AMERICAN ITALIAN PASTA CO, 424B4, 1997-10-09

AMERICAN ITALIAN PASTA CO
424B4, 1997-10-09
MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS

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<PAGE> 1
PROSPECTUS Filed pursuant to Rule 424(b)(4)

7,900,000 Shares
[AIPC LOGO]
American Italian Pasta Company
CLASS A COMMON STOCK
------------------------

OF THE 7,900,000 SHARES OF CLASS A COMMON STOCK BEING OFFERED HEREBY, 5,310,000
SHARES ARE BEING SOLD BY THE COMPANY AND 2,590,000 SHARES ARE BEING SOLD BY THE
SELLING STOCKHOLDERS. SEE "PRINCIPAL AND SELLING STOCKHOLDERS." THE COMPANY WILL
NOT RECEIVE ANY OF THE PROCEEDS FROM THE SALE OF SHARES OF CLASS A COMMON STOCK
BY SUCH SELLING STOCKHOLDERS. OF THE 7,900,000 SHARES OF CLASS A COMMON STOCK
BEING OFFERED HEREBY, 6,720,000 SHARES ARE BEING OFFERED INITIALLY IN THE UNITED
STATES AND CANADA BY THE U.S. UNDERWRITERS AND 1,180,000 SHARES ARE BEING
OFFERED INITIALLY OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL
UNDERWRITERS. SEE "UNDERWRITERS." PRIOR TO THE OFFERING, THERE HAS BEEN NO
PUBLIC MARKET FOR THE CLASS A COMMON STOCK OF THE COMPANY. SEE "UNDERWRITERS"
FOR A DISCUSSION OF THE FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL
PUBLIC OFFERING PRICE.
------------------------
THE COMPANY HAS TWO CLASSES OF AUTHORIZED COMMON STOCK CONSISTING OF THE CLASS A
COMMON STOCK OFFERED HEREBY AND CLASS B COMMON STOCK. SEE "DESCRIPTION OF
CAPITAL STOCK." HOLDERS OF CLASS A COMMON STOCK ARE ENTITLED TO ONE VOTE PER
SHARE ON EACH MATTER SUBMITTED TO A VOTE OF STOCKHOLDERS. THE CLASS B COMMON
STOCK IS NON-VOTING EXCEPT UNDER CERTAIN LIMITED CIRCUMSTANCES AND AS REQUIRED
BY LAW. ALL HOLDERS OF COMMON STOCK ARE ENTITLED TO RECEIVE SUCH DIVIDENDS AND
DISTRIBUTIONS, IF ANY, AS MAY BE DECLARED FROM TIME TO TIME BY THE BOARD OF
DIRECTORS.
------------------------

THE CLASS A COMMON STOCK HAS BEEN APPROVED FOR LISTING, SUBJECT TO OFFICIAL
NOTICE OF ISSUANCE, ON THE NEW YORK STOCK
EXCHANGE UNDER THE SYMBOL "PLB."
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------

PRICE $18 A SHARE
------------------------

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
-------- -------------- ----------- -------------------
<S> <C> <C> <C> <C>
Per Share............... $18.00 $1.24 $16.76 $16.76
Total(3)................ $142,200,000 $9,796,000 $88,995,600 $43,408,400
</TABLE>

- ------------

(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriters."
(2) Before deducting expenses payable by the Company estimated at $1,600,000.
(3) Certain Selling Stockholders have granted to the U.S. Underwriters an
option, exercisable within 30 days of the date hereof, to purchase up to an
aggregate of 1,185,000 additional Shares of Class A Common Stock at the
Price to Public less Underwriting Discounts and Commissions, for the purpose
of covering over-allotments, if any. If the U.S. Underwriters exercise such
option in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Selling Stockholders will be $163,530,000,
$11,265,400 and $63,269,000, respectively. See "Underwriters."

------------------------

The Shares of Class A Common Stock are offered, subject to prior sale,
when, as and if accepted by the Underwriters named herein and subject to
approval of certain legal matters by Davis Polk & Wardwell, counsel for the
Underwriters. It is expected that delivery of the Shares of Class A Common Stock
will be made on or about October 15, 1997 at the office of Morgan Stanley & Co.
Incorporated, New York, N.Y., against payment therefor in immediately available
funds.
------------------------

MORGAN STANLEY DEAN WITTER
BT ALEX. BROWN
GOLDMAN, SACHS & CO.
GEORGE K. BAUM & COMPANY

October 8, 1997
<PAGE> 2

AIPC'S PASTA LABELLA(R) BRANDED PASTA

MUELLER'S(R) IS A REGISTERED TRADEMARK OF CPC INTERNATIONAL INC.

PRODUCTS TO BE PRODUCED BY
AIPC FOR CPC INTERNATIONAL INC.

AIPC'S PRIVATE LABEL AND BRANDED PASTA

2
<PAGE> 3

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, BY THE SELLING STOCKHOLDERS OR BY
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE CLASS A COMMON STOCK
OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY
SHALL UNDER ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------

UNTIL NOVEMBER 2, 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
------------------------

FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE
TAKEN IN ANY JURISDICTION BY THE COMPANY, BY THE SELLING STOCKHOLDERS OR BY ANY
UNDERWRITER THAT WOULD PERMIT A PUBLIC OFFERING OF THE CLASS A COMMON STOCK OR
POSSESSION OR DISTRIBUTION OF THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION
FOR THAT PURPOSE IS REQUIRED, OTHER THAN IN THE UNITED STATES. PERSONS INTO
WHOSE POSSESSION THIS PROSPECTUS COMES ARE REQUIRED BY THE COMPANY, THE SELLING
STOCKHOLDERS AND THE UNDERWRITERS TO INFORM THEMSELVES ABOUT AND TO OBSERVE ANY
RESTRICTIONS AS TO THE OFFERING OF THE CLASS A COMMON STOCK AND THE DISTRIBUTION
OF THIS PROSPECTUS.
------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................... 4
Risk Factors........................... 10
Use of Proceeds........................ 17
Dividend Policy........................ 17
Capitalization......................... 18
Dilution............................... 19
Selected Financial and Other Data...... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 22
Business............................... 32
Management............................. 43
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Relationships and Related
Transactions......................... 53
Principal and Selling Stockholders..... 56
Description of Capital Stock........... 58
Shares Eligible for Future Sale........ 61
Certain United States Federal Income
Tax Considerations for Non-U.S.
Holders.............................. 63
Underwriters........................... 66
Legal Matters.......................... 70
Experts................................ 70
Additional Information................. 70
Index to Audited Financial
Statements........................... F-1
</TABLE>

------------------------

This Prospectus contains forward-looking statements and information based
on management's beliefs or assumptions made by and information currently
available to management that involve risks and uncertainties. If one or more of
these risks or uncertainties materialize, or should such assumptions prove
incorrect, the Company's actual results may be materially different from those
anticipated. Factors that may cause such differences include, but are not
limited to, those discussed under "Risk Factors" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." The Company
undertakes no obligation to update any such forward-looking statements to
reflect future events or developments.
------------------------

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS
OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF THE CLASS A COMMON STOCK IN
THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

3
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and Financial Statements,
including the Notes thereto, appearing elsewhere in this Prospectus. Unless
otherwise indicated, all references in this Prospectus to (i) the "Company" and
"AIPC" shall mean American Italian Pasta Company, a Delaware corporation, and
its predecessor unless the context otherwise requires; and (ii) "pasta" shall
mean dry pasta, including dry pasta used in shelf-stable, frozen and canned
pasta products. Unless otherwise indicated, all information in this Prospectus
has been adjusted to give effect to the Recapitalization (as defined herein) and
assumes the U.S. Underwriters' over-allotment option is not exercised.

THE COMPANY

OVERVIEW

AIPC is the third largest and one of the fastest-growing producers and
marketers of pasta in North America. The Company commenced operations in 1988
with the North American introduction of new, highly-efficient durum wheat
milling and pasta production technology. Management believes that the Company's
singular focus on pasta, vertically-integrated facilities, continued
technological improvements and development of a highly-skilled workforce enable
AIPC to produce high-quality pasta at costs below those of many of its
competitors. Management believes that the combination of the Company's cost
structure, the average age of its competitors' North American pasta production
equipment and the growing pasta consumption in North America creates significant
opportunities for continued growth. The Company's revenue and operating income
excluding product introduction costs were $121.6 million and $16.7 million,
respectively, for the calendar year ended December 31, 1996, and grew at
compound annual growth rates ("CAGR") of 33% and 33%, respectively, over the
five-year period ended December 31, 1996. During the nine-month period ended
June 30, 1997, the Company had revenue of $93.6 million and an operating margin
excluding product introduction costs of 15.9%.

