##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended July 2, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from       to
 Commission file number 0-27818
 Doane Pet Care Company
  Delaware
(State or other jurisdiction
of incorporation)
    
    43-1350515
(IRS Employer
Identification No.)
 210 Westwood Place South, Suite 400
Brentwood, TN 37027
  (615) 373-7774
  Yes þ  No o
 Rule 12b-2 Yes o  No þ




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TABLE OF CONTENTS
 
 
 PART I. Financial Information
 PageItem 1. Financial StatementsUnaudited Condensed Consolidated Balance Sheets as of the end of the
second quarter of fiscal 2005 and the end of fiscal 2004
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the
second quarter and first six months of fiscal 2005 and 2004
    
    
    2Unaudited Condensed Consolidated Statement of Stockholders (Deficit) Equity and
Comprehensive Loss as of the end of and for the first six months of fiscal 2005
    
    
    3Unaudited Condensed Consolidated Statements of Cash Flows for the
first six months of fiscal 2005 and 2004
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Report of Independent Registered Public Accounting Firm
    
    
    17Item 2. Managements Discussion and Analysis of Financial Condition andResults of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    26
 PART II. Other Information
 Item 1. Legal Proceedings
    
    
    28Item 6. Exhibits
    
    
    28Signatures
    
    
    29Letter from KPMG LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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##### Table of Contents



PART I. Financial Information
 
 ITEM 1.
    
    Financial Statements
 
 DOANE PET CARE COMPANY AND SUBSIDIARIES
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
 End ofSecond quarter
    
    
    Fiscal2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    37,031
    
    
    $
    28,847Accounts receivable, net
    
    
    91,491
    
    
    
    112,445Inventories, net
    
    
    67,657
    
    
    
    68,321Deferred tax assets
    
    
    1,935
    
    
    
    2,414Prepaid expenses and other current assets
    
    
    11,080
    
    
    
    7,038Total current assets
    
    
    209,194
    
    
    
    219,065Property, plant and equipment, net
    
    
    236,837
    
    
    
    258,070Goodwill and other intangible assets
    
    
    376,373
    
    
    
    390,471Other assets
    
    
    29,388
    
    
    
    34,300Total assets
    
    $
    851,792
    
    
    $
    901,906LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,516
    
    
    $
    3,673Accounts payable
    
    
    84,058
    
    
    
    102,149Accrued liabilities
    
    
    50,698
    
    
    
    59,239Total current liabilities
    
    
    138,272
    
    
    
    165,061Long-term debt:Long-term debt, excluding current maturities
    
    
    577,260
    
    
    
    580,090Senior Preferred Stock (Redeemable), 3,000,000 shares authorized,
1,200,000 shares issued and outstanding, $118,987 current redemption value
    
    
    114,874
    
    
    
    106,421Total long-term debt
    
    
    692,134
    
    
    
    686,511Deferred tax liabilities
    
    
    34,868
    
    
    
    33,641Other long-term liabilities
    
    
    9,842
    
    
    
    9,567Total liabilities
    
    
    875,116
    
    
    
    894,780Commitments and contingenciesStockholders (deficit) equity:Common stock, $0.01 par value; 1,000 shares authorized,
issued and outstanding
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    115,674
    
    
    
    115,674Accumulated other comprehensive income
    
    
    32,571
    
    
    
    62,650Accumulated deficit
    
    
    (171,569
    )
    
    
    (171,198
    )Total stockholders (deficit) equity
    
    
    (23,324
    )
    
    
    7,126Total liabilities and stockholders (deficit) equity
    
    $
    851,792
    
    
    $
    901,906
 
 1




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
 Second quarter
    
    
    First six months2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    243,872
    
    
    $
    258,338
    
    
    $
    511,008
    
    
    $
    529,218Cost of goods sold
    
    
    201,151
    
    
    
    225,201
    
    
    
    416,184
    
    
    
    455,263Gross profit
    
    
    42,721
    
    
    
    33,137
    
    
    
    94,824
    
    
    
    73,955Operating expenses:Promotion and distribution
    
    
    14,729
    
    
    
    13,767
    
    
    
    29,159
    
    
    
    27,994Selling, general and administrative
    
    
    12,811
    
    
    
    12,803
    
    
    
    25,930
    
    
    
    25,986Amortization
    
    
    1,024
    
    
    
    1,134
    
    
    
    2,190
    
    
    
    2,363Other operating expense (income), net
    
    
    1,805
    
    
    
    3,938
    
    
    
    (1,711
    )
    
    
    5,161Income from operations
    
    
    12,352
    
    
    
    1,495
    
    
    
    39,256
    
    
    
    12,451Interest expense, net
    
    
    19,031
    
    
    
    18,186
    
    
    
    37,677
    
    
    
    36,163Other income, net
    
    
    (448
    )
    
    
    (331
    )
    
    
    (693
    )
    
    
    (738
    )(Loss) income before income taxes
    
    
    (6,231
    )
    
