**UNITED STATES****SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-Q**

 
| ý | **Quarterly Report Pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934**  |
|--------|---------------------------------------------------------------------------------------------------------|
|   |                                                                                                    |
|   | **For  the quarterly period ended January 31, 2005**                                               |
|   |                                                                                                    |
|   | **or**                                                                                                  |
|   |                                                                                                    |
| **o**  | **Transition Report Pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934** |

 

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**Commission File No. 000-50111**

 

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**DAKOTA GROWERS PASTA COMPANY,INC.**

(Exact name of registrant as specified in itscharter)

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

 

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

(Address of principal executive officesincluding zip code)

 

**(701) 652-2855**

(Registrant’s telephone number, including areacode)

 

**NOT APPLICABLE**

(Former name, former address and former fiscalyear, if changed since last report)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

Yesý No o

 

Indicateby check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act)

Yeso No ý

 

Asof March 16, 2005, theRegistrant had 13,169,382 shares ofcommon stock, par value $0.01 per share, outstanding.

 

 

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**PART I - FINANCIAL INFORMATION**

** **

**ITEM 1. FINANCIAL STATEMENTS**

** **

**DAKOTA GROWERS PASTA COMPANY, INC.**

**CONSOLIDATED BALANCE SHEETS**

**(In Thousands, Except Share Information)**

 
| ** **                                                                                                              | ** ** | **(Unaudited)  January 31,  2005** | ** ** | **July 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-------------------------|------------|
| **ASSETS**                                                                                                              |       |                                    |       |                    |       |
|                                                                                                                    |       |                                    |       |                    |       |
| CURRENT ASSETS                                                                                                          |       |                                    |       |                    |       |
| Cash and cash  equivalents                                                                                              |       | $                                       | 3          |                    | $          | 589 |   |
|                                                                                                                    |       |                                    |       |                    |       |
| Trade accounts  receivable, less allowance for cash discounts and doubtful accounts of $1,403  and $1,209, respectively |       | 18,716                                  |       | 14,043                  |       |
|                                                                                                                    |       |                                    |       |                    |       |
| Due from related  parties                                                                                               |       | 82                                      |       | 703                     |       |
|                                                                                                                    |       |                                    |       |                    |       |
| Other  receivables                                                                                                      |       | 27                                      |       | 299                     |       |
|                                                                                                                    |       |                                    |       |                    |       |
| Inventories                                                                                                             |       | 24,633                                  |       | 25,211                  |       |
|                                                                                                                    |       |                                    |       |                    |       |
| Prepaid expenses                                                                                                        |       | 4,278                                   |       | 3,994                   |       |
|                                                                                                                    |       |                                    |       |                    |       |
| Deferred income  taxes                                                                                                  |       | 937                                     |       | 937                     |       |
|                                                                                                                    |       |                                    |       |                    |       |
| Total current  assets                                                                                                   |       | 48,676                                  |       | 45,776                  |       |
|                                                                                                                    |       |                                    |       |                    |       |
| PROPERTY AND  EQUIPMENT                                                                                                 |       |                                    |       |                    |       |
| In service                                                                                                              |       | 110,512                                 |       | 109,987                 |       |
| Construction in  process                                                                                                |       | 562                                     |       | 18                      |       |
|                                                                                                                    |       | 111,074                                 |       | 110,005                 |       |
| Less accumulated  depreciation                                                                                          |       | (49,644                                 | )          | (46,980                 | )          |
|                                                                                                                    |       |                                    |       |                    |       |
| Net property and  equipment                                                                                             |       | 61,430                                  |       | 63,025                  |       |
|                                                                                                                    |       |                                    |       |                    |       |
| INVESTMENT IN  JOINT VENTURE                                                                                            |       | 3,860                                   |       | 1,746                   |       |
|                                                                                                                    |       |                                    |       |                    |       |
| INVESTMENT IN  COOPERATIVE BANK                                                                                         |       | 2,223                                   |       | 2,343                   |       |
|                                                                                                                    |       |                                    |       |                    |       |
| INTANGIBLE  ASSETS                                                                                                      |       | 319                                     |       | 392                     |       |
|                                                                                                                    |       |                                    |       |                    |       |
| OTHER ASSETS                                                                                                            |       | 1,598                                   |       | 6,133                   |       |
|                                                                                                                    |       |                                    |       |                    |       |
|                                                                                                                    |       | $                                       | 118,106    |                    | $          | 119,415 |   |

 

 

2

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**DAKOTA GROWERS PASTA COMPANY, INC.**

