##### 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 April 1, 2006
 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
    
    43-1350515(State or other jurisdiction of
    
    (IRS employerincorporation or organization)
    
    identification no.)
 210 Westwood Place South, Suite 400
Brentwood, TN 37027
 (615) 373-7774
 þ o
 o o þ
 o þ




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsUnaudited Condensed Consolidated Balance Sheets as of the end of the first quarter of 2006 (Successor) and the end of 2005 (Successor)
    
    
    1Unaudited Condensed Consolidated Statements of Operations for the first quarters of 2006 (Successor Period) and 2005 (Predecessor Period)
    
    
    2Unaudited Condensed Consolidated Statement of Stockholders Equity and Comprehensive Loss for the first quarter of 2006 (Successor Period)
    
    
    3Unaudited Condensed Consolidated Statements of Cash Flows for the first quarters of 2006 (Successor Period) and 2005 (Predecessor Period)
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Report of Independent Registered Public Accounting Firm
    
    
    17Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    18Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    26Item 4.
    
    Controls and Procedures
    
    
    27PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    28Item 1A.
    
    Risk Factors
    
    
    28Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    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 amounts)
 Successor end ofFirst quarter2006
    
    
    2005ASSETSCurrent assets:Cash and cash equivalents
    
    $
    11,274
    
    
    $
    8,221Accounts receivable, net
    
    
    93,580
    
    
    
    105,069Inventories
    
    
    73,420
    
    
    
    65,169Deferred tax assets
    
    
    5,394
    
    
    
    5,394Prepaid expenses and other current assets
    
    
    10,141
    
    
    
    8,774Total current assets
    
    
    193,809
    
    
    
    192,627Property, plant and equipment, net of accumulated depreciation of
$17,783 and $7,530, respectively
    
    
    280,219
    
    
    
    284,988Intangible assets, net of accumulated amortization of $5,488
and $2,345, respectively
    
    
    286,282
    
    
    
    287,373Goodwill
    
    
    324,950
    
    
    
    321,115Other assets
    
    
    21,562
    
    
    
    23,235Total assets
    
    $
    1,106,822
    
    
    $
    1,109,338LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    3,224
    
    
    $
    3,158Accounts payable
    
    
    77,224
    
    
    
    79,984Accrued liabilities
    
    
    54,106
    
    
    
    56,771Total current liabilities
    
    
    134,554
    
    
    
    139,913Long-term debt, excluding current maturities
    
    
    560,547
    
    
    
    561,118Deferred tax liabilities
    
    
    99,996
    
    
    
    98,760Other long-term liabilities
    
    
    10,544
    
    
    
    8,264Total liabilities
    
    
    805,641
    
    
    
    808,055Commitments and contingenciesStockholders equity:Class A common stock, $0.01 par value; 2,000 shares authorized;
1,001 shares issued and outstanding
    
    
    
    
    
    
    Class B common stock, $0.01 par value; 100 shares authorized;
71.32 shares issued and outstanding
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    303,514
    
    
    
    303,059Accumulated other comprehensive income (loss)
    
    
    3,857
    
    
    
    (992
    )Accumulated deficit
    
    
    (6,190
    )
    
    
    (784
    )Total stockholders equity
    
    
    301,181
    
    
    
    301,283Total liabilities and stockholders equity
    
    $
    1,106,822
    
    
    $
    1,109,338
 
 1




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DOANE PET CARE COMPANY AND SUBSIDIARIES
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands)
 Successor
    
    
    
    Predecessorfirst quarter
    
    
    
    first quarter2006
    
    
    
    2005Net sales
    
    $
    237,724
    
    
    
    $
    267,136Cost of goods sold
    
    
    201,015
    
    
    
    
    215,033Gross profit
    
    
    36,709
    
    
    
    
    52,103Operating expenses:Promotion and distribution
    
    
    13,277
    
    
    
    
    14,430Selling, general and administrative
    
    
    12,979
    
    
    
    
    13,119Amortization
    
    
    3,098
    
    
    
