**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**WASHINGTON, D.C. 20549**

** **

**FORM 10-Q**

 
| **  ****x**                                   | **Quarterly Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934**  |
|---------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
|                                                    |
| **For the  quarterly period ended April 30, 2009** |
|                                                    |
| **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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**DAKOTA GROWERS PASTA COMPANY,INC.**

(Exactname of registrant as specified in its charter)

 

| **North  Dakota**         | ** ** | **45-0423511**                     |
|---------------------------|------------|------------------------------------|
| (State of  incorporation) |       | (IRS Employer  Identification No.) |

 

**One Pasta Avenue, Carrington, ND 58421**

(Addressof principal executive offices including zip code)

 

**(701) 652-2855**

(Registrant’stelephone number, including area code)

 

**NOT APPLICABLE**

(Formername, former address and former fiscal year, if changed since last report)

 

Indicate bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes x  No o

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporateWeb site, if any, every Interactive Data File required to be submitted andposted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files.) Yes o  No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 
| Large accelerated filer o |   | Accelerated filer o        |
|---------------------------|--------|----------------------------|
|                      |   |                       |   |   |   |   |
| Non-Accelerated filerx    |   | Smaller reporting companyo |
|                           |        |                            |  |  |  |  |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).  Yes o  Nox

 

As of June 12,2009, the Registrant had 10,203,063 shares of common stock, par value $0.01 pershare, outstanding.

 

 

 

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**PART I — FINANCIAL INFORMATION**

** **

**ITEM 1.FINANCIAL STATEMENTS**

** **

**DAKOTAGROWERS PASTA COMPANY, INC.**

**CONSOLIDATEDBALANCE SHEETS**

**(InThousands, Except Share Information)**

 
| ** **                                                                                                            | ** ** | **(Unaudited)**    | ** ** | ** **        | ** ** |
|-----------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-------------------|------------|
| ** **                                                                                                            | ** ** | **April 30,** | ** ** | **July 31,** | ** ** |
| ** **                                                                                                            | ** ** | **2009**           | ** ** | **2008**          | ** ** |
| **ASSETS**                                                                                                            |       |               |       |              |       |
|                                                                                                                  |       |               |       |              |       |
| CURRENT ASSETS                                                                                                        |       |               |       |              |       |
| Cash and cash equivalents                                                                                             |       | $                  | 125        |              | $          | 125 |   |
|                                                                                                                  |       |               |       |              |       |
| Trade accounts receivable, less allowance forcash discounts and  doubtful accounts of $1,304 and $1,294, respectively |       | 23,895             |       | 27,315            |       |
|                                                                                                                  |       |               |       |              |       |
| Other receivables                                                                                                     |       | 1,312              |       | 850               |       |
|                                                                                                                  |       |               |       |              |       |
| Inventories                                                                                                           |       | 30,755             |       | 51,956            |       |
|                                                                                                                  |       |               |       |              |       |
| Prepaid expenses                                                                                                      |       | 841                |       | 1,040             |       |
|                                                                                                                  |       |               |       |              |       |
| Deferred income taxes                                                                                                 |       | 1,053              |       | 1,053             |       |
|                                                                                                                  |       |               |       |              |       |
| Total current assets                                                                                                  |       | 57,981             |       | 82,339            |       |
|                                                                                                                  |       |               |       |              |       |
| PROPERTY AND EQUIPMENT                                                                                                |       |               |       |              |       |
| In service                                                                                                            |       | 133,697            |       | 132,815           |       |
| Construction in progress                                                                                              |       | 421                |       | 546               |       |
|                                                                                                                  |       | 134,118            |       | 133,361           |       |
| Less accumulated depreciation                                                                                         |       | (70,486            | )          | (65,983           | )          |
|                                                                                                                  |       |               |       |              |       |
| Net property and equipment                                                                                            |       | 63,632             |       | 67,378            |       |
|                                                                                                                  |       |               |       |              |       |
| INVESTMENT IN COOPERATIVE BANK                                                                                        |       | 1,507              |       | 1,355             |       |
|                                                                                                                  |       |               |       |              |       |
| INTANGIBLE ASSETS, NET                                                                                                |       | 2,438              |       | 2,590             |       |
|                                                                                                                  |       |               |       |              |       |
| GOODWILL                                                                                                              |       | 8,381              |       | 8,381             |       |
|                                                                                                                  |       |               |       |              |       |
| OTHER ASSETS                                                                                                          |       | 869                |       | 925               |       |
|                                                                                                                  |       |               |       |              |       |
|                                                                                                                  |       | $                  | 134,808    |              | $          | 162,968 |   |

 

(continuedon next page)

 

2

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**DAKOTAGROWERS PASTA COMPANY, INC.**

**CONSOLIDATEDBALANCE SHEETS**

**(InThousands, Except Share Information)**

 
| ** **                                                                                                                                                                           | ** ** | **(Unaudited)**    | ** ** | ** **        | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-------------------|------------|
| ** **                                                                                                                                                                           | ** ** | **April 30,** | ** ** | **July 31,** | ** ** |
| ** **                                                                                                                                                                           | ** ** | **2009**           | ** ** | **2008**          | ** ** |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY**                                                                                                                                       |       |               |       |              |       |
|                                                                                                                                                                                 |       |               |       |              |       |
| CURRENT LIABILITIES                                                                                                                                                                  |       |               |       |              |       |
| Excess outstanding checks over cash on deposit                                                                                                                                       |       | $                  | 1,887      |              | $          | 3,130 |   |
| Accounts payable                                                                                                                                                                     |       | 7,593              |       | 15,357            |       |
| Accrued liabilities                                                                                                                                                                  |       | 5,942              |       | 7,244             |       |
| Notes payable                                                                                                                                                                        |       | 4,300              |       | 25,750            |       |
| Current portion of long-term debt                                                                                                                                                    |       | 5,750              |       | 9,507             |       |
|                                                                                                                                                                                 |       |               |       |              |       |
| Total current liabilities                                                                                                                                                            |       | 25,472             |       | 60,988            |       |
|                                                                                                                                                                                 |       |               |       |              |       |
| COMMITMENTS AND CONTINGENCIES                                                                                                                                                        |       | —             |       | —            |       |
| LONG-TERM DEBT, net of current portion                                                                                                                                               |       | 26,609             |       | 31,174            |       |
| DEFERRED INCOME TAXES                                                                                                                                                                |       | 16,768             |       | 14,119            |       |
|                                                                                                                                                                                 |       |               |       |              |       |
| Total liabilities                                                                                                                                                                    |       | 68,849             |       | 106,281           |       |
|                                                                                                                                                                                 |       |               |       |              |       |
| STOCKHOLDERS’ EQUITY                                                                                                                                                            |       |               |       |              |       |
|                                                                                                                                                                                 |       |               |       |              |       |
| Series D delivery preferred stock,  non-cumulative, $.01 par value, 11,340,841 authorized, 11,275,297 shares  issued and outstanding                                            |       | 113                |       | 113               |       |
| Series F convertible preferred stock,  non-cumulative, $.01 par value, 2,100,000 shares authorized, 1,065,000 shares  issued and outstanding                                    |       | 11                 |       | 11                |       |
| Common stock, $.01 par value, 75,000,000 shares  authorized, 10,203,063 and 10,192,413 shares issued and outstanding as of  April 30, 2009 and July 31, 2008, respectively |       | 102                |       | 102               |       |
| Additional paid-in capital                                                                                                                                                           |       | 43,096             |       | 42,958            |       |
| Retained earnings                                                                                                                                                                    |       | 22,637             |       | 13,503            |       |
|                                                                                                                                                                                 |       |               |       |              |       |
| Total stockholders’ equity                                                                                                                                                      |       | 65,959             |       | 56,687            |       |
|                                                                                                                                                                                 |       |               |       |              |       |
| Total liabilities and stockholders’ equity                                                                                                                                      |       | $                  | 134,808    |              | $          | 162,968 |   |

 

See Notes to ConsolidatedFinancial Statements

 

3

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**DAKOTAGROWERS PASTA COMPANY, INC.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