The Company has rapidly established a significant market presence in North
America by developing strategic customer relationships with food industry
leaders that have substantial pasta requirements. North American pasta
consumption exceeded 5.0 billion pounds in 1995 and is expected to grow based on
industry and trade sources and the Company's own analysis. The Company has a
long-term supply agreement with Sysco Corporation ("Sysco"), the nation's
largest marketer and distributor of foodservice products. In 1998, AIPC will
become the exclusive producer of Mueller's(R), the largest pasta brand in the
United States, pursuant to a recent long-term manufacturing and distribution
agreement with CPC International Inc. ("CPC"). CPC has announced its intention
to close its current pasta production facility by December 1997. AIPC is also
the primary supplier of pasta to Sam's Wholesale Club ("Sam's Club"), the
largest club store chain in the United States, and supplies private label and
branded pasta to six of the 10 largest grocery retailers in the United States,
including Wal*Mart, A&P, Publix, Albertsons, American Stores and Winn-Dixie. In
addition, AIPC has developed supply relationships with leading food processors,
such as Pillsbury, General Mills and Kraft Foods which use the Company's pasta
as an ingredient in branded food products.

The Company produces more than 80 dry pasta shapes in two
vertically-integrated production and distribution facilities, strategically
located in Excelsior Springs, Missouri and Columbia, South Carolina. The
construction of the Missouri plant in 1988 represented the first use in North
America of a vertically-integrated, high-capacity pasta plant using Italian
pasta production technology. Management believes that this plant continues to be
among the most efficient and highly-automated pasta facilities in North America.
The South Carolina plant, which commenced operations in 1995, produces only
pasta shapes conducive to high-volume production and employs a highly-skilled,
self-managed workforce. Management believes that the South Carolina plant is the
most efficient pasta facility in North America in terms of productivity and
conversion cost per pound. To meet the significant volume requirements of the
CPC agreement and support future growth, the Company commenced a capital
expenditure program in 1997 to nearly double the
4
<PAGE> 5

Company's annual pasta production capacity and add a highly-automated durum
wheat mill to its South Carolina plant, with completion scheduled for 1998.

OPERATING STRATEGY

The Company's operating strategy is to grow revenues and profitability by
offering customers the highest quality pasta products at competitive prices with
superior customer service. Key elements of the Company's operating strategy are
to:

- Continue to Lead the Industry as a Low Cost Producer of High Quality
Pasta. AIPC has successfully implemented production and capital investment
strategies designed to achieve low-cost production of high-quality
products. AIPC has distinguished itself from most major pasta producers by
vertically integrating the durum wheat milling function with the production
process and strategically locating its distribution centers. Management
believes that its facilities are among the most efficient pasta production
facilities in North America in terms of productivity and conversion cost
per pound, and that its vertically-integrated processes produce pasta of
superior color, texture, flavor and consistency. The Company expects to
realize additional operating efficiencies through the completion of the
current expansion program at its South Carolina and Missouri facilities and
ongoing improvement programs.

- Provide Superior Customer Service. The Company develops and enhances
customer relationships by providing superior service and technical support
to its customers. The Company has invested heavily in the development of a
broad range of customer service programs, including electronic data
interchange ("EDI") and efficient consumer response ("ECR") which
streamline the order, invoicing and inventory management functions. The
Company provides marketing, technical and service support to its customers
by assisting customers with supply and category management decisions,
producing pasta to its customers' specifications and making operational
recommendations to its customers using pasta as an ingredient in their food
products.

GROWTH STRATEGY

The Company continues to implement its growth strategy, which builds on the
Company's operating strategy and industry trends. Key elements of the Company's
growth strategy are to:

- Successfully Implement CPC Business Expansion. The Company was
recently selected to be the exclusive producer of CPC's Mueller's brand
pasta, the largest pasta brand in North America. Upon completion of AIPC's
capacity expansion in 1998, management anticipates CPC's annual volume
requirements will represent an approximately 60% increase over the
Company's fiscal 1997 production run rate. Management believes that the
Company's experience in servicing large pasta supply agreements and its
current capacity expansion program will enable AIPC to meet the current CPC
volume requirements and support potential future growth.

- Pursue Strategic Alliances. The Company believes that commercial
users and marketers of pasta will continue to require increasing quantities
of pasta and that a greater portion of these requirements will be
outsourced to more efficient producers of high-quality pasta, such as AIPC.
Management has identified additional strategic opportunities with
commercial users and marketers of pasta which may result in incremental
growth, new product development and cost savings opportunities in the
future.
5
<PAGE> 6

- Secure Additional Private Label Customers. The Company intends to
continue to grow its private label customer base and secure additional
private label customers by continuing to offer quality products,
competitive pricing, category management and superior customer service.
Management believes that AIPC's prospects for growth in the private label
market have been enhanced since Borden Foods Holdings Corporation
("Borden"), historically the largest private label supplier in North
America, announced its intention to exit the private label pasta business
in 1997.

- Continue Product Innovation. In 1995, the Company introduced Pasta
LaBella(R) flavored pasta, a line of all natural, full-flavored pasta
products utilizing patented flavoring technology and AIPC's proprietary
production process. In addition to pursuing increased sales with
institutional customers, the Company is exploring potential sales and
marketing alliances to expand retail distribution of Pasta LaBella flavored
pasta. AIPC also intends to continue assisting its customers with
innovative products and packaging, and the development of additional
value-added products intended to generate higher margins than traditional
pasta products.

The Company was incorporated under the laws of the State of Delaware in
1991, and is the successor by merger of a Colorado corporation incorporated in
1986. The Company's executive offices are located at 1000 Italian Way, Excelsior
Springs, Missouri 64024, and its telephone number is (816) 502-6000. The
Company's home page on the World Wide Web is located at
http://www.pastalabella.com. Information contained in the Company's home page
shall not be deemed to be a part of this Prospectus.

RECAPITALIZATION

Prior to the Offering, the Company amended and restated its Certificate of
Incorporation (as so amended, the "Charter") and effected a recapitalization
(the "Recapitalization"), pursuant to which each share of common stock and Class
A common stock of the Company outstanding immediately prior to the
Recapitalization was converted into 6.132043 shares of Class A Common Stock, par
value $.001 per share, of the Company ("Class A Common Stock"). Shares of Class
A Common Stock held by the Morgan Stanley Stockholders (as defined herein) and
certain related persons are, in certain circumstances, convertible into an equal
number of shares of Class B Non-Voting Common Stock, par value $.001 per share,
of the Company ("Class B Common Stock") and vice versa. The Company's Charter
provides that if at any time after consummation of the Offering, the Morgan
Stanley Stockholders own in excess of 49% of the outstanding Class A Common
Stock, such excess shares will be automatically converted on a one-for-one basis
into shares of Class B Common Stock. Shares of Class A Common Stock held by
persons other than the Morgan Stanley Stockholders and such related persons are
not convertible into Class B Common Stock. Unless otherwise indicated, all
references in this Prospectus to "Common Stock" shall mean, collectively, the
Class A Common Stock and the Class B Common Stock. See "Description of Capital
Stock -- General."

OWNERSHIP

As of the date of this Prospectus, The Morgan Stanley Leveraged Equity Fund
II, L.P. ("MSLEF"), Morgan Stanley Capital Partners III, L.P. and certain
affiliated funds (the "MSCP Funds" and with MSLEF, the "Morgan Stanley
Stockholders") own approximately 75.1% of the outstanding Common Stock. Upon
consummation of the Offering, the Morgan Stanley Stockholders will own
approximately 39.6% of the outstanding Common Stock (32.5% if the over-allotment
option granted to the U.S. Underwriters is exercised in full). See "Principal
and Selling Stockholders" and "Underwriters."
6
<PAGE> 7

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered by:
The Company........................................ 5,310,000 shares
The Selling Stockholders........................... 2,590,000 shares(1)
-------------------
Total......................................... 7,900,000 shares
===================
Class A Common Stock offered in:
U.S. Offering...................................... 6,720,000 shares
International Offering............................. 1,180,000 shares
-------------------
Total......................................... 7,900,000 shares
===================
Common Stock outstanding after the Offering.......... 16,776,056 shares(2)
Use of proceeds...................................... The net proceeds to the Company from the
Offering will be used to repay existing
indebtedness, fund expansion of the Company's
facilities and for general corporate purposes.
The Company will not receive any proceeds from
the sale of Class A Common Stock by any
Selling Stockholder. See "Use of Proceeds."
New York Stock Exchange Symbol....................... PLB
</TABLE>

- -------------------------
(1) Of such shares, 630,000 shares are being offered by Thompson Holdings, L.P.
("Thompson Holdings"), a limited partnership of which Richard C. Thompson, a
director of the Company, is the only limited partner, 1,375,893 shares are
being offered by MSLEF and 584,107 shares are being offered by Morgan
Stanley Capital Partners III, L.P. Thompson Holdings, MSLEF and Morgan
Stanley Capital Partners III, L.P. are sometimes referred to herein
collectively as the "Selling Stockholders." Such shares do not include up to
1,185,000 shares that may be sold by the Morgan Stanley Stockholders
pursuant to the exercise of the U.S. Underwriters' over-allotment option.
See "Principal and Selling Stockholders."
(2) Excludes (i) 1,132,049 shares, 46,665 shares and 993,391 shares of Class A
Common Stock reserved for issuance upon the exercise of outstanding stock
options under the Company's 1992 Non-Statutory Stock Option Plan (the "1992
Plan"), 1993 Non-Qualified Stock Option Plan (the "1993 Plan") and 1997
Equity Incentive Plan (the "1997 Plan"), respectively; and (ii) 69,832
shares, 36,118 shares and 1,006,609 shares of Class A Common Stock available
for future grants under the 1992 Plan, the 1993 Plan and the 1997 Plan,
respectively. See "Management -- Stock Option Plans."