    
    1,166Other operating expense (income), net
    
    
    555
    
    
    
    
    (3,516
    )Income from operations
    
    
    6,800
    
    
    
    
    26,904Interest expense, net
    
    
    11,952
    
    
    
    
    18,646Other expense (income), net
    
    
    49
    
    
    
    
    (245
    )Income (loss) before income taxes
    
    
    (5,201
    )
    
    
    
    8,503Income tax expense
    
    
    205
    
    
    
    
    1,327Net income (loss)
    
    $
    (5,406
    )
    
    
    $
    7,176
 
 2




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DOANE PET CARE COMPANY AND SUBSIDIARIES
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
 STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS
 (In thousands, except share amounts)
 AccumulatedClass A
    
    
    Class B
    
    
    Additional
    
    
    othercommon stock
    
    
    common stock
    
    
    paid-in
    
    
    comprehensive
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    capital
    
    
    income (loss)
    
    
    deficit
    
    
    TotalSuccessor balances at the end of 2005
    
    
    1,001
    
    
    $
    
    
    
    
    71.32
    
    
    $
    
    
    
    $
    303,059
    
    
    $
    (992
    )
    
    $
    (784
    )
    
    $
    301,283Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,406
    )
    
    
    (5,406
    )Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,849
    
    
    
    
    
    
    
    4,849Total
comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (557
    )Non-cash stock-based
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    455
    
    
    
    
    
    
    
    
    
    
    
    455Successor balances at the end of
the first quarter 2006
    
    
    1,001
    
    
    $
    
    
    
    
    71.32
    
    
    $
    
    
    
    $
    303,514
    
    
    $
    3,857
    
    
    $
    (6,190
    )
    
    $
    301,181
 
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DOANE PET CARE COMPANY AND SUBSIDIARIES
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 Successor
    
    
    
    Predecessorfirst quarter
    
    
    
    first quarter2006
    
    
    
    2005Cash flows from operating activities:Net income (loss)
    
    $
    (5,406
    )
    
    
    $
    7,176Items not requiring (providing) cash:Depreciation
    
    
    10,137
    
    
    
    
    8,823Amortization
    
    
    3,098
    
    
    
    
    1,217Non-cash interest expense (income), net
    
    
    (817
    )
    
    
    
    5,479Deferred tax expense
    
    
    1,070
    
    
    
    
    1,016Equity in joint ventures
    
    
    (153
    )
    
    
    
    (302
    )Non-cash stock-based compensation expense
    
    
    455
    
    
    
    
    Changes in current assets and liabilities
    
    
    (8,238
    )
    
    
    
    (18,804
    )Net cash provided by operating activities
    
    
    146
    
    
    
    
    4,605Cash flows from investing activities:Capital expenditures
    
    
    (3,324
    )
    
    
    
    (4,531
    )Acquisition of business, including cash acquired
    
    
    3,738
    
    
    
    
    Other, net
    
    
    (512
    )
    
    
    
    (538
    )Net cash used in investing activities
    
    
    (98
    )
    
    
    
    (5,069
    )Cash flows from financing activities:Change in book overdraft
    
    
    4,228
    
    
    
    
    Repayments on long-term debt
    
    
    (790
    )
    
    
    
    (898
    )Payments for debt issuance costs
    
    
    (149
    )
    
    
    
    (22
    )Payments for transaction costs
    
    
    (292
    )
    
    
    
    Payment to minority interest holder
    
    
    (92
    )
    
    
    
    Net cash provided by (used in) financing activities
    
    
    2,905
    
    
    
    
    (920
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    100
    
    
    
    
    117Increase (decrease) in cash and cash equivalents
    
    
    3,053
    
    
    
    
    (1,267
    )Cash and cash equivalents, beginning of period
    
    
    8,221
    
    
    
    
    28,847Cash and cash equivalents, end of period
    
    $
    11,274
    
    
    
    $
    27,580
 
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DOANE PET CARE COMPANY AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (1) Basis of Presentation
     (2) Acquisitions
 Teachers Acquisition
  DIPP Acquisition
  5