**CONSOLIDATED BALANCE SHEETS**

**(In Thousands, Except Share Information)**

 
| ** **                                                                                                                                                                         | ** ** | **(Unaudited)  January 31,  2005** | ** ** | **July 31,  2004** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------|------------|-------------------------|------------|
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                     |       |                                    |       |                    |       |
|                                                                                                                                                                               |       |                                    |       |                    |       |
| CURRENT  LIABILITIES                                                                                                                                                               |       |                                    |       |                    |       |
| Notes payable                                                                                                                                                                      |       | $                                       | 15,700     |                    | $          | 12,200 |   |
| Current portion  of long-term debt                                                                                                                                                 |       | 4,771                                   |       | 7,176                   |       |
| Accounts payable                                                                                                                                                                   |       | 5,480                                   |       | 4,969                   |       |
| Excess  outstanding checks over cash on deposit                                                                                                                                    |       | 1,732                                   |       | —                  |       |
| Due to related  parties                                                                                                                                                            |       | 68                                      |       | —                  |       |
| Accrued  liabilities                                                                                                                                                               |       | 4,207                                   |       | 4,845                   |       |
|                                                                                                                                                                               |       |                                    |       |                    |       |
| Total current  liabilities                                                                                                                                                         |       | 31,958                                  |       | 29,190                  |       |
|                                                                                                                                                                               |       |                                    |       |                    |       |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                                     |       | —                                  |       | —                  |       |
| LONG-TERM DEBT,  net of current portion                                                                                                                                            |       | 16,316                                  |       | 21,087                  |       |
| DEFERRED INCOME  TAXES                                                                                                                                                             |       | 10,510                                  |       | 10,363                  |       |
| OTHER  LIABILITIES                                                                                                                                                                 |       | 111                                     |       | 136                     |       |
| MANDATORILY  REDEEMABLE PREFERRED STOCK                                                                                                                                            |       |                                    |       |                    |       |
| Series A,  6% cumulative, $100 par value, 533 shares authorized, 133 and 200 shares  issued and outstanding as of January 31, 2005 and July 31, 2004,  respectively |       | 13                                      |       | 20                      |       |
|                                                                                                                                                                               |       |                                    |       |                    |       |
| Total  liabilities                                                                                                                                                                 |       | 58,908                                  |       | 60,796                  |       |
|                                                                                                                                                                               |       |                                    |       |                    |       |
| STOCKHOLDERS’  EQUITY                                                                                                                                                         |       |                                    |       |                    |       |
| Series D  delivery preferred stock, non-cumulative, $.01 par value, 11,340,841 shares  authorized, 11,275,297 shares issued and outstanding                                   |       | 113                                     |       | 113                     |       |
| Common stock,  $.01 par value, 75,000,000 shares authorized, 13,169,382 shares issued and  outstanding                                                                             |       | 132                                     |       | 132                     |       |
| Additional  paid-in capital                                                                                                                                                        |       | 62,807                                  |       | 62,807                  |       |
| Accumulated  deficit                                                                                                                                                               |       | (3,854                                  | )          | (4,433                  | )          |
|                                                                                                                                                                               |       |                                    |       |                    |       |
| Total  stockholders’ equity                                                                                                                                                   |       | 59,198                                  |       | 58,619                  |       |
|                                                                                                                                                                               |       |                                    |       |                    |       |
| Total liabilities and  stockholders’ equity                                                                                                                                   |       | $                                       | 118,106    |                    | $          | 119,415 |   |

 

SeeNotes to Consolidated Financial Statements

 

3

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**DAKOTA GROWERS PASTA COMPANY, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In Thousands, Except Per ShareAmounts)(Unaudited)**

 
| ** **                                                                         | ** ** | **Three Months Ended  January 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                         | ** ** | **2005**                                 | ** ** | **2004** | ** ** |
| ** **                                                                         | ** ** | ** **                               | ** ** | ** ** | ** ** |
| Net revenues  (net of discounts and allowances of $5,755 and $4,563, respectively) |       | $                                        | 40,727     |   | $ | 35,403 |   |
|                                                                               |       |                                     |       |   |   |
| Cost of goods  sold                                                                |       | 36,208                                   |       | 32,361 |   |
|                                                                               |       |                                     |       |   |   |
| Gross profit                                                                       |       | 4,519                                    |       | 3,042 |   |
|                                                                               |       |                                     |       |   |   |
| Marketing,  general and administrative expenses                                    |       | 2,859                                    |       | 2,007 |   |
|                                                                               |       |                                     |       |   |   |
| Operating income                                                                   |       | 1,660                                    |       | 1,035 |   |
|                                                                               |       |                                     |       |   |   |
| Other income  (expense)                                                            |       |                                     |       |   |   |
| Interest and  other income                                                         |       | 414                                      |       | 903 |   |
| Gain on  disposition of property, equipment and other assets                       |       | 13                                       |       | — |   |
| Net loss  allocated from joint venture                                             |       | (218                                     | )          | (144 | ) |
| Interest  expense, net                                                             |       | (617                                     | )          | (725 | ) |
|                                                                               |       |                                     |       |   |   |
| Income before  income taxes                                                        |       | 1,252                                    |       | 1,069 |   |
|                                                                               |       |                                     |       |   |   |
| Income tax  expense                                                                |       | 488                                      |       | 417 |   |
|                                                                               |       |                                     |       |   |   |
| Net income                                                                         |       | $                                        | 764        |   | $ | 652 |   |
|                                                                               |       |                                     |       |   |   |
| Net earnings per  common share                                                     |       |                                     |       |   |   |
| Basic                                                                              |       | $                                        | 0.06       |   | $ | 0.05 |   |
|                                                                               |       |                                     |       |   |   |
| Diluted                                                                            |       | $                                        | 0.06       |   | $ | 0.05 |   |
|                                                                               |       |                                     |       |   |   |
| Weighted average  common shares outstanding                                        |       |                                     |       |   |   |
| Basic                                                                              |       | 13,169                                   |       | 12,260 |   |
|                                                                               |       |                                     |       |   |   |
| Diluted                                                                            |       | 13,529                                   |       | 12,620 |   |

 

SeeNotes to Consolidated Financial Statements

 

