
                                                           ---------    ---------    ---------    ---------
<S>                                                        <C>          <C>          <C>          <C>
NET SALES                                                  $  91,198    $  90,197    $ 274,411    $ 266,613

COST OF GOODS SOLD                                            67,893       66,915      207,089      197,143
                                                           ---------    ---------    ---------    ---------
    GROSS PROFIT                                              23,305       23,282       67,322       69,470

SELLING, GENERAL AND ADMINISTRATIVE
    EXPENSES                                                  16,639       17,822       50,036       49,875
                                                           ---------    ---------    ---------    ---------
    OPERATING INCOME                                           6,666        5,460       17,286       19,595

OTHER:
    Interest expense                                           4,941        3,978       13,465       12,138
    Interest (income)                                            (44)         (39)        (118)        (135)
    Other (income) expense, net                                  (63)         112         (764)       1,317
    Net (gain) on extinguishment of debt                          --           --      (23,226)          --
                                                           ---------    ---------    ---------    ---------
    INCOME FROM CONTINUING OPERATIONS
       BEFORE INCOME TAXES                                     1,832        1,409       27,929        6,275

PROVISION FOR INCOME TAXES                                     2,227          599        5,890        2,440
                                                           ---------    ---------    ---------    ---------
    INCOME (LOSS) FROM CONTINUING OPERATIONS                    (395)         810       22,039        3,835

DISCONTINUED OPERATIONS:
    (Loss) from discontinued operations (net of income
       taxes)                                                     --       (1,740)        (124)     (12,757)
    Gain (loss) on disposal of discontinued operations
       (net of income taxes)                                      --       (1,342)         231       (1,342)
                                                           ---------    ---------    ---------    ---------
    NET INCOME (LOSS)                                           (395)      (2,272)      22,146      (10,264)

OTHER COMPREHENSIVE INCOME (LOSS):
    Derivative instruments                                      (383)         230           36       (1,011)
    Currency translation adjustment                              (92)       7,930        2,080        4,276
                                                           ---------    ---------    ---------    ---------
    COMPREHENSIVE INCOME (LOSS)                            $    (870)   $   5,888    $  24,262    $  (6,999)
                                                           =========    =========    =========    =========
    NET INCOME (LOSS)                                           (395)      (2,272)      22,146      (10,264)

Excess of the reduction of redeemable preferred stock
    over total assets divested and costs and liabilities
    incurred on the Prince Transactions                           --           --       20,138           --
Preferred dividends                                           (4,223)      (2,282)      (8,074)      (6,526)
                                                           ---------    ---------    ---------    ---------
    NET INCOME (LOSS) AVAILABLE TO
       COMMON SHAREHOLDERS                                 $  (4,618)   $  (4,554)   $  34,210    $ (16,790)
                                                           =========    =========    =========    =========
</TABLE>
       See notes to unaudited Condensed Consolidated Financial Statements

                                       5
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
                       STOCKHOLDERS' DEFICIT (Unaudited)
            For the Three Months and Nine Months Ended March 31, 2004
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                                             Accumulated
                                     Preferred    Common Stock                                  Other
                                       Stock    ----------------    Paid-in   Accumulated   Comprehensive
                                      Series A  Class A  Class B    Capital     Deficit     Income (Loss)     Total
                                  ----------- ---------------------------- --------------   -------------   ----------

<S>                                    <C>        <C>      <C>      <C>        <C>              <C>         <C>
Balance, June 30, 2003                 $ 521      $ 1      $ 1      $ 860      $ (79,489)       $ (6,404)   $ (84,510)

 Dividends on Series B and C
    redeemable preferred stock                                                    (2,453)                      (2,453)

 Equity value accreted on
    Series B and C redeemable
    preferred stock                                                                1,466                        1,466

 Derivative instruments                                                                              317          317

 Foreign currency translation
    adjustment                                                                                      (859)        (859)

 Net income                                                                        1,255                        1,255
                                       -----      ---      ---      -----      ---------        --------    ---------
Balance, September 30, 2003            $ 521      $ 1      $ 1      $ 860      $ (79,221)       $ (6,946)   $ (84,784)
                                       =====      ===      ===      =====      =========        ========    =========
 Excess of the reduction in
  redeemable preferred stock over
  total assets divested and costs
  and liabilities incurred on the
  Prince Transactions                                                             20,138                       20,138

 Dividends on Series B and C
    redeemable preferred stock                                                    (2,348)                      (2,348)

 Equity value accreted on
    Series B and C redeemable
    preferred stock                                                                 (516)                        (516)

 Derivative instruments                                                                            102            102

 Foreign currency translation
    adjustment                                                                                   3,031          3,031

 Net income                                                                       21,286                       21,286
                                       -----      ---      ---      -----      ---------      --------      ---------
Balance, December 30, 2003             $ 521      $ 1      $ 1      $ 860      $ (40,661)     $ (3,813)     $ (43,091)
                                       =====      ===      ===      =====      =========      ========      =========
 Dividends on Series B and C
    redeemable preferred stock                                                      (621)                        (621)
 Equity value accreted on
    Series B and C redeemable
    preferred stock                                                               (3,602)                      (3,602)
 Derivative instruments                                                                           (383)          (383)
 Foreign currency translation
    adjustment                                                                                     (92)           (92)
 Net (loss)                                                                         (395)                        (395)
                                       -----      ---      ---      -----      ---------      --------      ---------
                                       $ 521      $ 1      $ 1      $ 860      $ (45,279)     $ (4,288)     $ (48,184)
                                       =====      ===      ===      =====      =========      ========      =========
</TABLE>
       See notes to unaudited Condensed Consolidated Financial Statements

                                       6
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
                For the Nine Months Ended March 31, 2004 and 2003
                                 (In Thousands)

                                                            2004         2003
                                                         ---------    ---------
OPERATING ACTIVITIES:
    Net income (loss)                                    $  22,146    $ (10,264)
    Adjustment for discontinued operations                    (107)      14,099
                                                         ---------    ---------
    Income from continuing operations                       22,039        3,835

    Adjustments to reconcile income from continuing
      operations to net cash
        provided (used) by operating activities:
      Depreciation and amortization                         10,103        9,918
      Deferred income taxes                                    263          131
      Net (gain) on extinguishment of debt                 (23,226)          --
      Unrealized foreign currency (gains) and other           (632)        (637)

      Changes in operating assets and liabilities:
        Accounts receivable                                 (2,780)         112
        Inventories                                         (2,658)      (5,898)
        Prepaid expenses and other current assets           (1,151)         264
        Other assets                                           977       (2,016)
        Accounts payable                                   (12,710)      15,542
        Accrued expenses and other liabilities               8,781        5,865
    Cash provided (used) by discontinued operations           (421)       1,531
                                                         ---------    ---------
        NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES    (1,415)      28,647
                                                         ---------    ---------

INVESTING ACTIVITIES:
    Capital expenditures                                    (4,132)      (7,301)
    Proceeds from sale of assets                             1,081        2,556
    Other investing                                             (1)         765
    Discontinued operations                                 14,951        1,400
                                                         ---------    ---------
        NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES    11,899       (2,580)
                                                         ---------    ---------

FINANCING ACTIVITIES:
    Cash overdraft                                           2,354       (3,121)
    Net (decrease) in short-term debt                      (28,868)      (6,012)
    Proceeds from long-term debt                           109,622        2,125
    Payments of long-term debt                             (34,632)     (13,720)
    Payment of Pfizer obligations                          (28,300)          --
    Payments relating to the Prince Transactions and
      transaction costs                                    (21,023)          --
    Debt refinancing costs                                 (14,945)          --
                                                         ---------    ---------
        NET CASH (USED) BY FINANCING ACTIVITIES            (15,792)     (20,728)
                                                         ---------    ---------

EFFECT OF EXCHANGE RATE CHANGES ON CASH                        319          273
                                                         ---------    ---------

        NET INCREASE (DECREASE) IN CASH AND
          CASH EQUIVALENTS                                  (4,989)       5,612

CASH AND CASH EQUIVALENTS at beginning of period            11,179        6,419
                                                         ---------    ---------

CASH AND CASH EQUIVALENTS at end of period               $   6,190    $  12,031
                                                         =========    =========

       See notes to unaudited Condensed Consolidated Financial Statements

                                       7
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

1.  General

   Principles of Consolidation and Basis of Presentation


      In  the  opinion  of  Phibro  Animal  Health  Corporation  ("PAHC"),   the
accompanying  unaudited condensed  consolidated financial statements contain all
adjustments  (consisting  only of normal  recurring  adjustments)  necessary  to
present  fairly its  financial  position as of March 31, 2004 and its results of
operations  and cash flows for the three  months and nine months ended March 31,
2004 and 2003. PAHC and/or its subsidiaries are referred to as the "Company".

      The condensed  consolidated  balance sheet as of June 30, 2003 was derived
from audited financial statements, but does not include all disclosures required
by accounting principles generally accepted in the United States.  Additionally,
it  should  be noted  that the  accompanying  condensed  consolidated  financial
statements  and notes thereto have been prepared in accordance  with  accounting
standards  appropriate  for  interim  financial  statements.  While the  Company
believes that the  disclosures  presented  are adequate to make the  information
contained herein not misleading, it is suggested that these financial statements
be read  in  conjunction  with  the  Company's  audited  consolidated  financial
statements for the year ended June 30, 2003.

    The Company's  Odda,  Carbide,  and MRT businesses  have been  classified as
discontinued  operations,  as  discussed  in Note  7.  These  footnotes  present
information only for continuing operations, unless otherwise indicated.

      The results of operations for the three months and nine months ended March
31, 2004 may not be indicative of results for the full year.

   New Accounting Pronouncements

      The  Company   adopted   the   following   new  and   revised   accounting
pronouncements in fiscal 2004:

      Statement of Financial  Accounting  Standards No. 149,  "Amendment of SFAS
No. 133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS
No.  149  amends  and  clarifies   accounting   and  reporting  for   derivative
instruments,   including  certain  derivative   instruments  embedded  in  other
contracts,  and for hedging  activities under SFAS No. 133. The adoption of SFAS
No.  149  did  not  result  in a  material  impact  on the  Company's  financial
statements.

      Statement of  Financial  Accounting  Standards  No. 150,  "Accounting  for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity"  ("SFAS No.  150").  SFAS No.  150  requires  that an issuer  classify a
financial  instrument,  that is within its scope, as a liability (or an asset in
some circumstances).  SFAS No. 150 also revises the definition of liabilities to
encompass  certain  obligations  that can, or must, be settled by issuing equity
shares,  depending  on the nature of the  relationship  established  between the
holder and the issuer. The adoption of SFAS No. 150 did not result in a material
impact on the Company's financial statements.

      Statement  of  Financial   Accounting   Standards  No.  132,   "Employers'
Disclosures about Pensions and Other  Postretirement  Benefits,  an amendment to
FASB  Statements  No. 87, 88, and 106 (revised  2003)"  ("SFAS No.  132").  This
revision to SFAS No. 132 relates to employers'  disclosures  about pension plans
and other  postretirement  benefit plans.  SFAS No. 132 now requires  additional
disclosures  to  describe  the  types  of  plan  assets,   investment  strategy,
measurement  date(s),  plan  obligations,  cash  flows,  and  components  of net
periodic benefit cost recognized during interim periods of defined pension plans
and other defined  postretirement plans. The additional  disclosures required by
this revision to SFAS No. 132 have been provided.

      FASB  Interpretation No. 46,  "Consolidation of Variable Interest Entities
(revised  December  2003)" ("FIN No. 46"). This revision to FIN No. 46 clarifies
the application of Accounting Research Bulletin No. 51, "Consolidated  Financial
Statements",  to certain  entities  in which  equity  investors  do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support.  The adoption of FIN No. 46 did not result in a
material impact on the Company's financial statements.


                                       8
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

2.  Risks and Uncertainties

      The use of  antibiotics  in  medicated  feed  additives  is a  subject  of
legislative  and  regulatory  interest.  The issue of  potential  for  increased
bacterial  resistance  to certain  antibiotics  used in  certain  food-producing
animals is the  subject of  discussions  on a  worldwide  basis and,  in certain
instances,  has led to  government  restrictions  on the use of  antibiotics  in
food-producing  animals. The sale of feed additives containing  antibiotics is a
material  portion  of  the  Company's  business.   Should  regulatory  or  other
developments  result in further  restrictions  on the sale of such products,  it
could  have a  material  adverse  impact on the  Company's  financial  position,
results of operations and cash flows.

      The testing,  manufacturing,  and  marketing  of certain of the  Company's
products are subject to extensive regulation by numerous government  authorities
in the United States and other countries.

      The Company has  significant  assets located outside of the United States,
and a significant  portion of the Company's sales and earnings are  attributable
to operations conducted abroad.

      The  Company  has assets  located in Israel and a portion of its sales and
earnings are  attributable  to  operations  conducted in Israel.  The Company is
affected by social,  political and economic conditions affecting Israel, and any
major hostilities  involving Israel as well as the Middle East or curtailment of
trade between  Israel and its current  trading  partners,  either as a result of
hostilities or otherwise, could have a material adverse effect on the Company.

      The Company's  operations,  properties and  subsidiaries  are subject to a
wide  variety  of  complex  and  stringent  federal,  state,  local and  foreign
environmental laws and regulations,  including those governing the use, storage,
handling,  generation,  treatment,  emission, release, discharge and disposal of
certain  materials  and  wastes,   the  remediation  of  contaminated  soil  and
groundwater,  the  manufacture,  sale and use of  pesticides  and the health and
safety of employees.  As such,  the nature of the  Company's  current and former
operations and those of its subsidiaries expose the Company and its subsidiaries
to the risk of claims with respect to such matters.

3.  Refinancing

      On October 21,  2003,  the Company  issued  105,000  units  consisting  of
$85,000 of 13% Senior Secured Notes due 2007 of PAHC (the "US Senior Notes") and
$20,000 13% Senior Secured Notes due 2007 of Philipp  Brothers  Netherlands  III
B.V.  (the "Dutch Senior  Notes" and,  together  with the US Senior  Notes,  the
"Senior Secured Notes"), an indirect wholly-owned subsidiary of PAHC (the "Dutch
issuer").  The Company  used the proceeds  from the issuance to: (i)  repurchase
$51,971 of its 9 7/8% Senior Subordinated Notes due 2008 at a price equal to 60%
of the principal amount thereof,  plus accrued and unpaid  interest;  (ii) repay
its senior credit facility of $34,888  outstanding at the repayment date;  (iii)
satisfy,  for a payment of  approximately  $29,315,  certain of its  outstanding
obligations to Pfizer Inc., including: (a) $20,075 aggregate principal amount of
its  promissory  note plus accrued and unpaid  interest,  (b) $9,748 of accounts
payable,  (c) $9,040 of accrued  expenses,  and (d) future  contingent  purchase
price  obligations  under its  agreements  with Pfizer Inc. by which the Company
acquired  Pfizer's  medicated  feed  additive  business;  and  (iv) pay fees and
expenses relating to the above transactions.


                                       9
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

      A net  gain  on  extinguishment  of  debt  is  included  in the  Company's
condensed consolidated statement of operations, calculated as follows:

      Net Gain on Repurchase of 9 7/8% Senior
        Subordinated Notes due 2008:
        Principal amount of repurchased notes                    $ 51,971
        Repurchased at 60% of principal amount                    (31,183)
        Transaction costs                                          (4,107)
                                                                 --------
      Net gain on repurchase of notes                              16,681
                                                                 --------
      Loss on repayment of senior credit facility                  (1,018)
                                                                 --------
      Net Gain on Payment of Pfizer Obligations:
        Obligations paid:
        -promissory note                                           20,075
        -accrued interest on promissory note                        1,015
        -accounts payable and accrued expenses                     18,788
                                                                 --------
        Total obligations paid                                     39,878
        Cash payment to Pfizer                                    (29,315)
        Transaction costs                                          (3,000)
                                                                 --------
      Net gain on payment of Pfizer obligations                     7,563
                                                                 --------
      Net gain on extinguishment of debt                         $ 23,226
                                                                 ========

      The US  Senior  Notes  and the  Dutch  Senior  Notes  are  senior  secured
obligations   of  each  of  PAHC  (the  "US  Issuer")  and  the  Dutch   issuer,
respectively. The US Senior Notes and the Dutch Senior Notes are guaranteed on a
senior secured basis by all PAHC's  domestic  restricted  subsidiaries,  and the
Dutch Senior Notes are  guaranteed on a senior  secured basis by PAHC and by the
restricted  subsidiaries  of the Dutch  issuer,  presently  consisting of Phibro
Animal  Health SA. The US Senior  Notes and  related  guarantees  are secured by
substantially  all of PAHC's  assets and the assets of its  domestic  restricted
subsidiaries, other than real property and interests therein, including a pledge
of all the capital stock of such  domestic  restricted  subsidiaries.  The Dutch
Senior Notes and related  guarantees are secured by a pledge of all the accounts
receivable,  a security  interest or  floating  charge on the  inventory  to the
extent permitted by applicable law, and a mortgage on  substantially  all of the
real  property of the Dutch issuer and each of its  restricted  subsidiaries,  a
pledge of 100% of the capital stock of each  subsidiary  of the Dutch issuer,  a
pledge of the  intercompany  loans  made by the Dutch  issuer to its  restricted
subsidiaries and substantially all of the assets of the U.S.  guarantors,  other
than real property and  interests  therein.  The indenture  governing the Senior
Secured Notes provides for optional make-whole  redemptions at any time prior to
June 1, 2005,  optional  redemption  on or after June 1, 2005,  and requires the
Company to make certain offers to purchase Senior Secured Notes upon a change of
control,  upon certain  asset sales and from fifty  percent (50%) of excess cash
flow (as such terms are defined in the indenture).

