PURINA MILLS INC/, S-1/A, 2000-10-11

PURINA MILLS INC/
S-1/A, 2000-10-11
GRAIN MILL PRODUCTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 11, 2000

REGISTRATION NO. 333-45400

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1

FORM S-1
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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PURINA MILLS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 2048 76-0407288
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

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1401 SOUTH HANLEY ROAD
ST. LOUIS, MISSOURI 63144
(314) 768-4100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

DARRELL D. SWANK
EXECUTIVE VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND SECRETARY
1401 SOUTH HANLEY ROAD
ST. LOUIS, MISSOURI 63144
(314) 768-4100
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
------------------------

COPIES TO:
CHARLES W. HARDIN, JR., ESQ.
JONES, DAY, REAVIS & POGUE
NORTH POINT
901 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
(216) 586-3939

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: No definitive
date; shelf registration under Rule 415.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]

If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

CALCULATION OF REGISTRATION FEE

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<CAPTION>
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PROPOSED
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED(1) OFFERING PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C>
Common Stock, par value $.01 per share...................... $25,823,601 $6,817
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</TABLE>

(1) One preferred share purchase right is attached to, and trades with, each
share of common stock. These rights are also covered by this registration
statement.

(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933.

(3) A filing fee of $6,817 was previously paid in connection with the initial
filing of this registration statement on September 8, 2000. Pursuant to Rule
457(b), that amount has been credited against the fee payable hereunder.
Accordingly, no amount is remitted with this registration statement.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND
NEITHER WE NOR THE SELLING STOCKHOLDERS ARE SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED OCTOBER 11, 2000

UP TO 2,356,168 SHARES

PURINA MILLS, INC. LOGO

COMMON STOCK
------------------------
We have prepared this prospectus to allow GSCP Recovery, Inc. and its
transferees as selling stockholders to sell up to 2,356,168 shares of our common
stock. GSCP Recovery acquired the common stock from us by operation of our plan
of reorganization under the Bankruptcy Code, which became effective on June 29,
2000.

Our common stock currently trades under the symbol "PMIL" on the Nasdaq
National Market System. On October 9, 2000, the last reported sale price of our
common stock on Nasdaq was $9.56 per share.

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

See "Risk Factors" beginning on page 4 to read about factors you should
consider before buying shares of our common stock.
------------------------
The selling stockholders directly, through agents designated from time to
time, or through dealers or underwriters also to be designated, may sell the
common stock from time to time on terms to be determined at the time of sale. To
the extent required, the specific shares to be sold, names of the selling
stockholders, purchase price, public offering price, the names of any such
agent, dealer or underwriter, amount of expenses of the offering and any
applicable commission or discount with respect to a particular offer will be set
forth in an accompanying prospectus supplement. The selling stockholders reserve
the sole right to accept and, together with its agents from time to time, to
reject in whole or in part any proposed purchase of shares of common stock to be
made directly or through agents.

The aggregate proceeds to the selling stockholders from the shares of
common stock will be the purchase price of the shares of common stock sold less
the aggregate agents' commissions and the underwriters' discounts, if any. We
will receive no proceeds from this offering, but will pay the expenses of this
offering.

The selling stockholders and any broker-dealers, agents or underwriters
that participate with them in the distribution of the shares of common stock may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions received by them and any profit on the resale of the shares
of common stock purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act.

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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

Prospectus dated , 2000.
<PAGE> 3

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding our company and our consolidated financial statements and
related notes appearing elsewhere in this prospectus.

OUR BUSINESS

We are a market leader in the United States in developing, manufacturing,
and marketing differentiated animal nutrition products and programs for dairy
cattle, beef cattle, hogs, and horses. We also develop, manufacture and sell
poultry feeds as well as specialty feeds for rabbits, zoo animals, laboratory
animals, birds, fish and pets. In the United States our products are generally
marketed under the widely recognized brand names Purina(R) and Chow(R), and the
"Checkerboard" Nine Square Logo(R) and other trademarks pursuant to an
exclusive, perpetual, royalty-free license from Ralston Purina Company, except
with regard to dog and cat food, which is marketed domestically under the PMI
Nutrition brand name. Our products are sold as complete feeds or concentrated
nutritional additives which are mixed with our customer's base ingredients.

Our product lines range from economy feeds to high-performance, value-added
products, and are sold in complete rations or as concentrated nutritional
additives to be mixed with grains. We maintain a total of over 36,000 active
feed formulas, which encompass a wide range of animal species. Although products
are the principal point of differentiation, we develop and sell our products as
part of nutrition and management programs that address all critical areas in the
production of meat, milk and eggs. Our nutrition programs include information
and services regarding the care of the animals and their facilities, as well as
nutritional, genetic and breeding counseling.

We distribute our products through two primary distribution channels:
through dealers and directly to end-users. During 1999, approximately 60% of our
sales were made through our dealer network and 40% of sales were made directly
to animal producers. Although sales volume through our dealer network has always
been substantially higher than our direct sales volume, direct sales to
customers have accounted for an increasing proportion of our sales volume over
the past 10 years.

Our basic feed manufacturing process consists of grinding various grains
and protein sources into a meal form that is then mixed with various nutritional
additives. The resulting products are sold in a variety of forms, including
meal, pellets, blocks and liquids. Our feed formulas are based upon the nutrient
content as determined through proprietary scientific research. When the price of
certain raw ingredients increases, we can generally adjust our feed formulas by
substituting lower-cost, alternative ingredients to produce feeds with
comparable nutritional value. By using our least-cost product formulation
system, we can determine optimal formulations that meet our nutritional
standards and maintain product quality.

We currently operate 48 feed manufacturing plants located in 25 states. Our
total feed manufacturing capacity is approximately 6.4 million tons per year
based on a three shift per day, five-day week, and individual plant capacity
ranges from 60,000 tons to 275,000 tons per year. We have invested in highly
sophisticated computerized systems for mixing, pelleting, micro-ingredient
blending and packing. In addition, we have developed and implemented a
sophisticated software program for feed formulation that incorporates the
nutritional value of substitute ingredients.

1
<PAGE> 4

We are a Delaware corporation and our principal executive offices are
located at 1401 South Hanley Road, St. Louis, Missouri 63144. Our telephone
number is (314) 768-4100.

OUR HISTORY

Purina Mills and its predecessors have been in the animal nutrition
business since 1894. Over the past 100 years, we have built and maintained our
industry leadership by consistently providing high-quality, innovative products
and dedicated customer service.

In March 1998 we and our subsidiaries were acquired in a leveraged
acquisition by Koch Agriculture Company, a subsidiary of Koch Industries, Inc.
Subsequent to the acquisition, we had substantial indebtedness. Because of the
highly leveraged nature of the acquisition, a significant portion of our cash
flow from operations was thereafter dedicated to the payment of principal and
interest on our indebtedness, reducing the funds available for our operations.
Ultimately, our substantial degree of leverage limited our ability to adjust to
depressed conditions in the agricultural markets we serve and resulted in our
decision to seek bankruptcy protection.

In October 1999, after defaulting on our debt obligations, we and our
subsidiaries filed voluntary petitions for relief under chapter 11 of the
Bankruptcy Code. Our plan of reorganization was confirmed by the bankruptcy
court in April 2000. The plan became effective and we emerged from bankruptcy on
June 29, 2000. The plan provided for, among other things:

- cancellation of Koch Agriculture's equity interest in us;

- issuance of 10,000,000 shares of our common stock, par value $0.01 per
share, of which 9,910,000 shares will be distributed to holders of
general unsecured claims under the plan, which includes holders of all of
our $350 million in prepetition subordinated debt;

- repayment of all of our $278 million prepetition secured debt through a
$103 million cash payment and $175 million in borrowings under a new,
post-bankruptcy term loan; and

- a new $50 million revolving credit facility.

Affiliates of GSCP Recovery, Inc. owned approximately 32.1% of our
prepetition subordinated debt and, by operation of our plan of reorganization,
GSCP Recovery became our largest stockholder, owning approximately 28.6% of our
common stock as of August 25, 2000.

2
<PAGE> 5

THE OFFERING

Common stock offered by Purina Mills....... None

Common stock offered by selling
stockholders............................... Up to 2,356,168 shares

Common stock outstanding prior to this
offering................................... 8,230,332 shares

Use of proceeds............................ Purina Mills will not receive
any proceeds from this offering

Nasdaq National Market symbol.............. "PMIL"

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

The above information is based upon the number of shares outstanding as of
August 25, 2000. This information excludes 912,858 shares of common stock
issuable upon the exercise of outstanding options at a weighted average exercise
price of $21.97 per share and 87,142 shares of common stock reserved for future
issuance under our equity incentive plan.

3
<PAGE> 6

RISK FACTORS

You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing us. Additional risks and uncertainties not presently known to
us or that we currently believe are immaterial may also impair our business
operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected, the value of our stock could decline, and you may lose all or part of
your investment.

WE RECENTLY EMERGED FROM A CHAPTER 11 REORGANIZATION AND HAVE A HISTORY OF
RECENT LOSSES.

We sought protection under chapter 11 of the Bankruptcy Code in October
1999. We incurred net losses of $52.9 million and $280.8 million during the two
fiscal years ended December 31, 1998 and December 31, 1999. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Our equity ownership, board of directors and a portion of our senior
management was replaced in connection with our reorganization. While our current
senior management has concentrated on reformulating and refining our business
strategy, there can be no assurance that we will attain profitability or achieve
growth in our operating performance.

WE ARE SUBSTANTIALLY LEVERAGED AND OUR LEVERAGE AND DEBT SERVICE REQUIREMENTS
MAKE US MORE VULNERABLE TO ECONOMIC DOWNTURNS IN THE AGRICULTURAL MARKETS WE
SERVE OR IN THE ECONOMY GENERALLY.

Even after our emergence from bankruptcy, our long term debt was
approximately $171.2 million as of June 30, 2000. While we believe that our
future operating cash flow, together with financing arrangements, will be
sufficient to finance our operating requirements, our indebtedness restricts our
ability to obtain additional financing in the future and, because we may be more
leveraged than some of our competitors, may place us at a competitive
disadvantage. Also, the new financing facility that we entered into as part of
our emergence from bankruptcy contains covenants that impose operating and
financial restrictions on us. These covenants could adversely affect our ability
to finance future operations, potential acquisitions or capital needs or to
engage in other business activities that may be in our interest. In addition, if
we cannot achieve the financial results necessary to maintain compliance with
these covenants, we could be declared in default and be required to sell or
liquidate our assets to repay outstanding debt.

OUR HISTORICAL FINANCIAL INFORMATION IS NOT COMPARABLE TO OUR CURRENT FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

As a result of our emergence from bankruptcy, we are operating our business
under a new capital structure. We are also subject to the fresh start accounting
rules and our balance sheet as of June 30, 2000 reflects the application of
these rules. Accordingly, our financial condition and results of operations will
not be comparable to the financial condition or results of operations reflected
in our historical financial statements contained in this registration statement.

THE MARKET FOR COMMERCIAL FEED PRODUCTS IS HIGHLY COMPETITIVE.

Most of our competitors compete principally on the basis of price. Some
animal producers purchase feed on that basis without regard to the performance
qualities of the products. Competition in our markets occasionally limit our
ability to pass ingredient price increases on to our customers and has led us
and some of our competitors to develop various market price risk arrangements to
promote sales. For example, we offer various financing programs to our dealers
and direct customers. As of June 30, 2000, our promissory notes from and
guaranties for the benefit of our customers totaled approximately $7.3 million,
net of a reserve of $17.5 million. There can be no assurance that we will not be
required to increase our use of these or similar arrangements in response to
competitive pressures or that losses from these arrangements will not be
material.

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<PAGE> 7

FLUCTUATIONS IN AGRICULTURAL COMMODITY PRICES COULD ADVERSELY AFFECT THE DEMAND
FOR OUR PRODUCTS.

Historically, when the price of grains is relatively high, more of our
customers purchase complete feed products and our feed sales are correspondingly
higher. During periods when commodity prices are relatively low, animal
producers purchase our products as concentrated nutritional additives with which
the customers mix their own commodity ingredients. This results in decreased
feed sales. Because the cost of feed typically represents more than half of the
cost of livestock production at the farm level, higher ingredient prices over
time could result in a decline in livestock production and a decline in the
demand for our products. In addition, when market prices for livestock and
livestock products are low, livestock producers cut back on production and
search for lower-cost feed alternatives. Severe and sustained increases in the
prices of ingredients for our products or decreases in the market prices
received by our customers in the livestock production industry could have a
material adverse effect on our business.

CONSOLIDATION IN THE FEED PRODUCTION AND ANIMAL PRODUCTION INDUSTRIES COULD
ADVERSELY AFFECT US.

Both the feed production and animal production industries are
consolidating, and this trend is expected to continue. As producers of animals
increase in size, they historically have tended to vertically integrate their
businesses by acquiring or constructing their own feed production facilities to
meet some or all of their requirements and, consequently, have relied less on
outside suppliers of feed. As the consolidation of animal producers continues,
the available market for commercial feeds may shrink if producers integrate
their operations, which could lead to decreased market demand for our feed
products. In addition, should these market conditions result in business
failures of major customers, such failures could result in lost sales by us and
a reduction in the utilization levels of our manufacturing plants.

OUR BUSINESS COULD SUFFER IF WE ARE UNABLE TO SUCCESSFULLY IDENTIFY AND ENTER
INTO JOINT VENTURES AND/OR STRATEGIC ALLIANCES.

We intend to pursue joint ventures and strategic alliances in order to
adapt to the trends of consolidation of production and vertical integration that
are reshaping our industry. There can be no assurance that we will be successful
in identifying appropriate joint venture or strategic alliance partners or in
consummating such transactions, or that any newly acquired partners will be
successfully integrated with our business. There also can be no assurance that
these joint venture or strategic alliances will result in the expected benefits
or any benefits at all.

WE MAY LOSE SALES BECAUSE OF THE WEAKENED FINANCIAL CONDITION OF OUR CUSTOMERS.

One of our strengths is our network of more than 4,100 independent dealers
that sell feed products. However, like us, these dealers, as well as other
direct purchasers of our feed products, are subject to significant downturns in
the agricultural markets and the highly competitive and consolidating nature of
the animal production industry. We believe that certain of our significant
customers, both dealers and direct purchasers, recently have experienced adverse
operating results. This could result in lower feed sales to these customers and
any significant decline in our sales of feed products could have a material
adverse effect on our results of operations and financial condition.

THE SEASONALITY OF OUR BUSINESSES MAY HAVE A MATERIAL ADVERSE AFFECT ON OUR
RESULTS OF OPERATIONS.

Our results of operations are seasonal, with a higher percentage of sales
and earnings generated during the fourth and first quarters of the year. This
seasonality is driven largely by weather conditions affecting our beef cattle
products. If the weather is particularly warm during the winter, then sales of
feed for beef cattle may decrease as compared with normal seasonal patterns
because the cattle may be better able to graze under warmer conditions. Other
product lines are affected marginally by seasonal conditions, but these
conditions do not materially affect our overall quarter-by-quarter results of
operations.

5
<PAGE> 8

WE MAY BE SUBJECT TO MATERIAL FEDERAL INCOME TAX LIABILITY.

According to regulations issued by the United States Treasury Department,
each subsidiary of a corporation that was a member of a consolidated group
during any part of a consolidated return year is severally liable for the
consolidated federal income tax liability of the entire group for that year,
even if the subsidiary in question had no taxable income on a stand-alone basis
for that year. The presence of a tax sharing agreement between corporations
filing a consolidated return does not affect any group member's liability to the
Internal Revenue Service for unpaid federal income taxes owed by the group. As a
result, we remain severally liable for any deficiencies arising out of
consolidated federal income tax returns filed by Koch Industries beginning in
1998 and ending in 2000. Pursuant to a tax sharing agreement, Koch Industries
must indemnify us with respect to any of these types of liabilities under most,
but not all, circumstances.

IF WE DO NOT COMPLY WITH THE NUMEROUS LAWS AND REGULATIONS THAT GOVERN THE FEED
PRODUCTION INDUSTRY, OUR BUSINESS COULD BE HARMED.

Our operations are subject to regulation by federal, state and local
agencies that administer laws governing health, safety and the protection of the
environment, including the United States Food and Drug Administration and the
United States Department of Agriculture. In particular, we are subject to
federal, state and local environmental laws and regulations involving the
management and disposal of solid animal waste material resulting from the
production, processing and preparation of foods at facilities where company
owned animals are located. We believe that the procedures currently in effect at
our facilities are consistent with industry practice and are in general
compliance with such laws and regulations. However, future violations of such
laws, the enactment of stricter laws or regulations or the implementation of
more aggressive enforcement policies could adversely affect our operations or
financial condition.

THE ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS, AND OUR RIGHTS AGREEMENT
COULD ADVERSELY AFFECT OUR STOCKHOLDERS.

Our certificate of incorporation and by-laws contain some provisions that
may have the effect of delaying, deferring or preventing a change in control.
These provisions, including those providing for the possible issuance of
preferred stock and regulating the nomination of directors, together with our
rights agreement and Delaware statutes, may make it more difficult for other
persons, without the approval of our board of directors, to make a tender offer
or otherwise acquire substantial amounts of our common stock or to launch other
takeover attempts that a stockholder might consider to be in the stockholder's
best interest. These provisions could limit the price that some investors might
be willing to pay in the future for shares of our common stock.

Under our rights agreement, entered into as of the effective date of our
plan of reorganization, each outstanding share of our common stock presently has
one right attached that trades with the common stock. Generally, the rights
become exercisable and trade separately after a third party acquires 15% or more
of the then-outstanding common stock or commences a tender offer for a specified
percentage of the then-outstanding common stock. Upon the occurrence of certain
additional triggering events specified in the agreement, each right would
entitle its holder (other than, in certain instances, the holder of 15% or more
of the then-outstanding common stock) to purchase shares of common stock at an
exercise price of 50% of the then-current market value of the common stock. The
rights expire on June 29, 2001, unless our board of directors takes action prior
to that date to extend the rights, and are presently redeemable at $.01 per
right. See "Description of Capital Stock -- Rights Agreement."

OUR LARGEST STOCKHOLDER OWNS A LARGE PERCENTAGE OF PURINA MILLS AND COULD
SIGNIFICANTLY INFLUENCE ALL MATTERS REQUIRING STOCKHOLDER APPROVAL.

GSCP Recovery, Inc. beneficially owns approximately 28.6% of our
outstanding common stock and is able to significantly influence all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions.

6
<PAGE> 9

WE EXPECT TO EXPERIENCE VOLATILITY IN OUR STOCK PRICE WHICH COULD NEGATIVELY
AFFECT YOUR INVESTMENT.

An investment in our common stock involves substantial risks. The stock
market generally and the market for stocks of companies with lower market
capitalizations, like us, in particular have from time to time experienced and
likely will again experience significant price and volume fluctuations that are
unrelated to the operating performance of a particular company.

WE MAY BE HARMED IF WE LOSE OUR MARKET STANDING ON THE NASDAQ NATIONAL MARKET
SYSTEM.

There can be no assurance that in the future our common stock will meet the
continued listing qualifications of the Nasdaq National Market System.
De-listing from Nasdaq could cause, among other things, a decline in the market
price of our common stock and an inability to obtain future equity financing, or
use our common stock as consideration for acquisitions.

SALES OF STOCK BY THE SELLING STOCKHOLDERS MAY NEGATIVELY AFFECT THE MARKET
PRICE.

All of the common stock being offered through this prospectus is offered
solely by selling stockholders who are not restricted as to the prices at which
they may sell the common stock. Shares sold below the current level at which the
shares of our common stock are trading may adversely affect the market price of
our common stock. The outstanding shares of common stock covered by this
prospectus represent approximately 28.6% of our outstanding shares as of August
25, 2000. This large amount of common stock, if sold all at once or in blocks,
may have a negative effect on the market price.

SALES OF SUBSTANTIAL AMOUNTS OF COMMON STOCK IN THE PUBLIC MARKET OR THE
AVAILABILITY OF SUBSTANTIAL AMOUNTS OF SUCH STOCK FOR SALE SUBSEQUENT TO THIS
OFFERING COULD ADVERSELY AFFECT THE PREVAILING MARKET PRICE OF OUR COMMON STOCK.

The 2,356,168 shares of common stock offered hereby will be freely tradable
immediately following this offering, except for any shares that might be
purchased by our "affiliates," as that term is defined in the Securities Act.
All of the remaining 5,874,164 outstanding shares, are available for sale in the
public market during 2000, subject, in certain instances, to the applicable
resale limitations of Rule 144 under the Securities Act. In addition, we filed a
registration statement covering up to 1,000,000 shares issuable upon exercise of
stock options under our equity incentive plan. Such option shares, upon
issuance, will be immediately available for resale, subject to the applicable
resale limitations under Rule 144 for holders that are our affiliates. Our
executive officers and certain other employees or former employees have agreed
not to sell an aggregate of 50,938 shares of common stock for a period of six
months following the effectiveness of our plan of reorganization. Thereafter,
the holders of these shares may resell them pursuant to the applicable resale
limitations of Rule 144. See "Shares Eligible for Future Sale."

SINCE EMERGING FROM BANKRUPTCY, WE HAVE NOT PAID ANY DIVIDENDS ON OUR COMMON
STOCK AND DO NOT ANTICIPATE DOING SO IN THE FORESEEABLE FUTURE.

We currently anticipate that all of our earnings will be retained for
development and expansion of our business. We do not anticipate paying any cash
dividends on our common stock in the foreseeable future. In addition, our credit
facility contains covenants that restrict the payment of cash dividends. See
"Dividend Policy" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."

7
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A WARNING ABOUT FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are not based on historical
facts, but rather are based on current expectations, estimates and projections
about our industry, our beliefs and our assumptions. We use words such as
"anticipate," "believe," "plan," "estimate," "expect," "future," "intend" and
variations of these words and similar expressions to identify forward-looking
statements. These statements are not guarantees of future performance and are
subject to risks, uncertainties and other factors, some of which are beyond our
control and difficult to predict and could cause actual results to differ
materially from those anticipated in these forward-looking statements. These
risks and uncertainties include those described above in "Risk Factors" and
elsewhere in this prospectus. Readers are cautioned not to place undue reliance
on these forward-looking statements, which reflect our management's view only as
of the date of this prospectus. Except as required by law, we undertake no
obligation to update any forward-looking statement, whether as a result of new
information, future events or otherwise.

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MARKET FOR COMMON STOCK

Our common stock has only been listed for trading on the Nasdaq National
Market System since August 15, 2000. As a result, the market for our common
stock is new and not well developed. On October 9, 2000, the last reported sale
of our common stock as reported by Nasdaq was $9.56. As of August 25, 2000,
there were approximately 545 holders of record of our common stock.

USE OF PROCEEDS

All of the shares of common stock offered hereby are being offered by the
selling stockholders. We will not receive any of the proceeds from their sale.
We estimate that expenses payable in connection with this registration statement
will be approximately $136,817. There are no other material incremental expenses
attributable solely to the issuance and distribution of the shares.

DIVIDEND POLICY

We have neither declared nor paid any dividends on our shares of common
stock since emerging from bankruptcy. Any decisions as to the future payment of
dividends will depend on our earnings and financial position and such other
factors as our board of directors deems relevant. We anticipate that we will
retain earnings, if any, in order to finance expansion of our operations, and
have no intention of declaring dividends for the foreseeable future. In
addition, our credit facility contains covenants that restrict the payment of
cash dividends.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected historical information is qualified by reference to
and should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our financial statements and
Notes thereto included elsewhere in this prospectus. The Consolidated Statements
of Operations Data for each of the years in the three year period ended December
31, 1999 and the Consolidated Balance Sheet Data as of December 31, 1998 and
1999 presented below, have been derived from audited financial statements
included elsewhere in this prospectus. The Consolidated Statements of Operations
Data for the six month periods ended June 30, 1999 and 2000 and the Consolidated
Balance Sheet Data as of June 30, 2000, presented below, have been derived from
unaudited financial statements also included elsewhere in this prospectus. The
Consolidated Statement of Operations Data for the years ended December 31, 1995
and 1996 and the Consolidated Balance Sheet Data as of December 31, 1995, 1996
and 1997 has been derived from audited financial statement not included in this
prospectus.

The consolidated financial data for the period prior to March 12, 1998 has
been prepared on a predecessor basis. The consolidated balance sheet data at
June 30, 2000, December 31, 1999 and December 31, 1998 are not comparable with
the December 31, 1997, 1996, and 1995 balance sheet data presented. Also, the
June 30, 2000 consolidated balance sheet data is not comparable to the other
balance sheet data presented due to the adoption of fresh-start reporting as of
that date. Operating results subsequent to the 1998 merger are comparable to the
operating results prior to the 1998 merger except for depreciation expense,
amortization of intangible assets, interest expense and post-retirement health
care costs.