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DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (3) Inventories
  Successor end ofFirst quarter2006
    
    
    2005Raw materials
    
    $
    16,421
    
    
    $
    16,098Packaging materials
    
    
    21,428
    
    
    
    20,172Finished goods
    
    
    38,146
    
    
    
    31,28075,995
    
    
    
    67,550Less: Allowances
    
    
    (2,575
    )
    
    
    (2,381
    )Total
    
    $
    73,420
    
    
    $
    65,169
 (4) Long-Term Debt
  Successor end ofFirst quarter2006
    
    
    2005Revolving credit facility
    
    $
    
    
    
    $
    U.S. dollar term loan facility
    
    
    104,475
    
    
    
    104,737Euro term loan facility
    
    
    55,533
    
    
    
    54,481Senior notes
    
    
    230,307
    
    
    
    231,493Senior subordinated notes
    
    
    150,873
    
    
    
    150,843Industrial development revenue bonds
    
    
    11,757
    
    
    
    11,754Debt of foreign subsidiaries
    
    
    10,826
    
    
    
    10,968563,771
    
    
    
    564,276Less: Current maturities
    
    
    (3,224
    )
    
    
    (3,158
    )Total
    
    $
    560,547
    
    
    $
    561,118
  6




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DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Maturities
by year2006
    
    $
    2,3862007
    
    
    3,4422008
    
    
    3,5532009
    
    
    3,6742010
    
    
    234,0762011 and thereafter
    
    
    316,640Total
    
    $
    563,771
  (5) Accrued Restructuring Costs
  First quarter2006Successor balance at the end of 2005
    
    $
    1,707Severance
    
    
    203Plant costs
    
    
    394Cash payments
    
    
    (993
    )Successor balance at the end of the first quarter 2006
    
    $
    1,311
   Years ending
    
    Payout2006
    
    $
    8712007
    
    
    440Total
    
    $
    1,311
 
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DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 (6) Income Taxes
  (7) Stock Option Plan of Doane Enterprises
    Weighted-averageWeighted-average
    
    remainingNumber of
    
    exercise
    
    contractualoptions
    
    price
    
    lifeOptions outstanding at the end of 2005
    
    
    272,668
    
    
    $
    100
    
    
    
    9.8Options outstanding at the end of the
first quarter 2006
    
    
    272,668
    
    
    
    100
    
    
    
    9.6Options exerciseable at the end of the
first quarter 2006
    
    
    
    
    
    
    
    
    
    
    
   8




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DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Predecessorfirst quarter2005Net income as reported
    
    $
    7,176Less: Non-cash stock-based compensation expense
determined based on the fair value method for
all awards
    
    
    (1
    )Pro forma net income
    
    $
    7,175
 (8) Benefit Plans
    Pension benefits
    
    
    Other postretirement benefitsSuccessor
    
    
    
    Predecessor
    
    
    Successor
    
    
    
    Predecessorfirst quarter
    
    
    
    first quarter
    
    
    first quarter
    
    
    
    first quarter2006
    
    
    
    2005
    
    
    2006
    
    
    
    2005Service cost
    
    $
    37
    
    
    
    $
    9
    
    
    $
    11
    
    
    
    $
    3Interest cost
    
    
    304
    
    
    
    
    253
    
    
    
    50
    
    
    
    
    58Expected return on plan assets
    
    
    (330
    )
    
    
    
    (345
    )
    
    
    
    
    
    
    
    Recognition of actuarial loss
    
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    
    35Amortization
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    (61
    )Net periodic cost
    
    $
    11
    
    
    
    $
    89
    
    
    $
    61
    
    
    
    $
    35
 
 9




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




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DOANE PET CARE COMPANY AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   11




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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
 Successor end of first quarter 2006IntercompanyGuarantor
    
    
    Non-guarantor
    
    
    eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    59
    
    
    $
    11,215
    
    
    $
    
    
    
    $
    11,274Accounts receivable, net
    
    
    40,326
    
    
    