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

 
| ** **                                                                         | ** ** | **Three  Months Ended** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------|------------|
| ** **                                                                         | ** ** | **April 30,**      | ** ** |
| ** **                                                                         | ** ** | **2009**                | ** ** | **2008** | ** ** |
| Net  revenues (net of discounts and allowances of $7,252 and $6,572, respectively) |       | $                       | 71,513     |   | $ | 78,538 |   |
|                                                                               |       |                    |       |   |   |
| Cost  of goods sold                                                                |       | 57,373                  |       | 70,823 |   |
|                                                                               |       |                    |       |   |   |
| Gross  profit                                                                      |       | 14,140                  |       | 7,715 |   |
|                                                                               |       |                    |       |   |   |
| Marketing,  general and administrative expenses                                    |       | 4,452                   |       | 4,297 |   |
|                                                                               |       |                    |       |   |   |
| Operating  income                                                                  |       | 9,688                   |       | 3,418 |   |
|                                                                               |       |                    |       |   |   |
| Other  income (expense)                                                            |       |                    |       |   |   |
| Interest  and other income (expense)                                               |       | (1                      | )          | 8 |   |
| Loss  on disposition of property, equipment and other assets                       |       | (38                     | )          | — |   |
| Interest  expense, net                                                             |       | 110                     |       | (706 | ) |
|                                                                               |       |                    |       |   |   |
| Income  before income taxes                                                        |       | 9,759                   |       | 2,720 |   |
|                                                                               |       |                    |       |   |   |
| Income  tax expense                                                                |       | 3,582                   |       | 979 |   |
|                                                                               |       |                    |       |   |   |
| Net  income                                                                        |       | $                       | 6,177      |   | $ | 1,741 |   |
|                                                                               |       |                    |       |   |   |
| Net  earnings per common share                                                     |       |                    |       |   |   |
| Basic                                                                              |       | $                       | 0.61       |   | $ | 0.17 |   |
|                                                                               |       |                    |       |   |   |
| Diluted                                                                            |       | $                       | 0.52       |   | $ | 0.15 |   |
|                                                                               |       |                    |       |   |   |
| Weighted  average common shares outstanding                                        |       |                    |       |   |   |
| Basic                                                                              |       | 10,196                  |       | 10,192 |   |
|                                                                               |       |                    |       |   |   |
| Diluted                                                                            |       | 11,958                  |       | 11,958 |   |

 

SeeNotes to Consolidated Financial Statements

 

4

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**DAKOTAGROWERS PASTA COMPANY, INC.**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

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

** **
| ** **                                                                            | ** ** | **Nine  Months Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                            | ** ** | **April 30,**     | ** ** |
| ** **                                                                            | ** ** | **2009**               | ** ** | **2008** | ** ** |
| Net  revenues (net of discounts and allowances of $20,351 and $20,724,  respectively) |       | $                      | 230,726    |   | $ | 195,330 |   |
|                                                                                  |       |                   |       |   |   |
| Cost  of goods sold                                                                   |       | 196,845                |       | 172,964 |   |
|                                                                                  |       |                   |       |   |   |
| Gross  profit                                                                         |       | 33,881                 |       | 22,366 |   |
|                                                                                  |       |                   |       |   |   |
| Marketing,  general and administrative expenses                                       |       | 14,948                 |       | 13,832 |   |
|                                                                                  |       |                   |       |   |   |
| Operating  income                                                                     |       | 18,933                 |       | 8,534 |   |
|                                                                                  |       |                   |       |   |   |
| Other  income (expense)                                                               |       |                   |       |   |   |
| Interest  and other income                                                            |       | 421                    |       | 2,122 |   |
| Loss  on disposition of property, equipment and other assets                          |       | (38                    | )          | (9 | ) |
| Interest  expense, net                                                                |       | (1,149                 | )          | (2,757 | ) |
|                                                                                  |       |                   |       |   |   |
| Income  before noncontrolling interests and income taxes                              |       | 18,167                 |       | 7,890 |   |
|                                                                                  |       |                   |       |   |   |
| Noncontrolling  interests                                                             |       | —                 |       | 202 |   |
|                                                                                  |       |                   |       |   |   |
| Income  before income taxes                                                           |       | 18,167                 |       | 8,092 |   |
|                                                                                  |       |                   |       |   |   |
| Income  tax expense                                                                   |       | 6,669                  |       | 3,073 |   |
|                                                                                  |       |                   |       |   |   |
| Net  income                                                                           |       | 11,498                 |       | 5,019 |   |
| Dividends  on preferred stock                                                         |       | (326                   | )          | (283 | ) |
|                                                                                  |       |                   |       |   |   |
| Net  earnings on common stock                                                         |       | $                      | 11,172     |   | $ | 4,736 |   |
|                                                                                  |       |                   |       |   |   |
| Net  earnings per common share                                                        |       |                   |       |   |   |
| Basic                                                                                 |       | $                      | 1.10       |   | $ | 0.46 |   |
|                                                                                  |       |                   |       |   |   |
| Diluted                                                                               |       | $                      | 0.94       |   | $ | 0.40 |   |
|                                                                                  |       |                   |       |   |   |
| Weighted  average common shares outstanding                                           |       |                   |       |   |   |
| Basic                                                                                 |       | 10,194                 |       | 10,192 |   |
|                                                                                  |       |                   |       |   |   |
| Diluted                                                                               |       | 11,958                 |       | 11,958 |   |
|                                                                                  |       |                   |       |   |   |
| Dividends  per common share                                                           |       | $                      | 0.20       |   | $ | 0.16 |   |

 

SeeNotes to Consolidated Financial Statements

 

5

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**DAKOTAGROWERS PASTA COMPANY, INC.**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(InThousands)(Unaudited)**

** **
| ** **                                                                  | ** ** | **Nine  Months Ended** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                  | ** ** | **April 30,**     | ** ** |
| ** **                                                                  | ** ** | **2009**               | ** ** | **2008** | ** ** |
| OPERATING  ACTIVITIES                                                       |       |                   |       |   |   |
| Net  income                                                                 |       | $                      | 11,498     |   | $ | 5,019 |   |
| Adjustments  to reconcile net income to net cash from operating activities: |       |                   |       |   |   |
| Depreciation  and amortization                                              |       | 4,931                  |       | 5,016 |   |
| Undistributed  patronage capital from cooperatives                          |       | (152                   | )          | (45 | ) |
| Loss  on disposition of property, equipment and other assets                |       | 38                     |       | 9 |   |
| Noncontrolling  interests                                                   |       | —                 |       | (202 | ) |
| Deferred  income taxes                                                      |       | 2,649                  |       | 1,228 |   |
| Stock-based  employee compensation                                          |       | 88                     |       | 126 |   |
| Changes  in assets and liabilities                                          |       |                   |       |   |   |
| Trade  receivables                                                          |       | 3,420                  |       | (9,512 | ) |
| Other  receivables                                                          |       | (462                   | )          | (632 | ) |
| Inventories                                                                 |       | 21,201                 |       | (11,496 | ) |
| Prepaid  expenses                                                           |       | 199                    |       | 52 |   |
| Other  assets                                                               |       | 9                      |       | — |   |
| Accounts  payable                                                           |       | (7,764                 | )          | 14,900 |   |
| Other  accrued liabilities                                                  |       | (1,302                 | )          | (1,402 | ) |
| NET  CASH FROM OPERATING ACTIVITIES                                         |       | 34,353                 |       | 3,061 |   |
|                                                                        |       |                   |       |   |   |
| INVESTING  ACTIVITIES                                                       |       |                   |       |   |   |
| Purchase  of interests in DNA Dreamfields Company, LLC                      |       | —                 |       | (2,232 | ) |
| Purchases  of property and equipment                                        |       | (913                   | )          | (1,555 | ) |
| Proceeds  from sale of property, equipment and other assets                 |       | 25                     |       | 53 |   |
| Payments  for package design costs                                          |       | (136                   | )          | (81 | ) |
| Proceeds  from other investments                                            |       | —                 |       | 57 |   |
| NET  CASH USED FOR INVESTING ACTIVITIES                                     |       | (1,024                 | )          | (3,758 | ) |
|                                                                        |       |                   |       |   |   |
| FINANCING  ACTIVITIES                                                       |       |                   |       |   |   |
| Net  change in excess outstanding checks over cash on deposit               |       | (1,243                 | )          | 1,042 |   |
| Net  change in short-term notes payable                                     |       | (21,450                | )          | 9,800 |   |
| Principal  payments on long-term debt                                       |       | (8,322                 | )          | (8,302 | ) |
| Issuance  of common stock                                                   |       | 50                     |       | — |   |
| Dividends  paid on common stock                                             |       | (2,038                 | )          | (1,630 | ) |
| Dividends  paid on preferred stock                                          |       | (326                   | )          | (283 | ) |
| NET  CASH FROM (USED FOR) FINANCING ACTIVITIES                              |       | (33,329                | )          | 627 |   |
|                                                                        |       |                   |       |   |   |
| NET  CHANGE IN CASH AND CASH EQUIVALENTS                                    |       | —                 |       | (70 | ) |
| CASH  AND CASH EQUIVALENTS, BEGINNING OF PERIOD                             |       | 125                    |       | 89 |   |
| CASH  AND CASH EQUIVALENTS, END OF PERIOD                                   |       | $                      | 125        |   | $ | 19 |   |
|                                                                        |       |                   |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION                          |       |                   |       |   |   |
| Cash  payments for                                                          |       |                   |       |   |   |
| Interest  (net of amounts capitalized)                                      |       | $                      | 1,499      |   | $ | 3,044 |   |
|                                                                        |       |                   |       |   |   |
| Income  taxes                                                               |       | $                      | 5,963      |   | $ | 2,954 |   |
|                                                                        |       |                   |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES     |       |                   |       |   |   |
| Purchase  of interests in DNA Dreamfields Company, LLC                      |       |                   |       |   |   |
| Goodwill  reduction                                                         |       |                   |       | $ | (8,273 | ) |
| Amortizable  intangibles                                                    |       |                   |       | 2,759 |   |
| Noncontrolling  interests reduction                                         |       |                   |       | 7,746 |   |
|                                                                        |       |                   |       |   |   |
|                                                                        |       |                   |       | $ | 2,232 |   |