4

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** **

**DAKOTA GROWERS PASTA COMPANY, INC.**

**CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In Thousands, Except Per ShareAmounts)(Unaudited)**

 
| ** **                                                                          | ** ** | **Six Months Ended  January 31,** | ** ** |
|-------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                          | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| ** **                                                                          | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Net revenues  (net of discounts and allowances of $12,017 and $9,305, respectively) |       | $                                      | 76,650     |   | $ | 73,051 |   |
|                                                                                |       |                                   |       |   |   |
| Cost of goods  sold                                                                 |       | 68,816                                 |       | 68,099 |   |
|                                                                                |       |                                   |       |   |   |
| Gross profit                                                                        |       | 7,834                                  |       | 4,952 |   |
|                                                                                |       |                                   |       |   |   |
| Marketing,  general and administrative expenses                                     |       | 5,229                                  |       | 4,009 |   |
|                                                                                |       |                                   |       |   |   |
| Operating income                                                                    |       | 2,605                                  |       | 943 |   |
|                                                                                |       |                                   |       |   |   |
| Other income  (expense)                                                             |       |                                   |       |   |   |
| Interest and  other income                                                          |       | 433                                    |       | 904 |   |
| Gain on  disposition of property, equipment and other assets                        |       | 22                                     |       | 13 |   |
| Net loss  allocated from joint venture                                              |       | (856                                   | )          | (144 | ) |
| Interest  expense, net                                                              |       | (1,255                                 | )          | (1,531 | ) |
|                                                                                |       |                                   |       |   |   |
| Income before  income taxes                                                         |       | 949                                    |       | 185 |   |
|                                                                                |       |                                   |       |   |   |
| Income tax  expense                                                                 |       | 370                                    |       | 72 |   |
|                                                                                |       |                                   |       |   |   |
| Net income                                                                          |       | $                                      | 579        |   | $ | 113 |   |
|                                                                                |       |                                   |       |   |   |
| Net earnings per  common share                                                      |       |                                   |       |   |   |
| Basic                                                                               |       | $                                      | 0.04       |   | $ | 0.01 |   |
|                                                                                |       |                                   |       |   |   |
| Diluted                                                                             |       | $                                      | 0.04       |   | $ | 0.01 |   |
|                                                                                |       |                                   |       |   |   |
| Weighted average  common shares outstanding                                         |       |                                   |       |   |   |
| Basic                                                                               |       | 13,169                                 |       | 12,260 |   |
|                                                                                |       |                                   |       |   |   |
| Diluted                                                                             |       | 13,529                                 |       | 12,620 |   |

 

SeeNotes to Consolidated Financial Statements

 

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**DAKOTA GROWERS PASTA COMPANY, INC.**

**CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In Thousands)(Unaudited)**

 
| ** **                                                                       | ** ** | **Six Months Ended  January 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                       | ** ** | **2005**                               | ** ** | **2004** | ** ** |
| OPERATING  ACTIVITIES                                                            |       |                                   |       |   |   |
| Net income                                                                       |       | $                                      | 579        |   | $ | 113 |   |
| Adjustments to  reconcile net income to net cash from from operating activities: |       |                                   |       |   |   |
| Depreciation and  amortization                                                   |       | 3,850                                  |       | 4,354 |   |
| Gain on  disposition of property, equipment and other assets                     |       | (22                                    | )          | (13 | ) |
| Net loss  allocated from joint venture                                           |       | 856                                    |       | 144 |   |
| Deferred income  taxes                                                           |       | 147                                    |       | 72 |   |
| Payments for  long-term marketing costs                                          |       | —                                 |       | (125 | ) |
| Accrued  promotional costs applied to marketing prepayments                      |       | 3,593                                  |       | — |   |
| Changes in  assets and liabilities                                               |       |                                   |       |   |   |
| Trade  receivables                                                               |       | (4,673                                 | )          | (4,117 | ) |
| Due from related  parties                                                        |       | 621                                    |       | — |   |
| Other  receivables                                                               |       | 272                                    |       | 884 |   |
| Inventories                                                                      |       | 578                                    |       | 7,128 |   |
| Prepaid expenses                                                                 |       | (24                                    | )          | 234 |   |
| Other assets                                                                     |       | 5                                      |       | 5 |   |
| Accounts payable                                                                 |       | 511                                    |       | (179 | ) |
| Due to related  parties                                                          |       | 68                                     |       | — |   |
| Other accrued  liabilities                                                       |       | (638                                   | )          | 623 |   |
| NET CASH FROM  OPERATING ACTIVITIES                                              |       | 5,723                                  |       | 9,123 |   |
|                                                                             |       |                                   |       |   |   |
| INVESTING  ACTIVITIES                                                            |       |                                   |       |   |   |
| Purchases of  property and equipment                                             |       | (1,096                                 | )          | (619 | ) |
| Payments for  package design costs                                               |       | (412                                   | )          | (242 | ) |
| Proceeds from  cooperative bank equity retirements                               |       | 120                                    |       | — |   |
| Investments in  joint venture                                                    |       | (2,970                                 | )          | (145 | ) |
| NET CASH USED  FOR INVESTING ACTIVITIES                                          |       | (4,358                                 | )          | (1,006 | ) |
|                                                                             |       |                                   |       |   |   |
| FINANCING  ACTIVITIES                                                            |       |                                   |       |   |   |
| Net change in  excess outstanding checks over cash on deposit                    |       | 1,732                                  |       | 586 |   |
| Net change in  short-term notes payable                                          |       | 3,500                                  |       | (1,305 | ) |
| Principal  payments on long-term debt                                            |       | (7,176                                 | )          | (7,391 | ) |
| Preferred stock  retirements                                                     |       | (7                                     | )          | (6 | ) |
| NET CASH USED  FOR FINANCING ACTIVITIES                                          |       | (1,951                                 | )          | (8,116 | ) |
|                                                                             |       |                                   |       |   |   |
| NET CHANGE IN  CASH AND CASH EQUIVALENTS                                         |       | (586                                   | )          | 1 |   |
| CASH AND CASH  EQUIVALENTS, BEGINNING OF PERIOD                                  |       | 589                                    |       | 5 |   |
| CASH AND CASH  EQUIVALENTS, END OF PERIOD                                        |       | $                                      | 3          |   | $ | 6 |   |
|                                                                             |       |                                   |       |   |   |
| SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION                               |       |                                   |       |   |   |
| Cash payments  (refunds) for                                                     |       |                                   |       |   |   |
| Interest (net of  amounts capitalized)                                           |       | $                                      | 1,411      |   | $ | 1,693 |   |
|                                                                             |       |                                   |       |   |   |
| Income taxes                                                                     |       | $                                      | (200       | ) | $ | (972 | ) |

 

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 be read in conjunction with the notes to thefinancial statements for the year ended July 31, 2004 as filed in the Company’sForm 10 K.

