**UNITED STATES****SECURITIESAND 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 April 30,  2005** |
|                                                    | ** ** | ** **                                                                                               |
| **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 ofregistrant as specified in its charter)

 
| **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) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.

Yes ý  No  o

 

Indicate by check mark whether the registrant isan accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o  No  ý

 

As of June 14,2005, the Registrant had 13,169,382 shares of common stock, par value $0.01 pershare, outstanding.

 

 

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**PART I – FINANCIALINFORMATION**

 

**ITEM 1.**FINANCIAL STATEMENTS

 

# **DAKOTA GROWERS PASTACOMPANY, INC.**

#### **CONSOLIDATED BALANCE SHEETS**

**(InThousands, Except Share Information)**

 
| ** **                                                                                                             | ** ** | **(Unaudited)**    | ** ** | ** **        | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-------------------|------------|
| ** **                                                                                                             | ** ** | **April 30,** | ** ** | **July 31,** | ** ** |
| ** **                                                                                                             | ** ** | **2005**           | ** ** | **2004**          | ** ** |
| **ASSETS**                                                                                                             |       |               |       |              |       |
|                                                                                                                   |       |               |       |              |       |
| CURRENT ASSETS                                                                                                         |       |               |       |              |       |
| Cash and cash equivalents                                                                                              |       | $                  | 4          |              | $          | 589 |   |
|                                                                                                                   |       |               |       |              |       |
| Trade accounts receivable, less allowance for cash  discounts and doubtful accounts of $1,454 and $1,209, respectively |       | 15,461             |       | 14,043            |       |
|                                                                                                                   |       |               |       |              |       |
| Due from related parties                                                                                               |       | 103                |       | 703               |       |
|                                                                                                                   |       |               |       |              |       |
| Other receivables                                                                                                      |       | 41                 |       | 299               |       |
|                                                                                                                   |       |               |       |              |       |
| Inventories                                                                                                            |       | 29,436             |       | 25,211            |       |
|                                                                                                                   |       |               |       |              |       |
| Prepaid expenses                                                                                                       |       | 2,285              |       | 3,994             |       |
|                                                                                                                   |       |               |       |              |       |
| Deferred income taxes                                                                                                  |       | 937                |       | 937               |       |
|                                                                                                                   |       |               |       |              |       |
| Total current assets                                                                                                   |       | 48,267             |       | 45,776            |       |
|                                                                                                                   |       |               |       |              |       |
| PROPERTY AND EQUIPMENT                                                                                                 |       |               |       |              |       |
| In service                                                                                                             |       | 111,053            |       | 109,987           |       |
| Construction in process                                                                                                |       | 5,151              |       | 18                |       |
|                                                                                                                   |       | 116,204            |       | 110,005           |       |
| Less accumulated depreciation                                                                                          |       | (50,979            | )          | (46,980           | )          |
|                                                                                                                   |       |               |       |              |       |
| Net property and equipment                                                                                             |       | 65,225             |       | 63,025            |       |
|                                                                                                                   |       |               |       |              |       |
| INVESTMENT IN JOINT VENTURE                                                                                            |       | 3,802              |       | 1,746             |       |
|                                                                                                                   |       |               |       |              |       |
| INVESTMENT IN COOPERATIVE BANK                                                                                         |       | 2,161              |       | 2,343             |       |
|                                                                                                                   |       |               |       |              |       |
| INTANGIBLE ASSETS                                                                                                      |       | 282                |       | 392               |       |
|                                                                                                                   |       |               |       |              |       |
| OTHER ASSETS                                                                                                           |       | 1,472              |       | 6,133             |       |
|                                                                                                                   |       |               |       |              |       |
|                                                                                                                   |       | $                  | 121,209    |              | $          | 119,415 |   |

 

(continued on next page)

 

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# **DAKOTA GROWERS PASTACOMPANY, INC.**

#### **CONSOLIDATED BALANCE SHEETS**

**(InThousands, Except Share Information)**

 
| ** **                                                                                                                                                                      | ** ** | **(Unaudited)**    | ** ** | ** **        | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-------------------|------------|
| ** **                                                                                                                                                                      | ** ** | **April 30,** | ** ** | **July 31,** | ** ** |
| ** **                                                                                                                                                                      | ** ** | **2005**           | ** ** | **2004**          | ** ** |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                   |       |               |       |              |       |
|                                                                                                                                                                            |       |               |       |              |       |
| CURRENT LIABILITIES                                                                                                                                                             |       |               |       |              |       |
| Notes payable                                                                                                                                                                   |       | $                  | 14,000     |              | $          | 12,200 |   |
| Current portion of long-term debt                                                                                                                                               |       | 4,771              |       | 7,176             |       |
| Accounts payable                                                                                                                                                                |       | 7,404              |       | 4,969             |       |
| Excess outstanding checks over cash on deposit                                                                                                                                  |       | 3,241              |       | —            |       |
| Accrued liabilities                                                                                                                                                             |       | 4,404              |       | 4,845             |       |
|                                                                                                                                                                            |       |               |       |              |       |
| Total current liabilities                                                                                                                                                       |       | 33,820             |       | 29,190            |       |
|                                                                                                                                                                            |       |               |       |              |       |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                   |       | —             |       | —            |       |
| LONG-TERM DEBT, net of current portion                                                                                                                                          |       | 16,316             |       | 21,087            |       |
| DEFERRED INCOME TAXES                                                                                                                                                           |       | 10,764             |       | 10,363            |       |
| OTHER LIABILITIES                                                                                                                                                               |       | 98                 |       | 136               |       |
| MANDATORILY REDEEMABLE PREFERRED STOCK                                                                                                                                          |       |               |       |              |       |
| Series A, 6% cumulative, $100 par value, 533  shares authorized, 100 and 200 shares issued and outstanding as of April 30,  2005 and July 31, 2004, respectively |       | 10                 |       | 20                |       |
|                                                                                                                                                                            |       |               |       |              |       |
| Total liabilities                                                                                                                                                               |       | 61,008             |       | 60,796            |       |
|                                                                                                                                                                            |       |               |       |              |       |
| STOCKHOLDERS’ EQUITY                                                                                                                                                       |       |               |       |              |       |
| Series D delivery preferred stock, non-cumulative,  $.01 par value, 11,340,841 shares authorized, 11,275,297 shares issued and outstanding                                 |       | 113                |       | 113               |       |
| Common stock, $.01 par value, 75,000,000 shares  authorized, 13,169,382 shares issued and outstanding                                                                           |       | 132                |       | 132               |       |
| Additional paid-in capital                                                                                                                                                      |       | 62,807             |       | 62,807            |       |
| Accumulated deficit                                                                                                                                                             |       | (2,851             | )          | (4,433            | )          |
|                                                                                                                                                                            |       |               |       |              |       |
| Total stockholders’ equity                                                                                                                                                 |       | 60,201             |       | 58,619            |       |
|                                                                                                                                                                            |       |               |       |              |       |
| Total liabilities and stockholders’ equity                                                                                                                                 |       | $                  | 121,209    |              | $          | 119,415 |   |

