UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

(Mark One)

For the quarterly period ended April 2, 2005

OR

For the transition period from            to

Commission file number 0-27818

Doane Pet Care Company

     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 þ No o

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

     As of May 10, 2005, the registrant had outstanding 1,000 shares of common stock, all of which were held by its parent, Doane Pet Care Enterprises, Inc.

TABLE OF CONTENTS

PART 1. Financial Information

ITEM 1. Financial Statements

DOANE PET CARE COMPANY AND SUBSIDIARIES

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

1

DOANE PET CARE COMPANY AND SUBSIDIARIES

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

2

DOANE PET CARE COMPANY AND SUBSIDIARIES

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

3

DOANE PET CARE COMPANY AND SUBSIDIARIES

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

4

DOANE PET CARE COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

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

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

     In conformity with accounting principles generally accepted in the United States, preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements; and therefore, actual results could ultimately differ from those estimates.

     The Company’s fiscal year ends on the Saturday nearest to the end of December. Each quarter also ends on a Saturday with the first quarters of fiscal 2005 and 2004 ending on April 2, 2005 and April 3, 2004, respectively.

(2) Recent Accounting Pronouncements

     In December 2004, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payment, or SFAS 123 – Revised. SFAS 123 – Revised replaces SFAS 123 and supersedes SFAS No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure – An Amendment of FASB Statement No. 123 and APB Opinion No. 25. SFAS 123 – Revised eliminates the alternative to use the intrinsic value method of accounting under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, or APB 25, previously allowed under SFAS 123 and requires entities to recognize the cost of services received in exchange for awards of equity instruments, or compensation cost, based on the fair value of those awards at the grant date. In April 2005, the Securities and Exchange Commission announced that it was delaying the effective date of the revised accounting standard. SFAS 123 – Revised is effective as of the beginning of our next fiscal year, or January 1, 2006, for all awards granted after the effective date and for all awards modified, repurchased or cancelled after that date. In the opinion of management, the Company meets the nonpublic entity criteria under SFAS 123 – Revised. Accordingly, upon adoption, the grant-date fair value of awards of equity share options and similar instruments is to be calculated using the historical volatility of an appropriate industry sector index rather than expected volatility of the Company’s share price. The Company will evaluate the impact on its results of operations and financial position upon the adoption of SFAS 123 – Revised.

(3) Inventories

     A summary of inventories follows (in thousands):

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DOANE PET CARE COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(4) Long-Term Debt and Liquidity

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

     As of the end of the first quarter of fiscal 2005, the Company’s senior credit facility provided for total commitments of $230.0 million, consisting of a $195.0 million Term Loan Facility and a $35.0 million Revolving Credit Facility, with a $20.0 million sub-limit for issuance of stand-by letters of credit. The Term Loan Facility bears interest, at the option of the Company, of adjusted LIBOR plus 4.00%, or ABR, as defined in the senior credit facility agreement, plus 3.00%. The Revolving Credit Facility bears interest, at the option of the Company, of adjusted LIBOR plus 4.50%, or ABR plus 3.50%. As of the end of the first quarter of fiscal 2005, the Term Loan Facility bore interest at 6.70%.

     As of the end of the first quarter of fiscal 2005, the Company had no borrowings outstanding under its Revolving Credit Facility and $4.8 million of stand-by letters of credit outstanding, resulting in $30.2 million of availability under its Revolving Credit Facility. Availability of funds under the senior credit facility is subject to certain customary terms and conditions.

     As of the end of the first quarter of fiscal 2005, the principal amounts due under the Company’s long-term debt and the respective final maturity dates were as follows (in thousands):

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

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DOANE PET CARE COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Company’s senior notes and senior subordinated notes. The Company was in compliance with the financial covenants in its senior credit facility as of the end of the first quarter of fiscal 2005.

(5)	Accruals for Restructuring Costs

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

     During the first quarter of fiscal 2005, the Company made payments of $0.2 million for severance costs related to the European restructuring plan which was completed in fiscal 2004.