 

**NOTE 1 - ORGANIZATION**

** **

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

 

**NOTE 2 – FINANCIAL STATEMENTPRESENTATION**

** **

The unauditedconsolidated financial statements included herein have been prepared pursuantto the rules and regulations of the Securities and Exchange Commission.Accordingly, they do not include all the information and footnotes required byaccounting principles generally accepted in the United States of America forcomplete financial statements. In the opinion of management, all adjustments(consisting of normal recurring accruals) considered necessary for a fairpresentation have been included. Operating results for the three and six monthperiods ended January 31, 2005 are not necessarily indicative of theresults that may be expected for the year ended July 31, 2005. Theunaudited 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 31,2004. The information contained in the balance sheet as of July 31, 2004was derived from the Company’s audited annual report for fiscal year 2004.Reclassifications have been made to facilitate comparability with currentpresentation. Such reclassifications have no effect on the net results ofoperations.

 

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

 

###### **NOTE 3 – INVENTORIES**

###### ** **

Inventories are valued at lower of cost ormarket. Inventories as of January 31, 2005 include raw materials andpackaging of $6,878,000 and finished goodsof $17,755,000. Inventoriesat July 31, 2004 include raw materials and packaging of $6,396,000 andfinished goods of $18,815,000.

 

**NOTE 4 – LOAN AGREEMENTS**

 

EffectiveFebruary 22, 2005, the Company secured a $25 million revolving creditfacility with CoBank that extends through February 20, 2006. Interest onthe revolving line is currently charged at a variable rate established byCoBank based on CoBank’s cost of funds, although the facility also allows for afixed rate option. The balance outstanding under the revolving line of credit totaled$15.7 million and $12.2 million as of January 31, 2005 and July 31,2004, respectively. The Company had $9.3 million available for borrowings underthe line of credit as of January 31, 2005.

 

TheCompany’s various debt agreements with CoBank and certain institutionalinvestors obligate the Company to maintain or achieve certain amounts of equityand certain financial ratios and impose certain restrictions on the Company.The Company was in compliance with these financial covenants as of January 31,2005. The Company entered into an amendment with CoBank on December 1,2004 which requires the Company to maintain a current ratio of not less than1.10 to 1.0 through and including April 30, 2005 and of not less than 1.25to 1.0 thereafter.

 

7

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###### **NOTE 5 – EARNINGS PER SHARE**

###### ** **

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

 

Dilutive securities, consisting of stock options and convertiblepreferred stock, included in the calculation of diluted weighted average commonshares totaled 360,000 for the three and six month periods ended January 31,2005 and 2004. As there is currently no established public trading market forthe Company’s common stock, the Company has assumed the proceeds from theexercise of stock options would reduce debt and, thus, interest expense.

 

**NOTE 6 – 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 received payments in the amount of $425,000 and $903,000 in December 2004and 2003, respectively, under the Offset Act. $305,000 of the $903,000 wasrepaid to Customs in April 2004pursuant to a reclamation request from Customs. These amountshave been classified as other income. The Company cannot reasonably estimatethe potential amount, if any, that it may receive under the Offset Act in futureperiods as any such amount will be based upon future events over which theCompany has little or no control, including, but not limited to, the amount ofexpenditures by domestic pasta producers and the amount of antidumping andcountervailing duties collected by Customs.

 

**NOTE 7 – INVESTMENT IN JOINTVENTURE**

 

The Company acquired a24% ownership interest in DNA Dreamfields Company, LLC (“DNA Dreamfields”)during fiscal year 2004. The Company accounts for the investment in DNADreamfields using the equity method. DNA Dreamfields was formed by the Companyand other food technology, manufacturing and consumer products marketingenterprises to develop, manufacture and sell low digestible carbohydrate pasta,rice and potatoes under the DreamfieldsTM brand name. The Companymet its initial $3,962,000 aggregate investment commitment in DNA Dreamfieldsduring the fiscal quarter ended October 31, 2004.

 

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

 

**NOTE 8 – RELATED PARTYTRANSACTIONS**

 

The Company has entered into a manufacturingagreement with DNA Dreamfields whereby Dakota Growers is the exclusivemanufacturer of DreamfieldsTM low digestible carbohydrate pasta. TheCompany has also entered into a services agreement with DNA Dreamfields under whichthe Company provides administrative, accounting, information technology, sales,customer service and distribution services to DNA Dreamfields. Shipments ofDreamfieldsTM low digestible carbohydrate pasta began in February 2004.

 

8

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Pursuant to the services agreement with DNADreamfields, to the extent the Company supplies logistics services for thedelivery and billing of DreamfieldsTM product, the title in and tothe DreamfieldsTM product shall remain with Dakota Growers, and therisk of loss shall pass from Dakota Growers to Dakota Grower’s customers inaccordance with terms and conditions set forth in purchase orders or agreementsbetween Dakota Growers and its customers. Sales of DreamfieldsTM productsare included in the Company’s net revenues. Manufacturing, distribution, andpromotional costs incurred by the Company related to DreamfieldsTM productsare included in the applicable line items of the Company’s income statement. Ona monthly basis, the Company calculates a net amount due to DNA Dreamfieldsbased on the total sales of DreamfieldsTM product less relatedDreamfieldsTM product costs, which include cash discounts, promotionand allowances, brokerage fees, bad debt write-offs, freight costs, storage andhandling fees, and the transfer price established between the Company and DNADreamfields (as outlined in the manufacturing agreement). This net amount dueto DNA Dreamfields is included in the Company’s cost of goods sold and totaled$424,000 and $1,137,000 for the three and six month periods ended January 31,2005, respectively. Service fee revenues from DNA Dreamfields are included in theCompany’s net revenues and totaled $29,000 and $75,000 for the three and sixmonth periods ended January 31, 2005, respectively. The net amount due toDNA Dreamfields was $68,000 as of January 31, 2005, while the net amountdue from DNA Dreamfields was $621,000 as of July 31, 2004.

