UNITED
STATES
 SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-Q / X /
  Quarterly Report
  Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly
  period ended January 31, 2001or/   
  /
  Transition Report
  Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  Commission File No. 33-99834  DAKOTA
GROWERS PASTA COMPANY(Exact name of registrant as specified in its
charter) North Dakota
  
  45-0423511(State of incorporation)
  
  (IRS Employer Identification No.) One Pasta Avenue, P.O. Box 21, Carrington, ND 58421-0021(Address of principal executive
offices including zip code) (701) 652-2855(Registrant's telephone number,
including area code) NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)  Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90
days.                                  Yes
/ X /  No /    / The number of shares outstanding of the
Registrant's classes of common stock were 1,157 shares of membership stock, par
value $125.00, and 11,253,121 of equity stock, par value $2.50, as of March 16,
2001.   PART I - FINANCIAL
INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DAKOTA GROWERS PASTA COMPANY
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Information)

(Unaudited)January
  31,
  July
  31,2001
  2000ASSETSCURRENT ASSETSCash and cash equivalents
  $-
  $1,725Short-term investments
  (restricted)
  1,974
  1,974Trade accounts receivable,
  less allowance for cash discounts and doubtful accounts of $488 and $348,
  respectively
  11,765
  12,890Other receivables
  463
  593Inventories
  24,355
  21,781Prepaid expenses
  1,309
  1,603Total
  current assets
  39,866
  40,566PROPERTY AND EQUIPMENTIn service
  110,649
  110,021Construction in process
  4,344
  2,560114,993
  112,581Less
  accumulated depreciation
  (30,447)
  (27,009)Net
  property and equipment
  84,546
  85,572INVESTMENT IN COOPERATIVE BANKS
  2,037
  2,037OTHER ASSETS
  8,045
  3,682$134,494
  $131,857LIABILITIES AND MEMBERS'
  INVESTMENTCURRENT LIABILITIESNotes payable and current
  portion of long-term debt
  $15,889
  $4,979Excess outstanding checks
  over cash on deposit
  1,459
  -Accounts payable
  4,245
  4,104Accrued grower payments
  1,157
  1,287Accrued liabilities
  5,604
  5,107Total
  current liabilities
  28,354
  15,477COMMITMENTS AND CONTINGENCIESLONG-TERM DEBT, net of current portion
  48,914
  51,626DEFERRED INCOME TAXES
  3,936
  4,095Total
  liabilities
  81,204
  71,198REDEEMABLE PREFERRED STOCKSeries A, 6% non-cumulative,
  $100 par value, issued 667 and 733 shares, respectively
  67
  73Series B, 2% non-cumulative,
  $100 par value, issued 525 shares
  53
  53Total
  preferred stock
  120
  126MEMBERS' INVESTMENTConvertible preferred stock
  Series C, 6% non-cumulative, $100 par value, issued 924 shares
  92
  92Membership stock, $125 par
  value, issued 1,157 and 1,158 shares, respectively
  145
  145Equity stock, $2.50 par
  value, issued 11,253,121 shares
  28,133
  28,133Additional paid-in capital
  22,876
  22,876Accumulated allocated
  earnings
  4,596
  1,931Accumulated unallocated
  earnings (deficit)
  (2,672)
  7,356Total
  members' investment
  53,170
  60,533Total
  liabilities and members' investment
  $134,494
  $131,857See Notes to Consolidated Financial
Statements

DAKOTA GROWERS PASTA COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)(Unaudited)

