**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 

| **ý** | **Quarterly Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934**  |
|------------|-----------------------------------------------------------------------------------------------|
|       |                                                                                          |
|       | **For the quarterly  period ended January 31, 2004**                                          |
|       |                                                                                          |
|       | **or**                                                                                        |
|       |                                                                                          |
| **o**      | **Transition Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934** |

 

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**Commission File No. 000-50111**

 

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**DAKOTAGROWERS PASTA COMPANY, INC.**

(Exact name of registrant as specified in itscharter)

 

| **North Dakota**                                                                    |   | **45-0423511**                    |
|-------------------------------------------------------------------------------------|--------|-----------------------------------|
| (State of incorporation)                                                            |   | (IRS Employer Identification No.) |
|                                                                                |   |                              |
| **One Pasta Avenue, Carrington, ND 58421**                                          |
| (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 reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90days.                 Yes ý No o

 

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

 

As of March 16, 2004, the Registrant had 12,260,291 shares of common stock, parvalue $0.01 per share, outstanding.

 

 

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**PART I - FINANCIAL INFORMATION**

 

**ITEM1. FINANCIAL STATEMENTS**

 

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

 
|                                                                                                                   |   | **(Unaudited)  January 31,  2004** |    | **July 31,  2003** |   |
|------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|--------------------|--------|
| **ASSETS**                                                                                                             |   |                               |    |               |   |
|                                                                                                                   |   |                               |    |               |   |
| CURRENT ASSETS                                                                                                         |   |                               |    |               |   |
| Cash and cash equivalents                                                                                              |   | $                                  | 6       |               | $      | 5 |   |
|                                                                                                                   |   |                               |    |               |   |
| Trade accounts receivable, less allowance  for cash discounts and doubtful accounts of $1,198 and $1,012, respectively |   | 13,969                             |    | 9,852              |   |
|                                                                                                                   |   |                               |    |               |   |
| Other receivables                                                                                                      |   | 341                                |    | 1,225              |   |
|                                                                                                                   |   |                               |    |               |   |
| Inventories                                                                                                            |   | 20,954                             |    | 28,082             |   |
|                                                                                                                   |   |                               |    |               |   |
| Prepaid expenses                                                                                                       |   | 3,830                              |    | 3,940              |   |
|                                                                                                                   |   |                               |    |               |   |
| Deferred income taxes                                                                                                  |   | 569                                |    | 569                |   |
|                                                                                                                   |   |                               |    |               |   |
| Total current assets                                                                                                   |   | 39,669                             |    | 43,673             |   |
|                                                                                                                   |   |                               |    |               |   |
| PROPERTY AND EQUIPMENT                                                                                                 |   |                               |    |               |   |
| In service                                                                                                             |   | 109,297                            |    | 108,263            |   |
| Construction in process                                                                                                |   | 425                                |    | 868                |   |
|                                                                                                                   |   | 109,722                            |    | 109,131            |   |
| Less accumulated depreciation                                                                                          |   | (44,794                            | )       | (41,799            | )      |
|                                                                                                                   |   |                               |    |               |   |
| Net property and equipment                                                                                             |   | 64,928                             |    | 67,332             |   |
|                                                                                                                   |   |                               |    |               |   |
| INVESTMENT IN COOPERATIVE BANKS                                                                                        |   | 2,413                              |    | 2,413              |   |
|                                                                                                                   |   |                               |    |               |   |
| INTANGIBLE ASSETS                                                                                                      |   | 466                                |    | 539                |   |
|                                                                                                                   |   |                               |    |               |   |
| OTHER ASSETS                                                                                                           |   | 7,402                              |    | 8,433              |   |
|                                                                                                                   |   |                               |    |               |   |
|                                                                                                                   |   | $                                  | 114,878 |               | $      | 122,390 |   |

 

2

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

 
|                                                                                                                                                               |   | **(Unaudited)  January 31,  2004** |    | **July 31,  2003** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|--------------------|--------|
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                      |   |                               |    |               |   |
|                                                                                                                                                               |   |                               |    |               |   |
| CURRENT LIABILITIES                                                                                                                                                |   |                               |    |               |   |
| Notes payable                                                                                                                                                      |   | $                                  | 8,400   |               | $      | 9,705 |   |
| Current portion of long-term debt                                                                                                                                  |   | 9,796                              |    | 10,011             |   |
| Accounts payable                                                                                                                                                   |   | 3,614                              |    | 3,793              |   |
| Excess outstanding checks over cash on  deposit                                                                                                                    |   | 2,805                              |    | 2,219              |   |
| Accrued liabilities                                                                                                                                                |   | 5,139                              |    | 4,516              |   |
|                                                                                                                                                               |   |                               |    |               |   |
| Total current liabilities                                                                                                                                          |   | 29,754                             |    | 30,244             |   |
|                                                                                                                                                               |   |                               |    |               |   |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                      |   | —                             |    | —             |   |
| LONG-TERM DEBT, net of current portion                                                                                                                             |   | 21,087                             |    | 28,263             |   |
| DEFERRED INCOME TAXES                                                                                                                                              |   | 9,917                              |    | 9,845              |   |
| OTHER LIABILITIES                                                                                                                                                  |   | 162                                |    | 187                |   |
| MANDATORILY REDEEMABLE PREFERRED STOCK                                                                                                                             |   |                               |    |               |   |
| Series A, 6% cumulative, $100 par value,  533 shares authorized, 267 and 333 shares issued and outstanding as of  January 31, 2004 and July 31, 2003, respectively |   | 27                                 |    | 33                 |   |
|                                                                                                                                                               |   |                               |    |               |   |
| Total liabilities                                                                                                                                                  |   | 60,947                             |    | 68,572             |   |
|                                                                                                                                                               |   |                               |    |               |   |
| STOCKHOLDERS’ EQUITY                                                                                                                                          |   |                               |    |               |   |
| Series D delivery preferred stock,  non-cumulative, $.01 par value, 11,324,377 shares authorized, 11,275,297  shares issued and outstanding                        |   | 113                                |    | 113                |   |
| Common stock, $.01 par value, 75,000,000  shares authorized, 12,554,747 shares issued                                                                              |   | 126                                |    | 126                |   |
| Additional paid-in capital                                                                                                                                         |   | 60,188                             |    | 60,188             |   |
| Treasury stock at cost, 294,456 shares                                                                                                                             |   | (1,840                             | )       | (1,840             | )      |
| Accumulated deficit                                                                                                                                                |   | (4,656                             | )       | (4,769             | )      |
|                                                                                                                                                               |   |                               |    |               |   |
| Total stockholders’ equity                                                                                                                                    |   | 53,931                             |    | 53,818             |   |
|                                                                                                                                                               |   |                               |    |               |   |
| Total liabilities and stockholders’ equity                                                                                                                    |   | $                                  | 114,878 |               | $      | 122,390 |   |