 

See Notes to Consolidated Financial Statements

 

6

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**DAKOTA GROWERS PASTA COMPANY,INC.**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

 

The following notes should beread in conjunction with the notes to the financial statements for the yearended July 31, 2008 as filed in the Company’s Form 10-K.

 

**NOTE 1 - ORGANIZATION**

** **

Dakota GrowersPasta Company, Inc. (“Dakota Growers” or “the Company”) is a North Dakotacorporation that operates a milling and pasta manufacturing facility inCarrington, North Dakota. The Company’s wholly-owned subsidiary, Primo Piatto, Inc.(“Primo Piatto”), a Minnesota corporation, operates a pasta manufacturingfacility in New Hope, Minnesota.  DNADreamfields Company, LLC (“DNA Dreamfields”) became a wholly-ownedsubsidiary on September 21, 2007 (See Note 7).

 

**NOTE 2 — FINANCIAL STATEMENT PRESENTATION**

** **

The unauditedconsolidated financial statements included herein have been prepared pursuantto the rules and regulations of the Securities and Exchange Commission (“SEC”)for quarterly reporting. Accordingly, they do not include all the informationand footnotes 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 nine month periods ended April 30, 2009 are notnecessarily indicative of the results that may be expected for the year ended July 31,2009. The unaudited consolidated financial statements included in this Form 10-Qshould be read in conjunction with the consolidated financial statements andfootnotes included in the Company’s Form 10-K for the year ended July 31,2008. The information contained in the balance sheet as of July 31, 2008was derived from the Company’s audited annual report for fiscal year 2008.Reclassifications have been made to facilitate comparability with currentpresentation. Such reclassifications have no effect on the net results ofoperations.

 

The financialinformation presented herein includes the consolidated balance sheets andresults of operations of the Company, Primo Piatto and DNADreamfields, which the Company began to consolidate in fiscal year 2005. Allmaterial inter-company accounts and transactions have been eliminated in thepreparation of the consolidated financial statements.

 

The Company recorded a $960,000 non-recurring pre-tax charge in itsfiscal second quarter ending January 31, 2008 to reflect the costsassociated with the withdrawal from the Central States Southeast and SouthwestAreas Pension Fund.

 

**NOTE 3 — NEW ACCOUNTING PRONOUNCEMENTS**

** **

In September 2006,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standard (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”).SFAS 157 defines fair value, establishes a framework for measuring fair valueand expands disclosure of fair value measurements. SFAS 157 applies under otheraccounting pronouncements that require or permit fair value measurements andaccordingly, does not require any new fair value measurements. SFAS 157 wasinitially effective for fiscal years beginning after November 15, 2007,and interim periods within those fiscal years. In February 2008, the FASBissued FASB Staff Position (“FSP”) FAS 157-2.  This FSP permitsa delay in the effective date of SFAS 157 to fiscal years beginning after November 15,2008, for nonfinancial assets and nonfinancial liabilities, except for itemsthat are recognized or disclosed at fair value in the financial statements on arecurring basis (at least annually). In October 2008, the FASB issued FSPFAS 157-3, “Determining the Fair Value of a Financial Asset when the Market forThat Asset Is Not Active,” which clarifies the application of SFAS 157 forfinancial assets in a market that is not active. The adoption of SFAS 157 didnot have a material impact on the Company’s financial statements.

 

7

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**DAKOTA GROWERS PASTA COMPANY,INC.**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

 

In February 2007, FASB issued SFAS 159, “The Fair Value Option forFinancial Assets and Financial Liabilities” (“SFAS 159”).  SFAS 159provides companies with an option to report selected financial assets andliabilities at fair value and establishes presentation and disclosurerequirements designed to facilitate comparisons between companies that choosedifferent measurement attributes for similar types of assets andliabilities.  SFAS 159 is effective for fiscal years beginning after November 15,2007.  The Company has elected not to apply the fair value option to thespecified financial assets and liabilities, and accordingly, the adoption ofSFAS No. 159 had no financial statement impact.

 

InDecember 2007, FASB issued SFAS No. 141 (Revised 2007), “BusinessCombinations” (“SFAS 141R”). The objective of SFAS 141R is to improve therelevance, representational faithfulness, and comparability of the informationthat a reporting entity provides in its financial reports about a businesscombination and its effects. SFAS 141R requires an acquirer to recognize theassets acquired, the liabilities assumed, and any noncontrolling interest inthe acquiree at the acquisition date, measured at their fair values as of thatdate. SFAS 141R also requires the acquirer to recognize and measure thegoodwill acquired in a business combination or a gain from a bargain purchaseand how to evaluate the nature and financial effects of the businesscombination. SFAS 141R is effective for financial statements issued for fiscalyears beginning after December 15, 2008. The Company is in the process ofevaluating the impact, if any, that the adoption of SFAS 141R will have on itsfinancial statements.

 

InDecember 2007, FASB issued SFAS No. 160, “Noncontrolling Interests inConsolidated Financial Statements-an Amendment of ARB No. 51” (“SFAS 160”).The objective of SFAS 160 is to improve the relevance, comparability, andtransparency of the financial information that a reporting entity provides inits consolidated financial statements. SFAS 160 amends ARB No. 51 toestablish accounting and reporting standards for the noncontrolling interest ina subsidiary and for the deconsolidation of a subsidiary. SFAS 160 also changesthe way the consolidated income statement is presented, establishes a singlemethod of accounting for changes in a parent’s ownership interest in asubsidiary that do not result in deconsolidation, requires that a parentrecognize a gain or loss in net income when a subsidiary is deconsolidated andexpanded disclosures in the consolidated financial statements that clearlyidentify and distinguish between the interests of the parent’s owners and theinterest of the noncontrolling owners of a subsidiary. SFAS 160 is effectivefor financial statements issued for the fiscal years beginning on or after December 15,2008. The Company is in the process of evaluating the impact, if any, that theadoption of SFAS 160 will have on its financial statements.

 

InMay 2008, FASB issued FASB Statement No. 162, “The Hierarchy of Generally AcceptedAccounting Principles.” This statement identifies the sources ofaccounting principles and the framework for selecting the principles used inthe preparation of financial statements of nongovernmental entities that arepresented in conformity with generally accepted accounting principles (“GAAP”)in the United States. This statement became effective 60 days following the SEC’sapproval of the Public Company Accounting Oversight Board (“PCAOB”) amendmentsto AU Section 411, “The Meaningof Present Fairly in Conformity with Generally Accepted Accounting Principles.”The adoption of this statement did not have a material impact on our financialstatements.

 

In April 2008, FASB issued FASB Staff Position No. 142-3, “Determination of the Useful Life ofIntangible Assets” (“FSP 142-3”). This FSP amends the factors thatshould be considered in developing renewal or extension assumptions used todetermine the useful life of a recognized intangible asset under FASB StatementNo. 142, “Goodwill and OtherIntangible Assets.” The intent of this FSP is to improve the consistencybetween the useful life of a recognized intangible asset under FASB Statement No. 142and the period of expected cash flows used to measure the fair value of theasset under FASB Statement No. 141R, and other U.S. generally acceptedaccounting principles. FSP 142-3 is effective for our interim and annualfinancial statements beginning in fiscal 2010. The Company is in the process ofevaluating the impact, if any, that the adoption of FSP 142-3 will have on itsfinancial statements.