Three
  Months EndedJanuary
  31,2001
  2000Net revenues (net of discounts and
  allowancesof $4,537 and $4,558, respectively)
  $31,632
  $33,969Cost of product sold
  30,010
  28,886Gross proceeds
  1,622
  5,083Marketing, general and administrative expenses
  2,469
  2,655Operating proceeds (loss)
  (847)
  2,428Other income (expense)Interest and
  other income
  46
  157Gain on sale of
  property and equipment
  -
  9Interest
  expense, net
  (1,062)
  (1,253)Income (loss) before income taxes
  (1,863)
  1,341Income tax benefit
  80
  500Net income (loss) from patronage and non-patronage
  business
  (1,783)
  1,841Dividends on preferred stock
  1
  -Net earnings (loss) from patronage and
  non-patronage business available for members
  $(1,784)
  $1,841Average equity shares outstanding
  11,253
  11,136Net earnings (loss) from patronage and
  non-patronage business per average equity share outstandingBasic
  $(0.16)
  $0.17

See
Notes to Consolidated Financial Statements

DAKOTA GROWERS PASTA COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)(Unaudited)

Six
  Months EndedJanuary
  31,2001
  2000Net revenues (net of discounts and allowances
  of $9,401 and $9,580, respectively)
  $64,915
  $69,664Cost of product sold
  60,957
  58,147Gross proceeds
  3,958
  11,517Marketing, general and administrative expenses
  5,071
  5,038Operating proceeds (loss)
  (1,113)
  6,479Other income (expense)Interest and
  other income
  185
  282Gain on sale of
  property and equipment
  -
  9Interest
  expense, net
  (2,115)
  (2,385)Income (loss) before income taxes
  (3,043)
  4,385Income tax benefit
  159
  500Net income (loss) from patronage and
  non-patronage business
  (2,884)
  4,885Dividends on preferred stock
  13
  1Net earnings (loss) from patronage and
  non-patronage business available for members
  $(2,897)
  $4,884Average equity shares outstanding
  11,253
  11,117Net earnings (loss) from patronage and
  non-patronage business per average equity share outstandingBasic
  $(0.26)
  $0.44

See
Notes to Consolidated Financial Statements

DAKOTA GROWERS PASTA COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands) (Unaudited)

Six
  Months EndedJanuary
  31,2001
  2000OPERATING ACTIVITIESNet income (loss)
  $(2,884)
  $4,885Add (deduct) non-cash itemsDepreciation
  and amortization
  4,403
  4,555Non-cash
  portion of patronage dividends
  -
  18Cooperative
  bank stock valuation adjustment
  -
  80Gain on
  sale of property and equipment
  -
  (9)Deferred
  income taxes
  (159)
  (157)Changes in assets and
  liabilitiesTrade
  receivables
  1,125
  2,085Other
  receivables
  130
  197Inventories
  (2,574)
  (3,968)Prepaid
  expenses
  178
  488Other
  assets
  2
  (232)Accounts
  payable
  141
  (471)Excess
  outstanding checks over cash deposits
  1,459
  -Growers
  payables
  (130)
  (294)Other
  accrued liabilities
  497
  (1,030)NET CASH FROM OPERATING ACTIVITIES
  2,188
  6,147INVESTING ACTIVITIESPurchases of property and
  equipment
  (2,415)
  (3,794)Proceeds from sale of
  property and equipment
  -
  62Receipts on note receivable
  -
  1,884Net purchase of short-term
  investments
  -
  (299)Payments for long-term
  prepaid marketing costs
  (5,038)
  (463)Payments for package design
  costs
  (173)
  (294)NET CASH USED IN INVESTING ACTIVITIES
  (7,626)
  (2,904)FINANCING ACTIVITIESNet change in short-term
  debt
  12,525
  6,875Payments on long-term debt
  (4,327)
  (6,813)Preferred stock issued
  -
  58Preferred stock retirements
  (6)
  -Dividends paid on preferred
  stock
  (13)
  (1)Memberships retired, net
  -
  (1)Options exercised
  -
  1,306Patronage distributions
  (4,466)
  (7,358)NET CASH FROM (USED IN) FINANCING ACTIVITIES
  3,713
  (5,934)NET CHANGE IN CASH AND CASH EQUIVALENTS
  (1,725)
  (2,691)CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
  1,725
  3,425CASH AND CASH EQUIVALENTS, END OF PERIOD
  $-
  $734SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATIONCash payments forInterest
  $1,056
  $1,378Income
  taxes
  $4
  $534

See
Notes to Consolidated Financial Statements



DAKOTA GROWERS PASTA COMPANYNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The
following notes should be read in conjunction with the notes to the financial
statements for the year ended July 31, 2000 as filed in the Company’s Form
10-K.