 

Amounts due fromofficers totaled $82,000 as of January 31, 2005 and July 31, 2004.

 

###### **NOTE 9 – COMMITMENTS**

###### ** **

The Company forward contracts for a certain portion of its future durumwheat requirements. The Company had outstanding commitments for grain purchasestotaling $14,293,000 related to forward purchase contracts as of January 31,2005. These contracts are set price contracts to deliver grain to the Company’smill, and are not derivative in nature as they have no net settlement provisionand are not transferable.

 

Subsequent to January 31, 2005, the Company entered into acommitment to purchase pasta equipment totaling approximately $5.0 million,which is expected to be paid within one year.

 

9

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**ITEM2.  MANAGEMENT’S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

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

 

**Forward-LookingStatements**

 

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 31,2004 under “Risk Factors,” that could cause actual results to differ materiallyfrom those anticipated. The Company cautions readers not to place unduereliance on such forward-looking statements. The Company will not update anyforward-looking statements in this Quarterly Report to reflect future events ordevelopments.

 

**Summary**

 

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

 

Netincome for the quarter ended January 31, 2005 totaled $764,000 compared to$652,000 for the quarter ended January 31, 2004. Net income for the sixmonths ended January 31, 2005 totaled $579,000 versus $113,000 for the sixmonths ended January 31, 2004. Revenues increased in the Company’s secondfiscal quarter 2005 as a result of new customer rollouts. The benefits of thesesales were partially offset by costs associated with production scheduling and distributioninefficiencies experienced during the roll out period. The Company has beensuccessful in implementing sales price increases, most of which became effectivein the latter half of the Company’s second fiscal quarter 2005. The sales priceincreases were most profound in the private label retail market. However,increased freight costs continued to have a negative impact on earnings.

 

**CriticalAccounting Policies**

 

Theaccompanying discussion and analysis of our results of operations and financialcondition are based upon our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in theUnited States. The preparation of these financial statements requiresmanagement to make estimates and judgments that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities. These estimates form the basis for makingjudgments about the carrying values of assets and liabilities that are not readilyapparent from other sources. We base our estimates and judgments on historicalexperience and on various other assumptions that we believe are reasonableunder the circumstances. However, future events are subject to change and thebest estimates and judgments may require adjustment. For a complete descriptionof the Company’s significant accounting policies, please see Note 1 to theconsolidated financial statements included in the Company’s Form 10-Kfor the year ended July 31, 2004. Our critical accounting policies arethose that have meaningful impact on the reporting of our financial conditionand results, and that require significant management judgment and estimates.These policies include our accounting for (a) allowance for doubtfulaccounts, (b) inventory valuation, (c) asset impairment, and (d) incometaxes.

 

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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 were to deteriorate, additionalallowances may be required in the future which could have an adverse impact onour 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.

 

*AssetImpairment*

 

Weare required to evaluate our long-lived assets for impairment wheneverindicators of impairment exist, and write down the value of any assets if theyare determined to be impaired. Evaluating the impairment of long-lived assetsinvolves management judgment in estimating the future cash flows and fairvalues related to these assets. Future events could cause management toconclude that impairment indicators exist and that the value of certainlong-lived assets is impaired.

 

*IncomeTaxes*

 

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 January 31, 2005will be realized through the generation of future taxable income and the use ofappropriate tax planning strategies.

 

**Resultsof Operations**

 

*Comparisonof the Three Months Ended January 31, 2005 and 2004*

 

***Net Revenues.***Net revenuestotaled $40.7 million for the three months ended January 31, 2005, anincrease of $5.3 million, or 15.0%, compared to $35.4 million for the threemonths ended January 31, 2004. The increase primarily resulted from higherpasta sales volumes, particularly in the foodservice and ingredient markets.

 

Revenuesfrom the retail market, a portion of which includes co-pack and governmental sales,increased $1.6 million, or 8.6%, primarily as a result of a 7.4% increase inper unit selling prices. Sales of DreamfieldsTM low digestiblecarbohydrate pasta products, which have significantly higher per unit salesprices than the Company’s other products, accounted for a majority of theaverage sales price increase in the retail market. Foodservice revenuesincreased $2.6 million, or 27.6%, primarily due to increased sales volumes. Increasedfoodservice volumes were derived from sales under the New World Pasta licenseagreement combined with new customer sales. The Company entered into alicense agreement with New World Pasta Company in September 2004, whichgave the Company the exclusive right to produce and market pasta productsbearing the *Ronzoni*, *Prince*,*San Giorgio* and *Mrs. Weiss*brands in the foodservice market. Ingredient revenues increased $2.7million, or 109.7%, mostly due to an increase in sales volume related to theaddition of one customer in this market.

 

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The Company marketssemolina production in excess of its own requirements as well as durum wheatflour, other flour blends and by-products of the durum milling process. Revenues from semolina,by-product and other mill sales decreased $1.6 million to $3.0 million for thethree months ended January 31, 2005, compared to $4.6 million for thethree months ended January 31, 2004. The change primarily resulted from lowersemolina sales volumes.