     As of the end of the first quarter of fiscal 2005, the future expected payout of the Company’s accrued restructuring costs, which consist primarily of severance associated with European restructuring, follows (in thousands):

(6) Comprehensive Loss

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

(7) Stock Option Plan of Parent

     The Company and its Parent, Doane Pet Care Enterprises, Inc., have elected to continue to follow APB 25 to account for fixed stock awards granted to employees. However, if the Company adopted SFAS No. 123, Accounting for Stock Based Compensation, or SFAS 123, to account for fixed stock awards granted to employees, the Company’s net income (loss) for the first quarter of fiscal 2005 and 2004 would have been adjusted as follows (in thousands):

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DOANE PET CARE COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

     At the end of the first quarter of fiscal 2005 and 2004, Parent had total options outstanding of 3,718,398 and 4,230,350, respectively, under its stock option plans. There were no new stock options granted during the first quarter of fiscal 2005.

(8) Benefit Plans

Pension and Postretirement Plans

     The Company has a defined benefit, non-contributory inactive pension plan which was frozen on May 28, 1998. As a result, future benefits no longer accumulate and the Company no longer incurs service cost related to the plan. The Company’s funding policy for this inactive plan is to make the minimum annual contribution required by applicable regulations. The Company’s only active pension plan covers 42 union employees at one of its facilities. The Company also has a postretirement healthcare plan that provides medical coverage for eligible retirees and their dependents. The Company pays benefits under this plan when due and does not fund its plan obligations as they accrue; therefore, there are no plan assets. The information below has been determined based on the three months ending March 31, 2005 and 2004, respectively.

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

(9) Commitments and Contingencies

     The Company is a party, in the ordinary course of business, to claims and litigation. In management’s opinion, the resolution of such matters is not expected to have a material impact on the future financial condition, results of operations or cash flows of the Company.

(10) Financial Information Related to Guarantor Subsidiaries

     The Company’s guarantor subsidiaries are wholly-owned domestic subsidiaries who have jointly and severally guaranteed on a full and unconditional basis all of the Company’s senior notes and senior subordinated notes. The guarantor subsidiaries are minor subsidiaries of the Company’s domestic operations that have no material operations of their own; and therefore, no separate information for these subsidiaries is presented. The financial information presented below in the guarantor columns is substantially that of the Company, excluding its European operations.

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DOANE PET CARE COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The financial information presented below in the non-guarantor columns consist of the Company’s non-guarantor subsidiaries, which are its wholly-owned European subsidiaries. See Note 8, Long-Term Debt and Liquidity, in the Company’s 2004 10-K.

     Unaudited condensed consolidated financial information follows (in thousands, except share and par value amounts):

9

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

10

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

11

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

12

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

13

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

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors
Doane Pet Care Company:

We have reviewed the accompanying condensed consolidated balance sheet of Doane Pet Care Company and subsidiaries as of April 2, 2005, the related condensed consolidated statements of operations for the three-month periods ended April 2, 2005 and April 3, 2004, the condensed consolidated statement of stockholder’s equity and comprehensive loss as of and for the three-month period ended April 2, 2005 and the condensed consolidated statements of cash flows for the three-month periods ended April 2, 2005 and April 3, 2004. These condensed consolidated financial statements are the responsibility of the Company’s management.

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

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

We have previously audited, in accordance with standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Doane Pet Care Company and subsidiaries as of January 1, 2005, and the related consolidated statements of operations, stockholder’s equity and comprehensive income (loss) and cash flows for the year then ended (not presented herein); and in our report dated March 30, 2005, we expressed an unqualified opinion on those consolidated financial statements. Our report refers to the restatement of previously issued fiscal 2003 consolidated financial statements and a change in accounting for senior preferred stock. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of January 1, 2005 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Nashville, Tennessee
May 10, 2005

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

     The reader is encouraged to refer to the accompanying unaudited condensed consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q and our audited consolidated financial statements and related notes in our annual report on Form 10-K for the fiscal year ended January 1, 2005, or the 2004 10-K.

Forward-Looking Statements

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

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

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

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

First Quarter Fiscal 2005 in Review

     In the first quarter of fiscal 2005, net sales decreased 1.4% to $267.1 million from $270.9 million in the first quarter of fiscal 2004. Excluding the impact of foreign currency exchange rate fluctuations, net sales decreased 2.6% from the first quarter of fiscal 2004. This decrease in our net sales was primarily due to our new domestic pricing and cost-sharing strategy, in which we passed through a portion of the period-over-period commodity cost decreases to our cost-sharing customers. Our gross profit increased $11.3 million as a result of lower global commodity costs, partially offset by the impact of our domestic pricing strategy discussed above. We had net income of $7.2 million, which was also favorably impacted by litigation settlements of $3.2 million.