 

SeeNotes to Consolidated Financial Statements

 

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# **DAKOTA GROWERS PASTACOMPANY, INC.**

#### **CONSOLIDATED STATEMENTS OF OPERATIONS**

**(InThousands, Except Per Share Amounts)(Unaudited)**

 
| ** **                                                                         | ** ** | **Three Months Ended   April 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                         | ** ** | **2005**                                | ** ** | **2004** | ** ** |
| Net revenues (net of discounts and allowances of  $6,372 and $5,665, respectively) |       | $                                       | 39,157     |   | $ | 37,605 |   |
|                                                                               |       |                                    |       |   |   |
| Cost of goods sold                                                                 |       | 34,443                                  |       | 33,479 |   |
|                                                                               |       |                                    |       |   |   |
| Gross profit                                                                       |       | 4,714                                   |       | 4,126 |   |
|                                                                               |       |                                    |       |   |   |
| Marketing, general and administrative expenses                                     |       | 2,563                                   |       | 1,987 |   |
|                                                                               |       |                                    |       |   |   |
| Operating income                                                                   |       | 2,151                                   |       | 2,139 |   |
|                                                                               |       |                                    |       |   |   |
| Other income (expense)                                                             |       |                                    |       |   |   |
| Interest and other income (expense)                                                |       | 6                                       |       | (309 | ) |
| Gain on disposition of property, equipment and other  assets                       |       | 13                                      |       | 14 |   |
| Net income (loss) allocated from joint venture                                     |       | (58                                     | )          | 30 |   |
| Interest expense, net                                                              |       | (466                                    | )          | (558 | ) |
|                                                                               |       |                                    |       |   |   |
| Income before income taxes                                                         |       | 1,646                                   |       | 1,316 |   |
|                                                                               |       |                                    |       |   |   |
| Income tax expense                                                                 |       | 642                                     |       | 513 |   |
|                                                                               |       |                                    |       |   |   |
| Net income                                                                         |       | $                                       | 1,004      |   | $ | 803 |   |
|                                                                               |       |                                    |       |   |   |
| Net earnings per common share                                                      |       |                                    |       |   |   |
| Basic                                                                              |       | $                                       | 0.08       |   | $ | 0.07 |   |
|                                                                               |       |                                    |       |   |   |
| Diluted                                                                            |       | $                                       | 0.08       |   | $ | 0.07 |   |
|                                                                               |       |                                    |       |   |   |
| Weighted average common shares outstanding                                         |       |                                    |       |   |   |
| Basic                                                                              |       | 13,169                                  |       | 12,260 |   |
|                                                                               |       |                                    |       |   |   |
| Diluted                                                                            |       | 13,570                                  |       | 12,620 |   |

 

SeeNotes to Consolidated Financial Statements

 

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# **DAKOTA GROWERS PASTACOMPANY, INC.**

#### **CONSOLIDATED STATEMENTS OF OPERATIONS**

**(InThousands, Except Per Share Amounts)(Unaudited)**

 
| ** **                                                                           | ** ** | **Nine Months Ended   April 30,** | ** ** |
|--------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                           | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| Net revenues (net of discounts and allowances of  $18,389 and $14,971, respectively) |       | $                                      | 115,807    |   | $ | 110,656 |   |
|                                                                                 |       |                                   |       |   |   |
| Cost of goods sold                                                                   |       | 103,260                                |       | 101,577 |   |
|                                                                                 |       |                                   |       |   |   |
| Gross profit                                                                         |       | 12,547                                 |       | 9,079 |   |
|                                                                                 |       |                                   |       |   |   |
| Marketing, general and administrative expenses                                       |       | 7,792                                  |       | 5,996 |   |
|                                                                                 |       |                                   |       |   |   |
| Operating income                                                                     |       | 4,755                                  |       | 3,083 |   |
|                                                                                 |       |                                   |       |   |   |
| Other income (expense)                                                               |       |                                   |       |   |   |
| Interest and other income                                                            |       | 440                                    |       | 595 |   |
| Gain on disposition of property, equipment and other  assets                         |       | 34                                     |       | 27 |   |
| Net loss allocated from joint venture                                                |       | (914                                   | )          | (114 | ) |
| Interest expense, net                                                                |       | (1,721                                 | )          | (2,090 | ) |
|                                                                                 |       |                                   |       |   |   |
| Income before income taxes                                                           |       | 2,594                                  |       | 1,501 |   |
|                                                                                 |       |                                   |       |   |   |
| Income tax expense                                                                   |       | 1,012                                  |       | 585 |   |
|                                                                                 |       |                                   |       |   |   |
|                                                                                 |       |                                   |       |   |   |
| Net income                                                                           |       | $                                      | 1,582      |   | $ | 916 |   |
|                                                                                 |       |                                   |       |   |   |
| Net earnings per common share                                                        |       |                                   |       |   |   |
| Basic                                                                                |       | $                                      | 0.12       |   | $ | 0.07 |   |
|                                                                                 |       |                                   |       |   |   |
| Diluted                                                                              |       | $                                      | 0.12       |   | $ | 0.07 |   |
|                                                                                 |       |                                   |       |   |   |
| Weighted average common shares outstanding                                           | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Basic                                                                                |       | 13,169                                 |       | 12,260 |   |
|                                                                                 |       |                                   |       |   |   |
| Diluted                                                                              |       | 13,543                                 |       | 12,620 |   |