<TABLE>
<CAPTION>
PRE-MERGER POST-MERGER
------------------------------------------ ---------------------------------------------------
JANUARY 1 MARCH 13 YEAR SIX MONTHS SIX MONTHS
TO TO ENDED ENDED ENDED
YEAR ENDED DECEMBER 31 MARCH 12 DECEMBER 31 DECEMBER 31 JUNE 30 JUNE 30
------------------------------ --------- ----------- ----------- ---------- ----------
1995 1996 1997 1998 1998 1999 1999 2000
-------- -------- -------- --------- ----------- ----------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA
OPERATING DATA:
Net Sales.................. $1,047.2 $1,212.2 $1,128.4 $214.3 $784.4 $ 881.9 $437.4 $414.5
Cost of products sold...... 863.2 1,035.9 913.0 171.2 640.3 706.9 352.9 329.2
-------- -------- -------- ------ ------ ------- ------ ------
Gross Profit............. 184.0 176.3 215.4 43.1 144.1 175.0 84.5 85.3
Other costs and expenses:
Marketing and
distribution............. 83.9 84.7 87.3 17.5 73.1 91.5 46.2 43.2
General and
administrative........... 30.2 31.4 55.7 27.6 59.9 65.4 32.9 26.5
Research and development... 6.7 7.0 7.2 1.4 5.4 6.0 3.0 2.7
-------- -------- -------- ------ ------ ------- ------ ------
120.8 123.1 150.2 46.5 138.4 162.9 82.1 72.4
Provision for asset
write-offs............... -- 14.0 4.4 -- -- 19.7 19.7 --
Restructuring
expenses(1)(2)........... -- -- -- -- -- 18.1 0.5 24.9
Provision for intangible
asset impairment(3)...... -- -- -- -- -- 161.6 -- --
Provision for loss
guarantees(4)............ -- -- -- -- 14.2 -- -- --
Other expense(income) --
net(5)................... 2.8 (10.5) (3.5) 0.1 4.5 0.7 (0.5) (28.5)
Amortization of
intangibles.............. 18.6 19.5 20.6 3.9 14.5 15.1 7.6 13.6
-------- -------- -------- ------ ------ ------- ------ ------
142.2 146.1 171.7 50.5 171.6 378.1 109.4 82.4
-------- -------- -------- ------ ------ ------- ------ ------
Operating income (loss).... 41.8 30.2 43.7 (7.4) (27.5) (203.1) (24.9) 2.9
Interest expense........... 44.5 43.6 41.5 8.1 39.5 48.7 26.0 9.7
-------- -------- -------- ------ ------ ------- ------ ------
</TABLE>

10
<PAGE> 13

<TABLE>
<CAPTION>
PRE-MERGER POST-MERGER
------------------------------------------ ---------------------------------------------------
JANUARY 1 MARCH 13 YEAR SIX MONTHS SIX MONTHS
TO TO ENDED ENDED ENDED
YEAR ENDED DECEMBER 31 MARCH 12 DECEMBER 31 DECEMBER 31 JUNE 30 JUNE 30
------------------------------ --------- ----------- ----------- ---------- ----------
1995 1996 1997 1998 1998 1999 1999 2000
-------- -------- -------- --------- ----------- ----------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income (loss)before income
taxes.................... (2.7) (13.4) 2.2 (15.5) (67.0) (251.8) (50.9) (6.8)
Provision (benefit) for
income taxes............. 0.6 (3.4) 1.7 (5.8) (23.8) 29.0 (16.1) --
-------- -------- -------- ------ ------ ------- ------ ------
Income (loss) before
extraordinary item....... (3.3) (10.0) 0.5 (9.7) (43.2) (280.8) (34.8) (6.8)
Extraordinary item-gain on
extinguishment of debt,
net of tax............... -- -- -- -- -- -- -- 159.3
Revaluation of assets and
liabilities pursuant to
the adoption of
fresh-start reporting.... -- -- -- -- -- -- -- 2.5
-------- -------- -------- ------ ------ ------- ------ ------
Net income(loss)........... $ (3.3) $ (10.0) $ 0.5 $ (9.7) $(43.2) $(280.8) $(34.8) $155.0
======== ======== ======== ====== ====== ======= ====== ======
OTHER DATA:
Adjusted EBITDA(6)......... $ 95.0 $ 93.4 $ 99.1 $ 18.2 $ 47.8 $ 50.7 $ 24.3 $ 30.6
Adjusted EBITDA/Interest
expense.................. 2.1x 2.1x 2.4x 2.2x 1.2x 1.0x 0.9x 3.2x
Total depreciation and
amortization(7).......... $ 47.6 $ 50.4 $ 50.0 $ 10.1 $ 40.1 $ 48.0 $ 24.4 $ 30.4
Capital expenditures(8).... 25.5 23.9 30.4 4.5 25.3 21.0 10.1 8.6
Cash provided (used) --
operations............... 50.1 58.3 70.0 (40.1) 59.9 (32.0) (49.3) 27.0
Cash provided (used) --
investing................ (82.9) (22.1) (29.3) (4.3) (24.3) (23.3) (12.1) 10.9
Cash provided (used) --
financing................ 31.7 (32.2) (38.5) 391.9 (369.2) 61.9 31.5 (42.8)
SELECTED RATIOS:
Ratio of earnings to fixed
charges(9)............... -- -- 1.05x -- -- -- -- --
Deficiency of earnings to
cover fixed charges(9)... 2.7 13.4 -- 15.5 67.0 251.8 50.9 6.8
</TABLE>

11
<PAGE> 14

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------- FRESH START
PRE-MERGER POST-MERGER REPORTING
------------------------------ ------------------- -------------
1995 1996 1997 1998 1999 JUNE 30, 2000
-------- -------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital................................. $ 2.2 $ 19.3 $ 26.2 $ 15.8 $ (199.8) $ 65.4
Property, plant and equipment, net.............. 266.8 250.6 243.7 262.8 235.4 206.8
Total assets.................................... 637.7 613.4 592.9 815.7 589.0 531.9
Total long-term debt............................ 371.3 364.3 340.2 558.5 -- 171.2
Stockholder's equity............................ 24.2 7.7 (16.2) 66.3 (215.8) 184.2
</TABLE>

---------------
(1) Provision for asset write-offs represents the noncash write-down of the net
book value of closed facilities and the write-down of other assets to net
realizable value. During 1996, we closed seven feed plants and recorded a
corresponding loss of $14.0 million. The 1997 charges related to the
write-down of the value of a feed supply agreement. For the year ended
December 31, 1999 and six months ended June 30, 1999 the charge relates to
the closure of five feed plants resulting in a loss of $19.7 million.

(2) Restructuring expenses represents the costs incurred in connection with a
business analysis and subsequent bankruptcy filing on October 28, 1999. The
costs include advisory fees, severance and relocation costs and compensation
expense in connection with our Key Employee Retention Plan.

(3) Provision for intangible asset impairment represents the non-cash write-down
of the net book value of the intangible assets to net realizable value.

(4) Provision for loss guarantees represents a loss reserve recorded for the
potential funding of various loan guarantees made by banks to assist our
customers in obtaining bank loans for working capital or fixed asset
additions.

(5) Other expense (income)-net includes profit or loss on marketing agreements
and the production of eggs, hogs and turkeys, interest income on customer
accounts, fee income for various agricultural services, equity income of
less than 50% owned subsidiaries and other costs or revenues. The 1996
amount also includes the proceeds received in settlement of a claim of
excess charges on raw material purchases in prior years and the profit on
the sales of our bromethaline inventory and related trademark and other
rights. The amount for the six month period ended June 30, 2000 also
includes proceeds in excess of $20.0 million received in settlement for
claims for excess charges of vitamin purchases in prior years and the gain
of $3.3 million from the sale of the headquarters building.

(6) Adjusted EBITDA as used in this prospectus consists of earnings before
interest, income taxes, depreciation, amortization, gains or loses on fixed
asset dispositions or write-downs, noncash compensation expense related to
stock units and the increase in value over cost of stock allocated to
participants in a then existing employee stock ownership plan and
extraordinary gains, losses or expenses. Adjusted EBITDA is presented
because it may be used by investors as a financial indicator

12
<PAGE> 15

of our ability to service existing or additional indebtedness. Detail
regarding calculation of Adjusted EBITDA is presented in the following
table:

<TABLE>
<CAPTION>
JANUARY 1 MARCH 13 SIX MONTHS SIX MONTHS
TO TO YEAR ENDED ENDED ENDED
YEAR ENDED DECEMBER 31 MARCH 12 DECEMBER 31 DECEMBER 31 JUNE 30 JUNE 30
------------------------ --------- ----------- ----------- ---------- ----------
1995 1996 1997 1998 1998 1999 1999 2000
------ ------ ------ --------- ----------- ----------- ---------- ----------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income................ $41.8 $30.2 $43.7 $(7.4) $(27.5) $(203.1) $(24.9) $ 2.9
Depreciation and amortization... 47.6 50.4 50.0 10.1 40.1 48.0 24.4 30.4
Amortization related to deferred
financing costs............... (3.7) (3.3) (2.9) (0.6) (0.8) (1.3) (0.7) (0.6)
(Gains) losses related to asset
dispositions and vitamin
purchases claim settlement.... 2.5 1.0 0.9 0.2 1.4 1.3 0.2 (27.0)
Noncash Employee Stock Option
Plan valuation charge and
stock units expense........... 4.1 1.1 2.0 -- -- -- -- --
Nonrecurring charges:
Provision for asset
write-off................... -- 14.0 4.4 -- -- 19.7 19.7 --
Restructuring expenses........ -- -- -- -- -- 18.1 0.5 24.9
Provision for loss
guarantees.................. -- -- -- -- 14.2 -- -- --
Provision for intangible asset
impairment.................. -- -- -- -- -- 161.6 -- --
Other......................... 2.7 -- 1.0 15.9 20.4 6.4 5.1 --
----- ----- ----- ----- ------ ------- ------ ------
Adjusted EBITDA................. $95.0 $93.4 $99.1 $18.2 $ 47.8 $ 50.7 $ 24.3 $ 30.6
</TABLE>

The nonrecurring charges-other represents the cost and expenses in
connection with unsuccessful acquisitions in 1995 and 1997, compensation
expense of $15.9 million paid management and holders of options and stock
rights during the period ended March 12, 1998 in connection with the merger
and reserves for litigation losses, merger integration expenses and
provisions for losses on discontinued businesses for the periods ended
December 31, 1998 and 1999 and the six month period ended June 30, 1999.

Adjusted EBITDA is not a measure of financial performance determined in
accordance with generally accepted accounting principles, should not be
considered as an alternative to net income as a measure of performance or
to cash flow as a measure of liquidity and is not necessarily comparable to
similarly titled measures of other companies.

(7) Total depreciation and amortization includes amortization related to
deferred financing costs that is included in interest expense for periods
noted.

(8) Capital expenditures includes expenditures for capital asset replacement,
cost reductions, regulatory compliance, and quality and service projects,
and capital spending projects designed to increase manufacturing,
warehousing, transportation or other capacity or otherwise increase sales
volume.

(9) For purposes of computing these ratios and amounts, earnings consisted of
income from continuing operations before income taxes and fixed charges.
Fixed charges consist of interest expense on debt, amortization of financing
costs and the portion (approximately one-third) of rental expense that
management believes is representative of the interest component of rental
expenses.

13
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following Management's Discussion and Analysis of
Financial Condition and Results of Operations together with the consolidated
financial statements and related notes included elsewhere in this prospectus.
This discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors, including
those set forth under "Risk Factors" and elsewhere in this prospectus.

RESULTS OF OPERATIONS

Overview of Our Industry

The economic environment in the agricultural industry during 1998, 1999 and
the first six months of 2000 has been a difficult one. Livestock commodity
prices have been depressed and reached historic lows in many markets. In
addition to the overall economic environment, there is significant continuing
competition in all areas of agriculture, including the feed industry. As a
result of this competition, we expect the U.S. feed industry to further
consolidate in the years ahead. Nevertheless, although the total volume of
processed feed sold into the livestock systems market may decline, larger
producers are tending to purchase products with lower inclusion rates and higher
margins. As they grow larger, these producers are typically better able to
measure performance differences and make sound economic decisions regarding
nutrition and management programs.

The feed industry generally prices products on the basis of aggregate
ingredient cost plus a dollar amount margin, rather than a gross profit
percentage. As ingredient prices fluctuate, the changes are generally passed on
to customers through weekly or monthly changes in the our price lists. Feed
tonnage and total income over ingredient cost (IOIC), which is net sales minus
cost of ingredients, and gross profit (IOIC less manufacturing costs), rather
than sales dollars, are the key indicators of performance because of the
distortions in sales dollars caused by changes in commodity prices and product
mix between complete feed and concentrate products, to which customers add their
own base ingredients, such as corn and other grains. Historically, when the
price of grains has been relatively high, more of our customers have tended to
purchase complete rations and our sales volume has been higher; alternatively,
when the price of grains has been relatively low, more of our customers have
tended to use their own grains and mix them with our higher-margin concentrates,
resulting in lower sales volume but relatively higher overall unit margins.

Overview of Our Business

We develop, manufacture and market a comprehensive line of animal nutrition
products for dairy cattle, beef cattle, hogs, horses and poultry, as well as
specialty feeds for rabbits, zoo animals, birds, fish and pets. For the year
ended December 31, 1999, the product mix by volume was approximately 26% for
dairy, 29% for beef cattle, 14% for hogs, 12% for horses, 7% for poultry and 12%
for all others.

In addition, competition in the agricultural markets we serve has caused us
and some of our competitors to develop market and production risk arrangements
for customers to promote sales. We have entered into several production and
marketing joint venture arrangements with our animal production customers,
especially in the swine sector, in order to facilitate additional feed sales.

In connection with our merger with Koch Industries in 1998, we incurred a
significant amount of indebtedness. This indebtedness limited our flexibility to
adjust to the depressed conditions in the agricultural industry and made us
particularly vulnerable to the downturn in the swine market. As a result of our
financial condition during 1999 and our substantial degree of leverage, our
ability to finance working capital requirements was adversely affected by cash
requirements for debt service. On September 15, 1999, we failed to make a
scheduled interest payment of $15.75 million due to the holders of the senior
subordinated notes and on October 21, 1999, the indenture trustee accelerated
the notes. On

14
<PAGE> 17

September 30, 1999, we failed to pay $2.1 million in principal payments under
our pre-petition credit facility. This principal payment was subsequently made
on October 27, 1999. Faced with these events and an inability to service future
interest payment on the subordinated notes, we commenced reorganization cases
under chapter 11 of the bankruptcy code on October 28, 1999. On January 18,
2000, we filed a plan of reorganization and disclosure statement with the
Securities and Exchange Commission. The plan, as amended, was approved by the
creditors, confirmed by the bankruptcy court on April 5, 2000 and became
effective on June 29, 2000.

During 1999 we focused on managing and mitigating the impact of the
significant decline in hog prices on our performance. With the prices of hogs
having increased moderately from December 1998, which was the lowest price in
nearly forty years, and through the efforts of management, we mitigated some of
our swine exposure in an effort to reduce the negative implications on future
earnings, cash flow and liquidity. In April 1999, we locked in a margin on
market hogs to be marketed during the remainder of 1999 by entering into futures
contracts for market hogs and the major feed ingredients to grow the hogs. This
action resulted in limiting the risk of any market decline for the remainder of
the year on these hogs, but also limited the potential for gain if market prices
significantly increased. We have locked in a majority, but not all, margin for
hogs to be marketed in 2000 and, as such, we are subject to risk of fluctuations
in the price of market hogs, which could have an impact on results of operations
and liquidity.

During 1999, we decided to discontinue manufacturing operations at five
facilities. Products for distribution to customers of the closed facilities are
being manufactured at our other facilities. In connection with these plant
closures, we recorded a loss of $13.1 million on manufacturing assets, which
represented the amount by which the book value of these assets exceeded their
estimated net realizable value. Estimated demolition costs of $1.2 million,
severance costs of $0.4 million and a write-off of $5.0 million for related
goodwill were also recorded. We will continue to review the performance of our
facilities in an attempt to optimize overall capacity and maximize profits.

Period Comparisons

Our consolidated financial statements for all the periods through June 29,
2000 have been prepared on historical cost basis. Our consolidated balance sheet
at June 30, 2000 is not comparable with the historical balance sheet presented
due to our adoption of "fresh-start" reporting upon our emergence from
bankruptcy.

Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999

Due to overall lower commodity prices and a decrease in tons sold, net
sales decreased 5.2% from the 1999 period. Gross profit was $85.4 million for
the six months ended June 30, 2000 compared to $84.6 million for the six months
ended June 30, 1999. Overall volume for the six months ended June 30, 2000 was
1.9 million tons compared to 2.1 million tons for the comparable 1999 period, a
decrease of 8.8%. Average IOIC per ton was $67.60, a 4.2% increase from the
six-month period ended June 30, 1999 due primarily to a shift in product mix to
higher margin products.

Beef cattle volume increased 3.5% over the 1999 period due to increased
volume in the grass cattle business resulting primarily from weather conditions.
Dairy cattle tons decreased 7.6% from the prior year due to low milk prices and
lower commodity prices. Hog volume decreased 23.3% from the prior year due to
the depressed market conditions and the resulting loss from market
consolidation. Horse volume increased 5.2% over the 1999 period. We have had
continued success in growing our horse volume by aggressive marketing and
promotion of product lines. Laying chicken and meatbird volume decreased 56.3%
from 1999 which can be attributed to the loss of a major customer in the third
quarter of 1999. Specialty and other volume decreased 1.2% over the 1999 period.

Cost of products sold decreased $23.7 million, or 6.7% from the comparable
1999 period, due primarily to the $18.2 million decrease in ingredient costs.
Net losses from the hog program also decreased $5.4 million due to increases in
hog market prices. Manufacturing expenses remained consistent with the amount
for the comparable 1999 period.

15
<PAGE> 18

Marketing, distribution and advertising costs decreased $3.0 million due
primarily to a decrease in sales volume and reduction of sales personnel.
General and administrative expenses decreased $6.5 million from the 1999 period
due to a decrease in relocation costs of $1.2 million and reduced bad debt
expense of approximately $4.6 million. Additionally, a decrease of $0.7 million
in administrative costs occurred due to consolidation of various functions such
as accounting and credit as a result of the implementation of a new accounting
system.

Intangible amortization expense increased due to our evaluation that an
impairment of the intangible assets had occurred in 1999. In addition to
recording a loss provision in 1999, effective January 1, 2000 goodwill is being
amortized over five years on a straight line basis. Through December 31, 1999
goodwill was being amortized over 40 years.

Research and development costs decreased slightly compared with the 1999
period. Other (income) expense, net for the six months ended June 30, 2000,
relates to service fees for swine and dairy management, the (income) loss on our
equity investments and losses on marketing arrangements. Other (income) expense
for the six months ended June 30, 2000 includes proceeds in excess of $20.0
million received in settlement of claims for excess charges of vitamin purchases
in prior years. Additionally, we recorded a gain of $3.3 million from the sale
of our headquarters building.

Restructuring expenses for the six months ending June 30, 2000 include
$13.8 million in advisory and financing fees incurred in connection with the
bankruptcy cases. Additionally, $4.6 million was incurred for severance and
moving costs and $6.5 million for compensation expense in connection with our
Key Employee Retention Plan.

Interest expense for the six months ended June 30, 2000 decreased $16.2
million from the 1999 period primarily as a result of the discontinuance of
recording any interest expense on the senior subordinated notes, which had been
classified as "liabilities subject to compromise." We also terminated our
pre-petition debt and our swap contract on $114.7 million of that debt, and
realized a gain of $2.5 million, which is shown as a reduction of interest
expense.

For the first six months of the year 2000, we determined that we are not
likely to receive a tax benefit or incur any tax cost under our tax sharing
agreement with Koch Industries and thus have recorded no tax benefit or expense.
Our effective income tax rate differed from the statutory rate in 1999 due to
amortization of goodwill not being allowed as a tax deduction.

The extraordinary gain on extinguishment of debt represents the amount of
unsecured liabilities, as reflected on our balance sheet as of the petition
date, which will be satisfied by issuance of our common stock in accordance with
our bankruptcy plan. The total of such liabilities less the reduction in tax
basis of our assets as a result of the debt extinguishment, at the applicable
tax rate, less the value of our new common stock issued in satisfaction thereof
resulted in a net gain of $159.4 million.

The income on the revaluation of our assets and liabilities pursuant to the
adoption of "fresh-start" reporting totaled $2.5 million. It represents our best
estimate of the reorganization value of Purina Mills immediately after the
effective date of our bankruptcy plan in excess of the net value of our assets
after the consummation of the plan, including the extinguishment of debt.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Continued depressed commodity prices and low market prices for producer
products caused 1999 net sales to decrease 11.7% from the 1998 period. While
gross profit decreased $12.0 million or 6.4% from 1998 due primarily to
increased competition in the industry, our gross profit percentage increased to
19.8% from 18.7% due to production efficiencies. As a result, average feed IOIC
per ton was $63.73 for 1999, approximately equal to the amount for 1998. Overall
volume was 4.3 million tons for the year 1999, a decrease of 6.7% from 1998.

16
<PAGE> 19

Beef cattle and dairy cattle feed tons remained fairly constant in 1999
with overall volume totaling 1.3 million and 1.1 million tons, respectively. Hog
volume decreased 32.4% reflecting the depressed market conditions for producers
and the loss of customers resulting from the consolidation within the hog
industry.

Sales of horse feed remained strong as we increased our market share with a
volume increase of 12.3% during 1999 as total volume was just under 0.5 million
tons. This increase continued the trend for the past seven years as our horse
feed products continued to enjoy strong customer acceptance. Laying chicken and
meatbird volume decreased 18.9% primarily as a result of a major customer
incurring severe financial difficulties and discontinuing purchases. Specialty
and other volume increased 2.8% over 1998 as a result of our continued emphasis
on promotion of these products.

The decrease in overall volume caused a corresponding decrease in cost of
products sold. Ingredient costs decreased $101.8 million and total cost of
products sold decreased $104.7 million, or 12.9% from 1998. Manufacturing costs
also decreased $2.9 million due to the lower 1999 volume and the discontinuance
or curtailment of manufacturing operations at five locations. Marketing,
distribution and advertising costs remained fairly constant as the decrease in
expense attributable to the volume decline was offset by continuing costs
associated with the America's Country Store initiative designed to significantly
enhance our existing dealer network and to recruit new investors in specialty
retail markets. General and administrative expenses were 7.4% of sales for 1999
as compared to 7.2% in 1998, excluding the $15.9 million expense in 1998 for
compensation paid management and holders of options and stock rights.

Amortization expense and research and development expenses, as a percentage
of sales, remained fairly constant as we continued our emphasis on product
development.

During 1999 we made the decision to discontinue or curtail manufacturing
operations at five of our facilities. Products for distribution to customers of
the closed facilities are being manufactured at our other facilities. In
connection with these plant closures, we recorded a loss of $13.1 million on
manufacturing assets, representing the amount by which the book value exceeds
estimated fair value. Estimated demolition costs of $1.2 million, severance
costs of $0.4 million and a write-off of $5.0 million for related goodwill were
also recorded. Also, in 1999, we recorded a provision for loss on impairment of
intangible assets of $161.6 million. The provision reduced the carrying value of
intangible assets to management's estimate of the fair value of intangible
assets at December 31, 1999.

During the third quarter of 1999, we conducted a comprehensive strategic
business review, including the development of a business plan which addressed
both short-term and longer-term issues required to stabilize and turn around the
business. In connection with the business plan and the reorganization cases, we
incurred advisory fees and expenses of $10.7 million during 1999. Additionally,
we recorded severance cost of $3.9 million, bank fees of $1.4 million and
compensation expense of $2.1 in connection with the Key Employee Retention
Program during 1999. These costs and fees are shown as restructuring expenses.

Other (income) expense, net for 1999 relates to service fees for swine and
dairy management, the (income) loss of equity investments and losses on
marketing arrangements. The amount approximates the amount for 1998, excluding
the 1998 loss of $4.6 million on the sale of discontinued products.

Interest expense for 1999 increased $1.2 million as a result of the
increase in the outstanding debt under our prepetition credit facility. The 1999
provision for income taxes, in addition to not recording a tax benefit for 1999
losses, reflects the establishment of a valuation allowance on our deferred tax
assets. There is no assurance that the deferred tax assets or tax benefit of
1999 losses would be realized considering the bankruptcy filing and the expected
discontinuance of our tax sharing agreement with Koch Industries. The 1998
effective income tax rate approximates the statutory rate.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Due to overall lower commodity prices, net sales decreased 11.5% from the
1997 period. Gross profit decreased $28.3 million in 1998, or 13.1% from 1997.
Overall volume was 4.6 million tons for the year ended December 31, 1998, a 1.6%
decrease from 1997. The decrease in volume was attributable to a decrease in
animal numbers, extreme depressed prices for end products of producers and
continued

17
<PAGE> 20

consolidation in the hog industry. Average feed IOIC per ton was $63.66 for
1998, a 2.2% decrease from the prior year. The decrease in average feed IOIC per
ton was attributable to intense competition, low commodity prices and the
depressed agriculture economy.

Beef cattle feed tons remained consistent with the 1997 period, although we
experienced intense competition for the cattle feed business. Dairy cattle feed
tons decreased 4.2% due to some product mix switch to concentrates and a
decrease in the number of smaller dairy operations. Hog volume decreased 3.9%
due to the depressed market conditions and the resulting pressure on hog feed
margins.

Horse feed volume increased 8.4% over the 1998 period. The success in
growing this business was the result of continued aggressive promotion of
products. Laying chicken and meatbird feed volume decreased 11.9% from 1997. The
decrease can be attributed to the loss of sales of lower margin turkey and
broiler feed to two large customers. Specialty and other volume increased 3.2%
over 1997.

Cost of products sold decreased $101.4 million, or 11.1% from 1997, due
primarily to the $122.1 million decrease in ingredient costs. This decrease was
partially offset by 1998 net losses of $13.8 million from our hog program due to
the severely depressed hog market. Manufacturing expenses increased $6.9 million
over the 1997 period due primarily to increased depreciation expense and other
costs associated with the opening of the new Lubbock mill in the fourth quarter
of 1998. Marketing, distribution and advertising costs increased $3.3 million
from 1997 due primarily to an increase in the sales force and costs associated
with the roll out of the America's Country Store initiative. General and
administrative expenses increased $31.8 million primarily due to the $15.9
million of compensation paid to management and holders of options and stock
rights units as a part of the 1998 merger, an increase in the provision for bad
debt losses on capital loans and trade receivables of $10.2 million and $5.0
million attributable to increased information system costs and relocation and
severance costs. The additional bad debt provision is primarily related to
customers in the hog industry.

Amortization of intangibles and research and development costs remained
consistent with the 1997 period.

The provision for loss on guarantees of $14.2 million includes an $11.5
million charge for a guarantee we had to an entity that provided funding for our
network of independently-owned dealers and producers. The remaining $2.7 million
relates to loan guarantees made to banks to assist our customers in obtaining
bank loans for working capital, lines of credit, and additions to property,
plant and equipment.

Other (income) expense, net for 1998 relates to service fees for swine and
dairy management, the (income) loss on our equity investments, losses on
marketing arrangements and losses on the sale of discontinued products. An
increase in service fees of $1.1 million over 1997 was offset by losses on
marketing arrangements of $5.9 million due primarily to the depressed conditions
prevailing in the hog market. Additionally, we incurred a charge of $4.6 million
in 1998 on the sale of discontinued products and a charge of $1.0 million in
1997 related to an aborted recapitalization project.

Interest expense for 1998 increased $6.0 million as a result of the
increase in the outstanding debt under our prepetition credit facility and
subordinated notes. Our effective income tax rate in 1998 approximated the
statutory rate. Our effective income tax rate exceeded the statutory rate in
1997 due to amortization of goodwill not being allowed as a tax deduction.
Management reviewed the realization of the deferred tax assets at December 31,
1998 and believed it was more likely than not that they would be realized
through future taxable earnings.

SEASONALITY

Our results of operations are seasonal, with a higher percentage of our
volume and earnings being generated during the fourth and first quarters of the
year. This seasonality is driven largely by weather conditions affecting our
beef cattle products. If the weather is particularly warm during the winter,
sales of feed for beef cattle may decrease as compared with normal seasonal
patterns because the cattle may be better able to graze under warmer conditions.
Other product lines are affected marginally by seasonal

18
<PAGE> 21

conditions, but these conditions do not materially affect our overall
quarter-by-quarter results of operations. The seasonality of our businesses may
have a material adverse affect on our results of operations.

LIQUIDITY AND CAPITAL RESOURCES

For the six months ended June 30, 2000, net cash provided by operating
activities was $27.0 million compared to net cash used in operating activities
of $49.3 million during the same period in 1999. The increase in net cash
provided from the prior period results primarily from the net change in working
capital and an increase in profitability of $28.0 million. As a result of the
reorganization cases, our current liabilities, including trade payables and
payables to affiliates for ingredients, at December 31, 1999, were substantially
lower than these amounts at December 31, 1998. Accordingly, we had a slight
increase in working capital during the first six months of 2000 compared to the
significant decrease that occurred during the comparable 1999 period.

Net cash provided by investing activities was $10.9 million for the first
six months of 2000 compared to net cash used of $12.1 million for the six month
period ended June 30, 1999. The increase is due to the proceeds received from
the headquarters building sale of approximately $14.9 million and a decrease in
capital expenditures of $1.5 million.

Net cash used in financing activities in 2000 includes repayment on our
pre-petition revolving credit facility of $87.5 million and our repayment of
pre-petition term loans of $15.5 million, offset by the receipt of $60.0 million
from Koch Industries related to the negotiated settlement as provided in the
bankruptcy plan. Net cash provided by financing activities in 1999 includes
borrowings under our pre-petition revolving credit facility of $35.0 million
less the repayment of term loans of $3.4 million.

