The following discussion and analysis of financial condition and results of operations should be read in conjunction with "Selected Financial Data," our consolidated historical financial statements and the notes to those statements that appear elsewhere in this report. Our discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under "Cautionary Note Concerning Forward-Looking Information" and "Risk Factors" elsewhere in this report.

Overview

We report on a 52/53 week fiscal year ending on the Friday nearest the end of the quarter. Fiscal year 2009 was a 53-week year and fiscal years 2008 and 2007 were 52-week years.

We believe we are the largest producer and marketer of dry pasta in North America, by volume, based on data available from Nielsen, published competitor financial information, industry sources such as the National Pasta Association, suppliers, trade magazines, other market date, and our own market research. Management believes that the combination of our low cost structure, our product strategy of offering proprietary branded, customer branded, imported and specialty products, our scalable production facilities and our key customer relationships create competitive advantages.

We generate revenues in two customer markets: retail and institutional. Retail market revenues include the sales of our pasta products to customers who resell the pasta in retail channels, including traditional grocery retailers, club stores, mass merchants, drug and discount stores, and encompasses sales of our proprietary branded products, customer branded (also referred to as "private label") products, and imported products. These revenues represented 78.9%, 74.8%, and 76.5% of our total revenue for the years ended October 2, 2009, September 26, 2008 and September 28, 2007, respectively. Institutional market revenues include the sales of our pasta products to customers to foodservice distributors (comprised of businesses and organizations that sell products to restaurants, healthcare facilities, schools, hotels, industrial caterers, and multi-unit restaurant chains that procure directly), food processors that use pasta as a food ingredient, government agencies, and other customers that we periodically supply. The institutional market represented 21.1%, 25.2% and 23.5% of our total revenue for the years ended October 2, 2009, September 26, 2008 and September 28, 2007, respectively.

Average selling prices for both our branded and non-branded products are based on the competitive market environment. In addition, average selling prices for our non-branded products may be affected by customer-specific packaging and raw material requirements, product manufacturing complexity and other service requirements. Average retail and institutional prices will also vary due to changes in the relative share of customer revenues and item specific sales volumes (i.e., product sales mix). Generally, average retail selling prices are higher than institutional selling prices. Selling prices of our proprietary branded products are higher than selling prices for our other product categories, including customer brands. Revenues are reported net of cash discounts, product returns, and promotional and slotting allowances.

Our cost of goods sold consists primarily of raw materials, packaging, manufacturing costs (including depreciation) and distribution (including transportation) costs, offset by by-product sales. A significant portion of our cost of goods sold is durum wheat. We purchase durum wheat on the open market and, consequently, those purchases are subject to fluctuations in cost. During the past three years, durum prices have been volatile and are expected to remain volatile. To a certain extent, we manage our durum wheat cost risk through advance purchase contracts for durum wheat that are generally less than six months in duration. As a result, our durum costs for any given period may be

higher or lower than the current spot market price. We seek to achieve low-cost production through vertical integration and investment in the most current pasta-making assets and technologies. The manufacturing and distribution related capital assets that have been or will be acquired to support this strategy are depreciated over their respective economic lives. Such depreciation expense is a component of inventory cost and cost of goods sold.

According to Nielsen data for U.S. grocery and mass merchants, during the 52 week period ending September 26, 2009 (the date nearest our fiscal year end for which this information is available), the dry pasta category grew at a rate of approximately 4.5% as compared to the prior 52 week period. The trend continued through the 13 weeks ending September 26, 2009, with growth of approximately 3.1% compared to the prior year period. With the economic downturn, we believe more people are choosing to cook at home and are taking advantage of the many alternatives available with a versatile food such as dry pasta. Dry pasta offerings include traditional semolina pasta as well as alternative formulations such as whole-wheat, multi-grain, and omega-added. Consumption of traditional semolina pasta, which comprises approximately 90% of the pasta market when expressed as a percent of pounds consumed, increased 3.9% and 2.0% during the 52 and 13 weeks ending September 26, 2009, respectively. The consumption of alternative formulation pasta grew at a growth rate of 9.9% and 11.9% during the 52 and 13 week periods ending September 26, 2009, respectively. In addition, across nearly every store product category, consumers have been taking advantage of lower priced private label alternatives to traditional branded label products. For the pasta category, during the 52 week period ending September 26, 2009, total brand growth was 2.2% and private label growth was 9.4%. Further, consumers are increasingly taking advantage of lower priced delivery channels, such as discount and dollar stores.