 

SeeNotes to Consolidated Financial Statements

 

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# **DAKOTA GROWERS PASTACOMPANY, INC.**

#### **CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(InThousands)(Unaudited)**

 
| ** **                                                                  | ** ** | **Nine Months Ended   April 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                  | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| OPERATING ACTIVITIES                                                        |       |                                   |       |   |   |
| Net income                                                                  |       | $                                      | 1,582      |   | $ | 916 |   |
| Adjustments to reconcile net income to net cash from  operating activities: |       |                                   |       |   |   |
| Depreciation and amortization                                               |       | 5,865                                  |       | 6,348 |   |
| Undistributed patronage capital from cooperatives                           |       | (46                                    | )          | (51 | ) |
| Gain on disposition of property, equipment and other  assets                |       | (34                                    | )          | (27 | ) |
| Net loss allocated from joint venture                                       |       | 914                                    |       | 114 |   |
| Deferred income taxes                                                       |       | 401                                    |       | 585 |   |
| Payments for long-term marketing costs                                      |       | —                                 |       | (125 | ) |
| Accrued promotional costs applied to marketing  prepayments                 |       | 5,142                                  |       | — |   |
| Changes in assets and liabilities:                                          |       |                                   |       |   |   |
| Trade receivables                                                           |       | (1,418                                 | )          | (3,045 | ) |
| Due from related parties                                                    |       | 600                                    |       | — |   |
| Other receivables                                                           |       | 258                                    |       | 694 |   |
| Inventories                                                                 |       | (4,225                                 | )          | 1,933 |   |
| Prepaid expenses                                                            |       | 179                                    |       | 466 |   |
| Other assets                                                                |       | 7                                      |       | 6 |   |
| Accounts payable                                                            |       | 2,435                                  |       | 1,320 |   |
| Other accrued liabilities                                                   |       | (441                                   | )          | 399 |   |
| NET CASH FROM OPERATING ACTIVITIES                                          |       | 11,219                                 |       | 9,533 |   |
|                                                                        |       |                                   |       |   |   |
| INVESTING ACTIVITIES                                                        |       |                                   |       |   |   |
| Purchases of property and equipment                                         |       | (6,227                                 | )          | (1,168 | ) |
| Proceeds on sale of property, equipment and other  assets                   |       | —                                 |       | 8 |   |
| Payments for package design costs                                           |       | (690                                   | )          | (258 | ) |
| Proceeds from cooperative bank equity retirements                           |       | 228                                    |       | 60 |   |
| Investments in joint venture                                                |       | (2,970                                 | )          | (240 | ) |
| NET CASH USED FOR INVESTING ACTIVITIES                                      |       | (9,659                                 | )          | (1,598 | ) |
|                                                                        |       |                                   |       |   |   |
| FINANCING ACTIVITIES                                                        |       |                                   |       |   |   |
| Net change in short-term notes payable                                      |       | 1,800                                  |       | 295 |   |
| Net change in excess outstanding checks over cash on  deposit               |       | 3,241                                  |       | 477 |   |
| Principal payments on long-term debt                                        |       | (7,176                                 | )          | (8,701 | ) |
| Preferred stock retirements                                                 |       | (10                                    | )          | (10 | ) |
| NET CASH USED FOR FINANCING ACTIVITIES                                      |       | (2,145                                 | )          | (7,939 | ) |
|                                                                        |       |                                   |       |   |   |
| NET CHANGE IN CASH AND CASH EQUIVALENTS                                     |       | (585                                   | )          | (4 | ) |
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                              |       | 589                                    |       | 5 |   |
| CASH AND CASH EQUIVALENTS, END OF PERIOD                                    |       | $                                      | 4          |   | $ | 1 |   |
|                                                                        |       |                                   |       |   |   |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                           |       |                                   |       |   |   |
| Cash payments (refunds) for                                                 |       |                                   |       |   |   |
| Interest (net of amounts capitalized)                                       |       | $                                      | 2,215      |   | $ | 2,676 |   |
|                                                                        |       |                                   |       |   |   |
| Income taxes                                                                |       | $                                      | (76        | ) | $ | (964 | ) |

 

SeeNotes to Consolidated Financial Statements

 

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# **DAKOTA GROWERS PASTACOMPANY, INC.**

#### **NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

The following notes should be read in conjunctionwith the notes to the financial statements for the year ended July 31, 2004as filed in the Company’s Form 10-K.

 

**NOTE1 - ORGANIZATION**

** **

Dakota GrowersPasta Company, Inc. (“Dakota Growers” or “the Company”) is a North Dakotacorporation that operates milling and pasta manufacturing facilities inCarrington, North Dakota. In addition, the Company’s wholly-owned subsidiary,Primo Piatto, Inc. (“Primo Piatto”), a Minnesota corporation, operatespasta manufacturing facilities in New Hope, Minnesota.

 

**NOTE2 – FINANCIAL STATEMENT PRESENTATION**

** **

The unauditedconsolidated financial statements included herein have been prepared pursuantto the rules and regulations of the Securities and Exchange Commission.Accordingly, they do not include all the information and footnotes required byaccounting principles generally accepted in the United States of America forcomplete financial statements. In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included. Operating results for the three and nine monthperiods ended April 30, 2005 are not necessarily indicative of the resultsthat may be expected for the year ended July 31, 2005. The unauditedconsolidated financial statements included in this Form 10-Q should beread in conjunction with the consolidated financial statements and footnotes includedin the Company’s Form 10-K for the year ended July 31, 2004. Theinformation contained in the balance sheet as of July 31, 2004 was derivedfrom the Company’s audited annual report for fiscal year 2004. Reclassificationshave been made to facilitate comparability with current presentation. Suchreclassifications have no effect on the net results of operations.