 

8

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**DAKOTA GROWERS PASTA COMPANY,INC.**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

 

InApril 2009, FASB issued FASB Staff Position No. FAS 115-2 and FAS124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP115-2 and 124-2”). FSP 115-2 and 124-2 amend the guidance onother-than-temporary impairment for debt securities and modifies thepresentation and disclosure of other-than-temporary impairments on debt andequity securities in the financial statements. These FSPs are effective forinterim and annual periods ending after June 15, 2009. The Company isevaluating the impact, if any, that the adoption of FSP 115-2 and 124-2 willhave on its financial statements.

 

InApril 2009, FASB issued FASB Staff Position No. FAS 157-4,*“*Determining Fair Value When the Volumeand Level of Activity for the Asset or Liability Have Significantly Decreasedand Identifying Transactions That Are Not Orderly” (“FSP 157-4”) toprovide guidelines for making fair value measurements more consistent with theprinciples presented in SFAS 157. FSP 157-4 is applicable to allassets and liabilities (i.e. financial and nonfinancial) and providesadditional authoritative guidance to determine whether a market is active orinactive or whether a transaction is distressed. FSP 157-4 is effective forinterim and annual periods ending after June 15, 2009. The Company isevaluating the impact, if any, that the adoption of FSP 157-4 will have on itsfinancial statements.

 

InApril 2009, FASB issued FASB Staff Position No. FAS 107-1 and APB28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS107-1 and APB 28-1”).   FSP FAS 107-1 and APB 28-1 amends FASB 107, “Disclosuresabout Fair Value of Financial Instruments” to require disclosures about fairvalue of financial instruments in interim and annual financial statements.  FSP FAS 107-1 and APB 28-1 is effective for periods ending after June 15,2009.  The Company is evaluating the impact, if any, that the adoptionof FSP 107-1 and APB 28-1 will have on its financial statements.

 

InMay 2009, the FASB issued SFAS No. 165 “Subsequent Events,” whichestablishes general standards of accounting for and disclosure of events thatoccur after the balance sheet date but before the financial statements areissued or are available to be issued. It requires the disclosure of the datethrough which an entity has evaluated subsequent events and the basis for thatdate. The Statement sets forth: the period after the balance sheet date duringwhich management of a reporting entity should evaluate events or transactionsthat may occur for potential recognition or disclosure in the financialstatements; the circumstances under which an entity should recognize events ortransactions occurring after the balance sheet date in its financialstatements; and the disclosures that an entity should make about events ortransactions that occurred after the balance sheet date. SFAS No. 165 iseffective for interim and annual reporting periods ending after June 15,2009, and should be applied prospectively. The company is currently evaluatingthe impact, if any, that the adoption of SFAS No. 165 will have on itsfinancial statements.

 

**NOTE 4 —INVENTORIES**

 

Inventories arevalued at lower of cost or market. Inventories as of April 30, 2009 include rawmaterials and packaging of $12,643,000 and finished goods of $18,112,000.Inventories at July 31, 2008 include raw materials and packaging of $18,559,000and finished goods of $33,397,000.

 

###### **NOTE5 — LOAN AGREEMENTS**

###### ** **

The Company has a $45 million revolving credit facility with CoBankthat extends through January 13, 2010 and is collateralized by all assetsof the Company. Interest on the revolving line of credit is at the 7-day LIBORrate subject to performance adjustments depending upon the Company’s ratio oftotal debt to earnings before interest, taxes, depreciation and amortization or“EBITDA.” The higher the ratio the higher the adjustment to the 7-day LIBORrate within a range of 200 to 300 basis points above the 7-day LIBORrate.  Fixed interest rate options are also available. The balancesoutstanding under the revolving credit arrangements totaled $4.3 million and$25.8

 

9

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** **

**DAKOTA GROWERS PASTA COMPANY,INC.**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

 

million as of April 30, 2009 and July 31, 2008,respectively.  The Company had $40.7million and $19.2 million available for borrowings under the revolving line ofcredit as of April 30, 2009 and July 31, 2008, respectively.

 

During the second quarter of fiscal year 2009, the Company also enteredinto modifications to existing CoBank term loan agreements with respect to debtpreviously incurred by the Company. These modifications increased the performance pricing adjustmentschedule by 25 basis points.

 

The Company’s various debt agreements with CoBank and certaininstitutional note holders 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, 2009.

 

The Company earns patronage refunds from its patronage-based debtissued through CoBank based on its share of the net interest income earned byCoBank. These patronage refunds received are applied against interest expense. Cash and equity patronage refundsreceived from CoBank and applied against interest expense totaled $435,000 and$225,000 for the three months ended April 30, 2009 and 2008, respectively.

 

###### **NOTE6 — EARNINGS PER SHARE**

###### ** **

Basic earnings per share (“EPS”) is calculated by dividing net earningson Common Stock by the weighted average number of common shares outstandingduring the period. Diluted EPS includes the effect of all potentially dilutivesecurities, such as stock options and convertible preferred stock. Prior toAugust 1, 2008, the Company had not included nonvested stock options in thecalculation of diluted EPS.  Nonvestedstock options have been considered in the calculation of diluted EPS for thethree and nine month periods ended April 30, 2009 and 2008, as presentedherein.

 

Dilutive securities, consisting of stock options and convertiblepreferred stock, included in the calculation of diluted weighted average commonshares totaled 1,762,000 and 1,766,000 for the three months ended April 30,2009 and 2008, respectively. Dilutive securities totaled 1,764,000 and1,766,000 for the nine months ended April 30, 2009 and 2008, respectively.The Series F Convertible Preferred Stock is included in the fully dilutedEPS calculation and not included in the basic EPS calculation. As there iscurrently no established public trading market for the Company’s Common Stock,the Company has assumed the proceeds from the exercise of stock options wouldreduce debt and, thus, interest expense.

 

The components of basic earnings per share are as follows (inthousands, except per share amounts):

 
| ** **                                    | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                    | ** ** | **April 30**           | ** ** | **April 30**          | ** ** |
| ** **                                    | ** ** | **2009**               | ** ** | **2008**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Earnings per share - Basic**                |       |                   |       |                  |       |   |   |   |   |
|                                          |       |                   |       |                  |       |   |   |   |   |
| Net earnings available to common stockholders |       | $                      | 6,177      |                  | $          | 1,741 |   | $ | 11,172 |   | $ | 4,736 |   |
|                                          |       |                   |       |                  |       |   |   |   |   |
| Basic weighted-average shares outstanding     |       | 10,196                 |       | 10,192                |       | 10,194 |   | 10,192 |   |
|                                          |       |                   |       |                  |       |   |   |   |   |
| Earnings per share - Basic                    |       | $                      | 0.61       |                  | $          | 0.17 |   | $ | 1.10 |   | $ | 0.46 |   |

 

10

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**DAKOTA GROWERS PASTA COMPANY,INC.**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

 

The components of diluted earnings per share are as follows (in thousands,except per share amounts):

 
| ** **                                                                     | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                     | ** ** | **April 30**           | ** ** | **April 30**          | ** ** |
| ** **                                                                     | ** ** | **2009**               | ** ** | **2008**              | ** ** | **2009** | ** ** | **2008** | ** ** |
| **Earnings  per share - Diluted**                                              |       |                   |       |                  |       |   |   |   |   |
| ** **                                                                     |       |                   |       |                  |       |   |   |   |   |
| Net earnings available to common stockholders                                  |       | $                      | 6,177      |                  | $          | 1,741 |   | $ | 11,172 |   | $ | 4,736 |   |
| Plus: Impact of interest expense on the exercise of options, net of  taxes (1) |       | 13                     |       | 27                    |       | 39 |   | 78 |   |
| Net earnings available to common stockholders                                  |       | $                      | 6,190      |                  | $          | 1,768 |   | $ | 11,211 |   | $ | 4,814 |   |
|                                                                           |       |                   |       |                  |       |   |   |   |   |
| Diluted weighted-average shares outstanding:                                   |       |                   |       |                  |       |   |   |   |   |
| Basic weighted-average shares outstanding                                      |       | 10,196                 |       | 10,192                |       | 10,194 |   | 10,192 |   |
| Plus: Incremental shares from assumed conversions                              |       |                   |       |                  |       |   |   |   |   |
| Options                                                                        |       | 697                    |       | 701                   |       | 699 |   | 701 |   |
| Convertible preferred shares                                                   |       | 1,065                  |       | 1,065                 |       | 1,065 |   | 1,065 |   |
| Diluted weighted-average shares outstanding                                    |       | 11,958                 |       | 11,958                |       | 11,958 |   | 11,958 |   |
|                                                                           |       |                   |       |                  |       |   |   |   |   |
| Earnings per share - Diluted                                                   |       | $                      | 0.52       |                  | $          | 0.15 |   | $ | 0.94 |   | $ | 0.40 |   |

 

----

(1) Asthere is currently no established public trading market for the Company’scommon stock, the Company has assumed the proceeds from the exercise of stockoptions would reduce debt and, thus, interest expense.