 

***Cost of Goods Sold.*** Cost of goods sold totaled $36.2 millionfor the three months ended January 31, 2005, an increase of $3.8 million,or 11.9%, compared to $32.4 million for the three months ended January 31,2004. The increase resulted mainly from highersales volumes relative to the comparable quarter of the prior year. Gross profitas a percentage of net revenues increased to 11.1% from 8.6% primarilydue to lower per unit manufacturing costs resulting from increased factoryutilization. Benefits realized were partially offset by higher freight costs whichnegatively impacted gross profit.

 

***Marketing, General, and Administrative (“MG&A”) Expenses.*** MG&Aexpenses totaled $2.9 million for the three months ended January 31, 2005,an increase of 42.5% from $2.0 million for the three months ended January 31,2004. MG&A expenses as a percentage of net revenues increased to 7.0% forthe quarter ended January 31, 2005, from 5.7% for the comparable quarterof the prior year. The increase in MG&A resulted from a variety of factors,the most significant of which was increased customer marketing supportassociated with DreamfieldsTM pasta products.

 

***Net Loss Allocated from Joint Venture. ***The net loss allocated from joint venturetotaled $0.2 million for the three months ended January 31, 2005, comparedto $0.1 million for the three months ended January 31, 2004. The net lossallocated from joint venture represents the Company’s allocable share of netlosses from DNA Dreamfields Company, LLC.

 

***Interest Expense.*** Interest expense for the three monthsended January 31, 2005 totaled $0.6 million, down $0.1 million from $0.7million for the three months ended January 31, 2004. The decrease was primarilydue to lower average outstanding debt levels.

 

***Interest and Other Income.*** Interestand other income totaled $0.4 million for the three months ended January 31,2005 compared to $0.9 million for the three months ended January 31, 2004.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 $0.9 million inDecember 2004 and 2003, respectively, under the Offset Act. $0.3 millionof the $0.9 million was repaid to Customs inApril 2004 pursuant to a reclamation request from Customs. Theseamounts have 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, the amountof expenditures by domestic pasta producers and the amount of antidumping andcountervailing duties collected by Customs.

 

***Income Taxes.***Income tax expense for thethree months ending January 31, 2005, was $0.5 million, compared to $0.4million for the three months ending January 31, 2004.  The income tax expense reflects an effectivecorporate income tax rate of approximately 39%.

 

***Net Income.***Net income for the three months ending January 31, 2005 totaled $0.8million compared to $0.7 million for the three months ending January 31,2004. The increase in net income resulted primarily from higher pasta salesvolumes and operating margins as noted above.

 

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*Comparison of the Six Months Ended January 31,2005 and 2004*

 

***Net Revenues.***Netrevenues increased $3.6 million, or 4.9%, to $76.7 million for the six monthsended January 31, 2005, from $73.1 million for the six months ended January 31,2004. The increase resulted from higher pasta sales volumes, particularly inthe foodservice and ingredient markets.

 

Revenues from the retail market, a portion of which includes co-pack and governmental sales, decreased $2.4 million or 5.9% during the six months ended January 31, 2005 versus the same period last year. Retail revenues decreased due to a 14.5% volume decline, which was partially offset by a 10.1% increase in average selling prices associated with changes in product sales mix. A significant factor contributing to retail volume declines was a decrease in co-pack sales, primarily to New World Pasta Company. Co-pack sales comprised less than 1% of net revenues for the six months ended January 31, 2005 compared to 5.5% of net revenues for the six months ended January 31, 2004. Sales of DreamfieldsTM low digestible carbohydrate pasta products, which have significantly higher per unit sales prices than the Company’s other products, accounted for a majority of the average sales price increase in the retail market. Foodservice revenues increased $4.2 million, or 21.7%, primarily due to sales volume growth associated with sales under the New World Pasta license agreement combined with new customer sales. Ingredient revenues increased $4.0 million, or 74.9%, due sales volume increases related to the addition of one customer in this market.

 

Revenues from semolina, by-product and other mill sales totaled $5.3million for the six months ended January 31, 2005, down $2.4 million from$7.7 million for the six months ended January 31, 2004. The changeprimarily resulted from semolina sales volume declines.

 

***Cost of Goods Sold.***Cost ofgoods sold totaled $68.8 million for the six months ended January 31,2005, an increase of $0.7 million, or 1.0%, compared to $68.1 million for thesix months ended January 31, 2004. Gross profit as a percentage of netrevenues increased to 10.2% from 6.8% due to various factors including lowerper unit manufacturing costs resulting from increased factory utilization, withthose factors partially offset by negative impacts of higher freight costs.

 

***Marketing, General, and Administrative (“MG&A”) Expenses.*** MG&Aexpenses totaled $5.2 million for the six months ended January 31, 2005, up30.4% from $4.0 million for the six months ended January 31, 2004.MG&A expenses as a percentage of net revenues increased to 6.8% for the sixmonths ended January 31, 2005 from 5.5% for the corresponding period ofthe prior year. The increase in MG&A resulted from a variety of factors,the most significant of which was increased customer marketing supportassociated with DreamfieldsTM pasta products.

 

***Net Loss Allocated from Joint Venture. ***The net loss allocated from joint venturetotaled $0.9 million for the six months ended January 31, 2005, comparedto $0.1 million for the six months ended January 31, 2004. The net lossallocated from joint venture represents the Company’s allocable share of netlosses from DNA Dreamfields Company, LLC.

 

***Interest Expense.*** Interest expense for the six monthsended January 31, 2005 totaled $1.3 million, down from $1.5 million forthe six months ended January 31, 2004. The decrease was primarily due tolower average outstanding debt levels.