NOTE 1 - ORGANIZATION

Dakota Growers Pasta Company (“Dakota
Growers”, "the Company" or "the Cooperative") is organized
as a farmers' cooperative for purposes of manufacturing food for human
consumption from durum and other grain products. Net proceeds are allocated to
patrons who are members on the basis of their participation in the Cooperative.

The ownership of membership stock, which
signifies membership in the Cooperative, is restricted to producers of
agricultural products. The ownership of equity stock is restricted to members
of the Cooperative. Preferred stock may be held by persons who are not members
of the Cooperative.

NOTE 2 – FINANCIAL
STATEMENT PRESENTATION

The
unaudited consolidated financial statements included herein as of January 31,
2001 and for the three and six month periods ended January 31, 2001 and 2000,
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles. In the opinion
of management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three and six month periods ended January 31, 2001 are not necessarily
indicative of the results that may be expected for the year ended July 31,
2001. The information included in this Form 10-Q should be read in conjunction
with Management’s Discussion and Analysis and the consolidated financial
statements and footnotes included in the Company’s Form 10-K for the year ended
July 31, 2000. The information contained in the balance sheet as of July 31,
2000 was derived from the Company’s audited annual report for fiscal 2000.
Reclassifications have been made to facilitate comparability with current
presentation. Such reclassifications have no effect on the net results of operations.

The
financial information presented herein includes the consolidated balances and
results of operations of Dakota Growers Pasta Company and its wholly owned
subsidiary. All significant intercompany balances and transactions have been
eliminated.

NOTE 3 – INVENTORIES

Inventories
are valued at lower of cost or market. Inventories as of January 31, 2001
include raw materials of $6,819,000 and finished goods of $17,536,000.
Inventories at July 31, 2000 include raw materials of $5,329,000 and finished goods
of $16,452,000.

NOTE 4 – OTHER ASSETS

Other
assets as of January 31, 2001 and July 31, 2000 consisted of the following:

January
  31,
  July
  31,2001
  2000Package design costs - net
  $1,328
  $1,453Prepaid marketing costs
  6,484
  1,979Debt issuance costs
  167
  182Other
  66
  68$8,045
  $3,682NOTE 5 – LOAN
AGREEMENTS

In December 2000, the Company renewed its $15
million seasonal line of credit with CoBank. The available credit on the
seasonal line was increased to $19 million in January 2001. The seasonal loan
has a variable interest rate and matures on December 31, 2001. It is secured by
property, equipment, and current assets of the Company. The balance outstanding
on the line of credit totaled $14,400,000 as of January 31, 2001.

As
of January 31, 2001, the Company was not in compliance with the consolidated
funded debt to consolidated cash flow ratio set forth in the amended note
agreement with institutional investors. The amended note agreement requires
that the ratio of consolidated funded debt to consolidated cash flow not exceed
3.40 to 1 for the period from November 1, 2000 to January 31, 2001, and 3.00 to
1 at all times thereafter, in each case determined as of the end of each fiscal
quarter for the immediately preceding four fiscal quarters, treating such
period of four fiscal quarters as a single accounting period.

The Company has had discussions with its
lenders regarding the covenant noncompliance situation and is negotiating to
resolve the issue.