    
    (16,360
    )
    
    
    2,272
    
    
    
    (22,974
    )Income tax expense
    
    
    1,316
    
    
    
    1,377
    
    
    
    2,643
    
    
    
    2,570Net loss
    
    $
    (7,547
    )
    
    $
    (17,737
    )
    
    $
    (371
    )
    
    $
    (25,544
    )
 
 2




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
STOCKHOLDERS (DEFICIT) EQUITY AND COMPREHENSIVE LOSS
(In thousands, except share amounts)
 AccumulatedAdditional
    
    
    otherCommon stock
    
    
    paid-in
    
    
    comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    capital
    
    
    income (loss)
    
    
    deficit
    
    
    TotalBalances at end of fiscal 2004
    
    
    1,000
    
    
    $
    
    
    
    $
    115,674
    
    
    $
    62,650
    
    
    $
    (171,198
    )
    
    $
    7,126Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (371
    )
    
    
    (371
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,079
    )
    
    
    
    
    
    
    (30,079
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,450
    )Balances at end of second quarter 2005
    
    
    1,000
    
    
    $
    
    
    
    $
    115,674
    
    
    $
    32,571
    
    
    $
    (171,569
    )
    
    $
    (23,324
    )
 
 3




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 First six months2005
    
    
    2004Cash flows from operating activities:Net loss
    
    $
    (371
    )
    
    $
    (25,544
    )Items not requiring (providing) cash:Depreciation
    
    
    17,825
    
    
    
    17,303Amortization
    
    
    2,258
    
    
    
    2,860Deferred income tax expense
    
    
    2,042
    
    
    
    2,065Non-cash interest expense
    
    
    11,099
    
    
    
    9,713Equity in joint ventures
    
    
    (151
    )
    
    
    (457
    )Asset impairments
    
    
    1,129
    
    
    
    420Changes in current assets and liabilities
    
    
    (12,557
    )
    
    
    (12,674
    )Net cash provided by (used in) operating activities
    
    
    21,274
    
    
    
    (6,314
    )Cash flows from investing activities:Capital expenditures
    
    
    (10,132
    )
    
    
    (5,126
    )Other, net
    
    
    (743
    )
    
    
    (404
    )Net cash used in investing activities
    
    
    (10,875
    )
    
    
    (5,530
    )Cash flows from financing activities:Proceeds from issuance of long-term debt
    
    
    
    
    
    
    13,078Principal payments on long-term debt
    
    
    (1,768
    )
    
    
    (17,276
    )Payments for debt issuance costs
    
    
    (22
    )
    
    
    (3,002
    )Net cash used in financing activities
    
    
    (1,790
    )
    
    
    (7,200
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (425
    )
    
    
    (187
    )Increase (decrease) in cash and cash equivalents
    
    
    8,184
    
    
    
    (19,231
    )Cash and cash equivalents, beginning of period
    
    
    28,847
    
    
    
    29,293Cash and cash equivalents, end of period
    
    $
    37,031
    
    
    $
    10,062
 
 4




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (1)
    
    Basis of Presentation
     (2)
    
    Recent Accounting Pronouncements
   5




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DOANE PET CARE COMPANY
AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (3)
    
    Inventories
  End ofSecond quarter
    
    
    Fiscal2005
    
    
    2004Raw materials
    
    $
    16,107
    
    
    $
    16,041Packaging materials
    
    
    21,441
    
    
    
    20,564Finished goods
    
    
    32,385
    
    
    
    34,57369,933
    
    
    
    71,178Less: Allowances
    
    
    (2,276
    )
    
    
    (2,857
    )Total
    
    $
    67,657
    
    
    $
    68,321
 (4)
    
    Property, Plant and Equipment
  End ofSecond quarter
    
    
    Fiscal2005
    
    
    2004Land
    
    $
    11,210
    
    
    $
    11,601Buildings and improvements
    
    
    99,331
    
    
    
    104,778Machinery and equipment
    
    
    309,644
    
    
    
    320,097Construction-in-progress
    
    
    9,679
    
    
    
    6,727429,864
    
    
    
    443,203Less: Accumulated depreciation
    
    
    (193,027
    )
    
    
    (185,133
    )Total
    
    $
    236,837
    
    
    $
    258,070
 (5)
    
    Long-Term Debt and Liquidity
  End ofSecond quarter
    
    
    Fiscal2005
    
    
    2004Revolving credit facility
    
    $
    
    
    
    $
    Term loan facility
    
    
    193,538
    
    
    
    194,513Senior notes
    
    
    211,323
    
    
    
    211,144Senior subordinated notes
    
    
    149,326
    
    
    
    149,147Industrial development revenue bonds
    
    
    14,499
    
    
    
    14,493Debt of
foreign subsidiaries
    
    
    12,090
    
    
    
    14,466580,776
    
    
    
    583,763Less: Current maturities
    
    
    (3,516
    )
    
    
    (3,673
    )577,260
    
    
    
    580,090Senior preferred stock
    
    
    114,874
    
    
    