Results of Operations

     We manufacture pet food, primarily private label, in the United States and Europe using 28 combined manufacturing and distribution facilities. We manufacture pet food products primarily for dogs and cats, including dry, wet, semi-moist, soft dry, soft treats and dog biscuits. We sell our products to various types of retailers.

     Historically, approximately 75% of our cost of goods sold has been comprised of raw material and packaging costs with the remainder primarily comprised of salaries, wages and related fringe benefits, utilities and depreciation. Our operating expenses generally consist of promotion and distribution expenses, selling, general and administrative expenses, amortization and other operating expenses. Promotion and distribution expenses are primarily comprised of promotions, freight, brokerage fees and warehousing expenses. Selling, general and administrative expenses primarily include salaries and related fringe benefits, depreciation and other corporate overhead costs, which typically do not increase proportionately with increases in net sales and sales volumes.

     We have foreign currency exposure relating to our business transactions in currencies other than the U.S. dollar. In addition, the timing and extent of foreign currency exchange rate fluctuations may have a material impact on our operations due to the translations of the financial statements of our foreign subsidiaries. Although our functional currencies other than the U.S. dollar include the Euro, Danish Krona and British Pound Sterling, the Euro to U.S. dollar exchange rate approximates the impact of movements in our individual functional foreign currency exchange rates. For the purpose of analyzing our results of operations, the average Euro to U.S. dollar exchange rates for the first quarter of fiscal 2005 and 2004 were approximately 1.31 and 1.25, respectively. For the purpose of analyzing our financial position, the Euro to U.S. dollar exchange rates as of the end of the first quarter of fiscal 2005 and the end of fiscal 2004 were approximately 1.30 and 1.36, respectively.

     Our fiscal year ends on the Saturday nearest to the end of December; and therefore, fiscal 2004 ended on January 1, 2005. Each quarter also ends on a Saturday with the first quarter of fiscal 2005 and 2004 ending on April 2, 2005 and April 3, 2004, respectively.

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

First Quarter of Fiscal 2005 Compared to First Quarter of Fiscal 2004

     Net sales. Net sales in the first quarter of fiscal 2005 decreased 1.4%, or $3.8 million, to $267.1 million from $270.9 million in the first quarter of fiscal 2004. Excluding the impact of foreign currency exchange fluctuations in the first quarter of fiscal 2005, net sales decreased 2.6%, or $7.1 million, from the first quarter of fiscal 2004. The decrease in our net sales was primarily due to our new domestic pricing and cost-sharing strategy in which we passed through a portion of the lower U.S. commodity costs to our cost-sharing customers.

     Gross profit. Gross profit in the first quarter of fiscal 2005 increased 27.6%, or $11.3 million, to $52.1 million from $40.8 million in the first quarter of fiscal 2004. Excluding the impact of foreign currency exchange fluctuations in the first quarter of fiscal 2005, gross profit increased 25.9%, or $10.6 million, from the first quarter of fiscal 2004. This increase was primarily due to lower global commodity costs, which decreased as a percentage of net sales to 46.4% in the first quarter of fiscal 2005 from 50.3% in the first quarter of fiscal 2004, partially offset by the impact of our new domestic pricing and cost-sharing strategy. Other cost of goods sold was consistent in the first quarter of fiscal 2005 compared to the first quarter of fiscal 2004 as a percentage of net sales.

     Promotion and distribution. Promotion and distribution expenses for the first quarter of fiscal 2005 increased 1.4%, or $0.2 million, to $14.4 million from $14.2 million in the first quarter of fiscal 2004. Excluding the impact of foreign currency exchange fluctuations in the first quarter of fiscal 2005, promotion and distribution expenses decreased 1.1%, or $0.2 million, from the first quarter of fiscal 2004.

     Selling, general and administrative. Selling, general and administrative expenses in the first quarter of fiscal 2005 decreased 0.5%, or $0.1 million, to $13.1 million from $13.2 million in the first quarter of fiscal

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2004. Excluding the impact of foreign currency exchange fluctuations in the first quarter of fiscal 2005, selling, general and administrative expenses decreased 2.0%, or $0.3 million, from the first quarter of fiscal 2004, primarily due to the cost reductions associated with our European restructuring plan completed in fiscal 2004.