 

See Notes to Consolidated Financial Statements

 

3

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

 
|                                                                               |   | **Three  Months Ended  January 31,** |   |
|------------------------------------------------------------------------------------|--------|--------------------------------------|--------|
|                                                                               |   | **2004**                             |   | **2003** |   |
| Net revenues (net of discounts and  allowances of $4,563 and $5,034, respectively) |   | $                                    | 35,403 |   | $ | 40,740 |   |
|                                                                               |   |                                 |   |   |   |
| Cost of goods sold                                                                 |   | 32,361                               |   | 36,012 |   |
|                                                                               |   |                                 |   |   |   |
| Gross profit                                                                       |   | 3,042                                |   | 4,728 |   |
|                                                                               |   |                                 |   |   |   |
| Marketing, general and administrative  expenses                                    |   | 2,007                                |   | 3,166 |   |
|                                                                               |   |                                 |   |   |   |
| Operating income                                                                   |   | 1,035                                |   | 1,562 |   |
|                                                                               |   |                                 |   |   |   |
| Other income (expense)                                                             |   |                                 |   |   |   |
| Interest and other income                                                          |   | 903                                  |   | 1,035 |   |
| Gain on disposition of property, equipment  and other assets                       |   | —                               |   | 11 |   |
| Net loss allocated from joint venture                                              |   | (144                                 | )      | — |   |
| Interest expense, net                                                              |   | (725                                 | )      | (895 | ) |
|                                                                               |   |                                 |   |   |   |
| Income before income taxes                                                         |   | 1,069                                |   | 1,713 |   |
|                                                                               |   |                                 |   |   |   |
| Income tax expense                                                                 |   | 417                                  |   | 668 |   |
|                                                                               |   |                                 |   |   |   |
| Net income                                                                         |   | 652                                  |   | 1,045 |   |
| Dividends on preferred stock                                                       |   | —                               |   | 1 |   |
|                                                                               |   |                                 |   |   |   |
| Net earnings on common stock                                                       |   | $                                    | 652    |   | $ | 1,044 |   |
|                                                                               |   |                                 |   |   |   |
| Net earnings per common share                                                      |   |                                 |   |   |   |
| Basic                                                                              |   | $                                    | 0.05   |   | $ | 0.08 |   |
|                                                                               |   |                                 |   |   |   |
| Diluted                                                                            |   | $                                    | 0.05   |   | $ | 0.08 |   |
|                                                                               |   |                                 |   |   |   |
| Weighted average common shares outstanding                                         |   |                                 |   |   |   |
| Basic                                                                              |   | 12,260                               |   | 12,340 |   |
|                                                                               |   |                                 |   |   |   |
| Diluted                                                                            |   | 12,620                               |   | 12,593 |   |

 

See Notes to Consolidated Financial Statements

 

4

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

 
|                                                                               |   | **Six Months  Ended  January 31,** |   |
|------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                               |   | **2004**                           |   | **2003** |   |
| Net revenues (net of discounts and  allowances of $9,305 and $9,894, respectively) |   | $                                  | 73,051 |   | $ | 78,071 |   |
|                                                                               |   |                               |   |   |   |
| Cost of goods sold                                                                 |   | 68,099                             |   | 68,136 |   |
|                                                                               |   |                               |   |   |   |
| Gross profit                                                                       |   | 4,952                              |   | 9,935 |   |
|                                                                               |   |                               |   |   |   |
| Marketing, general and administrative  expenses                                    |   | 4,009                              |   | 5,482 |   |
|                                                                               |   |                               |   |   |   |
| Operating income                                                                   |   | 943                                |   | 4,453 |   |
|                                                                               |   |                               |   |   |   |
| Other income (expense)                                                             |   |                               |   |   |   |
| Interest and other income                                                          |   | 904                                |   | 1,076 |   |
| Gain on disposition of property, equipment  and other assets                       |   | 13                                 |   | 24 |   |
| Net loss allocated from joint venture                                              |   | (144                               | )      | — |   |
| Interest expense, net                                                              |   | (1,531                             | )      | (1,796 | ) |
|                                                                               |   |                               |   |   |   |
| Income before income taxes                                                         |   | 185                                |   | 3,757 |   |
|                                                                               |   |                               |   |   |   |
| Income tax expense                                                                 |   | 72                                 |   | 1,465 |   |
|                                                                               |   |                               |   |   |   |
| Net income                                                                         |   | 113                                |   | 2,292 |   |
| Dividends on preferred stock                                                       |   | —                             |   | 2 |   |
|                                                                               |   |                               |   |   |   |
| Net earnings on common stock                                                       |   | $                                  | 113    |   | $ | 2,290 |   |
|                                                                               |   |                               |   |   |   |
| Net earnings per common share                                                      |   |                               |   |   |   |
| Basic                                                                              |   | $                                  | 0.01   |   | $ | 0.18 |   |
|                                                                               |   |                               |   |   |   |
| Diluted                                                                            |   | $                                  | 0.01   |   | $ | 0.18 |   |
|                                                                               |   |                               |   |   |   |
| Weighted average common shares outstanding                                         |   |                               |   |   |   |
| Basic                                                                              |   | 12,260                             |   | 12,448 |   |
|                                                                               |   |                               |   |   |   |
| Diluted                                                                            |   | 12,620                             |   | 12,599 |   |

 

See Notes to Consolidated Financial Statements

 