    106,421Total
    
    $
    692,134
    
    
    $
    686,511
 6




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##### Table of Contents



DOANE
PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
    Maturities by fiscal year2010 andFinal maturity
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    thereafter
    
    
    TotalTerm loan facility
    
    February 13, 20071
    
    $
    975
    
    
    $
    1,950
    
    
    $
    190,613
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    193,538Senior notes
    
    March 1, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211,323
    
    
    
    211,323Senior subordinated notes
    
    May 15, 2007
    
    
    
    
    
    
    
    
    
    
    149,326
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    149,326Other
    
    Various
    
    
    756
    
    
    
    1,572
    
    
    
    2,005
    
    
    
    2,141
    
    
    
    2,282
    
    
    
    17,833
    
    
    
    26,5891,731
    
    
    
    3,522
    
    
    
    341,944
    
    
    
    2,141
    
    
    
    2,282
    
    
    
    229,156
    
    
    
    580,776Senior preferred stock
    
    September 30, 2007
    
    
    
    
    
    
    
    
    
    
    114,874
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,874Total
    
    
    
    $
    1,731
    
    
    $
    3,522
    
    
    $
    456,818
    
    
    $
    2,141
    
    
    $
    2,282
    
    
    $
    229,156
    
    
    $
    695,650
 
 1
    
    The Companys senior credit facility matures on the earlier of November 5, 2009 or 91 days prior to the maturity of the senior subordinated
notes due May 15, 2007 (as may be refinanced, extended, or
renewed), unless terminated sooner upon an event of default.  (6)
    
    Restructuring Activities
  7




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DOANE
PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  First six months2005Balance at end of fiscal 2004
    
    $
    722Severance
    
    
    36Revisions to estimates
    
    
    (15
    )Cash payments
    
    
    (415
    )Balance at end of second quarter 2005
    
    $
    328
   Fiscal years ending
    
    Payout2005
    
    $
    2692006
    
    
    59Total
    
    $
    328
 (7) Comprehensive Loss
  Second quarter
    
    
    First six months2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss
    
    $
    (7,547
    )
    
    $
    (17,737
    )
    
    $
    (371
    )
    
    $
    (25,544
    )Foreign currency translation
    
    
    (17,625
    )
    
    
    (873
    )
    
    
    (30,079
    )
    
    
    (4,907
    )Total
    
    $
    (25,172
    )
    
    $
    (18,610
    )
    
    $
    (30,450
    )
    
    $
    (30,451
    )
 (8) Stock Option Plan of Parent
  8




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DOANE
PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Second quarter
    
    
    First six months2005
    
    
    2004
    
    
    2005
    
    
    2004Net loss, as reported
    
    $
    (7,547
    )
    
    $
    (17,737
    )
    
    $
    (371
    )
    
    $
    (25,544
    )Less: Stock-based employee
compensation expense determined based
on the fair value method for all awards
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Pro forma net loss
    
    $
    (7,547
    )
    
    $
    (17,738
    )
    
    $
    (372
    )
    
    $
    (25,546
    )
  (9) Pension and Postretirement Plans
   Pension benefitsSecond quarter
    
    
    First six months2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    9
    
    
    $
    9
    
    
    $
    18
    
    
    $
    18Interest cost
    
    
    254
    
    
    
    270
    
    
    
    507
    
    
    
    540Expected return on plan assets
    
    
    (344
    )
    
    
    (347
    )
    
    
    (689
    )
    
    
    (693
    )Recognition of actuarial loss
    
    
    168
    
    
    
    169
    
    
    
    336
    
    
    
    338Amortization of prior service cost
    
    
    2
    
    
    
    3
    
    
    
    5
    
    
    
    5Amortization of transition obligation
    
    
    1
    
    
    
    1
    
    
    
    2
    
    
    
    2Net periodic pension cost
    
    $
    90
    
    
    $
    105
    
    
    $
    179
    
    
    $
    210
 Postretirement benefitsSecond quarter
    
    
    First six months2005
    
    
    2004
    
    
    2005
    
    
    2004Service cost
    
    $
    5
    
    
    $
    3
    
    
    $
    8
    
    
    $
    7Interest cost
    
    
    45
    
    
    
    75
    
    
    
    103
    
    
    
    150Recognition of actuarial loss
    
    
    28
    
    
    
    27
    
    
    
    63
    
    
    
    54Amortization of prior service benefit
    
    
    (61
    )
    
    
    (13
    )
    
    
    (122
    )
    
    
    (26
    )Net periodic postretirement cost
    
    $
    17
    
    
    $
    92
    
    
    $
    52
    
    
    $
    185
 9




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##### Table of Contents



DOANE
PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (10)
    
    Major Customer
  (11)
    
    Commitments and Contingencies
  (12)
    
    Financial Information Related to Guarantor Subsidiaries
   10




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Unaudited Condensed Consolidated Balance Sheets
For The Guarantor and Non-Guarantor Subsidiaries
 End of second quarter 2005Non-
    