      Also,  on October 21, 2003,  the Company  entered  into a new  replacement
domestic  senior credit  facility  ("senior  credit  facility") with Wells Fargo
Foothill, Inc., providing for a working capital facility plus a letter of credit
facility.  The  aggregate  amount of borrowings  under such working  capital and
letter  of  credit  facilities  may  not  exceed  $25,000,  including  aggregate
borrowings under the working capital facility up to $15,000.  On April 29, 2004,
the Company amended the senior credit facility to increase the aggregate  amount
of  borrowings  available  under  such  working  capital  and  letter  of credit
facilities  from  $25,000 to $27,500  and to  increase  the amount of  aggregate
borrowings available under the working capital facility from $15,000 to $17,500.


                                       10
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

      Borrowings  under the senior  credit  facility  are subject to a borrowing
base formula based on percentages of eligible domestic  receivables and domestic
inventory.  Under the senior credit facility, the Company may choose between two
interest rate options:  (i) the  applicable  base rate as defined plus 0.50% and
(ii) the LIBOR rate as defined plus 2.75%.  Indebtedness under the senior credit
facility  is  secured  by a  first  priority  lien on  substantially  all of the
Company's  assets  and assets of  substantially  all of the  Company's  domestic
subsidiaries. The Company is required to pay an unused line fee of 0.375% on the
unused  portion of the  senior  credit  facility,  a monthly  servicing  fee and
standard  letter of credit fees to issuing  banks.  Borrowings  under the senior
credit facility are available  until,  and are repayable no later than,  October
31, 2007, although borrowings must be repaid by June 30, 2007 if the maturity of
the Senior Secured Notes has not been extended, as required by the senior credit
facility, by that date.

      Pursuant to the terms of an intercreditor agreement, the security interest
securing  the Senior  Secured  Notes and the  guarantees  made by the  Company's
domestic restricted  subsidiaries are subordinated to a lien securing the senior
credit facility.

      The Company believes that, through the refinancings referred to above, the
liquidity issues mentioned in the Company's June 30, 2003 consolidated financial
statements have been resolved. The Company's replaced senior credit facility and
its note  payable  to Pfizer  were to mature in  November  2003 and March  2004,
respectively.

      The Company's  ability to fund its operating  plan relies upon its ability
to  continue  to  successfully  implement  its  efforts to improve  its  overall
liquidity (through cost reduction activities, working capital improvement plans,
shutdown of unprofitable operations and sales of certain business operations and
other  assets) and the  continued  availability  of  borrowing  under the senior
credit  facility.  The Company  believes that it will be able to comply with the
terms of its covenants  under the senior credit facility based on its forecasted
operating plan. In the event of adverse  operating  results and/or  violation of
covenants under this facility,  there can be no assurance that the Company would
be able to obtain waivers or consents on favorable terms, if at all.

4.  Prince Transactions

      Effective  December 26, 2003 (the "Closing Date"),  the Company  completed
the  divestiture of  substantially  all of the business and assets of The Prince
Manufacturing  Company ("PMC") to a company ("Buyer") formed by Palladium Equity
Partners II, LP and certain of its affiliates (the "Palladium  Investors"),  and
the related  reduction of the  Company's  preferred  stock held by the Palladium
Investors (collectively the "Prince Transactions").

      Pursuant  to  definitive  purchase  and other  agreements  executed on and
effective as of the Closing Date, the Prince Transactions included the following
elements:  (i) the transfer of  substantially  all of the business and assets of
PMC to Buyer;  (ii) the reduction of the value of the Company's  Preferred Stock
owned by the Palladium  Investors from $72,184 to $16,517  (accreted through the
Closing  Date) by means  of the  redemption  of all of its  shares  of  Series B
Preferred  Stock  and a  portion  of its  Series C  Preferred  Stock;  (iii) the
termination of $2,250 in annual management  advisory fees payable by the Company
to  Palladium;  (iv) a cash  payment of $10,000 to the  Palladium  Investors  in
respect  of the  portion  of the  Company's  Preferred  Stock not  exchanged  in
consideration  of the business and assets of PMC; (v) the agreement of the Buyer
to pay the Company for advisory  fees for the next three years of $1,000,  $500,
and  $200,  respectively  (which  were  pre-paid  at  closing  by the  Buyer and
satisfied  for $1,300,  the net present  value of such  payments);  and (vi) the
Buyer  agreed  to supply  manganous  oxide and red iron  oxide  products  and to
provide certain mineral blending  services to the Company's Prince  Agriproducts
subsidiary ("Prince Agri").  Prince Agri agreed to continue to provide the Buyer
with certain laboratory,  MIS and telephone services, all on terms substantially
consistent  with the historic  relationship  between Prince Agri and PMC, and to
lease to Buyer office space used by PMC in Quincy,  Illinois. The Company has an
agreement to receive certain treasury services from Palladium for $100 per year.
Pursuant to definitive agreements,  the Company made customary  representations,
warranties and  environmental  and other  indemnities,  agreed to a post-closing
working capital adjustment, paid $3,958 in full satisfaction of all intercompany
debt owed to PMC, paid a closing fee to Palladium of $500,  made certain capital
expenditure  adjustments included as part of the intercompany settlement amount,
and agreed to pay for certain out-of-pocket  transaction expenses.  PMC retained
$414 of its accounts  receivable.  The Company  established  a $1,000  letter of
credit escrow for two years to secure its working capital adjustment and certain
indemnification  obligations.  The Company  agreed to  indemnify  the


                                       11
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

Palladium Investors for a portion, at the rate of $0.65 for every dollar, of the
amount  they  receive  in  respect  of the  disposition  of Buyer  for less than
$21,000,  up to a  maximum  payment  by the  Company  of $4,000  (the  "Backstop
Indemnification  Amount"). The Backstop  Indemnification Amount would be payable
on the earlier to occur of July 1, 2008 or six months after the redemption  date
of all of the  Company's  Senior  Secured  Notes due 2007 if such a  disposition
closes  prior to such  redemption  and six months  after the closing of any such
disposition if the disposition  closes after any such redemption.  The Company's
obligations  with respect to the Backstop  Indemnification  Amount will cease if
the  Palladium  Investors  do not close the  disposition  of Buyer by January 1,
2009.  The  definition  of  "Equity  Value"  in  the  Company's  Certificate  of
Incorporation  was amended to reduce the multiple of trailing  EBITDA payable in
connection with any future redemption of Series C Preferred to 6.0 from 7.5. The
amount  of  consideration  paid  and  payable  in  connection  with  the  Prince
Transactions and all matters in connection therewith were determined pursuant to
arm's length negotiations.

      The  excess of the  reduction  in  redeemable  preferred  stock over total
assets  divested and costs and liabilities  incurred on the Prince  Transactions
was recorded as a decrease to  accumulated  deficit on the  Company's  condensed
consolidated balance sheet at December 31, 2003, and was calculated as follows:

      Series B & C Redeemable Preferred Stock:
       Accreted value pre-transaction                                $72,184
       Accreted value post-transaction                                16,517
                                                                     -------
       Reduction in redeemable preferred stock                        55,667
                                                                     -------
       Assets Divested and Costs Incurred:
       PMC net assets divested                                         7,430
       Cash paid to Palladium Investors for:
        -reduction of redeemable preferred stock                      10,000
        -settlement of PMC intercompany debt                           3,958
        -working capital adjustment                                    1,331
        -closing fee                                                     500
       Transaction costs                                               8,310
       Contingent Backstop Indemnification Amount accrued              4,000
                                                                     -------
       Total assets divested and costs and liabilities incurred       35,529
                                                                     -------
       Excess amount recorded as a decrease to accumulated deficit   $20,138
                                                                     =======

    PMC is included in the Company's  Industrial  Chemicals segment. The results
of  operations  of PMC for the three months and nine months ended March 31, 2004
and 2003 were:

                                   Three Months Ended         Nine Months Ended
                                        March 31,                 March 31,
                                     2004       2003          2004        2003
                                    -----------------        -------------------
Net sales                           $ --      $ 5,743        $11,118     $16,784
Operating income                      --          839          2,278       2,867
Depreciation and amortization         --          240            487         711

      The divestiture of PMC has not been reflected as a discontinued  operation
due to the existence of the Backstop  Indemnification  and continuing supply and
service agreements.


                                       12
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

5.  Inventories

    Inventories  are valued at the lower of cost or market.  Cost is  determined
principally  under the first-in,  first-out (FIFO) and average methods;  however
certain of the Company's subsidiaries used the last-in,  first-out (LIFO) method
of valuing  inventories.  Obsolete and unsaleable  inventories  are reflected at
estimated net realizable value. Inventory costs include materials,  direct labor
and manufacturing overhead. Inventories consisted of the following:

                                                             As of
                                                --------------------------------
                                                March 31, 2004     June 30, 2003
                                                --------------     -------------
       Raw materials                               $ 21,482          $ 22,277
       Work-in-process                                2,004             1,765
       Finished goods                                64,957            65,357
       Excess of FIFO cost over LIFO cost                --              (632)
                                                   --------          --------
       Total inventory                             $ 88,443          $ 88,767
                                                   ========          ========

5.  Intangibles

      Product  intangibles  cost arising from the  acquisition  of the medicated
feed additives business of Pfizer Inc. was $10,424 and $10,449 at March 31, 2004
and June 30, 2003,  respectively,  and accumulated  amortization  was $2,947 and
$1,780 at March 31, 2004 and June 30, 2003,  respectively.  Amortization expense
was  $313  and $244  for the  three  months  ended  March  31,  2004  and  2003,
respectively,  and $921 and $868 for the nine  months  ended  March 31, 2004 and
2003, respectively.

6. Debt

   Loans Payable to Banks

      At March 31, 2004, loans payable to banks included $8,004 under the senior
credit  facility  with Wells Fargo  Foothill,  Inc.,  and $2,298  under  foreign
revolving lines of credit.  The weighted  average interest rate under the senior
credit  facility  from its  inception at October 21, 2003 through March 31, 2004
was 5.7%.  At March 31,  2004,  the Company had $6,996 of  borrowings  available
under the borrowing base formula in effect for the working capital facility that
is provided under the senior credit facility.


      On October 21, 2003, the Company entered into a new senior credit facility
with Wells Fargo Foothill, Inc., providing for a working capital facility plus a
letter of credit facility. The aggregate amount of borrowings under such working
capital  and  letter of credit  facilities  may not  exceed  $25,000,  including
aggregate  borrowings  under the working capital  facility of up to $15,000.  On
April 29, 2004, the Company  amended the senior credit  facility to increase the
aggregate  amount of borrowings  available under such working capital and letter
of credit  facilities  from  $25,000 to $27,500  and to  increase  the amount of
aggregate  borrowings  available under the working capital facility from $15,000
to $17,500.

      Borrowings  under the senior  credit  facility  are subject to a borrowing
base formula based on percentages of eligible domestic  receivables and domestic
inventory.  Under the senior credit facility, the Company may choose between two
interest rate options:  (i) the  applicable  base rate as defined plus 0.50% and
(ii) the LIBOR rate as defined plus 2.75%.  Indebtedness under the senior credit
facility  is  secured  by a  first  priority  lien on  substantially  all of the
Company's  assets  and assets of  substantially  all of the  Company's  domestic
subsidiaries. The Company is required to pay an unused line fee of 0.375% on the
unused  portion of the  senior  credit  facility,  a monthly  servicing  fee and
standard  letter of credit fees to issuing  banks.  Borrowings  under the senior
credit facility are available  until,  and are repayable no later than,  October
31, 2007, although borrowings must be repaid by June 30, 2007 if the maturity of
the Senior Secured Notes has not been extended, as required by the senior credit
facility, by that date.


                                       13
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

     As of March 31,  2004,  the Company was in  compliance  with the  financial
covenants of the senior credit  facility.  The senior credit facility  requires,
among other things,  the maintenance of certain levels of trailing  consolidated
and  domestic  EBITDA  (earnings  before  interest,   taxes,   depreciation  and
amortization)  calculated on a monthly basis, and an acceleration  clause should
an event of default (as defined in the agreement) occur. In addition,  there are
certain restrictions on additional borrowings, additional liens on the Company's
assets, guarantees,  dividend payments,  redemption or purchase of the Company's
stock,  sale of subsidiaries'  stock,  disposition of assets,  investments,  and
mergers and acquisitions.

     The  senior  credit  facility  contains  a  lock-box   requirement  and  an
acceleration  clause  should an event of default (as  defined in the  agreement)
occur.  Accordingly,  the amounts outstanding have been classified as short-term
and are included in loans payable to banks in the condensed consolidated balance
sheet.

   Long-Term Debt

                                                              As of
                                                --------------------------------
                                                March, 31, 2004    June 30, 2003
                                                ---------------    -------------
Senior secured notes due December 1, 2007          $105,000          $     --
Senior subordinated notes due June 1, 2008           48,029           100,000
Foreign bank loans                                    6,950             3,750
Pfizer promissory note                                   --            20,075
Bank capital expenditure facility                        --             1,496
Capitalized lease obligations and other                 314             1,194
                                                   --------          --------
                                                    160,293           126,515
Less:  current maturities                             1,945            24,124
                                                   --------          --------
                                                   $158,348          $102,391
                                                   ========          ========

      Senior Secured Notes due 2007

      In October 2003 the Company issued 105,000 units, consisting of $85,000 of
13% Senior Secured Notes due 2007 of PAHC (the "US Senior Notes") and $20,000 of
13% Senior Secured Notes due 2007 of Philipp Brothers  Netherlands III B.V. (the
"Dutch Senior Notes" and, together with the US Senior Notes, the "Senior Secured
Notes"), an indirect wholly-owned subsidiary of PAHC (the "Dutch issuer").

      The US  Senior  Notes  and the  Dutch  Senior  Notes  are  senior  secured
obligations   of  each  of  PAHC  (the  "US  issuer")  and  the  Dutch   issuer,
respectively. The US Senior Notes and the Dutch Senior Notes are guaranteed on a
senior secured basis by all PAHC's  domestic  restricted  subsidiaries,  and the
Dutch Senior Notes are  guaranteed on a senior  secured basis by PAHC and by the
restricted  subsidiaries  of the Dutch  issuer,  presently  consisting of Phibro
Animal  Health SA. The US Senior  Notes and  related  guarantees  are secured by
substantially  all of PAHC's  assets and the assets of its  domestic  restricted
subsidiaries, other than real property and interests therein, including a pledge
of all the capital stock of such  domestic  restricted  subsidiaries.  The Dutch
Senior Notes and related  guarantees are secured by a pledge of all the accounts
receivable,  a security  interest or  floating  charge on the  inventory  to the
extent permitted by applicable law, and a mortgage on  substantially  all of the
real  property of the Dutch issuer and each of its  restricted  subsidiaries,  a
pledge of 100% of the capital stock of each  subsidiary  of the Dutch issuer,  a
pledge of the  intercompany  loans  made by the Dutch  issuer to its  restricted
subsidiaries and substantially all of the assets of the U.S.  guarantors,  other
than real property and  interests  therein.  The indenture  governing the Senior
Secured Notes provides for optional make-whole  redemptions at any time prior to
June 1, 2005,  optional  redemption  on or after June 1, 2005,  and requires the
Company to make certain offers to purchase Senior Secured Notes upon a change of
control,  upon certain  asset sales and from fifty  percent (50%) of excess cash
flow (as such terms are defined in the indenture).