    53,597
    
    
    
    (343
    )
    
    
    93,580Inventories
    
    
    42,906
    
    
    
    30,514
    
    
    
    
    
    
    
    73,420Deferred tax assets
    
    
    5,394
    
    
    
    
    
    
    
    
    
    
    
    5,394Prepaid expenses and other current assets
    
    
    7,549
    
    
    
    2,592
    
    
    
    
    
    
    
    10,141Total current assets
    
    
    96,234
    
    
    
    97,918
    
    
    
    (343
    )
    
    
    193,809Property, plant and equipment, net
    
    
    182,913
    
    
    
    97,306
    
    
    
    
    
    
    
    280,219Intangible assets, net
    
    
    220,364
    
    
    
    65,918
    
    
    
    
    
    
    
    286,282Goodwill
    
    
    224,234
    
    
    
    100,716
    
    
    
    
    
    
    
    324,950Other assets
    
    
    311,438
    
    
    
    5,979
    
    
    
    (295,855
    )
    
    
    21,562Total assets
    
    $
    1,035,183
    
    
    $
    367,837
    
    
    $
    (296,198
    )
    
    $
    1,106,822LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    1,608
    
    
    $
    1,616
    
    
    $
    
    
    
    $
    3,224Accounts payable
    
    
    43,052
    
    
    
    34,515
    
    
    
    (343
    )
    
    
    77,224Accrued liabilities
    
    
    38,933
    
    
    
    15,173
    
    
    
    
    
    
    
    54,106Total current liabilities
    
    
    83,593
    
    
    
    51,304
    
    
    
    (343
    )
    
    
    134,554Long-term debt, excluding current maturities
    
    
    551,337
    
    
    
    209,613
    
    
    
    (200,403
    )
    
    
    560,547Deferred tax liabilities
    
    
    92,234
    
    
    
    7,762
    
    
    
    
    
    
    
    99,996Other long-term liabilities
    
    
    9,481
    
    
    
    1,063
    
    
    
    
    
    
    
    10,544Total liabilities
    
    
    736,645
    
    
    
    269,742
    
    
    
    (200,746
    )
    
    
    805,641Commitments and contingenciesStockholders equity:Class A common stock, $0.01 par value; 2,000
shares authorized; 1,001 shares issued
and outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Class B common stock, $0.01 par value; 100
shares authorized; 71.32 shares issued
and outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    303,514
    
    
    
    95,712
    
    
    
    (95,712
    )
    
    
    303,514Accumulated other comprehensive income (loss)
    
    
    (809
    )
    
    
    4,666
    
    
    
    
    
    
    
    3,857Accumulated deficit
    
    
    (4,167
    )
    
    
    (2,283
    )
    
    
    260
    
    
    
    (6,190
    )Total stockholders equity
    
    
    298,538
    
    
    
    98,095
    
    
    
    (95,452
    )
    
    
    301,181Total liabilities and stockholders equity
    
    $
    1,035,183
    
    
    $
    367,837
    
    
    $
    (296,198
    )
    
    $
    1,106,822
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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
 Successor end of 2005IntercompanyGuarantor
    
    
    Non-guarantor
    
    
    eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    479
    
    
    $
    7,742
    
    
    $
    
    
    
    $
    8,221Accounts receivable, net
    
    
    48,238
    
    
    
    56,831
    
    
    
    
    
    
    
    105,069Inventories
    
    
    36,913
    
    
    
    28,256
    
    
    
    
    
    
    
    65,169Deferred tax assets
    
    
    5,394
    
    
    
    
    
    
    
    
    
    
    
    5,394Prepaid expenses and other current assets
    
    
    7,586
    
    
    
    1,188
    
    
    
    
    
    
    
    8,774Total current assets
    
    
    98,610
    
    
    
    94,017
    
    
    
    
    
    
    
    192,627Property, plant and equipment, net
    
    
    187,048
    
    
    
    97,940
    
    
    
    
    
    
    