 

The financial informationpresented herein includes the consolidated balance sheets and results ofoperations of Dakota Growers Pasta Company, Inc. and its wholly-ownedsubsidiary. All significant intercompany balances and transactions have beeneliminated.

 

###### **NOTE 3 –INVENTORIES**

###### ** **

Inventories are valued at lowerof cost or market. Inventories as of April 30, 2005 include raw materialsand packaging of $8,411,000 and finished goods of $21,025,000. Inventories at July 31,2004 include raw materials and packaging of $6,396,000 and finished goods of $18,815,000.

 

###### **NOTE4 – LOAN AGREEMENTS**

###### ** **

Effective February 22, 2005, the Company secured a new $25.0million revolving credit facility with CoBank that extends through February 20,2006. Interest on the revolving line is currently charged at a variable rateestablished by CoBank based on CoBank’s cost of funds, although the facilityalso allows for a fixed rate option. This newly-secured revolving creditfacility replaced an existing revolving credit facility with CoBank. Balancesoutstanding under revolving line of credit arrangements totaled $14.0 million asof April 30, 2005, and $12.2 million as of July 31, 2004. The Companyhad $11.0 million available for borrowings under the line of credit as of April 30,2005.

 

The Company’s various debt agreements with CoBank and certaininstitutional investors obligate the Company to maintain or achieve certainamounts of equity and certain financial ratios and impose certain restrictionson the Company. The Company was in compliance with these financial covenants asof April 30, 2005.

 

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###### **NOTE 5 – EARNINGSPER 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 all potentiallydilutive securities, such as stock options and convertible preferred stock.

 

Dilutive securities, consisting of stock options and convertiblepreferred stock, included in the calculation of diluted weighted average commonshares totaled 401,000 and 360,000 for the three months ended April 30,2005 and 2004, respectively. Dilutive securities included in the calculation ofdiluted weighted average common shares totaled 374,000 and 360,000 for the ninemonths ended April 30, 2005 and 2004, respectively. As there is currentlyno established public trading market for the Company’s common stock, theCompany has assumed the proceeds from the exercise of stock options wouldreduce debt and, thus, interest expense.

 

**NOTE 6 – CONTINUED DUMPING ANDSUBSIDY OFFSET ACT OF 2000**

 

U.S.Customs and Border Protection (“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.The Company received payments in the amount of $425,000 and $903,000 in December 2004and 2003, respectively, under the Offset Act. $305,000 of the $903,000 wasrepaid to Customs in April 2004pursuant to a reclamation request from Customs. Theseamounts have been classified as other income. The Company cannot reasonablyestimate the potential amount, if any, that it may receive under the Offset Actin future periods as any such amount will be based upon future events overwhich the Company has little or no control, including, but not limited to, theamount of expenditures by domestic pasta producers and the amount ofantidumping and countervailing duties collected by Customs.

 

**NOTE 7 – INVESTMENT INJOINT VENTURE**

 

The Companyacquired a 24% ownership interest in DNA Dreamfields Company, LLC (“DNADreamfields”) during fiscal year 2004. The Company accounts for the investmentin DNA Dreamfields using the equity method. DNA Dreamfields was formed by theCompany and other food technology, manufacturing and consumer productsmarketing enterprises to develop, manufacture and sell low digestiblecarbohydrate pasta, rice and potatoes under the DreamfieldsTM brandname. The Company met its initial $3,962,000 aggregate investment commitment inDNA Dreamfields during the fiscal quarter ended October 31, 2004.

 

On November 3,2004, the Company and the other members of DNA Dreamfields entered intoAmendment No. 3 to the DNA Dreamfields Operating Agreement. Under theterms of the Amendment, the Company contributed an additional $1,500,000 intoDNA Dreamfields, which increased its economic ownership in DNA Dreamfields to29.5%.

 

**NOTE 8 –RELATED PARTY TRANSACTIONS**

 

The Company has entered intoa manufacturing agreement with DNA Dreamfields whereby Dakota Growers is theexclusive manufacturer of DreamfieldsTM low digestible carbohydratepasta. The Company has also entered into a services agreement with DNADreamfields under which the Company provides administrative, accounting,information technology, sales, customer service and distribution services toDNA Dreamfields. Shipments of DreamfieldsTM low digestiblecarbohydrate pasta began in February 2004.

 

Pursuant to the servicesagreement with DNA Dreamfields, to the extent the Company supplies logisticsservices for the delivery and billing of DreamfieldsTM product, thetitle in and to the DreamfieldsTM product shall remain

 

8

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with Dakota Growers, and therisk of loss shall pass from Dakota Growers to Dakota Grower’s customers inaccordance with terms and conditions set forth in purchase orders or agreementsbetween Dakota Growers and its customers. Sales of DreamfieldsTM productsare included in the Company’s net revenues. Manufacturing, distribution, andpromotional costs incurred by the Company related to DreamfieldsTM productsare included in the applicable line items of the Company’s income statement. Ona monthly basis, the Company calculates a net amount due to DNA Dreamfieldsbased on the total sales of DreamfieldsTM product less relatedDreamfieldsTM product costs, which include cash discounts, promotionsand allowances, brokerage fees, bad debt write-offs, freight costs, storage andhandling fees, and the transfer price established between the Company and DNADreamfields as outlined in the manufacturing agreement. This net amount due toDNA Dreamfields is included in the Company’s cost of goods sold and totaled $439,000and $1,222,000 for the three months ended April 30, 2005 and 2004,respectively, and $1,575,000 and $1,222,000 for the nine months ended April 30,2005 and 2004, respectively. Service fee revenues from DNA Dreamfields areincluded in the Company’s net revenues and totaled $35,000 and $51,000 for thethree months ended April 30, 2005 and 2004, respectively, and $111,000 and$51,000 for the nine months ended April 30, 2005 and 2004, respectively. Netamounts due from DNA Dreamfields totaled $21,000 and $621,000 as of April 30,2005 and July 31, 2004, respectively.

 

Amounts due from officers ofthe Company totaled $82,000 as of April 30, 2005 and July 31, 2004.