During 2009, we began implementation of our strategy to focus on growing customer brands (private label) in the overall market and our proprietary brands in core markets where they are strongest. As a part of that strategy, we are extracting our proprietary branded products from those markets in which they are underperforming. As a result, during 2009 we experienced volume and revenue growth in our private label and focus brands, partly offset by the anticipated decrease in branded volume and revenue in those markets in which we extracted branded products.

Our institutional business had significant changes during the last half of 2009. The food service channel, including restaurants, has been increasingly challenged as a result of current macro-economic conditions. The ingredient channel has benefited from consumption growth in products such as prepared dinners and soups, which use pasta as an ingredient. Within the ingredient channel, we generally receive a conversion fee with costs recovered on a pass-through basis. Ingredient products primarily use non-durum wheat classes for production. Although our per unit margin remained stable, average selling prices decreased due primarily to declines in the cost of non-durum wheat.

Critical Accounting Policies

Our results of operations and financial condition, as reflected in our consolidated financial statements, have been prepared in accordance with accounting principles generally accepted in the United States. As discussed in Note 2 to our consolidated financial statements, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. On an ongoing basis, our management evaluates its estimates and judgments. We consider our accounting policies related to indefinite-lived intangible assets, long-lived assets, share-based compensation, allowance for doubtful accounts, reserves for slow-moving, damaged and discontinued inventory, reserve for obsolete and impaired spare parts, promotional allowances, and income taxes to be our critical accounting policies. Our management bases its estimates and judgments on relevant facts and circumstances, the results of

which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our most critical accounting policies are described below.

Indefinite-lived Intangible Assets: We assess indefinite-lived intangible assets, which are not subject to amortization, for impairment at least annually, during our fourth quarter, or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We completed our annual review of fiscal year 2007 based on the 2008 fiscal year business plan and our forecast available in the fourth quarter of fiscal year 2007. Based on the review, no impairment charges were recorded in fiscal year 2007. We performed our fiscal year 2008 annual review of our brands based on the fiscal year 2009 business plan and forecasts, which resulted in a brand impairment of $3.7 million. We completed our annual review of fiscal year 2009 based on the 2010 fiscal year business plan and our forecast available in the fourth quarter of fiscal year 2009. Based on the review, no impairment charges were recorded in fiscal year 2009. Future events could cause our management to conclude that the carrying value of one or more of our brands is not recoverable and that the value of intangible assets is further impaired. At October 2, 2009, the balance of our intangible brand assets was $79.1 million.

Long-Lived Assets: We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We evaluate recoverability of assets to be held and used by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell. At October 2, 2009, net long-lived assets totaled $291.2 million.

Share-Based Compensation: The fair value of stock options and stock appreciation rights classified as equity is measured based on the grant date fair value of the award. We recognize the fair value on a straight-line basis over the period during which an employee is required to provide service in exchange for the award. We use the Black-Scholes option pricing model to determine the grant date fair value of stock options and stock appreciation rights. Key assumptions of the Black-Scholes option pricing model include the expected term of the grants, the expected volatility of the price of the underlying share, the expected risk-free interest rate, and the expected dividends on the underlying shares. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside our control. While we do not believe share-based compensation would have been materially impacted by the variability in the range of reasonable assumptions we could have applied to value option awards, it is possible that share-based compensation could be materially impacted by the application of alternate assumptions in future periods. Also, we record share-based compensation expense for nonvested stock awards, stock options, and stock appreciation rights net of estimated forfeitures. Our forfeiture rate assumption used in determining share-based compensation expense is estimated based on historical data. The actual forfeiture rate could differ from those estimates, which could have a material impact on compensation expense.