    
    IntercompanyGuarantor
    
    
    guarantor
    
    
    eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    33,177
    
    
    $
    3,854
    
    
    $
    
    
    
    $
    37,031Accounts receivable, net
    
    
    40,781
    
    
    
    50,710
    
    
    
    
    
    
    
    91,491Inventories, net
    
    
    40,004
    
    
    
    27,653
    
    
    
    
    
    
    
    67,657Deferred tax assets
    
    
    1,935
    
    
    
    
    
    
    
    
    
    
    
    1,935Prepaid expenses and other current assets
    
    
    9,880
    
    
    
    1,200
    
    
    
    
    
    
    
    11,080Total current assets
    
    
    125,777
    
    
    
    83,417
    
    
    
    
    
    
    
    209,194Property, plant and equipment, net
    
    
    142,346
    
    
    
    94,491
    
    
    
    
    
    
    
    236,837Goodwill and other intangible assets
    
    
    267,780
    
    
    
    108,593
    
    
    
    
    
    
    
    376,373Other assets
    
    
    273,378
    
    
    
    12,565
    
    
    
    (256,555
    )
    
    
    29,388Total assets
    
    $
    809,281
    
    
    $
    299,066
    
    
    $
    (256,555
    )
    
    $
    851,792LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    1,950
    
    
    $
    1,566
    
    
    $
    
    
    
    $
    3,516Accounts payable
    
    
    48,848
    
    
    
    35,210
    
    
    
    
    
    
    
    84,058Accrued liabilities
    
    
    36,950
    
    
    
    13,748
    
    
    
    
    
    
    
    50,698Total current liabilities
    
    
    87,748
    
    
    
    50,524
    
    
    
    
    
    
    
    138,272Long-term debt:Long-term debt, excluding current maturities
    
    
    566,736
    
    
    
    154,495
    
    
    
    (143,971
    )
    
    
    577,260Senior Preferred Stock (Redeemable),
3,000,000 shares authorized, 1,200,000 shares
issued and outstanding,
$118,987 current redemption value
    
    
    114,874
    
    
    
    
    
    
    
    
    
    
    
    114,874Total long-term debt
    
    
    681,610
    
    
    
    154,495
    
    
    
    (143,971
    )
    
    
    692,134Deferred tax liabilities
    
    
    32,333
    
    
    
    2,535
    
    
    
    
    
    
    
    34,868Other long-term liabilities
    
    
    9,842
    
    
    
    
    
    
    
    
    
    
    
    9,842Total liabilities
    
    
    811,533
    
    
    
    207,554
    
    
    
    (143,971
    )
    
    
    875,116Commitments and contingenciesStockholders (deficit) equity:Common stock, $0.01 par value; 1,000 shares
authorized, issued and outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    115,674
    
    
    
    95,861
    
    
    
    (95,861
    )
    
    
    115,674Accumulated other comprehensive (loss)
income
    
    
    (24,555
    )
    
    
    73,849
    
    
    
    (16,723
    )
    
    
    32,571Accumulated deficit
    
    
    (93,371
    )
    
    
    (78,198
    )
    
    
    
    
    
    
    (171,569
    )Total stockholders (deficit) equity
    
    
    (2,252
    )
    
    
    91,512
    
    
    
    (112,584
    )
    
    
    (23,324
    )Total liabilities and stockholders (deficit) equity
    
    $
    809,281
    
    
    $
    299,066
    
    
    $
    (256,555
    )
    
    $
    851,792
 11




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Unaudited Condensed Consolidated Balance Sheets
For The Guarantor and Non-Guarantor Subsidiaries
 End of fiscal 2004Non-
    
    
    IntercompanyGuarantor
    
    
    guarantor
    
    
    eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    24,963
    
    
    $
    3,884
    
    
    $
    
    
    
    $
    28,847Accounts receivable, net
    
    
    48,660
    
    
    
    63,785
    
    
    
    
    
    
    
    112,445Inventories, net
    
    
    39,406
    
    
    
    28,915
    
    
    
    
    
    
    
    68,321Deferred tax assets
    
    
    2,414
    
    
    
    
    
    
    
    
    
    
    
    2,414Prepaid expenses and other current assets
    
    
    6,128
    
    
    
    910
    
    
    
    
    
    
    
    7,038Total current assets
    
    
    121,571
    
    
    
    97,494
    
    
    
    
    
    
    
    219,065Property, plant and equipment, net
    
    
    147,293
    
    
    
    110,777
    
    
    
    
    
    
    
    258,070Goodwill and other intangible assets
    
    
    267,780
    
    
    
    122,691
    
    
    
    
    
    
    
    390,471Other assets
    
    
    267,224
    
    
    
    14,436
    
    
    
    (247,360
    )
    
    
    34,300Total assets
    
    $
    803,868
    
    
    $
    345,398
    
    
    $
    (247,360
    )
    