5

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**DAKOTA GROWERS PASTA COMPANY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In Thousands)(Unaudited)**

 
|                                                                                   |   | **Six Months  Ended  January 31,** |   |
|----------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                   |   | **2004**                           |   | **2003** |   |
| OPERATING ACTIVITIES                                                                   |   |                               |   |   |   |
| Net income                                                                             |   | $                                  | 113    |   | $ | 2,292 |   |
| Adjustments to reconcile net income to net  cash from (used for) operating activities: |   |                               |   |   |   |
| Depreciation and amortization                                                          |   | 4,354                              |   | 5,093 |   |
| Gain on disposition of property, equipment  and other assets                           |   | (13                                | )      | (24 | ) |
| Net loss allocated from joint venture                                                  |   | 144                                |   | — |   |
| Deferred income taxes                                                                  |   | 72                                 |   | 478 |   |
| Payments for long-term marketing costs                                                 |   | (125                               | )      | (5,000 | ) |
| Changes in assets and liabilities                                                      |   |                               |   |   |   |
| Trade receivables                                                                      |   | (4,117                             | )      | (204 | ) |
| Other receivables                                                                      |   | 884                                |   | (33 | ) |
| Inventories                                                                            |   | 7,128                              |   | (4,634 | ) |
| Prepaid expenses                                                                       |   | 234                                |   | (1,076 | ) |
| Other assets                                                                           |   | 5                                  |   | 5 |   |
| Accounts payable                                                                       |   | (179                               | )      | (1,481 | ) |
| Excess outstanding checks over cash on  deposit                                        |   | 586                                |   | 2,971 |   |
| Other accrued liabilities                                                              |   | 623                                |   | (750 | ) |
|                                                                                   |   |                               |   |   |   |
| NET CASH FROM (USED FOR) OPERATING  ACTIVITIES                                         |   | 9,709                              |   | (2,363 | ) |
|                                                                                   |   |                               |   |   |   |
| INVESTING ACTIVITIES                                                                   |   |                               |   |   |   |
| Purchases of property and equipment                                                    |   | (619                               | )      | (949 | ) |
| Proceeds on sale of property, equipment,  and other assets                             |   | —                             |   | 3 |   |
| Redemption of short-term investments                                                   |   | —                             |   | 1,974 |   |
| Payments for package design costs                                                      |   | (242                               | )      | (236 | ) |
| Investments in joint venture                                                           |   | (145                               | )      | — |   |
|                                                                                   |   |                               |   |   |   |
| NET CASH FROM (USED FOR) INVESTING  ACTIVITIES                                         |   | (1,006                             | )      | 792 |   |
|                                                                                   |   |                               |   |   |   |
| FINANCING ACTIVITIES                                                                   |   |                               |   |   |   |
| Net change in short-term notes payable                                                 |   | (1,305                             | )      | 7,250 |   |
| Principal payments on long-term debt                                                   |   | (7,391                             | )      | (6,684 | ) |
| Preferred stock retirements                                                            |   | (6                                 | )      | (14 | ) |
| Dividends paid on preferred stock                                                      |   | —                             |   | (2 | ) |
| Purchase of treasury stock                                                             |   | —                             |   | (1,840 | ) |
|                                                                                   |   |                               |   |   |   |
| NET CASH USED FOR FINANCING ACTIVITIES                                                 |   | (8,702                             | )      | (1,290 | ) |
|                                                                                   |   |                               |   |   |   |
| NET CHANGE IN CASH AND CASH EQUIVALENTS                                                |   | 1                                  |   | (2,861 | ) |
|                                                                                   |   |                               |   |   |   |
| CASH AND CASH EQUIVALENTS, BEGINNING OF  PERIOD                                        |   | 5                                  |   | 2,866 |   |
|                                                                                   |   |                               |   |   |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                               |   | $                                  | 6      |   | $ | 5 |   |
|                                                                                   |   |                               |   |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW  INFORMATION                                     |   |                               |   |   |   |
|                                                                                   |   |                               |   |   |   |
| Cash payments (refunds) for                                                            |   |                               |   |   |   |
| Interest (net of amounts capitalized)                                                  |   | $                                  | 1,693  |   | $ | 1,945 |   |
|                                                                                   |   |                               |   |   |   |
| Income taxes                                                                           |   | $                                  | (972   | ) | $ | 1,160 |   |

 

See Notes to Consolidated Financial Statements

 

6

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**DAKOTA GROWERS PASTA COMPANY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

 

The following notes should be read in conjunction with the notes to thefinancial statements for the year ended July 31, 2003 as filed in the Company’sForm 10-K.

 

**NOTE 1 - ORGANIZATION**

 

Dakota Growers Pasta Company, Inc. (“Dakota Growers” or “the Company”)is a North Dakota corporation that operates milling and pasta manufacturingfacilities in Carrington, North Dakota. In addition, the Company’s wholly ownedsubsidiary, Primo Piatto, Inc., a Minnesota corporation, operates pastamanufacturing facilities in New Hope, Minnesota.

 

**NOTE 2 – FINANCIALSTATEMENT PRESENTATION**

 

The unaudited consolidated financial statements included herein havebeen prepared pursuant to the rules and regulations of the Securities andExchange Commission. Accordingly, they do not include all the information andfootnotes required by accounting principles generally accepted in the UnitedStates of America for complete financial statements. In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included. Operatingresults for the three and six month periods ended January 31, 2004 are notnecessarily indicative of the results that may be expected for the year endedJuly 31, 2004. The information included in this Form 10-Q should be read inconjunction with Management’s Discussion and Analysis and the consolidatedfinancial statements and footnotes included in the Company’s Form 10-K for theyear ended July 31, 2003. The information contained in the balance sheet as ofJuly 31, 2003 was derived from the Company’s audited annual report for fiscalyear 2003. Reclassifications have been made to facilitate comparability withcurrent presentation. Such reclassifications have no effect on the net resultsof operations.

 

The financial information presented herein includes the consolidatedbalance sheets and results of operations of Dakota Growers Pasta Company, Inc.and its wholly owned subsidiary. All significant intercompany balances andtransactions have been eliminated.

 

**NOTE3 – INVENTORIES**

 

Inventories are valued at lower of cost or market. Inventories as ofJanuary 31, 2004 include raw materials and packaging of $4,324,000 and finished goods of $16,630,000. Inventories at July 31,2003 include raw materials and packaging of $5,533,000 and finished goods of$22,549,000.

 

**NOTE 4 – LOAN AGREEMENTS**

 

TheCompany extended its $19 million revolving credit facility with CoBank throughMarch 31, 2004. The revolving line has a variable interest rate established byCoBank based on CoBank’s cost of funds. The balance outstanding under therevolving line of credit totaled $8,400,000 and $9,705,000 as of January 31,2004 and July 31, 2003, respectively.