    284,988Intangible assets, net
    
    
    221,812
    
    
    
    65,561
    
    
    
    
    
    
    
    287,373Goodwill
    
    
    222,872
    
    
    
    98,243
    
    
    
    
    
    
    
    321,115Other assets
    
    
    311,009
    
    
    
    7,941
    
    
    
    (295,715
    )
    
    
    23,235Total assets
    
    $
    1,041,351
    
    
    $
    363,702
    
    
    $
    (295,715
    )
    
    $
    1,109,338LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current maturities of long-term debt
    
    $
    1,596
    
    
    $
    1,562
    
    
    $
    
    
    
    $
    3,158Accounts payable
    
    
    41,139
    
    
    
    38,845
    
    
    
    
    
    
    
    79,984Accrued liabilities
    
    
    44,844
    
    
    
    11,927
    
    
    
    
    
    
    
    56,771Total current liabilities
    
    
    87,579
    
    
    
    52,334
    
    
    
    
    
    
    
    139,913Long-term debt, excluding current maturities
    
    
    551,712
    
    
    
    209,409
    
    
    
    (200,003
    )
    
    
    561,118Deferred tax liabilities
    
    
    90,956
    
    
    
    7,804
    
    
    
    
    
    
    
    98,760Other long-term liabilities
    
    
    8,264
    
    
    
    
    
    
    
    
    
    
    
    8,264Total liabilities
    
    
    738,511
    
    
    
    269,547
    
    
    
    (200,003
    )
    
    
    808,055Commitments and contingenciesStockholders equity:Class A common stock, $0.01 par value; 2,000
shares authorized; 1,001 shares issued
and outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Class B common stock, $0.01 par value; 100
shares authorized; 71.32 shares issued
and outstanding
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additional paid-in-capital
    
    
    303,059
    
    
    
    95,712
    
    
    
    (95,712
    )
    
    
    303,059Accumulated other comprehensive income (loss)
    
    
    382
    
    
    
    (1,374
    )
    
    
    
    
    
    
    (992
    )Accumulated deficit
    
    
    (601
    )
    
    
    (183
    )
    
    
    
    
    
    
    (784
    )Total stockholders equity
    
    
    302,840
    
    
    
    94,155
    
    
    
    (95,712
    )
    
    
    301,283Total liabilities and stockholders equity
    
    $
    1,041,351
    
    
    $
    363,702
    
    
    $
    (295,715
    )
    
    $
    1,109,338
 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
 Successor first quarter 2006IntercompanyGuarantor
    
    
    Non-guarantor
    
    
    eliminations
    
    
    ConsolidatedNet sales
    
    $
    167,381
    
    
    $
    70,730
    
    
    $
    (387
    )
    
    $
    237,724Cost of goods sold
    
    
    143,220
    
    
    
    58,182
    
    
    
    (387
    )
    
    
    201,015Gross profit
    
    
    24,161
    
    
    
    12,548
    
    
    
    
    
    
    
    36,709Operating expenses:Promotion and distribution
    
    
    6,540
    
    
    
    6,737
    
    
    
    
    
    
    
    13,277Selling, general and administrative
    
    
    8,564
    
    
    
    4,415
    
    
    
    
    
    
    
    12,979Amortization
    
    
    1,969
    
    
    
    1,129
    
    
    
    
    
    
    
    3,098Other operating expense, net
    
    
    269
    
    
    
    286
    
    
    
    
    
    
    
    555Income (loss) from operations
    
    
    6,819
    
    
    
    (19
    )
    
    
    
    
    
    
    6,800Interest expense, net
    
    
    9,520
    
    
    
    2,432
    
    
    
    
    
    
    
    11,952Other
expense (income), net
    
    
    (185
    )
    
    
    234
    
    
    
    
    
    
    
    49Loss before income taxes
    
    
    (2,516
    )
    
    
    (2,685
    )
    
    
    
    
    
    
    (5,201
    )Income tax expense (income)
    
    
    1,050
    
    
    
    (845
    )
    
    
    
    
    