 

**NOTE 7 —DNA DREAMFIELDS COMPANY, LLC**

 

Effective May 1,2005, the Company’s ownership in DNA Dreamfields increased to 46.7%. In conjunction with the Company’s increase inownership in DNA Dreamfields and changes in the DNA Dreamfieldsoperating agreement and other contractual arrangements, the Company determined that DNA Dreamfields was a variableinterest entity under FASB Interpretation No. 46(R), “Consolidation ofVariable Interest Entities,” and that the Company was the primary beneficiary.Therefore, effective May 1, 2005, the Company began to include DNADreamfields in its consolidated financial statements.

 

Effective September 21, 2007, the Companyacquired the remaining units of DNA Dreamfields, increasing its ownership to100%.  Pursuant to the terms of thepurchase agreement, the Company acquired the remaining units for an aggregatepurchase price of $2.2 million.  Inconjunction with this purchase, the Company eliminated the noncontrollinginterests, recorded amortizable intangible assets (covenants not-to-compete andtechnology license) and reduced recorded goodwill associated with the buyout ofDNA Dreamfields in the Company’s first quarter of fiscal year 2008.

 

###### **NOTE8 — DIVIDENDS**

###### ** **

OnDecember 18, 2008, the Company’s Board of Directors authorized the paymentof non-periodic dividends of 1 cent per share on its Series D DeliveryPreferred Stock, 20 cents per share on its Common Stock and 20 cents per shareon its Series F Convertible Preferred Stock, payable on January 7,2009 to stockholders of record as of December 26, 2008.

 

OnDecember 20, 2007, the Company’s Board of Directors authorized the paymentof non-periodic dividends of 1 cent per share on its Series D DeliveryPreferred Stock, 16 cents per share on its Common Stock and 16 cents per shareon its Series F Convertible Preferred Stock, payable on January 15,2008 to stockholders of record as of December 31, 2007.

 

11

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**DAKOTA GROWERS PASTA COMPANY,INC.**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

 

**NOTE 9 — GOODWILL AND OTHER INTANGIBLE ASSETS**

 

In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” goodwill and intangible assets with indefinite useful lives are to be tested for impairment at least annually. As of April 30, 2009, the value of goodwill was $8.4 million.

 

Amortizable intangible assets are amortized using the straight-line method over their estimated useful lives, which is the estimated period over which economic benefits are expected to be provided. In conjunction with the acquisition of the remaining units of DNA Dreamfields (See Note 7), the Company recorded amortizable intangible assets including covenants not-to-compete and a technology license.  The covenants not-to-compete totaling $112,000 are being amortized over 36 months. The technology license totaling $2.6 million is being amortized over its estimated useful life of approximately 16 years.

 
| ** **                            | ** ** | **As of  April 30, 2009 (in thousands)** | ** ** |
|---------------------------------------|------------|-----------------------------------------------|------------|
| ** **                            | ** ** | **Gross  Carrying**                           | ** ** | **Accumulated** | ** ** | **Net  Carrying** | ** ** |
| ** **                            | ** ** | **Amount**                                    | ** ** | **Amortization** | ** ** | **Amount** | ** ** |
|                                  |       |                                          |       |   |   |   |   |
| Covenants  not-to-compete             |       | $                                             | 112        |   | $ | (59 | ) | $ | 53 |   |
| Technology  license                   |       | 2,647                                         |       | (262 | ) | 2,385 |   |
|                                  |       |                                          |       |   |   |   |   |
| Total  intangible assets              |       | 2,759                                         |       | (321 | ) | 2,438 |   |
|                                  |       |                                          |       |   |   |   |   |
| Goodwill                              |       | 8,381                                         |       | — |   | 8,381 |   |
|                                  |       |                                          |       |   |   |   |   |
| Total  goodwill and intangible assets |       | $                                             | 11,140     |   | $ | (321 | ) | $ | 10,819 |   |

 

Amortization expense of intangible assets totaled $51,000 for the three months ended April 30, 2009 and 2008 and $152,000 and $119,000 for the nine months ended April 30, 2009 and 2008, respectively.

 

**NOTE 10 — STOCK OPTIONS**

 

The Company accounts forshare based payments in accordance with Statement of Financial AccountingStandard No. 123 (revised 2004), “Share Based Payment” (“SFAS No. 123R”).Under SFAS No. 123R, the Company is required to recognize, as expense, theestimated fair value of all share based payments to employees. In accordancewith this standard, the Company has elected to recognize the compensation costof all service based awards on a straight-line basis over the vesting period ofthe award. Performance based awards are recognized ratably for each vestingtranche. The Company recorded stock-based employee compensation expense of$24,000 and $34,000 for the three months ended April 30, 2009 and 2008,respectively, and $88,000 and $126,000 for the nine months ended April 30,2009 and 2008, respectively.

 

12

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**DAKOTA GROWERS PASTA COMPANY,INC.**

**NOTES TO CONSOLIDATED FINANCIALSTATEMENTS**

**(Unaudited)**

 

The following tables set forth information regardingstock options outstanding and exercisable:

 
| ** **                          | ** ** | **Options  to purchase Series C Convertible Preferred Stock** | ** ** |
|-------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                          | ** ** | **Number  of**                                                     | ** ** | ** ** | ** ** | **Weighted** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Series C**                                                  | ** ** | **Option** | ** ** | **Average** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Convertible**                                                    | ** ** | **Price** | ** ** | **Exercise** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Preferred  Shares**                                              | ** ** | **per  Share** | ** ** | **Price** | ** ** | **Exercisable** | ** ** |
|                                |       |                                                               |       |   |   |   |   |   |   |
| Outstanding  at July 31, 2008  |       | 1,977                                                              |       | $100-$150 |   | $ | 117.35 |   | 1,977 |   |
| Exercised                           |       | —                                                             |       |   |   |   |   |   |   |
| Granted                             |       | —                                                             |       |   |   |   |   |   |   |
| Forfeited/Expired                   |       | —                                                             |       |   |   |   |   |   |   |
| Outstanding  at April 30, 2009 |       | 1,977                                                              |       | $100-$150 |   | $ | 117.35 |   | 1,977 |   |

 
| ** **                          | ** ** | **Options  to purchase Common Stock** | ** ** |
|-------------------------------------|------------|---------------------------------------|------------|
| ** **                          | ** ** | ** **                            | ** ** | ** ** | ** ** | **Weighted** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | ** **                            | ** ** | **Option** | ** ** | **Average** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Number  of**                        | ** ** | **Price** | ** ** | **Exercise** | ** ** | ** ** | ** ** |
| ** **                          | ** ** | **Common  Shares**                    | ** ** | **per  Share** | ** ** | **Price** | ** ** | **Exercisable** | ** ** |
|                                |       |                                  |       |   |   |   |   |   |   |
| Outstanding  at July 31, 2008  |       | 653,013                               |       | $4.00-$6.25 |   | $ | 5.10 |   | 485,128 |   |
| Exercised                           |       | (10,650                               | )          | $4.00-$5.00 |   | $ | 4.67 |   |   |   |
| Granted                             |       | —                                |       |   |   |   |   |   |   |
| Forfeited/Expired                   |       | —                                |       |   |   |   |   |   |   |
| Outstanding  at April 30, 2009 |       | 642,363                               |       | $4.00-$6.25 |   | $ | 5.11 |   | 574,182 |   |

 

A summary of the status of the Company’s issued but nonvested stockoptions as of July 31, 2008, and changes during the nine months ended April 30,2009, is presented below:

 
| ** **                        | ** ** | ** ** | ** ** | **Weighted-Average** | ** ** |
|-----------------------------------|------------|------------|------------|----------------------|------------|
| ** **                        | ** ** | **Common** | ** ** | **Grant-Date**       | ** ** |
| **Nonvested Stock Options**       | ** ** | **Shares** | ** ** | **Fair Value**       | ** ** |
|                              |       |       |       |                 |       |
| Nonvested  at July 31, 2008  |       | 167,885    |       | $                    | 4.81       |   |
| Granted                           |       | —     |       |                 |       |
| Vested                            |       | (99,704    | )          | $                    | 4.68       |   |
| Forfeited/Expired                 |       | —     |       |                 |       |
| Nonvested  at April 30, 2009 |       | 68,181     |       | $                    | 5.00       |   |

 

As of April 30, 2009, there was approximately$48,000 of total unrecognized compensation cost related to nonvested employeestock options.  That cost is expected to be recognized over a period of0.50 years.