RISK FACTORS

See "Risk Factors" for a discussion of certain factors that should be
considered in evaluating an investment in the Class A Common Stock.
7
<PAGE> 8

SUMMARY FINANCIAL AND OPERATING DATA

The following summary financial and operating data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the Financial Statements of the Company,
including the Notes thereto, appearing elsewhere in this Prospectus. In 1996,
the Company changed its fiscal year end from December 31 to the last Friday of
September or the first Friday of October. This change resulted in a nine-month
fiscal period ended September 30, 1996, and will result in a 53-week year for
fiscal 1997, and a 52- or 53-week year for all subsequent fiscal years. The
Company's first three fiscal quarters end on the Friday last preceding December
31, March 31, and June 30 of each year. For purposes of this Prospectus, the
1996 fiscal year is described as the nine-month fiscal period ended September
30, 1996, and the nine-month 1996 and 1997 interim periods are described as
having ended June 30. The statement of operations data of the Company for the
calendar year ended December 31, 1996 and the nine-month period ended June 30,
1996 are included herein only for comparison purposes.

<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH
CALENDAR FISCAL PERIOD PERIOD ENDED
FISCAL YEAR ENDED DECEMBER 31, YEAR ENDED ENDED JUNE 30,
------------------------------------- DECEMBER 31, SEPTEMBER 30, ----------------------
1992 1993 1994 1995 1996 1996 1996 1997
---- ---- ---- ---- ------------ ------------- ---- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................ $39,049 $47,872 $69,465 $92,903 $121,621 $92,074 $86,514 $ 93,616
Cost of goods sold.............. 28,750 35,081 54,393 73,851 89,704 68,555 65,697 67,821
Plant expansion costs(1)........ -- 1,171 484 2,065 -- -- 425 --
------- ------- ------- ------- -------- ------- ------- --------
Gross profit.................... 10,299 11,620 14,588 16,987 31,917 23,519 20,392 25,795
Selling and marketing expense,
including product introduction
costs(2)...................... 2,888 2,883 3,792 5,303 21,250 16,798 11,236 10,212
General and administrative
expense....................... 2,077 2,049 1,951 2,930 3,498 2,805 2,741 2,855
------- ------- ------- ------- -------- ------- ------- --------
Operating profit................ 5,334 6,688 8,845 8,754 7,169 3,916 6,415 12,728
Interest expense, net........... 5,396 3,210 4,975 8,008 10,575 8,023 8,030 7,800
------- ------- ------- ------- -------- ------- ------- --------
Income (loss) before income tax
and extraordinary loss........ (62) 3,478 3,870 746 (3,406) (4,107) (1,615) 4,928
Income tax...................... -- (3,221) 1,484 270 (1,288) (1,556) (642) 1,878
Extraordinary loss, net of
income tax(3)................. 2,639 -- 204 -- 1,647 1,647 1,647 --
------- ------- ------- ------- -------- ------- ------- --------
Net income (loss)............... $(2,701) $ 6,699 $ 2,182 $ 476 $ (3,765) $(4,198) $(2,620) $ 3,050
======= ======= ======= ======= ======== ======= ======= ========
Pro forma net income (loss) per
common share(4)............... $ (.38) $ .64 $ .21 $ .05 $ (.36) $ (.40) $ (.25) $ .25
Pro forma weighted average
common shares
outstanding(4)................ 7,114 10,390 10,401 10,445 10,475 10,473 10,466 12,176
OTHER DATA:
EBITDA(5)....................... $ 7,993 $ 9,495 $12,408 $13,836 $ 12,460 $ 8,994 $11,395 $ 18,037
EBITDA as a percent of
revenues(5)................... 20.5% 19.8% 17.9% 14.9% 10.2% 9.8% 13.2% 19.3%
Revenue per employee
(end of period)............... $ 209 $ 244 $ 288 $ 361 $ 437 NM NM NM
Working capital excluding
current maturities of
long-term debt (average for
the period) as a percent of
revenues...................... 17.3% 14.2% 12.0% 4.6% 6.5% NM NM NM
Cash flows provided by (used
in):
Operating activities.......... $ 966 $ 4,787 $ 3,690 $ 5,730 $ (5,013) $(7,477) $(4,155) $ 14,076
Investing activities.......... (1,000) (15,139) (25,431) (38,789) (3,870) (3,041) (6,084) (11,464)
Financing activities.......... 2,142 10,382 19,603 33,066 10,543 12,318 11,722 (1,818)
Earnings to fixed charges....... .50x 1.87x 1.48x .92x .52x .28x .59x 1.60x
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-------------------------
ACTUAL AS ADJUSTED(6)
------ --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 2,612 $ 21,310
Working capital............................................. 13,276 34,849
Total assets................................................ 145,462 164,160
Long-term debt, less current maturities..................... 89,500 23,677
Stockholders' equity........................................ 40,977 128,373
</TABLE>

(footnotes appear on following page)
8
<PAGE> 9

(footnotes from previous page)
- -------------------------
(1) Plant expansion costs include incremental direct and indirect manufacturing
and distribution costs which are incurred as a result of construction,
commissioning and start-up of new capital assets. These costs are expensed
as incurred but are unrelated to current production and, therefore, are
reported as a separate line item in the statement of operations.

(2) Selling and marketing expense includes incremental product introduction
costs, including payment of product placement or "slotting" fees, related to
the Company's launch of its Pasta LaBella flavored pasta products into the
U.S. retail grocery market. The Company did not incur such product
introduction costs prior to the calendar year ended December 31, 1996.
Product introduction costs were incurred as follows: $9.6 million for the
calendar year ended December 31, 1996, $8.1 million for the nine-month
period ended September 30, 1996, $4.6 million for the nine-month period
ended June 30, 1996 and $2.1 million for the nine-month period June 30,
1997.

(3) Represents losses due to early extinguishment of long-term debt, net of
income tax.

(4) Earnings per share is presented on a pro forma basis giving effect to the
consummation of the Recapitalization in connection with the Offering.

(5) EBITDA represents earnings before interest, income taxes, depreciation and
amortization, thereby removing the effect of certain non-cash charges on
income. Management believes that EBITDA is a meaningful measure of operating
performance, cash generation and ability to service debt. However, EBITDA
should not be considered as an alternative either to: (i) net earnings
(determined in accordance with U.S. generally accepted accounting principles
("GAAP")); (ii) operating cash flow (determined in accordance with GAAP); or
(iii) liquidity. There can be no assurance that the Company's calculation of
EBITDA is comparable to similarly-titled items reported by other companies.

(6) Adjusted to give effect to the issuance and sale by the Company of 5,310,000
shares of Class A Common Stock in the Offering at the initial public
offering price per share of $18 and the application of the net proceeds to
the Company therefrom. See "Use of Proceeds" and "Capitalization."
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RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors in evaluating an
investment in the shares of Class A Common Stock offered hereby.

DEPENDENCE ON MAJOR CUSTOMERS

Historically, a limited number of customers have accounted for a
substantial portion of the Company's revenues. During 1994, 1995, the nine-month
fiscal period ended September 30, 1996, and the nine-month period ended June 30,
1997, Sysco accounted for approximately 38%, 33%, 27% and 27%, respectively, and
sales to Sam's Club accounted for approximately 12%, 23%, 19% and 21%,
respectively, of the Company's revenues. The Company expects it will continue to
rely on a limited number of major customers for a substantial portion of its
revenues in the future. Management believes that a majority of the Company's
fiscal 1998 revenues will be derived from combined sales to Sysco, Sam's Club
and CPC. The Company has an exclusive supply contract with Sysco (the "Sysco
Agreement") through June 2000, subject to renewal by Sysco for two additional
three-year periods. The Company recently entered into a long-term manufacturing
and distribution agreement with CPC (the "CPC Agreement") that requires CPC to
purchase a minimum of 175 million pounds of pasta annually for nine years. The
Company does not have supply contracts with a substantial number of its
customers, including Sam's Club. Accordingly, the Company is dependent upon its
customers to sell the Company's products and to assist the Company in promoting
market acceptance of, and creating demand for, the Company's products. An
adverse change in, or termination or expiration without renewal of, the
Company's relationships with or the financial viability of one or more of its
major customers could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, certain exclusivity
provisions of the Sysco Agreement and CPC Agreement prevent AIPC from producing
and supplying competitors of Sysco and CPC with certain pasta products. Under
the Sysco Agreement, the Company is restricted from supplying pasta products to
foodservice businesses other than Sysco. Without CPC's consent, AIPC may not
produce branded retail pasta for Borden, Hershey Foods Corporation ("Hershey")
or Barilla Alimentare S.p.A. ("Barilla"), and is limited to the production of an
aggregate of 12 million pounds of branded pasta products annually for other
producers. See "Business -- Production and Supply Agreements."