 

###### **NOTE 9 – COMMITMENTS**

 

The Company forward contracts for a certain portion of its future durumwheat requirements. The Company had outstanding commitments for grain purchasestotaling $9,014,000 related to forward purchase contracts as of April 30,2005. 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 had commitments to purchase pasta equipmenttotaling approximately $4.2 million as of April 30, 2005. These amountsare expected to be paid within one year.

 

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

 

ThisManagement’s Discussion and Analysis of Financial Condition and Results ofOperations (MD&A) should be read in conjunction with the MD&A includedin the Company’s Form 10-K for the year ended July 31, 2004.

 

**Forward-Looking Statements**

 

Thefollowing discussion contains forward-looking statements. Such forward-lookingstatements include, among others, those statements including the words “expect”,“anticipate”, “believe”, “may” and similar expressions. Such statements arebased on assumptions by the Company’s management, as of the date of thisQuarterly Report, and are subject to risks and uncertainties, including thosediscussed in the Company’s Form 10-K for the year ended July 31, 2004under “Risk Factors,” that could cause actual results to differ materially fromthose anticipated. The Company cautions readers not to place undue reliance onsuch forward-looking statements. The Company will not update any forward-lookingstatements in this Quarterly Report to reflect future events or developments.

 

**Summary**

 

Dakota Growers is the third largest pastamanufacturer in North America. The Company generates a majority of its revenuesfrom manufacturing pasta for the retail store brand and foodservice markets,although we serve and continually look for opportunities in the entire drypasta industry. The Company has two production plants, located in Carrington,North Dakota and New Hope, Minnesota. The Company’s cost of goods sold consistsmainly of raw materials (primarily durum wheat), packaging, and manufacturingand distribution costs.

 

Netincome for the quarter ended April 30, 2005 totaled $1,004,000 compared to$803,000 for the quarter ended April 30, 2004. Net income for the ninemonths ended April 30, 2005 totaled $1,582,000 versus $916,000 for the ninemonths ended April 30, 2004. Net earnings per basic common share for thequarter ended April 30, 2005 was $0.08 per share compared to $0.07 pershare for the quarter ended April 30, 2004.  Net earnings per basic common share for thenine months ended April 30, 2005 was $0.12 per share compared to $0.07 pershare for the nine months ended April 30, 2004.

 

TheCompany’s net revenues have increased 4.7% for the nine months ended April 30,2005 when compared to the same period of last year as a result of higher pastasales in the ingredient and foodservice markets. The Company has also beensuccessful in implementing sales price increases, primarily associated with higherinput and distribution costs, most of which became effective in the latter halfof the Company’s second fiscal quarter 2005. The sales price increases weremost profound in the private label retail market. The benefits of the revenuegains have been partially offset by continued higher transportation costs and costsassociated with production scheduling and distribution inefficienciesexperienced during new customer roll out periods.

 

TheCompany is currently undertaking a $15.0 million capital project at its NewHope facility to better balance its pasta production capabilities and improveoperating costs. During the quarter ended April 30, 2005, the Company’sfinished goods inventories increased by $3.3 million, primarily to allow forreduced pasta production volumes during the production upgrade at the New Hopefacility.

 

**Critical Accounting Policies**

 

Theaccompanying discussion and analysis of our results of operations and financialcondition are based upon our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in theUnited States. The preparation of these financial statements requiresmanagement to make estimates and judgments that affect the reported amounts ofassets, 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,future events are subject to change and the best estimates and judgments mayrequire adjustment. For a complete description of the Company’s significantaccounting policies, please see Note 1 to the consolidated financial statementsincluded in the Company’s Form 10-K for the year ended July 31, 2004.Our critical accounting policies are those that have meaningful impact on thereporting of our financial condition and results, and that require significantmanagement judgment and estimates. These policies include our accounting for (a) allowancefor doubtful accounts, (b) inventory valuation, (c) asset impairment,and (d) income taxes.

 

*Allowance for Doubtful Accounts*

 

Weevaluate the collectibility of our accounts receivable based on a combinationof factors. In cases where we are aware of circumstances that may impair aspecific customer’s ability to meet its financial obligations to us, we recorda specific allowance against amounts due to us, and thereby reduce the netrecognized receivable to the amount we reasonably believe will be collected.For all other customers, we recognize allowances for doubtful accounts based onthe length of time the receivables are past due and our historical experience.If the financial condition of our customers would deteriorate, additionalallowances may be required in the future which could have an adverse impact onour future operating results.

 

*Inventory Valuation*

 

Inventories are stated atthe lower of cost or market, determined on a first-in, first-out (FIFO) basis, using product specific standard costs. The Company analyzesvariances between actual manufacturing costs incurred and amounts absorbed atinventory standard costs. Inventory valuations are adjusted for these variancesas applicable. The Company regularly evaluates its inventories and recognizesinventory allowances for discontinued and slow-moving inventories based uponthese evaluations.

 

*Asset Impairment*

 

Weare required to evaluate our long-lived assets for impairment wheneverindicators of impairment exist, and write down the value of any assets if theyare determined to be impaired. Evaluating the impairment of long-lived assetsinvolves management judgment in estimating the future cash flows and fairvalues 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*

 

Indetermining income for financial statement purposes, management must makecertain 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 thatsome portion or all of the recorded deferred tax assets will not be realized infuture periods. Management believes it is likely that the deferred tax assetsas of April 30, 2005 will be realized through the generation of futuretaxable income and the use of appropriate tax planning strategies.

 

**Results of Operations**

 

*Comparison of the Three Months Ended April 30,2005 and 2004*

 

***Net Revenues.****** ***Net revenuestotaled $39.2 million for the three months ended April 30, 2005, an increaseof $1.6 million, or 4.1%, compared to $37.6 million for the three months ended April 30,2004. The increase resulted from higher pastasales volumes, particularly in the ingredient market and, to a lesser extent,the foodservice market.