    
    205Net loss
    
    $
    (3,566
    )
    
    $
    (1,840
    )
    
    $
    
    
    
    $
    (5,406
    )
 Predecessor first quarter 2005Guarantor
    
    
    Non-guarantor
    
    
    ConsolidatedNet sales
    
    $
    194,621
    
    
    $
    72,515
    
    
    $
    267,136Cost of goods sold
    
    
    157,887
    
    
    
    57,146
    
    
    
    215,033Gross profit
    
    
    36,734
    
    
    
    15,369
    
    
    
    52,103Operating expenses:Promotion and distribution
    
    
    6,557
    
    
    
    7,873
    
    
    
    14,430Selling, general and administrative
    
    
    8,867
    
    
    
    4,252
    
    
    
    13,119Amortization
    
    
    949
    
    
    
    217
    
    
    
    1,166Other operating income, net
    
    
    (3,255
    )
    
    
    (261
    )
    
    
    (3,516
    )Income from operations
    
    
    23,616
    
    
    
    3,288
    
    
    
    26,904Interest expense, net
    
    
    11,988
    
    
    
    6,658
    
    
    
    18,646Other
expense (income), net
    
    
    (338
    )
    
    
    93
    
    
    
    (245
    )Income (loss) before income taxes
    
    
    11,966
    
    
    
    (3,463
    )
    
    
    8,503Income tax expense
    
    
    1,049
    
    
    
    278
    
    
    
    1,327Net income (loss)
    
    $
    10,917
    
    
    $
    (3,741
    )
    
    $
    7,176
 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
 Successor first quarter 2006Guarantor
    
    
    Non-guarantor
    
    
    ConsolidatedCash flows from operating activities:Net loss
    
    $
    (3,566
    )
    
    $
    (1,840
    )
    
    $
    (5,406
    )Items not requiring (providing) cash:Depreciation and amortization
    
    
    8,361
    
    
    
    4,874
    
    
    
    13,235Deferred tax expense
    
    
    1,050
    
    
    
    20
    
    
    
    1,070Other non-cash charges (income), net
    
    
    (3,081
    )
    
    
    2,566
    
    
    
    (515
    )Changes in current assets and liabilities
    
    
    (6,244
    )
    
    
    (1,994
    )
    
    
    (8,238
    )Net cash
provided by (used in) operating activities
    
    
    (3,480
    )
    
    
    3,626
    
    
    
    146Cash flows from investing activities:Capital expenditures
    
    
    (2,277
    )
    
    
    (1,047
    )
    
    
    (3,324
    )Acquisition of business, including cash acquired
    
    
    (276
    )
    
    
    4,014
    
    
    
    3,738Other, net
    
    
    1,951
    
    
    
    (2,463
    )
    
    
    (512
    )Net cash
provided by (used in) investing activities
    
    
    (602
    )
    
    
    504
    
    
    
    (98
    )Cash flows from financing activities:Change in book overdraft
    
    
    4,228
    
    
    
    
    
    
    
    4,228Repayments on long-term debt
    
    
    (401
    )
    
    
    (389
    )
    
    
    (790
    )Other
    
    
    (165
    )
    
    
    (368
    )
    
    
    (533
    )Net cash
provided by (used in) financing activities
    
    
    3,662
    
    
    
    (757
    )
    
    
    2,905Effect of exchange rate changes on cash
and cash equivalents
    
    
    
    
    
    
    100
    
    
    
    100Increase (decrease) in cash and cash equivalents
    
    
    (420
    )
    
    
    3,473
    
    
    
    3,053Cash and cash equivalents, beginning of period
    
    
    479
    
    
    
    7,742
    
    
    
    8,221Cash and cash equivalents, end of period
    
    $
    59
    
    
    $
    11,215
    
    
    $
    11,274
 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
 Predecessor first quarter 2005Guarantor
    
    
    Non-guarantor
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    10,917
    
    
    $
    (3,741
    )
    
    $
    7,176Items not requiring (providing) cash:Depreciation and amortization
    
    
    5,730
    
    
    