MANAGEMENT OF GROWTH AND IMPLEMENTATION OF CPC BUSINESS

The Company has experienced rapid growth and management expects significant
additional growth in the future. Successful management of any such future growth
will require the Company to continue to invest in and enhance its operational,
financial and management information resources and systems, attract and retain
management personnel to manage such resources and systems, accurately forecast
sales demand and meet such demand, accurately forecast retail sales, control its
overhead, and attract, train, motivate and manage its employees effectively.
There can be no assurance that the Company will continue to grow, or that it
will be effective in managing its future growth. Any failure to effectively
manage growth could have a material adverse effect on the Company's business,
financial condition and results of operations.

During 1998, the Company will be required to produce substantially all of
CPC's Mueller's brand pasta, which has averaged approximately 200 million pounds
of pasta annually over the last five years. To meet its significant volume and
other obligations under the CPC Agreement and provide for future growth, the
Company must successfully complete its 1997-1998 capital expansion program to
increase its overall milling, production and distribution capacity by
approximately 100%. Implementation of the CPC Agreement may also adversely
affect the Company's financial, operational and human resources. There can be no
assurance that the Company's planned expansion of its production facilities will
be completed in a timely and cost-effective manner or at all, or that such
expanded facilities will be adequate to meet the CPC volume requirements and any
future growth. Failure to complete the Company's planned capital expansion in a
timely and cost-effective manner and implement the CPC Agreement could have a
material adverse effect on the Company's business, financial condition and
results of operations.

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SUBSTANTIAL PLANNED INVESTMENTS IN MILLING AND PRODUCTION FACILITIES

The Company has begun a major expansion of its durum wheat milling and
pasta production and distribution facilities, budgeted to cost approximately $86
million during the 1997 and 1998 fiscal years, which is planned to increase
AIPC's overall milling, production and distribution capacity by approximately
100%. There can be no assurance that the Company will be able to complete this
expansion on schedule, within budget or at all, that the expanded facilities
will result in the anticipated increase in production capacity or that future
revenues from products produced at the expanded facilities will be sufficient to
recover the Company's investment in the expansion. In addition, there can be no
assurance that the Company will be able to calibrate its production capacity to
future changes in demand for its products or that any future additions to, or
expansions of, its facilities will be completed on schedule and within budget.
Any significant delay or cost overrun in the construction or acquisition of new
or expanded facilities could have a material adverse effect on the Company's
business, financial condition and results of operations.

RAW MATERIALS

The principal raw material in the Company's products is durum wheat. Durum
wheat is used almost exclusively in pasta production and is a narrowly traded,
cash only commodity crop. The Company attempts to minimize the effects of durum
wheat cost fluctuations through forward purchase contracts and raw material
cost-based pricing agreements with many of its customers. The Company's
commodity procurement and pricing practices are intended to reduce the risk of
durum wheat cost increases on profitability, but also may temporarily affect the
Company's ability to benefit from possible durum wheat cost decreases. The
supply and price of durum wheat is subject to market conditions and is
influenced by numerous factors beyond the control of the Company, including
general economic conditions, natural disasters and weather conditions,
competition, and governmental programs and regulations. The supply and cost of
durum wheat may also be adversely affected by insects, plant diseases and
funguses, including the karnal bunt fungus which infected a portion of the durum
wheat produced in the southwestern United States in 1996 and in central Texas in
1997. The Company also relies on the supply of plastic, corrugated and other
packaging materials. The costs of durum wheat and packaging materials have
varied widely in recent years and future changes in such costs may cause the
Company's results of operations and margins to fluctuate significantly. A large,
rapid increase in the cost of raw materials could have a material adverse effect
on the Company's operating profit and margins unless and until the increased
cost can be passed along to customers. Following a period of relatively stable
prices during the nine months ended June 30, 1997, the market price of durum
wheat increased by approximately 21% from $5.60 per bushel to $6.75 per bushel
between June 30, 1997 and October 6, 1997. Historically, changes in prices of
the Company's pasta products have lagged changes in the Company's materials
costs. Competitive pressures may also limit the ability of the Company to raise
prices in response to increased raw material costs in the future. Accordingly,
there can be no assurance as to whether, or the extent to which, the Company
will be able to offset raw material cost increases with increased product
prices. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Raw Materials and Supplies."

COMPETITION

The Company operates in a highly-competitive environment against numerous
well-established national, regional and foreign companies, and many smaller
companies in the procurement of raw materials, the development of new pasta
products and product lines, the improvement and expansion of previously
introduced pasta products and product lines and the production, marketing and
distribution of pasta products. Several of these companies have longer operating
histories, broader product lines, significantly greater brand recognition and
greater production capacity and financial and other resources than the Company.
The Company's direct competitors include large multi-national companies such as
food industry leader Hershey with brands such as San Giorgio(R) and Ronzoni(R),
and Borden with brands such as Prince(R) and Creamette(R), regional U.S.
producers of retail and institutional pasta such as Dakota Growers Pasta Company
("Dakota Growers"), a farmer-owned cooperative in North Dakota, Philadelphia
Macaroni Co. Inc. ("Philadelphia Macaroni") and A. Zerega's Sons, Inc.
("Zerega's"), each an independent producer, and foreign companies such as
Italian pasta producers De Cecco ("De Cecco") and Barilla.

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The Company's competitive environment depends to a significant extent on
the aggregate industry capacity relative to aggregate demand for pasta products.
Several domestic pasta producers have recently completed production facility
additions or announced their intention to increase domestic production capacity.
In addition to AIPC's planned capital expansion, management believes that these
capacity additions represent more than 200 million pounds in aggregate. Dakota
Growers recently increased the capacity of its durum wheat mill and has
announced plans to complete a pasta production capacity expansion in excess of
100 million pounds by the end of 1997. Hershey recently added approximately 50
million pounds of pasta capacity to its facility in Winchester, Virginia. In
September 1997, Barilla announced plans to build a pasta plant near Ames, Iowa
with an estimated annual pasta capacity of over 200 million pounds. Two major
pasta producers have also recently announced planned reductions in pasta
production capacity. Borden announced that it will close or sell five of its ten
North American pasta plants by the end of 1997, and CPC intends to eliminate its
capacity of approximately 180 million pounds by the end of 1997. Increases in
industry capacity levels above demand for pasta products could have a material
adverse effect on the Company's business, financial condition and results of
operations.

Several foreign producers, based principally in Italy and Turkey, have
aggressively targeted the U.S. pasta market in recent years. In 1996, a U.S.
Department of Commerce investigation revealed that several Italian and Turkish
producers were engaging in unfair trade practices by selling pasta at less than
fair value in the U.S. markets and benefitting from subsidies from their
respective governments. Effective July 1996, the U.S. International Trade
Commission ("ITC"), imposed anti-dumping and countervailing duties on Italian
and Turkish imports. While such duties may enable the Company and its domestic
competitors to compete more favorably against Italian and Turkish producers in
the U.S. pasta market, there can be no assurance that the duties will be
maintained for any length of time, or that these or other foreign producers will
not sell competing products in the United States at prices less than those of
the Company. Such practices, if continued or increased, could have a material
adverse effect on the Company's business, financial condition and results of
operations. Bulk imported pasta, and pasta produced in the U.S. by foreign
firms, are generally not subject to such anti-dumping and countervailing duties.
Foreign pasta producers generally may avoid such duties by importing bulk pasta
into the United States and repackaging it in U.S. facilities for distribution. A
leading branded Italian producer, Barilla, opened a bulk pasta repackaging and
distribution facility in Syracuse, New York in 1996 and recently announced plans
to build a pasta production plant in Ames, Iowa for completion in mid-1998. In
addition, on August 28, 1997, the Department of Commerce announced that it is
conducting an administrative review of its anti-dumping and countervailing duty
orders of July 1996 relating to three Turkish and 16 Italian pasta producers,
including Barilla and De Cecco. The Department of Commerce indicated that it
intends to complete its review not later than July 31, 1998. The Company cannot
predict the outcome of the Department of Commerce's review. See "Business --
Pasta Industry -- Pasta Production Capacity" and "-- Competition."

RELIANCE ON PASTA; PRODUCT LINE CONCENTRATION

Since commencing operations in 1988, the Company has focused exclusively on
the dry pasta industry. For the foreseeable future, AIPC expects to continue to
receive substantially all of its revenues from the sale of pasta and
pasta-related products. Because of this product concentration, any decline in
the demand or pricing for dry pasta, any shift in consumer preferences away from
dry pasta, or any other factor that adversely affects the pasta market, could
have a more significant adverse effect on the Company's business, financial
condition and results of operations than on pasta producers which also produce
other products. In addition, the Company's pasta production equipment is highly
specialized and is not adaptable to the production of non-pasta food products.