    $
    901,906LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    1,950
    
    
    $
    1,723
    
    
    $
    
    
    
    $
    3,673Accounts payable
    
    
    52,131
    
    
    
    50,018
    
    
    
    
    
    
    
    102,149Accrued liabilities
    
    
    46,623
    
    
    
    12,616
    
    
    
    
    
    
    
    59,239Total current liabilities
    
    
    100,704
    
    
    
    64,357
    
    
    
    
    
    
    
    165,061Long-term debt, excluding current maturities
    
    
    567,347
    
    
    
    165,574
    
    
    
    (152,831
    )
    
    
    580,090Senior Preferred Stock (Redeemable), 3,000,000
shares authorized, 1,200,000 shares issued and
outstanding, $110,942 current redemption value
    
    
    106,421
    
    
    
    
    
    
    
    
    
    
    
    106,421Total long-term debt
    
    
    673,768
    
    
    
    165,574
    
    
    
    (152,831
    )
    
    
    686,511Deferred tax liabilities
    
    
    30,714
    
    
    
    2,927
    
    
    
    
    
    
    
    33,641Other long-term liabilities
    
    
    9,567
    
    
    
    
    
    
    
    
    
    
    
    9,567Total liabilities
    
    
    814,753
    
    
    
    232,858
    
    
    
    (152,831
    )
    
    
    894,780Commitments and contingenciesStockholders (deficit) equity:Common stock, $0.01 par value; 1,000 shares
authorized, issued and outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    115,674
    
    
    
    95,861
    
    
    
    (95,861
    )
    
    
    115,674Accumulated other comprehensive (loss) income
    
    
    (24,555
    )
    
    
    85,873
    
    
    
    1,332
    
    
    
    62,650Accumulated deficit
    
    
    (102,004
    )
    
    
    (69,194
    )
    
    
    
    
    
    
    (171,198
    )Total stockholders (deficit) equity
    
    
    (10,885
    )
    
    
    112,540
    
    
    
    (94,529
    )
    
    
    7,126Total liabilities and stockholders (deficit) equity
    
    $
    803,868
    
    
    $
    345,398
    
    
    $
    (247,360
    )
    
    $
    901,906
 12




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Unaudited Condensed Consolidated Statements of Operations
For The Guarantor and Non-Guarantor Subsidiaries
 Second quarter 2005Non-Guarantor
    
    
    guarantor
    
    
    ConsolidatedNet sales
    
    $
    172,506
    
    
    $
    71,366
    
    
    $
    243,872Cost of goods sold
    
    
    144,383
    
    
    
    56,768
    
    
    
    201,151Gross profit
    
    
    28,123
    
    
    
    14,598
    
    
    
    42,721Operating expenses:Promotion and distribution
    
    
    6,177
    
    
    
    8,552
    
    
    
    14,729Selling, general and administrative
    
    
    8,723
    
    
    
    4,088
    
    
    
    12,811Amortization
    
    
    816
    
    
    
    208
    
    
    
    1,024Other operating expense (income), net
    
    
    1,816
    
    
    
    (11
    )
    
    
    1,805Income from operations
    
    
    10,591
    
    
    
    1,761
    
    
    
    12,352Interest expense, net
    
    
    12,617
    
    
    
    6,414
    
    
    
    19,031Other (income) expense, net
    
    
    (791
    )
    
    
    343
    
    
    
    (448
    )Loss before income taxes
    
    
    (1,235
    )
    
    
    (4,996
    )
    
    
    (6,231
    )Income tax expense
    
    
    1,049
    
    
    
    267
    
    
    
    1,316Net loss
    
    $
    (2,284
    )
    
    $
    (5,263
    )
    
    $
    (7,547
    )
 Second quarter 2004Non-Guarantor
    
    
    guarantor
    
    
    ConsolidatedNet sales
    
    $
    192,502
    
    
    $
    65,836
    
    
    $
    258,338Cost of goods sold
    
    
    173,380
    
    
    
    51,821
    
    
    
    225,201Gross profit
    
    
    19,122
    
    
    
    14,015
    
    
    
    33,137Operating expenses:Promotion and distribution
    
    
    6,580
    
    
    
    7,187
    
    
    
    13,767Selling, general and administrative
    
    
    8,673
    
    
    
    4,130
    
    
    
    12,803Amortization
    
    
    935
    
    
    
    199
    
    
    
    1,134Other operating expenses
    
    
    
    
    
    
    3,938
    
    
    
    3,938Income from operations
    
    
    2,934
    
    
    
    (1,439
    )
    
    
    1,495Interest expense, net
    
    
    12,205
    
    
    
    5,981
    
    
    
    18,186Other (income) expense, net
    
    
    (521
    )
    
    
    190
    
    
    
    (331
    )Loss before income taxes
    
    
    (8,750
    )
    
    
    (7,610
    )
    
    
    (16,360
    )Income tax expense
    
    
    1,070
    
    
    
    307
    
    
    
    1,377Net loss
    
    $
    (9,820
    )
    