 

Revenuesfrom the retail market, a portion of which includes co-pack and governmentalsales, increased $0.2 million, or 0.9%, as a result of a 7.0% increase inaverage per unit selling prices offset by co-pack and governmental sales volumedeclines. Retail sales volumes of DreamfieldsTM low digestiblecarbohydrate pasta

 

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products, which have significantly higher per unit sales prices than theCompany’s other products, were down 24.9% during the quarter ended April 30,2005 when compared to the same quarter of last year primarily due to the impactof introductory sales in the prior year. Foodservice revenues increased $0.8million, or 7.7%, primarily due to higher sales volumes. Increased foodservice volumes were derivedfrom sales under the New World Pasta license agreement combined with newcustomer sales. The Company entered into a license agreement with NewWorld Pasta Company in September 2004, which gave the Company theexclusive right to produce and market pasta products bearing the *Ronzoni*, *Prince*, *San Giorgio* and *Mrs. Weiss*brandsin the foodservice market. Ingredient revenues increased $2.1 million, or 66.5%, mostly dueto an increase in sales volume related to the addition of one customer in thismarket.

 

The Company marketssemolina production in excess of its own requirements as well as durum wheatflour, other flour blends and by-products of the durum milling process. Revenues from semolina,by-product and other mill sales decreased $1.5 million to $2.8 million for thethree months ended April 30, 2005, compared to $4.3 million for the threemonths ended April 30, 2004. The change primarily resulted from lowersemolina sales volumes and lower average millfeed prices.

 

***Cost of Goods Sold.***  Costof goods sold increased 2.9% to $34.4 million for the three months ended April 30,2005, compared to $33.5 million for the three months ended April 30, 2004.The increase resulted mainly from highersales volumes relative to the comparable quarter of the prior year. Gross profitas a percentage of net revenues improved to 12.0% for the three months ended April 30,2005 from 11.0% for the three months ended April 30, 2004. Lowerper unit manufacturing costs resulting from increased factory utilization contributedto the gross profit percentage improvement. However, benefits derived fromoperating efficiencies were partially offset by higher freight costs whichcontinued to negatively impact gross profit.

 

***Marketing, General, andAdministrative (“MG&A”) Expenses.***  MG&A expenses totaled $2.6 million for thethree months ended April 30, 2005, an increase of 29.0% from $2.0 millionfor the three months ended April 30, 2004. MG&A expenses as apercentage of net revenues increased to 6.6% for the quarter ended April 30,2005, from 5.3% for the comparable quarter of the prior year. The increase inMG&A resulted from a variety of factors, the most significant of which wasincreased customer marketing support associated with DreamfieldsTM pastaproducts. The costs associated with DreamfieldsTMare recovered from DNA Dreamfields through the services agreement, and theCompany’s allocable portion is reflected in the calculation of net income(loss) allocated from joint venture.

 

***Net Income (Loss) Allocated fromJoint Venture.****** ***The net lossallocated from joint venture totaled $58,000 for the three months ended April 30,2005, compared to net income $30,000 allocated for the three months ended April 30,2004. The amounts allocated from joint venture represent the Company’sallocable share of net income (loss) from DNA Dreamfields.

 

***Interest Expense.********* Interest expense forthe three months ended April 30, 2005 totaled $0.5 million, down $0.1million from $0.6 million for the three months ended April 30, 2004. Thedecrease was primarily due to lower average outstanding debt levels. Cash andequity patronage refunds received from CoBank totaling $114,000 and $103,000have been netted against interest expense for the three months ended April 30,2005 and 2004, respectively.

 

***Interestand Other Income (Expense).********* Interest and other income (expense) totaled $6,000for the three months ended April 30, 2005 compared to ($309,000) for thethree months ended April 30, 2004. U.S. Customsand Border Protection (“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.$0.3 million was repaid to Customs in April 2004pursuant to a reclamation request from Customs and was classifiedas other income (expense). The Company cannot reasonably estimate the potentialamount, if any, that it may receive under the Offset Act in future periods asany such amount will be based upon future events over which the Company haslittle or no control, including, but not limited to, the amount of expendituresby domestic pasta producers and the amount of antidumping and countervailingduties collected by Customs.

 

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***IncomeTaxes.***  Income tax expense totaled$0.6 million and $0.5 million for the three months ending April 30, 2005and 2004, respectively. The income tax expense reflects an effective corporateincome tax rate of approximately 39%.

 

***Net Income.****** ***Net income for the three months ended April 30,2005 totaled $1.0 million, an increase of $0.2 million compared to net income of$0.8 million for the three months ended April 30, 2004.

 

*Comparison of the Nine Months Ended April 30,2005 and 2004*

 

***Net Revenues.****** ***Net revenuesincreased $5.1 million, or 4.7%, to $115.8 million for the nine months ended April 30,2005, from $110.7 million for the nine months ended April 30, 2004.The increase resulted from higher pasta sales volumes, particularly in thefoodservice and ingredient markets.

 

Revenues from the retail market, a portion of which includes co-pack and governmental sales, decreased $2.2 million, or 3.7%, for the nine months ended April 30, 2005 versus the same period last year. Retail revenues decreased due to an 11.9% volume decline partially offset by an increase in average selling prices. A significant factor contributing to retail volume declines was a decrease in co-pack sales, primarily to New World Pasta Company. Sales of DreamfieldsTM low digestible carbohydrate pasta products, which have significantly higher per unit sales prices than the Company’s other products, accounted for a majority of the average sales price increase in the retail market. Foodservice revenues increased $5.0 million, or 16.7%, primarily due to sales volume growth associated with sales under the New World Pasta license agreement combined with new customer sales. Ingredient revenues increased $6.2 million, or 71.6%, due to sales volume increases associated with the addition of one customer in this market.

 

Revenues from semolina, by-product and other mill sales totaled $8.1million for the nine months ended April 30, 2005, down $3.9 million from $12.0million for the nine months ended April 30, 2004. The decrease resultedfrom lower semolina sales volumes as the Company utilized a larger portion ofits semolina production for internal pasta production purposes.