For the year ended December 31, 1999, net cash used in operating activities
was $32.0 million compared to $19.8 million net cash provided during the same
period in 1998. The increase in net cash used results primarily from the
reduction in payables of $31.8 million, a reduction in advance payments of $6.4
million and an $11.6 million increase in the cash operating loss.

Net cash used in investing activities was $23.3 million and $28.7 million
for the years ended December 31, 1999 and 1998, respectively. This change was
due to a decrease in capital expenditures of $8.8 million as construction of the
Lubbock, Texas plant was completed in the last quarter of 1998. This decrease
was partially offset by an increase in capital loans over the comparable 1998
period.

Net cash provided by financing activities in 1999 includes borrowings on
our prepetition credit facility of $67.5 million less the term loan repayment of
$5.5 million. Net cash provided by financing activities in 1998 includes the
proceeds from the prepetition credit facility of $220.0 million, the proceeds
from the senior subordinated notes of $350.0 million less the repayment of
certain prior indebtedness totaling $388.7 million and payments of $253.3
million, including $8.0 million acquisition costs, for the purchase of PM
Holdings shares in connection with the 1998 merger. In addition, net cash used
in financing activities in 1998 includes payments of $12.4 million for financing
costs.

At June 30, 2000, we had $43.2 million in cash and cash equivalents on hand
with $35.6 million available for borrowing under our new revolving credit
facility. We operate with a relatively low working capital level because a
majority of our sales are made on terms whereby customers receive a 3% discount
if payment is received immediately upon shipment of feed products, and raw
ingredients are normally purchased just prior to manufacturing and shipment.

Liquidity needs have been and will continue to be met through internally
generated funds and, to the extent necessary, borrowings under our revolving
credit facility. Our ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions and general corporate
purposes, should we need to do so, may be affected by cash requirements for debt
service. Our credit agreement contains restrictive covenants that, among other
things and under various conditions, limit our ability to incur additional
indebtedness, to acquire (including a limitation on capital expenditures) or
dispose of assets or operations and to pay dividends. Additionally, we are
required to provide to the banks monthly financial reports as to the results of
our operations. The credit agreement also requires us to make mandatory

19
<PAGE> 22

repayments of the term loan in amounts equal to 80% of Excess Cash Flow (as
defined in the credit agreement). The first payment is due March 2001.

We expect that capital expenditures during fiscal year 2000 will be
approximately $25.0 million to $30.0 million which includes $2.3 million related
to new or improved manufacturing systems at facilities where horse products are
manufactured to maintain these systems as ionophore free. Our actual capital
expenditures for the six months ended June 30, 2000 were $8.6 million. We may
from time to time be required to make additional capital expenditures in
connection with the execution of our business strategies. Our capital
expenditures during fiscal year 1999 were approximately $21 million, which
included $3.3 million related to our new accounting and information reporting
systems.

We will incur substantially lower interest expense in the future as a
result of the lower level of debt. We believe that existing cash, cash flow from
operations and availability under our revolving credit facility will provide
adequate funds for our foreseeable working capital needs, planned capital
expenditures and debt service obligations. Our ability to fund operations and
make planned capital expenditures, to make scheduled debt payments, to refinance
indebtedness and to remain in compliance with all of the financial covenants
under debt agreements depends on our future operating performance and cash flow,
which, in turn, are subject to prevailing economic conditions and to financial,
business and other factors, some of which are beyond our control.

RECENTLY ISSUED STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS

In June 1998 the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 (SFAS No. 133), Accounting for Derivative
Instruments and Hedging Activities. This statement standardizes the accounting
for derivative instruments by requiring that an entity recognize these items as
assets and liabilities in the statement of financial position and measure them
at fair value. SFAS No. 133 becomes effective for fiscal years beginning after
June 15, 2000. We are currently evaluating the impact of SFAS No. 133 on our
financial statements.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Under our credit agreement, the term loan bears interest at floating rates
that are, at our option, based either upon bank prime or Eurodollar rates. We
primarily pay interest based on the Eurodollar rate. As a result, we are subject
to interest rate risk. The following table provides information about our term
loan that is subject to interest rate risk. For the term loan, the table
presents principal cash flows and applicable interest rates by expected maturity
dates.

<TABLE>
<CAPTION>
FAIR MARKET
VALUE AT
2000(1) 2001 2002 2003 TOTAL JUNE 30, 2000
------- ---- ----- ------ ------ -------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Variable rate term debt including
current portion:
Tranche A......................... $ -- $8.0 $17.0 $150.0 $175.0 $175.0
Interest rate(2).................. -- -- -- -- -- --
</TABLE>

---------------
(1) No payments are due for the remainder of 2000.

(2) Alternative base rate plus 1.75% (11.25% at June 30, 2000). On July 5, 2000
we converted the entire term loan to Eurodollar rates. The interest rate is
Eurodollar plus 2.75%, or 9.39% at July 5, 2000.

20
<PAGE> 23

BUSINESS

OVERVIEW

We compete in both the livestock systems and the lifestyle animal feed
businesses. We define the livestock systems feed business as including nutrition
products and programs for dairy cattle, beef cattle, hogs and poultry and
believe the business is characterized by continued industry consolidation and
vertical integration of animal producers, product price sensitivities and
increasing customer sophistication. In contrast, we believe that the lifestyle
animal feed business, which includes feed products for horses, rabbits, zoo
animals, laboratory animals, birds, fish and pets, requires aggressive
marketing, customer brand awareness and strong national distribution
capabilities.

For our livestock systems business, we develop and sell our products as
part of a package that includes nutrition and management programs. Our nutrition
programs include information and services regarding the care of the animals and
their facilities, as well as nutritional, genetic and breeding counseling. We
have approximately 400 sales representatives and technical services staff,
including approximately 50 consultants with Ph.D. degrees, who work closely with
dealers and customers to help ensure that our feed products, programs and
services are matched with the animal producer's facilities and overall
management practices, as well as the genetic potential of the specific animal
species.

Our fastest growing business consists of developing, manufacturing and
selling products for the lifestyle animal market, consisting of feed products
for horses, rabbits and other companion animals. We have developed a
differentiated line of products and programs and a strong distribution system,
aggressive marketing support and brand reputation to serve this lifestyle animal
market. Our products for lifestyle animal owners include Omolene(R),
Strategy(TM) and a series of pelleted and extruded products including Equine
Senior(TM), Equine Adult(TM) and Equine Junior(TM) feeds for horses, Goat Chow,
Rabbit Chow, Layena(TM) for family flocks and PMI Nutrition(TM) for dogs and
cats.

INDUSTRY BACKGROUND

According to the 2000 Feedstuffs Reference Issue, in 1999 the U.S. animal
feed industry produced approximately 119.1 million tons of primary feed. The
industry is highly fragmented and although it includes several large producers,
it is comprised primarily of regional competitors with several manufacturing
facilities as well as a large number of small, local manufacturers, many of whom
operate only one feed mill. Animal feed typically represents 50-70% of the total
cost of producing meat, milk and eggs at the farm level. The magnitude of costs
represented by animal feed makes the effective management of feed cost one of
the most important economic components of animal raising. Although some
customers buy feed on the basis of price alone, many customers consider the
performance characteristics of the feed they purchase and appreciate the cost
effectiveness and yields produced by our value-added products.

The feed industry generally prices its products on the basis of Income Over
Ingredient Cost (IOIC) or a dollar based margin which is added to aggregate
ingredient cost. We believe that total IOIC and gross profit dollars, rather
than sales dollars, are the key indicators of performance because of distortions
in sales dollars caused by changes in commodity prices. Total IOIC less
manufacturing costs equals gross profit.

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<PAGE> 24

Although feed producers are subject to fluctuations in ingredient commodity
prices, they are generally able to pass on price increases in raw materials to
customers through weekly adjustments in product prices.

The demand for particular products is affected by a number of factors,
including the price of grains and the price of the end-products of animal
producers. When the price of grains has been relatively high, more of our
customers have tended to purchase complete rations and our tonnage has been
correspondingly higher. During periods when commodity prices (particularly for
corn) have been relatively low, animal producers have tended to purchase our
products as concentrated nutritional additives with which the customers mix
their own commodity ingredients. This results in decreased sales tonnage for us,
because the commodity portion of the product is provided by the customer. Our
concentrates, however, generally provide higher per-unit IOIC than do complete
feeds. In addition, we are diversified across a broad range of different animal
species and regions. Consequently, our total IOIC and gross profit have
historically been stable. Because the cost of feed typically represents more
than half of the cost of producing animals at the farm level, higher ingredient
prices over time can result in a decline in animal production and a decline in
the demand for our products. In addition, when market prices for live animals
and animal products are low, animal producers will also cut back on production
and search for lower-cost feed alternatives. We have attempted to counter this
producer reaction by maintaining a line of economy products while emphasizing
the relative value of our high-performance, value-added products.

OUR GROWTH STRATEGY

Our objective is to continue to be a market leader in the United States for
providing differentiated animal nutrition products and programs. Our growth
strategy emphasizes the following key elements:

Strengthen Existing Dealer Relationships and Attract New Dealers. We
intend to grow our market share of dealer feed sales by leveraging our valuable
brands to become the premier supplier of feed and related products to lifestyle
animal owners. We intend to expand our existing incentive programs rewarding top
performing dealers and to assist dealers in developing new or additional
marketing and retailing expertise.

Build Our Brands. We intend to continue to build our brands particularly
with lifestyle animal owners by:

- developing a local market based "event marketing" strategy (across specie
lines), expanding participation in industry shows and creating and
executing large venue marketing events;

- developing additional marketing programs using sports figures and other
celebrities, increasing involvement with equine and small animal
veterinarians and expanding our America's Horse Country program by adding
sponsors; and

- executing local pricing strategies (local market rate pricing and price
point segregation), implementing selective dealer distribution for
lifestyle animal owners and employing whole market planning to increase
profitability.

Expand Our America's Country Store Initiative. We will continue to pursue
our America's Country Store initiative designed to significantly enhance our
existing dealer network and to recruit new investors in "ruralpolitan" specialty
retail markets. The America's Country Store initiative features a "turn-key"
package that provides investors with a standardized model that we believe offers
lifestyle animal owners a unique shopping experience. We presently plan for the
construction of more than 200 America's Country Store facilities over the next
four years, strengthening its position in the profitable "ruralpolitan"
specialty retail market. We anticipate that all America's Country Store's
facilities, with the exception of a few company-owned model stores, will be
privately owned and will require minimal capital investment by us, other than
normal trade credit terms on feed products.

Continue to Pursue Joint Ventures and Strategic Alliances. We intend to
evaluate and pursue strategic alliances in the livestock systems market, with an
initial focus on the swine business. We intend to leverage our significant
market share, nutritional and husbandry management expertise and strong brand

22
<PAGE> 25

name and reputation to participate with selected partners in the swine, feedlot
cattle, dairy system and poultry markets.

Further Develop Our Manufacturing Capabilities. We intend to manufacture
and deliver products and plant services at optimal cost through:

- creating dedicated plants that match cost structure and scale to market
opportunities, especially in livestock systems;

- consolidating regional capacity through strategic alliances;

- increasing productivity through economies of scale and plant and product
rationalization;

- creating local manufacturing capabilities that improve profitability by
meeting local market needs;

- optimizing private label manufacturing opportunities; and

- pursuing selected toll manufacturing opportunities.

Continue to Streamline Our Operations. We plan to continue to shift
reporting and accountability relationships, previously based on a plant or
geographic focus, to a market-focused structure based on business markets.
Through the implementation of SAP enterprise resource planning software, we
recently eliminated our multiple geographic profit centers, each of which had
its own general and administrative infrastructure and centralized many
accounting and credit functions in St. Louis. We intend to implement additional
reductions in corporate administration and to further reduce overhead through:
efficiencies in SAP; manufacturing improvements; transitioning to a
market-focused sales force; and improving our distribution, logistics and
transaction processing systems.

PRODUCTS AND SERVICES

RESEARCH AND DEVELOPMENT

Our research efforts are focused on the development of proprietary product
forms and process technologies designed to support new product development and
increase manufacturing efficiency while lowering processing costs. At our
research center in Gray Summit, Missouri, we conduct extensive animal research
to develop value-added products and programs designed to optimize the genetic
performance potential of animals. Basic research is conducted by Ph.D.
scientists and technical staff who are dedicated to each species served by our
products. Each species of animal is closely studied from birth to maturity to
enable scientists to understand the complex nutritional needs and genetic
capabilities at each stage in its life cycle. By understanding the metabolic
process of each species, our scientists have identified which nutrients are
required by an animal at various stages in its development to maximize its
genetic potential. Further, researchers have gained extensive knowledge of the
nutritional composition and values of the primary ingredients used in feed and a
wide range of acceptable substitute ingredients. In addition to the development
of high-performance feeds through our research efforts, we are able to recommend
specific feeding and management programs that enhance the effectiveness of our
feed products.

SALES AND MARKETING

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<PAGE> 26

sales were made directly to animal producers. To support increasingly
sophisticated customers, our mix of salespeople includes approximately 85%
"specialists" who focus on individual species or distribution channels. Although
sales volume through our dealer network has always been substantially higher
than our direct sales volume, direct sales to customers have accounted for an
increasing proportion of our sales volume over the past 10 years. This trend
results from increasing consolidation in the animal production and processing
industries. We believe that consolidation among our customers generally results
in a more sophisticated market for our products and that these purchasers better
appreciate the advantages of high-performance nutrition products and nutritional
programs.

As of December 31, 1999, our dealer network consisted of over 4,100
independent dealers located in 49 states, with approximately 600 dealers
representing 65% of total dealer volume and 40% of our total volume in 1999. The
number of direct customers in 1999 was in excess of 5,000.

During 1999, our top 50 customers represented approximately 17% of our
total sales volume and our largest customer accounted for approximately 1% of
our total sales volume.

MANUFACTURING PROCESS

The basic feed manufacturing process consists of grinding various grains
and protein sources into a meal form that is then mixed with certain nutritional
additives, such as vitamins, minerals, synthetic amino acids, and, in some
cases, medications. The resulting products are sold in a variety of forms,
including meal, pellets, blocks and liquids. The Company's feed formulas are
based upon the nutrient content as determined through proprietary scientific
research. When the price of certain raw ingredients increases, the Company can
generally adjust its feed formulas by substituting lower-cost, alternative
ingredients to produce feeds with comparable nutritional value. By using its
least-cost product formulation system, the Company can determine optimal
formulations that meet its nutritional standards and maintain product quality.

We currently operate 48 feed manufacturing plants located in 25 states. Our
total feed manufacturing capacity is approximately 6.4 million tons per year
based on a three shift per day, five-day week, and individual plant capacity
ranges from 60,000 tons to 275,000 tons per year. Our capacity utilization
varies by plant and by season, with higher utilization during the first and
fourth fiscal quarters.

Potential manufacturing economies of scale are generally not sufficient in
the feed industry to offset the cost of shipping products over significant
distances, as raw ingredients make up a large percentage of the cost of finished
products and are often available locally. As a result, we operate nationally
with a network of manufacturing facilities with sufficient capacity to meet the
demands of the local markets in which the facilities are located. We regularly
review our plant capacity and factors such as trends in animal production in
specific markets and changes in transportation costs. Based on these factors,
from time to time manufacturing capacity in particular markets may be expanded,
consolidated or eliminated. In this regard, based on our evaluation of areas
where its operations could be consolidated or rationalized, we closed 5 feed
manufacturing plants in 1999.

We have invested in highly sophisticated computerized systems for mixing,
pelleting, micro-ingredient blending and packing. In addition, we have developed
and implemented a sophisticated software program for feed formulation that
incorporates the nutritional value of substitute ingredients. We believe this
program provides us with a competitive advantage. We have also made investments
to maintain the operating capability of our manufacturing facilities.

INTELLECTUAL PROPERTY

We market our products under the highly recognized brand names Purina(R)
and Chow(R) and the "Checkerboard" Nine Square Logo(R) pursuant to an exclusive,
perpetual, royalty-free license from Ralston Purina Company. Under the Ralston
License, we may not use those trademarks outside the United States or in
connection with any dog, cat or human food within the United States, and Ralston
uses those trademarks in those markets. The Ralston License may not be assigned
to a major competitor of Ralston

24
<PAGE> 27

or otherwise without the consent of Ralston. We have developed trademarks for
use in international and domestic markets and were granted a trademark for the
America's Country Store(R) name in 1998. Our operations do not depend to any
significant extent upon any single or related group of patents.

SEASONALITY

Our business is seasonal, with a higher percentage of the feed volume sold
and earnings being generated during the first and fourth quarters of the year.
This seasonality is driven largely by weather conditions affecting our cattle
product lines. If the weather is particularly cold and wet during the winter,
sales of feed for cattle increase as compared with normal seasonal patterns
because the cattle are unable to graze under those conditions and have higher
nutritional requirements. If the weather is relatively warm during the winter,
sales of feed for cattle may decrease as compared with normal seasonal patterns
because the cattle may be better able to graze under the warmer conditions.
Other product lines are affected marginally by seasonal conditions but these
conditions do not materially affect our quarter-by-quarter results of
operations.

COMPETITION

The feed industry, which has substantial excess capacity in certain areas
of the country, is highly competitive. Both the feed production and animal
production industries are consolidating, and this trend is expected to continue.
To date, we have been successful at generating business directly with some large
producers of animals. However, as producers of animals get larger, they
historically have tended to integrate their business by acquiring or
constructing feed production facilities to meet some or all of their
requirements and, consequently, have relied less on outside suppliers of feed.
As the consolidation of animal producers continues, the available market for
commercial feeds may shrink if producers integrate into feed production and, if
so, competition may increase. We expect consolidation in the commercial feed
industry itself, and acquisitions and other business combinations in recent
years indicate that this consolidation is occurring.

The industry is highly fragmented, with the bulk of the industry consisting
of regional competitors, including cooperatives, with several manufacturing
facilities and a large number of small, local manufacturers, many of which
operate only one feed mill. Only one competitor's commercial business approaches
the scope of our national distribution network. We believe that we distinguish
ourselves from our competitors through a competitive strategy of differentiation
using our high-performance, value-added products, which we develop and sell on a
national basis. Although the strength of competitors varies by geographic area
and product line, we believe that none of our competitors produces and markets
the breadth of products we do.

Much of the competition in the industry centers around price due to the
commodity-like aspects of the basic product lines. However, we focus our efforts
on high-performance, value-added products that are designed to be cost effective
on the basis of weight gain, feed efficiency, animal health and price. We
believe that our extensive expertise in animal nutrition requirements and the
nutritional content of various ingredients, developed through research and
combined with our manufacturing expertise and ingredient purchasing
capabilities, allow us to use lower-cost ingredients, as well as alternative
ingredients, to a greater extent than many of our competitors. We also compete
on the basis of service by providing training programs for dealers, using
species specialists with advanced technical qualifications to consult with
customers, developing and manufacturing customized products for customers, and
offering various financing assistance programs to attract and retain dealers and
direct customers.

GOVERNMENT REGULATION

We are subject to regulation by the FDA, USDA, EPA and state feed and
livestock remedy laws. The FDA and states regulate all ingredients that are part
of animal feed (feed additives) or that contact animal feed (feed contact
additives). It also regulates animal drugs that come in dosage form for

25
<PAGE> 28

administration to animals, or that are added through water or feed. Our
production facilities are subject to inspection at least once every two years by
the FDA.

The USDA is responsible for assuring that products derived from animals are
wholesome, which includes inspection for any drug residues that the animal might
contain. The USDA monitors residues and when violations occur, the USDA works in
conjunction with FDA to investigate and assign responsibility. Similar to this
federal regime, each state's Department of Agriculture also regulates our feed
production facilities and feed products manufactured or distributed in the
state.

We have an environmental policy designed to ensure that we operate in
material compliance with applicable environmental regulations. We also have
undertaken a compliance audit program that addresses environmental and other
regulatory compliance.

EMPLOYEES

We had approximately 2,300 full-time employees as of June 30, 2000,
approximately 13% of whom were union members. We have a satisfactory
relationship with our employees, including our unionized employees.

FACILITIES

We lease our corporate headquarters in St. Louis and own a 1,188 acre
research center in Gray Summit, Missouri.

We currently operate 48 feed manufacturing plants located in 25 states, one
of which is leased. In addition to on-site storage at each of our manufacturing
plants, we also store products in owned or leased warehouses.

LEGAL PROCEEDINGS

On October 28, 1999, we filed voluntary petitions for relief under chapter
11 of the United States Bankruptcy Code. We filed a joint plan of reorganization
with the bankruptcy court on January 18, 2000, which, as amended, was declared
effective on June 29, 2000. As of that date, we emerged from bankruptcy and
began operating under a new capital structure.

The bankruptcy plan constituted the agreement among Koch Industries, Koch
Agriculture, their respective affiliates, the official committee of unsecured
creditors, the holders of approximately 55% of the principal amount of our
prepetition subordinated debt and us regarding the settlement of issues among
Koch Industries, Koch Agriculture, our creditors and us.

The plan provided for, among other things:

- the cancellation of Koch Agriculture's equity in us;

- repayment of all of our $278 million prepetition secured debt through a
$103 million cash payment and $175 million in borrowings under a new,
post-bankruptcy term loan;

- a capital contribution to us of $60 million by Koch Agriculture;

- the discharge of prepetition intercompany claims among our companies;

- the selection of a new board of directors;

- the settlement of claims by and against Koch Industries, Koch Agriculture
and other related parties;

26
<PAGE> 29

- the merger of Purina Mills, Inc. into PM Holdings Corporation, with PM
Holdings surviving the merger and changing its name to Purina Mills,
Inc.;

- other corporate restructuring transactions designed to simplify our
corporate structure; and

- the substantive consolidation of us and our subsidiaries.

The plan also permitted us to grant options to purchase 1,000,000 shares of
our common stock to selected key employees under our equity incentive plan.

Except for our chapter 11 proceedings, we are not involved in any material
legal proceedings.

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<PAGE> 30

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors, and their ages and positions as of
August 15, 2000 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Brad J. Kerbs............................. 53 Director, Chief Executive Officer and
President
Rick L. Bowen............................. 48 Executive Vice President, Operations
Mark S. Chenoweth......................... 42 Executive Vice President, Retail Dealer
Development
James R. Emanuelson....................... 42 Executive Vice President and Chief
Information Officer
David R. Hoogmoed......................... 43 Executive Vice President, Livestock
Systems Business Group
Del G. Meinz.............................. 52 Vice President, Treasurer and Controller
Bradley D. Schu........................... 42 Executive Vice President, Dealer Business
Group
Darrell D. Swank.......................... 37 Executive Vice President, Chief Financial
Officer and Secretary
Craig Scott Bartlett, Jr.(1)(2)........... 67 Director
Robert Cummings, Jr.(2)................... 50 Director
James Gaffney(1).......................... 60 Director
Robert A. Hamwee(1)(2).................... 30 Director
</TABLE>

---------------
(1) Member of Compensation Committee.

(2) Member of Audit Committee.

Brad J. Kerbs has served as a director since our emergence from bankruptcy
and as our Chief Executive Officer and President since February 2000.
Previously, he served as our President and Chief Operating Officer since August
1999, and as a Executive Vice President since August 1998. He joined us 1969 and
has served in various operational, administrative, marketing and management
positions.

Rick L. Bowen has served as our Executive Vice President, Operations since
February 2000. He previously served as one of our Vice Presidents since October
1995. He joined us in 1984 and has served in various positions, including
Manager Financial Services, District Manager, Division Sales Manager, Region
Director of Pricing, Area General Manager, and Vice President, Dairy Operations.

Mark S. Chenoweth has served as our Executive Vice President, Retail Dealer
Development since February, 2000. He previously served as one of our Vice
Presidents since July, 1999. He joined us in 1987 and has served in various
positions including Branded Meats Marketing Manager, Retail Specialty Marketing
Manager and Director, Retail Business Development of America's Country Store.

James R. Emanuelson has served as our Executive Vice President and Chief
Information Officer since February 2000. He previously served as our Chief
Information Officer since August 1999. Prior to joining us, he was employed by
Compaq Computer Corporation, a computer hardware company, for seven years, where
he held various positions including Director of Corporate Manufacturing Systems.

David R. Hoogmoed has served as our Executive Vice President, Livestock
Systems Group since February 2000. From August 1999 through February 2000, he
served as our Senior Vice President, Livestock Systems. He joined us in 1979 and
previously has served in various positions, including District Manager, Division
Sales Manager, Regional Director of Sales and Marketing, Area General Manager,
Central Region Vice President; and most recently, Vice President, Swine
Operations.

Del G. Meinz has served as our Vice President, Treasurer and Controller
since August 1998. He joined us in February 1988 as Director of Taxes and was
promoted to Controller in September 1993.

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<PAGE> 31

Bradley D. Schu has served as our Executive Vice President, Dealer Business
Group since February 2000. He previously served as one of our Vice Presidents
since August 1998. He joined us in 1980 and has served in various positions,
including field sales, sales management, Director, Retail Specialty Business
Group and Vice President, National Dealer Sales.

Darrell D. Swank has served as our Executive Vice President and Chief
Financial Officer since February 2000. He was also elected Secretary of the
Company in August, 2000. He previously served as our Chief Financial Officer
since April 1998. Prior to his appointment as Chief Financial Officer, he was
Chief Financial Officer of Koch Agriculture Company, a position he held since
January 1997. Before joining Koch Agriculture, he was a consultant with Deloitte
Consulting, L.L.C., a management consulting firm.

Craig Scott Bartlett, Jr. has served as a director since our emergence from
bankruptcy. Since 1994, Mr. Bartlett has been a self-employed corporate director
and currently serves on the board of directors of NVR, Inc., a homebuilder,
Janus Hotels and Resorts, Inc., a hotel and hotel management company, Abraxas
Petroleum Corporation, an exploration and development company, New ICO Global
Communications (Holdings) Limited, a satellite telecommunications company and
Connecticut Bank of Commerce.

Robert Cummings, Jr. has served as a director since our emergence from
bankruptcy. Mr. Cummings joined Goldman Sachs & Co., an investment bank, in 1973
and served with Goldman Sachs & Co. in various capacities from that date until
his retirement in 1998 as a General Partner of the firm. Since his retirement,
Mr. Cummings has served as an Advisory Director of Goldman Sachs & Co.

James Gaffney has served as a director since our emergence from bankruptcy.
Since 1997 Mr. Gaffney has served as the Chairman of the Board of Vermont
Investments, Ltd., an investor consulting firm. Mr. Gaffney was previously the
Chairman of the Board and Chief Executive Officer of General Aquatics, Inc., a
swimming pool equipment manufacturer.

Robert A. Hamwee has served as a director since our emergence from
bankruptcy. Mr. Hamwee is a Managing Director of GSC Partners, an investment
firm, which he joined in 1994. Mr. Hamwee was previously associated with The
Blackstone Group, a merchant bank, where he worked on a wide range of
assignments in the Merchant Banking, Mergers & Acquisitions and Restructuring
departments.

As noted in their individual biographies, each of Messrs. Kerbs, Bowen,
Chenoweth, Emanuelson, Hoogmoed, Meinz, Schu and Swank served as an officer of
Purina Mills, Inc. at the time it filed chapter 11 proceedings in October 1999.