    $
    (7,917
    )
    
    $
    (17,737
    )
 13




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Unaudited Condensed Consolidated Statements of Operations
For The Guarantor and Non-Guarantor Subsidiaries
 First six months 2005Non-Guarantor
    
    
    guarantor
    
    
    ConsolidatedNet sales
    
    $
    367,127
    
    
    $
    143,881
    
    
    $
    511,008Cost of goods sold
    
    
    302,270
    
    
    
    113,914
    
    
    
    416,184Gross profit
    
    
    64,857
    
    
    
    29,967
    
    
    
    94,824Operating expenses:Promotion and distribution
    
    
    12,734
    
    
    
    16,425
    
    
    
    29,159Selling, general and administrative
    
    
    17,590
    
    
    
    8,340
    
    
    
    25,930Amortization
    
    
    1,765
    
    
    
    425
    
    
    
    2,190Other operating income, net
    
    
    (1,439
    )
    
    
    (272
    )
    
    
    (1,711
    )Income from operations
    
    
    34,207
    
    
    
    5,049
    
    
    
    39,256Interest expense, net
    
    
    24,605
    
    
    
    13,072
    
    
    
    37,677Other (income) expense, net
    
    
    (1,129
    )
    
    
    436
    
    
    
    (693
    )Income (loss) before income taxes
    
    
    10,731
    
    
    
    (8,459
    )
    
    
    2,272Income tax expense
    
    
    2,098
    
    
    
    545
    
    
    
    2,643Net income (loss)
    
    $
    8,633
    
    
    $
    (9,004
    )
    
    $
    (371
    )
 First six months 2004Non-Guarantor
    
    
    guarantor
    
    
    ConsolidatedNet sales
    
    $
    391,940
    
    
    $
    137,278
    
    
    $
    529,218Cost of goods sold
    
    
    346,716
    
    
    
    108,547
    
    
    
    455,263Gross profit
    
    
    45,224
    
    
    
    28,731
    
    
    
    73,955Operating expenses:Promotion and distribution
    
    
    13,355
    
    
    
    14,639
    
    
    
    27,994Selling, general and administrative
    
    
    17,106
    
    
    
    8,880
    
    
    
    25,986Amortization
    
    
    1,956
    
    
    
    407
    
    
    
    2,363Other operating (income) expense, net
    
    
    (415
    )
    
    
    5,576
    
    
    
    5,161Income (loss) from operations
    
    
    13,222
    
    
    
    (771
    )
    
    
    12,451Interest expense, net
    
    
    23,956
    
    
    
    12,207
    
    
    
    36,163Other (income) expense, net
    
    
    (1,134
    )
    
    
    396
    
    
    
    (738
    )Loss before income taxes
    
    
    (9,600
    )
    
    
    (13,374
    )
    
    
    (22,974
    )Income tax expense
    
    
    2,001
    
    
    
    569
    
    
    
    2,570Net loss
    
    $
    (11,601
    )
    
    $
    (13,943
    )
    
    $
    (25,544
    )
 14




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Unaudited Condensed Consolidated Statements of Cash Flows
For The Guarantor and Non-Guarantor Subsidiaries
 First six months 2005Non-Guarantor
    
    
    guarantor
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    8,633
    
    
    $
    (9,004
    )
    
    $
    (371
    )Items not requiring (providing) cash:Depreciation and amortization
    
    
    11,395
    
    
    
    8,688
    
    
    
    20,083Deferred income tax expense (benefit)
    
    
    2,098
    
    
    
    (56
    )
    
    
    2,042Asset impairments
    
    
    1,129
    
    
    
    
    
    
    
    1,129Other non-cash expense (income), net
    
    
    11,120
    
    
    
    (172
    )
    
    
    10,948Changes in current assets and liabilities
    
    
    (18,339
    )
    
    
    5,782
    
    
    
    (12,557
    )Net cash provided by operating activities
    
    
    16,036
    
    
    
    5,238
    
    
    
    21,274Cash flows from investing activities:Capital expenditures
    
    
    (6,044
    )
    
    
    (4,088
    )
    
    
    (10,132
    )Other, net
    
    
    (781
    )
    
    
    38
    
    
    
    (743
    )Net cash used in investing activities
    
    
    (6,825
    )
    
    
    (4,050
    )
    
    
    (10,875
    )Cash flows from financing activities:Principal payments on long-term debt
    
    
    (975
    )
    
    
    (793
    )
    
    
    (1,768
    )Payments for debt issuance costs
    
    
    (22
    )
    
    
    
    
    
    
    (22
    )Net cash used in financing activities
    
    
    (997
    )
    
    
    (793
    )
    
    
    (1,790
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    (425
    )
    
    
    (425
    )Increase (decrease) in cash and cash equivalents
    
    
    8,214
    
    
    
    (30
    )
    
    
    8,184Cash and cash equivalents, beginning of period
    
    
    24,963
    
    
    
    3,884
    
    
    