RELIANCE ON KEY PERSONNEL

The Company's operations and prospects depend in large part on the
performance of its senior management team, including Horst W. Schroeder,
Chairman of the Board, Timothy S. Webster, President and Chief Executive
Officer, David E. Watson, Executive Vice President and Chief Financial Officer,
Norman F. Abreo, Executive Vice President of Operations and David B. Potter,
Senior Vice President of Procurement. No assurance can be given that the Company
would be able to find qualified replacements for

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any of these individuals if their services were no longer available. The loss of
the services of one or more members of the Company's senior management team
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company does not maintain key person
life insurance on any of its key employees. The Company has entered into
employment agreements with Messrs. Schroeder, Webster, Watson, Abreo and Potter
effective upon consummation of the Offering. See "Management."

TRANSPORTATION

Durum wheat is shipped to the Company's production facility in Missouri
directly from North Dakota, Montana and Canada under a long-term rail contract
with its most significant rail carrier, the Canadian Pacific Rail System. Under
such agreement, the Company is obligated to transport specified wheat volumes
and, in the event such volumes are not met, the Company must reimburse the
carrier for certain of its costs. The Company currently is in compliance with
such volume obligations. The Company also has a rail contract to ship semolina,
milled and processed at the Missouri facility, to the South Carolina facility.
An extended interruption in the Company's ability to ship durum wheat by
railroad to the Missouri plant, or semolina to the Company's South Carolina
facility, could have a material adverse affect on the Company's business,
financial condition and results of operations. The Company experienced a
significant interruption in railroad shipments in 1994 due to a railroad strike.
While the Company would attempt to transport such materials by alternative means
if it were to experience another interruption due to strike, natural disasters
or otherwise, there can be no assurance that the Company would be able to do so
or be successful in doing so in a timely and cost-effective manner. See
"Business -- Milling and Production Processes" and "-- Raw Materials and
Supplies."

PRODUCTION AND INVENTORY MANAGEMENT

Most of the Company's customers use, to some extent, inventory management
systems which track sales of particular products and rely on reorders being
rapidly filled by suppliers to meet consumer demand rather than on large
inventories being maintained by retailers. Although these systems reduce a
retailer's investment in inventory, they increase pressure on suppliers like the
Company to fill orders promptly and thereby shift a portion of the retailer's
inventory management cost to the supplier. The Company's production of excess
inventory to meet anticipated retailer demand could result in markdowns and
increased inventory carrying costs for the Company. In addition, if the Company
underestimates the demand for its products, it may be unable to provide adequate
supplies of pasta products to retailers in a timely fashion, and may
consequently lose sales.

POTENTIAL VOLATILITY OF FUTURE QUARTERLY OPERATING RESULTS

The Company's results of operations may fluctuate on a quarterly basis as a
result of a number of factors, including total sales volumes, the timing and
scope of new customer volumes, the timing and amounts of price adjustments due
to durum wheat and other cost changes, the cost of raw materials, including
durum wheat (see "Risk Factors -- Raw Materials"), plant expansion costs and
interest expenses. In addition, fluctuations in quarterly results could affect
the market price of the Class A Common Stock in a manner unrelated to the longer
term operating performance of the Company.

RISK OF PRODUCT LIABILITY

Although the Company has never been involved in a product liability
lawsuit, the sale of food products for human consumption involves the risk of
injury to consumers as a result of tampering by unauthorized third parties,
product contamination or spoilage, including the presence of foreign objects,
substances, chemicals, aflatoxin and other agents, or residues introduced during
the growing, storage, handling or transportation phases. While the Company is
subject to U.S. Food & Drug Administration inspection and regulations and
believes its facilities comply in all material respects with all applicable laws
and regulations, there can be no assurance that consumption of the Company's
products will not cause a health-related illness in the future or that the
Company will not be subject to claims or lawsuits relating to such matters. The
Company maintains product liability insurance in an amount which the Company
believes to be adequate. However, there can be

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no assurance that the Company will not incur claims or liabilities for which it
is not insured or that exceed the amount of its insurance coverage.

SUBSTANTIAL INFLUENCE OF CURRENT PRINCIPAL STOCKHOLDER

Upon consummation of the Offering, the Morgan Stanley Stockholders will own
approximately 39.6% of the outstanding Common Stock (32.5% if the over-allotment
option granted to the U.S. Underwriters is exercised in full). The Company's
Charter provides that, if at any time after consummation of the Offering, the
Morgan Stanley Stockholders own in excess of 49% of the outstanding Class A
Common Stock, such excess shares will be automatically converted into an equal
number of shares of Class B Common Stock. The Morgan Stanley Stockholders are
affiliates of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), an
affiliate of Morgan Stanley & Co. Incorporated, a representative of the U.S.
Underwriters, and Morgan Stanley & Co. International Limited, a representative
of the International Underwriters. Upon consummation of the Offering, three of
nine directors of the Company will be employees of a wholly-owned subsidiary of
MSDWD. Pursuant to the Stockholders Agreement (as amended and restated effective
upon the consummation of the Offering) among the Morgan Stanley Stockholders,
the Company, and certain other stockholders of the Company, one of the Morgan
Stanley Stockholders, The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF
II"), has the right to designate two director nominees so long as the Morgan
Stanley Stockholders own at least 25% of the outstanding Common Stock or one
director nominee so long as the Morgan Stanley Stockholders own at least 10% but
less than 25% of the outstanding Common Stock. In addition, another Morgan
Stanley Stockholder, Morgan Stanley Capital Partners III, L.P. ("MSCP"), has the
right to designate two director nominees so long as the Morgan Stanley
Stockholders own at least 35% of the outstanding Common Stock or one director
nominee so long as the Morgan Stanley Stockholders own at least 10% but less
than 35% of the outstanding Common Stock. Whenever the Morgan Stanley
Stockholders collectively own at least 5% but less than 10% of the outstanding
Common Stock, they shall jointly be entitled to designate one director nominee.
The number of directors designated by the Morgan Stanley Stockholders will
increase proportionately if the size of the Board of Directors is increased in
the future. In addition, so long as the Morgan Stanley Stockholders own at least
25% of the outstanding shares of Common Stock, certain significant corporate
actions are subject to the approval of the Board of Directors and the Morgan
Stanley Stockholders. As a result of their ownership interest in the Company and
their rights under the Stockholders Agreement, the Morgan Stanley Stockholders
will continue to have a substantial influence over the affairs of the Company
following the consummation of the Offering, including with respect to mergers or
other business combinations involving the Company and the acquisition or
disposition of assets by the Company. Similarly, the Morgan Stanley Stockholders
will have the power to prevent or, by selling their Common Stock, cause a change
of control of the Company and could take other actions that might be favorable
to the Morgan Stanley Stockholders. In such instances or otherwise, various
conflicts of interest between the Company and the Morgan Stanley Stockholders
could arise. Stockholders may be prevented from receiving a premium for their
shares if the Morgan Stanley Stockholders were to act in concert to oppose any
takeover attempt. See "Principal and Selling Stockholders," "Anti-takeover
Effect of Certain Charter, By-Law and Statutory Provisions" and "Certain
Relationships and Related Transactions -- Stockholders Agreement."

FINANCIAL LEVERAGE; SENSITIVITY TO INTEREST RATE FLUCTUATIONS; COVENANT
RESTRICTIONS

The Company will use the net proceeds to the Company from the Offering to
reduce its outstanding bank indebtedness as of June 30, 1997 from approximately
$86 million to $17 million upon application of the net proceeds of the Offering,
after which such debt will represent approximately 11% of the Company's total
capitalization. However, the Company intends to substantially increase such
indebtedness in the future to finance its capital expenditure plan. The degree
to which the Company is financially leveraged following such borrowings and the
terms of the Company's indebtedness could have important consequences to
stockholders, including: (i) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, and general
corporate purposes may be impaired; (ii) a substantial portion of the Company's
cash flow from operations may have to be dedicated to the payment of the
principal of and interest on its indebtedness; (iii) the terms of such
indebtedness may restrict the Company's ability to pay dividends; and (iv) the
Company may be more highly leveraged than many of its competitors, which may
place the Company

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at a competitive disadvantage. As of June 30, 1997, the outstanding indebtedness
under the Company's $162.6 million credit facility (the "Credit Facility") was
$85.9 million. See "Use of Proceeds."

As of June 30, 1997, the Company's indebtedness had a weighted average
interest rate of 9.3% and approximately 92%, or $85.9 million, of the Company's
indebtedness bore interest at variable rates. Although the Company will use the
net proceeds of the Offering to substantially reduce the amount of such
variable-rate indebtedness, the Company may incur additional amounts of
variable-rate indebtedness in the future. If this were to occur, and if interest
rates were to significantly increase thereafter, the Company's operating results
and its ability to satisfy its debt service obligations may be materially and
adversely affected. Previously, the Company had relied on an interest rate cap
to effectively limit the Company's exposure to variable rates with respect to a
portion of the Company's debt. Under the Credit Facility, the Company is
required to obtain an interest rate protection agreement by November 15, 1997.
There can be no assurance the Company will be able to obtain such interest rate
protection agreement on favorable terms.