Allowance for Doubtful Accounts: We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a specific customer's inability to meet its financial obligations to us (e.g. bankruptcy filings, substantial down-grading of credit scores), we record a specific reserve for bad debts against amounts due to reduce the net recognized receivable to the amount we reasonably believe will be collected. For all other customers, we recognize reserves for bad debts based on the length of time the receivables are past due and our historical experience. Our allowance for doubtful accounts was $1.4 million as of October 2, 2009.

Reserve for Slow-Moving, Damaged and Discontinued Inventory: We carry our finished goods inventory at standard cost, adjusted for capitalized variances, determined on a first-in, first-out (FIFO)

basis. At the end of each period, we review our inventory to ensure that the items are carried at lower of cost or market value. We periodically review our inventory for slow-moving, damaged and discontinued items and provide reserves to reduce such items identified to the recoverable amount. Our reserve balance was $0.6 million as of October 2, 2009.

Reserve for Obsolete and Impaired Spare Parts: We carry our spare parts inventory as a component of property, plant and equipment. Spare parts, valued at the lower of average cost or net realizable value, are not depreciated but are expensed when placed in service. We periodically review our spare parts for excess and obsolete items and establish reserves to reduce such items to their recoverable amounts. Our reserve balance was $0.9 million as of October 2, 2009.

Promotional Allowances: Promotional allowances related to our sales are recorded at the time revenue is recognized. Such allowances, where applicable, are estimated based on anticipated volume and promotional spending with specific customers. We periodically review our estimate for promotional allowances and adjust accruals to reflect our estimate of the future liability.

Income Taxes: We estimate our income tax provision or benefit in each of the jurisdictions in which we operate, including estimating exposures related to examinations by taxing authorities. Tax positions are initially recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. Although we believe that our accruals for tax liabilities, including uncertain tax positions, are reasonable and adequate, tax regulations are subject to interpretation and the tax review and resolution process is inherently uncertain; therefore, our assessment can involve both a series of complex judgments about future events and rely heavily on estimates and assumptions. To the extent the probable tax outcome of these matters changes, such changes in estimates may have a material impact on the income tax provision and on our consolidated statements of operations in the period in which such determination is made.

We must also make judgments regarding the realizability of deferred tax assets and tax liabilities. Our judgments regarding future taxable income may change due to changes in market conditions, changes in tax laws, tax planning strategies or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowances we have established may be increased or decreased, resulting in a respective increase or decrease in income tax expense which may have a material impact on our consolidated statements of operations in the period of the change in assumptions of estimates.

In accordance with FASB ASC 740, "Income Taxes", the valuation allowance against deferred tax assets as of October 2, 2009 and September 26, 2008 was $6.4 million and $37.1 million, respectively. During the fiscal years ended October 2, 2009, September 26, 2008 and September 28, 2007, the valuation reserve decreased $30.7 million, $12.7 million and $2.5 million, respectively. The valuation allowance at October 2, 2009 was primarily related to state and foreign operating loss carryforwards and state tax credit carryforwards that, in the judgment of management, were not more likely than not to be realized. The valuation allowance at September 26, 2008 was related to federal, state, and foreign net operating loss carryforwards, deferred tax assets, and tax credit carryforwards that, in the judgment of management, were not more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods) and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, we will need to generate future taxable income before the