 

TheCompany’s various debt agreements with CoBank and certain institutionalinvestors obligate the Company to maintain or achieve certain amounts of equityand certain financial ratios and impose certain restrictions on the Company.The Company was not in compliance with certain ratios set forth in its debtagreements with CoBank and such institutional investors as of January 31, 2004.The Company is currently in discussions with CoBank and such institutionalinvestors regarding the terms of a waiver and amendment to resolve thenoncompliance situation.

 

7

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**NOTE5 – EARNINGS PER SHARE**

 

Basic earnings per share (EPS) is calculated by dividing net earningson common stock by the weighted average number of common shares effective andoutstanding during the period. Diluted EPS includes the effect of allpotentially dilutive securities, such as stock options and convertiblepreferred stock.

 

Dilutivesecurities, consisting of stock options and convertible preferred stock,included in the calculation of diluted weighted average common shares totaled360,000 and 253,000 for the three months ended January 31, 2004 and 2003,respectively. Dilutive securities included in the calculation of dilutedweighted average common shares totaled 360,000 and 151,000 for the six monthsended January 31, 2004 and 2003, respectively. As there is currently noestablished public trading market for the Company’s common stock, the Companyhas assumed the proceeds from the exercise of stock options would reduce debtand, thus, interest expense.

 

**NOTE 6 –STOCK OPTIONS**

 

The Compensation Committee of the Board of Directorsgranted, effective February 1, 2004, incentive stock options to purchase 80,524shares of the Company’s common stock at a per share exercise price of $4.25.The vesting of these options is subject to certain qualifications, includingbut not limited to, the continued employment of the optionee with the Company.Subject to the foregoing qualifications and such other certain qualifications,fifty percent of theseoptions vest on February 1, 2005, twenty-five percent vest on February 1, 2006,and twenty-five percent vest on February 1, 2007.

 

**NOTE 7 – CONTINUED DUMPING ANDSUBSIDY OFFSET ACT OF 2000**

 

The U.S. Customs Service (“Customs”) has distributed antidumping andcountervailing duties assessed on certain pasta imported from Italy and Turkeyto affected domestic producers pursuant to the Continued Dumping and SubsidyOffset Act of 2000 (the “Offset Act”), which was enacted in October 2000. TheCompany received payments in the amount of $903,000 and $1,000,000 in December2003 and 2002, respectively, under the Offset Act, based on duties assessedfrom October 1, 2001 to September 30, 2003. These amounts have been classifiedas other income. Under certain circumstances, the Company may be obligated toreturn certain amounts previously received by the Company under the Offset Act.The Company cannot reasonably estimate the potential amount, if any, that itmay receive under the Offset Act in future periods as any such amount will bebased upon future events over which the Company has little or no control,including, but not limited to, the amount of expenditures by domestic pastaproducers and the amount of antidumping and countervailing duties collected byCustoms.

 

**NOTE 8****– MANDATORILYREDEEEMABLE PREFERRED STOCK**

 

TheCompany adopted SFAS No. 150, “Accounting for Certain Financial Instrumentswith Characteristics of Both Liabilities and Equity” effective August 1, 2003.SFAS No. 150 establishes standards for how an issuer classifies and measurescertain financial instruments with characteristics of both liabilities andequity. Many of these instruments were previously classified as equity. SFASNo. 150 requires that an issuer classify a financial instrument that is withinits scope as a liability, or as an asset in some circumstances. This Statementapplies to three types of freestanding financial instruments. One type offinancial instrument to which SFAS No. 150 applies is mandatorily redeemableshares, which the issuing company is obligated to buy back in exchange for cashor assets.

 

8

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The Company had 267 shares of Series A Preferred Stock, $100 par value,outstanding as of January 31, 2004. The Series A Preferred Stock is required tobe redeemed ratably on a quarterly basis through December 2005. As the sharesof Series A Preferred Stock are mandatorily redeemable, these shares have beenclassified as a liability in the Company’s consolidated balance sheet and“dividends” paid on the Series A Preferred Stock have been recorded as interestexpense upon adoption of SFAS No. 150. “Dividends” paid on Series A PreferredStock prior to the adoption of SFAS No. 150 have not been reclassified asinterest cost.

 

**NOTE 9 – INVESTMENT IN JOINT VENTURE**

 

The Company has a 24% ownership interest in DNADreamfields Company, LLC, an Ohio limited liability company (“DNADreamfields”). The investment is accounted for using the equity method. DNADreamfields was formed by the Company and other food technology, manufacturingand consumer products marketing enterprises to develop, manufacture and selllow digestible carbohydrate pasta, rice and potatoes under the DreamfieldsTMbrand name. The Company made aggregate investments in DNA Dreamfields of$145,000 through January 31, 2004. Under the terms of the DNA Dreamfieldsoperating agreement, the Company shall contribute, when and as needed, additional funds up to anaggregate of approximately $4.0 million, to DNA Dreamfields to pay for thedevelopment of supply chain, product package development, consumer research,test market launch and regional roll out, advertising and merchandising. Suchcontributions shall be additional capital contributions by the Company withoutthe issuance of any additional ownership units in DNA Dreamfields.

 

TheCompany has entered into a manufacturing agreement with DNA Dreamfields wherebyDakota Growers is the exclusive manufacturer of DreamfieldsTM lowdigestible carbohydrate pasta. The Company has also entered into a servicesagreement with DNA Dreamfields under which it provides administrative,accounting, information technology, sales and distribution services to DNADreamfields. Shipments of DreamfieldsTM low digestible carbohydratepasta began in February 2004.

 

**NOTE10 – COMMITMENTS**

 

The Company forward contracts for a certain portion of its future durumwheat requirements. The Company had outstanding commitments for grain purchasestotaling $10,502,000 related to forward purchase contracts as of January 31,2004. These contracts are set price contracts to deliver grain to the Company’smill, and are not derivative in nature as they have no net settlement provisionand are not transferable.

 

The Company has a commitment to contribute, when and as needed,additional funds up to an aggregate of approximately $4.0 million, to DNADreamfields under the terms of the DNA Dreamfields operating agreement (SeeNote 9 – Investment in Joint Venture).