The limitations contained in the agreements relating to the Company's
existing Credit Facility, together with the leveraged position of the Company,
restrict the Company from paying dividends and could limit the ability of the
Company to effect future debt or equity financings and may otherwise restrict
corporate activities, including the ability to avoid defaults and to respond to
competitive market conditions, to provide for capital expenditures beyond those
permitted or to take advantage of business opportunities. See "Capitalization"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND STATUTORY PROVISIONS

Charter and Bylaws. Certain provisions of the Company's Charter and By-laws
(the "By-laws") could delay or frustrate the removal of incumbent directors and
could make more difficult a merger, tender offer or proxy contest involving the
Company, even if such events could be beneficial, in the short term, to the
interests of the stockholders. For example, the Charter and By-laws allow the
Company to issue preferred stock with rights senior to those of the Class A
Common Stock without stockholder action, require the Board of Directors to be
divided into three classes serving three-year staggered terms, require
stockholder actions to be effected only at annual or special stockholder
meetings (unless the action to be effected by written consent of stockholders
and the taking of such action by written consent have been approved in advance
by the Board of Directors or unless the shareholder action involves the removal
of a director nominated pursuant to the Stockholders Agreement and the person
who nominated such director pursuant to the Stockholders Agreement votes in
favor of the removal of such director pursuant to such written consent), require
the affirmative vote of holders of two-thirds of the outstanding shares entitled
to vote to remove directors (unless the removal of a director has been requested
by a shareholder who designated such director as a nominee for election pursuant
to the Stockholders Agreement, in which case such director can be removed with
or without cause by the affirmative vote of holders of a simple majority of such
shares), require the affirmative vote of holders of at least 80% of the
outstanding shares to amend certain provisions of the Charter or to repeal or
amend the Company's By-laws and impose various other procedural requirements on
the taking of certain actions.

Pursuant to the Charter, shares of preferred stock and Class A Common Stock
may be issued in the future without further stockholder approval and, in the
case of such preferred stock, upon such terms and conditions, and having such
rights, privileges and preferences, as the Board of Directors may determine. The
issuance of preferred stock and Class A Common Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
transactions, could have the effect of making it more difficult for a third
party to acquire, or effectively preventing a third party from acquiring, a
majority of the outstanding Common Stock of the Company. See "Description of
Capital Stock -- Delaware Law and Certain Charter and By-Law Provisions."

Delaware Corporation Law. The Company also is subject to provisions of the
General Corporation Law of the State of Delaware, as amended (the "DGCL"), that
prohibit a publicly-held Delaware corporation from engaging in a broad range of
business combinations with a person who, together with affiliates and
associates, owns 15% of more of the corporation's common stock (an "Interested
Stockholder") for three

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<PAGE> 16

years after the person became an Interested Stockholder, unless the business
combination is approved in a prescribed manner. Those provisions could
discourage or make more difficult a merger, tender offer or similar transaction,
even if favorable to the Company's stockholders. See "Description of Capital
Stock -- Delaware Law and Certain Charter and By-Law Provisions."

Amended Stockholders Agreement. In addition, the amended Stockholders
Agreement grants the Morgan Stanley Stockholders the right, depending on their
respective ownership percentages, to designate nominees to the Board and to have
the right to approve certain significant corporate actions including, but not
limited to, mergers, consolidations or other similar transactions. The
substantial ownership position of the Morgan Stanley Stockholders could make it
more difficult for a third party to acquire, or effectively prevent a third
party from acquiring, a majority of the outstanding Common Stock.

Dual Class Structure. Tender offers or other non-open market acquisitions
of stock are usually made at prices above the prevailing market price of a
company's stock. In addition, acquisitions of stock by persons attempting to
acquire control through market purchases may cause the market price of the stock
to reach levels which are higher than would otherwise prevail. While the Class B
Common Stock is non-voting, the ability of the Morgan Stanley Stockholders to
convert that stock into Class A Common Stock (so long as such conversion does
not increase their aggregate ownership of Class A Common Stock above 49% of the
then-outstanding Class A Common Stock) may discourage such acquisitions,
particularly those of less than all of the Company's stock, and may thereby
deprive shareholders of an opportunity to sell their shares at a premium price.

ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Class A
Common Stock. Even if the Class A Common Stock is listed on the New York Stock
Exchange, there can be no assurance that an active trading market for the Class
A Common Stock will develop or be sustained after the Offering, or that
purchasers of Class A Common Stock will be able to resell their Class A Common
Stock at prices equal to or greater than the initial public offering price. The
initial public offering price was determined by negotiations between the Company
and the U.S. Representatives based on the factors described in "Underwriters."

The trading price of the Class A Common Stock could be subject to wide
fluctuations in response to announcements of increases in the cost of raw
materials, new products introduced by the Company or its competitors, variations
in the Company's quarterly results of operations, or changes in financial
estimates by securities analysts and other events or factors. The stock market
has experienced extreme price and volume fluctuations in recent years. Stock
market volatility unrelated to the operating performance of the Company may
adversely affect the market price of the Class A Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Upon consummation of the Offering, the Company will have outstanding an
aggregate of 16,776,056 shares of Common Stock, assuming no exercise of
outstanding options. Of these shares, all of the shares sold in the Offering
will be freely tradeable without restriction or further registration under the
Securities Act, unless such shares are purchased by "affiliates" of the Company
as that term is defined in Rule 144 under the Securities Act ("Affiliates"). The
remaining 8,876,056 shares of Common Stock held by existing stockholders are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act ("Restricted Shares"). Restricted Shares may be sold in the public market
only if registered or if they qualify for an exemption from registration under
Rule 144 or 701 promulgated under the Securities Act. As a result of the
contractual restrictions described below and the provisions of Rules 144 and
701, the Restricted Shares will be available for sale in the public market as
follows: (i) no shares will be eligible for immediate sale on the date of this
Prospectus; and (ii) 8,220,330 shares will be eligible for sale pursuant to Rule
144, provided the conditions of Rule 144 are met, upon expiration of the lock-up
agreements at least 180 days after the date of this Prospectus. All officers,
directors and substantially all stockholders and holders of vested options of
the Company have agreed not to sell or otherwise transfer any shares of Common
Stock or any other securities of the Company for a period of at least 180 days
after the date of this Prospectus. Sales, or the possibility of sales, of Common
Stock by the Company's existing stockholders, whether in connection with the
exercise of

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registration rights or otherwise, could adversely affect the market price of the
Company's Class A Common Stock. The Company has granted the stockholders who are
parties to the Stockholders Agreement, including the Morgan Stanley
Stockholders, certain "demand" and "piggyback" registration rights with respect
to the Common Stock owned by such stockholders. See "Certain Relationships and
Related Transactions -- Stockholders Agreement" and "Shares Eligible for Future
Sale."

ABSENCE OF DIVIDENDS

The Company has never declared or paid cash dividends on its Common Stock
and currently intends to retain all available funds for use in the operation and
expansion of its business. The Company does not anticipate that any cash
dividends on the Common Stock will be declared or paid in the foreseeable
future. See "Dividend Policy."

SUBSTANTIAL AND IMMEDIATE DILUTION

Investors in the Offering will incur immediate dilution of $10.77 per share
in the pro forma net tangible book value per share of Class A Common Stock
(based upon the initial public offering price of $18 per share) as of June 30,
1997. See "Dilution."

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the Class A
Common Stock in the Offering are approximately $87.4 million. The Company will
use approximately $68.7 million of the net proceeds from the Offering to repay
bank indebtedness (with stated maturities from 2000 through 2004 and bearing
interest at a weighted-average interest rate of 9.3% per annum as of June 30,
1997) incurred under the Company's Credit Facility and the balance will be used
to fund the expansion of the Company's facilities and for general corporate
purposes. The Company will not receive any of the proceeds from the sale of
Class A Common Stock by the Selling Stockholders. See "Underwriters."

DIVIDEND POLICY

The Company has not declared or paid any dividends on its Common Stock to
date and does not anticipate paying any such dividends in the foreseeable
future. After consummation of the Offering, the Company intends to retain
earnings for the foreseeable future to provide funds for the operation and
expansion of its business and for the repayment of indebtedness. The borrowing
agreements relating to the Company's Credit Facility contain certain provisions
which effectively prohibit the payment of dividends. Future borrowing agreements
of the Company may also contain limitations on the payment of dividends. Any
determination to pay dividends in the future will be at the discretion of the
Company's Board of Directors and will depend upon the Company's financial
condition, capital requirements, results of operations and other factors,
including any contractual or statutory restrictions on the Company's ability to
pay dividends.