                                       14
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

      The indenture  contains certain  covenants with respect to the Company and
the  guarantors,  which  restrict,  among other  things,  (a) the  incurrence of
additional  indebtedness,  (b) the  payment of  dividends  and other  restricted
payments, (c) the creation of certain liens, (d) the sale of assets, (e) certain
payment  restrictions   affecting   subsidiaries,   and  (f)  transactions  with
affiliates.  The indenture  restricts the Company's  ability to consolidate,  or
merge with or into,  or to transfer all or  substantially  all of its assets to,
another person.

      Senior Subordinated Notes due 2008

      The Company issued $100,000  aggregate  principal  amount of 9-7/8% Senior
Subordinated  Notes due 2008  ("Senior  Subordinated  Notes")  of which  $51,971
principal  amount was repurchased with proceeds of the Senior Secured Notes. The
Senior  Subordinated Notes are general unsecured  obligations of the Company and
are  subordinated in right of payment to all existing and future senior debt (as
defined in the indenture  agreement of the Company) and rank pari passu in right
of payment with all other existing and future senior  subordinated  indebtedness
of the Company. The Senior Subordinated Notes are unconditionally  guaranteed on
a senior  subordinated  basis by the  domestic  restricted  subsidiaries  of the
Company.  Additional  future domestic  subsidiaries may become  guarantors under
certain circumstances.

      The indenture  contains certain  covenants with respect to the Company and
the  Guarantors,  which  restrict,  among other  things,  (a) the  incurrence of
additional  indebtedness,  (b) the  payment of  dividends  and other  restricted
payments, (c) the creation of certain liens, (d) the sale of assets, (e) certain
payment  restrictions   affecting   subsidiaries,   and  (f)  transactions  with
affiliates.  The indenture  restricts the Company's  ability to consolidate,  or
merge with or into,  or to transfer all or  substantially  all of its assets to,
another person.

      Foreign Bank Loans

      The bank loans of the  Company's  Koffolk  Ltd.  (Israel)  subsidiary  are
collateralized  by its receivables and inventory,  accrue interest at LIBOR plus
1.25%,  and are repayable in equal  quarterly  payments  through 2005. The LIBOR
rate was 1.09% at March 31, 2004.

7.  Discontinued Operations

      The Company  shutdown  Odda  Smelteverk  (Norway)  ("Odda")  and  divested
Carbide  Industries  (U.K.)  ("Carbide"),  during the 2003 fiscal year, and sold
Mineral  Resource  Technologies,  Inc.  ("MRT") in August 2003. These businesses
have been  classified as  discontinued  operations.  The Company's  consolidated
financial  statements have been  reclassified to report separately the operating
results, financial position and cash flows of the discontinued operations.


                                       15
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

   Odda and Carbide

     Operating results and loss on disposal of Odda and Carbide were:


                                          Three Months Ended   Nine Months Ended
                                               March 31,           March 31,
                                                 2003                 2003
                                          ------------------   -----------------
      OPERATING RESULTS:
      Net sales                                $  1,933           $ 11,217
      Cost of goods sold                          1,623             13,723
      Selling, general and
       administrative expenses                      883              3,175
      Asset writedown                                --              7,781
      Other income (expense)                        (59)             2,327
                                               --------           --------
      Loss before income taxes                     (632)           (11,135)
      (Benefit) for income taxes                    (84)               (58)
                                               --------           --------
      (Loss) from operations                   $   (548)          $(11,077)
                                               ========           ========
      Depreciation and amortization            $    192           $    894
                                               ========           ========

                                          Three Months Ended   Nine Months Ended
                                               March 31,           March 31,
                                                 2003                 2003
                                          ------------------   -----------------
      LOSS ON DISPOSAL:
      Assets                                   $ (4,018)          $ (4,018)
      Liabilities                                 6,432              6,432
      Unsecured debt                              2,488              2,488
      Currency translation adjustment            (6,244)            (6,244)
                                               --------           --------
      Loss on disposal                         $ (1,342)          $ (1,342)
                                               ========           ========


                                       16
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

   Mineral Resource Technologies, Inc.

    The Company sold MRT on August 28, 2003.  Net  proceeds,  after  transaction
costs,  were  approximately  $13,836.  Operating results and gain on sale of MRT
were:

                                    Three Months Ended     Nine Months Ended
                                         March 31,              March 31,
                                           2003             2004       2003
                                    -----------------    ---------   --------
      OPERATING RESULTS:
      Net sales                          $  3,542        $  3,327    $ 14,001
      Cost of goods sold                    4,103           3,135      13,997
      Selling, general and
        administrative expenses               631             316       1,684
                                         --------        --------    --------
      Loss before income taxes             (1,192)           (124)     (1,680)
      Provision for income taxes               --              --          --
                                         --------        --------    --------
      Income (loss) from operations      $ (1,192)       $   (124)   $ (1,680)
                                         ========        ========    ========
      Depreciation and amortization      $    337        $     --    $    973
                                         ========        ========    ========

                                                            Nine Months Ended
                                                                March 31,
                                                                   2004
                                                            -----------------
      GAIN ON SALE:
      Current assets                                             $  5,813
      Property, plant & equipment - net and other assets           10,703
      Current liabilities                                          (2,511)
      Other liabilities                                              (400)
      Net proceeds of sale                                        (13,836)
                                                                 --------
      (Gain) on sale                                             $   (231)
                                                                 ========


                                       17
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                                                                    As of
                                                                June 30, 2003
                                                                -------------
      BALANCE SHEET:
      Trade receivables                                            $ 2,633
      Other receivables                                                304
      Inventories                                                    1,643
      Prepaid expenses and other current assets                        362
                                                                   -------
      Current assets from discontinued operations                  $ 4,942
                                                                   =======

      Property, plant and equipment - net                          $ 9,999
      Other assets                                                     651
                                                                   -------
      Other assets from discontinued operations                    $10,650
                                                                   =======

      Accounts payable                                             $ 1,466
      Accrued expenses and other current liabilities                   585
                                                                   -------
      Current liabilities from discontinued operations             $ 2,051
                                                                   =======

      Other liabilities                                            $   198
                                                                   -------
      Other liabilities from discontinued operations               $   198
                                                                   =======

8. Employee Benefit Plans

      Components of net periodic pension expense were:

                                          Three Months Ended   Nine Months Ended
                                                March 31,         March 31,
Domestic                                     2004     2003       2004     2003
--------                                     ----     ----       ----     ----
Service cost - benefits earned during
  the year                                  $ 290    $ 416      $ 971    $ 844
 Interest cost on benefit obligation          218      279        673      615
 Expected return on plan assets              (213)    (260)      (633)    (591)
 Amortization of initial unrecognized net
   transition  (asset)                         (1)      (1)        (2)      (3)
 Amortization of prior service costs          (35)     (53)      (117)    (126)
 Amortization of loss (gain)                    2      (14)        23      (42)
                                            -----    -----      -----    -----
Net periodic pension cost                   $ 261    $ 367      $ 915    $ 697
                                            =====    =====      =====    =====


                                       18
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                                         Three Months Ended    Nine Months Ended
                                               March 31,           March 31,
International                               2004     2003        2004     2003
-------------                               ----     ----        ----     ----
Service cost - benefits earned during
  the year                                 $ 123    $  77       $ 350    $ 231
Interest cost on benefit obligation           98       65         280      195
Expected return on plan assets               (79)     (51)       (225)    (153)
Amortization of loss (gain)                    6       --          17       --
                                           -----    -----       -----    -----
Net periodic pension cost                  $ 148    $  91       $ 422    $ 273
                                           =====    =====       =====    =====

     Employer  contributions to the domestic and international pension plans for
the nine  months  ended  March 31,  2004 were $524 and $568,  respectively.  The
Company anticipates additional funding to the domestic and international pension
plans of $230 and $0, respectively, during the fourth quarter of fiscal 2004.


9.  Contingencies

   Litigation

     On or about April 17, 1997, CP Chemicals, Inc. (a subsidiary, "CP") and the
Company were served with a complaint filed by Chevron U.S.A. Inc. ("Chevron") in
the United States  District Court for the District of New Jersey,  alleging that
the operations of CP at its Sewaren plant affected  adjoining  property owned by
Chevron and alleging that the Company,  as the parent of CP, is also responsible
to  Chevron.  In July 2002,  a phased  settlement  agreement  was  reached and a
Consent Order entered by the Court.  That  settlement is in the process of being
implemented. The Company's and CP's portion of the settlement for past costs and
expenses  through  the entry of the Consent  Order was $495 and was  included in
selling,  general  and  administrative  expenses  in fiscal 2002 and was paid in
fiscal  2003.  The Consent  Order then  provides  for a period of due  diligence
investigation  of the  property  owned by Chevron.  The  investigation  has been
conducted and the results are under review.  The  investigation  costs are being
split with one other defendant, Vulcan Materials Company. Upon completion of the
review of the results of the  investigation,  a decision will be made whether to
opt out of the  settlement or proceed.  If no party opts out of the  settlement,
the Company and CP will take title to the adjoining Chevron  property,  probably
through the use of a three-member  New Jersey  limited  liability  company.  The
third member of the limited liability company will be Vulcan Materials  Company.
The  Company  also  has  commenced   negotiations  with  Chevron  regarding  its
allocation of responsibility and associated costs under the Consent Order. While
the costs  cannot be estimated  with any degree of  certainty at this time,  the
Company  believes that insurance  recoveries will be available to offset some of
those costs.

     The  Company's  Phibro-Tech  subsidiary  was named in 1993 as a potentially
responsible  party  ("PRP") in  connection  with an action  commenced  under the
Federal Comprehensive  Environmental Response,  Compensation,  and Liability Act
("CERCLA") by the United  States  Environmental  Protection  Agency ("the EPA"),
involving a former third-party  fertilizer  manufacturing site in Jericho, South
Carolina.  An agreement has been reached under which such  subsidiary  agreed to
contribute  up to $900 of which  $635 has been  paid as of June 30,  2003.  Some
recovery from insurance and other sources is expected but has not been recorded.
The Company also has accrued its best estimate of any future costs.

     Phibro-Tech,  Inc. has resolved certain alleged technical permit violations
with the California  Department of Toxic  Substances  Control and has reached an
agreement to pay $425 over a six year period ending October 2008.

     In February 2000, the EPA notified numerous parties of potential  liability
for waste disposal at a licensed Casmalia, California disposal site, including a
business,  assets of which were  originally  acquired by a subsidiary in 1984. A
settlement  has been reached in this matter and the Company has paid $171 of the
settlement amount.


                                       19
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

     On or about  April 5,  2002,  the  Company  was  served,  as a  potentially
responsible  party,  with an  information  request  from the EPA  relating  to a
third-party  superfund site in Rhode Island.  The Company is  investigating  the
matter,  which relates to events in the 1950's and 1960's,  but management  does
not believe that the Company has any liability in this matter.

     The  Company  and its  subsidiaries  are party to a number  of  claims  and
lawsuits  arising  out  of the  normal  course  of  business  including  product
liabilities and governmental  regulation.  Certain of these actions seek damages
in various  amounts.  In most cases,  such claims are covered by insurance.  The
Company  believes  that  none  of  the  claims  or  pending   lawsuits,   either
individually  or in the  aggregate,  will have a material  adverse effect on its
financial position.

   Environmental Remediation

     The Company's operations, properties and subsidiaries are subject to a wide
variety of complex and stringent federal, state, local and foreign environmental
laws and  regulations,  including  those governing the use,  storage,  handling,
generation,  treatment,  emission,  release,  discharge  and disposal of certain
materials and wastes, the remediation of contaminated soil and groundwater,  the
manufacture,  sale and use of pesticides and the health and safety of employees.
As such, the nature of the Company's  current and former operations and those of
its subsidiaries  exposes the Company and its subsidiaries to the risk of claims
with respect to such matters. Under certain circumstances, the Company or any of
its  subsidiaries  might be required to curtail  operations  until a  particular
problem  is  remedied.   Known  costs  and  expenses  under  environmental  laws
incidental  to  ongoing  operations  are  generally  included  within  operating
results.  Potential  costs and expenses may also be incurred in connection  with
the repair or upgrade of facilities to meet existing or new  requirements  under
environmental   laws  or  to  investigate  or  remediate   potential  or  actual
contamination  and from time to time the Company  establishes  reserves for such
contemplated  investigation  and  remediation  costs.  In  many  instances,  the
ultimate  costs under  environmental  laws and the time period during which such
costs are likely to be incurred are difficult to predict.

     The Company's  subsidiaries have, from time to time, implemented procedures
at  their  facilities   designed  to  respond  to  obligations  to  comply  with
environmental  laws.  The Company  believes that its operations are currently in
material  compliance with such environmental laws, although at various sites its
subsidiaries  are  engaged  in  continuing  investigation,   remediation  and/or
monitoring  efforts  to address  contamination  associated  with their  historic
operations.

     The  nature of the  Company's  and its  subsidiaries'  current  and  former
operations  exposes the Company and its  subsidiaries to the risk of claims with
respect to environmental matters and the Company cannot assure it will not incur
material costs and  liabilities in connection  with such claims.  Based upon its
experience to date, the Company believes that the future cost of compliance with
existing  environmental  laws,  and  liability  for known  environmental  claims
pursuant to such environmental  laws, will not have a material adverse effect on
the Company's financial position.

     Based  upon  information  available,  the  Company  estimates  the  cost of
litigation proceedings described above and the cost of further investigation and
remediation  of identified  soil and  groundwater  problems at operating  sites,
closed sites and  third-party  sites,  and closure  costs for closed sites to be
approximately  $2,743, which is included in current and long-term liabilities in
the March 31, 2004 condensed consolidated balance sheet (approximately $2,791 at
June 30, 2003).

10.  Guarantees

     As part of the Prince Transactions, as is normal for such transactions, the
Company has agreed to indemnify the Palladium  Investors for losses  arising out
of breach of  representations,  warranties and covenants.  The Company's maximum
liability under such indemnifications is limited to $15,000.


                                       20
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

     The Company agreed to indemnify the Palladium  Investors for a portion,  at
the rate of $0.65 for every dollar, of the amount they receive in respect of the
disposition  of Buyer for less than  $21,000,  up to a  maximum  payment  by the
Company  of  $4,000  (the  "Backstop   Indemnification  Amount").  The  Backstop
Indemnification  Amount would be payable on the earlier to occur of July 1, 2008
or six months after the redemption  date of all of the Company's  Senior Secured
Notes due 2007 if such a  disposition  closes prior to such  redemption  and six
months after the closing of any such disposition if the disposition closes after
any such  redemption.  The  Company's  obligations  with respect to the Backstop
Indemnification  Amount will cease if the  Palladium  Investors do not close the
disposition  of Buyer  by  January  1,  2009.  The  maximum  potential  Backstop
Indemnification  Amount  is  included  in  other  liabilities  on the  Company's
condensed consolidated balance sheet at March 31, 2004.

     The Company  established  a $1,000 letter of credit escrow for two years to
secure  its  working  capital  adjustment  and  certain  other   indemnification
obligations relating to the Prince Transactions.

11.  Business Segments

     The  Company's   reportable  segments  are  Animal  Health  and  Nutrition,
Industrial Chemicals,  Distribution and All Other. Reportable segments have been
determined  primarily  on the basis of the nature of products  and  services and
certain  similar  operating  units have been  aggregated.  The Company's  Animal
Health and Nutrition segment manufactures and markets more than 500 formulations
and  concentrations  of medicated feed additives and nutritional  feed additives
including  antibiotics,  antibacterials,  anticoccidials,  anthelmintics,  trace
minerals,  vitamins,  vitamin  premixes  and other animal  health and  nutrition
products.  The Industrial Chemicals segment manufactures and markets a number of
chemicals   for   use  in  the   pressure-treated   wood,   chemical   catalyst,
semiconductor,  automotive,  and aerospace industries.  The Distribution segment
markets and  distributes  a variety of  industrial,  specialty  and fine organic
chemicals and intermediates  produced primarily by third parties.  The All Other
segment  manufactures  and markets a variety of specialty  custom  chemicals and
copper-based fungicides.  Intersegment sales and transfers were not significant.
The following segment data includes information only for continuing operations.