 

9

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

 

**Forward-LookingStatements**

 

The following discussion contains forward-looking statements. Suchforward-looking statements include, among others, those statements includingthe words “expect”, “anticipate”, “believe”, “may” and similar expressions.Such statements are based on assumptions by the Company’s management, as of thedate of this Quarterly Report, and are subject to risks and uncertainties,including those discussed in the Company’s Form 10-K for the year ended July31, 2003 under “Risk Factors”, that could cause actual results to differ materiallyfrom those anticipated. The Company cautions readers not to place unduereliance on such forward-looking statements. The Company will not update anyforward-looking statements in this Quarterly Report to reflect future events ordevelopments.

 

**Summary**

 

Dakota Growers is the third largest producer of dry pasta products inNorth America. The pasta industry identifies domestic dry pasta into two basicmarkets: retail and institutional. The Company recognizes the institutionalmarket as being comprised of foodservice and ingredient sales. We participatein each of the retail, foodservice and ingredient markets. The Company has twoproduction plants, located in Carrington, North Dakota and New Hope, Minnesota.The Company’s cost of goods sold consists mainly of raw materials (primarilydurum wheat), packaging, and manufacturing and distribution costs.

 

Netincome for the six months ended January 31, 2004 totaled $0.1 million comparedto $2.3 million for the six months ended January 31, 2003. Lower sales volumesalong with higher raw material costs and higher per unit manufacturing costs,primarily resulting from lower production volumes, were the major factors contributing to the decrease in netearnings for the six months ended January 31, 2004 when compared to thecorresponding period of the prior year. The Company was able to increase salesprices to pass through a portion of the increase in raw material costs. TheCompany was unable to fully recover higher costs incurred due to the continuedcompetitive pricing environment in the dry pasta industry.

 

The Company has a 24% ownership interest inDNA Dreamfields Company, LLC. DNA Dreamfields was formed by the Company andother food technology, manufacturing and consumer products marketingenterprises to develop, manufacture and sell low digestible carbohydrate pasta,rice and potatoes under the DreamfieldsTM brand name. The Companyhas entered into a manufacturing agreement with DNA Dreamfields whereby DakotaGrowers is the exclusive manufacturer of DreamfieldsTM lowdigestible carbohydrate pasta. The Company has also entered into a servicesagreement with DNA Dreamfields under which it provides administrative,accounting, information technology, sales and distribution services to DNADreamfields. The Company believes that the DreamfieldsTM line of products is well suited for what theCompany views as an increased demand for low carbohydrate products, and thatthe increased sales and shift from lower margin customers and products willultimately provide greater profit margins. The Company expects to incursignificant expenses associated with its commitments to DNA Dreamfieldsrelating to the new product roll-out in its third fiscal quarter 2004.DreamfieldsTM lowdigestible carbohydrate pasta has been accepted for distribution into nearly10,000 grocery outlets nationwide, with shipments beginning in February 2004.

 

**Critical AccountingPolicies**

 

The accompanying discussion and analysis of our results of operationsand financial condition are based upon our consolidated financial statements,which have been prepared in accordance with accounting principles generallyaccepted in the United States. The preparation of these financial statementsrequires management to make estimates and judgments that affect the reported amountsof assets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities. These estimates form the basis for makingjudgments about the carrying values of assets and liabilities that are notreadily apparent from other sources. We base our estimates and judgments onhistorical experience and on various other assumptions that we believe arereasonable under the

 

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circumstances. However, futureevents are subject to change and the best estimates and judgments may requireadjustment. For a complete description of the Company’s significant accountingpolicies, please see Note 1 to the consolidated financial statements includedin the Company’s Form 10-K for the year ended July 31, 2003. Our criticalaccounting policies are those that have meaningful impact on the reporting ofour financial condition and results, and that require significant managementjudgment and estimates. These policies include our accounting for (a) allowancefor doubtful accounts, (b) asset impairment, and (c) income taxes.

 

*Allowance for Doubtful Accounts*

 

We evaluate the collectibility of our accounts receivable based on acombination of factors. In cases where we are aware of circumstances that mayimpair a specific customer’s ability to meet its financial obligations to us,we record a specific allowance against amounts due to us, and thereby reducethe net recognized receivable to the amount we reasonably believe will becollected. For all other customers, we recognize allowances for doubtfulaccounts based on the length of time the receivables are past due and ourhistorical experience. If the financial condition of our customers woulddeteriorate, additional allowances may be required in the future which couldhave an adverse impact on our future operating results.

 

*Asset Impairment*

 

We are required to evaluate our long-lived assets for impairmentwhenever indicators of impairment exist, and write down the value of any assetsif they are determined to be impaired. Evaluating the impairment of long-livedassets involves management judgment in estimating the future cash flows andfair values related to these assets. Future events could cause management toconclude that impairment indicators exist and that the value of certainlong-lived assets is impaired.

 

*Income Taxes*

 

In determining income for financial statement purposes, management mustmake certain estimates and judgments in calculating tax liabilities and indetermining the recoverability of certain deferred tax assets. Deferred taxassets must be reduced by a valuation allowance, if based on the weight ofavailable evidence, it is more likely than not that some portion or all of therecorded deferred tax assets will not be realized in future periods. Managementbelieves it is more likely than not that the deferred tax assets as of January31, 2004 will be realized through the generation of future taxable income andtax planning strategies.

 

**Results of Operations**

 

*Comparison of theThree Months Ended January 31, 2004 and 2003*

 

***Net Revenues.***Netrevenues decreased $5.3 million, or 13.1%, to $35.4 million for the threemonths ended January 31, 2004, from $40.7 million for the three months endedJanuary 31, 2003. The decrease for the three months ended January 31, 2004primarily resulted from lower pasta sales volumes.