17
<PAGE> 18

CAPITALIZATION

The following table sets forth information regarding the short-term debt
and capitalization of the Company on a pro forma basis to give effect to the
Recapitalization as if it had occurred as of June 30, 1997 and on a pro forma as
adjusted basis which reflects the issuance and sale of 5,310,000 shares of Class
A Common Stock offered hereby by the Company at the initial public offering
price of $18 per share and the application of the estimated net proceeds
therefrom. See "Use of Proceeds," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Description of Capital Stock
- -- General." The following table should be read in conjunction with the
Financial Statements, including the Notes thereto, appearing elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-----------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt and capital lease obligations, current
portion................................................... $ 3,685 $ 810
======== ========
Long-term debt and capital lease obligations, less current
portion:
Long-term debt............................................ $ 83,063 $ 17,240
Capital lease obligations................................. 6,437 6,437
-------- --------
Total long-term debt and capital lease obligations,
less current portion.................................. 89,500 23,677
-------- --------
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares
authorized, no shares issued and outstanding pro forma
and pro forma as adjusted.............................. -- --
Class A Common Stock, $.001 par value, 75,000,000 shares
authorized, 11,466,056 shares issued and outstanding
pro forma and 16,776,056 shares issued and outstanding
pro forma as adjusted(1)............................... 11 17
Class B Common Stock, $.001 par value, 25,000,000 shares
authorized, no shares issued and outstanding pro forma
and pro forma as adjusted.............................. -- --
Additional paid-in capital................................ 55,324 142,714
Notes receivable from officers............................ (298) (298)
Accumulated deficit....................................... (14,060) (14,060)
-------- --------
Total stockholders' equity........................... 40,977 128,373
-------- --------
Total capitalization........................................ $130,477 $152,050
======== ========
</TABLE>

- -------------------------
(1) Excludes (i) 1,132,049 shares, 46,665 shares and 993,391 shares of Class A
Common Stock reserved for issuance upon the exercise of outstanding stock
options under the Company's 1992 Plan, 1993 Plan and 1997 Plan,
respectively; and (ii) 69,832 shares, 36,118 shares and 1,006,609 shares of
Class A Common Stock available for future grants under the 1992 Plan, the
1993 Plan and the 1997 Plan, respectively. See "Management -- Stock Option
Plans."

18
<PAGE> 19

DILUTION

The pro forma net tangible book value of the Company at June 30, 1997 was
$33.8 million, or $2.95 per share of Common Stock. Pro forma net tangible book
value per share is equal to the Company's total tangible assets less total
liabilities, divided by the pro forma total number of shares outstanding. The
Company had a pro forma total of 11,466,056 shares of Common Stock outstanding
as of June 30, 1997, assuming the Recapitalization had occurred as of that date.
After giving effect to the sale by the Company of 5,310,000 shares of Class A
Common Stock in the Offering at the initial public offering price of $18 per
share and deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company, the pro forma as adjusted net tangible
book value of the Company as of such date would have been approximately $121.2
million, or $7.23 per share, based on 16,776,056 shares of Common Stock to be
outstanding after the Offering. This represents an immediate increase in net
tangible book value of $4.28 per share to the current holders of the Common
Stock and an immediate dilution of $10.77 per share to new investors purchasing
shares of Common Stock in the Offering. The following table illustrates this per
share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price............................... $18.00
Pro forma net tangible book value per share before the
Offering.................................................. 2.95
Increase per share attributable to new investors............ 4.28
----
Pro forma as adjusted net tangible book value per share
after the Offering........................................ 7.23
------
Dilution per share to new investors......................... $10.77
======
</TABLE>

The following table summarizes as of June 30, 1997, on a pro forma basis
after giving effect to the Offering, the differences in the total consideration
paid and the average price per share paid by the existing stockholders with
respect to the outstanding Common Stock and by the purchasers of the shares of
Common Stock offered by the Company in the Offering (at the initial public
offering price of $18 per share and before deducting underwriting discounts and
commissions and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)(2)............... 11,466,056 68.3% $ 55,335,000 36.7% $ 4.83
New investors(2).......................... 5,310,000 31.7 95,580,000 63.3 18.00
---------- ----- ------------ ----- ------
Total................................ 16,776,056 100.0% $150,915,000 100.0% $ 9.00
========== ===== ============ ===== ======
</TABLE>

- -------------------------
(1) Excludes (i) 1,132,049 shares, 46,665 shares and 993,391 shares of Class A
Common Stock reserved for issuance upon the exercise of outstanding stock
options under the Company's 1992 Plan, the 1993 Plan and the 1997 Plan,
respectively; and (ii) 69,832 shares, 36,118 shares and 1,006,609 shares of
Class A Common Stock available for future grants under the 1992 Plan, the
1993 Plan and the 1997 Plan, respectively. See "Management -- Stock Option
Plans."

(2) Sales of Class A Common Stock by the Selling Stockholders in the Offering
will reduce the number of shares of Common Stock held by existing
stockholders to 8,876,056, or approximately 52.9% of the total shares of
Common Stock outstanding after the Offering, and will increase the number of
shares held by new investors to 7,900,000, or approximately 47.1% of the
total shares of Common Stock outstanding after the Offering. See "Principal
and Selling Stockholders."

19
<PAGE> 20

SELECTED FINANCIAL AND OTHER DATA

The selected statement of operations data for the years ended December 31,
1994 and 1995, the nine-month fiscal period ended September 30, 1996, and the
nine-month period ended June 30, 1997 and the selected balance sheet data as of
December 31, 1995, September 30, 1996 and June 30, 1997 are derived from, and
are qualified by reference to, the Financial Statements of the Company audited
by Ernst & Young LLP, independent auditors, appearing elsewhere in this
Prospectus. The selected statement of operations data for the years ended
December 31, 1992 and 1993 and the selected balance sheet data as of December
31, 1992, 1993 and 1994 have been derived from audited financial statements of
the Company not included herein. The selected statement of operations data for
the calendar year ended December 31, 1996 and the nine-month period ended June
30, 1996, and the balance sheet data as of December 31, 1996 and June 30, 1996
have been derived from the Company's unaudited internal financial statements,
which in the opinion of management, have been prepared on the same basis as the
audited financial statements and reflect all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the results of
operations and financial position of the Company. The statement of operations
data of the Company for the calendar year ended December 31, 1996 and the
nine-month period ended June 30, 1996 are included herein only for comparison
purposes. The Company's results of operations for the nine-month period ended
June 30, 1997 are not necessarily indicative of its results for the full fiscal
year. The selected other data has been derived from the accounting records of
the Company and have not been audited. The selected financial and other data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
Financial Statements, including the Notes thereto, appearing elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH
CALENDAR FISCAL PERIOD PERIOD ENDED
FISCAL YEAR ENDED DECEMBER 31, YEAR ENDED ENDED JUNE 30,
-------------------------------------- DECEMBER 31, SEPTEMBER 30, ----------------------
1992 1993 1994 1995 1996(1) 1996(1) 1996 1997(1)
---- ---- ---- ---- ------------ ------------- ---- -------
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................... $39,049 $47,872 $69,465 $ 92,903 $121,621 $ 92,074 $ 86,514 $ 93,616
Cost of goods sold............... 28,750 35,081 54,393 73,851 89,704 68,555 65,697 67,821
Plant expansion costs(2)......... -- 1,171 484 2,065 -- -- 425 --
------- ------- ------- -------- -------- -------- -------- --------
Gross profit..................... 10,299 11,620 14,588 16,987 31,917 23,519 20,392 25,795
Selling and marketing expense,
including product introduction
costs(3)....................... 2,888 2,883 3,792 5,303 21,250 16,798 11,236 10,212
General and administrative
expense........................ 2,077 2,049 1,951 2,930 3,498 2,805 2,741 2,855
------- ------- ------- -------- -------- -------- -------- --------
Operating profit................. 5,334 6,688 8,845 8,754 7,169 3,916 6,415 12,728
Interest expense, net............ 5,396 3,210 4,975 8,008 10,575 8,023 8,030 7,800
------- ------- ------- -------- -------- -------- -------- --------
Income (loss) before income tax
and extraordinary loss......... (62) 3,478 3,870 746 (3,406) (4,107) (1,615) 4,928
Income tax....................... -- (3,221) 1,484 270 (1,288) (1,556) (642) 1,878
Extraordinary loss, net of income
tax(4)......................... 2,639 -- 204 -- 1,647 1,647 1,647 --
------- ------- ------- -------- -------- -------- -------- --------
Net income (loss)................ $(2,701) $ 6,699 $ 2,182 $ 476 $ (3,765) $ (4,198) $ (2,620) $ 3,050
======= ======= ======= ======== ======== ======== ======== ========
Pro forma net income (loss) per
common share(5)................ $ (.38) $ .64 $ .21 $ .05 $ (.36) $ (.40) $ (.25) $ .25
Pro forma weighted average common
shares outstanding(5).......... 7,114 10,390 10,401 10,445 10,475 10,473 10,466 12,176
OTHER DATA:
EBITDA(6)........................ $ 7,993 $ 9,495 $12,408 $ 13,836 $ 12,460 $ 8,994 $ 11,395 $ 18,037
EBITDA as a percent of
revenues(6).................... 20.5% 19.8% 17.9% 14.9% 10.2% 9.8% 13.2% 19.3%
Revenue per employee
(end of period)................ $ 209 $ 244 $ 288 $ 361 $ 437 NM NM NM
Working capital excluding current
maturities of long-term debt
(average for the period) as a
percent of revenues............ 17.3% 14.2% 12.0% 4.6% 6.5% NM NM NM
Cash flows provided by (used in):
Operating activities........... $ 966 $ 4,787 $ 3,690 $ 5,730 $ (5,013) $ (7,477) $ (4,155) $ 14,076
Investing activities........... (1,000) (15,139) (25,431) (38,789) (3,870) (3,041) (6,084) (11,464)
Financing activities........... 2,142 10,382 19,603 33,066 10,543 12,318 11,722 (1,818)
Earnings to fixed charges........ .50x 1.87x 1.48x .92x .52x .28x .59x 1.60x