NOTE 6 – INCOME TAXES

The Company is a non-exempt cooperative as
defined by Section 1381(a)(2) of the Internal Revenue Code (“Code”).
Accordingly, net margins from business transacted with its member patrons which
are allocated, qualified, and paid as prescribed in Section 1382 of the Code
will be taxable to the members and not to the Company. Net margins and member
allocations are determined on the basis of accounting used for financial
reporting purposes. To the extent that net margins are not allocated and paid
as stated above or arise from business done with non-members, the Company shall
have taxable income subject to corporate income tax rates. Cooperative
organizations have 8 1⁄2 months after their fiscal year end to make such
allocations in the form of written notices of allocation or cash.

The
Company has recorded an income tax benefit of $80,000 for the three months
ending January 31, 2001 and $159,000 for the six months ending January 31, 2001
resulting from reductions in deferred tax liabilities associated with differences
between the book and tax basis of property and equipment.  An income tax benefit of $500,000 was
recorded for the three months ending January 31, 2000. The benefit related to a
reclassification of approximately $2,000,000 of income from nonpatronage to
patronage for the year ended July 31, 1999. The reclassification was based on
cooperative income tax developments taking place in the second quarter of
fiscal year 2000.

NOTE 7 – PATRONAGE BUSINESS

The Company’s business is conducted on a
cooperative basis. The Company calculates income from patronage sources based
on income derived from bushels of durum delivered by members. Non-patronage
income is derived from the resale of pasta purchased from non-members, the
resale of semolina purchased from non-members, certain amounts of interest
income, rental income from Company assets and any income taxes assessed on
non-member business.  For the six months
ended January 31, 2001, the net loss allocable to patronage business totaled
$2,720,000.This compares to $4,979,000 of net earnings allocable to
patronage business for the six months ended January 31, 2000.

NOTE 8 – EARNINGS (LOSS) PER SHARE

The Company allocates its earnings (loss) and
patronage distributions based on patronage business (bushels of durum delivered,
which approximates one bushel of durum per equity share). For presentation
purposes, it has calculated basic net earnings (loss) per share by dividing
earnings (loss) from patronage and non-patronage business available for members
(net income (loss) less preferred dividends) by the weighted average number of
equity shares effective and outstanding during the period.

The Company had convertible preferred stock
and stock options for convertible preferred stock outstanding during the
periods presented. Fully diluted earnings (loss) per share are calculated for
the assumed conversion of these dilutive securities. As the Company’s stock is
only traded in a small secondary market through private transactions, the
Company has assumed the proceeds from the exercise of stock options would
reduce debt and, thus, interest expense. Fully diluted earnings (loss) per
share are not presented, as the dilutive effect of outstanding convertible
preferred stock and stock options is not material for the periods presented.

NOTE 9 – DIVIDENDS

The Board of Directors authorized a qualified
patronage allocation of $4,466,000 ($.4284 per bushel acquired or $.40 per
average outstanding equity share) for fiscal year 2000 at its November 2000
meeting. The total qualified patronage allocation was paid in cash on November
30, 2000.  The Board also voted to
allocate, on a non-qualified basis, the remainder of the fiscal 2000 patronage
earnings totaling $2,665,000. In taking these actions, the Board of Director
rescinded the patronage allocations authorized at the October 2000 meeting as
reported in the Company’s Form 10-K for the year ended July 31, 2000.

NOTE 10 – COMMITMENTS

The
Company forward contracts for a certain portion of its future durum wheat
requirements. The Company had outstanding commitments for grain purchases
totaling $3,436,000 at January 31, 2001.

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking
Statements

The
following discussion contains forward-looking statements. Such forward-looking
statements include, among others, those statements including the words
“expect”, “anticipate”, “believe”, “may” and similar expressions. Such
statements are based on assumptions by the Company’s management, as of the date
of this Quarterly Report, and are subject to risks and uncertainties, including
those discussed in the Company’s 2000 Form 10-K under "Risk Factors",
that could cause actual results to differ materially from those anticipated.
The Company cautions readers not to place undue reliance on such
forward-looking statements. The Company will not update any forward-looking
statements in the Quarterly Report to reflect future events or developments.