 

Revenuesfrom the retail market, a portion of which includes co-pack and governmentalsales, decreased $2.6 million, or 12.0%, primarily as a result of a 9.1%decrease in sales volumes. A significant factor relating to the decrease inretail sales volumes was a decline in co-pack sales, primarily to New WorldPasta Company. Co-pack sales comprised only 2.2% of net revenues for thequarter ended January 31, 2004 compared to 8.9% of net revenues for the quarterended January 31, 2003. Foodservice revenues decreased $4.0 million, or 30.0%,as a result of a 32.8% decrease in sales volumes. The large decrease infoodservice volumes primarily resulted from a 54% decrease in sales to U.S. Foodservice,the Company’s largest customer. As noted in previous public filings with theSecurities and Exchange Commission, sales volumes to U.S. Foodservice fell offdramatically after the second fiscal quarter 2003, down 67% in the second halfof fiscal 2003 compared to first half of fiscal 2003. The Company was led tobelieve the increased sales to U.S. Foodservice in October through December2002 were being fueled by increased demand by U.S. Foodservice customers fordry pasta products. In addition, the Company had received informationsuggesting that its third fiscal quarter 2003 sales to U.S. Foodservice, while 

 

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belowsecond fiscal quarter 2003 levels, would be relatively consistent withhistorical third quarter U.S. Foodservice sales. While the Company had noreason to question the reliability of this information at that time, itsubsequently learned the information was inaccurate. U.S. Foodservice salesvolumes did not return to normalized historical levels until the end of fiscalyear 2003. Based on published news reports, certain management personnel atU.S. Foodservice were investigated for alleged accounting improprieties.Ingredient revenues increased $0.4 million, or 20.0%, mainly as a result of a 17.3%increase in sales volumes.

 

The Company marketssemolina production in excess of its own requirements as well as by-products ofthe durum milling process. Revenues from semolina and by-product salesincreased $0.9 million to $4.6 million for the three months ended January 31,2004, compared to $3.7 million for the three months ended January 31, 2003. Thechange primarily resulted from higher semolina sales volumes.

 

***Cost of Goods Sold.***Cost of goods sold totaled $32.4 million for the three months ended January 31,2004, a decrease of $3.7 million, or 10.1%, compared to the three months endedJanuary 31, 2003. The decrease resultedmainly from lower sales volumes. Gross profit as a percentage of netrevenues decreased from 11.6% to 8.6% primarilydue to higher per unit manufacturing costs resulting from lower productionvolumes during the quarter ended January 31, 2004 compared to the correspondingquarter of the prior year.

 

***Marketing, General,and Administrative (“MG&A”) Expenses.*** MG&Aexpenses totaled $2.0 million for the three months ended January 31, 2004, down36.6% from $3.2 million for the three months ended January 31, 2003. MG&Aexpenses as a percentage of net revenues decreased from 7.8% to 5.7%. The decrease in MG&A expenses wasprimarily due to lower incentive compensation costs. A portion of incentivecompensation for the second fiscal quarter 2003 related to a compensatorytransaction in conjunction with theunwinding of previous stock option exercises and related officer loans inresponse to the Sarbanes-Oxley Act of 2002.

 

***Interest Expense.***Interest expense for the three months ended January 31, 2004 totaled $0.7million, down $0.2 million from $0.9 million for the three months ended January31, 2003. The decrease was primarily due to lower average outstanding debtlevels.

 

***Interest and OtherIncome.*** Interest and other income totaled $0.9million for the three months ended January 31, 2004 compared to $1.0 millionfor the three months ended January 31, 2003. The U.S. Customs Service (“Customs”)has distributed antidumping and countervailing duties assessed on certain pastaimported from Italy and Turkey to affected domestic producers pursuant to theContinued Dumping and Subsidy Offset Act of 2000 (the “Offset Act”), which wasenacted in October 2000. The Company received payments in the amount of$903,000 and $1,000,000 in December 2003 and 2002, respectively, under theOffset Act, based on duties assessed from October 1, 2001 to September 30,2003. These amounts have been classified as other income. Under certaincircumstances, the Company may be obligated to return certain amountspreviously received by the Company under the Offset Act. The Company cannotreasonably estimate the potential amount, if any, that it may receive under theOffset Act in future periods as any such amount will be based upon futureevents over which the Company has little or no control, including, but notlimited to, the amount of expenditures by domestic pasta producers and theamount of antidumping and countervailing duties collected by Customs.

 

***Income Taxes.***Income tax expense for the three monthsending January 31, 2004, was $0.4 million, compared to $0.7 million for thethree months ending January 31, 2003. The income tax expense reflects an effective corporate income tax rateof approximately 39%.

 

***Net Income.***Net income for thethree months ending January 31, 2004 totaled $0.7 million compared to $1.0million for the three months ending January 31, 2003. The decrease in netincome resulted primarily from lower pasta sales volumes and cost increases asnoted above.

 

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*Comparison of the Six Months EndedJanuary 31, 2004 and 2003*

 

***Net Revenues.***Net revenues decreased $5.0 million, or 6.4%,to $73.1 million for the six months ended January 31, 2004, from $78.1 millionfor the six months ended January 31, 2003. The decrease primarily resulted fromlower pasta sales volumes.

 

Revenuesfrom the retail market, a portion of which includes co-pack and governmentalsales, decreased $3.0 million, or 6.9%, primarily due to a 6.5% decrease insales volumes. A significant factor relating to the decrease in retail salesvolumes was a decline in co-pack sales, primarily to New World Pasta Company.Co-pack sales comprised 5.5% of net revenues for the six months ended January31, 2004 compared to 9.2% of net revenues for the six months ended January 31,2003.  Foodservice revenues decreased$3.4 million, or 14.9%, primarily due to a volume decrease of 19.6% offsetpartially by higher per unit selling prices. The volume decrease relatedprimarily to U.S. Foodservice. Ingredient revenues increased $0.9 million, or 21.8%, mainly as aresult of a 22.1% increase in sales volumes.

 

Revenues from semolinaand by-product sales for the six months ended January 31, 2004 totaled $7.7million, up $0.5 million from $7.2 million for the six months ended January 31,2003. The change primarily resulted from an increase in semolina sales volumes.

 

***Cost of Goods Sold.***Costof goods sold totaled $68.1 million for the six months ended January 31, 2004,and January 31, 2003. Gross profit as apercentage of net revenues decreased from 12.7% to 6.8% due to higher rawmaterial costs and higher per unit manufacturing costs, primarily resultingfrom lower production volumes, for the six months ended January 31, 2004compared to the corresponding period of the prior year.

 

***Marketing, General,and Administrative (“MG&A”) Expenses.*** MG&Aexpenses totaled $4.0 million for the six months ended January 31, 2004, down26.9% from $5.5 million for the six months ended January 31, 2003. MG&Aexpenses as a percentage of net revenues decreased from 7.0% to 5.5%. The decrease in MG&A expenses wasprimarily due to lower incentive compensation costs. A portion of incentive compensationfor the six months ended January 31, 2003 related to a compensatory transactionin conjunction with the unwinding ofprevious stock option exercises and related officer loans in response to theSarbanes-Oxley Act of 2002.