There are no family relationships between any of the above-named executive
officers and directors.

BOARD COMMITTEES

Audit Committee. Our audit committee recommends an accounting firm to
serve as our independent accountants, and reviews the professional services
provided by our independent accountants and the independence of such accountants
from management and us. The audit committee also reviews the annual audit plan,
the scope and results of the audit coverage, our annual financial statements and
such other matters with respect to our accounting, auditing and financial
reporting practices and procedures as are delineated in its charter, as it may
otherwise find appropriate or as are brought to its attention. The audit
committee reports its findings and recommendations to the board for appropriate
action. The current members of the audit committee are Messrs. Bartlett,
Cummings and Hamwee.

Compensation Committee. Our compensation committee reviews and recommends
to our board salary and incentive compensation arrangements for officers and
other employees and administers our equity incentive plans. The members of the
compensation committee are Messrs. Bartlett, Gaffney and Hamwee.

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<PAGE> 32

DIRECTOR COMPENSATION

Our directors are not currently paid for service as members of our board of
directors or any board committee but are reimbursed for travel and other related
expenses incurred in attending board or board committee meetings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The compensation committee currently consists of three independent
directors, Messrs. Bartlett, Gaffney and Hamwee. None was an officer or employee
of ours during the last fiscal year or was formerly an officer or employee of
ours. Prior to our emergence from bankruptcy we did not have a compensation
committee or other committee of the board of directors performing similar
functions. Previously, decisions concerning compensation of our executive
officers were made by the board of directors.

LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

The Delaware General Corporation Law authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breaches of directors' applicable duties,
subject to very limited exceptions. Our certificate of incorporation includes
provisions that eliminate the personal liability of our directors to the fullest
extent permitted by Delaware law. See "Description of Capital
Stock -- Limitations on Liability and Indemnification of Directors and
Officers."

EXECUTIVE COMPENSATION

The following table sets forth all compensation awarded to, earned by or
paid to our chief executive officer and our other four most highly compensated
executive officers for services rendered in all capacities to us during 1999.
These individuals are referred to as our "named executive officers."

SUMMARY COMPENSATION TABLE(1)

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(2) COMPENSATION(3)
--------------------------- ------- -------- ---------------
($) ($) ($)
<S> <C> <C> <C>
James M. Dumler,........................................ 33,333 100,000 4,800
Former Director(4)
Timothy A. Durkin,...................................... 33,333 100,000 4,800
Former Director(4)
Richard E. Knudson,..................................... 33,333 100,000 4,800
Former Director(4)
Dean E. Watson,......................................... 46,680 -- 2,790
Former Chief Executive Officer(5)
Brad J. Kerbs,.......................................... 155,834 80,000 4,800
President and Chief Executive Officer(4)(6)
Darrell D. Swank,....................................... 165,000 120,000 3,750
Executive Vice President and Chief Financial
Officer(6)
James R. Emanuelson,.................................... 156,667 75,000 2,188
Executive Vice President and Chief Information
Officer(6)
Rick L. Bowen,.......................................... 128,033 50,000 4,866
Executive Vice President, Operations(6)
</TABLE>

---------------
(1) A column to this table entitled "Long Term Compensation" has been excluded
because no compensation was paid to any of the named executive officers that
requires disclosure as "Long Term Compensation."

(2) Amounts shown for 1999 represent bonuses earned during the 1999 fiscal year,
which were paid during the first quarter of 2000, except for Messrs. Dumler,
Durkin, Knudson, Kerbs and Swank who

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<PAGE> 33

were paid 50% during the first quarter of 2000 with the remainder being paid
upon our emergence from bankruptcy on June 29, 2000.

(3) "All Other Compensation" represents matching payments made under our 401(k)
Savings Investment Plan.

(4) From April 1999 through February 2000, Messrs. Dumler, Durkin and Knudson
jointly served in the three-member office of the Chief Executive Officer. As
of February 4, 2000, (a) the three-member office of the Chief Executive
Officer was eliminated, and (b) Mr. Kerbs became President and Chief
Executive Officer. Messrs. Dumler, Durkin and Knudson are no longer
employees.

(5) Mr. Watson was President and Chief Executive Officer from January through
March 1999.

(6) Although the annual compensation shown is for the fiscal year 1999, the job
titles of the named executive officers reflect promotions each received in
February 2000.

OPTIONS GRANTS IN THE LAST FISCAL YEAR

During fiscal year 1999, there were no options granted under any equity
incentive plans to any of our directors or named executive officers.

EMPLOYMENT ARRANGEMENTS

We have entered into employment agreements with our named executive
officers and 14 other executives. The terms of these agreements are generally
for an initial period of two years until September 2000, with automatic yearly
extensions thereafter, unless we or the executive gives written notice of
termination not less than 90 days prior to the yearly renewal date.

These agreements set forth:

- the executive's compensation and benefits;

- the executive's obligations not to compete for the term of the agreement
plus one year (if the termination is not in connection with a "triggering
event") or two years (if the termination is in connection with a
"triggering event") unless the executive terminated his employment for
good reason or the employer terminates the executive for good cause; and

- the executive's right to receive severance payments if the agreement is
terminated.

EQUITY INCENTIVE PLAN

We adopted our equity incentive plan on May 17, 2000 and authorized
1,000,000 shares to be reserved under the plan. As of the date of this
prospectus, options to purchase 912,858 shares have been granted under the plan.
The plan provides for the grant of stock options to our key employees. The plan
is administered by our board, or a committee designated by our board consisting
of not less than two directors. Our board is authorized to interpret the plan
and related agreements, to make awards under the plan, or in its discretion,
make no awards, and to amend the plan from time to time.

The number of shares of common stock that may be issued or transferred upon
the exercise of option rights may not exceed 1,000,000 shares of common stock
plus any shares relating to awards that expire or are forfeited. No participant
may be granted option rights for more than 250,000 shares of common stock during
any year, subject to adjustment as provided in the plan.

The maximum number of shares that may be issued and delivered under the
plan, the number of shares covered by outstanding option right, and the prices
per share applicable to these shares, are subject to adjustment in the event of
stock dividends, stock splits, combinations of shares, recapitalizations,
mergers, consolidations, spin-offs, reorganizations, liquidations, issuances of
rights or warrants and similar events. In the event of any such transaction or
event, our board, in its discretion, may provide in substitution for any or all
outstanding awards under the plan such alternative consideration as it, in good

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<PAGE> 34

faith, may determine to be equitable in the circumstances and may require the
surrender of all awards so replaced.

Fifty percent of the options granted to each optionee will have an option
price of $18.50 per share, twenty-five percent of the options granted to each
optionee will have an option price of $23.12 per share and twenty-five percent
of the options granted to each optionee will have an option price of $27.75 per
share. The option price is payable in cash or by check at the time of exercise.

Options granted under the equity incentive plan will become exercisable to
the extent of one-third of the options on each anniversary of the effective date
of our emergence from bankruptcy, which occurred on June 29, 2000, and will
become immediately exercisable with respect to all of the options upon certain
events, for example, a change of control or the optionee's retirement at or
after age 65, death or disability. No option right will be exercisable after
December 31, 2006.

SECTION 16 COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, requires our officers
and directors, and persons who own more than 10% of a registered class of our
equity securities, to file reports of ownership and changes in ownership with
the SEC. Officers, directors and greater than 10% stockholders are required by
regulations of the SEC to furnish us with copies of all these reports. Based
solely on our review of the copies of such reports received by us, or written
representations from certain reporting persons that no reports were required for
those persons, we believe that all filing requirements applicable to our
officers, directors, and greater than 10% stockholders were complied with during
the applicable period.

CERTAIN TRANSACTIONS

The following is a description of transactions since January 1, 1999 to
which we have been a party, in which the amount involved exceeds $60,000 and in
which any director, executive officer or holder of five percent or more of our
capital stock had or will have a direct or indirect material interest, other
than our compensation arrangement with our senior executives described under
"Management -- Employment Arrangements."

Registration Rights Agreement With GSCP Recovery, Inc. We have entered
into a registration rights agreement with GSCP Recovery, Inc. which requires us
to register under the Securities Act the shares of our common stock received by
GSCP Recovery by operation of our bankruptcy plan and to keep the registration
in effect for a two-year period. This prospectus was filed in compliance with
the terms of the agreement. GSCP Recovery is also entitled to customary
"piggyback" registration rights under the agreement as well as other related
benefits. For a further description of the agreement, see "Description of
Capital Stock -- Registration Rights."

Indemnification Agreements. We have entered into indemnification
agreements with each of our directors and officers providing for the
indemnification of and advancement of expenses to these persons to the fullest
extent permitted by law. We also intend to execute these agreements with our
future directors and officers. See "Management -- Limitations of Liability and
Indemnification Matters."

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of our common stock as of June 30, 2000 held by:

- each person or group believed by us to beneficially own more than 5% of
our common stock;

- each of our directors, chief executive officer and our other named
executive officers; and

- all of our directors and executive officers as a group.

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<PAGE> 35

Beneficial ownership is determined under the rules of the SEC and generally
includes any shares over which a person exercises sole or shared voting or
investment power. Except as indicated below, each person identified in the table
possesses sole voting and investment power with respect to all shares of common
stock held by that person. Shares of common stock subject to options currently
exercisable or exercisable within 60 days of August 25, 2000 are deemed
outstanding and to be beneficially owned by the person holding the options for
purposes of calculating the percentage, but are not deemed outstanding for
purposes of calculating the percentage ownership of any other person. Applicable
percentage ownership in the following table is based on 8,230,332 shares of
common stock outstanding as of August 25, 2000. Because the selling stockholders
may offer all or some part of the Common Stock which they hold pursuant to the
offering contemplated by this prospectus, and because this offering is not being
underwritten on a firm commitment basis, no estimate can be given as to the
amount of common stock that will be held by the selling stockholders upon
termination of this offering. See "Plan of Distribution."

BENEFICIAL OWNERSHIP OF COMMON
STOCK PRIOR TO OFFERING

<TABLE>
<CAPTION>
NO. OF SHARES
NAME AND ADDRESS PERCENT OF COMMON STOCK
OF BENEFICIAL OWNERS NO. OF SHARES OF CLASS BEING OFFERED
-------------------- ------------- -------- ---------------
<S> <C> <C> <C>
Franklin Resources, Inc.(1)........................... 1,047,953 10.6% --
GSCP Recovery, Inc.(2)................................ 2,356,168 28.6% 2,356,168
Koch Agriculture Company(3)........................... 516,668 6.3% --
Rick L. Bowen......................................... 4,035 * --
Mark S. Chenoweth..................................... 2,862 * --
James R. Emanuelson................................... 4,293 * --
David R. Hoogmoed..................................... 4,035 * --
Brad J. Kerbs......................................... 6,610 * --
Del G. Meinz.......................................... 2,576 * --
Bradley D. Schu....................................... 4,006 * --
Darrell D. Swank...................................... 9,014 * --
Craig Scott Bartlett, Jr. ............................ -- -- --
Robert Cummings, Jr. ................................. -- -- --
James Gaffney......................................... -- -- --
Robert A. Hamwee...................................... -- -- --
All Executive Officers and Directors as a Group (11
persons)............................................ 37,431 * --
</TABLE>

---------------
* Indicates beneficial ownership of less than 1.0% of the outstanding common
stock.

(1) These 1,047,953 shares represent the estimated amount of shares Franklin
Resources was to receive pursuant to the plan of reorganization according to
a Schedule 13D filed with the Securities and Exchange Commission on August
10, 2000, and are owned by one or more open or closed end investment
companies or other managed account that are advised by direct and indirect
investment advisory subsidiaries of Franklin Resources, Inc. Advisory
contracts grant to these adviser subsidiaries all investment and/or voting
power over the securities owned by the advisory clients.

The voting and investment powers held by Franklin Mutual Advisers, LLC,
formerly Franklin Mutual Advisers, Inc., an indirect wholly owned investment
advisory subsidiary of Franklin Resources, are exercised independently from
Franklin Resources and from all other investment advisor subsidiaries of
Franklin Resources (Franklin Resources, its affiliates and investment
advisor subsidiaries other than Franklin Mutual are collectively referred to
as "Franklin affiliates"). Furthermore, Franklin Mutual and Franklin
Resources internal policies and procedures establish informational barriers
that prevent the flow between Franklin Mutual and the Franklin affiliates of
information that relates to the voting and investment powers over the
securities owned by their respective advisory clients.

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<PAGE> 36

Charles B. Johnson and Rupert H. Johnson, Jr. each own in excess of 10% of the
outstanding common stock and are the principal shareholders of Franklin
Resources. Franklin Resources and Messrs. C. Johnson and R. Johnson may be
deemed to be, for purposes of Rule 13d-3 under the Securities and Exchange
Act of 1934, the beneficial owner of securities held by persons and
entities advised by the Franklin Resources subsidiaries. Franklin Resources
and each of the adviser subsidiaries disclaim any economic interest of
beneficial ownership in any of the securities covered by this statement.

Franklin Resources and each of the adviser subsidiaries are of the view that
they are not acting as a "group" for purposes of Section 13(d) under the 1934
Act and that they are not otherwise required to attribute to each other the
"beneficial ownership" of securities held by any of them or by any persons
or entities advised by the Franklin Resources subsidiaries.

(2) According to a Schedule 13D filed with the Securities and Exchange
Commission on July 10, 2000, (a) GSCP Recovery, Inc., a Cayman Islands
corporation, has sole dispositive power over an estimated 2,706,368 shares
issued or to be issued; (b) Greenwich Street Capital Partners II, L.P., a
Delaware limited partnership, has shared voting power over an estimated
2,706,368 shares issued or to be issued; (c) GSCP Offshore Fund, L.P., a
Cayman Islands exempted limited partnership, has shared voting power over an
estimated 2,706,368 shares issued or to be issued; (d) Greenwich Fund, L.P.,
a Delaware limited partnership, has shared voting power over an estimated
2,706,368 shares issued or to be issued; (e) Greenwich Street Employees
Fund, L.P., a Delaware limited partnership, has shared voting power over an
estimated 2,706,368 shares issued or to be issued; (f) TRV Executive Fund,
L.P., a Delaware limited partnership, has shared voting power over an
estimated 2,706,368 shares issued or to be issued; (g) Greenwich Street
Investments II, L.L.C., a Delaware limited liability company, has shared
voting power over an estimated 2,706,368 shares issued or to be issued; (h)
Alfred C. Eckert III has shared voting power over an estimated 2,706,368
shares issued or to be issued; (i) Keith W. Abell has shared voting power
over an estimated 2,706,368 shares issued or to be issued; and (j) Sanjay H.
Patel has shared voting power over an estimated 2,706,368 shares issued or
to be issued.

All of the outstanding capital stock of GSCP Recovery, Inc. is owned by
Greenwich Street Capital Partners II, L.P., GSCP Offshore Fund, L.P.,
Greenwich Fund, L.P., Greenwich Street Employees Fund, L.P. and TRV
Executive Fund, L.P. Greenwich Street Investments II, L.L.C. is the general
partner of each of the entities that collectively own all of the capital
stock of GSCP Recovery.

Based on the 8,230,332 shares issued and outstanding as of August 25, 2000,
the actual amount of shares that GSCP Recovery actually received to date
pursuant to the plan of reorganization was 2,356,168.

(3) According to a Schedule 13D filed with the Securities and Exchange
Commission on August 16, 2000, Koch Agriculture Company, a Nebraska
corporation, has sole dispositive and voting power over 516,668 shares,
which were issued to Koch Agriculture pursuant to the plan of
reorganization.

All of the outstanding capital stock of Koch Agriculture Company is owned by
Koch Industries, Inc., a Kansas corporation.

DESCRIPTION OF CAPITAL STOCK

We are authorized to issue 20,000,000 shares of common stock, $0.01 par
value, and 5,000,000 shares of preferred stock, $0.01 par value. The following
description of our capital stock does not purport to be complete and is subject
to, and qualified in its entirety by, our certificate of incorporation and
bylaws, which we have included as exhibits to the registration statement of
which this prospectus forms a part.

COMMON STOCK

As of August 25, 2000 there were 8,230,332 shares of common stock
outstanding, held of record by 545 stockholders. In addition, there were 912,858
shares of common stock which we are obligated to issue upon the exercise of
options as of the date of this prospectus.

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<PAGE> 37

Each share of common stock entitles its holder to one vote on all matters
to be voted upon by stockholders. Cumulative voting for the election of
directors is not provided for in our certificate of incorporation. Subject to
preferences that may apply to any outstanding preferred stock, holders of common
stock may receive ratably any dividends that the board of directors may declare
out of funds legally available for that purpose. In the event of our
liquidation, dissolution or winding up, the holders of our common stock are
entitled to share ratably in all assets remaining after payment of liabilities
and any liquidation preference of preferred stock that may be outstanding. The
common stock has no preemptive rights, conversion rights or other subscription
rights or redemption or sinking fund provisions. Each outstanding share of our
common stock is, and all shares of our common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.

PREFERRED STOCK

Our board of directors has the authority, without further action by our
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series and to designate the rights, preferences, privileges and restrictions of
each such series. The issuance of preferred stock could have the effect of
restricting dividends on our common stock, diluting the voting power of our
common stock, impairing the liquidation rights of our common stock or delaying
or preventing a change in control without further action by the stockholders.
Except as described below in relation to our rights agreement, we have no
present plans to issue any shares of preferred stock.

We have authorized an initial class of preferred stock designated as
"Series A Junior Participating Preferred Stock." This Series A Preferred may be
issued only in connection with the exercise of rights under our rights plan as
described below. Each holder of Series A preferred will be entitled to 100 votes
per share and, except as otherwise required by law, will vote together with the
common stock as a single class on all matters properly submitted to a vote at a
meeting of the stockholders. All other preferred stock we may issue, however,
must have only one vote per share in accordance with our certificate of
incorporation.

REGISTRATION RIGHTS

GSCP Recovery, Inc. is entitled to require us to register the sale of their
2,356,168 shares of common stock under the Securities Act. Subject to
limitations specified in our agreement with GSCP Recovery, these registration
rights include:

- Piggyback Registration Rights. An unlimited number of piggyback
registration rights that require us to register sales of GSCP Recovery's
shares when we undertake a public offering anytime prior to June 29, 2002
or otherwise for so long as GSCP or its transferees are our affiliates,
subject to the discretion of the underwriters of the offering to decrease
the amount that GSCP Recovery may register for marketing reasons; and

- Shelf Registration Rights. The right to require us to register sales of
GSCP Recovery's shares pursuant to a shelf registration statement
covering the continuous resale of these shares. This prospectus was filed
to fulfill this contractual obligation. These shelf registration rights
expire upon the earlier of June 29, 2002 or GSCP's sale or disposition of
all of the shares eligible for registration.

We must pay all registration expenses when these registration rights are
exercised, other than any underwriting discounts and commissions, which will be
paid by the selling stockholders.

ANTI-TAKEOVER PROVISIONS

Delaware Law

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to specific exceptions, Section 203 prohibits a
publicly-held Delaware corporation from engaging in a

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<PAGE> 38

"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless:

- the transaction in which such stockholder became an "interested
stockholder" is approved by the corporation's board of directors prior to
the date the "interested stockholder" attained that status;

- upon the consummation of the transaction that resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding those shares owned by persons
who are directors and also officers; or

- on or subsequent to the date the person became an interested stockholder,
the "business combination" is approved by the board of directors and
authorized at an annual or special meeting of stockholders by the
affirmative vote of at least two-thirds of the outstanding voting stock
that is not owned by the "interested stockholder."

"Business combinations" include mergers, asset sales and other transactions
resulting in a financial benefit to the "interested stockholder." Subject to
various exceptions, an "interested stockholder" is a person who, together with
his or her affiliates and associates, owns, or within three years did own, 15%
or more of the corporation's voting stock.

Rights Agreement

Under our rights agreement, on the effective date of our reorganization we
effected a distribution of one share purchase right for each share of our common
stock. Each share purchase right provides the holder with the right to purchase
one one-hundredth of a share of our Series A Junior Participating preferred
stock at a price of $100 per one one-hundredth of a share, subject to
adjustment. Under the agreement, the rights will be evidenced by the common
stock share certificates until the earlier of the following:

- the close of business on the first date of public announcement that a
person (together with its affiliates and associates) has acquired
beneficial ownership of 15% or more of the outstanding shares of our
common stock; or

- the close of business on the tenth business day (or a later date as may
be specified by our board of directors) following the commencement of a
tender offer or exchange offer by a person, the consummation of which
would result in beneficial ownership by such person of 15% or more of the
outstanding shares of our common stock.

After the rights separate from our common stock, certificates representing the
rights will be mailed to record holders of the common stock. Once distributed,
the rights certificates alone will represent the rights.

All shares of common stock issued before the date the rights separate from
the common stock will be issued with the rights attached. The rights are not
exercisable until the date the rights separate from the common stock. The rights
will expire on June 29, 2001 unless earlier redeemed or exchanged by us.

If an acquirer obtains or has the rights to obtain 15% or more of our
common stock, then each right will entitle the holder to purchase a number of
shares of our common stock equal to twice the purchase price of each right.

Each right will entitle the holder to purchase a number of shares of common
stock of the acquirer having a then current market value of twice the purchase
price if an acquirer obtains 15% or more of our common stock and any of the
following occurs:

- we merge into another entity;

- an acquiring entity mergers into us; or

- we sell more than 50% of our assets or earning power.

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<PAGE> 39

These rights will not interfere with any merger or other business
combination approved by our board of directors because each right may be
redeemed by us for $0.01 before the date of distribution. For so long as the
rights are redeemable, we may amend them in any manner except for the redemption
price.

The full description and terms of the rights are set forth in a rights
agreement between us and the rights agent, a copy of which was filed as Exhibit
4(c) to our Registration Statement on Form 10, which is incorporated by
reference into this prospectus. See "Where You Can Find More Information." The
summary of the terms of the rights agreement described above is not complete and
is qualified by reference to the rights agreement.

Certificate of Incorporation and Bylaws

Our certificate of incorporation:

- does not provide for cumulative voting in the election of directors; and

- authorizes our board of directors to establish the terms of and to issue
shares of our authorized but unissued preferred stock.

Our bylaws provide that candidates for director may be nominated by our
board of directors or by a stockholder who gives written notice to us no later
than 60 days prior nor earlier than 90 days prior to the first anniversary of
the last annual meeting of stockholders.

Delaware law, our rights agreement and these provisions of our certificate
of incorporation and bylaws may have the effect of deterring hostile takeovers
or delaying changes in our board of directors, which could depress the market
price of our common stock.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breaches of directors' applicable duties except for:

- any breach of the directors' duty of loyalty to us or our stockholders;

- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

- any unlawful payment of a dividend or unlawful stock repurchase or
redemption; or

- any transactions from which the director derived an improper personal
benefit.

- Our certificate of incorporation includes a provision that eliminates the
personal liability of our directors to the fullest extent permitted by
Delaware law.

Our certificate of incorporation also provides that:

- we must indemnify our directors and officers to the fullest extent
permitted by Delaware law subject to the limited exceptions listed above;

- we may indemnify our other employees and agents to the same extent that
we indemnify our directors and officers, except that, to the extent that
such person has been successful on the merits or otherwise in defense of
any action, suit, or proceeding, we must indemnify them; and

- we must advance expenses, as incurred, to our directors and officers, and
may do so to our other employees, agents, and any person who may have a
right of indemnification in connection with legal proceedings.

We have obtained directors' and officers' insurance providing coverage for
our directors, officers and key employees. We believe that these indemnification
provisions and the insurance are necessary to attract and retain qualified
directors and executive officers.

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<PAGE> 40

The limitation of liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against directors for breach of their fiduciary duty. These
provisions may also have the effect of reducing the likelihood of derivative
litigation against directors and officers, even though such an action, if
successful, might otherwise benefit us and our stockholders. Furthermore, a
stockholder's investment may be adversely affected to the extent we pay the
costs of settlement and damage awards against directors and officers pursuant to
these indemnification provisions.

At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees for which indemnification is sought. We are
unaware of any threatened litigation that may result in claims for
indemnification.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is Wells Fargo Bank
Minnesota, N.A.

SHARES ELIGIBLE FOR FUTURE SALE

SALES OF OUR COMMON STOCK AFTER THE OFFERING

No predictions can be made as to the effect, if any, that sales of
additional shares of our common stock, or the perception that sales will be
made, could have on the trading price of our common stock after the offering.
Sales of substantial amounts of our common stock after the offering could
adversely affect the trading price for the common stock because a greater supply
of shares would be, or would be perceived to be, available for sale in the
public market.

As of August 25, 2000, we have outstanding 8,230,332 shares of our common
stock. Of these outstanding shares, the 2,356,168 shares being sold in this
offering will be freely transferable without restriction under the Securities
Act, except for any shares which are purchased by our affiliates. Shares
purchased by our affiliates will be subject to the limitations on resale of Rule
144 under the Securities Act described below. In addition, we intend to file a
registration statement covering up to 1,000,000 shares issuable upon exercise of
stock options under our equity incentive plan. Such option shares, upon
issuance, will be immediately available for resale, subject to the applicable
resale limitations under Rule 144 for holders that are our affiliates.
Restricted shares may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rule 144 or 144(k) promulgated
under the Securities Act, which rules are summarized below.

RULE 144

In general, under Rule 144 as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year is entitled
to sell within any three-month period a number of shares that does not exceed
the greater of either:

- 1% of the number of shares of our common stock, which is approximately
82,303 shares immediately following this offering; or

- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing date
of a notice on Form 144 for the proposed sale.

Sales under Rule 144 are also subject to specific manner of sale
limitations, notice requirements and the availability of current public
information about us.

RULE 144(k)

Under Rule 144(k), a person who has not been an affiliate of ours at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares to be sold for at least two years, is entitled to sell shares without
complying with the volume limitation, manner of sale, notice and public
information
38
<PAGE> 41

provisions of Rule 144. Therefore, unless otherwise restricted, shares meeting
the requirements of Rule 144(k) may be resold immediately upon the completion of
this offering.

STOCK OPTIONS

1,000,000 shares of our common stock are reserved for issuance upon the
exercise of options issued under our equity incentive plans. As of the date of
this prospectus, options to purchase 912,858 shares of our common stock at a
weighted average exercise price of $21.97 per share have been granted. We filed
a registration statement under the Securities Act to register shares reserved
for issuance under our equity incentive plans. Shares issued under these plans
or upon exercise of outstanding options after the effective date of that
registration statement, other than shares held by affiliates, which will be
subject to the limitations on resale of Rule 144, generally will be tradable
without restriction under the Securities Act, subject to vesting restrictions
and the lock-up agreement described below.

LOCK-UP AGREEMENTS

Each of our executive officers and certain other employees who received
common stock by operation of our plan of reorganization, have agreed, subject to
specified exceptions, not to offer, sell, contract to sell, grant any option to
purchase or otherwise dispose of any shares of our common stock or options to
acquire shares of our common stock during the six-month period after the
effectiveness of our plan of reorganization

REGISTRATION RIGHTS

GSCP Recovery, Inc. has registration rights with respect to their 2,356,168
shares of common stock that require us to register their shares under the
Securities Act pursuant to a shelf registration statement as well as rights to
participate in any future registration of securities by us. See "Description of
Capital Stock -- Registration Rights."