Summary

Dakota
Growers incurred a net loss of $2.9 million for the six months ended January
31, 2001, down considerably from net earnings of $4.9 million for the
corresponding period of the prior year. The net loss resulted from lower sales
volumes and competitive pricing within the dry pasta industry combined with
increased raw material, freight, and utility costs.

The
Company has increased prices, where possible, to cover higher input costs while
continuing to explore cost reduction opportunities. With excess capacity
available in the pasta industry, the Company has been unable to fully implement
price increases to cover higher costs on a timely basis. There have also been
instances whereby a major competitor has offered pricing below the
Cooperative’s current cost of production, which has resulted in the loss of
customers in certain instances. Although the Company has experienced adverse
operating results due to industry overcapacity and competitive pricing, a
favorable development occurred in late February 2001 when the Company began
shipping to a significant new retail customer. Annualized volumes relating to
this customer are expected to exceed 25 million pounds.

The
lasagna line installed at the New Hope, Minnesota plant became operational in
February 2001. This, combined with the closure of the Minneapolis, Minnesota production
facility in February 2001, is expected to significantly reduce lasagna
production costs. The Company is continuing its attempt to reduce freight costs
through rail freight programs.

Results of Operations

Comparison of the
Three Months Ended January 31, 2001 and 2000

Net Revenues.Total net revenues decreased $2.3 million, or
6.9%, to $31.6 million for the quarter ended January 31, 2000. The decrease was
due to lower average sales prices as well as lower sales volumes. Net pasta
revenues declined by 4.4% due to competitive pricing within the pasta industry
and a volume decline of 3.2%.

Revenues
from the retail segment, including co-pack operations, decreased by 6.3%.
Retail volumes decreased 2.6%. Foodservice revenues increased by 13.0%, mainly
due to volume growth of 10.0% resulting from increased product demand due to
expansions and acquisitions made by the Company’s current customers. Ingredient
revenues decreased by 18.9% mainly due to a volume decline of 18.8%.

The
Company markets semolina production in excess of its own requirements as well
as by-products of durum milling. Revenues from semolina and by-product sales
were relatively stable.

Cost of Product Sold.Cost of product sold increased 3.9% to $30.0
million. The $1.1 million increase resulted mainly from higher input costs
including raw materials, packaging, freight and utilities. Gross margin as a
percentage of net revenues decreased from 15.0% to 5.1% as a result of these
factors combined with lower average sales prices.

Marketing, General, and Administrative
(“MG&A”) Expenses.MG&A expenses decreased $186,000, or 7%, from last year. MG&A
as a percentage of net revenues remained steady at 7.8% in each year.

Interest Expense.Interest expense decreased by $191,000 mainly
due to an adjustment of the Company’s estimated patronage refund and a write
down in the value of its investment in CoBank totaling $184,000 being
recognized during the three months ended January 31, 2000.

Income Taxes.The Company has recorded an income tax benefit
of $80,000 for the quarter ended January 31, 2001 relating to the reduction in
deferred tax liabilities associated with differences between the book and tax
basis of property and equipment.  The
Company recorded an income tax benefit of $500,000 for the three months ending
January 31, 2000 relating to a reclassification of approximately $2,000,000 of
income from nonpatronage to patronage for the year ended July 31, 1999. The
reclassification was based on cooperative income tax developments taking place
in the second quarter of fiscal year 2000.



Net Income.Net income decreased by $3.6 million mainly
due to the decreases in sales volumes and prices combined with increases in
input costs noted above.

Comparison of the
Six Months Ended January 31, 2001 and 2000

Net Revenues.Net revenues decreased $4.7 million, or 6.8%.
The decrease resulted from a decline in pasta sales volumes combined with lower
average selling prices. The average sales price per pound of pasta declined by
3.0% due to highly competitive pricing within the pasta industry. Pasta sales
volumes declined by 2.7%.