expiration of the deferred tax assets as governed by the tax code. As we had a three-year cumulative loss as of September 26, 2008, management considered income from the reversal of net temporary differences in existence as of September 26, 2008 and did not considered future years' forecasted income in determining the measurement and recognition of our valuation allowance. During 2009, we achieved cumulative income for the preceding three-year period and based on all available evidence, both positive and negative, management determined that it is more likely than not that we will realize the benefit of federal and certain state net operating loss carryforwards that previously had a valuation allowance. The benefit of reducing that portion of the valuation allowance attributable to these loss carryforwards is reflected in the determination of our 2009 effective tax rate. Also during 2009, management determined, based upon all available evidence including future projected income, that it is more likely than not that we will utilize the benefits primarily related to AMT credit carryforwards. These benefits were recognized as a discrete event in our second quarter.

53-Week Fiscal Year 2009 Compared to 52-Week Fiscal Year 2008

    Following is an analysis of changes in key items included in the
consolidated statements of operations for the 53-week fiscal year ended
October 2, 2009 compared to the 52-week fiscal year ended September 26, 2008.
Amounts have been rounded. Percent of revenues, dollar change and percent change
are all calculated based on amounts presented in this table (dollar amounts in
millions):

                       53-Week Fiscal Year          52-Week Fiscal Year
                              Ended                        Ended
                         October 2, 2009             September 26, 2008
                                      % of                         % of       Dollar    Percent
                      Amount        Revenues       Amount        Revenues     Change     Change
Revenues:
Retail               $    495.6           78.9 %  $    425.5           74.8 % $  70.1       16.5 %
Institutional             132.6           21.1         143.7           25.2     (11.1 )     (7.7 )
Total revenues            628.2          100.0         569.2          100.0      59.0       10.4
Significant
Expenses
Cost of goods
sold                      451.5           71.9         446.9           78.5       4.6        1.0
Selling and
marketing expense          28.0            4.5          27.7            4.9       0.3        1.1
General and
administrative
expense                    34.4            5.5          46.7            8.2     (12.3 )    (26.3 )
Impairment
charges to brands             -              -           3.7            0.7      (3.7 )   (100.0 )
Interest expense,
net                        16.5            2.6          26.2            4.6      (9.7 )    (37.0 )
Income tax
expense (benefit)           8.6            1.4          (2.3 )         (0.4 )    10.9        n/c
Key Measurements
Gross profit              176.7           28.1         122.3           21.5      54.4       44.5
Operating profit          113.4           18.1          43.1            7.6      70.3      163.1
Income before
income taxes               96.9           15.4          16.8            3.0      80.1      476.8
Net income                 88.3           14.1          19.1            3.4      69.2      362.3


--------------------------------------------------------------------------------
n/c-not calculated

Revenues: Revenues increased $59.0 million, or approximately 10%, to $628.2 million for the fiscal year ended October 2, 2009, from $569.2 million for the fiscal year ended September 26, 2008. Revenues increased approximately $32.8 million, or 6%, due to higher volume and approximately $30.0 million, or 5%, due to increased average selling prices. The volume increase was partially due to an industry wide increase in consumption and partially to the inclusion of an additional week in fiscal year 2009. These increases were partly offset by a $3.8 million decrease in revenue related to payments received from the U.S. government under the Continued Dumping and Subsidy Offset Act of 2000 ("Byrd Amendment").

Retail revenues increased $70.1 million, or approximately 17%, to $495.6 million for the fiscal year ended October 2, 2009, from $425.5 million for the fiscal year ended September 26, 2008. The $70.1 million increase in revenues was comprised of a $38.2 million, or 9%, increase due to higher average selling prices and $35.7 million, or 8%, increase due to increased volume, partially offset by a $3.8 million decrease in payments received under the Byrd Amendment. The increase in revenues, exclusive of the impact Byrd Amendment payments received, of $73.9 million, consists of a $78.3 million increase in our strategic proprietary and customer brands, partly offset by a $4.4 million decrease in revenue related to proprietary brands we are extracting from underperforming markets. The increased volume was principally due to an industry wide increase in consumption combined with the inclusion of an additional week in fiscal year 2009. Our fiscal year 2009 selling prices include the full impact of pasta price increases made in response to rising commodity, transportation, and other input costs that had not been fully implemented during the first two quarters of the comparable period of the prior fiscal year.