 

**NOTE 11 — CONTINUED DUMPING AND SUBSIDY 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

 

13

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**DAKOTA GROWERS PASTA COMPANY, INC.**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**(Unaudited)**

 

receivedpayments in the amount of $384,000 and $2,200,000 in December 2008 and2007, respectively, under the Offset Act. These amounts have been classified asother income. 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 federal legislation, the amount ofexpenditures by domestic pasta producers and the amount of antidumping andcountervailing duties collected by Customs. The Offset Act, also known as the Byrd Amendment, has been repealed andtherefore, duties assessed on pasta imports after September 30, 2007 willno longer be distributed to domestic producers. However, amounts collected (whether such collections occur before orafter September 30, 2007) related to duties assessed on pasta entriesprior to September 30, 2007, are expected to be available for futuredistribution to domestic producers.

 

###### **NOTE12 — COMMITMENTS**

###### ** **

The Company forward contracts for a certain portion of its future durumwheat requirements. The Company had outstanding commitments for grain purchasestotaling $21.5 million as of April 30, 2009, 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.

 

**NOTE 13 — RELATED PARTYTRANSACTIONS**

 

Jeffrey Topp, a director ofthe Company, sold wheat to the Company through an affiliated entity during thenine months ended April 30, 2009. Those sales totaled $554,000 at marketprices. During the third quarter of fiscal year 2009, the Company entered intoa commitment to purchase wheat totaling $187,500 from Mr. Topp and/or hisaffiliated entity.

 

14

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**ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF 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, 2008.

 

**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, 2008under “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 anyforward-looking statements in this Quarterly Report to reflect future events ordevelopments.

 

**Summary**

 

Dakota Growers is the third largest pastamanufacturer in North America. The Company has two production plants, locatedin Carrington, North Dakota and New Hope, Minnesota, and generates a majorityof its revenues from manufacturing dry pasta for the retail store brand,foodservice and ingredient markets.  TheCompany’s cost of goods sold consists mainly of raw materials (primarily durumwheat), packaging, and manufacturing and distribution costs.  The Company competes through low cost production,high product quality, flexibility and customer service.

 

Netincome for the quarter ended April 30, 2009 totaled $6,177,000 compared tonet income of $1,741,000 for the quarter ended April 30, 2008.  Net income for the nine months ended April 30,2009 totaled $11,498,000 compared to $5,019,000 for the nine months ended April 30,2008. The Company recorded a $960,000 non-recurring pre-tax charge in itsfiscal second quarter ending January 31, 2008 to reflect the costsassociated with the withdrawal from the Central States Southeast and SouthwestAreas Pension Fund. Net earnings per basic common share for the quarter ended April 30,2009 were $0.61 per share compared to $0.17 per share for the quarter ended April 30,2008. Net earnings per basic common share, after the effect of dividends onPreferred Stock, were $1.10 per share for the nine months ended April 30,2009 and $0.46 per share for the nine months ended April 30, 2008.  The Company paid dividends of $0.01 per share on its Series DDelivery Preferred Stock, $0.20 per share on its Series F ConvertiblePreferred Stock and $0.20 per share on its Common Stock during the secondquarter of fiscal year 2009.

 

**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 requires managementto make estimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assetsand liabilities. These estimates form the basis for making judgments about thecarrying values of assets and liabilities that are not readily apparent fromother sources. We base our estimates and judgments on historical experience andon various other assumptions that we believe are reasonable under thecircumstances. However, future events are subject to change and the bestestimates and judgments may require adjustment. For a complete description ofthe Company’s significant accounting policies, please see Note 1 to theconsolidated financial statements included in the Company’s Form 10-K forthe year ended July 31, 2008. Our critical accounting policies are thosethat have meaningful impact on the reporting of our financial condition andresults, and that require significant management judgment and estimates. Thesepolicies include our accounting for (a) allowance for doubtful accounts, (b) inventoryvaluation, (c) asset impairment, and (d) income taxes.

 

15

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*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 deteriorates, additional allowancesmay be required in the future. Any such additional allowances could have anadverse impact on our future operating results.

 

*InventoryValuation*

 

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 analyzes variances betweenactual manufacturing costs incurred and amounts absorbed at inventory standardcosts. Inventory valuations are adjusted for these variances as applicable. TheCompany regularly evaluates its inventories and recognizes inventory allowancesfor discontinued and slow-moving inventories based upon these evaluations.

 

*Asset Impairment*

 

Weare required to evaluate our long-lived assets, including goodwill, forimpairment and write down the value of any assets if they are determined to beimpaired. Evaluating the impairment of long-lived assets involves managementjudgment in estimating the future cash flows and fair values related to these assets.Future events could cause management to conclude that impairment indicatorsexist and that the value of certain long-lived assets is impaired.

 

*Income Taxes*

 

Indetermining income (loss) 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 likely that the deferred tax assets as of April 30, 2009will be realized through the generation of future taxable income and taxplanning strategies.

 

**Results of Operations**

 

*Comparison of the Three Months Ended April 30,2009 and 2008*

 

***Net Revenues.***Net revenues totaled $71.5 million forthe three months ended April 30, 2009, a decrease of 8.9%, compared to netrevenues of $78.5 million for the three months ended April 30, 2008.Overall pasta per unit selling prices decreased 5.6% while pasta sales volumesincreased 3.6% in comparison to the comparable period in 2008. Revenues fromthe retail market, a portion of which includes co-pack and government sales,increased $3.1 million, or 10.2%, due to a 10.9% increase in volume offset by a0.6% decline in average selling prices. Foodservice revenues decreased $3.4million, or 18.4%, due to a 2.7% decrease in volume and a 16.1% decrease inaverage selling prices. Ingredient revenues decreased $1.1 million, or 5.7%,due to a 6.0% decrease in average selling prices slightly offset by a 0.4%increase in volume.

 

The Company markets durumand semolina in excess of its own requirements as well as durum wheat flour,other flour blends and by-products of the durum milling process. Revenues frommill product sales totaled $5.4 million for the three months ended April 30,2009, a decrease of $5.6 million when compared to the same period of the prioryear.  The decline resulted fromdecreases in both sales volumes and per unit selling prices.

 

***Cost of Goods Sold.***Cost of goods sold decreased 19.0% to $57.4 million for the three months ended April 30,2009, compared to $70.8 million for the three months ended April 30, 2008.The decrease was primarily due to

 

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lowerdurum costs. Gross profit as a percentage of net revenues improved to 19.8% forthe three months ended April 30, 2009 from 9.8% for the three months endedApril 30, 2008.

 

***Marketing, General, and Administrative (“MG&A”) Expenses.***MG&A expenses increased 3.6% to $4.5 million for the three months ended April 30,2009, compared to $4.3 million for the three months ended April 30, 2008.MG&A expenses as a percentage of net revenues increased to 6.2% for thethree months ended April 30, 2009, from 5.5% for the comparable quarter ofthe prior year.

 

***Loss on Disposition of Property, Equipment and Other Assets (“Loss onDisposition”). ***TheCompany incurred losses on disposition of $38,000 during the three months endedApril 30, 2009. The loss was related to retirements of certain equipmentin conjunction with capital projects at the Carrington, North Dakota facility.

 

***Interest Expense.***Interest expense, net of patronage refunds, decreased $0.8 million from thecorresponding period of the prior year. The decrease was related to lowerinterest rates and lower outstanding debt as well as higher patronagerefunds.  Cash and equity patronagerefunds received from CoBank totaling $435,000 and $225,000 have been nettedagainst interest expense for the three months ended April 30, 2009 and2008, respectively.