     Other operating (income) expense. Other operating income of $3.5 million in the first quarter of fiscal 2005 included $3.2 million of favorable litigation settlements. Other operating expenses of $1.2 million in the first quarter of fiscal 2004 consisted of severance costs of $1.6 million related to our European restructuring plan and asset impairments of $0.4 million related to the closure of a distribution center, partially offset by $0.8 million of income related to an arbitration award.

     Interest expense, net. Interest expense, net of interest income, in the first quarter of fiscal 2005 increased 3.7%, or $0.6 million, to $18.6 million from $18.0 million in the first quarter of fiscal 2004. The increase was primarily due to increased dividends on our senior preferred stock.

     Income tax expense. We recognized income tax expense of $1.3 million in the first quarter of fiscal 2005 compared to $1.2 million in the first quarter of fiscal 2004. The overall effective tax rate for both periods differs from the expected combined federal and state rate of 38.9% due to the valuation allowances against our deferred tax assets that are not recoverable through known reversals of deferred tax liabilities.

Liquidity and Capital Resources

     We have historically funded our operations, capital expenditures and working capital requirements with cash flows from operations, bank borrowings and the issuance of other indebtedness.

Cash and Cash Flows

     Net cash provided by our operating activities was $4.6 million in the first quarter of fiscal 2005 compared to net cash used in operating activities of $2.0 million in the first quarter of fiscal 2004. The increase was due to higher net income partially offset by the timing of payments on certain accrued expenses.

     Net cash used in our investing activities was $5.1 million in the first quarter of fiscal 2005 compared to $2.6 million in the first quarter of fiscal 2004. Capital expenditures in the first quarter of fiscal 2005 were $4.5 million compared to $2.1 million in the first quarter of fiscal 2004.

     Net cash used in our financing activities was $0.9 million in the first quarter of fiscal 2005 compared to $4.5 million in the first quarter of fiscal 2004. In the first quarter of fiscal 2005, we made scheduled payments on our current senior credit facility and debt of our foreign subsidiaries. In the first quarter of fiscal 2004, we made scheduled principal payments on our previous senior credit facility and paid transaction fees and expenses associated with a first quarter amendment to our previous senior credit facility.

Debt

     We are highly leveraged and have significant cash requirements for debt service relating to our senior credit facility, senior notes, senior subordinated notes, industrial development revenue bonds and foreign debt. Our ability to borrow is limited by our senior credit facility, including compliance with the financial covenants therein, and the limitations on the incurrence of additional indebtedness in the indentures governing our senior notes and senior subordinated notes.

     Our senior credit facility provides for total commitments of $230.0 million, consisting of a $195.0 million term loan facility, of which $1.0 million has been repaid as of the end of the first quarter of fiscal 2005, and a $35.0 million revolving credit facility, with a $20.0 million sub-limit for issuance of stand-by letters of credit. The term loan facility bears interest, at the option of the Company, of adjusted LIBOR plus 4.00%, or ABR, as defined in the senior credit facility agreement, plus 3.00%. The revolving credit facility bears interest, at the option of the Company, of adjusted LIBOR plus 4.50%, or ABR plus 3.50%.

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As of the end of the first quarter of fiscal 2005, the term loan facility bore interest at 6.70%. We are required to make annual principal payments on the senior credit facility calculated as 1% of $195.0 million, payable in equal quarterly installments of each year. The loans under our senior credit facility may be prepaid and commitments may be reduced; however, optional prepayments of the term loan facility may not be reborrowed.

Liquidity

     As of the end of the first quarter of fiscal 2005, our principal sources of liquidity consisted of working capital of $69.9 million, including cash of $27.6 million, and $30.2 million of availability under our revolving credit facility.

     We believe that cash flows generated from our business, together with available cash balances and future borrowings, will be sufficient in the near term to enable us to make interest and required principal payments on our debt and to provide us with the necessary liquidity for operational and capital requirements in our current operating environment. However, we have significant debt and redemption obligations that mature in 2007. See the section on annual maturities of long-term debt below. We may be required to refinance all or a portion of the principal amount of our outstanding obligations, including those that mature in 2007, on or prior to maturity or a mandatory redemption date. In addition, we may not have sufficient capital available to us for any future acquisitions, joint ventures or similar transactions. We believe that offerings of additional debt securities are possible, or other sources of capital are available, if the need arises, although any such capital may not be available on terms acceptable to us or at all.