PLAN OF DISTRIBUTION

The common stock offered hereby may be sold from time to time by the
selling stockholders on the Nasdaq National Market System at then prevailing
prices or at prices related to the then current market price or in private
transactions at negotiated prices. The shares may be sold by one or more of the
following methods, without limitation:

- a block trade in which a broker or dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction;

- purchase by a broker or dealer as principal and resale by that broker or
dealer for its account pursuant to this prospectus;

- ordinary brokerage transactions and transactions in which the broker
solicits purchasers; and

- face-to-face transactions between sellers and purchasers without a
broker-dealer.

In effecting sales, brokers and dealers engaged by the selling stockholders
may arrange for other brokers or dealers to participate. These brokers or
dealers may receive commissions or discounts from selling stockholders in
amounts to be negotiated. These brokers and dealers and any other participating
brokers and dealers may be deemed to be "underwriters" within the meaning of the
Securities Act, in connection with such sales. Shares of common stock offered
under this registration statement may be used to cover short sales or other
hedging transactions. From time to time, one or more of the selling stockholders
may pledge, hypothecate or grant a security interest in some or all of the
shares owned by them, and the pledgees, secured parties or persons to whom such
securities have been hypothecated will, upon foreclosure in the event of
default, be deemed selling stockholders for those purposes.

39
<PAGE> 42

We will not receive any proceeds from the sale of the share of the common
stock being offered by the selling stockholders. However, we have agreed to bear
all expenses incident to the registration, offering and sale of the common stock
to the public by selling stockholders, other than commissions and discounts of
underwriters, brokers, dealers and agents. We have also agreed to indemnify the
selling stockholders and their officers, directors, employees, agents, partners
and controlling persons against certain liabilities, including liabilities under
the Securities Act, arising out of or incident to registration of the common
stock.

Information as to whether underwriters who may be selected by the selling
shareholders, or any other broker-dealer, is acting as principal or agent for
the selling shareholders, the compensation to be received by underwriters who
may be selected by the selling shareholders, or any broker-dealer, acting as
principal or agent for the selling shareholders and the compensation to be
received by other broker-dealers, if the compensation of such other
broker-dealers is in excess of usual and customary commissions, will, to the
extent required, be set forth in a supplement to this prospectus. Any dealer or
broker participating in any distribution of the shares may be required to
deliver a copy of this prospectus, including the prospectus supplement, if any,
to any person who purchases any of the shares from or through such dealer or
broker.

During such time as the selling shareholders may be engaged in a
distribution of the shares included in this prospectus, they are required to
comply with Regulation M promulgated under the Securities Exchange Act of 1934.
With certain exceptions, Regulation M precludes any selling shareholders, any
affiliated purchasers and any broker-dealer or other person who participates in
such distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing may affect the marketability of the common stock.

We filed this registration statement in order to comply with our
obligations under the Registration Rights Agreement with GSCP Recovery Inc. We
are also obligated pursuant to that agreement to use our best efforts to
register or qualify the common stock under the securities or blue sky laws of
such jurisdictions as the selling stockholders reasonably request. See
"Description of Capital Stock -- Registration Rights Agreement."

LEGAL MATTERS

The validity of the common stock offered by this prospectus is being passed
upon for us by Jones, Day, Reavis & Pogue.

EXPERTS

Consolidated balance sheets as of December 31, 1999 and 1998 and the
related consolidated statements of operations, stockholder's equity (deficit),
and cash flows for the year ended December 31, 1999 and for the period March 13,
1998 through December 31, 1998 included in this prospectus have been audited by
KPMG LLP, independent certified public accountants, to the extent set forth in
their report appearing elsewhere in this prospectus and are included in reliance
upon such report upon the authority of that firm as an expert in accounting and
auditing.

The consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the year ended December 31, 1997 and the period January 1,
1998 through March 12, 1998 included in this prospectus have been audited by
Deloitte & Touche, LLP, independent auditors, as stated in their report
appearing herein, and is included in reliance upon the report of such firm given
their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement under the Securities
Act with respect to the shares of common stock being offered by this prospectus.
This prospectus is a part of the registration

40
<PAGE> 43

statement, but does not include all of the information that you can find in the
registration statement. For more information about us and our common stock
offered by this prospectus, you should refer to the registration statement,
including the exhibits filed as a part of the registration statement. Statements
contained in this prospectus concerning the contents of any contract or any
other document are not necessarily complete. If a contract or document has been
filed as an exhibit to the registration statement, we refer you to the copy of
the contract or document that has been filed. Each statement in this prospectus
relating to a contract or document filed as an exhibit is qualified in all
respects by the filed exhibit.

You may read and copy, at rates prescribed by the SEC, the registration
statement at the SEC's public reference rooms, located at:

<TABLE>
<S> <C> <C>
450 Fifth Street, NW 7 World Trade Center, Northwest Atrium Center
Washington, DC 20549 Suite 1300 500 West Madison Street,
New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>

Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. This information is also available on-line through the SEC's
Electronic Data Gathering, Analysis, and Retrieval System, commonly known as
"EDGAR," located on the SEC'S web site, http://www.sec.gov.

We are subject to the information and reporting requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, we file periodic
reports, proxy statements and other information with the SEC, which may be
inspected as described above. You may also inspect these reports, proxy
statements and other information at the office of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.

The SEC allows us to incorporate by reference the information we file with
them, which means that we can disclose important information to you by referring
you to these documents. The information incorporated by reference is an
important part of this prospectus, and information that we file later with the
SEC will automatically update and supersede this information. We incorporate by
reference the documents listed below (and any amendments thereto) and any future
filings made with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the selling stockholders sell all of their
common stock:

- Registration statement on Form 10 (Registration No. 000-30077) filed
March 23, 2000, as amended May 18, 2000;

- Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000;
and

- Current Report on Form 8-K filed June 29, 2000.

To obtain a copy of these filings at no cost, you may write or telephone us
at the following address:

Corporate Secretary
Purina Mills, Inc.
1401 South Hanley Road
St. Louis, Missouri 63144
(314) 768-4100

We intend to provide our stockholders with annual reports containing
audited financial statements and with quarterly reports for the first three
quarters of each fiscal year containing unaudited interim financial information.

Information contained on our Web site is not a prospectus and does not
constitute a part of this prospectus.

41
<PAGE> 44

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Balance Sheets at December 31, 1999 and 1998... F-4
Consolidated Statements of Operations for the year ended
December 31, 1999 and for the period March 13, 1998
through December 31, 1998 and for the year ended December
31, 1997 and for the period January 1, 1998 through March
12, 1998.................................................. F-6
Consolidated Statements of Stockholder's Equity (Deficit)
for the year ended December 31, 1999 and for the period
March 13, 1998 through December 31, 1998 and for the year
ended December 31, 1997 and for the period January 1, 1998
through March 12, 1998.................................... F-7
Consolidated Statements of Cash Flows for the year ended
December 31, 1999 and for the period March 13, 1998
through December 31, 1998 and for the year ended December
31, 1997 and for the period January 1, 1998 through March
12, 1998.................................................. F-8
</TABLE>

F-1
<PAGE> 45

INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS AND STOCKHOLDER
PM HOLDINGS CORPORATION

We have audited the accompanying consolidated balance sheets of PM Holdings
Corporation and Subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of operations, stockholder's equity (deficit), and cash
flows for the year ended December 31, 1999 and for the period March 13, 1998
through December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PM Holdings
Corporation and Subsidiaries at December 31, 1999 and 1998, and the results of
their operations and their cash flows for the year ended December 31, 1999 and
for the period from March 13, 1998 through December 31, 1998, in conformity with
generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, PM Holdings Corporation and certain
of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the
federal bankruptcy laws in the United States Bankruptcy Court on October 28,
1999. This event and circumstances relating to this event, including the
Company's highly leveraged capital structure, raise substantial doubt about its
ability to continue as a going concern. Although PM Holdings Corporation and
certain of its subsidiaries are currently operating their businesses as
debtors-in-possession under the jurisdiction of the Bankruptcy Court, the
continuation of their businesses as going concerns is contingent upon, among
other things, the ability to (1) formulate a Plan of Reorganization which will
gain approval of the creditors and shareholders and confirmation by the
Bankruptcy Court, (2) maintain compliance with all debt covenants under the
debtor-in-possession financing facility, (3) generate sufficient cash from
operations and financing sources to meet obligations, and (4) achieve
satisfactory levels of future operating profit. The consolidated financial
statements as of and for the year ended December 31, 1999 neither include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amount of liabilities that might be necessary should PM Holdings
Corporation and certain of its subsidiaries be unable to continue as going
concerns, nor do the consolidated financial statements include any adjustments
relating to the recoverability and classification of reported asset amounts or
adjustments relating to the establishment, settlement and classification of
liabilities that may be required in connection with restructuring PM Holdings
Corporation and certain of its subsidiaries as they reorganize under Chapter 11
of the federal bankruptcy laws.

As discussed in Note 1 to the consolidated financial statements, effective
March 12, 1998, Koch Agriculture Company acquired all of the outstanding stock
of PM Holdings Corporation in a business combination accounted for as a
purchase. As a result of the acquisition, the consolidated financial information
for the period after the acquisition is presented on a different cost basis than
for the periods before the acquisition and, therefore, is not comparable.

KPMG LLP
St. Louis, Missouri
March 10, 2000
F-2
<PAGE> 46

INDEPENDENT AUDITORS' REPORT

BOARD OF DIRECTORS AND STOCKHOLDER
PM HOLDINGS CORPORATION

We have audited the accompanying consolidated statements of operations,
stockholder's equity (deficit), and cash flows of PM Holdings Corporation and
Subsidiaries for the year ended December 31, 1997 and the period January 1, 1998
through March 12, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of PM Holdings
Corporation and Subsidiaries for the year ended December 31, 1997 and the period
January 1, 1998 through March 12, 1998, in conformity with generally accepted
accounting principles.

DELOITTE & TOUCHE LLP
Saint Louis, Missouri
August 7, 1998

F-3
<PAGE> 47

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1999 1998
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 48,094 $ 41,446
Accounts receivable -- trade, net of allowance for
doubtful accounts of $15,733 and $9,044 at December
31, 1999 and 1998, respectively....................... 38,817 44,105
Inventories............................................... 58,869 61,862
Prepaid expenses and other assets......................... 7,758 3,789
Deferred income taxes..................................... -- 16,428
-------- --------
TOTAL CURRENT ASSETS................................... 153,538 167,630
Property, plant and equipment, net.......................... 235,378 262,791
Intangible assets, net...................................... 155,000 333,633
Deferred income taxes....................................... -- 10,499
Notes receivable............................................ 8,147 4,258
Deferred financing costs, net............................... 10,107 11,456
Other assets................................................ 26,845 25,445
-------- --------
TOTAL ASSETS........................................... $589,015 $815,712
======== ========
</TABLE>

See Notes 1 and 2

F-4
<PAGE> 48

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ---------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE AMOUNTS)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable -- other................................. $ 32,759 $ 50,559
Accounts payable -- affiliate, net........................ 66 42,159
Customer advance payments................................. 10,809 16,870
Accrued expenses.......................................... 31,703 24,849
Interest payable.......................................... -- 9,861
Current portion of long-term debt and bank borrowings
under Revolving Credit Facility........................ 278,031 7,550
--------- --------
TOTAL CURRENT LIABILITIES.............................. 353,368 151,848
Retirement obligations...................................... 25,730 26,061
Accrued postretirement benefit costs........................ 150 458
Other liabilities........................................... 6,069 12,461
Long-term debt.............................................. -- 558,547
Commitments and contingencies (Notes 13 and 14)
Liabilities subject to compromise (Note 2).................. 419,500 --
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock, $1.00 par value; 1,000 shares authorized,
issued and outstanding................................. 1 1
Additional paid-in capital................................ 109,499 109,499
Retained deficit.......................................... (323,956) (43,163)
Accumulated other comprehensive loss...................... (1,346) --
--------- --------
TOTAL STOCKHOLDER'S EQUITY (DEFICIT)................... (215,802) 66,337
--------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)... $ 589,015 $815,712
========= ========
</TABLE>

See accompanying notes.

See Notes 1 and 2

F-5
<PAGE> 49

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
---------------------------- ----------------------------
YEAR ENDED MARCH 13 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, MARCH 12, DECEMBER 31,
1999 1998 1998 1997
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
NET SALES................................ $ 881,936 $784,408 $214,272 $1,128,390
COSTS AND EXPENSES:
Cost of products sold.................. 706,888 640,359 171,233 912,984
Marketing, distribution and
advertising......................... 91,477 73,064 17,543 87,333
General and administrative............. 65,455 59,900 27,587 55,706
Amortization of intangibles............ 15,126 14,491 3,838 20,572
Research and development............... 5,978 5,429 1,376 7,166
Provision for plant closings and asset
impairments......................... 19,665 -- -- 4,402
Provision for intangible asset
impairment.......................... 161,593 -- -- --
Provision for loss on guarantees....... -- 14,175 -- --
Restructuring expenses................. 18,102 -- -- --
Other (income) expense -- net.......... 743 4,470 109 (3,497)
---------- -------- -------- ----------
1,085,027 811,888 221,686 1,084,666
---------- -------- -------- ----------
OPERATING INCOME (LOSS).................. (203,091) (27,480) (7,414) 43,724
Interest expense -- net.................. 48,698 39,467 8,047 41,557
---------- -------- -------- ----------
Income (loss) before income taxes........ (251,789) (66,947) (15,461) 2,167
Provision (benefit) for income taxes..... 29,004 (23,784) (5,713) 1,698
---------- -------- -------- ----------
NET INCOME (LOSS)........................ $ (280,793) $(43,163) $ (9,748) $ 469
========== ======== ======== ==========
</TABLE>

See accompanying notes.

See Note 1

F-6
<PAGE> 50

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN COMPREHENSIVE RETAINED COMPREHENSIVE
STOCK CAPITAL LOSS DEFICIT LOSS TOTAL
------ ---------- ------------- --------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
PRE-MERGER
BALANCE JANUARY 1, 1997.... $ 5 $ 35,205 $(1,241) $ (26,256) $ -- 7,713
Released ESOP shares....... -- 616 -- -- -- 616
Appreciation in value of
earned ESOP shares....... -- -- -- (24,591) -- (24,591)
Purchase of shares for the
ESOP, net................ -- (479) -- -- -- (479)
Activity under stock
plans.................... -- 948 -- -- -- 948
Comprehensive loss:
Net income............... -- -- -- 469 469 469
Other comprehensive loss,
net of
tax -- adjustment for
minimum supplemental
retirement
liabilities........... -- -- (858) -- (858) (858)
--- -------- ------- --------- --------- ---------
Comprehensive loss......... (389)
=========
BALANCE DECEMBER 31,
1997..................... 5 36,290 (2,099) (50,378) (16,182)
Comprehensive loss:
Net loss................. -- -- -- (9,748) (9,748) (9,748)
--- -------- ------- --------- ========= ---------
BALANCE MARCH 12, 1998..... 5 36,290 (2,099) (60,126) (25,930)
Adjustments due to
merger................... (4) 73,209 2,099 60,126 135,430

POST-MERGER
Comprehensive loss:
Net loss................. -- -- -- (43,163) (43,163) (43,163)
--- -------- ------- --------- ========= ---------
BALANCE DECEMBER 31,
1998..................... 1 109,499 -- (43,163) 66,337
Comprehensive loss:
Net loss................. -- -- -- (280,793) (280,793) (280,793)
Other comprehensive loss,
net of
tax -- adjustment for
minimum supplemental
retirement
liabilities........... -- -- (1,346) -- (1,346) (1,346)
--- -------- ------- --------- ========= ---------
Comprehensive loss......... $(282,139)
=========
BALANCE DECEMBER 31,
1999..................... $ 1 $109,499 $(1,346) $(323,956) $(215,802)
=== ======== ======= ========= =========
</TABLE>

See accompanying notes.

See Note 1

F-7
<PAGE> 51

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
---------------------------- ----------------------------
YEAR ENDED MARCH 13 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, MARCH 12, DECEMBER 31,
1999 1998 1998 1997
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)...................... $(280,793) $(43,163) $ (9,748) $ 469
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization....... 45,800 39,275 9,965 49,797
Accretion of discount on Discount
Debentures........................ -- -- 1,845 8,697
Compensation under ESOP............. -- -- -- 5,625
Provision for deferred income
taxes............................. 27,761 (29,580) (2,926) (3,355)
Loss on disposal of property, plant
and equipment..................... 1,326 1,266 169 1,028
Provision for loss on plant closings
and asset impairment.............. 19,665 -- -- 4,402
Provision for loss on intangible
asset impairment.................. 161,593 -- -- --
Provision for loss on guarantees and
notes receivable.................. -- 19,812 -- --
Net changes in operating assets and
liabilities:
Accounts receivable................. 5,288 (1,628) 8,731 4,608
Inventories......................... 2,993 3,358 1,580 (5,436)
Prepaid expenses and other assets... (5,369) 10,516 (4,846) 1,563
Accounts payable and other
liabilities....................... (10,252) 60,067 (44,901) 2,580
--------- -------- -------- --------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES............................. $ (31,988) $ 59,923 $(40,131) $ 69,978
--------- -------- -------- --------
INVESTING ACTIVITIES:
Purchase of property, plant, equipment
and other assets.................... $ (20,980) $(25,280) $ (4,486) $(30,429)
Proceeds from sale of property, plant
and equipment....................... 1,571 154 58 941
Net change in notes receivable......... (3,889) 782 98 182
--------- -------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES.... $ (23,298) $(24,344) $ (4,330) $(29,306)
--------- -------- -------- --------
</TABLE>

See Note 1

F-8
<PAGE> 52

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
---------------------------- ----------------------------
YEAR ENDED MARCH 13 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, MARCH 12, DECEMBER 31,
1999 1998 1998 1997
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
FINANCING ACTIVITIES:
Proceeds from Senior Subordinated
Notes............................... $ -- $ -- $ 350,000 $ --
Proceeds from Term Loans............... -- -- 200,000 --
Proceeds from Revolving Credit
Facility, net....................... 67,471 20,000 -- --
Repayment of Term Loans, Senior
Subordinated Notes, Discount
Debentures and IRBs................. (5,475) (388,687) -- (36,409)
Equity contribution from parent........ -- -- 109,500 --
Purchase of equity and acquisition
costs............................... -- -- (253,255) --
Loan to ESOP........................... -- -- -- (1,208)
Payment of financing costs............. (371) (11,996) (58)
Other.................................. (62) (183) (2,300) (839)
-------- --------- --------- --------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES............................. 61,934 (369,241) 391,949 (38,514)
-------- --------- --------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS......................... 6,648 (333,662) 347,488 2,158
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD........................... 41,446 375,108 27,620 25,462
-------- --------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD.............................. $ 48,094 $ 41,446 $ 375,108 $ 27,620
======== ========= ========= ========
SUPPLEMENTAL CASH FLOW STATEMENT
INFORMATION:
Interest paid.......................... $ 39,152 $ 31,070 $ 11,267 $ 30,942
======== ========= ========= ========
Income taxes paid (refunded)........... 484 (800) 43 7,892
======== ========= ========= ========
Non-cash effects of reorganization
activities:
Deferral of Senior Subordinated
Notes due to reorganization
activities........................ $350,000 $ -- $ -- $ --
Deferral of accounts payable and
other liabilities due to
reorganization activities......... 69,500 -- -- --
-------- --------- --------- --------
INCREASE IN LIABILITIES SUBJECT TO
COMPROMISE........................ $419,500 $ -- $ -- $ --
======== ========= ========= ========
</TABLE>

See accompanying notes.

See Note 1

F-9
<PAGE> 53

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Pursuant to the Agreement and Plan of Merger among PM Holdings Corporation
("Holdings"), Koch Agriculture Company ("Koch Agriculture") and Arch Acquisition
Corporation, dated as of January 9, 1998 (the "Merger Agreement"), Arch
Acquisition Corporation was merged with and into Holdings (the "Merger"), with
Holdings being the surviving corporation. As a result of the Merger, all of the
shares of the common stock of Holdings ("Holdings common stock"), par value $.01
per share outstanding immediately prior to March 12, 1998, were canceled and
converted into the right to receive cash consideration of $540 per share (the
"Merger Consideration"). In addition, pursuant to the Merger Agreement, each
outstanding stock option and stock rights unit became 100% vested. Option
holders and stock rights unit holders received the Merger Consideration, less
the exercise price of the stock options, for each share of Holdings common stock
into which such stock options and stock rights units were exercisable
immediately prior to March 12, 1998. As a result of the Merger, Koch Agriculture
owns 100% of Holdings, which owns 100% of Purina Mills, Inc. ("Purina Mills" or
"PMI"). Unless the context otherwise requires, the term "Company" refers to PM
Holdings Corporation and its subsidiaries and the term "Purina Mills" refers to
Purina Mills, Inc. and its subsidiaries. Holdings conducts no business other
than that of Purina Mills.

The Company develops, manufactures and markets animal nutrition products
for dairy cattle, beef cattle, hogs and horses. The Company also develops,
manufactures and sells poultry feeds and specialty feeds for rabbits, zoo
animals, birds, fish and pets. The Company's products are sold as complete feeds
or as concentrates that are mixed with customer's base ingredients. The Company
distributes its products through two primary distribution channels, dealers and
directly to end-users. The Company's dealer network consists of over 4,500
independent dealers located in 48 states. The number of direct customers is in
excess of 4,500. The Company operates 48 feed manufacturing plants located in 25
states.

The sources and use of funds required to consummate the Merger and related
financings are summarized below. See Notes 9 and 10 for a description of debt
and capital stock.

Sources of funds (in millions):

<TABLE>
<S> <C>
New Credit Facilities Term Loans............................ $200.0
Revolving Credit Facility................................. 9.9
Notes....................................................... 350.0
Equity Contribution to Holdings............................. 109.7
------
Total.................................................. $669.6
======
</TABLE>

Use of funds (in millions):

<TABLE>
<S> <C>
Purchase price for equity of Holdings....................... $258.7
Repayment of existing indebtedness.......................... 385.5
Fees and expenses........................................... 25.4
------
Total.................................................. $669.6
======
</TABLE>

The Merger closed on March 12, 1998. The Merger has been accounted for as a
purchase transaction in accordance with Accounting Principles Board Opinion No.
16 and, accordingly, the consolidated financial statements for periods
subsequent to March 12, 1998 reflect the purchase price, including transaction
costs, allocated to tangible and intangible assets acquired and liabilities
assumed, based on their estimated fair values as of March 12, 1998. The
consolidated financial statements for periods prior to March 12, 1998 have been
prepared on the predecessor cost basis of the Company. Operating results
subsequent to the Merger are comparable to the operating results prior to the
Merger except for

F-10
<PAGE> 54
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

depreciation expense, amortization of intangible assets, interest expense and
postretirement health care costs.

The allocation of the $109.5 million purchase price for the Company is
summarized as follows (in millions):

<TABLE>
<S> <C>
Current assets.............................................. $ 130.8
Property, plant and equipment............................... 268.0
Intangible assets........................................... 343.1
Other noncurrent assets..................................... 47.6
Liabilities assumed......................................... (680.0)
-------
Total.................................................. $ 109.5
=======
</TABLE>

In connection with the Merger, the Company incurred $15.9 million in
non-recurring expenses during the period January 1, 1998 to March 12, 1998. The
costs are included in general and administrative expense and relate to
compensation paid to management of the Company and the $13.5 million in Merger
Consideration paid to holders of options and stock rights units.

2. FINANCIAL RESTRUCTURING DEVELOPMENTS

The economic environment in the agricultural industry during 1998 and 1999
has been a difficult one for many individual producers and companies that
participate in the sector. Livestock commodity prices have been depressed and
reached historic lows in many markets. In addition to the overall economic
environment, there is significant competition in all areas of agriculture,
including the feed industry.

In connection with the Merger, the Company incurred a significant amount of
indebtedness. As of March 31, 1998, the Company had approximately $557.2 million
of consolidated indebtedness, and its stockholders' equity was approximately
$109.4 million. Of the total $669.6 million required to consummate the 1998
Merger and related transactions, $559.9 million was supplied by indebtedness and
$109.7 million was supplied by equity contributions. The Company's indebtedness
was raised through the sale of $350.0 million aggregate principal amount of its
Senior Subordinated Notes Due 2010 (the "Notes") and borrowings under a $300.0
million secured credit facility, pursuant to a new credit agreement (the "Credit
Agreement"), from a syndicate of lenders (the "Credit Facility"). The Credit
Facility includes: a $200.0 million term loan facility (the "Term Loan") and a
$100.0 million revolving credit facility (the "Revolving Credit Facility").
Since the Merger, a significant portion of the Company's cash flow from
operations has been dedicated to the payment of principal and interest on its
indebtedness, thereby reducing the funds available to the Company for its
operations. The Company's substantial degree of leverage has limited its
flexibility to adjust to the depressed conditions in the agricultural industry
and made it particularly vulnerable to the downturn in the swine market.

As a result of its financial condition during 1999 and its substantial
degree of leverage, the Company's ability to finance its working capital
requirements and implement its business plan have been adversely affected by its
cash requirements for debt service. On September 15, 1999, the Company failed to
make a scheduled interest payment of $15.75 million due to holders of the Notes.
On October 21, 1999, the trustee under the indenture (the "Notes Indenture") for
the Notes accelerated such Notes as a result of the failure to make such
interest payment. On September 30, 1999, the Company failed to pay $2.1 million
in principal payments due on the Term Loan. Such principal payment was
subsequently made on October 28, 1999. The Company is in default under the Notes
Indenture and the Credit Agreement.

Faced with these events and an inability to service future interest
payments on the Notes, Holdings and certain of its subsidiaries (the "Debtor")
filed voluntary petitions for relief (the "Reorganization Cases") under Chapter
11 of the U.S. Bankruptcy Code, as amended, with the United States Bankruptcy

F-11
<PAGE> 55
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Court for the District of Delaware (the "Bankruptcy Court") on October 28, 1999
(the "Petition Date"). In connection with preparations for the filing of the
Reorganization Cases, the Company determined that it would need to obtain
Debtor-in-Possession financing to ensure sufficient liquidity to meet its
ongoing operating needs. On November 15, 1999, the Company obtained Bankruptcy
Court approval for borrowings of up to $50 million under the
Debtor-in-Possession Credit Agreement (the "DIP Credit Agreement"). The
agreement will mature November 1, 2000.

Under Chapter 11, certain claims against the Debtor in existence prior to
the filing of the petitions for relief under the federal bankruptcy laws are
stayed while the Debtor continues business operations as Debtor-in-Possession.
These claims are reflected in the December 31, 1999 balance sheet as
"liabilities subject to compromise" and consist of the following:

<TABLE>
<S> <C>
Accounts payable -- other................................... $ 13,764
Accounts payable -- affiliate............................... 30,215
Accrued expenses............................................ 2,379
Interest payable on Senior Subordinated Notes due 2010...... 19,600
Retirement obligations...................................... 3,212
Other liabilities........................................... 330
Senior Subordinated Notes due 2010.......................... 350,000
--------
$419,500
========
</TABLE>

As of the Petition Date, the Company has discontinued accruing interest on
its unsecured pre-petition debt obligations. Additional claims may arise
subsequent to the filing date resulting from rejection of executory contracts
and unexpired leases, and from the determination by the court or as agreed to by
parties in interest of allowed claims for contingencies and other disputed
amounts. Claims secured against the Debtor's assets also are stayed, although
the holders of such claims have the right to move the court for relief from the
stay.