    28,847Cash and cash equivalents, end of period
    
    $
    33,177
    
    
    $
    3,854
    
    
    $
    37,031
 15




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##### Table of Contents



DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Unaudited Condensed Consolidated Statements of Cash Flows
For The Guarantor and Non-Guarantor Subsidiaries
 First six months 2004Non-Guarantor
    
    
    guarantor
    
    
    ConsolidatedCash flows from operating activities:Net loss
    
    $
    (11,601
    )
    
    $
    (13,943
    )
    
    $
    (25,544
    )Items not requiring (providing) cash:Depreciation and amortization
    
    
    11,640
    
    
    
    8,523
    
    
    
    20,163Deferred income tax expense
    
    
    2,001
    
    
    
    64
    
    
    
    2,065Asset impairments
    
    
    420
    
    
    
    
    
    
    
    420Other non-cash expense (income), net
    
    
    9,359
    
    
    
    (103
    )
    
    
    9,256Changes in current assets and liabilities
    
    
    (21,185
    )
    
    
    8,511
    
    
    
    (12,674
    )Net cash (used in) provided by operating activities
    
    
    (9,366
    )
    
    
    3,052
    
    
    
    (6,314
    )Cash flows from investing activities:Capital expenditures
    
    
    (2,990
    )
    
    
    (2,136
    )
    
    
    (5,126
    )Other, net
    
    
    (802
    )
    
    
    398
    
    
    
    (404
    )Net cash used in investing activities
    
    
    (3,792
    )
    
    
    (1,738
    )
    
    
    (5,530
    )Cash flows from financing activities:Proceeds from the issuance of long-term debt
    
    
    
    
    
    
    13,078
    
    
    
    13,078Principal payments on long-term debt
    
    
    (3,220
    )
    
    
    (14,056
    )
    
    
    (17,276
    )Payments for debt issuance costs
    
    
    (3,002
    )
    
    
    
    
    
    
    (3,002
    )Net cash used in financing activities
    
    
    (6,222
    )
    
    
    (978
    )
    
    
    (7,200
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    (187
    )
    
    
    (187
    )(Decrease) increase in cash and cash equivalents
    
    
    (19,380
    )
    
    
    149
    
    
    
    (19,231
    )Cash and cash equivalents, beginning of period
    
    
    25,939
    
    
    
    3,354
    
    
    
    29,293Cash and cash equivalents, end of period
    
    $
    6,559
    
    
    $
    3,503
    
    
    $
    10,062
 16




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 17




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##### Table of Contents



ITEM 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Forward-Looking Statements
  
    
    reliance on a few customers for a large portion of our sales and our ability
to maintain our relationships with these customers;
    
    our exposure to, and our ability to manage, market risk
relating to commodity, oil and natural gas prices, interest rates and foreign currency exchange rates;
    
    future capital expenditures and our ability to finance these capital
expenditures;
    
    our ability to finance our debt service requirements under our senior credit
facility and other indebtedness and to comply with the financial covenants under our debt
agreements;
    
    our future results of operations or financial condition;
    
    our business strategies and other plans and objectives for future operations;
    
    general economic and business conditions;
    
    business opportunities that may be presented to and pursued by us from time to time;
    
    risks related to our international operations;
    
    the impact of existing or new accounting pronouncements; and
    
    the outcome of any legal proceedings to which we or any of our subsidiaries may be a party.
  18




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##### Table of Contents



Second Quarter Fiscal 2005 in Review
   
 Results of Operations
     19




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##### Table of Contents



Statement of operations data.
 Second quarter
    
    
    First six months2005
    
    
    2004
    
    
    2005
    
    
    2004Net sales
    
    $
    243,872
    
    
    
    100.0
    %
    
    $
    258,338
    
    
    
    100.0
    %
    
    $
    511,008
    
    
    
    100.0
    %
    
    $
    529,218
    
    
    
    100.0
    %Cost of goods sold:Commodity costs
    
    
    116,495
    
    
    
    47.8
    
    
    
    134,152
    
    
    
    51.9
    
    
    
    240,307
    
    
    
    47.0
    
    
    
    270,476
    
    
    
    51.1Other
    
    
    84,656
    
    
    
    34.7
    
    
    
    91,049
    
    
    
    35.3
    
    
    
    175,877
    
    
    
    34.4
    
    
    
    184,787
    
    
    
    34.9Total cost of goods sold
    
    
    201,151
    
    
    
    82.5
    
    
    
    225,201
    
    
    
    87.2
    
    
    
    416,184
    
    
    
    81.4
    
    
    
    455,263
    
    
    
    86.0Gross profit
    
    
    42,721
    
    
    
    17.5
    
    
    
    33,137
    
    
    
    12.8
    
    
    
    94,824
    
    
    
    18.6
    
    
    
    73,955
    
    
    
    14.0Operating expenses:Promotion and distribution
    
    
    14,729
    
    
    
    6.0
    
    
    
    13,767
    
    
    
    5.3
    
    
    