 

***Income Taxes.***Income taxexpense for the three month periods ended April 30, 2009 and 2008 totaled$3.6 million and $1.0 million, respectively. The Company’s effective income taxrate was 36.7% for the three months ended April 30, 2009 compared to 36.0%for the three months ended April 30, 2008.

 

***NetIncome. ***Net income for the three months ended April 30, 2009 totaled $6.2million compared to net income of $1.7 million for the three months ended April 30,2008.  The increase is related to lowerdurum costs partially offset by lower average selling prices, pasta salesvolume increases and lower interest expense. Net income as a percentof net revenues was 8.6% versus 2.2% in the comparable quarter of the priorfiscal year.

 

*Comparison of the Nine Months Ended April 30,2009 and 2008*

 

***Net Revenues.***Net revenues totaled $230.7 million forthe nine months ended April 30, 2009, an increase of $35.4 million, or18.1% compared to $195.3 million for the nine months ended April 30, 2008.Overall, pasta per unit selling prices increased 23.1% with ingredient sellingprices up 29.0%, retail selling prices up 26.1% and foodservice selling pricesup 14.6%. Total pasta sales volumes increased 0.6% with ingredient and retailsales volumes up 7.4% and 0.9%, respectively, offset by a foodservice volumedecrease of 7.6%.

 

Revenues from millproduct sales totaled $19.2 million and $24.6 million for the nine months endedApril 30, 2009 and 2008, respectively. The decrease is primarily due tolower mill sales volumes, partially offset by higher per unit selling prices.

 

***Cost of Goods Sold.***Cost of goods sold increased 13.8%, to $196.8 million for the nine months endedApril 30, 2009, compared to $173.0 million for the nine months ended April 30,2008.  The increase was primarily due tohigher durum costs and, to a lesser extent, other input costs.  Gross profit as a percentage of net revenuesincreased to 14.7% for the nine months ended April 30, 2009, compared to11.5% for the nine months ended April 30, 2008.

 

The Company recorded a $960,000 non-recurringpre-tax charge in its fiscal second quarter ending January 31, 2008 to reflectthe costs associated with the withdrawal from the Central States Southeast andSouthwest Areas Pension Fund

 

***Marketing, General, and Administrative (“MG&A”) Expenses.***MG&A expenses increased $1.1 million, or 8.1%, to $14.9 million for thenine months ended April 30, 2009, compared to $13.8 million for the ninemonths ended April 30, 2008. The increase was primarily related to higherbrokerage commission costs associated with higher revenues as well as increasedcompensation costs and higher professional fees. MG&A expenses as apercentage of net revenues decreased to 6.5% for the nine months ended April 30,2009, from 7.1% for the comparable period of the prior year.

 

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***Interest and Other Income.***Interest and other income totaled $0.4 million for the nine months ended April 30,2009, compared to $2.1 million for the nine months ended April 30, 2008.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 $0.4 million and $2.2 million inDecember 2008 and 2007, respectively, under the Offset Act. These amountshave been classified as other income. The Company cannot reasonably estimatethe potential amount, if any, that it may receive under the Offset Act infuture periods as any such amount will be based upon future events over whichthe Company has little or no control, including but not limited to federallegislation, the amount of expenditures by domestic pasta producers and theamount of antidumping and countervailing duties collected by Customs.  The Offset Act, also known as the ByrdAmendment, has been repealed and therefore, duties assessed on pasta importsafter September 30, 2007 will no longer be distributed to domesticproducers.  However, amounts collected(whether such collections occur before or after September 30, 2007)related to duties assessed on pasta entries prior to September 30, 2007,are expected to be available for future distribution to domestic producers.

 

***Loss on Disposition of Property, Equipment and Other Assets (“Loss onDisposition”). ***TheCompany incurred losses on disposition of $38,000 and $9,000 during the ninemonths ended April 30, 2009 and 2008, respectively.   The losses were related to retirements ofcertain equipment in conjunction with capital projects.

 

***Interest Expense.***Interest expense, net of patronage refunds, totaled $1.1 million and $2.8million for the nine months ended April 30, 2009 and 2008, respectively.The decrease was related to lower interest rates, lower outstanding debt andhigher patronage refunds.

 

***Noncontrolling Interests. ***Noncontrollinginterests reflect the portion of the DNA Dreamfields net loss allocable toother members of DNA Dreamfields and totaled $0.2 million for the nine monthsended April 30, 2008.

 

***Income Taxes. ***Income tax expense was $6.7 million based on aneffective income tax rate of 36.7% for the nine months ended April 30,2009, compared to $3.1 million based on an effective income tax rate of 38.0%for the nine months ended April 30, 2008.

 

***Net Income. ***Net income for the ninemonths ended April 30, 2009 totaled $11.5 million, compared to $5.0million for the nine months ended April 30, 2008.  Net earnings available to common shareholderstotaled $11.2 million and $4.7 million for the nine months ended April 30,2009 and 2008, respectively, after reducing net income for dividends declaredon preferred stock.

 

**Liquidity and Capital Resources**

 

TheCompany’s primary sources of liquidity are cash provided by operations andborrowings under its revolving credit facility. Working capital as of April 30,2009 totaled $32.5 million compared to $21.4 million as of July 31, 2008.

 

The Company has a$45 million revolving credit facility with CoBank which extends through January 13,2010. Interest on the revolving line of credit is at the 7-day LIBOR ratesubject to performance adjustments depending upon the Company’s ratio of totaldebt to earnings before interest, taxes, depreciation and amortization or “EBITDA.”The higher the ratio the higher the adjustment to the 7-day LIBOR rate within arange of 200 to 300 basis points above the 7-day LIBOR rate.  Fixedinterest rate options are also available. The primary purpose of the revolvingcredit facility is to finance inventory and receivables. The balancesoutstanding under the revolving credit arrangements totaled $4.3 million and$25.8 million as of April 30, 2009 and July 31, 2008,respectively.  The Company had $40.7million and $19.2 million available for borrowings under the revolving line ofcredit as of April 30, 2009 and July 31, 2008, respectively.

 

During the second quarterof fiscal year 2009, the Company entered into amendments to its existing CoBankterm loan agreements with respect to debt previously incurred by theCompany.  These modifications increasedthe performance pricing adjustment schedule by 25 basis points.

 

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The Company’s variousdebt agreements with CoBank and certain institutional investors obligate theCompany to maintain or achieve certain amounts of equity and certain financialratios and impose certain restrictions on the Company. The Company was incompliance with these financial covenants as of April 30, 2009 and thedate of this filing.

 

Netcash from operating activities totaled $34.4 million and $3.1 million for thenine months ended April 30, 2009 and 2008, respectively. Significant itemscontributing to this increase were changes in inventories, trade receivablesand net income adjusted for non-cash items, which were partially offset bychanges in accounts payable.

 

Netcash used for investing activities totaled $1.0 million and $3.8 million forthe nine months ended April 30, 2009 and 2008, respectively.  A majority of the net cash used for investingactivities in the nine months ended April 30, 2008 related to the purchaseof the remaining interests in DNA Dreamfields as well as fixed asset purchases.

 

Netcash used for financing activities totaled $33.3 million for the nine monthsended April 30, 2009 compared to the net cash provided from financingactivities totaled $0.6 million for the nine months ended April 30,2008.  The $33.3 million of net cash usedfor financing activities for the nine months ended April 30, 2009 includeda decrease in short-term notes payable of $21.5 million and $8.3 million inscheduled payments on long-term debt. The Company paid dividends of $0.1 million ($0.01 per share) on its Series DDelivery Preferred Stock, $0.2 million ($0.20 per share) on its Series FConvertible Preferred Stock and $2.0 million ($0.20 per share) on its CommonStock during the second quarter of fiscal year 2009. The Company paid dividendsof $0.1 million ($0.01 per share) on its Series D Delivery PreferredStock, $0.2 million ($0.16 per share) on its Series F ConvertiblePreferred Stock and $1.6 million ($0.16 per share) on its Common Stock duringthe second quarter of fiscal year 2008.