    4,310
    
    
    
    10,040Deferred tax expense (benefit)
    
    
    1,049
    
    
    
    (33
    )
    
    
    1,016Other non-cash charges, net
    
    
    2,633
    
    
    
    2,544
    
    
    
    5,177Changes in current assets and liabilities
    
    
    (17,309
    )
    
    
    (1,495
    )
    
    
    (18,804
    )Net cash provided by operating activities
    
    
    3,020
    
    
    
    1,585
    
    
    
    4,605Cash flows from investing activities:Capital expenditures
    
    
    (2,511
    )
    
    
    (2,020
    )
    
    
    (4,531
    )Other, net
    
    
    (538
    )
    
    
    
    
    
    
    (538
    )Net cash used in investing activities
    
    
    (3,049
    )
    
    
    (2,020
    )
    
    
    (5,069
    )Cash flows from financing activities:Repayments on long-term debt
    
    
    (488
    )
    
    
    (410
    )
    
    
    (898
    )Payments for debt issuance costs
    
    
    (22
    )
    
    
    
    
    
    
    (22
    )Net cash used in financing activities
    
    
    (510
    )
    
    
    (410
    )
    
    
    (920
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    117
    
    
    
    117Decrease in cash and cash equivalents
    
    
    (539
    )
    
    
    (728
    )
    
    
    (1,267
    )Cash and cash equivalents, beginning of period
    
    
    24,963
    
    
    
    3,884
    
    
    
    28,847Cash and cash equivalents, end of period
    
    $
    24,424
    
    
    $
    3,156
    
    
    $
    27,580
 16




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
        
 17




---



##### Table of Contents



ITEM 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    Recent Developments
   Forward-Looking Statements
  18




---



##### Table of Contents




    
    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, our market risk relating to
commodity, oil and natural gas prices, interest rates and foreign currency exchange rates;
    
    changes in demand for our products;
    
    future capital expenditures and our ability to finance these capital expenditures;
    
    our ability to make required interest or principal payments on our senior
credit facility and our other indebtedness and to comply with the financial covenants under
our debt agreements;
    
    our business strategies and other plans and objectives for future operations;
    
    general economic and business conditions and changes in market trends;
    
    business opportunities that may be presented to and pursued by us from time to time;
    
    risks related to our international operations;
    
    risks related to product liability claims and product recalls;
    
    the outcome of any legal proceedings to which we or any of our subsidiaries may be a party;
    
    consummation of the acquisition of Doane Enterprises by Mars, and related
transactions, in accordance with the terms of the Merger Agreement
and any other relevant agreements; and
    
    the impact of existing or new accounting pronouncements.
  First Quarter Fiscal 2006 in Review
   19




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##### Table of Contents



Results of Operations
      Statement of operations data.
 20




---



##### Table of Contents



Successor first quarter 2006
    
    
    Predecessor first quarter 2005Net sales
    
    $
    237,724
    
    
    
    100.0
    %
    
    $
    267,136
    
    
    
    100.0
    %Cost of goods sold:Commodities
    
    
    110,613
    
    
    
    46.5
    
    
    
    123,812
    
    
    
    46.4Other
    
    
    90,402
    
    
    
    38.0
    
    
    
    91,221
    
    
    
    34.1Total cost of goods sold
    
    
    201,015
    
    
    
    84.5
    
    
    
    215,033
    
    
    
    80.5Gross profit
    
    
    36,709
    
    
    
    15.5
    
    
    
    52,103
    
    
    
    19.5Operating expenses:Promotion and distribution
    
    
    13,277
    
    
    
    5.6
    
    
    
    14,430
    
    
    
    5.4Selling, general and administrative
    
    
    12,979
    
    
    
    5.5
    
    
    
    13,119
    
    
    
    4.9Amortization
    
    
    3,098
    
    
    
    1.3
    
    
    
    1,166
    
    
    
    0.4Other
operating expense (income), net
    
    
    555
    
    
    
    0.2
    
    
    