Revenues
from the retail segment, including co-pack operations, decreased by 7.2%, with
per unit selling prices down 5.7%. Retail volumes were down 1.6%. Foodservice
revenues increased by 7.8%, mainly due to volume growth of 5.7% in large part
due to expansions by the Company’s current customer base. Ingredient revenues
decreased by 16.5% primarily from volume declines of 15.3%.

Revenues
from by-product sales were comparable to the prior year on relatively steady
volumes and per unit prices.

Cost of Product Sold.Cost of product sold for the six months ended
January 31, 2001 totaled $61.0 million, an increase of 4.8%. The $2.8 million
increase resulted mainly from higher input costs including raw materials,
packaging, freight and utilities. Gross margin as a percentage of net revenues
decreased from 16.5% to 6.1% resulting from higher input costs combined with
lower per unit selling prices.

Marketing, General, and Administrative
(“MG&A”) Expenses.MG&A expenses were essentially unchanged, increasing $33,000, or
0.7% from the prior year.

Interest Expense.Interest expense decreased by $270,000,
mainly due to an adjustment of the Company’s estimated patronage refund and a
write down in the value of its investment in CoBank totaling $184,000 being
recognized during the six months ended January 31, 2000. The remainder of the
decrease resulted from lower average outstanding debt levels.

Income Taxes.The Company has recorded an income tax benefit
of $159,000 for the six months ended January 31, 2001 relating to the reduction
in deferred tax liabilities associated with differences between the book and
tax basis of property and equipment. 
The Company recorded an income tax benefit of $500,000 for the six months
ending January 31, 2000 relating to a reclassification of approximately
$2,000,000 of income from nonpatronage to patronage for the year ended July 31,
1999. The reclassification was based on cooperative income tax developments
taking place in the second quarter of fiscal year 2000.

Net Income.Net income decreased by $7.8 million mainly
due to the decreases in sales volumes and per unit selling prices combined with
the increases in input costs noted above.

Liquidity and Capital Resources

The
Company's liquidity requirements include the operation of manufacturing
facilities and equipment and the expansion of working capital to meet its
growth requirements, as well as providing a fair return to its members. The
Company meets these liquidity requirements from cash provided by operations,
short-term borrowings under its line of credit, sales of equities and outside
debt financing.

The
Company utilizes financing on a short-term basis to fund operations and capital
projects until permanent financing is issued. The Company renewed its seasonal
line of credit for $15 million with CoBank (“the Bank”) in December 2000. The
available credit on the seasonal line was increased to $19 million in January
2001. The balance outstanding on the line of credit totaled $14,400,000 as of
January 31, 2001. Property, equipment, and current assets of the Company secure
borrowings against the line of credit.

The
Company’s long-term financing is provided through various secured term loans
and secured notes from both the Bank and certain institutional investors.
Variable interest rates on term and seasonal loans are based on the lender’s
cost of funds, and are subject to an adjustment (increase or decrease)
depending on the Company’s financial condition. The CoBank loan agreement, which
covers the seasonal line of credit and various term loans, was renewed in
December 2000.

The
various debt agreements with the Bank and institutional investors obligate the
Company to maintain or achieve certain amounts of equity and certain financial
ratios and impose certain restrictions on the Company. As of January 31, 2001,
the Company was not in compliance with the consolidated funded debt to
consolidated cash flow ratio set forth in the amended note agreement with
institutional investors. The amended note agreement requires that the ratio of
consolidated funded debt to consolidated cash flow not exceed 3.40 to 1 for the
period from November 1, 2000 to January 31, 2001, and 3.00 to 1 at all times
thereafter, in each case determined as of the end of each fiscal quarter for
the immediately preceding four fiscal quarters, treating such period of four
fiscal quarters as a single accounting period. The Company does not expect to
be in compliance with the amended ratio as of April 30, 2001 or July 31, 2001.
The Company has had discussions with its lenders regarding the covenant
noncompliance situation and is negotiating to resolve the issue.