 

***Interest Expense.***Interest expense for the six months ended January 31, 2004 totaled $1.5million, down $0.3 million from $1.8 million for the six months ended January31, 2003. The decrease was primarily due to lower average outstanding debtlevels.

 

***Interest and OtherIncome.*** Interest and other income totaled $0.9million for the six months ended January 31, 2004 compared to $1.1 million forthe six months ended January 31, 2003. The Company received payments in theamount of $0.9 million and $1.0 million in December 2003 and 2002,respectively, under the Offset Act, based on duties assessed from October 1,2001 to September 30, 2003. Under certain circumstances, the Company may beobligated to return certain amounts previously received by the Company underthe Offset Act. The Company cannot reasonably estimate the potential amount, ifany, that it may receive under the Offset Act in future periods as any suchamount will be based upon future events over which the Company has little or nocontrol, including, but not limited to, the amount of expenditures by domesticpasta producers and the amount of antidumping and countervailing dutiescollected by Customs.

 

***Income Taxes.***Income tax expense for the six months endingJanuary 31, 2004, was $72,000, compared to $1.5 million for the six monthsending January 31, 2003.  The income taxexpense reflects an effective corporate income tax rate of approximately 39%.

 

***Net Income. ***Net income for the sixmonths ended January 31, 2004 totaled $0.1 million compared to $2.3 million forthe six months ended January 31, 2003. The decrease resulted primarily fromlower pasta sales volumes and cost increases as noted above.

 

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**Liquidity and CapitalResources**

 

Our primary sources of liquidity are cash provided by operations andborrowings under our credit facility. Working capital as of January 31, 2004totaled $9.9 million compared to $13.4 million as of July 31, 2003.

 

TheCompany extended its $19 million revolving credit facility with CoBank throughMarch 31, 2004. The Company plans to increase its line of credit to $25 millionupon entering into a new revolving credit agreement on or before the March 31,2004 maturity date. The revolving line has a variable interest rate establishedby CoBank based on CoBank’s cost of funds. The balance outstanding under therevolving line of credit totaled $8.4 million as of January 31, 2004.

 

Thevarious debt agreements with CoBank and certain institutional investorsobligate the Company to maintain or achieve certain amounts of equity andcertain financial ratios and impose certain restrictions on the Company. TheCompany was not in compliance with certain ratios set forth in its debtagreements with CoBank and such institutional investors as of January 31, 2004.The Company is currently in discussions with CoBank and such institutionalinvestors regarding the terms of a waiver and amendment to resolve thenoncompliance situation. As noted above, sales volumes to the Company’s largestcustomer, U.S. Foodservice, increased significantly in October through Decemberof 2002 when compared to historical levels and then fell off dramatically. U.S.Foodservice sales volumes did not return to normalized historical levels untilthe end of fiscal year 2003. The Company believes that if U.S. Foodservice hadnot shifted their purchasing pattern from normalized historical quarterlylevels, the Company would have remained in compliance with all financialcovenants as of January 31, 2004.

 

Netcash from operating activities totaled $9.7 million for the six months endedJanuary 31, 2004 compared to net cash used for operating activities of $2.4million for the six months ended January 31, 2003. The increase was primarilydue to the reduction in inventory and lower payments for long-term marketingcosts offset by an increase in trade receivables and the reduction in netincome.  Because of the actions of U.S.Foodservice, as well as an unexpected decline in co-pack sales, the Companyincreased its finished goods inventories by $6.2 million through May 2003.  Changes in production schedules and improvedsales volumes enabled the Company to reduce its finished goods by $6.2 millionas of January 31, 2004.  The reducedfactory utilization, as well as carrying costs associated with the higherinventory levels, have negatively impacted the Company’s earnings over the lastfour fiscal quarters.

 

Netcash used for investing activities totaled $1.0 million for the six monthsended January 31, 2004, compared to net cash from investing activities of $0.8million for the six months ended January 31, 2003. Cash used for investingactivities related primarily to the purchase of milling and pasta equipment andpayments for package design costs. The Company redeemed short-term investmentsof $2.0 million during the six months ended January 31, 2003, accounting for amajority of the change.

 

Netcash used for financing activities totaled $8.7 million and $1.3 million forthe six months ended January 31, 2004 and 2003, respectively.  Substantially all of the net cash used forfinancing activities for the six months ended January 31, 2004 related to debtprincipal payments. The net cash used for financing activities for the sixmonths ended January 31, 2003 consisted primarily of debt principal paymentsand the repurchase of stock offset by net borrowings under the revolving creditfacility.

 

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The following table summarizes the Company’s contractual obligations asof January 31, 2004 (in thousands):

 
| **Contractual Obligations** |   | **Total** |   | **Payments  Due in Less  Than 1 Year** |   | **Payments  Due in  1-3 Years** |   | **Payments  Due in  4-5 Years** |   | **Payments  Due After  5 Years** |   |
|-----------------------------|--------|-----------|--------|----------------------------------------|--------|---------------------------------|--------|---------------------------------|--------|----------------------------------|--------|
|                        |   |      |   |                                   |   |                            |   |                            |   |                             |   |
| Long-term debt              |   | $         | 30,883 |                                   | $      | 9,796                           |   | $                               | 14,313 |                             | $      | 5,774 |   | $ | 1,000 |   |
| Durum purchase obligations  |   | 10,502    |   | 10,502                                 |   | —                          |   | —                          |   | —                           |   |
| Operating leases            |   | 3,565     |   | 1,261                                  |   | 2,242                           |   | 62                              |   | —                           |   |
|                        |   |      |   |                                   |   |                            |   |                            |   |                             |   |
|                        |   | $         | 44,950 |                                   | $      | 21,559                          |   | $                               | 16,555 |                             | $      | 5,836 |   | $ | 1,000 |   |

 

The Company forward contracts for a certain portion of its future durumwheat requirements. The Company had outstanding commitments for grain purchasestotaling $10.5 million as of January 31, 2004 related to forward purchasecontracts. These contracts are set price contracts to deliver grain to theCompany’s mill, and are not derivative in nature as they have no net settlementprovision and are not transferable.

 

The Company made aggregate investments in DNADreamfields of $145,000 through January 31, 2004. Under the terms of the DNADreamfields operating agreement, the Company shall contribute, when and as needed,additional funds up to an aggregate of approximately $4.0 million, to DNADreamfields to pay for the development of supply chain, product packagedevelopment, consumer research, test market launch and regional roll out,advertising and merchandising. Such contributions shall be additional capitalcontributions by the Company without the issuance of any additional ownershipunits in DNA Dreamfields.