<TABLE>
<CAPTION>

                                       Animal
                                      Health &   Industrial                     All      Corporate &
Three Months Ended March 31, 2004    Nutrition    Chemicals    Distribution    Other        Other        Total
                                     ---------    ---------    ------------    -----     -----------     -----
<S>                                  <C>          <C>          <C>         <C>          <C>          <C>
Net sales                            $  64,819    $  10,000    $   7,916   $   8,463    $      --    $  91,198
Operating income (loss)                  8,370        1,136          789         194       (3,823)       6,666
Depreciation and amortization            2,086          403            3         206          660        3,358

                                       Animal
                                      Health &   Industrial                     All      Corporate &
Three Months Ended March 31, 2003    Nutrition    Chemicals    Distribution    Other        Other        Total
                                     ---------    ---------    ------------    -----     -----------     -----
Net sales                            $  62,675    $  12,192    $   7,612   $   7,718    $      --    $  90,197
Operating income (loss)                  8,902         (716)         900         346       (3,972)       5,460
Depreciation and amortization            1,890          738            2         196          405        3,231

                                       Animal
                                      Health &   Industrial                     All      Corporate &
Nine Months Ended March 31, 2004     Nutrition    Chemicals    Distribution    Other        Other        Total
                                     ---------    ---------    ------------    -----     -----------     -----
Net sales                            $ 193,347    $  33,661    $  23,511   $  23,892    $      --    $ 274,411
Operating income/(loss)                 22,925        2,736        2,322       1,040      (11,737)      17,286
Depreciation and amortization            6,174        1,691           10         620        1,608       10,103
</TABLE>


                                       21
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

<TABLE>
<CAPTION>

                                       Animal
                                      Health &   Industrial                     All      Corporate &
Nine Months Ended March 31, 2003     Nutrition    Chemicals    Distribution    Other        Other        Total
                                     ---------    ---------    ------------    -----     -----------     -----
<S>                                  <C>          <C>          <C>         <C>           <C>        <C>
Net sales                            $ 189,301    $  37,317    $  22,905   $  17,090     $     --    $ 266,613
Operating income/(loss)                 29,915       (1,538)       2,452         216      (11,450)      19,595
Depreciation and amortization            5,702        2,495            8         558        1,155        9,918

                                       Animal
Identifiable Assets of                Health &   Industrial                     All      Corporate &
Continuing Operations                Nutrition    Chemicals    Distribution    Other        Other        Total
                                     ---------    ---------    ------------    -----     -----------     -----
At March 31, 2004                    $ 185,298    $  26,768    $   7,518   $  14,230    $  19,097    $ 252,911
At June 30, 2003                       190,864       33,191        9,154      12,735       12,811      258,755
</TABLE>

12.  Consolidating Financial Statements

     The units of Senior  Secured Notes due 2007,  consisting of US Senior Notes
issued by the Company  (the  "Parent  Issuer")  and Dutch Senior Notes issued by
Philipp Brothers  Netherlands III B.V. (the "Dutch  Issuer"),  are guaranteed by
certain  subsidiaries.  The Company and its U.S.  subsidiaries ("U.S.  Guarantor
Subsidiaries"),  excluding The Prince Manufacturing Company, Prince MFG, LLC and
Mineral  Resource   Technologies,   Inc.  (until  divested)  (the  "Unrestricted
Subsidiaries", as defined in the indenture), fully and unconditionally guarantee
all of the Senior Secured Notes on a joint and several basis.  In addition,  the
Dutch  Issuer's  subsidiaries,  presently  consisting of Phibro Animal Health SA
(the "Belgium Guarantor"),  fully and unconditionally guarantee the Dutch Senior
Notes. The Dutch issuer and the Belgium Guarantor do not guarantee the US Senior
Notes.  Other  foreign  subsidiaries   ("Non-Guarantor   Subsidiaries")  do  not
presently  guarantee the Senior Secured Notes. The U.S.  Guarantor  Subsidiaries
include all domestic  subsidiaries  of the Company  other than the  Unrestricted
Subsidiaries  and  include:  CP  Chemicals,  Inc.,  Phibro-Tech,   Inc.,  Prince
Agriproducts,  Inc, Phibrochem,  Inc., Phibro Chemicals, Inc., Western Magnesium
Corp., Phibro Animal Health Holdings, Inc., and Phibro Animal Health U.S., Inc.

     The Senior  Subordinated  Notes due 2008, issued by the Parent Issuer,  are
guaranteed by certain subsidiaries.  The Company's U.S. subsidiaries,  including
the U.S.  Guarantor  Subsidiaries and the Unrestricted  Subsidiaries,  fully and
unconditionally  guarantee the Senior  Subordinated Notes on a joint and several
basis. The Dutch Issuer, Belgium Guarantor and Non-Guarantor Subsidiaries do not
presently   guarantee  the  Senior   Subordinated   Notes.  The  U.S.  Guarantor
Subsidiaries and Unrestricted  Subsidiaries include all domestic subsidiaries of
the  Company  including:   CP  Chemicals,   Inc.,   Phibro-Tech,   Inc.,  Prince
Agriproducts,  Inc., The Prince Manufacturing Company,  Prince MFG, LLC, Mineral
Resource  Technologies,   Inc.  (until  divested),   Phibrochem,   Inc.,  Phibro
Chemicals,  Inc., Western Magnesium Corp., Phibro Animal Health Holdings,  Inc.,
and Phibro Animal Health U.S., Inc.

     The  following   consolidating   financial  data   summarizes  the  assets,
liabilities  and  results of  operations  and cash  flows of the Parent  Issuer,
Unrestricted  Subsidiaries,  U.S. Guarantor Subsidiaries,  Dutch Issuer, Belgium
Guarantor and Non-Guarantor  Subsidiaries.  The Unrestricted Subsidiaries,  U.S.
Guarantor  Subsidiaries,  Dutch  Issuer,  Belgium  Guarantor  and  Non-Guarantor
Subsidiaries  are directly or indirectly  wholly owned as to voting stock by the
Company.

     Investments  in  subsidiaries  are accounted for by the Parent Issuer using
the  equity  method.  Income  tax  expense  (benefit)  is  allocated  among  the
consolidating  entities based upon taxable income (loss) by jurisdiction  within
each group.

     The principal  consolidation  adjustments  are to eliminate  investments in
subsidiaries  and intercompany  balances and  transactions.  Separate  financial
statements of the Guarantor Subsidiaries and the Non-Guarantor  Subsidiaries are
not presented because  management has determined that such financial  statements
would not be material to investors.


                                       22
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                      CONDENSED CONSOLIDATING BALANCE SHEET
                              As of March 31, 2004

<TABLE>
<CAPTION>

                                                                  U.S.
                                         Parent  Unrestricted  Guarantor   Dutch  Belgium  Non-Guarantor Consolidation  Consolidated
                                         Issuer  Subsidiaries Subsidiaries Issuer Guarantor Subsidiaries  Adjustments     Balance
                                       --------------------------------------------------------------------------------------------
<S>                                      <C>      <C>          <C>      <C>      <C>         <C>        <C>               <C>
                                                                               ASSETS

CURRENT ASSETS:
  Cash and cash equivalents            $   1,462  $     --     $   409  $    19  $   229     $ 4,071    $      --         $  6,190
  Trade receivables                        2,596        --      27,866       --    1,386      25,700           --           57,548
  Other receivables                          421       414       1,297       --       57       1,174           --            3,363
  Inventory                                2,108        --      39,357       --   19,684      27,294                        88,443
  Prepaid expenses and other               1,633       110       1,278       --       35       7,146           --           10,202
                                       --------------------------------------------------------------------------------------------
    TOTAL CURRENT ASSETS                   8,220       524      70,207       19   21,391      65,385           --          165,746
                                       --------------------------------------------------------------------------------------------
Property, plant & equipment, net             118        --      13,154       --   17,693      31,722           --           62,687

Intangibles                                   --        --          --       --    1,358       6,119           --            7,477
Investment in subsidiaries               131,896        --       3,619     (407)      --          --     (135,108)              --
Intercompany                             (17,277)   20,968      61,897   21,167    3,909     (11,785)     (78,879)              --
Other assets                              15,258        --         860       --       --         883           --           17,001
                                       --------------------------------------------------------------------------------------------

                                       $ 138,215  $ 21,492   $ 149,737 $ 20,779 $ 44,351    $ 92,324    $(213,987)       $ 252,911
                                       ============================================================================================

                                                               LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Cash overdraft                       $      --  $     12   $   4,028 $     --      $--    $     --    $      --          $ 4,040
  Loan payable to banks                    8,004        --          --       --       --       2,298           --           10,302
  Current portion of long-term debt           --        --         195       --       --       1,750           --            1,945
  Accounts payable                           691         5      23,760       --    1,847      14,051           --           40,354
  Accrued expenses and other              14,816         9       7,902    1,156    9,642      12,151                        45,676
                                       --------------------------------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES             23,511        26      35,885    1,156   11,489      30,250           --          102,317
                                       --------------------------------------------------------------------------------------------

Long-term debt                           133,029        --           3   20,000       --       5,316           --          158,348
Intercompany debt                             --        --          --       57   32,193      46,629      (78,879)              --
Other liabilities                          8,571        --       6,493       --    1,076       3,002           --           19,142

                                       --------------------------------------------------------------------------------------------
    TOTAL LIABILITIES                    165,111        26      42,381   21,213   44,758      85,197      (78,879)         279,807
                                       --------------------------------------------------------------------------------------------

REDEEMABLE SECURITIES:
  Series C preferred stock                21,288        --          --       --       --          --           --           21,288
                                       --------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT):
  Series A preferred stock                   521        --          --       --       --          --           --              521
  Common stock                                 2         1          31       --       --          --          (32)               2
  Paid-in capital                            860        --     108,363       23       57       5,176     (113,619)             860
  Retained earnings
    (accumulated deficit)                (45,279)   21,465        (937)  (5,445)  (5,452)     11,125      (20,756)          (45,279)
  Accumulated other comprehensive                                                                                               --
    income (loss):
  Gain on derivative instruments             117        --         117       --       --          --         (117)             117
  Cumulative currency translation
    adjustment                            (4,405)       --        (218)   4,988    4,988      (9,174)        (584)          (4,405)
                                       --------------------------------------------------------------------------------------------
    TOTAL STOCKHOLDERS'
      EQUITY (DEFICIT)                   (48,184)   21,466     107,356     (434)    (407)      7,127     (135,108)         (48,184)
                                       --------------------------------------------------------------------------------------------

                                       $ 138,215  $ 21,492   $ 149,737 $ 20,779 $ 44,351    $ 92,324    $(213,987)       $ 252,911
                                       ============================================================================================
</TABLE>


                                       23
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)


                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                    For The Three Months Ended March 31, 2004

<TABLE>
<CAPTION>

                                                                  U.S.
                                         Parent  Unrestricted  Guarantor   Dutch  Belgium  Non-Guarantor Consolidation  Consolidated
                                         Issuer  Subsidiaries Subsidiaries Issuer Guarantor Subsidiaries  Adjustments     Balance
                                       --------------------------------------------------------------------------------------------
<S>                                      <C>         <C>       <C>        <C>       <C>       <C>         <C>           <C>
NET SALES                                $  5,331    $ --      $ 55,374   $     --  $  1,162  $ 29,331    $     --      $ 91,198

NET SALES-- INTERCOMPANY                       16      --            32         --     7,534       418      (8,000)           --

COST OF GOODS SOLD                          4,176      --        40,301         --     6,461    24,955      (8,000)       67,893
                                        ----------------------------------------------------------------------------------------

  GROSS PROFIT                              1,171      --        15,105         --     2,235     4,794          --        23,305


SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                   4,868      --         6,476          2       776     4,517          --        16,639
                                        ----------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)                    (3,697)     --         8,629         (2)    1,459       277          --         6,666

OTHER:
  Interest expense                          4,179      --            --        650        60        52          --         4,941
  Interest (income)                            (1)     --            --         --        --       (43)         --           (44)
  Other (income) expense, net                 112      --          (350)        --       118        57          --           (63)
  Net (gain) on extinguishment of debt         --      --            --         --        --        --          --            --

  Intercompany interest and other          (4,407)     --         2,345       (657)      943     1,776          --            --

  Loss (profit) relating to subsidiaries   (3,185)     --            --          2        --        --       3,183            --
                                        ----------------------------------------------------------------------------------------
INCOME (LOSS) FROM
  CONTINUING OPERATIONS
  BEFORE INCOME TAXES                        (395)     --         6,634          3       338    (1,565)     (3,183)        1,832

PROVISION FOR INCOME TAXES                     --      --           211         --       340     1,676          --         2,227
                                        ----------------------------------------------------------------------------------------
INCOME (LOSS) FROM
  CONTINUING OPERATIONS                      (395)     --         6,423          3        (2)   (3,241)     (3,183)         (395)

DISCONTINUED OPERATIONS:
  Profit (loss) relating to
    discontinued operations                    --                    --         --        --        --          --            --
  (Loss) from discontinued operations
    (net of income taxes)                      --                    --         --        --        --          --            --
  Gain from disposal of discontinued
    operations (net of income taxes)           --                    --         --        --        --          --            --
                                        ----------------------------------------------------------------------------------------
    NET INCOME (LOSS)                   $   (395)   $ --      $  6,423   $      3  $     (2) $ (3,241)   $ (3,183)     $   (395)
                                        ========================================================================================

</TABLE>

                                       24
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                    For The Nine Months Ended March 31, 2004

<TABLE>
<CAPTION>

                                                                  U.S.
                                         Parent  Unrestricted  Guarantor   Dutch  Belgium  Non-Guarantor Consolidation  Consolidated
                                         Issuer  Subsidiaries Subsidiaries Issuer Guarantor Subsidiaries  Adjustments     Balance
                                       --------------------------------------------------------------------------------------------
<S>                                      <C>         <C>       <C>        <C>       <C>       <C>         <C>           <C>
NET SALES                                $ 16,453    $ 11,118  $ 158,070  $   --    $ 3,402   $ 85,368   $     --       $ 274,411

NET SALES - INTERCOMPANY                      113       2,598        425      --     20,530      2,593    (26,259)             --

COST OF GOODS SOLD                         12,995      10,139    117,520      --     20,432     72,262    (26,259)        207,089
                                        --------------------------------------------------------------------------------------------
  GROSS PROFIT                              3,571       3,577     40,975      --      3,500     15,699         --          67,322


SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                  14,936       1,299     18,851       4      1,860     13,086         --          50,036
                                        --------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)                   (11,365)      2,278     22,124      (4)     1,640      2,613         --          17,286


OTHER:
  Interest expense                         11,920          18         --   1,156         79        292         --          13,465
  Interest (income)                            (4)         --         --      --         --       (114)        --            (118)
  Other (income) expense, net                 640          --       (626)     --       (294)      (484)        --            (764)
  Net (gain) on extinguishment of debt    (23,226)         --         --      --         --         --                    (23,226)

  Intercompany interest and other         (16,152)      1,892      7,833  (1,167)     2,389      5,205         --              --

  Loss (profit) relating to
    subsidiaries                           (8,533)         --         --     534         --         --      7,999              --
                                        --------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
  CONTINUING OPERATIONS
  BEFORE INCOME TAXES                      23,990         368     14,917    (527)      (534)    (2,286)    (7,999)         27,929

PROVISION FOR INCOME TAXES                  1,951          96        883      --         --      2,960         --           5,890
                                        --------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
CONTINUING OPERATIONS                      22,039         272     14,034    (527)      (534)    (5,246)    (7,999)         22,039

DISCONTINUED OPERATIONS:
  Profit (loss) relating to
    discontinued operations                  (124)         --         --      --         --         --        124              --
  (Loss) from discontinued operations
    (net of income taxes)                      --        (124)        --      --         --         --         --            (124)
  Gain from disposal of discontinued
    operations (net of income taxes)          231          --         --      --         --         --         --             231
                                        --------------------------------------------------------------------------------------------
    NET INCOME (LOSS)                    $ 22,146    $    148  $  14,034  $ (527)   $  (534)  $ (5,246)  $ (7,875)      $  22,146
                                        ============================================================================================

</TABLE>

                                       25
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                    For the Nine Months Ended March 31, 2004