 

***Interest and Other Income.*** Interestand other income totaled $0.4 million for the six months ended January 31,2005 compared to $0.9 million for the six months ended January 31, 2004. TheCompany received payments in the amount of $0.4 million and $0.9 million in December 2004and 2003, respectively, under the Offset Act. $0.3 million of the $0.9 millionwas repaid to Customs in April 2004pursuant to a reclamation request from Customs. Theseamounts have been classified as other income. The Company cannot reasonablyestimate the potential amount, if any, that it may receive under the Offset Actin future periods as any such amount will be based upon future events over whichthe Company has little or no control, including, but not limited to, the amountof expenditures by domestic pasta producers and the amount of antidumping andcountervailing duties collected by Customs.

 

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***Income Taxes.***Income tax expense for thesix months ending January 31, 2005, was $0.4 million compared to $0.1million for the six months ending January 31, 2004. The income tax expensereflects an effective corporate income tax rate of approximately 39%.

 

***Net Income. ***Net income for the sixmonths ended January 31, 2005 totaled $0.6 million compared to $0.1million for the six months ended January 31, 2004. The increase in net income resulted primarilyfrom higher pasta sales volumes and operating margins as noted above.

 

**Liquidityand Capital Resources**

 

Ourprimary sources of liquidity are cash provided by operations and borrowingsunder our credit facility. Working capital as of January 31, 2005 totaled$16.7 million compared to $16.6 million as of July 31, 2004.

 

EffectiveFebruary 22, 2005, the Company secured a $25 million revolving creditfacility with CoBank that extends through February 20, 2006. Interest onthe revolving line is currently charged at a variable rate established byCoBank based on CoBank’s cost of funds, although the facility also allows for afixed rate option. The balance outstanding under the revolving line of credittotaled $15.7 million as of January 31, 2005, leaving $9.3 millionavailable for borrowings at that time.

 

TheCompany’s various debt agreements with CoBank and certain institutionalinvestors obligate the Company to maintain or achieve certain amounts of equityand certain financial ratios and impose certain restrictions on the Company.The Company was in compliance with these financial covenants as of January 31,2005 and the date of this filing. The Company and CoBank entered into anAmendment to the Master Loan Agreement in December 2004 under which theCompany is required to maintain a current ratio of not less than 1.10 to 1.0through and including April 30, 2005, and of not less than 1.25 to 1.0thereafter.

 

Net cash from operating activities totaled $5.7million and $9.1 million for the six months ended January 31, 2005 and2004, respectively. The net decrease was primarily due to a$7.1 million decrease in inventories for the six months ended January 31,2004 compared to a $0.6 million decrease for the six months ended January 31,2005. This net decrease attributable to inventories was offset by $3.6 millionof accrued promotional costs applied to marketing prepayments related to U.S.Foodservice during the six months ended January 31, 2005. In December 2004,the Company entered into a letter of intent with U.S. Foodservice whichoutlined the economic terms and conditions governing the purchase of dry pastaproducts by U.S. Foodservice from the Company. The letter of intent includedprovisions to apply accrued promotional amounts to marketing prepayments whichthe Company anticipates will lessen the time to recover the unamortized portionof these marketing prepayments made to U.S. Foodservice. The letter of intentalso eliminated the Company’s right to be the exclusive supplier of dry pastaproducts to U.S. Foodservice and does not provide for minimum purchase commitmentsby U.S. Foodservice.

 

Net cash used for investing activities totaled$4.4 million and $1.0 million for the six months ended January 31, 2005and 2004, respectively. The Company invested $3.0 million in DNA Dreamfieldsduring the six months ended January 31, 2005 compared to $0.1 million forthe six months ended January 31, 2004, which accounted for a majority ofthe $3.4 million change.

 

Net cash used for financing activities totaled $2.0million and $8.1 million for the six months ended January 31, 2005 and 2004,respectively. Substantially all of these amountsrelated to debt principal payments offset by net borrowings under the Company’srevolving credit facility and increases in excess outstanding checks over cashon deposit.

 

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The following table summarizes the Company’scontractual obligations as of January 31, 2005 (in thousands):

 
| ** **                  | ** ** | ** ** | ** ** | **Payments**    | ** ** | **Payments**  | ** ** | **Payments**  | ** ** | **Payments**  | ** ** |
|-----------------------------|------------|------------|------------|-----------------|------------|---------------|------------|---------------|------------|---------------|------------|
| ** **                  | ** ** | ** ** | ** ** | **Due in Less** | ** ** | **Due in**    | ** ** | **Due in**    | ** ** | **Due After** | ** ** |
| **Contractual Obligations** | ** ** | **Total**  | ** ** | **Than 1 Year** | ** ** | **1-3 Years** | ** ** | **4-5 Years** | ** ** | **5 Years**   | ** ** |
|                        |       |       |       |            |       |          |       |          |       |          |       |
| Long-term debt              |       | $          | 21,087     |            | $          | 4,771         |       | $             | 14,316     |          | $          | 2,000 |   | $ | — |   |
| Durum purchase  obligations |       | 14,293     |       | 14,293          |       | —        |       | —        |       | —        |       |
| Operating leases            |       | 2,694      |       | 1,151           |       | 1,479         |       | 64            |       | —        |       |
|                        |       |       |       |            |       |          |       |          |       |          |       |
|                        |       | $          | 38,074     |            | $          | 20,215        |       | $             | 15,795     |          | $          | 2,064 |   | $ | — |   |

 

The Company forward contracts for a certain portion of its future durumwheat requirements. The Company had outstanding commitments for grain purchasestotaling $14.3 million related to forward purchase contracts as of January 31,2005. These contracts are set price contracts to deliver grain to the Company’smill, and are not derivative in nature as they have no net settlement provisionand are not transferable.