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

     We believe the capital expenditures permitted under our senior credit facility are sufficient to provide us with the necessary flexibility to spend required maintenance capital and at the same time fund any planned expansion, cost reduction projects and customer requirements for fiscal 2005. We anticipate that our capital expenditures for fiscal 2005 will approximate $25 million to $30 million, with approximately $10 million to $12 million required to maintain our current business. Our capital expenditures were $4.5 million in the first quarter of fiscal 2005.

Annual Maturities of Long-Term Debt

     A summary of the maturities by fiscal year of our long-term debt as of the end of the first quarter of fiscal 2005 follows (in thousands):

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Commitments and Contingencies

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

Inflation and Changes in Prices

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

     In the event of any increases in raw materials, packaging and natural gas costs, we may be required to seek increased selling prices for our products to avoid margin deterioration. We cannot provide any assurances as to the timing or extent of our ability to implement future selling price increases in the event of increased raw materials, packaging or natural gas costs or whether any selling price increases implemented by us may affect future sales volumes to our customers.

Seasonality

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

Recently Issued Accounting Pronouncements

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

Critical Accounting Policies

     Accounts receivable allowances. As of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, our gross accounts receivable were $105.6 million and $116.3 million, respectively. We had cash

21

discounts on our gross accounts receivable of $1.0 million and $1.2 million as of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, respectively. Our allowances for doubtful accounts and outstanding deductions with customers were $2.5 million and $2.7 million as of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, respectively. We estimate the allowances by applying a recovery percentage based on historical collection experience. We accrue additional allowances based on a specific identification review for amounts deemed to be at risk. Receivables are written off against the allowances at the point in which an amount is deemed uncollectible by us. We may revise our allowances against accounts receivable as we receive more information or as we assess other factors impacting the realizability of our accounts receivable.

     Inventories allowances. As of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, our gross inventories were $71.8 million and $71.2 million, respectively. We had allowances, primarily for obsolescence of packaging inventories, of $2.3 million and $2.9 million as of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, respectively. We estimate our allowances against inventories based on a specific identification review of obsolete stock keeping units, or SKUs, or probable SKUs to be rationalized. We may revise our allowance against inventories as we receive more information on this matter or as we assess other factors impacting the realizability of our inventories.

     Deferred tax assets. As of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, our federal net operating loss, or NOL, carryforwards were $131.1 million and $142.2 million, respectively, and our foreign NOL carryforwards were $0.6 million and $0.9 million, respectively. Our gross deferred tax assets, including federal, foreign, state and local NOL carryforwards, were $75.1 million and $79.0 million as of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, respectively, and our gross deferred tax liabilities were $56.3 million and $54.8 million, respectively.

     We have concluded that, based on the weight of available evidence, it is more likely than not that we will not generate sufficient future taxable income to realize our deferred tax assets and that a valuation allowance is necessary. Our consolidated valuation allowance was $50.9 million and $55.4 million as of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, respectively. During the first quarter of fiscal 2005, we reduced the valuation allowance against our U.S. federal and state deferred tax assets $5.4 million and increased the valuation allowance against our foreign deferred tax assets $0.9 million. We currently expect that future years’ deferred income tax expense (benefit) will include deferred tax expense approximating the growth in our deferred tax liabilities related to amortization of goodwill for tax purposes.

     Goodwill and other intangible assets. As of the end of the first quarter of fiscal 2005 and the end of fiscal 2004, our goodwill and other intangible assets were $384.5 million and $390.5 million, respectively. The $6.0 million decrease is due to the impact of foreign currency exchange rate fluctuations. We test the carrying value of our goodwill and other intangible assets for impairment annually in the fourth quarter of each fiscal year and upon the occurrence of certain events. Our impairment test includes quantitative analyses of discounted future cash flows, market multiples of earnings and comparable transactions, if available. If the estimated fair value of goodwill and other intangible assets of either our domestic or European reporting unit is less than the carrying value, an impairment loss will be recognized. In the fourth quarter of fiscal 2004, we performed our annual assessment of impairment and determined no impairment was evident at that date.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

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

     Commodity price risk. We are exposed to market risk related to changes in commodity prices. We may seek to manage our commodity price risk associated with market fluctuations by using derivative instruments for portions of our corn, soybean meal, alternative proteins and natural gas purchases, principally through exchange traded futures and options contracts. The terms of such contracts are generally less than one year. During the term of a contract, we balance positions daily with cash payments to or from the exchanges. At the termination of a contract, we have the ability to settle financially or by

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exchange for the physical commodity, in which case, we would deliver the contract against the acquisition of the physical commodity. Our policy does not permit speculative commodity trading.