<TABLE>
<CAPTION>

                                                                  U.S.
                                         Parent  Unrestricted  Guarantor   Dutch  Belgium  Non-Guarantor Consolidation  Consolidated
                                         Issuer  Subsidiaries Subsidiaries Issuer Guarantor Subsidiaries  Adjustments     Balance
                                       --------------------------------------------------------------------------------------------
<S>                                      <C>         <C>       <C>        <C>       <C>       <C>         <C>           <C>
OPERATING ACTIVITIES:
Net income (loss)                        $ 22,146    $  148    $14,034    $ (527)  $ (534)    $(5,246)    $ (7,875)     $ 22,146
Adjustment for discontinued operation        (107)      124         --        --       --          --         (124)         (107)
                                         ----------------------------------------------------------------------------------------
Income (loss) from continuing operations   22,039       272     14,034      (527)    (534)     (5,246)      (7,999)       22,039

Adjustments to reconcile income (loss)
  from continuing operations to net cash
  provided (used) by operating activities:
Depreciation and amortization               1,608       487      1,864        --    1,900       4,244           --        10,103
Deferred income taxes                          --        --         --        --       --         263           --           263
Net (gain) on extinguishment of debt      (23,226)       --         --        --       --          --           --       (23,226)
Unrealized foreign currency (gains)
losses and other                              391        --       (606)       --   (1,177)        760           --          (632)
                                                                                                                              --
Changes in operating assets and liabilities:                                                                                  --
Accounts receivable                           156       336     (5,405)       --      260       1,873           --        (2,780)
Inventory                                     504      (543)     2,052        --   (5,238)        567           --        (2,658)
Prepaid expenses and other                  1,190       188     (1,163)       --      (35)     (1,331)          --        (1,151)
Other assets                                1,020        --         (4)       --       --         (39)          --           977
Intercompany                               (1,883)   17,358    (13,553)  (20,610)  13,145      (2,456)       7,999            --
Accounts payable                           (2,613)     (332)    (7,045)       --   (2,751)         31           --       (12,710)
Accrued expenses and other                  5,033      (276)     6,317     1,156    3,849      (7,298)          --         8,781
Cash provided (used) by discontinued
operations                                    231      (652)        --        --       --          --           --          (421)
                                         ----------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY
OPERATING ACTIVITIES                        4,450    16,838     (3,509)  (19,981)   9,419      (8,632)          --        (1,415)
                                         ----------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
Capital expenditures                          (44)      (62)    (1,334)       --   (1,163)     (1,529)          --        (4,132)
Proceeds from sale of assets                   --        --      1,057        --       --          23           --         1,080
Discontinued operations                    14,351        --         --        --       --         600           --        14,951

                                         ----------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES                       14,307       (62)      (277)       --   (1,163)       (906)          --        11,899
                                         ----------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
Cash overdraft                               (350)     (274)     2,987        --       --          (9)          --         2,354
Net increase (decrease) in short-term debt(29,874)       --         --        --       --       1,006           --       (28,868)
Proceeds from long-term debt               85,000        --         --    20,000       --       4,622           --       109,622
Payments of long-term debt                (32,679)      (13)      (960)       --       --        (980)          --       (34,632)
Payment of Pfizer obligations             (20,075)       --         --        --   (8,225)         --           --       (28,300)
Payments relating to the Prince
Transactions and transaction costs         (4,415)  (16,608)        --        --       --          --           --       (21,023)
Debt refinancing costs                    (14,945)       --         --        --       --          --           --       (14,945)

                                         ----------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES                      (17,338)  (16,895)     2,027    20,000   (8,225)      4,639           --       (15,792)
                                         ----------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES
ON CASH                                        --        --          1        --       13         305                        319
                                         ----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS                            1,419      (119)    (1,758)       19       44      (4,594)          --        (4,989)

CASH AND CASH EQUIVALENTS
at beginning of period                         43       119      2,167        --      185       8,665                     11,179
                                         ----------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
at end of period                          $ 1,462   $    --    $   409    $   19   $  229     $ 4,071     $     --       $ 6,190
                                         ========================================================================================
</TABLE>

                                       26
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                      CONDENSED CONSOLIDATING BALANCE SHEET
                               As of June 30, 2003

<TABLE>
<CAPTION>

                                                                  U.S.
                                         Parent  Unrestricted  Guarantor   Dutch  Belgium  Non-Guarantor Consolidation  Consolidated
                                         Issuer  Subsidiaries Subsidiaries Issuer Guarantor Subsidiaries  Adjustments     Balance
                                         ------------------------------------------------------------------------------------------
<S>                                      <C>        <C>        <C>        <C>       <C>       <C>         <C>           <C>
                                                                                 ASSETS

CURRENT ASSETS:
  Cash and cash equivalents              $     43   $   119    $  2,167   $    --  $   185    $  8,665                  $ 11,179
  Trade receivables                         2,759     2,452      22,071        --    1,542      26,847                    55,671
  Other receivables                           957         3         733        --      518       1,431                     3,642
  Inventory                                 2,612     4,278      41,266        --   13,459      27,152                    88,767
  Prepaid expenses and other                3,267       458         981        --      (68)      5,550                    10,188
  Current assets from discontinued
    operations                                 --     4,942          --        --       --          --                     4,942
                                         ------------------------------------------------------------------------------------------
    TOTAL CURRENT ASSETS                    9,638    12,252      67,218        --   15,636      69,645          --       174,389
                                         ------------------------------------------------------------------------------------------
Property, plant & equipment, net              153     3,269      13,297        --   17,049      32,672                    66,440

Intangibles                                    --        --          --        --    1,818       6,851                     8,669
Investment in subsidiaries                 96,672        --       3,619        --       --          --    (100,291)           --
Intercompany                               35,186   (19,431)     59,765        --    6,881      (9,418)    (72,983)           --
Other assets                               11,516       710       1,122        --       --         851                    14,199
Other assets from discontinued
  operations                                   --    10,650          --        --       --          --                    10,650
                                         ------------------------------------------------------------------------------------------
                                         $ 153,165  $ 7,450    $145,021   $    --  $41,384    $100,601   $(173,274)      274,347
                                         ===========================================================================================

                                                                 LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Cash overdraft                         $    350   $   286    $  1,041   $    --  $    --    $      9                     1,686
  Loan payable to banks                    32,147        --          --        --       --       6,767                    38,914
  Current portion of long-term debt        21,599        66         381        --       --       2,078                    24,124
  Accounts payable                          3,304     2,350      25,926        --   12,115      13,220                    56,915
  Accrued expenses and other                6,924     1,151       9,931        --    6,715      16,888                    41,609
  Current liabilities from
    discontinued operations                    --     2,051          --        --       --          --                     2,051
                                         ------------------------------------------------------------------------------------------
    TOTAL CURRENT LIABILITIES              64,324     5,904      37,279        --   18,830      38,962          --       165,299
                                         ------------------------------------------------------------------------------------------
Long-term debt                            100,073       213         149        --       --       1,956                   102,391
Intercompany debt                              --        --          --        --   22,302      50,681     (72,983)           --
Other liabilities                           4,397       114      13,289        --    1,256       3,032                    22,088
Other liabilities from discontinued
  operations                                   --       198          --        --       --          --                       198
                                         ------------------------------------------------------------------------------------------
    TOTAL LIABILITIES                     168,794     6,429      50,717        --   42,388      94,631     (72,983)      289,976
                                         ------------------------------------------------------------------------------------------
REDEEMABLE SECURITIES:
  Series B and C preferred stock           68,881        --          --        --       --          --                    68,881
                                         ------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (DEFICIT):
  Series A preferred stock                    521        --          --        --       --          --                       521
  Common stock                                  2         1          31        --       --          --         (32)            2
  Paid-in capital                             860        --     110,883        --       --       5,179    (116,062)          860
  Reatined earnings (accumulated
    deficit)                              (79,489)    1,020     (16,499)       --   (4,781)     10,860       9,400       (79,489)
  Accumulated other comprehensive                                                                                             --
    income (loss):
    Gain on derivative instruments             81        --          81        --       --          --         (81)           81
    Cumulative currency translation
      adjustment                           (6,485)       --        (192)       --    3,777     (10,069)      6,484        (6,485)
                                         ----------------------------------------------------------------------------------------
      TOTAL STOCKHOLDERS'
        EQUITY (DEFICIT)                  (84,510)    1,021      94,304        --   (1,004)      5,970    (100,291)      (84,510)
                                         ----------------------------------------------------------------------------------------

                                         $153,165  $  7,450    $145,021   $    --  $41,384    $100,601   $(173,274)     $274,347
                                         ===========================================================================================
</TABLE>


                                       27
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                    For The Three Months Ended March 31, 2003

<TABLE>
<CAPTION>

                                                                  U.S.
                                         Parent  Unrestricted  Guarantor   Dutch  Belgium  Non-Guarantor Consolidation  Consolidated
                                         Issuer  Subsidiaries Subsidiaries Issuer Guarantor Subsidiaries  Adjustments     Balance
                                       ---------------------------------------------------------------------------------------------
<S>                                    <C>       <C>        <C>           <C>     <C>        <C>            <C>          <C>
NET SALES                              $ 6,001   $ 5,743    $ 48,232      $ --     $ 3,647    $ 26,574    $      --      $ 90,197

NET SALES - INTERCOMPANY                   499     1,141         190        --      16,357       1,712      (19,899)           --

COST OF GOODS SOLD                       5,065     5,405      37,093        --      19,305      19,946      (19,899)       66,915
                                       ---------------------------------------------------------------------------------------------
  GROSS PROFIT                           1,435     1,479      11,329        --         699       8,340           --        23,282

SELLING, GENERAL AND
  ADMINISTRATIVE EXPENSES                4,680       640       7,689        --       1,065       3,748                     17,822
                                       ---------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS)                 (3,245)      839       3,640        --        (366)      4,592           --         5,460

OTHER:
  Interest expense                       3,785        19          --        --        (105)        279                      3,978
 Interest (income)                          (1)       --          --        --         (15)        (23)                       (39)
  Other expense, net                       129        --        (308)       --         756        (465)                       112

  Intercompany interest and other       (6,996)    1,240       3,000        --       1,478       1,278                         --

  Loss (profit) relating to subsidiaries  (972)       --          --        --          --          --          972            --
                                       ---------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
  CONTINUING OPERATIONS
  BEFORE INCOME TAXES                      810      (420)        948        --      (2,480)      3,523         (972)        1,409

PROVISION (BENEFIT) FOR INCOME TAXES        --        20         261        --        (992)      1,310                        599
                                       ---------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
  CONTINUING OPERATIONS                    810      (440)        687        --      (1,488)      2,213         (972)          810

DISCONTINUED OPERATIONS:
  Profit (loss) relating to
    discontinued operations             26,937        --          --        --          --          --      (26,937)           --
  (Loss) from discontinued operations
    (net of income taxes)                   --    (1,192)         --        --          --        (548)                    (1,740)
  Income (loss) on disposal of
    discontinued operations
    (net of income taxes)              (30,019)       --          --        --          --      28,677                     (1,342)
                                       ---------------------------------------------------------------------------------------------
    NET INCOME (LOSS)                  $(2,272) $ (1,632)   $    687      $ --    $ (1,488)   $ 30,342    $ (27,909)     $ (2,272)
                                       =============================================================================================
</TABLE>

                                       28
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                 CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
                    For The Nine Months Ended March 31, 2003

<TABLE>
<CAPTION>

                                                                  U.S.
                                         Parent  Unrestricted  Guarantor   Dutch  Belgium  Non-Guarantor Consolidation  Consolidated
                                         Issuer  Subsidiaries Subsidiaries Issuer Guarantor Subsidiaries  Adjustments     Balance
                                      ----------------------------------------------------------------------------------------------
<S>                                   <C>       <C>        <C>             <C>    <C>        <C>          <C>          <C>
NET SALES                             $ 18,667  $ 16,784   $ 141,693       $--    $ 5,390    $ 84,079     $    --      $ 266,613

NET SALES - INTERCOMPANY                   976     3,232         514        --     22,844       6,212     (33,778)            --

COST OF GOODS SOLD                      15,605    15,224     109,227        --     25,568      65,297     (33,778)       197,143
                                      ----------------------------------------------------------------------------------------------
  GROSS PROFIT                           4,038     4,792      32,980        --      2,666      24,994          --         69,470

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES                 13,863     1,925      20,272        --      1,499      12,316                     49,875
                                      ----------------------------------------------------------------------------------------------
  OPERATING INCOME (LOSS)               (9,825)    2,867      12,708        --      1,167      12,678          --         19,595

OTHER:
  Interest expense                      11,222        67           1        --         --         848                     12,138
  Interest (income)                         (2)       --          --        --        (15)       (118)                      (135)
  Other expense, net                       438        --        (308)       --        849         338                      1,317

  Intercompany interest and other      (22,402)    3,717      10,296        --      2,162       6,227                         --

  Loss (profit) relating to
    subsidiaries                        (3,072)       --          --        --         --          --       3,072             --
                                      ----------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
  CONTINUING OPERATIONS
  BEFORE INCOME TAXES                    3,991      (917)      2,719        --     (1,829)      5,383      (3,072)         6,275

PROVISION (BENEFIT) FOR
  INCOME TAXES                             156        40         467        --       (732)      2,509                      2,440
                                      ----------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
  CONTINUING OPERATIONS                  3,835      (957)      2,252        --     (1,097)      2,874      (3,072)         3,835

DISCONTINUED OPERATIONS:
  Profit (loss) relating to
    discontinued operations             15,920        --          --        --         --          --     (15,920)            --
  (Loss) from discontinued operations
    (net of income taxes)                   --    (1,680)         --        --         --     (11,077)                   (12,757)
  Income (loss) on disposal of
    discontinued operations
    (net of income taxes)              (30,019)       --          --        --         --      28,677                     (1,342)
                                      ----------------------------------------------------------------------------------------------
    NET INCOME (LOSS)                 $(10,264) $ (2,637)    $ 2,252       $--   $ (1,097)   $ 20,474  $  (18,992)     $ (10,264)
                                      ==============================================================================================
</TABLE>

                                       29
<PAGE>

                PHIBRO ANIMAL HEALTH CORPORATION AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 (In Thousands)

                 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                    For the Nine Months Ended March 31, 2003

<TABLE>
<CAPTION>

                                                                  U.S.
                                         Parent  Unrestricted  Guarantor   Dutch  Belgium  Non-Guarantor Consolidation  Consolidated
                                         Issuer  Subsidiaries Subsidiaries Issuer Guarantor Subsidiaries  Adjustments     Balance
                                      ----------------------------------------------------------------------------------------------
<S>                                   <C>         <C>          <C>         <C>   <C>         <C>          <C>           <C>
OPERATING ACTIVITIES:
  Net income (loss)                   $(10,264)   $ (2,637)     $ 2,252    $--   $ (1,097)   $ 20,474     $ (18,992)    $ (10,264)
  Adjustment for discontinued
    operation                           14,099       1,680           --     --         --     (17,600)       15,920        14,099
                                      ----------------------------------------------------------------------------------------------
  Income (loss) from continuing
    operations                           3,835        (957)       2,252     --     (1,097)      2,874        (3,072)        3,835

Adjustments to reconcile income
  (loss) from continuing operations
  to net cash provided by operating
  activities:
  Depreciation and amortization          1,155         711        2,486     --      1,913       3,653                       9,918
  Deferred income taxes                     --          --           --     --         --         131                         131
  Unrealized foreign currency (gains)
    losses and other                       319           6         (581)    --     (1,123)        742                        (637)

  Changes in operating assets and
    liabilities:
    Accounts receivable                   (137)        149         (291)    --     (1,208)      1,599                         112
    Inventory                             (167)        203      (10,056)    --      1,869       2,253                      (5,898)
    Prepaid expenses and other           1,112         191          491     --     (1,497)        (33)                        264
    Other assets                        (2,135)         --        1,068     --         --        (949)                     (2,016)
    Intercompany                           825       2,102       (5,216)    --        704      (1,487)        3,072            --
    Accounts payable                     1,241        (240)      13,851     --      3,150      (2,460)                     15,542
    Accrued expenses and other           4,274          36       (1,096)    --     (1,077)      3,728                       5,865
  Cash provided (used) by discontinued
    operations                              --      (1,439)          --     --         --       2,970                       1,531
                                      ----------------------------------------------------------------------------------------------
    NET CASH PROVIDED BY
      OPERATING ACTIVITIES              10,322         762        2,908     --      1,634      13,021            --        28,647
                                      ----------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
  Capital expenditures                      --        (343)      (2,306)    --     (1,640)     (3,012)                     (7,301)
  Proceeds from sale of assets              --          --        2,530     --         --          26                       2,556
  Other investing                           --          --           --     --         --         765                         765
  Discontinued operations                   --        (477)          --     --         --       1,877                       1,400
                                      ----------------------------------------------------------------------------------------------
    NET CASH PROVIDED (USED) BY
      INVESTING ACTIVITIES                  --        (820)         224     --     (1,640)       (344)           --        (2,580)
                                      ----------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
  Cash overdraft                             2         234       (1,668)    --         --      (1,689)                     (3,121)
  Net (decrease) in short-term debt     (5,609)         --           --     --         --        (403)                     (6,012)
  Proceeds from long-term debt              --          --           --     --         --       2,125                       2,125
  Payments of long-term debt            (5,129)        (92)        (318)    --         --      (8,181)                    (13,720)
                                     ---------------------------------------------------------------------------------------------
    NET CASH PROVIDED (USED) BY
      FINANCING ACTIVITIES             (10,736)        142       (1,986)    --         --      (8,148)           --       (20,728)
                                     ---------------------------------------------------------------------------------------------

EFFECT OF EXCHANGE RATE CHANGES
  ON CASH                                   --          --            2     --         65         206                         273
                                      ----------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND
  CASH EQUIVALENTS                        (414)         84        1,148     --         59       4,735            --         5,612

CASH AND CASH EQUIVALENTS
  at beginning of period                   457          52          600     --        618       4,692                       6,419
                                      ----------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS
  at end of period                     $    43       $ 136      $ 1,748    $--      $ 677     $ 9,427     $      --      $ 12,031
                                      ==============================================================================================

</TABLE>


                                       30
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

     This  information   should  be  read  in  conjunction  with  the  condensed
consolidated  financial  statements and related notes  contained in this Report.
The  Company's  Odda,  Carbide  and  MRT  businesses  have  been  classified  as
discontinued   operations.   This  discussion  presents   information  only  for
continuing operations, unless otherwise indicated.