Institutional revenues decreased $11.1 million, or approximately 8%, to $132.6 million for fiscal year ended October 2, 2009, from $143.7 million for fiscal year ended September 26, 2008. Revenues decreased $1.0 million, or 1%, due to decreased volume and decreased $10.1 million, or 7%, due to lower average selling prices. The primary reason for the revenue decline is that during the fiscal year 2008, we provided approximately $8.1 million of product pursuant to government contracts. Through most of 2009, we were precluded from bidding on this business due to restrictions limiting bids to small businesses as defined under the applicable government regulations. These bidding restrictions have changed. The U.S. Department of Agriculture allows certain qualified bidders (including us), who are not small businesses, to bid on specified portions of the government contracts. In addition, institutional revenue has recently been adversely affected by challenges to our customers in the food service industry and the impact of lower per-unit revenues on certain pass-through manufacturing agreements in our ingredient business.

Cost of goods sold: Cost of goods sold increased $4.6 million, or approximately 1%, to $451.5 million for the fiscal year ended October 2, 2009 from $446.9 million for the fiscal year ended September 26, 2008. As a percentage of revenues, cost of goods decreased to 71.9% for the fiscal year ended October 2, 2009 from 78.5% for fiscal year ended September 26, 2008. The fiscal year 2009 increase in cost of goods sold primarily resulted from higher sales volume, partially offset by lower commodity costs. The primary commodity used in production of pasta is durum wheat. The spot market price of durum declined during fiscal 2009 when compared to fiscal 2008. However, durum prices included as a component of cost of goods sold, while lower than in the prior year, were higher than spot market prices due to our forward purchases of durum and the use of the higher priced durum inventory in the manufacturing process. The lower durum wheat costs were partially offset by increases in other input costs including packaging, labor and energy.

Gross profit: Gross profit increased $54.4 million, or approximately 45%, to $176.7 million for the fiscal year ended October 2, 2009, from $122.3 million for the fiscal year ended September 26, 2008. Gross profit as a percentage of revenues increased to 28.1% during fiscal year 2009 compared to 21.5% during fiscal year 2008. The increase in gross profit primarily results from stabilized selling prices and favorable revenue shift to more retail and less institutional products.

Selling and marketing expense: Selling and marketing expense increased $0.3 million, or approximately 1%, to $28.0 million for the fiscal year ended October 2, 2009, from $27.7 million for fiscal year ended September 26, 2008. As a percentage of revenue, selling and marketing expense were 4.5% and 4.9% for the fiscal years 2009 and 2008, respectively. This increase is primarily the result of an increase in marketing expenses of $1.4 million and brand amortization expense of $0.8 million, partly offset by a decrease in consulting expenses of $1.6 million. The increase in marketing expense was due primarily to an overall increase in marketing programs resulting from our fiscal year 2008

strategic alignment. The increase in brand amortization expense results from the amortization of a brand that was designated as a definite life intangible as of the end of the prior fiscal year. The decrease in consulting expenses relates primarily to the costs, incurred and recognized during fiscal year 2008, related to an independent third party analysis of the pasta category and our market placement.

General and administrative expense: General and administrative expense decreased $12.3 or approximately 26% to $34.4 million for fiscal year 2009, from $46.7 million for fiscal year 2008. General and administrative expenses as a percentage of revenues were 5.5% for fiscal year 2009 compared to 8.2% for fiscal year 2008. This decrease was primarily due to reduction in professional fees of $15.4 million, partly offset by a $3.1 million increase in compensation and benefits. The decrease in professional fees was primarily related to restatement related fees incurred in the prior year. As previously disclosed, . . .