 

Subsequent to January 31, 2005, the Company entered into acommitment to purchase approximately $5.0 million of pasta equipment to beinstalled in the Company’s New Hope, MN manufacturing facility. The $5.0million commitment is part of a planned $14.0 million capital project at theNew Hope facility to balance the Company’s pasta production capabilities andimprove operating costs. We expect to fund the current commitment and anyfuture amounts to be expended under this capital project from net cash to beprovided by operations, borrowing capacity under our credit facility andadditional long-term debt financing.

 

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

 

**Recently Issued Accounting Standards**

 

The FASB issued SFAS No. 123(R), “Share-Based Payment” in December 2004.SFAS No. 123(R) is a revision of SFAS No. 123, “Accounting for StockBased Compensation” and is effective for fiscal quarters beginning after June 15,2005. SFAS No. 123(R) requires the cost of share-based payments toemployees, including grants of employee stock options, to be measured based ongrant-date fair values. That cost will be recognized over the period duringwhich an employee is required to provide service in exchange for the award,usually the vesting period. SFAS No. 123(R) will become effective for theCompany beginning with its first fiscal quarter 2006. The Company is currently evaluatingthe expected impact of the adoption of this Statement on its financialstatements.

 

**ITEM3.  QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**

 

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

 

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

 

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**ITEM4.  CONTROLS AND PROCEDURES**

 

***Evaluation of Disclosure Controls and Procedures***

 

TheCompany’s Chief Executive Officer and Chief Financial Officer have reviewed theCompany’s disclosure controls and procedures within 90 days prior to the filingof this quarterly report. Based upon this review, these officers believe thatthe Company’s disclosure controls and procedures are effective in ensuring thatmaterial information related to the Company is made known to them by otherswithin the Company.

 

***Changes in Internal Controls***

 

There were no changes in the Company’s internalcontrols over financial reporting during the Company’s fiscal second quarterended January 31, 2005 that have materially affected or are reasonablylikely to materially affect the Company’s internal control over financialreporting.

 

**PART II – OTHER INFORMATION**

 

**ITEM4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

The Annual Meeting ofStockholders of the Company was held on January 8, 2005. The followingproposals were presented for stockholder consideration at the Annual Meeting:

 

•                  The election of one director to serve as a Class Idirector.

•                  The election of three directors to serve as Class IIIdirectors.

•                  Approval of the appointment of Eide Bailly LLP as theCompany’s independent auditors for fiscal year 2005.

 

At the Annual Meeting,the Company’s stockholders elected each of the Company’s nominees named in itsProxy Statement, dated December 7, 2004, to serve as directors on theBoard of Directors of the Company. Following are the results for the election of directors:

 
| ** **                 | ** ** | **Shares Voted For** | ** ** | **Shares Withheld** | ** ** |
|----------------------------|------------|----------------------|------------|---------------------|------------|
|                       |       |                 |       |                |       |
| Class I  director:    |       |                 |       |                |       |
|                       |       |                 |       |                |       |
| Michael T.  Tokarz         |       | 6,805,026            |       | 428,079             |       |
|                       |       |                 |       |                |       |
| Class III  directors: |       |                 |       |                |       |
|                       |       |                 |       |                |       |
| Allyn K. Hart              |       | 6,851,017            |       | 382,088             |       |
| Curtis R.  Trulson         |       | 6,886,640            |       | 346,465             |       |
| Michael E.  Warner         |       | 6,582,677            |       | 650,428             |       |

 

As a newly elected Class Idirector, Michael T. Tokarz will serve on the Board of Directors for a one yearterm ending with the annual meeting in 2006, while the newly elected Class IIIdirectors, Allyn K. Hart, Curtis R. Trulson and Michael E. Warner, will servethree year terms ending with the annual meeting in 2008. John S. Dalrymple III,James F. Link and John D. Rice, Jr. will continue serving as directorsuntil the annual meeting in 2006. Roger A. Kenner, Eugene J. Nicholas andJeffrey O. Topp will continue serving as directors until the annual meeting in2007.

 

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In addition, thestockholders approved the appointment of Eide Bailly LLP as the Company’sindependent auditors for fiscal year 2005, as follows:

 
| Shares Voted For      |   | 7,106,048 |   |
|-----------------------|--------|-----------|--------|
| Shares Voted  Against |   | 72,930    |   |
| Shares Abstained      |   | 51,127    |   |

** **

**ITEM6. EXHIBITS AND REPORTS ON FORM 8-K**

 

**Exhibits**

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

 

**Reports on Form 8-K**

 

The Company filed a Form 8-K on February 24,2005 announcing that a Statused Revolving Credit Supplement to the Master LoanAgreement between the Company and CoBank, ACB became effective on February 22,2005.

 

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**SIGNATURES**

 

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

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

 

 
| **Signature**         | ** ** | **Title**                                                | ** ** | **Date**            |
|-----------------------|------------|----------------------------------------------------------|------------|---------------------|
| ** **            | ** ** | ** **                                               | ** ** | ** **          |
| /s/ Timothy J. Dodd   |       | President and Chief Executive Officer                    |       |                |
| Timothy J. Dodd       |       | (Principal Executive  Officer)                           |       | March 16, 2005 |
|                  |       |                                                     |       |                |
|                  |       |                                                     |       |                |
| /s/ Thomas P. Friezen |       | Chief Financial Officer                                  |       |                |
| Thomas P. Friezen     |       | (Principal Financial  Officer)                           |       | March 16, 2005 |
|                  |       |                                                     |       |                |
|                  |       |                                                     |       |                |
| /s/ Edward O. Irion   |       | Vice President – Finance and                        |       |                |
| Edward O. Irion       |       | Chief Accounting Officer  (Principal Accounting Officer) |       | March 16, 2005 |

 

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