General

     The Company is a leading  diversified global manufacturer and marketer of a
broad range of animal health and nutrition products, specifically medicated feed
additives  (MFAs)  and  nutritional  feed  additives  (NFAs),   which  are  sold
throughout the world  predominantly  to the poultry,  swine and cattle  markets.
MFAs are used  preventatively  and  therapeutically  in animal  feeds to produce
healthy livestock. The Company believes it is the third largest manufacturer and
marketer of MFAs in the world, and that certain of its MFA products have leading
positions  in  the  marketplace.  The  Company  is  also a  specialty  chemicals
manufacturer and marketer,  serving primarily the United States pressure-treated
wood and chemical industries.  The Company has several proprietary products, and
many of the  Company's  products  provide  critical  performance  attributes  to
customers'  products,  while representing a relatively small percentage of total
end-product cost.

     In August  2003,  the Company  completed  the sale of MRT for net  proceeds
after transaction costs of approximately $13.8 million.

Refinancing

     On October 21, 2003, the Company  issued 105,000 units  consisting of $85.0
million of 13% Senior Secured Notes due 2007 of PAHC (the "US Senior Notes") and
$20.0 million 13% Senior Secured Notes due 2007 of Philipp Brothers  Netherlands
III B.V. (the "Dutch Senior Notes" and,  together with the US Senior Notes,  the
"Senior Secured Notes"), an indirect wholly-owned subsidiary of PAHC (the "Dutch
issuer").  The Company  used the proceeds  from the issuance to: (i)  repurchase
$52.0 million of its 9 7/8% Senior  Subordinated Notes due 2008 at a price equal
to 60% of the principal amount thereof,  plus accrued and unpaid interest;  (ii)
repay its senior credit  facility of $34.9 million  outstanding at the repayment
date; (iii) satisfy, for a payment of approximately $29.3 million certain of its
outstanding  obligations to Pfizer Inc., including:  (a) $20.1 million aggregate
principal  amount of its promissory note plus accrued and unpaid  interest,  (b)
$9.7 million of accounts payable, (c) $9.0 million of accrued expenses,  and (d)
future  contingent  purchase price  obligations under its agreements with Pfizer
Inc. by which the Company acquired  Pfizer's  medicated feed additive  business;
and (iv) pay fees and expenses relating to the above transactions.


     A net gain on extinguishment of debt is included in the Company's condensed
consolidated  statement  of  operations,   calculated  as  follows  (amounts  in
thousands):

Net Gain on Repurchase of 9 7/8% Senior Subordinated
  Notes due 2008:
  Principal amount of repurchased notes                                $ 51,971
  Repurchased at 60% of principal amount                                (31,183)
  Transaction costs                                                      (4,107)
                                                                       --------
Net gain on repurchase of notes                                          16,681
                                                                       --------
Loss on repayment of senior credit facility                              (1,018)
                                                                       --------
Net Gain on Payment of Pfizer Obligations:
  Obligations paid:
  -promissory note                                                       20,075
  -accrued interest on promissory note                                    1,015
  -accounts payable and accrued expenses                                 18,788
                                                                       --------
  Total obligations paid                                                 39,878
  Cash payment to Pfizer                                                (29,315)
  Transaction costs                                                      (3,000)
                                                                       --------
Net gain on payment of Pfizer obligations                                 7,563
                                                                       --------
Net gain on extinguishment of debt                                     $ 23,226
                                                                       ========


                                       31
<PAGE>

     The US  Senior  Notes  and  the  Dutch  Senior  Notes  are  senior  secured
obligations   of  each  of  PAHC  (the  "US  Issuer")  and  the  Dutch   issuer,
respectively. The US Senior Notes and the Dutch Senior Notes are guaranteed on a
senior secured basis by all PAHC's  domestic  restricted  subsidiaries,  and the
Dutch Senior Notes are  guaranteed on a senior  secured basis by PAHC and by the
restricted  subsidiaries  of the Dutch  issuer,  presently  consisting of Phibro
Animal  Health SA. The US Senior  Notes and  related  guarantees  are secured by
substantially  all of PAHC's  assets and the assets of its  domestic  restricted
subsidiaries, other than real property and interests therein, including a pledge
of all the capital stock of such  domestic  restricted  subsidiaries.  The Dutch
Senior Notes and related  guarantees are secured by a pledge of all the accounts
receivable,  a security  interest or  floating  charge on the  inventory  to the
extent permitted by applicable law, and a mortgage on  substantially  all of the
real  property of the Dutch issuer and each of its  restricted  subsidiaries,  a
pledge of 100% of the capital stock of each  subsidiary  of the Dutch issuer,  a
pledge of the  intercompany  loans  made by the Dutch  issuer to its  restricted
subsidiaries and substantially all of the assets of the U.S.  guarantors,  other
than real property and  interests  therein.  The indenture  governing the Senior
Secured Notes provides for optional make-whole  redemptions at any time prior to
June 1, 2005,  optional  redemption  on or after June 1, 2005,  and requires the
Company to make certain offers to purchase Senior Secured Notes upon a change of
control,  upon certain  asset sales and from fifty  percent (50%) of excess cash
flow (as such terms are defined in the indenture).

     Also,  on October 21,  2003,  the Company  entered  into a new  replacement
domestic  senior credit  facility  ("senior  credit  facility") with Wells Fargo
Foothill, Inc., providing for a working capital facility plus a letter of credit
facility.  The  aggregate  amount of borrowings  under such working  capital and
letter of credit  facilities  may not exceed $25.0 million  including  aggregate
borrowings under the working capital facility up to $15.0 million.  On April 29,
2004, the Company  amended the senior credit  facility to increase the aggregate
amount of borrowings  available  under such working capital and letter of credit
facilities  from $25.0  million to $27.5  million and to increase  the amount of
aggregate  borrowings  available under the working  capital  facility from $15.0
million to $17.5 million.

     Borrowings under the senior credit facility are subject to a borrowing base
formula  based on  percentages  of eligible  domestic  receivables  and domestic
inventory.  Under the senior credit facility, the Company may choose between two
interest rate options:  (i) the  applicable  base rate as defined plus 0.50% and
(ii) the LIBOR rate as defined plus 2.75%.  Indebtedness under the senior credit
facility  is  secured  by a  first  priority  lien on  substantially  all of the
Company's  assets  and assets of  substantially  all of the  Company's  domestic
subsidiaries. The Company is required to pay an unused line fee of 0.375% on the
unused  portion of the  senior  credit  facility,  a monthly  servicing  fee and
standard  letter of credit fees to issuing  banks.  Borrowings  under the senior
credit facility are available  until,  and are repayable no later than,  October
31, 2007, although borrowings must be repaid by June 30, 2007 if the maturity of
the Senior Secured Notes has not been extended, as required by the senior credit
facility, by that date.


     Pursuant to the terms of an intercreditor  agreement, the security interest
securing  the Senior  Secured  Notes and the  guarantees  made by the  Company's
domestic  restricted  subsidiaries is subordinated to a lien securing the senior
credit facility.

     The Company believes that, through the refinancings  referred to above, the
liquidity issues mentioned in the Company's June 30, 2003 consolidated financial
statements have been resolved. The Company's replaced senior credit facility and
its note  payable  to Pfizer  were to mature in  November  2003 and March  2004,
respectively.

     The Company's ability to fund its operating plan relies upon its ability to
continue to successfully  implement its efforts to improve its overall liquidity
(through cost reduction activities,  working capital improvement plans, shutdown
of unprofitable  operations and sales of certain  business  operations and other
assets) and the  continued  availability  of borrowing  under the senior  credit
facility.  The Company believes that it will be able to comply with the terms of
its covenants under the senior credit facility based on its forecasted operating
plan. In the event of adverse  operating  results and/or  violation of covenants
under this facility, there can be no assurance that the Company would be able to
obtain waivers or consents on favorable terms, if at all.

Prince Transactions

     Effective December 26, 2003 (the "Closing Date"), the Company completed the
divestiture  of  substantially  all of the  business  and  assets of The  Prince
Manufacturing  Company ("PMC") to a company ("Buyer") formed by Palladium Equity
Partners II, LP and certain of its affiliates (the "Palladium  Investors"),  and
the related  reduction of the  Company's  preferred  stock held by the Palladium
Investors (collectively the "Prince Transactions").


                                       32
<PAGE>

    Pursuant  to  definitive  purchase  and  other  agreements  executed  on and
effective as of the Closing Date, the Prince Transactions included the following
elements:  (i) the transfer of  substantially  all of the business and assets of
PMC to Buyer;  (ii) the reduction of the value of the Company's  Preferred Stock
owned by the Palladium  Investors from $72.2 million to $16.5 million  (accreted
through the  Closing  Date) by means of the  redemption  of all of its shares of
Series B Preferred  Stock and a portion of its Series C Preferred  Stock;  (iii)
the  termination of $2.2 million in annual  management  advisory fees payable by
the Company to Palladium;  (iv) a cash payment of $10.0 million to the Palladium
Investors  in  respect  of the  portion  of the  Company's  Preferred  Stock not
exchanged in  consideration of the business and assets of PMC; (v) the agreement
of the Buyer to pay the  Company for  advisory  fees for the next three years of
$1.0 million, $0.5 million, and $0.2 million,  respectively (which were pre-paid
at closing by the Buyer and satisfied for $1.3 million, the net present value of
such payments); and (vi) the Buyer agreed to supply manganous oxide and red iron
oxide products and to provide certain mineral blending services to the Company's
Prince Agriproducts  subsidiary ("Prince Agri").  Prince Agri agreed to continue
to provide the Buyer with certain laboratory, MIS and telephone services, all on
terms  substantially  consistent with the historic  relationship  between Prince
Agri  and  PMC,  and to  lease to  Buyer  office  space  used by PMC in  Quincy,
Illinois. The Company has an agreement to receive certain treasury services from
Palladium  for $0.1 million per year.  Pursuant to  definitive  agreements,  the
Company made customary  representations,  warranties and environmental and other
indemnities,  agreed to a post-closing  working  capital  adjustment,  paid $4.0
million  in full  satisfaction  of all  intercompany  debt  owed to PMC,  paid a
closing fee to  Palladium of $0.5  million,  made  certain  capital  expenditure
adjustments  included as part of the intercompany  settlement amount, and agreed
to pay for certain out-of-pocket transaction expenses. PMC retained $0.4 million
of its accounts  receivable.  The Company  established a $1.0 million  letter of
credit escrow for two years to secure its working capital adjustment and certain
indemnification  obligations.  The Company  agreed to  indemnify  the  Palladium
Investors for a portion,  at the rate of $0.65 for every  dollar,  of the amount
they receive in respect of the  disposition of Buyer for less than $21.0 million
up  to a  maximum  payment  by  the  Company  of  $4.0  million  (the  "Backstop
Indemnification  Amount"). The Backstop  Indemnification Amount would be payable
on the earlier to occur of July 1, 2008 or six months after the redemption  date
of all of the  Company's  Senior  Secured  Notes due 2007 if such a  disposition
closes  prior to such  redemption  and six months  after the closing of any such
disposition if the disposition  closes after any such redemption.  The Company's
obligations  with respect to the Backstop  Indemnification  Amount will cease if
the  Palladium  Investors  do not close the  disposition  of Buyer by January 1,
2009.  The  definition  of  "Equity  Value"  in  the  Company's  Certificate  of
Incorporation  was amended to reduce the multiple of trailing  EBITDA payable in
connection with any future redemption of Series C Preferred to 6.0 from 7.5. The
amount  of  consideration  paid  and  payable  in  connection  with  the  Prince
Transactions and all matters in connection therewith were determined pursuant to
arm's length negotiations.

    The excess of the reduction in redeemable  preferred stock over total assets
divested  and costs and  liabilities  incurred  on the Prince  Transactions  was
recorded  as a  decrease  to  accumulated  deficit  on the  Company's  condensed
consolidated  balance sheet at December 31, 2003,  and was calculated as follows
(amounts in thousands):

Series B & C Redeemable Preferred Stock:
Accreted value pre-transaction                                           $72,184
Accreted value post-transaction                                           16,517
                                                                         -------
Reduction in redeemable preferred stock                                   55,667
                                                                         -------
Assets Divested and Costs Incurred:
PMC net assets divested                                                    7,430
Cash paid to Palladium Investors for:
  -reduction of redeemable preferred stock                                10,000
  -settlement of PMC intercompany debt                                     3,958
  -working capital adjustment                                              1,331
  -closing fee                                                               500
Transaction costs                                                          8,310
Contingent Backstop Indemnification Amount accrued                         4,000
                                                                         -------
Total assets divested and costs and liabilities incurred                  35,529
                                                                         -------
Excess amount recorded as a decrease to accumulated deficit              $20,138
                                                                         =======


                                       33
<PAGE>

    PMC is included in the Company's  Industrial  Chemicals segment. The results
of  operations  of PMC for the three months and nine months ended March 31, 2004
and 2003 were:

                                      Three Months             Nine Months
                                     Ended March 31,         Ended March 31,
                                    ----------------       ------------------
                                    2004        2003         2004        2003
                                    ----        ----         ----        ----
                                       (Thousands)             (Thousands)
Net sales                           $   --     $ 5,743     $11,118     $16,784
Operating income                        --         839       2,278       2,867
Depreciation and amortization           --         240         487         711

     The  divestiture of PMC has not been reflected as a discontinued  operation
due to the existence of the Backstop  Indemnification  and continuing supply and
service agreements.

Summary Consolidated Results of Continuing Operations

<TABLE>
<CAPTION>

                                                Three Months                Nine Months
                                               Ended March 31,            Ended March 31,
                                              ----------------          ------------------
                                             2004          2003         2004         2003
                                             ----          ----         ----         ----
                                                 (Thousands)               (Thousands)
<S>                                        <C>          <C>          <C>          <C>
Net sales                                  $  91,198    $  90,197    $ 274,411    $ 266,613
Gross profit                                  23,305       23,282       67,322       69,470
Selling, general and administrative           16,639       17,822       50,036       49,875
Operating income                               6,666        5,460       17,286       19,595
Interest expense, net                          4,897        3,939       13,347       12,003
Other expense (income), net                      (63)         112         (764)       1,317
Gain on extinguishment of debt                    --                   (23,226)
Provision for income taxes                     2,227          599        5,890        2,440
Income (loss) from continuing operations   $    (395)   $     810    $  22,039    $   3,835
</TABLE>

Comparison of Three Months Ended March 31, 2004 and 2003

     Net Sales of $91.2 million increased $1.0 million, or 1%. Animal Health and
Nutrition  sales of $64.8  million  increased  $2.1 million from the prior year.
Specialty  Chemical sales of $26.4 million  decreased $1.1 million primarily due
to the  divestiture of Prince  Manufacturing  which  generated  revenues of $5.7
million in 2003.  Excluding the  divestiture,  sales  increased for all segments
primarily due to volume increases.