 

***Cost of Goods Sold.*** Cost of goods sold increased $1.7 million, or 1.7%,to $103.3 million for the nine months ended April 30, 2005 from $101.6million for the nine months ended April 30, 2004. Gross profit as apercentage of net revenues increased from 8.2% for the nine months ended April 30,2004 to 10.8% for the nine months ended April 30, 2005 due to variousfactors including lower per unitmanufacturing costs resulting from increased factory utilization. Thesepositive factors were partially offset by the negative impacts of higherfreight costs.

 

***Marketing, General, andAdministrative (“MG&A”) Expenses.****** ***MG&Aexpenses for the nine months ended April 30, 2005 totaled $7.8 million, up30.0% from $6.0 million for the nine months ended April 30, 2004.  MG&A expenses as a percentage of netrevenues increased from 5.4% to 6.7%. The increase in MG&A resulted from avariety of factors, the most significant of which was increased customermarketing support associated with DreamfieldsTM pasta products. Thecosts associated with DreamfieldsTMare recovered from DNA Dreamfields through the services agreement, and theCompany’s allocable portion is reflected in the calculation of net income(loss) allocated from joint venture.

 

***Net Loss Allocated from Joint Venture. ***The net loss allocated from joint venturetotaled $0.9 million for the nine months ended April 30, 2005, compared to$0.1 million for the nine months ended April 30, 2004. The net lossallocated from joint venture represents the Company’s allocable share of netlosses from DNA Dreamfields.

 

***Interest Expense.****** ***Interestexpense for the nine months ended April 30, 2005 totaled $1.7 million,down $0.4 million from $2.1 million for the nine months ended April 30,2004. The decrease was mainly due to lower average outstanding debt levels.Cash and equity patronage refunds received from CoBank totaling $114,000 and $103,000have been netted against interest expense for the nine months ended April 30,2005 and 2004, respectively.

 

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***Interest and Other Income.********* Interest and otherincome totaled $0.4 million for the nine months ended April 30, 2005compared to $0.6 million for the nine months ended April 30, 2004. TheCompany received net payments in the amount of $0.4 million and $0.6 million infiscal years 2005 and 2004, respectively, under the Offset Act.Theseamounts have been classified as other income. The Company cannot reasonablyestimate the potential amount, if any, that it may receive under the Offset Actin future periods as any such amount will be based upon future events overwhich the Company has little or no control, including, but not limited to, theamount of expenditures by domestic pasta producers and the amount ofantidumping and countervailing duties collected by Customs.

 

***IncomeTaxes.***  Income tax expense totaled $1.0 million and$0.6 million for the nine months ending April 30, 2005 and 2004,respectively. The income tax expense reflects an effective corporate income taxrate of approximately 39%.

 

***NetIncome.****** ***Net income for the ninemonths ended April 30, 2005 totaled $1.6 million, an increase of $0.7 millioncompared to $0.9 million for the nine months ended April 30, 2004.

 

**Liquidity and Capital Resources**

 

Ourprimary sources of liquidity are cash provided by operations and borrowingsunder our credit facility with CoBank. Working capital as of April 30, 2005totaled $14.4 million compared to $16.6 million as of July 31, 2004.

 

Effective February 22, 2005, the Company secured a $25.0 millionrevolving credit facility with CoBank that extends through February 20,2006. Interest on the revolving line is currently charged at a variable rateestablished by CoBank based on CoBank’s cost of funds, although the facilityalso allows for a fixed rate option. The balance outstanding under therevolving line of credit totaled $14.0 million as of April 30, 2005,leaving $11.0 million available for borrowings as of that date.

 

TheCompany’s 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 in compliance with these financial covenants as of April 30,2005 and the date of this filing.

 

Net cash from operating activitiestotaled $11.2 million for the nine months ended April 30, 2005 compared to$9.5 million for the nine months ended April 30, 2004. The netincrease is attributable to $5.1 million of accrued promotional costs being appliedto marketing prepayments related to U.S. Foodservice during the nine monthsended April 30, 2005, offset partially by an increase in inventoriesduring that time period. In March 2005, the Company entered into anagreement with U.S. Foodservice which finalized the economic terms andconditions governing the purchase of dry pasta products by U.S. Foodservicefrom the Company. The agreement includes provisions to apply accruedpromotional amounts to marketing prepayments which the Company anticipates willlessen the time to recover the unamortized portion of these marketingprepayments made to U.S. Foodservice. The agreement also eliminated the Company’sright to be the exclusive supplier of dry pasta products to U.S. Foodserviceand does not provide for minimum purchase commitments by U.S. Foodservice. Theincrease in inventories for the nine months ended April 30, 2005 primarilyrelated to inventory build-up during the Company’s fiscal third quarter 2005 toallow for reduced pasta production volumes while the production upgrade projectat the New Hope, Minnesota manufacturing facility is in process.

 

Net cash used for investing activitiestotaled $9.7 million for the nine months ended April 30, 2005, compared to$1.6 million for the nine months ended April 30, 2004. The $8.1 million increasein net cash used for investing activities for the nine months ended April 30,2005 when compared to the same period last year related to increased investmentsin DNA Dreamfields and increased fixed asset expenditures in conjunction withthe New Hope production upgrade project. The Company is currently contemplatingadditional equity and/or debt investments in DNA Dreamfields, which may resultin future capital requirements.

 

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The Company is currently undertaking a$15.0 million capital project at its New Hope facility to better balance its pastaproduction capabilities and improve operating costs. As of April 30, 2005,the Company had expended $4.7 million in conjunction with this project. TheCompany had entered into additional commitments to purchase pasta equipmenttotaling $4.2 million as of April 30, 2005, related to the New Hopeproject. The Company is currently funding amounts expended under this capitalproject from net cash provided by operations and borrowing capacity under itscredit facility. The Company is currently in discussions with its lendersregarding a secured credit facility to fund the New Hope project and potentialadditional investments in DNA Dreamfields.

 

Net cash used for financing activitiestotaled $2.1 million for the nine months ended April 30, 2005, compared to$7.9 million for the nine months ended April 30, 2004. Substantiallyall of these amounts related to debt principal payments offset by netborrowings under the Company’s revolving credit facility and increases inexcess outstanding checks over cash on deposit.