Secured claims are secured primarily by liens on the capital stock of
Purina Mills (pledged by Holdings) and its subsidiaries and substantially all
assets of Purina Mills and its subsidiaries. In connection with the DIP Credit
Agreement, as adequate protection for the holders of secured claims under the
pre-petition Credit Agreement, the Debtor agreed to pay and continue to pay all
accrued and unpaid interest in accordance with the terms established in the DIP
Credit Agreement.

The Debtor received approval from the Bankruptcy Court to pay or otherwise
honor certain of its pre-petition obligations, including employee wages, dealer
and customer rebates, amounts owed certain critical vendors and amounts owed to
farmers, grain elevators, coops, brokers, dealers and other vendors and
suppliers pursuant to federal, state and local government regulations.

The Company filed a Form 8-K on January 18, 2000 with the Securities and
Exchange Commission, which includes a Plan of Reorganization (the "Plan") and a
disclosure statement. As described in the disclosure statement, a settlement has
been negotiated between Koch Industries, Inc. ("Koch Industries") and a
committee representing holders of Notes ("Noteholders"). The Plan has yet to be
approved by the creditors, accordingly, the financial statements at December 31,
1999 do not include any adjustments that might reflect the potential outcome of
the bankruptcy.

The Plan provides, among other things, the merger of Purina Mills with and
into Holdings prior to the effective date of the Plan. By operation of the
merger, Holdings will succeed to the business previously conducted by Purina
Mills and will change its name to Purina Mills, Inc.

The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets and liquidation of liabilities in the ordinary course of business.
However, as a result of the Reorganization Cases and circumstances relating

F-12
<PAGE> 56
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

to this event, including the Company's highly leveraged financial structure,
such continuity of operations and realization of assets and liquidation of
liabilities is subject to significant uncertainty. The appropriateness of using
the going-concern basis is dependent upon, among other things, the confirmation
of a plan of reorganization, the ability to comply with the DIP Credit
Agreement, generation of sufficient cash from operations and financing sources
to meet obligations and achievement of satisfactory levels of future operating
profit.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its majority owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Investments in
affiliated companies, 20% through 50% owned, are carried at equity.

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.

Inventories: Carrying amounts of merchandise, materials and animal
inventories are generally determined on a moving average cost basis and are
stated at the lower of cost or market.

Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Expenditures for new facilities and those which substantially increase the
useful lives of property are capitalized. Maintenance, repairs and minor
renewals are expensed as incurred. When properties are retired or otherwise
disposed of, the related cost and accumulated depreciation are removed from the
accounts and gains or losses on the dispositions are included in the
consolidated statements of operations. Depreciation is generally provided on the
straight-line basis by charges to costs or expenses at rates based upon the
following estimated useful lives:

<TABLE>
<S> <C>
Buildings and improvements.................................. 15 to 30 years
Machinery and equipment..................................... 5 to 15 years
Office furniture and equipment.............................. 3 to 15 years
</TABLE>

Intangible Assets (including Goodwill): Intangible assets represent the
excess of cost over the net tangible assets of the business at the time of
acquisition and are amortized over their estimated period of related benefit.
Intangible assets other than goodwill are amortized over 1 to 20 years. Goodwill
is amortized on a straight-line basis over 40 years.

Management periodically reviews the value of its intangible assets to
determine if an impairment has occurred or whether changes have occurred that
would require a revision to the remaining useful life. In making such
determination, management evaluates the performance, on an undiscounted basis,
of the underlying operations or assets which give rise to such amount. In 1999,
management has determined an impairment has occurred and accordingly the value
of the intangible assets has been reduced (see Note 7).

Internal Use Software: The Company has replaced or modified all of the
Company's current computer systems and software applications so that they are
year 2000 compliant. In connection with this process, the Company purchased and
implemented an enhanced accounting and information reporting system. The Company
capitalized all software and consultant costs and the direct costs of those
employees directly involved in the process, in accordance with Statement of
Position No. 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use ("SOP 98-1"). All other related costs were expensed as
incurred. The Company's policies are in accordance with the provisions of SOP
98-1. Total capitalized software costs related to the enhanced accounting and
information reporting
F-13
<PAGE> 57
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

system were $16.4 million and $13.4 million as of December 31, 1999 and 1998,
respectively. The Company is amortizing the costs associated with the project
using the straight line method over five years, the expected life of the system.

Deferred Financing Costs: Deferred financing costs are stated at cost and
amortized over the life of the related debt using the effective interest method.
Amortization of deferred financing costs is included in interest expense.

Income Taxes: Deferred income taxes are recognized for the effect of
temporary differences between the financial reporting bases and the tax bases of
the assets and liabilities plus operating loss carryforwards at enacted tax
rates expected to be in effect when such amounts are realized or settled.

The Company is part of a tax sharing agreement with Koch Industries
effective as of the date of the Merger. The agreement provides that the tax
liability of the group shall be allocated to the members of this group on the
basis of the percentage of the member's total tax, if computed on a separate
return, would bear to the total amount of the taxes of all members of the group
so computed. If the Company's tax attributes are utilized by another member of
the group, such member will reimburse the Company when the Company would have
been able to utilize such attributes in computing the Company's separate taxable
income. The Company's tax provisions for all periods after March 12, 1998 are
computed on this basis. The results of operations of the Company after March 12,
1998 through December 31, 1999 have been or will be included in the consolidated
U.S. corporation income tax return and certain consolidated state income tax
returns of Koch Industries. The results of operations of the Company prior to
March 12, 1998 were included in the consolidated U.S. corporation income tax
return of the Company.

Cash Equivalents: For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents. Cash includes currency on hand and
demand deposits with financial institutions. The carrying amounts reported in
the consolidated balance sheets for cash and cash equivalents approximate their
fair value.

Fair Value of Financial Instruments: The carrying amounts of cash and cash
equivalents and short-term borrowings approximate fair value because of the
short-term maturity of these instruments. Notes receivable carry current market
interest rates, so that discounted future cash flows approximate their carrying
values. As of December 31, 1999 and 1998, the fair value of debt, including
current maturities, was $365.5 million and $553.7 million, respectively,
compared to its carrying value of $628.0 million and $566.1 million,
respectively. The fair values of debt instruments as of December 31, 1999 and
1998 are based on quoted market prices and management's estimates for
instruments without quoted market prices.

Revenue Recognition: Net sales are generally recognized when products are
shipped. Allowances for customer discounts are recorded when revenues are
recognized.

Comprehensive Income: On January 1, 1998, the Company adopted SFAS No. 130,
Reporting Comprehensive Income ("SFAS 130"). SFAS 130 establishes standards for
reporting and presentation of comprehensive income and its components in a full
set of financial statements. Management has chosen to disclose the requirements
of this statement within the consolidated statements of shareholder's equity.

Reclassifications: Certain reclassifications have been made to the prior
period consolidated financial statements to conform to the consolidated
financial statement presentation at December 31, 1999 and the year then ended.

4. RESTRUCTURING EXPENSES

During the third and fourth quarters of 1999, the Company conducted a
comprehensive strategic business review, including the development of a business
plan which addressed both short-term and longer-term issues required to
stabilize and turn-around the business. The business plan, developed over a
number

F-14
<PAGE> 58
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of months in consultation with the Company's external advisors, establishes a
corporate mission and strategy. In connection with the business plan and the
Reorganization Cases, the Company incurred advisory fees and expenses of $10.7
million. Additionally, the Company has recorded severance and moving costs of
$3.9 million, bank fees of $1.4 million and compensation expense of $2.1 million
in connection with the Company's Key Employee Retention Plan.

5. INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
Raw materials............................................ $37,577 $34,619
Finished goods........................................... 11,411 12,391
Animals.................................................. 9,881 14,852
------- -------
Total............................................... $58,869 $61,862
======= =======
</TABLE>

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Land................................................... $ 13,362 $ 13,312
Buildings.............................................. 86,332 77,192
Machinery and equipment................................ 180,769 188,512
Construction in progress............................... 7,359 7,547
-------- --------
287,822 286,563
Accumulated depreciation............................... (52,444) (23,772)
-------- --------
Total............................................. $235,378 $262,791
======== ========
</TABLE>

Total depreciation expense was $29.3 million, $24.0 million, $5.3 million
and $26.6 million for the year ended December 31, 1999, the periods ended March
13, 1998 to December 31, 1998 and January 1, 1998 to March 12, 1998 and for the
year ended December 31, 1997, respectively.

During the quarter ended June 30, 1999, the Company made the decision to
discontinue or curtail manufacturing operations at five of its facilities.
Products for distribution to customers of the closed facilities are being
manufactured at the Company's other facilities. In connection with these plant
closures, the Company recorded a loss of $13.1 million on manufacturing assets,
representing the amount by which the book value exceeds estimated fair value.
Estimated demolition costs of $1.2 million, severance costs of $0.4 million and
the write-off of $5.0 million for related goodwill were also recorded.

The Company will continue to review the performance of its facilities to
attempt to optimize overall capacity and maximize profits. This review may
result in the decision to discontinue operations at additional facilities which
could result in an additional loss provision being recorded.

F-15
<PAGE> 59
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. INTANGIBLE ASSETS

Intangible assets consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
--------- --------
<S> <C> <C>
Distribution network.................................. $ 40,000 $ 40,000
Product specifications................................ 10,000 10,000
Patents............................................... 15,000 15,000
Covenant not to compete............................... 2,083 2,083
Goodwill.............................................. 262,728 262,528
Other intangibles..................................... 21,539 18,511
--------- --------
351,350 348,122
Accumulated amortization.............................. (196,350) (14,489)
--------- --------
Total............................................ $ 155,000 $333,633
========= ========
</TABLE>

In connection with the Company's revised business plan and the
Reorganization Cases, the Company recorded a provision for loss on impairment of
intangible assets of $161.6 million during the fourth quarter of 1999. The
provision reduces the net cost of intangible assets to management's estimate of
the fair value of intangible assets at December 31, 1999. Management's estimate
is based upon the expected net realizable value of the Company on a going
concern basis which contemplates continuity of operations, realization of assets
and liquidation of liabilities in the ordinary course of business. However, as a
result of the Reorganization Cases and circumstances relating to this event,
including the Company's highly leveraged financial structure, such continuity of
operations and realization of assets and liquidation of liabilities is subject
to significant uncertainty.

During 1997 the Company recorded a loss of $4.4 million to reflect
management's estimate of the reduction in net realizable value of a feed supply
contract.

8. DIP CREDIT AGREEMENT

In conjunction with the Reorganization Cases, the Debtor entered into the
DIP Credit Agreement with its pre-petition lenders. The DIP Credit Agreement
consists of a Revolving Credit and Letter of Credit Facility (the "Facility") in
an aggregate principal amount not to exceed $50.0 million with a sublimit of
$20.0 million for letters of credit to support the obligations of the Company.
Of the commitment, $40.0 million shall be available for the working capital and
general corporate purposes of the Debtors and $10.0 million shall be reserved
until June 1, 2000 and used for cure obligations and adequate assurance in
respect of any executory contract, in each case, subject to the terms of the DIP
Credit Agreement.

The DIP Credit Agreement is secured by a perfected first priority lien on
and security interest in substantially all of the property of the Debtor. On
November 15, 1999, the Bankruptcy Court entered a final order approving the DIP
Credit Agreement which terminates the earlier of November 1, 2000 or upon
confirmation of the Plan. The Company is charged an annual fee of 0.5% for
amounts available but unused under the Facility. In addition, the Company is
charged a fee of 3.0% per annum on the daily average amount available for
drawing under any letter of credit to the bank that has issued such letter of
credit. Outstanding borrowings under the Facility bear interest at floating
rates which are, at the Company's option, based either upon bank prime or
Eurodollar rates plus a premium.

Under the DIP Credit Agreement, the Company is required to satisfy certain
financial tests and provide the lender monthly and weekly financial reports. The
Company is in compliance with all its

F-16
<PAGE> 60
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

covenants at December 31, 1999. At December 31, 1999, the Company had $0.9
million in outstanding letters of credit under the Facility and, accordingly,
$49.1 million was available for future borrowings.

9. DEBT

Debt consists of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Term Loan.............................................. $190,550 $196,025
Senior Subordinated Notes due 2010..................... 350,000 350,000
Revolving Credit Facility.............................. 87,471 20,000
Other.................................................. 10 72
-------- --------
Total............................................. $628,031 $566,097
======== ========
</TABLE>

The foregoing debt is classified as follows in the consolidated balance
sheets (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Current portion of long-term debt and bank borrowings
under Revolving Credit Facility...................... $278,031 $ 7,550
Long-term debt and bank borrowings under Revolving
Credit Facility...................................... -- 558,547
Liabilities subject to compromise...................... 350,000 --
-------- --------
Total............................................. $628,031 $566,097
======== ========
</TABLE>

As a result of the failure to make the scheduled interest payment of $15.75
million due to the Noteholders on September 15, 1999, the Indenture Trustee
accelerated such Notes and accordingly, the Company is in default under both the
Notes Indenture and the Credit Agreement. Amounts owed pursuant to the
pre-petition Credit Agreement are included in current portion of long-term debt
at December 31, 1999. As a result of the Reorganization Cases, the Notes have
been classified as "liabilities subject to compromise." The corresponding
accrued interest on the Notes of $19.6 million has also been classified as
"liabilities subject to compromise." In connection with the DIP Credit
Agreement, as adequate protection for the holders of secured claims under the
pre-petition Credit Agreement, the Company agreed to pay and continue to pay all
interest in accordance with the terms established in the DIP Credit Agreement.
However, the Company is not required to make scheduled amortization payments.

Tender Offers: In connection with the Merger, Purina Mills offered to
purchase for cash the outstanding Senior Subordinated Notes due 2003 (the
"Senior Notes") and Holdings offered to purchase for cash the outstanding Series
B Subordinated Discount Debentures (the "Discount Debentures") due 2005 (the
"Offering") of which $190.0 million in aggregate principal of Senior Notes and
$109.4 million in aggregate principal amount at maturity of Discount Debentures
was outstanding as of the date of the Offering. The Offering commenced on
February 9, 1998 and expired on March 12, 1998. In conjunction with the
Offering, Holdings and Purina Mills solicited consents of registered holders of
the applicable series of existing debt securities to certain proposed amendments
to eliminate substantially all of the restrictive covenants in the indentures
under which the applicable series of existing debt securities were issued, in
order to increase the financial flexibility of Purina Mills after the
consummation of the Merger. The proposed amendments became operative immediately
following the consummation of the Merger and all of the Senior Notes and
Discount Debentures were redeemed during 1998.

F-17
<PAGE> 61
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Credit Facility: In connection with the Merger, Purina Mills entered into
the Credit Agreement which provides for secured borrowings from a syndicate of
lenders consisting of (i) a $200.0 million Term Loan and (ii) a $100.0 million
Revolving Credit Facility, with a $40.0 million sublimit for letters of credit.
The Term Loan consists of a $100.0 million Tranche A Term Loan with a maturity
date of March 12, 2005 and a $100.0 million Tranche B Term Loan with a maturity
date of March 12, 2007. The Revolving Credit Facility has a maturity date of
March 12, 2005.

Holdings and certain subsidiaries, certain of which have also filed
Reorganization Cases, guarantee Purina Mills' obligations under the Credit
Agreement. Borrowings under the Credit Agreement are also secured by a first
priority lien on the capital stock of Purina Mills (pledged by Holdings) and its
subsidiaries and substantially all assets of Purina Mills and its subsidiaries.

The proceeds of the Term Loan were borrowed in full on the date of the
consummation of the Offering, in addition to $9.9 million under the Revolving
Credit Facility, and were used to finance the Merger and related fees and
expenses. Proceeds of the Revolving Credit Facility were also used to redeem
Purina Mills' outstanding Industrial Revenue Bonds ("IRBs") and were available
to finance Purina Mills' ongoing working capital requirements. The Revolving
Credit Facility also may be used in part for the issuance of letters of credit
to be used solely for ordinary course of business purposes of Purina Mills. At
December 31, 1999, a balance of $87.5 million was outstanding and Purina Mills
had $12.5 million in outstanding letters of credit under the Revolving Credit
Facility. Accordingly, at December 31, 1999, no amount was available for future
borrowing under the Revolving Credit Facility.

Purina Mills is charged an annual fee of 0.5% for amounts available but
unused under the Revolving Credit Facility. In addition, Purina Mills is charged
a fee of 2.0% per annum on the daily average amount available for drawing under
any letter of credit to the bank that has issued such letter of credit. Loans
under the Credit Agreement bear interest at floating rates which are, at Purina
Mills' option, based either upon bank prime or Eurodollar rates plus a premium.
Rates on outstanding borrowings averaged 9.1% at December 31, 1999.

On February 26, 1999 Purina Mills entered into a fixed rate swap contract
effective March 31, 1999, on $114.7 million of amortizing debt under the Credit
Agreement. The swap contract provides that Purina Mills will pay interest on the
notional amount based on a fixed rate of 5.6% and will receive the three month
Eurodollar rate. Purina Mills also has an option contract on $75.0 million of
debt under the Credit Agreement. The option contract provides that Purina Mills
will pay interest on the notional amount if the three month Eurodollar rate
falls below 5.2% and will receive interest if the three month Eurodollar rate is
above 7.0%.

Notes: Purina Mills sold $350.0 million aggregate principal amount of Notes
generating gross proceeds of $350.0 million. The Notes are senior subordinated,
unsecured obligations of Purina Mills and bear interest at 9% per annum.

Covenants: As stated above, the Company is in compliance with all financial
and non-financial covenants included in the DIP Credit Agreement.

10. COMMON STOCK

The Company's authorized capital consists of 1,000 shares of common stock.
All common stock of the Company is owned by Koch Agriculture.

F-18
<PAGE> 62
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES

The components of the provision for income taxes are as follows (in
thousands):

The provision (benefit) for income taxes is different from the amounts
computed by applying the U.S. federal statutory income tax rate. The reasons for
these differences are as follows (in thousands):

<TABLE>
<CAPTION>
PRE-MERGER POST-MERGER
---------------------------- ----------------------------
YEAR ENDED MARCH 13 TO JANUARY 1 TO YEAR ENDED
DECEMBER 31, DECEMBER 31, MARCH 12, DECEMBER 31,
1999 1998 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income taxes (benefit) at
statutory rate......... $(88,126) $(23,431) $(5,411) $ 759
State income taxes, net
of federal benefit..... (1,668) (2,486) (521) 540
Change in valuation
allowance.............. 58,530 -- -- --
Amortization and
write-off of intangible
assets................. 60,656 1,756 107 548
Meals and entertainment
disallowance........... 137 75 245 148
Research tax credit...... (26) (190) -- (64)
Life insurance expense,
net.................... (567) (104) (35) (463)
Other, net............... 68 596 (98) 230
-------- -------- ------- ------
$ 29,004 $(23,784) $(5,713) $1,698
======== ======== ======= ======
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax

F-19
<PAGE> 63
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

purposes. Temporary differences which gave rise to deferred tax assets and
liabilities at December 31, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards....................... $46,849 $20,412
Alternative minimum tax credit carryforwards........... 9,449 9,725
Bad debt and loan loss reserves........................ 12,495 11,597
Accrued retirement benefits............................ 11,408 10,624
Other accruals not currently deductible for tax........ 7,360 7,531
Tax over book basis of inventory....................... 202 328
------- -------
87,763 60,217
Less valuation allowance............................... 58,530 --
------- -------
Total deferred tax assets........................... 29,233 60,217
DEFERRED TAX LIABILITIES:
Book over tax basis of property, plant and equipment... 21,428 23,243
Book over tax basis of intangible assets............... 7,805 10,047
------- -------
Total deferred tax liabilities...................... 29,233 33,290
------- -------
Net deferred tax assets............................. $ -- $26,927
======= =======
</TABLE>

Generally accepted accounting principles require that a valuation allowance
be recorded against tax assets which are not likely to be realized. The Company
has determined that it is not likely to receive a benefit for the net operating
loss carryforwards generated in the periods ended December 31, 1998 and 1999.
Under the Company's tax sharing agreement with the parent, a benefit would only
be realized to the extent the Company could utilize such future net tax benefits
on a stand-alone basis. Based on management's assessment, such net tax assets
will not be utilized prior to the tax deconsolidation with Koch Industries which
is expected to occur under the Reorganization Cases. The Company has established
a full valuation allowance against these carryforward benefits and its remaining
net deferred tax assets, and will recognize the benefits only as reassessment
demonstrates they are realizable.

12. TRANSACTIONS WITH AFFILIATES

In connection with the Merger, the Company entered into an exclusive
commodity purchasing agreement with Koch Agriculture, whereby its Nutrient
Services Division supplied the Company with all of its requirements for feed
ingredients commencing May 1, 1998. The cost of the ingredients to the Company
for the period May 1, 1998 through October 28, 1999 was equal to the spot market
price less a discount of $3.50 per ton. As part of the Transition Services
Agreement, effective October 29, 1999, for a period of 120 days, Koch
Agriculture agreed to continue purchasing ingredients for the Company at a cost
equal to the spot market price without discount. Furthermore, the parties agreed
to continue in good faith with the orderly transition of the commodity
purchasing function to the Company. As of January 1, 2000, substantially all
commodity purchasing is being done by the Company.

For the year ended December 31, 1999, the Company purchased $449.5 million
in commodities from Koch Agriculture's Nutrient Services Division. In the
ordinary course of business, the Company also contracted with Koch Industries
for various administrative and support services. For the year ended December 31,
1999 the total fees paid in connection with such services amounted to $3.5
million. In the opinion of management, such fees were reasonable.

F-20
<PAGE> 64
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Under the Transition Services Agreement, Koch Industries and Koch
Agriculture continued to provide, on terms substantially similar to the terms
existing prior to the execution of the agreement, payroll processing and
administration of employee benefit programs, access to certain information
technology systems, availability of certain insurance programs and certain
additional administrative support services.

At December 31, 1999, accounts payable -- affiliate, net consists of
noninterest-bearing current accounts payable to Koch Industries for
administrative and support services and accounts payable to Koch Agriculture for
commodity purchases, net of amounts due the Company from Koch Industries for
interest income and Merger Consideration not yet claimed by holders of Holdings
common stock, stock options and stock right units. The total amount due for
administrative and support services including payroll and related costs amounted
to $0.1 million. The total amount due for purchases of commodities amounted to
$30.8 million at December 31, 1999. Of the total amount due for purchases of
commodities, $30.2 million of pre-petition liabilities has been designated as
"liabilities subject to compromise" in the financial statements. The net amount
due from Koch Industries for the unclaimed Merger Consideration and interest
income is $0.6 million.

At December 31, 1999, included in accounts receivable -- trade is a $4.1
million receivable from a joint venture, owned 50% by the Company, for purchases
of grain made on behalf of the venture by the Company. Such amounts were paid
subsequent to year end.

13. CONCENTRATION OF CREDIT RISK AND LOAN GUARANTEES

Concentration of Credit Risk: Financial instruments which potentially
subject the Company to concentration of credit risk consist principally of trade
receivables. Substantially all of the Company's sales are to companies or
individuals in agriculture-related businesses, with approximately 15% of its
sales volume being feed for hogs. Hog producers experienced severely depressed
market prices in 1998 and 1999 and the Company has outstanding trade
receivables, loans and loan guarantees relating to customers in the hog
industry.

Loan Guarantees: The Company has provided a guarantee of up to $11.5
million to an entity formed in 1995 to provide funding for the growth,
consolidation and expansion of the Company's network of independently-owned
dealers and producers. All dealers or producers who are members of the entity
must have arrangements with the Company for some purchase of its products. The
Company recorded a loss reserve for the entire amount of the guarantee in 1998.
At December 31, 1999 and 1998, the Company had funded $6.7 million and $2.0
million on the guarantee, respectively. Additionally, in August 1999 the Company
issued a letter of credit for $3.3 million to secure a portion of the unfunded
guarantee. The Company is not a member of this non-stock membership corporation
and thus does not have an equity interest in the entity; however, the Company
did make a loan of $2.0 million to the entity to provide funding for its
establishment and initial operation. The Company recorded a loss reserve for the
$2.0 million loan in 1998.

Loan guarantees are also made to banks to assist the Company's customers in
obtaining bank loans for working capital, lines of credit, and additions to
property, plant and equipment. The guarantee arrangements essentially have the
same credit risk as that involved in extending loans to customers and are
subject to the Company's normal credit policies. Collateral (e.g., farm animals,
property, personal guarantees) is usually obtained based on management's
assessment of the specific customer's credit risk. The Company had guarantees of
approximately $6.3 million and $8.7 million at December 31, 1999 and 1998,
respectively, under these types of arrangements. A loss reserve of $1.2 million,
recorded in 1998, has been established for the above guarantees. The maturity
dates of these guarantees extend through May 2008 with the majority of the
guarantees maturing prior to 2003.

Swine Purchase Commitments and Swine Operations: To capitalize on the
consolidation of the hog industry, the Company implemented a strategy in 1997
that was expected to result in control over the
F-21
<PAGE> 65
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

feeding of approximately six million market hogs over four years. The program
provides a source of high quality weanlings and feeder pigs ("feeders") to
independent hog producers and gains the related feed business for the Company.
Under this program, at December 31, 1999, the Company has future net purchase
commitments, subject to the counterparties' ability to perform, to acquire 0.5
million feeders over the next eight years. Approximately 37% of these
commitments are at fixed prices whereas the other 63% vary based on current or
published futures prices. The net purchase commitment of 0.5 million feeders
represents gross commitments during the period for the Company to purchase
approximately 3.7 million feeders less 3.2 million feeders which are under
contract to be sold to third parties.

Additionally, the Company has direct ownership of several hog operations
which are expected to produce an additional 1.6 million feeders over the next
ten years. As hog producers are experiencing depressed market prices for their
end products, the Company has significant exposure relating to its feeder pig
program, direct hog ownership and joint venture interests in hog operations. At
December 31, 1999 and December 31, 1998, the Company had $8.6 million and $10.3
million, respectively, in hog inventory.

Based on published market prices at December 31, 1999, the Company's net
commitment to purchase the 0.5 million feeders totals approximately $17.0
million. This is a decrease of $233.0 million from such amount at December 31,
1998 due to the rejection of approximately $139.0 million of executory contracts
in accordance with the Company's Reorganization Cases, feeder purchases during
the year, renegotiation of future purchase agreements, additional contracts for
the sale of feeders and the change in hog market prices. Upon receipt of the
feeders the Company can either sell them at current market prices, feed the pigs
at Company leased facilities, or contract with independent producers to feed the
pigs. Based on 1999 contractual commitments, estimated feed costs, counterparty
risks and current spot and futures prices, the Company estimates that its 2000
loss associated with its swine exposure will range between $2.5 million and $5.0
million. The Company recorded a loss of $16.2 million during 1999. Depending on
the future market price for both feeders and market hogs, any or all of the
options available to the Company could have significant adverse impacts on net
income (loss), cash flows and liquidity.