     Gross Profit of $23.3 million  approximated the prior year and was 25.6% of
net sales, compared with 25.8% in 2003. Animal Health and Nutrition gross profit
decreased due to lower average selling prices and unfavorable  currency  related
to the effect of the Euro on Belgium  manufacturing  costs.  Specialty Chemicals
gross profit increased due to increased unit volumes and favorable  product mix,
primarily due to increased sales of wood treatment  products.  PMC's  operations
generated $1.5 million of gross profit in fiscal 2003,

     Selling,  General and  Administrative  Expenses of $16.6 million  decreased
$1.2  million,  or 7%, in part due to $0.6  million  of PMC  expense  last year.
Expenses in the operating segments,  excluding PMC, declined from the prior year
primarily due to lower  environmental  and severance  accruals offset in part by
unfavorable  foreign  exchange rates.  Corporate  expenses in the current fiscal
period reflect the elimination of the Palladium  annual  management fee of $2.25
million  ($0.6  million per  quarter)  and income of $0.25  million from the PMC
Advisory fee.  Corporate expenses in the third quarter of fiscal 2003 included a
vitamin  settlement  income of $2.2  million,  an actuarial  increase in pension
expense of $0.3 million,  higher  insurance  costs of $0.4 million and increased
costs related to debt restructuring activities.

     Operating  Income of $6.7 million  increased $1.2 million to 7.3% of sales.
The  increase  was  primarily  due  to  improved  operating  performance  of the
Specialty  Chemical group offset in part by gross profit  declines in the Animal
Health and Nutrition  segment.  PMC contributed $0.8 million of operating income
last year.


                                       34
<PAGE>

     Interest Expense, Net of $4.9 million increased $1.0 million from the prior
year,  primarily  due to  higher  average  interest  rates  associated  with the
issuance of the Company's Senior Secured Notes.

     Other (Income)  Expense,  Net of ($0.1) million improved in comparison with
expense of $0.1  million last year.  In March 2004,  the  Company's  Phibro-Tech
subsidiary  sold its customer  list,  inventory and other assets  related to the
manufacture and sale of ferric  chloride from its plant in Joliet,  Illinois and
recognized  a net  gain  of  $0.7  million.  The  balance  of  (income)  expense
principally  reflects foreign currency transaction net (gains) losses related to
short-term  inter-company  balances  and foreign  currency  translation  (gains)
losses.

     Income Taxes of $2.2 million were 121.5% of consolidated  pre-tax income of
$1.8 million. The estimated annual effective tax rate increased during the third
quarter to 21% due to increased  income tax  provisions  in  profitable  foreign
jurisdictions  and for state income taxes.  A provision for U.S.  federal income
taxes  has not  been  recorded  due to the  utilization  of net  operating  loss
carryforwards.  The Company previously had recorded valuation allowances related
to substantially all deferred tax assets.  The Company will continue to evaluate
the likelihood of  recoverability of these deferred tax assets based upon actual
and expected operating performance.

Comparison of  Nine Months Ended March 31, 2004 and 2003

     Net Sales of $274.4 million  increased  $7.8 million,  or 3%. Animal Health
and  Nutrition  sales of $193.3  million  increased  $4.0 million from the prior
year.  Specialty  Chemical  sales  of  $81.1  million  increased  $3.8  million,
primarily  due to volume  increases in the All Other  businesses.  The Specialty
Chemical   group  included  PMC  sales  of  $11.1  million  and  $16.8  million,
respectively, for the fiscal 2004 and 2003 periods.

     Gross Profit of $67.3 million decreased $2.1 million to 24.5% of net sales,
compared with 26.0% in 2003.  Animal Health and Nutrition gross profit decreased
due to lower average  selling  prices and  unfavorable  currency  related to the
effect of the Euro on Belgium manufacturing costs. Improvements in the Specialty
Chemical group  partially  offset the Animal Health and Nutrition  decline.  The
Specialty  Chemical  group  included  PMC gross  profit of $3.6 million and $4.7
million for the fiscal 2004 and 2003 periods, respectively.

     Selling,  General and  Administrative  Expenses of $50.0 million  increased
$0.2 million.  Expenses in the operating segments,  excluding PMC, declined from
the prior year  primarily  due to lower  environmental  and  severance  accruals
offset in part by unfavorable foreign exchange rates.  Corporate expenses in the
current fiscal period reflect the elimination of the Palladium annual management
fee of $2.25 million ($0.6 million per quarter) and income of $0.25 million from
the PMC  Advisory  fee.  Corporate  expenses in fiscal  2003  included a vitamin
settlement income of $2.8 million,  an actuarial  increase in pension expense of
$0.3 million, higher insurance costs of $0.4 million and increased costs related
to debt  restructuring  activities.  PMC  expenses  were $1.3  million  and $1.9
million for the fiscal 2004 and 2003 periods, respectively.

     Operating Income of $17.3 million  decreased $2.3 million to 6.3% of sales.
The decrease was primarily due to gross profit declines in the Animal Health and
Nutrition  segment  offset  in part by  improved  operating  performance  of the
Specialty  Chemical  group.  PMC  contributed  $2.3  million and $2.9 million in
fiscal 2004 and 2003, respectively.

     Interest  Expense,  Net of $13.3 million  increased $1.3 million,  from the
prior year,  primarily due to higher average  interest rates associated with the
issuance of the Company's Senior Secured Notes.

     Other (Income)  Expense,  Net of ($0.8) million improved in comparison with
expense of $1.3 million last year. During fiscal 2004, the Company's Phibro-Tech
subsidiary  sold its customer  list,  inventory and other assets  related to the
manufacture and sale of ferric  chloride from its plant in Joliet,  Illinois and
recognized  a net  gain  of  $0.7  million.  The  balance  of  (income)  expense
principally  reflects foreign currency transaction net (gains) losses related to
short-term  inter-company  balances  and foreign  currency  translation  (gains)
losses.

     Income Taxes of $5.9 million were 21.1% of  consolidated  pre-tax income of
$27.9  million.  Income taxes  primarily  were due to income tax  provisions  in
profitable  foreign  jurisdictions  and for state income taxes.  A provision for
U.S.  federal  income taxes has not been recorded due to the  utilization of net
operating loss  carryforwards.  The Company  previously  had recorded  valuation
allowances  related to substantially  all deferred tax assets.  The Company will
continue to evaluate the  likelihood  of  recoverability  of these  deferred tax
assets based upon actual and expected operating performance.


                                       35
<PAGE>

Operating Segments

     The Animal Health and Nutrition  segment  manufactures and markets MFAs and
NFAs to the poultry,  swine and cattle  markets,  and includes the operations of
the Phibro Animal Health business unit, Prince AgriProducts, Koffolk Israel, and
Koffolk  Brazil.  The Industrial  Chemicals  segment  manufacturers  and markets
specialty  chemicals  for use in the pressure  treated  wood,  brick,  glass and
chemical industries,  and includes Phibro-Tech and, until its divestiture,  PMC.
The Distribution segment markets a variety of specialty chemicals,  and includes
PhibroChem  and  Ferro  operations.  The All  Other  segment  includes  contract
manufacturing of crop protection chemicals, Wychem and all other operations.

                                     Three Months              Nine Months
                                    Ended March 31,          Ended March 31,
                                  -----------------        ------------------
                                  2004         2003        2004          2003
                                  ----         ----        ----          ----
                                     (Thousands)            (Thousands)
Net Sales
    Animal Health & Nutrition  $  64,819    $  62,675    $ 193,347    $ 189,301
    Specialty Chemicals:
       Industrial Chemicals       10,000        6,449       22,543       20,533
       PMC                            --        5,743       11,118       16,784
       Distribution                7,916        7,612       23,511       22,905
       All other                   8,463        7,718       23,892       17,090
                               ---------    ---------    ---------    ---------
                               $  91,198    $  90,197    $ 274,411    $ 266,613
                               =========    =========    =========    =========

                                     Three Months              Nine Months
                                    Ended March 31,          Ended March 31,
                                  -----------------        ------------------
                                  2004         2003        2004          2003
                                  ----         ----        ----          ----
                                     (Thousands)            (Thousands)
Operating Income
    Animal Health & Nutrition  $   8,370    $   8,902    $  22,925    $  29,915
    Specialty Chemicals:
       Industrial Chemicals        1,136       (1,555)         458       (4,405)
       PMC                                        839        2,278        2,867
       Distribution                  789          900        2,322        2,452
       All other                     194          346        1,040          216
    Corporate                     (3,823)      (3,972)     (11,737)     (11,450)
                               ---------    ---------    ---------    ---------
                               $   6,666    $   5,460    $  17,286    $  19,595
                               =========    =========    =========    =========

Operating Segments Comparison of Three Months Ended March 31, 2004 and 2003

     Animal Health and Nutrition

     Net Sales of $64.8 million increased $2.1 million.  MFA net sales decreased
by $2.9 million.  MFA revenues were lower for  anticoccidials,  antibiotics  and
other  medicated  feed  additives  but were  offset in part by  higher  sales of
antibacterials and anthelmintics.  The decrease in MFA revenues was due to lower
average  selling  prices  offset  in  part  by  favorable   currency  effect  on
international  sales. In addition,  sales of anticcoccidial  products were lower
due to pending  contract  negotiations  with a major customer.  Nutritional Feed
Additives  net  sales  increased  by $5.0  million,  principally  due to  volume
increases  in  core  inorganic  minerals,   trace  mineral  premixes  and  other
ingredients.

     Operating Income of $8.4 million  decreased $0.5 million.  Operating income
declined due to product mix, higher cost of goods reflecting the stronger Euro's
effect  on  Belgian  manufacturing  cost and  unfavorable  currency  effects  on
international selling, general and administrative expense. Lower average selling
prices also contributed to the decrease.


                                       36
<PAGE>

     Specialty Chemicals

     Industrial  Chemicals net sales of $10.0 million,  excluding PMC, increased
by $3.6 million.  Sales of copper related products to the wood treatment markets
increased due to the  introduction of new copper based wood treatment  chemicals
which offset the  divestiture  of the Company's  Eastern  United States  etchant
business in mid-fiscal 2003. The Company continues its existing etchant business
at one remaining facility. PMC, divested in December 2003, generated revenues of
$5.7 million in the year earlier fiscal period. Operating income of $1.1 million
was due to new product  introductions and savings from headcount  reductions and
facility restructurings in Phibro-Tech operations.

     Distribution  net sales of $7.9  million  increased  $0.3  million,  or 4%.
Higher unit sales volumes in Europe were partially offset by lower sales volumes
in the U.S.  Operating  income of $0.8  million  decreased  $0.1  million.  As a
percentage of sales, operating income decreased to 10% in 2003 from 12% in 2002.
The decline in operating  income  margins  resulted  principally  from increased
sales of lower margin products.

     All  Other  net  sales of $8.5  million  increased  $0.7  million,  or 10%.
Revenues  for  contract  manufacturing  increased  $0.9 million due to increased
volumes and average  selling prices.  Specialized lab projects and  formulations
decreased $0.2 million. Other operating income of $0.2 million decreased by $0.2
million from the prior year due to higher  manufacturing and operating costs for
contract manufacturing.

Operating Segments Comparison of Nine Months Ended March 31, 2004 and 2003

     Animal Health and Nutrition

     Net  Sales  of  $193.3  million  increased  $4.0  million.  Medicated  Feed
Additives  net  sales  decreased  by  $9.1  million.  Revenues  were  lower  for
anticoccidials,  antibiotics  and other medicated feed additives but were offset
in part by higher sales of antibacterials and anthelmintics. The decrease in MFA
revenues was due to lower  average  selling  prices  offset in part by favorable
currency effect on  international  sales. In addition,  sales of  anticcoccidial
products were lower due to pending contract  negotiations with a major customer.
Nutritional Feed Additives net sales increased by $13.1 million, principally due
to volume increases in core inorganic minerals, trace mineral premixes and other
ingredients.

     Operating Income of $22.9 million decreased $7.0 million.  Operating income
declined due to higher cost of goods  reflecting  the stronger  Euro's effect on
Belgian  manufacturing  cost and unfavorable  currency  effects on international
selling,  general and administrative  expense. Lower average selling prices also
contributed to the decrease.

     Specialty Chemicals

     Industrial  Chemicals net sales of $22.5 million,  excluding PMC, increased
$2.0 million,  or 10%.  Sales of copper  related  products to the wood treatment
markets  increased due to the  introduction  of new copper based wood  treatment
chemicals  which offset the  divestiture of the Company's  Eastern United States
etchant business in mid-fiscal 2003. The Company  continues its existing etchant
business at one remaining  facility.  PMC, divested in December 2003,  generated
revenues of $11.1  million and $16.8  million for fiscal  periods 2004 and 2003,
respectively. Operating income of $0.5 million improved by $4.8 million from the
prior year. This  improvement was due to new product  introductions  and savings
from headcount reductions and facility restructurings in Phibro-Tech operations.
PMC  provided  operating  income of $2.3  million  and $2.9  million  for fiscal
periods 2004 and 2003, respectively.

     Distribution  net sales of $23.5 million  increased  $0.6  million,  or 3%.
Higher unit sales volumes in Europe were partially offset by lower sales volumes
in the U.S.  Operating income of $2.3 million decreased by $0.1 million from the
prior year. As a percentage of sales,  operating  income was 10% and 11% in 2004
and 2003, respectively.

     All  Other net  sales of $23.9  million  increased  $6.8  million,  or 40%.
Revenues  for  contract  manufacturing  increased  $6.8 million due to increased
volumes and average  selling prices.  Specialized lab projects and  formulations
approximated  the prior year.  Operating income of $1.0 million improved by $0.8
million  from the prior year due to higher  revenues  and  increased  margins on
contract manufacturing.


                                       37
<PAGE>

Discontinued Operations

     During  fiscal  2003,  the  Company  decided  to  shutdown  or divest  Odda
Smelteverk   (Norway),   Carbide   Industries   (U.K.)  and   Mineral   Resource
Technologies,  Inc.  These  businesses  have  been  classified  as  discontinued
operations.  The sale of MRT was  completed on August 28, 2003 for net proceeds,
after transaction costs, of approximately $13.8 million and the Company recorded
a gain of  approximately  $0.2  million.  MRT was included in the  Company's All
Other  segment.  The  Company's  consolidated  financial  statements  have  been
reclassified to report separately the operating results,  financial position and
cash flows of the discontinued operations. Amounts in thousands.


                                                               Nine Months Ended
                                                                March 31, 2004
                                                               -----------------
                                                                      MRT
                                                                      ---
Net sales                                                           $ 3,327
                                                                    =======
Pre-tax income (loss) from discontinued operations                  $  (124)
Provision (benefit) for income tax                                  $    --
                                                                    -------
Net Income  (loss) from discontinued operations                     $  (124)
                                                                    =======
Depreciation and Amortization                                       $    --
                                                                    =======

<TABLE>
<CAPTION>
                                                           Nine Months Ended March 31, 2003
                                                     --------------------------------------------
                                                         Odda     Carbide       MRT        Total
<S>                                                  <C>         <C>         <C>         <C>
Net sales                                            $   6,110   $  5,107    $ 14,001    $ 25,218
                                                     =========   ========    ========    ========

Pre-tax income (loss) from discontinued operations   $ (11,193)  $     58    $ (1,680)   $(12,815)
Benefit for income tax                               $      --   $    (58)         $-    $    (58)
                                                     ---------   --------    --------    --------
Net Income  (loss) from discontinued operations      $ (11,193)  $    116    $ (1,680)   $(12,757)
                                                     =========   ========    ========    ========
Depreciation and Amortization                        $     643   $    251    $    973    $  1,867
                                                     =========   ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>

                                                           Three Months Ended March 31, 2003
                                                     --------------------------------------------
                                                         Odda     Carbide       MRT        Total
<S>                                                  <C>         <C>         <C>         <C>
Net sales                                            $      --   $  1,933    $  3,542    $  5,475
                                                     =========   ========    ========    ========
Pre-tax income from discontinued operations          $    (500)  $   (132)   $ (1,192)   $ (1,824)
Benefit for income tax                               $      --   $    (84)         --    $    (84)
                                                     ---------   --------    --------    --------
Net Income  (loss) from discontinued operations      $    (500)  $    (48)   $ (1,192)   $ (1,740)
                                                     =========   ========    ========    ========
Depreciation and Amortization                        $      --   $    192    $    337    $    529
                                                     =========   ========    ========    ========
</TABLE>

Liquidity and Capital Resources

     Net Cash (Used) Provided by Operating  Activities.  Cash (used) provided by
operations  for the nine months ended March 31, 2004 and 2003 was ($1.4) million
and $28.6 million,  respectively.  Cash used in 2004 was  attributable  to lower
income and increased working capital requirements. Cash provided in 2003 was due
to improved  income from  continuing  operations and aggressive  working capital
management. The increase in cash overdrafts of $2.4 million in 2004 is a partial
offset  to the use of funds  by  operations  and is  included  in the  financing
section of the cash flow statement.