    29,159
    
    
    
    5.7
    
    
    
    27,994
    
    
    
    5.3Selling, general and
administrative
    
    
    12,811
    
    
    
    5.3
    
    
    
    12,803
    
    
    
    5.0
    
    
    
    25,930
    
    
    
    5.1
    
    
    
    25,986
    
    
    
    4.9Amortization
    
    
    1,024
    
    
    
    0.4
    
    
    
    1,134
    
    
    
    0.4
    
    
    
    2,190
    
    
    
    0.4
    
    
    
    2,363
    
    
    
    0.4Other operating expense
(income), net
    
    
    1,805
    
    
    
    0.7
    
    
    
    3,938
    
    
    
    1.5
    
    
    
    (1,711
    )
    
    
    (0.3
    )
    
    
    5,161
    
    
    
    1.0Income from operations
    
    
    12,352
    
    
    
    5.1
    
    
    
    1,495
    
    
    
    0.6
    
    
    
    39,256
    
    
    
    7.7
    
    
    
    12,451
    
    
    
    2.4Interest expense, net
    
    
    19,031
    
    
    
    7.8
    
    
    
    18,186
    
    
    
    7.0
    
    
    
    37,677
    
    
    
    7.4
    
    
    
    36,163
    
    
    
    6.8Other income, net
    
    
    (448
    )
    
    
    (0.2
    )
    
    
    (331
    )
    
    
    
    
    
    
    (693
    )
    
    
    (0.1
    )
    
    
    (738
    )
    
    
    (0.1
    )(Loss) income before
income taxes
    
    
    (6,231
    )
    
    
    (2.5
    )
    
    
    (16,360
    )
    
    
    (6.4
    )
    
    
    2,272
    
    
    
    0.4
    
    
    
    (22,974
    )
    
    
    (4.3
    )Income tax expense
    
    
    1,316
    
    
    
    0.6
    
    
    
    1,377
    
    
    
    0.5
    
    
    
    2,643
    
    
    
    0.5
    
    
    
    2,570
    
    
    
    0.5Net loss
    
    $
    (7,547
    )
    
    
    (3.1
    )%
    
    $
    (17,737
    )
    
    
    (6.9
    )%
    
    $
    (371
    )
    
    
    (0.1
    )%
    
    $
    (25,544
    )
    
    
    (4.8
    )%
 Second Quarter of Fiscal 2005 Compared to Second Quarter of Fiscal 2004
 Net sales
 Gross profit.
 Promotion and distribution
 20




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##### Table of Contents



Other operating expense (income), net.
 Interest expense, net
 Income tax expense
 First Six Months of Fiscal 2005 Compared to First Six Months of Fiscal 2004
 Net sales.
 Gross profit.
 Promotion and distribution
 Other operating expense (income), net
 Interest expense, net.
 Income tax expense.
 21




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##### Table of Contents



Liquidity and Capital Resources
  Cash and Cash Flows
    Debt
   Liquidity
   22




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##### Table of Contents



Annual Maturities of Long-Term Debt
  Fiscal
    
    Maturities2005
    
    $
    1,7312006
    
    
    3,5222007
    
    
    456,8182008
    
    
    2,1412009
    
    
    2,2822010 and thereafter
    
    
    229,156$
    695,650
 Commitments and Contingencies
  23




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##### Table of Contents



Inflation and Changes in Prices
   Seasonality
  Recently Issued Accounting Pronouncements
  Critical Accounting Policies
 Accounts receivable allowances.
 Inventories allowances.
 24




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##### Table of Contents



Deferred tax assets.
  Goodwill and other intangible assets.
 
 ITEM 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
  Commodity price risk.
   25




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##### Table of Contents



Interest rate risk.
  Foreign currency exchange risk
  
 ITEM 4.
    
    Controls and Procedures
 Evaluation of disclosure controls and procedures.
  26




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##### Table of Contents



Changes in internal control over financial reporting.
 27




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##### Table of Contents



PART II. Other Information
 
 ITEM
1.
    
    Legal Proceedings
  
 ITEM
6.
    
    Exhibits
 ExhibitNumber
    
    Description15.1*
    

Letter
from KPMG LLP dated August 20, 2005 regarding unaudited interim
financial information.31.1*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) /
15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) /
15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to
Section 302 of the Sarbanes Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    Filed herewith.
    Furnished herewith. 28




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##### Table of Contents



SIGNATURES
  DOANE PET CARE COMPANYBy:
    /s/ PHILIP K. WOODLIEFPhilip K. WoodliefVice President, Finance and
Chief Financial Officer By:
    /s/ STEPHEN P. HAVALAStephen P. HavalaCorporate Controller and
Principal Accounting Officer 
 29




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description15.1*
    

Letter
from KPMG LLP dated August 20, 2005, regarding unaudited interim
financial information.31.1*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) /
15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to
Section 302 of the Sarbanes Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) /
15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to
Section 302 of the Sarbanes Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    Filed herewith.
    Furnished herewith.