     Although we may seek to manage the price risk of market fluctuations by hedging portions of our primary commodity product purchases, our results of operations have been adversely affected in the past by these fluctuations and may in the future. Moreover, the use of futures contracts also reduces our ability to take advantage of short-term reductions in raw material prices. If one or more of our competitors is able to reduce their manufacturing costs by taking advantage of any reductions in raw material prices, we may face pricing pressures from these competitors and may be forced to reduce our selling prices or face a decline in net sales, either of which could have a material adverse effect on our business, results of operations and financial condition.

     Our commodity derivative instruments are measured at fair value under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, or SFAS 133, in our accompanying unaudited condensed consolidated financial statements. Our results of operations for particular periods have been adversely affected in the past under SFAS 133 fair value accounting of our commodity derivative instruments due to the volatility in commodity prices and, similarly, our results of operations may be adversely affected in the future by SFAS 133 accounting.

     As of the end of the first quarter of fiscal 2005, we had open commodity contracts with a fair value gain of $3.8 million. Based upon an analysis we completed at the end of the first quarter of fiscal 2005 in which we utilized our actual derivative contractual volumes and assumed a 5% adverse movement in commodity prices, we determined the potential decrease in the fair value of our commodity derivative instruments would be approximately $1.1 million.

     Interest rate risk. We are exposed to market risk related to changes in interest rates. We periodically enter into interest rate swap and cap contracts to limit our exposure to the interest rate risk associated with our floating rate debt, which totaled $194.0 million at the end of the first quarter of fiscal 2005. Changes in market values of these financial instruments are highly correlated with changes in market values of the hedged item both at inception and over the life of the contract. At the end of the first quarter of fiscal 2005, we had no outstanding interest rate swap or cap contracts.

     Our results of operations may be adversely affected by changes in interest rates. Assuming a 100 basis point increase in the interest rates on our floating rate debt as of the end of the first quarter of fiscal 2005, interest expense would have increased by approximately $0.5 million for the first quarter of fiscal 2005. In addition, such a change would have resulted in a decrease of approximately $12.6 million in the fair value of our fixed rate debt at the end of the first quarter of fiscal 2005. In the event of an adverse change in interest rates, we could take action to mitigate our exposure; however, due to the uncertainty of these potential actions and the possible adverse effects, our analysis assumes no such actions. Furthermore, our analysis does not consider the effect of any changes in the level of overall economic activity that may exist in such an environment.

     Foreign currency exchange risk. We have foreign currency exposure relating to the translation of the financial statements of our foreign operations into U.S. dollars. Our functional currencies, other than the U.S. dollar, include the Euro, Danish Krona and British Pound Sterling. We also funded a portion of our fiscal 2000 acquisition of Arovit with Euro-denominated debt designated as a hedge of our net investment in Europe. The cumulative translation adjustment for the net investment in our European operations is recognized in accumulated other comprehensive income in the accompanying unaudited condensed consolidated financial statements included herein. At the end of the first quarter of fiscal 2005, we had a cumulative translation gain of $55.3 million, which included a $19.2 million cumulative loss for the translation of our previously extinguished Euro-denominated debt to U.S. dollars through the final repayment date.

     We also have foreign currency exposure, to a lesser extent, relating to transacting business in countries with foreign currencies other than our functional currencies. From time to time, we may enter into foreign currency options or forward contracts for the purchase or sale of a foreign currency to mitigate the risk

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from foreign currency exchange rate fluctuations in those transactions and translations. As of the end of the first quarter of fiscal 2005, we had no material outstanding foreign currency contracts.

ITEM 4. Controls and Procedures

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

     Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we performed an evaluation of the design and operation of our disclosure controls and procedures as of the end of the quarterly period ending April 2, 2005, pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

     Changes in internal control over financial reporting. Other than those changes referred to in Item 9A of the 2004 10-K, there were no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

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PART II. Other Information

ITEM 1. Legal Proceedings

     See Note 9, Commitments and Contingencies, in the accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this quarterly report on Form 10-Q, which is incorporated by reference in this Part II, Item 1.

ITEM 6. Exhibits

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 10, 2005

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EXHIBIT INDEX