 

The following table summarizesthe Company’s contractual obligations as of April 30, 2009 (in thousands):

 

Contractual Obligations

 
| ** **                             | ** ** | ** ** | ** **   | **Payments**     | ** ** | **Payments**   | ** ** | **Payments**   | ** ** | **Payments**   | ** ** |
|----------------------------------------|------------|------------|--------------|------------------|------------|----------------|------------|----------------|------------|----------------|------------|
| ** **                             | ** ** | ** ** | ** **   | **Due  in Less** | ** ** | **Due  in**    | ** ** | **Due  in**    | ** ** | **Due  After** | ** ** |
|                                   | ** ** | **Total**  | ** **   | **Than  1 Year** | ** ** | **1-3  Years** | ** ** | **4-5  Years** | ** ** | **5  Years**   | ** ** |
|                                   |       |       |         |             |       |           |       |           |       |           |       |
| Long-term debt                         |       | $          | 32,359       |             | $          | 5,750          |       | $              | 17,409     |           | $          | 9,200 |   | $ | — |   |
| Interest on long-term  obligations (1) |       | 2,389      |         | 812              |       | 1,345          |       | 230            |       | 2              |       |
| Durum purchase  obligations            |       | 21,522     |         | 21,522           |       | —         |       | —         |       | —         |       |
| Warehouse obligations                  |       | 3,658      |         | 1,322            |       | 2,197          |       | 139            |       | —         |       |
| Operating leases                       |       | 1,349      |         | 684              |       | 665            |       | —         |       | —         |       |
|                                   |       |       |         |             |       |           |       |           |       |           |       |
|                                   |       | $          |  61,277 |             | $          | 30,090         |       | $              | 21,616     |           | $          | 9,569 |   | $ | 2 |   |

 

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(1) Based on interest rates as of April 30,2009

 

TheCompany forward contracts for a certain portion of its future durum wheatrequirements. At April 30, 2009, the Company had outstanding commitmentsfor grain purchases totaling $21.5 million 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 currently available and to be provided by operatingactivities, along with amounts available under the Company’s line of credit,will be sufficient to meet the Company’s expected capital and liquidityrequirements for the foreseeable future.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

Market risk is the potential loss to future earnings,fair values or cash flows resulting from adverse changes in interest rates,commodity prices, exchange rates, equity prices and other market changes.

 

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The Company is exposed to market risk from changes ininterest rates. For fixed rate debt, interest rate changes affect the fairvalue of financial instruments but do not impact earnings or cash flows.Conversely, for variable rate debt, interest rate changes generally do notaffect the fair market value but do impact future earnings and cash flows,assuming other factors are held constant. A majority of the balancesoutstanding under the Company’s current debt agreements are subject to variableinterest rates.

 

TheCompany is exposed to certain fluctuations in commodity prices. The Companyforward contracts for a certain portion of its future wheat requirements. Thesecontracts are set price contracts to deliver grain to the Company’s mill, andare not derivative in nature as they have no net settlement provision and arenot transferable.

 

**ITEM 4T. CONTROLS AND PROCEDURES**

 

***Evaluation of DisclosureControls and Procedures***

 

As required by Rule 13a-15(b) underthe Securities Exchange Act of 1934 (the “Exchange Act”), we conducted anevaluation, under the supervision and with the participation of our management,including our Chief Executive Officer and Chief Financial Officer (together the“Certifying Officers”), of the effectiveness of the design and operation of ourdisclosure controls and procedures as of April 30, 2009, the end of theperiod covered by this report. Based upon that evaluation, the CertifyingOfficers concluded that our disclosure controls and procedures were effectiveas of April 30, 2009 to provide reasonable assurance that informationrequired to be disclosed in our Exchange Act reports is recorded, processed,summarized and reported within the time periods specified in the SEC’s rules andforms and that such information is accumulated and communicated to ourmanagement, including our Certifying Officers, as appropriate, to allow fortimely decisions regarding required disclosure.

 

***Inherent Limitations onEffectiveness of Controls***

 

Management is responsible for establishing andmaintaining adequate internal control over financial reporting to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withU.S. generally accepted accounting principles. Internal control over financialreporting includes those policies and procedures that (i) pertain to themaintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of assets; (ii) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with U.S. generally accepted accountingprinciples, and that receipts and expenditures are being made only inaccordance with authorizations of the management and the Board; and (iii) providereasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of Company assets that could have a materialeffect on the financial statements.

 

Management personnel, including the CertifyingOfficers, recognize that our internal control over financial reporting cannotprevent or detect all error and all fraud. A control system, no matter how welldesigned and operated, can provide only reasonable, not absolute, assurancethat the control system’s objectives will be met. The design of a controlsystem must reflect the fact that there are resource constraints, and thebenefits of controls must be considered relative to their costs. Further,because of the inherent limitations in all control systems, no evaluation ofcontrols can provide absolute assurance that misstatements due to error orfraud will not occur or that all control issues and instances of fraud, if any,have been detected. The design of any system of controls is based in part oncertain assumptions about the likelihood of future events, and there can be noassurance that any design will succeed in achieving its stated goals under allpotential future conditions.

 

***Changes in Internal Controlsover Financial Reporting***

 

Therewere no changes in the Company’s internal controls over financial reportingduring the Company’s fiscal quarter ended April 30, 2009 that havematerially affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting.

 

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**PART II — OTHER INFORMATION**

 

**ITEM 1A.RISK FACTORS**

 

There have been nomaterial changes from the risk factors disclosed in Part I, Item 1A, ofthe Company’s Annual Report on Form 10-K for the fiscal year ended July 31,2008.

 

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIESAND USE OF PROCEEDS.**

 

DuringApril 2009, one of the Company’s employees exercised options for thepurchase of a total of 10,650 shares of the Company’s common stock.  The aggregate consideration received by theCompany for the issuance of those shares was $49,690. The shares were issued inprivate placement transactions exempt from the registration requirements of theSecurities Act, pursuant to Section 4(2) of the Securities Act.

 

**ITEM 6. EXHIBITS**

 

**Exhibits**

 
| 3.1    |   | Second Amended and  Restated Articles of Incorporation of the Company, formerly Dakota Growers  Restructuring Company, Inc. (Incorporated by reference to  Exhibit 3.1 from the Company’s Pre-Effective Amendment No. 2 to  Form S-4 Registration Statement, File No. 333-81946, dated  April 19, 2002).                            |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 3.2    |   | Second Amended and  Restated Bylaws of the Company, formerly Dakota Growers Restructuring  Company, Inc. (Incorporated by reference to Exhibit 3.3 from the  Company’s Pre-Effective Amendment No. 2 to Form S-4 Registration  Statement, File No. 333-81946, dated April 19, 2002).                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 3.3    |   | Certificate of  Designation of Series E Junior Participating Preferred Stock of the  Company, formerly Dakota Growers Restructuring Company, Inc.  (Incorporated by reference to Exhibit 3.2 from the Company’s  Pre-Effective Amendment No. 2 to Form S-4 Registration Statement,  File No. 333-81946, dated April 19, 2002). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 3.4    |   | Certificate of  Designation of Series F Convertible Preferred Stock of the Company  (Incorporated by reference to Exhibit 3.1 from the Company’s Report on  Form 8-K, File No. 000-50111, filed February 15, 2007).                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.1   |   | Statused Revolving  Credit Supplement between the Company and CoBank, ACB (Incorporated by  reference to Exhibit 10.1 from the Company’s Current Report on  Form 8-K, File No. 000-50111, filed with the SEC January 16,  2009).                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.2   |   | Non-Revolving Credit  Supplement between the Company and CoBank, ACB (Incorporated by reference to  Exhibit 10.2 from the Company’s Current Report on Form 8-K, File  No. 000-50111, filed with the SEC January 16, 2009).                                                                                                                    |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.3   |   | Multiple Advance Term  Loan Supplement, Loan No. RIE539T07A between the Company and CoBank, ACB  (Incorporated by reference to Exhibit 10.3 from the Company’s Current  Report on Form 8-K, File No. 000-50111, filed with the SEC  January 16, 2009).                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 10.4   |   | Multiple Advance Term  Loan Supplement, Loan No. RIE539T06B between the Company and CoBank, ACB  (Incorporated by reference to Exhibit 10.4 from the Company’s Current  Report on Form 8-K, File No. 000-50111, filed with the SEC  January 16, 2009).                                                                                   |
|   |   |                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1   |   | Certification  of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002 (Exchange Act Rule 13a-14(a) or 15d-14(a)).                                                                                                                                                                                                        |

 

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| 31.2   |   | Certification of Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002 (Exchange Act 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).                        |

 

**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 Officer)                |       | June 12,  2009 |
|                 |       |                                          |       |                |
|                 |       |                                          |       |                |
| /s/ Edward O.  Irion |       | Chief Financial  Officer                      |       |                |
| Edward O. Irion      |       | (Principal  Financial and Accounting Officer) |       | June 12,  2009 |

 

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