14. COMMITMENTS AND CONTINGENCIES

Operating Leases: the Company rents certain transportation vehicles,
warehouses and operating facilities under various operating leases, many of
which contain renewal or purchase options. Rent expense was $6.0 million, $3.1
million, $1.0 million and $4.0 million for the year ended December 31, 1999, the
periods March 13, 1998 to December 31, 1998 and January 1, 1998 to March 12,
1998 and for the year ended December 31, 1997, respectively.

Future minimum lease payments for all noncancelable operating leases having
a remaining term in excess of one year consist of the following at December 31,
1999 (in thousands):

<TABLE>
<CAPTION>
OPERATING
LEASES
---------
<S> <C>
2000........................................................ $ 4,634
2001........................................................ 3,519
2002........................................................ 2,917
2003........................................................ 2,486
2004........................................................ 2,131
Thereafter.................................................. 4,268
-------
Total minimum lease payments........................... $19,955
=======
</TABLE>

Litigation: The Company, in the ordinary course of business, is engaged in
various litigation and other proceedings principally relating to product claims.
The ultimate liability with respect to such litigation and proceedings cannot be
determined at this time. The Company is of the opinion that the

F-22
<PAGE> 66
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

aggregate amount of any such liabilities will not have a material impact on its
financial position or results of operations. Included in "liabilities subject to
compromise" is the estimated exposure for pre-petition claims.

15. EMPLOYEE BENEFIT PLANS

The Company sponsors a defined contribution 401(k) plan which was available
to substantially all eligible employees at the time of the Merger. New employees
of the Company after the Merger participate in a similar plan sponsored by Koch
Industries. Effective January 1, 2000, the Company established new benefit
plans. See Note 18 for a description of the plans.

Before the Merger, the Company sponsored an ESOP covering substantially all
employees exclusive of those covered by a collective bargaining agreement. The
Company made contributions to the ESOP in an amount equal to 50% of employee
contributions to the Company's 401(k) plan, up to a maximum of 4% of an
individual employee's compensation. As a result of the Merger, the Company
terminated the ESOP. Upon termination, each ESOP participant had the right to
receive a distribution of Holdings common stock or exchange all their shares of
Holdings common stock for the Merger Consideration. No contributions were made
to the ESOP during 1998. For the year ended December 31, 1997 contributions to
the ESOP included $2.7 million in matching contributions and $2.6 million in
discretionary contributions; compensation expense attributable to released
shares was $6.3 million.

Effective January 1, 1998, the Company made matching contributions to the
Company's 401(k) in an amount equal to 50% of the employee contributions to the
Company's 401(k) plan, up to a maximum of 3% of an individual employee's
compensation. Participants in the Company's 401(k) plan vest in matching
contributions at the time they are made. Subsequent to the Merger, the Company
also made matching contributions for new employees participating in the plan
sponsored by Koch Industries in an amount equal to 50% of employee contributions
to the plan, up to a maximum of 3% of an individual employee's compensation.
Matching contributions made by participants in the plan sponsored by Koch
Industries vest over a period of five years. For the year ended December 31,
1998, matching contributions to the 401(k) plans were $2.2 million.

Effective January 1, 1999, those employees participating in the Company's
401(k) plan began making their employee contributions to the plan sponsored by
Koch Industries. The Company continued to make matching contributions in an
amount equal to 50% of employee contributions to the plan, up to a maximum of 3%
of an individual employee's compensation. Total matching contributions for the
year ended December 31, 1999 were $2.3 million. Participants' prior service with
the Company counts toward the vesting period.

During 1997 the Company maintained two defined benefit plans which covered
those employees whose employment is governed by the terms of a collective
bargaining agreement. Benefits for all other employees previously covered under
the plans have been frozen. Effective January 2, 1998, the net assets of the
plans were merged. The Company makes annual contributions to the plan which at
least equal the amounts required by law. Contribution amounts are determined by
independent actuaries using an actuarial cost method that has an objective of
providing an adequate fund to meet pension obligations as they mature over the
long-term future. At December 31, 1999 and 1998, the assets were held in equity
and fixed-income securities.

The following table sets forth the funded status of the plan at December
31, 1999 and 1998, and the amounts recognized in the Company's consolidated
balance sheets at that date and the components of net

F-23
<PAGE> 67
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

periodic pension costs related to the above plans for the years ended December
31, 1999, 1998 and 1997 (dollars in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1999 1998
------- -------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year................ $25,824 $23,856
Service cost........................................... 364 349
Interest cost.......................................... 1,638 1,646
Actuarial loss (gain).................................. (1,053) 1,114
Benefits paid.......................................... (1,205) (1,141)
------- -------
Benefit obligation at end of year...................... 25,568 25,824
------- -------
CHANGES IN PLAN ASSETS:
Fair value of plan assets at beginning of year......... 23,007 22,050
Actual return on plan assets........................... 2,698 2,082
Employer contribution.................................. -- 16
Benefits paid.......................................... (1,205) (1,141)
------- -------
Fair value of plan assets at end of year............... 24,500 23,007
------- -------
Funded status............................................ (1,068) (2,817)
Unrecognized net actuarial loss (gain)................... (625) 1,262
------- -------
Net amount recognized.................................. $(1,693) $(1,555)
------- -------
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS
CONSIST OF:
Accrued benefit liability........................... $(1,693) $(1,555)
======= =======
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost................................ $ 364 $ 349 $ 293
Interest cost............................... 1,638 1,646 1,508
Expected return on plan assets.............. (1,863) (1,682) (1,500)
------- ------- -------
Net periodic benefit cost................ $ 139 $ 313 $ 301
======= ======= =======
WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER
31:
Discount rate............................... 7.00% 6.50% 7.00%
Expected return on plan assets.............. 8.50% 8.50% 8.00%
Rate of compensation increase............... 4.50% 4.50% 4.00%
</TABLE>

The Company has a nonqualified, unfunded supplemental executive retirement
plan for executives whose benefits under a prior salaried retirement plan
sponsored by the former owner were reduced because of compensation under
deferral elections or limitations under federal tax laws. All benefit accruals
under the supplemental employee retirement plan ceased subsequent to August 31,
1993. The Company has retained sponsorship of this plan, as well as the
responsibility for all benefit payments thereunder. The liability associated
with the plan has been designated as a "liability subject to compromise" in
connection with the Chapter 11 bankruptcy filing.

The Company also has a nonqualified, unfunded capital accumulation plan for
which it has purchased life insurance on the lives of the participants. A
grantor trust is the sole owner and beneficiary of such policies. The amount of
coverage is designed to provide sufficient revenues to recover all costs of the
plan if assumptions made as to mortality experience, policy earnings and other
factors are realized.

F-24
<PAGE> 68
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table sets forth the status of the non-qualified plans at
December 31, 1999 and 1998, and the amounts recognized in the Company's
consolidated balance sheets at that date and the net periodic pension costs
related to the above plans for the years ended December 31, 1999, 1998 and 1997
(dollars in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year.............. $ 24,506 $ 23,551
Interest cost........................................ 1,626 1,618
Actuarial loss....................................... 2,436 150
Benefits paid........................................ (1,319) (813)
-------- --------
Benefit obligation at end of year.................... 27,249 24,506
-------- --------
CHANGES IN PLAN ASSETS:
Fair value of plan assets at beginning of year....... -- --
Employer contribution................................ 1,319 813
Benefits paid........................................ (1,319) (813)
-------- --------
Fair value of plan assets at end of year............. -- --
-------- --------
Funded status.......................................... (27,249) (24,506)
Unrecognized net actuarial loss........................ 2,215 --
-------- --------
Net amount recognized................................ $(25,034) $(24,506)
======== ========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS
CONSIST OF:
Accrued benefit liability......................... $(27,249) $(24,506)
Minimum liability adjustment...................... 2,215 --
-------- --------
Net amount recognized........................ $(25,034) $(24,506)
======== ========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Interest cost.................................. $1,626 $1,618 $1,479
Amortization of unrecognized net loss.......... 248 150 11
------ ------ ------
Net periodic benefit cost...................... $1,874 $1,768 $1,490
====== ====== ======
WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate............................... 7.00% 6.50% 7.00%
</TABLE>

Subsequent to the Merger, employees of the Company not covered by a
collective bargaining agreement participate in a defined benefit pension plan
sponsored by Koch Industries. The Company is charged a percentage of eligible
employees' compensation. The percentage was 4.9% in 1999 and 1998 and the total
cost to the Company approximated $4.0 million and $2.3 million for the year
ended December 31, 1999 and for the period June 1 to December 31, 1998,
respectively. The percentage is based primarily on years of service and
compensation rates near retirement.

16. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS/POSTEMPLOYMENT BENEFITS

The Company historically provided certain health care and life insurance
benefits to retired employees who met specified age and years of service
requirements. The life insurance plan provided a $5,000 benefit and was
available on a noncontributory basis. The health care plans paid a stated
percentage of most

F-25
<PAGE> 69
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

medical expenses reduced for any deductibles and co-payments, payments made by
government programs and other group coverage. The cost of providing these health
care benefits was shared with retirees. All plans were unfunded.

As a result of the Merger, the employee benefit plans of the Company that
provide health care and life insurance benefits to retired employees were
terminated. For any retiree who was 100% vested at the time of the Merger, the
Company will share a portion of their postretirement health care cost for the
three years following the date of Merger. Retirees who were receiving health
benefits under the health plans of the Company have been provided medical
benefits under Koch Agriculture's medical plans. After the three-year period
expires, neither the Company nor Koch Agriculture will share a portion of the
retirees' postretirement health care cost. At December 31, 1999, the Company
estimates its remaining liability for retirees' postretirement health care to be
$150,000 which is the amount payable to Koch Agriculture pursuant to an
agreement entered into between the Company, Koch Industries and Koch
Agriculture.

The following table sets forth the status of the accrued postretirement
benefit cost recognized in the Company's consolidated balance sheet at December
31, 1998 and the net periodic postretirement benefit cost for the years ended
December 31, 1998 and 1997 (dollars in thousands):

<TABLE>
<S> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year................... $ 18,710
Service cost.............................................. 118
Interest cost............................................. 336
Amendments................................................ (17,269)
Actuarial loss............................................ 501
Benefits paid............................................. (1,440)
--------
Benefit obligation at end of year......................... 956
--------
CHANGES IN PLAN ASSETS:
Fair value of plan assets at beginning of year............ --
Employer contribution..................................... 1,440
Benefits paid............................................. (1,440)
--------
Fair value of plan assets at end of year.................. --
--------
Funded status............................................... (956)
Unrecognized net actuarial loss............................. 498
--------
Net amount recognized..................................... $ (458)
========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED BALANCE SHEETS
CONSIST OF:
Accrued benefit liability.............................. $ (458)
========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1998 1997
----- ------
<S> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost............................................. $ 118 $ 837
Interest cost............................................ 336 1,809
Amortization of prior service credit..................... (64) (111)
Amortization of unrecognized net gain.................... (175) (431)
----- ------
Net periodic benefit credit........................... $ 215 $2,104
----- ------
WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER 31:
Discount rate......................................... 6.50% 7.00%
</TABLE>

F-26
<PAGE> 70
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Actuarial assumptions used for the Company's retiree health care and life
insurance plans were as follows (dollars in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------ ------
<S> <C> <C>
Projected health care cost trend rate...................... 7.0% 8.0%
Ultimate trend rate........................................ 6.50% 4.25%
Year ultimate trend rate is achieved....................... 2001 2002
Effect of a 1% increase in the health care cost trend rate
on the APBO.............................................. $ 24 $1,949
Effect of a 1% increase in the health care cost trend rate
on the aggregate of service and interest cost............ $ 1 $ 236
</TABLE>

17. STOCK OPTION PLANS

The Company had three stock option plans: the 1993 Stock Option Plan ("1993
Plan"), the PM Holdings Corporation Omnibus Stock and Incentive Plan ("1995
Plan"), and the PM Holdings Corporation Non-Employee Directors Stock Option Plan
("Directors Plan"). The 1993 Plan provided for the issuance of both incentive
stock options and non-qualified options. Under the plan, a maximum of 20,000
shares could have been granted at prices not less than 100% and 85% of the fair
market value of a share of common stock on the date the option was granted, for
incentive stock options and non-qualified options, respectively. The terms of
all options granted could not exceed ten years from the date of grant. This plan
was replaced by the 1995 Plan and no additional awards were granted under the
1993 Plan.

The 1995 Plan provided for the issuance of stock options, stock rights
units, stock appreciation rights, restricted stock and common stock to key
employees of the Company. Under the plan the 13,500 shares not previously
granted under the 1993 Plan plus an additional 26,000 shares could have been
granted. Upon the exercise of a stock rights unit, a participant received the
equivalent number of shares of common stock. The Directors Plan provided for
each non-employee director to receive an option to purchase 500 shares at fair
market value on the date of grant. Under the plan a maximum of 15,000 shares
could have been granted. All options and rights granted under the three plans
vested over a three-year period and had a term of ten years.

Pursuant to the Merger, each outstanding option to purchase Holdings common
stock and each stock rights unit entitling the holder thereof to acquire
Holdings common stock became 100% vested. Option holders and stock rights unit
holders received the Merger Consideration for each share of Holdings common
stock into which such options or stock rights units were exercisable immediately
prior to the Merger. Cash proceeds paid to holders of options and stock rights
units was $13.5 million. During 1998 and 1999 no additional stock options or
stock rights units were granted and there were no stock options or stock rights
units outstanding as of December 31, 1998 or 1999.

18. SUBSEQUENT EVENTS

Effective January 1, 2000, the Company had transitioned substantially all
of the commodity purchasing from Koch Agriculture and payroll processing and
employee benefit plan administration from Koch Industries pursuant to the
Transition Services Agreement.

The Company established a new 401(k) plan effective January 1, 2000 under
which employees are eligible to make before-tax and after-tax contributions. The
Company will make matching contributions up to 6% of pay to the new plan. The
new plan will accept transfers of assets and liabilities from Koch Industries'
savings plans. Prior to December 31, 1999, the Company's non-union employees
participated in the defined benefit plan sponsored by Koch Industries and
employees participated in health and welfare

F-27
<PAGE> 71
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

plans sponsored by Koch Industries. The Company reimbursed Koch Industries for
the cost of these plans. The Company ceased participating in these plans
sponsored by Koch Industries on December 31, 1999. The Company has established
similar stand alone health and welfare benefit plans effective January 1, 2000.

F-28
<PAGE> 72

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION)

INDEX TO FINANCIAL STATEMENTS
FOR THE PERIOD
ENDED JUNE 30, 2000

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Balance Sheets at June 30, 2000 and December F-30
31,1999...................................................
Consolidated Statements of Operations for six months ended F-32
June 30, 2000 and 1999....................................
Consolidated Statements of Cash Flows for the six months F-33
ended June 30, 2000 and 1999..............................
Notes to Consolidated Financial Statements.................. F-34
</TABLE>

F-29
<PAGE> 73

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
DECEMBER 31, 1999
(DERIVED FROM AUDITED
JUNE 30, 2000 FINANCIAL STATEMENTS)
------------- ---------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 43,151 $ 48,094
Accounts receivable, net.................................. 26,191 38,817
Inventories............................................... 50,530 58,869
Prepaid expenses and other current assets................. 11,062 7,758
Deferred income taxes..................................... 14,219 --
-------- --------
TOTAL CURRENT ASSETS................................... 145,153 153,538

Property, plant and equipment, net.......................... 206,753 235,378
Intangible assets, net...................................... 43,778 155,000
Reorganization value in excess of amounts allocable to
identifiable assets....................................... 103,967 --
Notes receivable............................................ 4,408 8,147
Deferred financing costs, net............................... -- 10,107
Other assets................................................ 27,890 26,845
-------- --------
TOTAL ASSETS........................................... $531,949 $589,015
======== ========
</TABLE>

F-30
<PAGE> 74

<TABLE>
<CAPTION>
DECEMBER 31, 1999
(DERIVED FROM AUDITED
JUNE 30, 2000 FINANCIAL STATEMENTS)
------------- ---------------------
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable--other................................... $ 32,700 $ 32,759
Customer advance payments................................. 2,466 10,809
Accrued expenses.......................................... 40,506 31,769
Interest payable.......................................... 54 --
Current portion of long-term debt and bank borrowings
under revolving credit facility........................ 4,000 278,031
-------- ---------
TOTAL CURRENT LIABILITIES.............................. 79,726 353,368

Deferred income taxes....................................... 66,518 --
Retirement obligations...................................... 24,500 25,730
Accrued post-retirement benefit costs....................... -- 150
Other liabilities........................................... 5,855 6,069
Liabilities subject to compromise........................... -- 419,500
Long-term debt.............................................. 171,150 --

Commitments and Contingencies (Note 9)

STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $0.01 par value: 5,000,000 shares
authorized, none issued or outstanding................. -- --
Common stock, $0.01 par value: 20,000,000 shares
authorized and 10,000,000 shares to be issued at June
30, 2000 and 1,000 shares authorized, issued and
outstanding at December 31, 1999....................... 100 1
Additional paid-in capital................................ 184,900 109,499
Retained deficit.......................................... (800) (323,956)
Accumulated other comprehensive loss...................... -- (1,346)
-------- ---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)................... 184,200 (215,802)
-------- ---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT)..... $531,949 $ 589,015
======== =========
</TABLE>

(See Accompanying Notes)

F-31
<PAGE> 75

<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
NET SALES................................................... $414,546 $437,442
COSTS AND EXPENSES:
Cost of products sold..................................... 329,164 352,879
Marketing, distribution and advertising................... 43,196 46,223
General and administrative................................ 26,494 32,975
Amortization of intangibles............................... 13,575 7,586
Research and development.................................. 2,723 3,003
Provision for plant closings.............................. -- 19,665
Restructuring expenses.................................... 24,924 553
Other (income) expense, net............................... (28,449) (530)
-------- --------
411,627 462,354

OPERATING INCOME (LOSS)..................................... 2,919 (24,912)
Interest expense -- net..................................... 9,759 25,957
-------- --------
Income (loss) before income taxes........................... (6,840) (50,869)
Benefit for income taxes.................................... -- (16,054)
-------- --------
Income (loss) before extraordinary item..................... (6,840) (34,815)
Extraordinary item-gain on extinguishment of debt, net of
tax....................................................... 159,359 --
Revaluation of assets and liabilities pursuant to the
adoption of fresh-start reporting......................... 2,483 --
======== ========
NET INCOME (LOSS)........................................... $155,002 $(34,815)
======== ========
</TABLE>

(See Accompanying Notes)

F-32
<PAGE> 76

<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)......................................... $155,002 $(34,815)
Adjustment to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Gain on extinguishment of debt......................... (159,359) --
Gain on revaluation pursuant to fresh-start
reporting............................................. (2,483) --
Depreciation and amortization.......................... 28,612 23,238
Provision for loss on asset disposition................ (5,616) 73
Provision for asset write-off.......................... -- 19,665
Provision for deferred taxes........................... -- (16,054)
Other.................................................. 10,817 (41,408)
-------- --------
Net cash provided by (used in) operations................... $ 26,973 $(49,301)

INVESTING ACTIVITIES:
Sale of property, plant and equipment..................... 15,757 --
Purchase of property, plant and equipment................. (8,642) (10,127)
Other..................................................... 3,739 (1,925)
-------- --------
Net cash provided by (used in) investing activities......... $ 10,854 $(12,052)

FINANCING ACTIVITIES:
Proceeds from revolving credit facility................... (87,471) 35,000
Repayment of term loans................................... (15,550) (3,400)
Capital contribution...................................... 60,000 --
Other..................................................... 251 (59)
-------- --------
Net cash provided by (used in) financing activities......... $(42,770) $ 31,541
Decrease in cash and cash equivalents....................... (4,943) (29,812)
Cash and cash equivalents at beginning of period............ 48,094 41,446
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 43,151 $ 11,634
-------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest............................................... $ 13,598 $ 26,165
Income taxes........................................... 173 450
</TABLE>

(See Accompanying Notes)

F-33
<PAGE> 77

PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Purina Mills filed a Form 8-K on January 18, 2000 with the Securities and
Exchange Commission, which included a Plan of Reorganization (the "Plan") and a
disclosure statement. The Plan, as amended, was approved by the creditors,
confirmed on April 5, 2000 by the Bankruptcy Court and became effective on June
29, 2000 (the "Effective Date").

The Plan provided, among other things, the merger of Purina Mills with and
into Holdings prior to the effective date of the Plan. By operation of the
merger, Holdings succeeded to the business previously conducted by Purina Mills
and changed its name to Purina Mills, Inc. On May 19, 2000, Purina Mills merged
with and into Holdings with Holdings being the surviving corporation, renamed as
Purina Mills, Inc. (the "Company"). Subsequently, the Plan became effective and
the Company emerged from Chapter 11 as of the beginning of business on June 30,
2000.

Within 45 days after the Effective Date the Company will make distributions
of cash and a partial distribution of new common stock of the Company to holders
of claims that have been allowed. As of the Effective Date the Company was
authorized to issue 20,000,000 shares of its $0.01 par value common stock. The
Company will issue 9,910,000 shares to holders of allowed unsecured claims and
90,000 shares to certain employees under the Company's Key Employee Retention
Program. The Company's request to list its stock on the NASDAQ National Market
was granted on June 26, 2000.

The consolidated balance sheet at June 30, 2000 and the consolidated
statements of operations and cash flows for the period ended June 30, 2000 are
unaudited and reflect all adjustments, consisting of normal recurring items and
the adoption of "fresh-start" reporting (See Note 3), which management considers
necessary for a fair presentation. Operating results for fiscal 2000 interim
periods are not necessarily indicative of results to be expected for the fiscal
year ending December 31, 2000. The consolidated balance sheet at December 31,
1999 was derived from the Company's December 31, 1999 audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles.

Although the Company believes the disclosures are adequate, certain
information and disclosures normally included in the notes to the financial
statements have been condensed or omitted as permitted by the rules and
regulations of the Securities and Exchange Commission. The accompanying
unaudited financial statements should be read in conjunction with the financial
statements for the year ended December 31, 1999 and the quarter ended March 31,
2000 which are included in the registration statement on Form 10/A, Amendment
No. 1 filed on May 18, 2000.

2. FINANCIAL RESTRUCTURING DEVELOPMENTS

The economic environment in the agricultural industry during 1998, 1999,
and early 2000 was a difficult one for many individual producers and companies
that participate in the sector. Livestock commodity prices have been depressed
and reached historic lows in many markets. In addition to the

F-34
<PAGE> 78
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

overall economic environment, there is significant competition in all areas of
agriculture, including the feed industry.

In connection with the Merger, the Company incurred a significant amount of
indebtedness. As of March 31, 1998, the Company had approximately $557.2 million
of consolidated indebtedness, and its stockholders' equity was approximately
$109.4 million. Of the total $669.6 million required to consummate the 1998
Merger and related transactions, $559.9 million was supplied by indebtedness and
$109.7 million was supplied by equity contributions. The Company's indebtedness
was raised through the sale of $350.0 million aggregate principal amount of its
Senior Subordinated Notes Due 2010 (the "Notes") and borrowings under a $300.0
million secured credit facility, pursuant to a credit agreement (the
"Prepetition Credit Agreement"), from a syndicate of lenders (the "Prepetition
Credit Facility"). The Prepetition Credit Facility included: a $200.0 million
term loan facility (the "Prepetition Term Loan") and a $100.0 million revolving
credit facility (the "Prepetition Revolving Credit Facility"). Since the Merger,
a significant portion of the Company's cash flow from operations has been
dedicated to the payment of principal and interest on its indebtedness, thereby
reducing the funds available to the Company for its operations. The Company's
substantial degree of leverage limited its flexibility to adjust to the
depressed conditions in the agricultural industry and made it particularly
vulnerable to the downturn in the swine market.

As a result of its financial condition during 1999 and its substantial
degree of leverage, the Company's ability to finance its working capital
requirements and implement its business plan have been adversely affected by its
cash requirements for debt service. On September 15, 1999, the Company failed to
make a scheduled interest payment of $15.75 million due to holders of the Notes.
On October 21, 1999, the trustee under the indenture (the "Prepetition Notes
Indenture") for the Notes accelerated such Notes as a result of the failure to
make such interest payment. On September 30, 1999, the Company failed to pay
$2.1 million in principal payments due on the Term Loan. Such principal payment
was subsequently made on October 28, 1999.

Faced with these events and an inability to service future interest
payments on the Notes, the Debtor filed voluntary petitions for relief (the
"Reorganization Cases") under Chapter 11 of the U.S. Bankruptcy Code, as
amended, with the Bankruptcy Court on the Petition Date. As described in the
disclosure statement, a settlement was negotiated between Koch Industries, Inc.

("Koch Industries") and a committee representing holders of Notes
("Noteholders") whereby Koch Industries agreed to make capital contribution of
$60 million to the Company. Such capital contribution was received by the
Company on the Effective Date.

F-35
<PAGE> 79
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

As of the Petition Date, the Company discontinued accruing interest on its
unsecured pre-petition debt obligations. Additional claims have arisen
subsequent to the filing date resulting from rejection of executory contracts
and unexpired leases, and from the determination by the court or as agreed to by
parties in interest of allowed claims for contingencies and other disputed
amounts. Claims secured against the Debtor's assets also are stayed, although
the holders of such claims have the right to move the court for relief from the
stay.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fresh-Start Reporting: As of June 30, 2000, in accordance with the AICPA
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code ("SOP 90-7"), the Company was required to adopt
"fresh-start" reporting and reflect the effects of such adoption in the
financial statements for the six months ended June 30, 2000. Accordingly, the
December 31, 1999 consolidated balance sheet is not comparable to the June 30,
2000 consolidated balance sheet.

In adopting fresh-start reporting, the Company with the assistance of its
financial advisors, was required to determine its reorganization value, which
represents the fair value of the entity before considering liabilities and
approximates the amount a willing buyer would pay for the assets of the Company
immediately after its emergence from Chapter 11 status. The reorganization value
of the Company was determined by consideration of several factors, including the
Company's historical financial performance, its fiscal 2000 budget, publicly
available data of companies whose operations are generally comparable to the
operations of the Company and economics and industry data trends.

The adjustments to reflect the consummation of the Plan, including the gain
on extinguishment of debt related to pre-petition liabilities and the adjustment
to record assets and liabilities at their fair values (including the
establishment of reorganization value in excess of amounts allocable to
identifiable assets), have been reflected in the accompanying consolidated
financial statements.

Intangible Assets (including Goodwill): Intangible assets at June 30, 2000
represent the Company's estimate of the value of such assets at the Effective
Date, in accordance with the principles of SOP 90-7, and will be amortized over
their estimated period of related benefit of one to ten years. Intangible
assets, at December 31, 1999, represent the excess of cost over the net tangible
assets of the business at the time of acquisition and were amortized over the
estimated period of related benefit.

Management periodically has and will continue to review the value of its
intangible assets to determine if an impairment has occurred or whether changes
have occurred that would require a revision to the remaining useful life. In
making such determination, management evaluates the performance, on an
undiscounted basis, of the underlying operations or assets which give rise to
such amount.

Reorganization Value in Excess of Amounts Allocable to Identifiable Assets:
As a result of adopting "fresh-start" reporting, the Company recorded
reorganization value in excess of amounts allocable to identifiable assets of
approximately $104.0 million. This intangible asset will be amortized on a
straight-line basis over a ten-year period.