 

The following table summarizesthe Company’s contractual obligations as of April 30, 2005 (in thousands):

 
| ** **                  | ** ** | ** ** | ** ** | **Payments**    | ** ** | **Payments**  | ** ** | **Payments**  | ** ** | **Payments**  | ** ** |
|-----------------------------|------------|------------|------------|-----------------|------------|---------------|------------|---------------|------------|---------------|------------|
| ** **                  | ** ** | ** ** | ** ** | **Due in Less** | ** ** | **Due in**    | ** ** | **Due in**    | ** ** | **Due After** | ** ** |
| **Contractual Obligations** | ** ** | **Total**  | ** ** | **Than 1 Year** | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** ** | **5 Years**   | ** ** |
|                        |       |       |       |            |       |          |       |          |       |          |       |
| Long-term debt              |       | $          | 21,087     |            | $          | 4,771         |       | $             | 14,316     |          | $          | 2,000 |   | $ | — |   |
| Durum purchase obligations  |       | 9,014      |       | 9,014           |       | —        |       | —        |       | —        |       |
| Operating leases            |       | 2,612      |       | 1,151           |       | 1,356         |       | 105           |       | —        |       |
|                        |       |       |       |            |       |          |       |          |       |          |       |
|                        |       | $          | 32,713     |            | $          | 14,936        |       | $             | 15,672     |          | $          | 2,105 |   | $ | — |   |

 

The Company forward contracts for a certain portion of its future durumwheat requirements. The Company had outstanding commitments for grain purchasestotaling $9.0 million as of April 30, 2005 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.

 

Managementbelieves that net cash to be provided by operating activities, its availableline of credit, and anticipated additional long-term debt financing, will besufficient to meet the Company’s expected capital and liquidity requirementsfor the foreseeable future.

 

**Recently Issued Accounting Standards**

 

The FASB issued SFAS No. 123(R), “Share-BasedPayment” in December 2004. SFAS No. 123(R) is a revision of SFAS No. 123,“Accounting for Stock Based Compensation” and is effective for fiscal quartersbeginning after June 15, 2005. SFAS No. 123(R) requires the cost ofshare-based payments to employees, including grants of employee stock options,to be measured based on grant-date fair values. That cost will be recognizedover the period during which an employee is required to provide service inexchange for the award, usually the vesting period. SFAS No. 123(R) willbecome effective for the Company beginning with its first fiscal quarter 2006.The Company is currently evaluating the expected impact of the adoption of thisStatement on its financial statements.

 

The FASB issued SFAS No. 151,“Inventory Costs, an amendment of ARB 43, Chapter 4” in November 2004.This Statement amends the guidance in ARB No. 43, Chapter 4, “InventoryPricing,” to clarify the accounting for abnormal amounts of idle facilityexpense, freight, handling costs, and wasted material (spoilage) so as torequire such costs to be treated as current period charges. Further, thisStatement requires that the allocation of fixed overhead costs to theinventoriable production costs be based on the normal capacity of theproduction facilities.  The provisions ofthis Statement are effective for inventory costs incurred during fiscal yearsbeginning after June 15, 2005 and will become effective for the Companybeginning with its first fiscal quarter 2006. The Company is currentlyevaluating the expected impact, if any, of the adoption of this Statement onits financial statements.

 

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**ITEM 3.****  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

Marketrisk is the risk of loss to future earnings, to fair values or to future cashflows that may result from changes in the price of a financial instrument. Thevalue of a financial instrument may change as a result of changes in interestrates, commodity prices, exchange rates, equity prices, and other marketchanges. Market risk is attributed to all market-risk sensitive financialinstruments, including long-term debt.

 

TheCompany does not believe it is subject to any material market risk exposurewith respect to interest rates, commodity prices, exchange rates, equityprices, or other market changes that would require disclosure under this item.

 

**ITEM 4.****  CONTROLS AND PROCEDURES**

 

TheCompany, under the supervision and with the participation of the Company’smanagement, including the Company’s Chief Executive Officer and Chief FinancialOfficer, has evaluated the effectiveness of the design and operation of theCompany’s disclosure controls and procedures as defined in Rule 13a-15(e) underthe Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of theend of the period covered by this report. Based on that evaluation, the ChiefExecutive Officer and Chief Financial Officer have concluded that, as of April 30,2005, the Company’s disclosure controls and procedures were effective to ensurethat information required to be disclosed by the Company in reports that itfiles or submits under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified inSecurities and Exchange Commission rules and forms.

 

Therewere no changes in the Company’s internal control over financial reportingduring the Company’s fiscal quarter ended April 30, 2005, that havematerially affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting.

 

**PART II – OTHER INFORMATION**

 

**ITEM 6.****EXHIBITS AND REPORTS ON FORM 8-K**

 

**Exhibits**

 
| 31.1   |   | Certification  of Chief Executive Officer required by Securities and Exchange Commission Rule 13a-14(a) or  15d-14(a).        |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                    |
| 31.2   |   | Certification  of Chief Financial Officer required by Securities and Exchange Commission Rule 13a-14(a) or  15d-14(a).        |
|   |   |                                                                                                                                    |
| 32.1   |   | Certification  of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002, 18 U.S.C. Section 1350. |
|   |   |                                                                                                                                    |
| 32.2   |   | Certification  of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002, 18 U.S.C. Section 1350. |

 

**Reports on Form 8-K**

 

None.

 

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**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon 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                   |                                | June 14, 2005 |
|                  |       | Officer)                               |                                |   |
|                  |       |                                   |                                |   |
|                  |       |                                   |                                |   |
| /s/ Thomas P. Friezen |       | Chief Financial  Officer               |                                |   |
| Thomas P. Friezen     |       | (Principal Financial                   |                                | June 14, 2005 |
|                  |       | Officer)                               |                                |   |
|                  |       |                                   |                                |   |
|                  |       |                                   |                                |   |
| /s/ Edward O. Irion   |       | Vice President –  Finance and     |                                |   |
| Edward O. Irion       |       | Chief Accounting  Officer              |                                | June 14, 2005 |
|                  |       | (Principal Accounting  Officer)        |                                |   |

 

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