    (3,516
    )
    
    
    (1.3
    )Income from operations
    
    
    6,800
    
    
    
    2.9
    
    
    
    26,904
    
    
    
    10.1Interest expense, net
    
    
    11,952
    
    
    
    5.1
    
    
    
    18,646
    
    
    
    7.0Other
expense (income), net
    
    
    49
    
    
    
    
    
    
    
    (245
    )
    
    
    (0.1
    )Income (loss) before income taxes
    
    
    (5,201
    )
    
    
    (2.2
    )
    
    
    8,503
    
    
    
    3.2Income tax expense
    
    
    205
    
    
    
    0.1
    
    
    
    1,327
    
    
    
    0.5Net income (loss)
    
    $
    (5,406
    )
    
    
    (2.3
    )%
    
    $
    7,176
    
    
    
    2.7
    %
 First Quarter of Fiscal 2006 (Successor Period) Compared to First Quarter of Fiscal 2005
(Predecessor Period)
 Net sales.
 Gross profit.
 Promotion and distribution
 Selling, general and administrative expenses
 21




---



##### Table of Contents



Amortization.
 Other operating expenses, net.
 Interest expense, net. 3 4
 Income tax expense.
 Liquidity and Capital Resources
 General
  Cash Flows
    Liquidity
   22




---



##### Table of Contents



Senior Credit Facility
    23




---



##### Table of Contents



Long-Term Debt Maturities
  Maturities
by year2006
    
    $
    2,3862007
    
    
    3,4422008
    
    
    3,5532009
    
    
    3,6742010
    
    
    234,0762011 and thereafter
    
    
    316,640Total
    
    $
    563,771
 Commitments and Contingencies
    Off-Balance Sheet Arrangements
  Inflation and Changes in Prices
   Critical Accounting Policies
 Accounts receivable allowances.
 24




---



##### Table of Contents



Inventories allowances
 Deferred tax assets
  Goodwill and intangible assets
   25




---



##### Table of Contents



ITEM 3  Quantitative and Qualitative Disclosures About Market Risk
  Commodity price risk
    Interest rate risk
  26




---



##### Table of Contents



Foreign currency exchange risk
  
 ITEM 4  Controls and Procedures
 Evaluation of disclosure controls and procedures.
  Changes in internal controls over financial reporting.
 27




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 ITEM 1  Legal Proceedings
  
 ITEM 1A  Risk Factors
 We
have commenced tender offers and consent solicitations for our senior
notes and senior subordinated notes, and, if the proposed amendments
to the indentures governing our senior notes and senior subordinated
notes become operative, holders of our senior notes and senior
subordinated notes who do not tender their notes will no longer be
entitled to the benefits of the provisions contained in the
applicable indenture as currently in effect.
  
 ITEM 4
 Submission of Matters to a Vote of Security Holders
  
 ITEM 6  Exhibits
 ExhibitNumber
    
    Description15.1*
    
    Letter from KPMG LLP dated
May 11, 2006, regarding unaudited interim
financial information.31.1*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) /
15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) /
15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to
Section 302 of the Sarbanes Oxley Act of 2002.32.1**
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2**
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.**
    
    Not considered to be filed for the purposes of Section 18 of the Securities Exchange Act of
1934 or
otherwise subject to the liabilities of that section. 28




---



##### Table of Contents



SIGNATURES
  DOANE PET CARE COMPANYBy:
    

/s/ PHILIP K. WOODLIEFPhilip K. WoodliefVice President, Finance andChief Financial OfficerBy:
    
/s/ STEPHEN P. HAVALAStephen P. HavalaCorporate Controller andPrincipal Accounting Officer
  29




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description15.1*
    
    Letter from KPMG LLP dated
May 11, 2006, regarding unaudited interim
financial information.31.1*
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) /
15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) /
15(d)-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1**
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2**

    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.**
    
    Not considered to be filed for the purposes of Section 18 of the Securities Exchange Act of
1934 or
otherwise subject to the liabilities of that section. 30