F-36
<PAGE> 80
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Income Taxes: Deferred income taxes are recognized for the effect of
temporary differences between the financial reporting basis and the tax basis of
the assets and liabilities plus operating loss carryforwards at enacted tax
rates expected to be in effect when such amounts are realized or settled. In
connection with "fresh-start" reporting the Company recorded a net $52.3 million
deferred tax liability for the effect of temporary differences between the
financial reporting and tax basis of its assets and liabilities. This is
reflected as a current asset of $14.2 million and a long-term liability of $66.5
million.

The Company was part of a tax sharing agreement with Koch Industries
effective as of the date of the Merger through June 29, 2000. The agreement
provided that the tax liability of the group shall be allocated to the members
of this group on the basis of the percentage of the member's total tax, if
computed on a separate return, would bear to the total amount of the taxes of
all members of the group so computed. If the Company's tax attributes were
utilized by another member of the group, such member would reimburse the Company
when the Company would have been able to utilize such attributes in computing
the Company's separate taxable income. The Company's tax provisions for all
periods after March 12, 1998 through June 29, 2000 were computed on this basis.
The results of operations of the Company after March 12, 1998 through June 29,
2000 have been or will be included in the consolidated U.S. corporation income
tax return and certain consolidated state income tax returns of Koch Industries.
The result of operations commencing June 30, 2000 will be included in the
consolidated return of the Company and its subsidiaries.

Revenue Recognition: Net sales are generally recognized when products are
shipped. Allowances for customer discounts are recorded when revenues are
recognized.

Internal Use Software: The Company has replaced or modified all of the
Company's computer systems and software applications so that they are Year 2000
compliant. In connection with this process, the Company purchased and
implemented an enhanced accounting and information reporting system. The Company
capitalized all software and consultant costs and the direct costs of those
employees directly involved in the process, in accordance with Statement of
Position No. 98-1, Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use ("SOP 98-1"). All other related costs were expensed as
incurred. The Company's policies are in accordance with the provisions of SOP
98-1. Total capitalized software costs related to the enhanced accounting and
information reporting systems were $16.4 million as of December 31, 1999. The
Company is amortizing the costs associated with the project using the
straight-line method over five years, the expected life of the system.

4. RESTRUCTURING EXPENSES

During the three and six months ended June 30, 2000, the Company incurred
advisory fees and expenses of $9.6 million and $13.8 million, respectively, in
connection with the Reorganization Cases. Additionally, the Company has recorded
severance and moving costs of $3.0 million and $4.6 million, respectively, and
compensation expense of $3.8 million and $6.5 million, respectively, in
connection with the Company's Key Employee Retention Plan for the same three and
six month periods.

F-37
<PAGE> 81
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
Raw materials.................................. $31,207 $37,577
Finished goods................................. 10,883 11,411
Animals........................................ 8,440 9,881
------- -------
Total........................................ $50,530 $58,869
------- -------
</TABLE>

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
Land........................................... $ 10,808 $ 13,362
Buildings...................................... 60,924 86,332
Machinery and equipment........................ 122,780 180,769
Construction in progress....................... 12,353 7,359
-------- --------
206,865 287,822
Accumulated depreciation....................... (112) (52,444)
-------- --------
Total........................................ $206,753 $235,378
======== ========
</TABLE>

In connection with the adoption of "fresh-start" reporting for the period
ended June 30, 2000, the Company was required to adjust property, plant and
equipment to its fair value. Based on the Company's estimate of the fair value
of such assets at the Effective Date, an adjustment was made to decrease the
value of property, plant and equipment by approximately $ 11.9 million with no
material change in the remaining useful lives.

During the quarter ended June 30, 1999, the Company made the decision to
discontinue manufacturing operations at five of its facilities. Products for
distribution to customers of the closed facilities are being manufactured at the
Company's other facilities. In connection with these plant closures, the Company
recorded a loss of $13.1 million on manufacturing assets, representing the
amount by which the book value exceeds estimated fair value. Estimated
demolition costs of $1.2 million, severance costs of $0.4 million and a
write-off of $5.0 million for related goodwill were also recorded.

7. INTANGIBLE ASSETS

Intangible assets consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
Distribution network........................... $24,000 $ 40,000
Patents........................................ 6,298 15,000
Covenant not to compete........................ -- 2,083
Goodwill....................................... -- 262,728
Other intangibles.............................. 13,480 31,539
------- ---------
43,778 351,350
Accumulated amortization....................... -- (196,350)
------- ---------
Total........................................ $43,778 $ 155,000
======= =========
</TABLE>

F-38
<PAGE> 82
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Intangible assets at June 30, 2000 represent the Company's estimate of the
value of such assets at the Effective Date, in accordance with the principles of
SOP 90-7, and will be amortized over their estimated period of related benefit
of one to ten years.

During the fourth quarter of 1999, in connection with the Company's
Reorganization Cases, the Company recorded a provision for loss on impairment of
intangible assets of $161.6 million. The provision reduced the net value of
intangible assets to management's estimate of the fair value of intangible
assets at December 31, 1999. Management's estimate was based upon the expected
net realizable value of the Company on a going concern basis which contemplated
continuity of operations, realization of assets and liquidation of liabilities
in the ordinary course of business.

8. DEBT

Debt consists of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C>
Term loan...................................... $175,000 $190,550
Senior subordinated notes due 2010............. -- 350,000
Revolving credit facility...................... -- 87,471
Other.......................................... 150 10
-------- --------
175,150 628,031
Less current portion of long-term debt......... 4,000 --
-------- --------
Total........................................ $171,150 $628,031
======== ========
</TABLE>

The foregoing debt is classified as follows in the December 31, 1999
consolidated balance sheet (in thousands):

<TABLE>
<S> <C>
Current portion of long-term debt and bank borrowings under
revolving credit facility................................. $278,031
Liabilities subject to compromise........................... 350,000
--------
Total.................................................. $628,031
========
</TABLE>

Credit Facility: In connection with the consummation of the Plan, Purina
Mills entered into a new credit agreement ("the Credit Agreement") which
provides for secured borrowings from a syndicate of lenders consisting of (i) a
term loan facility providing for an aggregate of $175.0 million Tranche A Term
Loan with a maturity date of December 31, 2003 ("the Term Loan") and (ii) a
$50.0 million Revolving Credit Facility with a maturity date of December 31,
2002, with a $30.0 million sub-limit for letters of credit, which is available
to finance the Company's ongoing working capital requirements. The proceeds of
the Term Loan were borrowed in full on June 29, 2000, to repay the Prepetition
Credit Facility, and $14.4 million of the Revolving Credit Facility has been
used for the issuance of letters of credit for ordinary course business purposes
of the Company and it subsidiaries. No borrowings were made under the Revolving
Credit Facility. The Company is charged an annual fee of 0.5% for amounts
available but unused under the Revolving Credit Facility. In addition, the
Company is charged a fee of 2.75% per annum on the daily average amount
available for drawing under any letter of credit. Loans under the Credit
Agreement bear interest at floating rates, which are, at the Company's option
based either upon bank prime or Eurodollar rates. Rates on outstanding
borrowings based on bank prime plus 1.75% were 11.25% at June 30, 2000.

F-39
<PAGE> 83
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The annual amortization schedule of the Term Loan outstanding on June 30,
2000 is $8.0 million in 2001, $17.0 million in 2002, and $150.0 million in 2003.
The 2003 amount includes a payment of $135.0 million on the Term Loan maturity
date of December 31, 2003. The Company is required to make mandatory repayments
of the Term Loan in amounts equal to 80% of Excess Cash Flow (as defined in the
Credit Agreement). The first such payment is due March 2001. Additionally, the
Company is generally required to make mandatory repayments of amounts received
on the sale of assets unless reinvested within specific time periods. Any
repayments under the Term Loan are not available for future re-borrowings.

Covenants: The Credit Agreement contains restrictive covenants that, among
other things and under certain conditions, limit the ability of the Company to
incur additional indebtedness, to acquire (including a limitation on capital
expenditures) or dispose of assets or operations and to pay dividends. The Term
Loan and Revolving Credit Facility also require the Company to satisfy certain
financial covenants and tests. The Company was in compliance with its debt
covenants at June 30, 2000.

9. CONCENTRATION OF CREDIT RISK AND LOAN GUARANTEES

Concentration of Credit Risk: Financial instruments which potentially
subject the Company to concentration of credit risk consist principally of trade
receivables. A substantial portion of the Company's sales are to companies or
individuals in agriculture-related businesses, with approximately 15% of its
sales volume being feed for hogs. Hog producers experienced severely depressed
market prices in 1998 and 1999 and the Company has outstanding trade
receivables, loans and loan guarantees relating to customers in the hog
industry.

Loan Guarantees: The Company had provided a guarantee of up to $11.5
million to an entity formed in 1995 to provide funding for the growth,
consolidation and expansion of the Company's network of independently-owned
dealers and producers. The Company recorded a loss reserve for the entire amount
of the guarantee in 1998. At June 30, 2000 and December 31, 1999, the Company
had funded $6.7 million on the guarantee. In August 1999 the Company issued a
letter of credit for $3.3 million to secure a portion of the unfunded guarantee.
The Company is not a member of this non-stock membership corporation and thus
does not have an equity interest in the entity.

Loan guarantees are also made to banks to assist the Company's customers in
obtaining bank loans for working capital, lines of credit, and additions to
property, plant and equipment. The guarantee arrangements essentially have the
same credit risk as that involved in extending loans to customers and are
subject to the Company's normal credit policies. Collateral (e.g., farm animals,
property, personal guarantees) is usually obtained based on management's
assessment of the specific customer's credit risk. The Company had guarantees of
approximately $4.7 million and $6.3 million at June 30, 2000 and December 31,
1999, respectively, under these types of arrangements. The maturity dates of
these guarantees extend through May 2008 with the majority of the guarantees
maturing prior to 2003.

Swine Purchase Commitments and Swine Operations: To capitalize on the
consolidation of the hog industry, the Company implemented a strategy in 1997
that was expected to result in control over the feeding of approximately six
million market hogs over four years. The program provides a source of high
quality weanlings and feeder pigs ("feeders") to independent hog producers and
gains the related feed business for the Company. Under this program, at June 30,
2000, the Company has future net purchase commitments, subject to the
counterparties' ability to perform, to acquire 0.3 million feeders over the next
eight years. Approximately 8% of these commitments are at fixed prices whereas
the other 92% vary based on current or published futures prices. The net
purchase commitment of 0.3 million feeders represents gross commitments during
the period for the Company to purchase approximately 3.4 million feeders less
3.1 million feeders which are under contract to be sold to third parties.

Additionally, the Company has direct ownership of several hog operations
which are expected to produce an additional 1.5 million feeders over the next
ten years. As hog producers experience volatile
F-40
<PAGE> 84
PURINA MILLS, INC. (FORMERLY PM HOLDINGS CORPORATION) AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

market prices for their end products, the Company has significant exposure
relating to its feeder pig program, direct hog ownership and joint venture
interests in hog operations. At June 30, 2000 and December 31, 1999, the Company
had $7.8 million and $8.6 million, respectively, in hog inventory.

Based on published market prices at June 30, 2000, the Company's net
commitment to purchase the 0.3 million feeders totals approximately $10.9
million. This is a decrease of $6.1 million from such amount at December 31,
1999. Upon receipt of the feeders the Company can either sell them at current
market prices, feed the pigs at Company leased facilities, or contract with
independent producers to feed the pigs. Based on 1999 contractual commitments,
estimated feed costs, counterparty risks and current spot and futures prices,
the Company estimates that its 2000 loss associated with its swine exposure will
range between $2.5 million and $5.0 million. The Company recorded a loss of
$16.2 million during 1999 and a loss of $2.6 million for the six months ended
June 30, 2000. Depending on the future market price for both feeders and market
hogs, any or all of the options available to the Company could have adverse
impacts on operations, cash flows and liquidity.

F-41
<PAGE> 85

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

NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER TO SELL
ONLY THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN
JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 4
Market for Common Stock............... 9
Use of Proceeds....................... 9
Dividend Policy....................... 9
Selected Consolidated Financial
Data................................ 10
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 21
Management............................ 28
Certain Transactions.................. 32
Principal and Selling Stockholders.... 32
Description of Capital Stock.......... 34
Shares Eligible for Future Sale....... 38
Plan of Distribution.................. 39
Legal Matters......................... 40
Experts............................... 40
Where You Can Find More Information... 40
Index to Financial Statements......... F-1
</TABLE>

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

Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to an unsold allotment or subscription.

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

UP TO 2,356,168 SHARES

PURINA MILLS, INC. LOGO

COMMON STOCK

------------------------------------------------------
------------------------------------------------------
<PAGE> 86

PART II

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table indicates the expenses to be incurred in connection
with the offering described in this registration statement, all of which will be
paid by us. All amounts are estimates, other than the Securities and Exchange
Commission registration fee.

<TABLE>
<S> <C>
Securities Exchange Commission registration fee............. $ 6,817
--------
NASD filing fee............................................. N/A
--------
Nasdaq listing fees......................................... N/A
--------
Legal fees and expenses..................................... 50,000
--------
Accounting fees and expenses................................ 30,000
--------
Printing expenses........................................... 50,000
--------
Blue sky fees and expenses.................................. N/A
--------
Transfer agent fees and expenses............................ N/A
--------
Miscellaneous expenses...................................... N/A
--------
Total....................................................... $136,817
========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Pursuant to the authority conferred by Section 102 of the Delaware General
Corporation Law, as amended (the "DGCL"), our bylaws contain a provision
providing that none of our directors shall be personally liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director to
the extent permitted by applicable law. The DGCL does not permit a provision in
a corporation's certificate of incorporation that would eliminate such liability
for:

- any breach of the directors' duty of loyalty to us or our stockholders;

- acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

- any unlawful payment of a dividend or unlawful stock repurchase or
redemption, as provided in section 174 of the DGCL; or

- any transactions from which the director derived an improper personal
benefit.

Our certificate of incorporation also provides that if Delaware law is
amended to further eliminate or limit the liability of directors, then the
liability of our directors shall be eliminated or limited, without further
stockholder action, to the fullest extent permissible under Delaware law as so
amended.

Section 145 of the DGCL contains provisions permitting (and, in some
situations, requiring) Delaware corporations such as us to provide
indemnification to their officers and directors for losses and litigation
expense incurred in connection with, among other things, their service to the
corporation in those capacities. Our certificate of incorporation contains
provisions requiring us to indemnify and hold harmless our directors, officers
and employees to the fullest extent permitted by law. Among other things, these
provisions provide that we are required to indemnify any person who was or is a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding") by reason of the fact that the indemnitee is or
was acting in an official capacity as our director, officer, employee or agent,
or is or was serving at our request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
(including service with respect to any employee benefit plan against all
expenses, liability and loss, including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid in settlement) reasonably incurred or
suffered by the indemnitee in connection with such proceeding to the
II-1
<PAGE> 87

fullest extent permitted by the DGCL, as the same exists or may be amended (but,
in the case of any amendment, only to the extent that the amendment permits us
to provide broader indemnification rights than law permitted us to provide prior
to the amendment). These provisions also provide for the advance payment of fees
and expenses incurred by the indemnitee in defense of any such proceeding,
subject to reimbursement by the indemnitee if it is ultimately determined that
the indemnitee is not entitled to be indemnified by us. We have entered into
agreements with our directors and executive officers providing contractually for
indemnification consistent with our certificate of incorporation and bylaws.

Our certificate of incorporation also permits us to secure insurance on
behalf of any director, officer, employee or agent for any liability arising out
of actions in his or her capacity as an officer, director, employee or agent,
regardless of whether Delaware law would permit indemnification. We have
obtained an insurance policy that insures our directors and officers against
losses, above a deductible amount, from specified types of claims.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In connection with the consummation of the merger in May 2000 of our then
subsidiary Purina Mills, Inc. with and into us, Koch Agriculture Company was
granted an option to purchase a warrant. Under the warrant purchase agreement,
Koch Agriculture had the right, during the period commencing immediately after
consummation of the merger and ending on the effective date of our plan of
reorganization, to purchase the warrant for $5.0 million. Koch Agriculture did
not exercise its right to purchase the warrant and the option expired.

As part of their respective fee arrangements related to our emergence from
bankruptcy, Houlihan, Lokey, Howard & Zukin Capital and Chanin Capital Partners
are entitled to convert certain promissory notes received from the Company into
approximately 78,000 shares of the common stock. The offer and distribution of
these notes and the common stock issuable upon conversion of the notes were or
will be made by a private placement and are exempt from registration pursuant to
Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits:

II-2
<PAGE> 88

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
4(b) Form of Registration Rights Agreement among Purina Mills,
Inc. and certain holders of Common Stock, incorporated by
reference to Exhibit 4(b) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
4(c) Form of Rights Agreement between Purina Mills, Inc. and the
Rights Agent thereunder, incorporated by reference to
Exhibit 4(c) of Purina Mills' Registration Statement on Form
10 (Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
4(d) Form of Convertible Promissory Note between Purina Mills,
Inc. and Houlihan Lokey Howard & Zukin Capital, incorporated
by reference to Exhibit 4(d) of Purina Mills' Quarterly
Report on Form 10-Q (Registration No. 033-66606) filed on
August 14, 2000.
4(e) Form of Convertible Promissory Note between Purina Mills,
Inc. and Chanin Capital Partners, incorporated by reference
to Exhibit 4(e) of Purina Mills' Quarterly Report on Form
10-Q (Registration No. 033-66606) filed on August 14, 2000.
4(f) Credit Agreement, dated as of June 28, 2000, among Purina
Mills, Inc. and certain of its lenders, incorporated by
reference to Exhibit 4(f) of Purina Mills' Quarterly Report
on Form 10-Q (Registration No. 033-66606) filed on August
14, 2000.
4(g) Form of Term Note, dated as of June 28, 2000, made by Purina
Mills, Inc, incorporated by reference to Exhibit 4(g) of
Purina Mills' Quarterly Report on Form 10-Q (Registration
No. 033-66606) filed on August 14, 2000.
4(h) Form of Lockup Agreement in respect to the Common Stock
issued under the Purina Mills, Inc. Key Employee Retention
Program, incorporated by reference to Exhibit 4(i) of Purina
Mills' Registration Statement on Form 10 (Registration No.
033-66606) filed on March 23, 2000, as amended by Amendment
No. 1 thereto filed on May 18, 2000.
5 * Opinion of Jones, Day, Reavis & Pogue as to the legality of
the shares being registered.
10(a) Form of Tax Sharing Agreement among Koch Industries, Inc.
and PM Holdings Corporation et al., incorporated by
reference to Exhibit 10(a) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
10(b) Form of Koch Indemnity Agreement among Purina Mills, Inc.,
Koch Industries, Inc. and Koch Agriculture, et al.,
incorporated by reference to Exhibit 10(b) of Purina Mills'
Registration Statement on Form 10 (Registration No.
033-66606) filed on March 23, 2000, as amended by Amendment
No. 1 thereto filed on May 18, 2000.
10(c) Form of Director and Officer Indemnification Agreement for
Purina Mills, Inc., incorporated by reference to Exhibit
10(c) of Purina Mills' Registration Statement on Form 10
(Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
10(d) Form of Senior Executive Officer Employment Agreement for
Purina Mills, Inc., incorporated by reference to Exhibit
10(d) of Purina Mills' Registration Statement on Form 10
(Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
10(e) Form of Equity Incentive Plan, incorporated by reference to
Exhibit 10(e) of Purina Mills' Registration Statement on
Form 10 (Registration No. 033-66606) filed on March 23,
2000, as amended by Amendment No. 1 thereto filed on May 18,
2000.
10(f) License Agreement, dated as of October 1, 1986, between
Ralston Purina Company and Purina Mills, Inc., incorporated
by reference to Exhibit 10(f) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
</TABLE>

II-3
<PAGE> 89

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10(g) Form of Merger Escrow Agreement among Koch Agriculture,
Purina Mills, Inc. and Escrow Agent incorporated by
reference to Exhibit 10(g) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
21 Subsidiaries of Purina Mills, Inc., incorporated by
reference to Exhibit 21 of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
23(a)* Consent of KPMG LLP.
23(b)* Consent of Deloitte & Touche LLP.
23(c)* Consent of Jones, Day, Reavis & Pogue (filed with the
Exhibit 5 opinion).
24 Power of Attorney.
27 Financial Data Schedule.
</TABLE>

---------------
* Filed herewith.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or event arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, present a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value
of securities offered would not exceed that which was registered) and
any deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of the prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of registration
Fee" table in the effective registration statement.

(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement; provided, however, that the undertakings set forth in
paragraphs (1)(i) and (1)(ii) above do not apply if the information
required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in this registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
of the securities being registered which remain unsold at the termination
of the offering.

(b) That for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
that is incorporated by reference in this registration statement shall be
deemed to be a new

II-4
<PAGE> 90

registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.

II-5
<PAGE> 91

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned thereunto duly
authorized on this 10th day of October 2000.

PURINA MILLS, INC.

By: /s/ DARRELL D. SWANK
------------------------------------
Darrell D. Swank
Executive Vice President,
Chief Financial Officer and
Secretary

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>

/s/ BRAD J. KERBS Director and Chief Executive Officer
----------------------------------------------------- (Principal Executive Officer)
Brad J. Kerbs

/s/ DARRELL D. SWANK Executive Vice President, Chief Financial
----------------------------------------------------- Officer and Secretary (Principal Financial
Darrell D. Swank and Accounting Officer)

* Director
-----------------------------------------------------
Craig Scott Bartlett, Jr.

* Director
-----------------------------------------------------
Robert Cummings, Jr.

* Director
-----------------------------------------------------
James Gaffney

* Director
-----------------------------------------------------
Robert A. Hamwee
</TABLE>

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

* The undersigned, by signing his name hereto, does sign and execute this
registration statement pursuant to the powers of attorney executed by the
above-named officers and directors of the registrant, which are being filed
herewith with the Securities and Exchange Commission on behalf of such
officers and directors.

By: /s/ DARRELL D. SWANK
--------------------------------------------------------
Darrell D. Swank
Executive Vice President,
Chief Financial Officer and Secretary

October 10, 2000

II-6
<PAGE> 92

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
2(a) Second Amended Joint Plan of Reorganization of Purina Mills,
Inc., PM Holdings Corporation and its Subsidiaries, dated
February 22, 2000, incorporated by reference to Exhibit 2(a)
of Purina Mills' Registration Statement on Form 10
(Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
2(b) Form of Agreement and Plan of Merger 2000, among Koch
Agriculture Company, PM Holdings Corporation and Purina
Mills, Inc., incorporated by reference to Exhibit 2(b) of
Purina Mills' Registration Statement on Form 10
(Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
3(a) Amended and Restated Certificate of Incorporation of Purina
Mills, Inc., incorporated by reference to Exhibit 3(a) of
Purina Mills' Registration Statement on Form 10
(Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
3(b) Amended and Restated By-Laws of Purina Mills, Inc.,
incorporated by reference to Exhibit 3(b) of Purina Mills'
Registration Statement on Form 10 (Registration No.
033-66606) filed on March 23, 2000, as amended by Amendment
No. 1 thereto filed on May 18, 2000.
4(a) Form of Stock Certificate for Common Stock, incorporated by
reference to Exhibit 4(a) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
4(b) Form of Registration Rights Agreement among Purina Mills,
Inc. and certain holders of Common Stock, incorporated by
reference to Exhibit 4(b) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
4(c) Form of Rights Agreement between Purina Mills, Inc. and the
Rights Agent thereunder, incorporated by reference to
Exhibit 4(c) of Purina Mills' Registration Statement on Form
10 (Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
4(d) Form of Convertible Promissory Note between Purina Mills,
Inc. and Houlihan Lokey Howard & Zukin Capital, incorporated
by reference to Exhibit 4(d) of Purina Mills' Quarterly
Report on Form 10-Q (Registration No. 033-66606) filed on
August 14, 2000.
4(e) Form of Convertible Promissory Note between Purina Mills,
Inc. and Chanin Capital Partners, incorporated by reference
to Exhibit 4(e) of Purina Mills' Quarterly Report on Form
10-Q (Registration No. 033-66606) filed on August 14, 2000.
4(f) Credit Agreement, dated as of June 28, 2000, among Purina
Mills, Inc. and certain of its lenders, incorporated by
reference to Exhibit 4(f) of Purina Mills' Quarterly Report
on Form 10-Q (Registration No. 033-66606) filed on August
14, 2000.
4(g) Form of Term Note, dated as of June 28, 2000, made by Purina
Mills, Inc, incorporated by reference to Exhibit 4(g) of
Purina Mills' Quarterly Report on Form 10-Q (Registration
No. 033-66606) filed on August 14, 2000.
4(h) Form of Lockup Agreement in respect to the Common Stock
issued under the Purina Mills, Inc. Key Employee Retention
Program, incorporated by reference to Exhibit 4(i) of Purina
Mills' Registration Statement on Form 10 (Registration No.
033-66606) filed on March 23, 2000, as amended by Amendment
No. 1 thereto filed on May 18, 2000.
5 * Opinion of Jones, Day, Reavis & Pogue as to the legality of
the shares being registered.
</TABLE>

<PAGE> 93

<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF EXHIBIT
------- ----------------------
<S> <C>
10(a) Form of Tax Sharing Agreement among Koch Industries, Inc.
and PM Holdings Corporation et al., incorporated by
reference to Exhibit 10(a) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
10(b) Form of Koch Indemnity Agreement among Purina Mills, Inc.,
Koch Industries, Inc. and Koch Agriculture, et al.,
incorporated by reference to Exhibit 10(b) of Purina Mills'
Registration Statement on Form 10 (Registration No.
033-66606) filed on March 23, 2000, as amended by Amendment
No. 1 thereto filed on May 18, 2000.
10(c) Form of Director and Officer Indemnification Agreement for
Purina Mills, Inc., incorporated by reference to Exhibit
10(c) of Purina Mills' Registration Statement on Form 10
(Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
10(d) Form of Senior Executive Officer Employment Agreement for
Purina Mills, Inc., incorporated by reference to Exhibit
10(d) of Purina Mills' Registration Statement on Form 10
(Registration No. 033-66606) filed on March 23, 2000, as
amended by Amendment No. 1 thereto filed on May 18, 2000.
10(e) Form of Equity Incentive Plan, incorporated by reference to
Exhibit 10(e) of Purina Mills' Registration Statement on
Form 10 (Registration No. 033-66606) filed on March 23,
2000, as amended by Amendment No. 1 thereto filed on May 18,
2000.
10(f) License Agreement, dated as of October 1, 1986, between
Ralston Purina Company and Purina Mills, Inc., incorporated
by reference to Exhibit 10(f) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
10(g) Form of Merger Escrow Agreement among Koch Agriculture,
Purina Mills, Inc. and Escrow Agent incorporated by
reference to Exhibit 10(g) of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
21 Subsidiaries of Purina Mills, Inc., incorporated by
reference to Exhibit 21 of Purina Mills' Registration
Statement on Form 10 (Registration No. 033-66606) filed on
March 23, 2000, as amended by Amendment No. 1 thereto filed
on May 18, 2000.
23(a)* Consent of KPMG LLP.
23(b)* Consent of Deloitte & Touche LLP.
23(c)* Consent of Jones, Day, Reavis & Pogue (filed with the
Exhibit 5 opinion).
24 Power of Attorney.
27 Financial Data Schedule.
</TABLE>

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

* Filed herewith.