Operations
generated $2.2 million of net cash flow for the six months ended January 31,
2001, down from the $6.1 million generated for the corresponding period of the
prior year. The decrease in net cash provided by operations is primarily due to
a decrease in net income offset by lower working capital requirements for the
corresponding periods.

Net cash used in investing
activities relates primarily to the construction and installation of milling
and pasta equipment and payments made under long-term marketing agreements. Net
cash used in financing activities totaled $7.6 million and $2.9 million for the
six months ended January 31, 2001 and 2000, respectively. A majority of the
pasta equipment expenditures for the six months ended January 31, 2001 related
to the installation of a lasagna line at the New Hope, Minnesota plant. The
lasagna line was completed and became operational in February 2001.  Many of the Company’s technology assets are
placed under lease agreements, which allow the Company to stay relatively
current with changing technologies.

Net
cash from financing activities totaled $3.7 million for the six months ended
January 31, 2001, mainly from borrowings on the seasonal line of credit offset
by payments for long-term debt service and patronage distributions. The Board
of Directors authorized a qualified patronage allocation of $4,466,000 ($.4284
per bushel acquired or $.40 per average outstanding equity share) for fiscal
year 2000 at its November 2000 meeting. The total qualified patronage
allocation was paid in cash on November 30, 2000.  The Board also voted to allocate, on a non-qualified basis, the
remainder of the fiscal 2000 patronage earnings totaling $2,665,000. In taking
these actions, the Board of Director rescinded the patronage allocations
authorized at the October 2000 meeting as reported in the Company’s Form 10-K
for the year ended July 31, 2000. Net cash used in financing activities of $5.9
million for the six months ended January 31, 2000 primarily resulted from
patronage distributions offset by amounts received upon the exercise of stock
options.

The
Company has current commitments for $3.4 million in raw material purchases,
primarily durum purchase commitments from its members. The Company anticipates
capital expenditures to total $3.5 million in fiscal year 2001. These
expenditures are primarily for pasta line upgrades and cost reduction projects.
Commitments for monthly operating lease payments for technology and other
assets total $1.1 million, of which $0.7 million is due within one year.

Since
January 31, 2001 net cash provided by operating activities and the Company’s
available line of credit have been sufficient to meet its capital and liquidity
requirements. Management believes those resources will be sufficient to meet
capital and liquidity requirements for the foreseeable future.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

Market
risk is the risk of loss to future earnings, to fair values or to future cash
flows that may result from changes in the price of a financial instrument. The
value of a financial instrument may change as a result of changes in interest
rates, commodity prices, exchange rates, equity prices, and other market
changes. Market risk is attributed to all market-risk sensitive financial
instruments, including long-term debt.

The Company does not believe it is
subject to any material market risk exposure with respect to interest rates,
commodity prices, exchange rates, equity prices, or other market changes that
would require disclosure under this item.

PART II – OTHER INFORMATION

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS

Mr.
Jeffrey O. Topp, Mr. Eugene J. Nicholas, and Mr. Roger A. Kenner were reelected
to their positions as members of the Company’s Board of Directors at Annual
District Meetings held in December 2000.

The
terms of office of the remaining members of the Board of Directors continue for
the terms for which they were elected in prior years as follows: Mr. Allyn K.
Hart, Mr. Michael E. Warner, and Mr. Curtis R. Trulson – one year remaining;
Mr. John S. Dalrymple III, Mr. James F. Link, and Mr. John D. Rice Jr. – two years
remaining.