 

Management believes that net cash to be provided by operatingactivities, along with its available line of credit, will be sufficient to meetthe Company’s expected capital and liquidity requirements for the foreseeablefuture.

 

**ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

 

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

 

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

 

**ITEM 4.  CONTROLS AND PROCEDURES**

 

***Evaluationof Disclosure Controls and Procedures***

 

The Company’s Chief Executive Officer and Chief Financial Officer havereviewed the Company’s disclosure controls and procedures within 90 days priorto the filing of this quarterly report. Based upon this review, these officersbelieve that the Company’s disclosure controls and procedures are effective inensuring that material information related to the Company is made known to themby others within the Company.

 

***Changesin Internal Controls***

 

There were no significant changes in theCompany’s internal controls or in other factors that could significantly affectthese controls subsequent to the date of the most recent evaluation.

 

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**PARTII – OTHER INFORMATION**

 

**ITEM 4. SUBMISSION OFMATTERS TO A VOTE OF SECURITY HOLDERS**

 

TheAnnual Meeting of Stockholders of the Company was held on January 10, 2004. Thefollowing proposals were presented for stockholder consideration at the AnnualMeeting:

 

•                  The election of three directors to serve as“Class II” directors.

•                  Approval of the appointment of Eide BaillyLLP as the Company’s independent auditors for fiscal year 2004.

 

Atthe Annual Meeting, the Company’s stockholders elected each of the Company’snominees named in its Proxy Statement, dated December 8, 2003, to serve as“Class II” directors on the Board of Directors of the Company.  The Company’s nominees were Roger A. Kenner,Eugene J. Nicholas and Jeffrey O. Topp. As newly-elected “Class II” directors, each of these individuals willserve on the Board of Directors for three-year terms ending in 2007. Followingare the results for the election of directors:

 
|               |   | **Shares  Voted For** |   | **Shares  Withheld** |   |
|--------------------|--------|-----------------------|--------|----------------------|--------|
| Roger A. Kenner    |   | 5,970,749             |   | 545,297              |   |
| Eugene J. Nicholas |   | 6,080,996             |   | 435,050              |   |
| Jeffrey O. Topp    |   | 6,232,766             |   | 283,280              |   |

 

AllynK. Hart, Curtis R. Trulson and Michael E. Warner will continue serving asdirectors until the annual meeting held in 2005. John S. Dalrymple III, JamesF. Link and John D. Rice, Jr. will continue serving as directors until theannual meeting held in 2006.

 

Inaddition, the stockholders approved the appointment of Eide Bailly LLP as theCompany’s independent auditors for fiscal year 2004, as follows:

 
| Shares Voted For     |   | 6,341,010 |   |
|----------------------|--------|-----------|--------|
| Shares Voted Against |   | 90,341    |   |
| Shares Abstained     |   | 84,695    |   |

 

**ITEM 6. EXHIBITS ANDREPORTS ON FORM 8-K**

 

**Exhibits**

 

10.1                 DNA DreamfieldsCompany, LLC Operating Agreement dated October 31, 2003 between the Company,B-New, LLC, TechCom Group, LLC, and Buhler, Inc. Confidential treatment hasbeen requested with respect to portions of the Exhibit.

 

10.2                 ManufacturingAgreement dated December 26, 2003 between the Company and DNA DreamfieldsCompany, LLC. Confidential treatment has been requested with respect toportions of the Exhibit.

 

10.3                 Services Agreementdated December 26, 2003 between the Company and DNA Dreamfields Company, LLC.Confidential treatment has been requested with respect to portions of theExhibit.

 

10.4                 Trademark LicenseAgreement dated December 26, 2003 between the Company and DNA DreamfieldsCompany, LLC.

 

10.5                 TechnologySublicense Agreement dated December 26, 2003 between the Company and DNADreamfields Company, LLC.

 

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10.6                 Dakota GrowersPasta Company, Inc. Amended and Restated 2003 Stock Option Plan.

 

31.1                 Certification ofChief Executive Officer required by Securities and Exchange Commission Rule13a-14(a) or 15d-14(a).

 

31.2                 Certification ofChief Financial Officer required by Securities and Exchange Commission Rule13a-14(a) or 15d-14(a).

 

32.1                 Certification of Chief ExecutiveOfficer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.Section 1350.

 

32.2                 Certification of Chief FinancialOfficer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.Section 1350.

 

**Reports onForm 8-K**

 

TheCompany filed a Form 8-K on January 12, 2004 announcing it had communicated tostockholders at the Company’s Annual Meeting of Stockholders held on January10, 2004, that it has been continuing its previously-disclosed efforts, workingwith other food technology organizations, to develop a low digestible carbohydratepasta product. The Company announced that it plans to commence productionand sale of a line of low digestible carbohydrate pasta products in the earlypart of calendar year 2004.

 

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**SIGNATURES**

 

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

 
|   | DAKOTA GROWERS PASTA COMPANY, INC. |   |
|--------|------------------------------------|--------|
|   |                               |
|   | (Registrant)                       |

 

 
| **Signature**         |   | **Title** |                                  | **Date** |
|-----------------------|--------|-----------|---------------------------------------|----------|
|                  |   |      |                                  |     |
|                  |   |      |                                  |     |
| /s/ Timothy J. Dodd   |   |      | President and Chief Executive Officer |     |   |
| Timothy J. Dodd       |   |      | (Principal Executive                  |     | March 16, 2004 |
|                  |   |      | Officer)                              |     |   |
|                  |   |      |                                  |     |   |
|                  |   |      |                                  |     |   |
| /s/ Thomas P. Friezen |   |      | Chief Financial Officer               |     |   |
| Thomas P. Friezen     |   |      | (Principal Financial                  |     | March 16, 2004 |
|                  |   |      | Officer)                              |     |   |
|                  |   |      |                                  |     |   |
|                  |   |      |                                  |     |   |
| /s/ Edward O. Irion   |   |      | Vice President – Finance and     |     |   |
| Edward O. Irion       |   |      | Chief Accounting Officer              |     | March 16, 2004 |
|                  |   |      | (Principal Accounting Officer)        |     |   |

 

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