                                       38
<PAGE>

     Net Cash Provided (Used) by Investing Activities.  Net cash provided (used)
by  investing  activities  for the nine months ended March 31, 2004 and 2003 was
$11.9  million  and  ($2.6)  million,  respectively.   Discontinued  operations,
primarily  from  the sale of MRT,  provided  funds  of  $14.9  million  in 2004.
Discontinued  operations provided $1.4 million in 2003. Capital  expenditures of
$4.1 million and $7.3 million in the  respective  2004 and 2003 periods were for
new product capacity,  for maintaining the Company's existing asset base and for
environmental, health and safety projects.

     Net Cash  (Used) by  Financing  Activities.  Net cash  (used) by  financing
activities for the nine months ended March 31, 2004 and 2003 was ($15.8) million
and  ($20.7)  million,  respectively.  Short-term  debt  decreased  due  to  the
reduction of the senior credit facility of $24.1 million,  debt payments related
to Odda of $5.7 million, and offset by other increases of $0.9 million. Proceeds
from  long-term debt reflect the issuance of $105.0 million Senior Secured Notes
and an increase of $4.6  million in foreign  bank loans.  Payments of  long-term
debt primarily reflect the retirement of senior  subordinated debt.  Payments of
the  Pfizer  obligations,  the  Prince  transactions  and costs  related  to the
refinancing account for the remainder of funds used by financing activities.

     Working Capital and Capital  Expenditures.  Working capital as of March 31,
2004 was $63.4  million  compared  to $9.1  million at fiscal  year end June 30,
2003, an increase of $54.3 million.  The increase in working  capital was due to
reduced current debt,  accounts payable and accrued expense levels,  principally
as a result of the Company's refinancing and satisfaction of its obligations due
Pfizer.

     The Company  anticipates  spending  approximately  $6.0 million for capital
expenditures related to continuing operations in fiscal 2004, primarily to cover
the  Company's  asset  replacement   needs,  to  improve   processes,   and  for
environmental and regulatory compliance, subject to the availability of funds.

     Liquidity.  At March 31,  2004,  the  Company  was in  compliance  with the
financial  covenants included in its senior credit facility.  At March 31, 2004,
the amount of credit extended under the Company's senior credit facility totaled
$8.0 million  under the  revolving  credit  facility and $8.1 million  under the
letter of credit facility,  and the Company had $7.0 million available under the
borrowing base formula in effect. In addition,  certain of the Company's foreign
subsidiaries also had availability  totaling $4.3 million under their respective
loan  agreements.  On April 29,  2004,  the Company  amended  the senior  credit
facility to increase the  aggregate  amount of borrowings  available  under such
working  capital  and letter of credit  facilities  from $25.0  million to $27.5
million and to increase the amount of aggregate  borrowings  available under the
working capital facility from $15.0 million to $17.5 million.

     The  senior  credit  facility  contains  a  lock-box   requirement  and  an
acceleration  clause  should an event of default (as  defined in the  agreement)
occur.  Accordingly,  the amounts outstanding have been classified as short-term
and are included in loans payable to banks in the condensed consolidated balance
sheet.

     The Company's ability to fund its operating plan relies upon its ability to
continue to successfully  implement its efforts to improve its overall liquidity
(through cost reduction activities,  working capital improvement plans, shutdown
of unprofitable  operations and sales of certain  business  operations and other
assets) and the  continued  availability  of borrowing  under the senior  credit
facility.  The Company believes that it will be able to comply with the terms of
its covenants under the senior credit facility based on its forecasted operating
plan. In the event of adverse  operating  results and/or  violation of covenants
under this facility, there can be no assurance that the Company would be able to
obtain waivers or consents on favorable terms, if at all.

     The Company  anticipates  taxable gains on extinguishment of debt and other
aspects of the refinancing  structure will be  substantially  offset by existing
net  operating  loss  carry  forwards,  and that  the  Company  will  not  incur
significant cash income tax payments related to these gains.

    The Company's contractual obligations (in millions) at March 31, 2004 mature
as follows:

                                                        Years
                                    --------------------------------------------
                                    Within 1   Over 1 to 3   Over 3 to 5   Total
                                    --------   -----------   -----------   -----
Loans payable to Banks              $  10.3      $   --        $   --     $ 10.3
Lease commitments                       1.8         1.4           0.6        3.8
Long-term debt (including
  current portion)                      2.0         5.3         153.0      160.3
                                      -----        ----        ------     ------
Total contractual obligations         $14.1        $6.7        $153.6     $174.4
                                      =====        ====        ======     ======


                                       39
<PAGE>

Critical Accounting Policies

     The Company's  discussion of results of operations and financial  condition
relies on consolidated  financial  statements that are prepared based on certain
critical  accounting  policies  that require  management  to make  judgments and
estimates  that are  subject to  varying  degrees of  uncertainty.  The  Company
believes that  investors  need to be aware of these policies and how they impact
our  financial  statements  as a whole,  as well as our related  discussion  and
analysis  presented  herein.  While the Company  believes that these  accounting
policies are based on sound measurement criteria, future events can and often do
result in outcomes  that can be  materially  different  from these  estimates or
forecasts.  The  accounting  policies and related  risk  described in our Annual
Report on Form 10-K for the year ended June 30,  2003 are those that depend most
heavily on these  judgments and estimates.  As of March 31, 2004 there have been
no  material  changes  to any  of the  critical  accounting  policies  contained
therein.

New Accounting Pronouncements

     The Company adopted the following new accounting  pronouncements  in fiscal
2004:

     Statement of Financial Accounting Standards No. 149, "Amendment of SFAS No.
133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No.
149 amends and clarifies  accounting and reporting for  derivative  instruments,
including certain derivative  instruments  embedded in other contracts,  and for
hedging  activities  under SFAS No.  133.  The  adoption of SFAS No. 149 did not
result in a material impact on the Company's financial statements.

     Statement  of  Financial  Accounting  Standards  No. 150,  "Accounting  for
Certain  Financial  Instruments  with  Characteristics  of both  Liabilities and
Equity"  ("SFAS No.  150").  SFAS No.  150  requires  that an issuer  classify a
financial  instrument,  that is within its scope, as a liability (or an asset in
some circumstances).  SFAS No. 150 also revises the definition of liabilities to
encompass  certain  obligations  that can, or must, be settled by issuing equity
shares,  depending  on the nature of the  relationship  established  between the
holder and the issuer. The adoption of SFAS No. 150 did not result in a material
impact on the Company's financial statements.

     Statement  of  Financial   Accounting   Standards   No.  132,   "Employers'
Disclosures about Pensions and Other  Postretirement  Benefits,  an amendment to
FASB  Statements  No. 87, 88, and 106 (revised  2003)"  ("SFAS No.  132").  This
revision to SFAS No. 132 relates to employers'  disclosures  about pension plans
and other  postretirement  benefit plans.  SFAS No. 132 now requires  additional
disclosures  to  describe  the  types  of  plan  assets,   investment  strategy,
measurement  date(s),  plan  obligations,  cash  flows,  and  components  of net
periodic benefit cost recognized during interim periods of defined pension plans
and other defined  postretirement plans. The additional  disclosures required by
this revision to SFAS No. 132 have been provided.

     FASB  Interpretation  No. 46,  "Consolidation of Variable Interest Entities
(revised  December  2003)" ("FIN No. 46"). This revision to FIN No. 46 clarifies
the application of Accounting Research Bulletin No. 51, "Consolidated  Financial
Statements",  to certain  entities  in which  equity  investors  do not have the
characteristics  of a controlling  financial  interest or do not have sufficient
equity at risk for the  entity to  finance  its  activities  without  additional
subordinated  financial support.  The adoption of FIN No. 46 did not result in a
material impact on the Company's financial statements.

Certain Factors Affecting Future Operating Results

Forward-Looking Statements

     This Report on Form 10-Q contains  "forward-looking  statements" within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the Securities Exchange Act of 1934, as amended.  Statements that are not
historical facts,  including statements about our beliefs and expectations,  are
forward-looking   statements.   Forward-looking  statements  include  statements
preceded  by,  followed by or that include the words  "may,"  "could,"  "would,"
"should,"  "believe,"  "expect,"  "anticipate,"  "plan,"  "estimate,"  "target,"
"project,"  "intend," or similar  expressions.  These statements include,  among
others,   statements  regarding  our  expected  business  outlook,   anticipated
financial and operating  results,  our business  strategy and means to implement
the strategy, our objectives, the amount and timing of capital expenditures, the
likelihood of our success in expanding our business,  financing plans,  budgets,
working capital needs and sources of liquidity.


                                       40
<PAGE>

     Forward-looking  statements are only  predictions and are not guarantees of
performance.  These  statements  are  based  on  our  management's  beliefs  and
assumptions,  which  in turn  are  based  on  currently  available  information.
Important assumptions relating to the forward-looking  statements include, among
others,  assumptions regarding demand for our products, the expansion of product
offerings  geographically  or through new  applications,  the timing and cost of
planned  capital  expenditures,  competitive  conditions  and  general  economic
conditions. These assumptions could prove inaccurate. Forward-looking statements
also involve  risks and  uncertainties,  which could cause  actual  results that
differ materially from those contained in any forward-looking statement. Many of
these  factors  are beyond our  ability to  control  or  predict.  Such  factors
include, but are not limited to, the following:

     o    our substantial leverage and potential inability to service our debt

     o    our dependence on distributions from our subsidiaries

     o    risks  associated  with our  international  operations and significant
          foreign assets

     o    our dependence on our Israeli operations

     o    competition in each of our markets

     o    potential environmental liability

     o    potential legislation affecting the use of medicated feed additives

     o    extensive regulation by numerous government  authorities in the United
          States and other countries

     o    our  reliance  on  the  continued  operation  and  sufficiency  of our
          manufacturing facilities

     o    our reliance upon unpatented trade secrets

     o    the risks of legal proceedings and general litigation expenses

     o    potential operating hazards and uninsured risks

     o    the risk of work stoppages

     o    our dependence on key personnel

     See also the discussion  under "Risks and  Uncertainties"  in Note 2 of our
Condensed Consolidated Financial Statements included in this Report.

     In addition,  the issue of the potential for increased bacterial resistance
to certain  antibiotics used in certain food producing animals is the subject of
discussions  on a  worldwide  basis  and,  in  certain  instances,  has  led  to
government  restrictions  on the use of  antibiotics  in  these  food  producing
animals. The sale of feed additives containing antibiotics is a material portion
of our  business.  Should  regulatory  or other  developments  result in further
restrictions  on the sale of such  products,  it could have a  material  adverse
impact on our financial position, results of operations and cash flows.

     We believe the  forward-looking  statements in this Report are  reasonable;
however, no undue reliance should be placed on any  forward-looking  statements,
as they are based on current expectations.  Further,  forward-looking statements
speak  only as of the date they are made,  and we  undertake  no  obligation  to
update publicly any of them in light of new information or future events.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     In the normal course of operations,  the Company is exposed to market risks
arising from adverse changes in interest rates, foreign currency exchange rates,
and commodity prices. As a result,  future earnings,  cash flows and fair values
of assets and  liabilities  are subject to  uncertainty.  The Company uses, from
time to time,  foreign currency forward contracts as a means of hedging exposure
to foreign  currency  risks.  The Company  also  utilizes,  on a limited  basis,
certain  commodity  derivatives,


                                       41
<PAGE>

primarily on copper used in its  manufacturing  processes,  to hedge the cost of
its anticipated purchase  requirements.  The Company does not utilize derivative
instruments  for trading  purposes.  The Company  does not hedge its exposure to
market  risks in a manner  that  completely  eliminates  the effects of changing
market conditions on earnings,  cash flows and fair values. The Company monitors
the financial stability and credit standing of its major counterparties.

     The Company's  debt  portfolio is comprised of fixed rate and variable rate
debt of approximately $170.9 million as of March 31, 2004.  Approximately 10% of
the debt is variable and would be interest rate sensitive.

Item 4.  Controls and Procedures

(a)  Based upon an evaluation,  under the supervision and with the participation
     of the  Company's  Principal  Executive  Officers and  Principal  Financial
     Officer,  of the effectiveness of the design and operation of the Company's
     disclosure  controls and  procedures as of the end of the period covered by
     this Quarterly  Report on Form 10-Q, they have concluded that the Company's
     disclosure  controls and procedures as defined in Rule 15d-15(e)  under the
     Securities  Exchange Act of 1934, as amended,  are effective for gathering,
     analyzing and disclosing information the Company is required to disclose in
     its periodic reports filed under such Act.

(b)  During the most  recent  fiscal  quarter,  there  have been no  significant
     changes in the Company's internal control over financial reporting that has
     materially  affected,  or is reasonably  likely to materially  affect,  the
     Company's internal control over financial reporting.

     PART II -- OTHER INFORMATION

Item 5.  Other Information

Subsequent Events

On April 29, 2004,  the Company  amended it senior  credit  facility  with Wells
Fargo Foothill, Inc., which provides for a working capital facility and a letter
of credit  facility,  to, among other things,  increase the aggregate  amount of
borrowings  available under the senior credit facility from $25 million to $27.5
million and  increase  the amount of aggregate  borrowings  available  under the
working capital facility from up to $15 million to up to $17.5 million.

Item 6. Exhibits and Reports on Form 8-K.

(a)  Exhibits

Exhibit No.  Description
-----------  -----------
10.31.2   Amendment  Number Two to Loan and Security  Agreement  dated April 29,
          2004.

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.

Since the Company does not have  securities  registered  under Section 12 of the
Securities  Exchange  Act of 1934 and is not required to file  periodic  reports
pursuant to Section 13 or 15 (d) of the  Securities  Exchange  Act of 1934,  the
Company is not an "issuer"  as defined in the  Sarbanes-Oxley  Act of 2002,  and
therefore the Company is not filing the written certification statement pursuant
to Section  906 of such Act.  The  Company  submits  periodic  reports  with the
Securities and Exchange  Commission because it is required to do so by the terms
of the indenture governing its 9 7/8% Senior Subordinated Notes due 2008.

(b) Reports on Form 8-K.

     On January 12, 2004,  the Company  furnished a report on Form 8-K reporting
items 2 and 7.


                                       42
<PAGE>

                                   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.


                                          HIBRO ANIMAL HEALTH CORPORATION.



Date: May 14, 2004                           By: /s/ JACK C. BENDHEIM
                                           -----------------------------------
                                                       Jack C. Bendheim
                                                     Chairman of the Board


Date: May 14, 2004                           By: /S/ GERALD K. CARLSON
                                           -----------------------------------
                                                       Gerald K. Carlson
                                                    Chief Executive Officer

Date: May 14, 2004                           By: /s/ RICHARD G. JOHNSON
                                           -----------------------------------
                                                      Richard G. Johnson
                                                   Chief Financial Officer
                                               (Principal Financial Officer and
                                                 Principal Accounting Officer)


                                       43
<PAGE>

                                  Exhibit Index


Exhibit No     Description
----------     -----------
10.31.2        Amendment Number Two to Loan and Security Agreement dated
               April 29, 2004.

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.

     Since the Company does not have securities  registered  under Section 12 of
the Securities Exchange Act of 1934 and is not required to file periodic reports
pursuant to Section 13 or 15 (d) of the  Securities  Exchange  Act of 1934,  the
Company is not an "issuer"  as defined in the  Sarbanes-Oxley  Act of 2002,  and
therefore the Company is not filing the written certification statement pursuant
to Section  906 of such Act.  The  Company  submits  periodic  reports  with the
Securities and Exchange  Commission because it is required to do so by the terms
of the indenture governing its 9 7/8% Senior Subordinated Notes due 2008.


                                       44