The
Company’s Annual Members’ Meeting was held January 6, 2001. At this meeting the
members approved, by a vote of 253 in favor and 215 opposed, amendments to the
Company’s Articles of Association, By-laws, and Growers Agreement. The restated
Articles of Association, By-laws, and Growers Agreement are filed as Exhibits
3.1, 3.2, and 10.5, respectively, with this Form 10-Q. The Company proposed the
amendments of the various documents as a result of management’s belief that the
Company may, in the course of its operations, have business reasons for
accepting membership in the cooperative and deliveries of durum wheat from (i)
agricultural producers who are not residents of the United States or (ii) from
associations or cooperatives of durum wheat producers. Prior to the amendments
adopted at the Annual Members’ Meeting, the Company’s Articles of Association
and Bylaws indicated that only producers of agricultural products may become
members in the Company and that only durum wheat produced in the United States
could be used by the Company in its operations. The amendments to the Company’s
governing documents were presented for adoption by the Company’s members to
explicitly permit membership in the Company by (i) agricultural producers who
are not residents of the United States and (ii) associations or cooperatives of
agricultural producers. A summary of the impact of the approved changes is as
follows:

1.
  Allows non-United States entities or
  individuals, as well associations of agricultural producers, to own
  membership stock.  In the case of
  associations, requires the ownership of one share of membership stock ($125
  par value) for each voting right held.2.
  Allows associations of agricultural
  producers to apply to become members.3.
  Terminates the membership of an association
  of agricultural producers if such association ceases to be an association of
  agricultural producers.4.
  Establishes a formula to determine the
  maximum votes an association of agricultural producers may be granted.5.
  Changes voting decisions from a majority of
  members to a majority of votes cast, reflecting that an association member
  may have multiple membership stock and voting rights.  Also requires an association to have individual
  producers represent each of its votes (rather than one casting all of its
  votes) and vote in person.6.
  Allows the Board of Directors to be
  expanded from 9 to 11 members, to allow for two representatives from
  associations of agricultural producers, as authorized by the Board of Directors.7.
  Allows an association of agricultural
  producers to choose its board representative and to fill vacancies.8.
  Allows an association of agricultural
  producers to establish its own rules for removing its board representative
  for cause.9.
  Allows the Growers Agreement contract to be
  extended to associations of agricultural producers.10.
  requires that an association of
  agricultural producers warrants that its members are agricultural producers,
  that its members will provide the committed bushels of durum or, if its
  members cannot deliver such bushels, that they will obtain them from other
  sources at their cost.11.
  Removes the requirement that durum
  delivered to the Company be grown in the United States.ITEM 6. EXHIBITS AND
REPORTS ON FORM 8-K

Exhibits

3.1
  
  Restated Articles of Association of Dakota
  Growers Pasta Company.3.2
  
  Restated By-laws of Dakota Growers Pasta
  Company.*10.1
  
  Loan Agreement in the aggregate amount of
  $37,975,000 dated December 5, 2000 between the Company and CoBank and related
  Promissory Notes.10.2
  
  Amendment to Loan Agreement dated January
  3, 2001 between the Company and CoBank and related Promissory Note.*10.3
  
  Distribution and Marketing Alliance
  Agreement between the Company and Gruppo Euricom dated August 15, 2000.*10.4
  
  Five-Year Contract Extension between the
  Company and U.S. Foodservice dated December 28, 2000.10.5
  
  Form of Growers Agreement between the
  Company and members of the Company.* - Portions of this exhibit have been
deleted from the publicly filed document and have been filed separately with
the Commission pursuant to a request for confidential treatment.

Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

DAKOTA GROWERS PASTA COMPANYBy:                  /s/
  Timothy J. DoddTimothy
  J. Dodd,PRESIDENT AND GENERAL MANAGER,AND PRINCIPAL EXECUTIVE OFFICERDated: March 16, 2001Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Signature
  Title
  Date/s/ Timothy J. Dodd
  General Manager (Principal Executive
  Officer)Timothy J. Dodd
  March 16, 2001/s/ Thomas P. Friezen
  Chief Financial Officer (Principal Financial
  Officer)Thomas P. Friezen
  March 16, 2001/s/ Edward O. Irion
  Vice President - Finance (Principal
  Accounting Officer)Edward O. Irion
  March 16, 2001