BALANCE SHEET DATA
(AT END OF PERIOD):
Cash and cash equivalents........ $ 2,119 $ 2,149 $ 11 $ 18 $ 1,678 $ 1,818 $ 707 $ 2,612
Working capital.................. 2,900 3,077 4,830 6,632 (1,965) (1,601) 1,667 13,276
Total assets..................... 48,803 66,337 93,629 135,424 137,974 141,688 141,293 145,462
Long-term debt, less current
maturities..................... 31,509 40,024 62,375 97,452 92,143 93,284 94,884 89,500
Stockholders' equity............. 9,994 16,973 19,401 20,067 16,402 15,969 16,716 40,977
</TABLE>

(footnotes appear on following page)

20
<PAGE> 21

(footnotes from previous page)
- -------------------------
(1) The Company adopted a fiscal year ending on the last Friday of September or
the first Friday of October, effective beginning with the nine-month fiscal
period ended September 27, 1996 and for all subsequent fiscal periods. For
purposes of this Prospectus, the 1996 fiscal year and 1997 interim period
are shown as having ended on September 30 and June 30, respectively.

(2) Plant expansion costs include incremental direct and indirect manufacturing
and distribution costs which are incurred as a result of construction,
commissioning and start-up of new capital assets. These costs are expensed
as incurred but are unrelated to current production and, therefore, are
reported as a separate line item in the statement of operations.

(3) Selling and marketing expense includes incremental product introduction
costs, including payment of product placement or "slotting" fees, related to
the Company's launch of its Pasta LaBella flavored pasta products into the
U.S. retail grocery market. The Company did not incur such product
introduction costs prior to the calendar year ended December 31, 1996.
Product introduction costs were incurred as follows: $9.6 million in
calendar year ended December 31, 1996, $8.1 million for the nine-month
period ended September 30, 1996, $4.6 million for the nine-month period
ended June 30, 1996 and $2.1 million for the nine-month period June 30,
1997.

(4) Represents losses due to early extinguishment of long-term debt, net of
income tax.

(5) Earnings per share is presented on a pro forma basis giving effect to the
consummation of the Recapitalization in connection with the Offering.

(6) EBITDA represents earnings before interest, income taxes, depreciation and
amortization, thereby removing the effect of certain non-cash charges on
income. Management believes that EBITDA is a meaningful measure of operating
performance, cash generation and ability to service debt. However, EBITDA
should not be considered as an alternative either to: (i) net earnings
(determined in accordance with GAAP); (ii) operating cash flow (determined
in accordance with GAAP); or (iii) liquidity. There can be no assurance that
the Company's calculation of EBITDA is comparable to similarly-titled items
reported by other companies.

21
<PAGE> 22

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following should be read in conjunction with the Financial Statements
of the Company and the Notes thereto included elsewhere in this Prospectus. For
a discussion of important factors that could cause actual results to differ
materially from the forward-looking statements, see "Risk Factors."

The Company changed its fiscal year end from December 31 to the last Friday
of September or the first Friday of October. This change resulted in a
nine-month fiscal year for 1996, and will result in a 53-week year for fiscal
1997, and a 52- or 53-week year for all subsequent fiscal years. The Company's
first three fiscal quarters end on the Friday last preceding December 31, March
31, and June 30. For purposes of this Prospectus, the 1996 fiscal year is
described as the nine-month fiscal period ended September 30, 1996, and the
nine-month 1996 and 1997 interim periods are described as having ended June 30.
The statement of operations data of the Company for the nine-month periods ended
September 30, 1995 and June 30, 1996, and the calendar year ended December 31,
1996 are included herein only for comparison purposes.

OVERVIEW

The Company generates its revenues in two customer markets: Retail and
Institutional. The Retail market revenues include the revenues from sales of the
Company's pasta products to customers who resell the Company's pasta in retail
channels. These revenues include sales to club stores and grocery retailers,
encompass sales of the Company's private label and branded products, and will
include sales to CPC. The Institutional market revenues include the revenues
from product sales to Company customers who use the Company's pasta as an
ingredient in food products or customers who resell the Company's pasta in the
foodservice market such as Sysco. The Institutional market also includes
revenues from opportunistic sales to government agencies and other customers
which the Company pursues periodically when capacity is available ("Contract
Sales") to increase production volumes and thereby lower average unit costs.
Average sales prices in the Retail and Institutional markets differ depending on
customer-specific packaging and raw material requirements, product manufacturing
complexity and other service requirements. Generally, average retail sales
prices are higher than institutional sales prices. Average retail and
institutional prices vary due to changes in the relative share of customer
revenues and item specific sales volumes (i.e., product sales mix). Revenues are
reported net of cash discounts, pricing allowances and product returns.

The Company seeks to develop strategic customer relationships with food
industry leaders that have substantial pasta requirements. The Company has
long-term supply agreements with Sysco and CPC and other arrangements with food
industry leaders, such as Sam's Club, that provide for the "pass-through" of
direct material cost changes as pricing adjustments. The pass-throughs are
generally limited to actual changes in cost and, as a result, impact marginal
profitability in periods of changing costs and prices. The pass-throughs are
generally effective 30 to 90 days following such costs changes and thereby
significantly reduce the long-term exposure of the Company's operating results
to the volatility of raw material costs. Management estimates that approximately
60% of the Company's revenues in fiscal 1997 will be pursuant to long-term
supply agreements and other non-contractual customer arrangements which provide
for the pass-through of changes in durum wheat costs. Management believes that
this percentage will increase as the Company begins to generate revenue from
CPC. See "Risk Factors -- Raw Materials."

The Company's Pasta LaBella flavored pasta products are sold at prices
which are significantly higher than the Company's non-flavored products as a
result of higher product and distribution costs and its premium

22
<PAGE> 23

brand position. In the second quarter of calendar 1996, the Company began
distribution of Pasta LaBella flavored pasta into the U.S. Retail grocery
market. This initiative was supported by a comprehensive trade and consumer
product introduction program, including the payment of product placement or
"slotting" fees to retailers, and an on-going selling and marketing program
required to support branded retail sales. The Company achieved distribution in
approximately 40% of the U.S. Retail grocery market and ceased to incur
additional product introduction costs in the first quarter of fiscal 1997. The
Company did not incur such product introduction costs prior to the calendar year
ended December 31, 1996. Product introduction costs included in selling and
marketing expense were incurred as follows: $9.6 million for the calendar year
ended December 31, 1996, $8.1 million for the nine-month period ended September
30, 1996, $4.6 million for the nine-month period ended June 30, 1996 and $2.1
million for the nine-month period June 30, 1997.

The Company's cost of goods sold consists primarily of raw materials,
packaging, manufacturing (including depreciation) and distribution costs. A
significant portion of the Company's cost of goods sold is durum wheat. The
Company purchases durum wheat on the open market and, consequently, is subject
to fluctuations in cost. The Company manages its durum cost risk through
long-term contracts and other noncontractual arrangements with its customers and
advance purchase contracts for durum wheat which are generally less than six
months' duration. The price of durum wheat was volatile during the period
between January 1, 1994 and September 30, 1996 and the published average monthly
market price per bushel fluctuated from $5.18 to $7.49 over this period. In
addition, following a period of relatively stable prices during the nine months
ended June 30, 1997, the market price per bushel of durum wheat increased by
approximately 21% from $5.60 at June 30, 1997 to $6.75 at October 6, 1997. On
September 12, 1997, the U.S. Department of Agriculture predicted that the 1997
U.S. durum wheat harvest will be approximately 22% lower than for 1996. The
durum cost volatility and the timing and amount of sales price adjustments
impacted profit and margins over the 1994-1997 periods and are expected to
increase the Company's costs beginning in the first quarter of its 1998 fiscal
year.

The Company's capital asset strategy is 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 which have been or will be acquired to support this strategy are
depreciated over their respective economic lives. Because of the capital
intensive nature of the Company's business and its current and future facilities
expansion plans, management believes its depreciation expense for production and
distribution assets may be higher than that of many of its competitors.
Depreciation expense is a component of inventory cost and cost of goods sold.
Plant expansion costs include incremental direct and indirect manufacturing and
distribution costs which are incurred as a result of construction, commissioning
and start-up of new capital assets. These costs are expensed as incurred but are
unrelated to current production and, therefore, reported as a separate line item
in the statement of operations.

The Company has commenced an $86 million capital expansion of its durum
wheat milling and pasta production and distribution facilities in Missouri and
South Carolina. The capital expansion will increase the Company's overall
milling, production and distribution capacity by approximately 100% to meet the
significant volume requirements of the CPC agreement. The expansion will be
financed with a combination of a portion of the net proceeds to the Company from
the Offering and borrowings under either the Company's current Credit Facility
or a new $150 million revolving credit facility the Company intends to enter
into with its lenders shortly following the Offering. The Company will use a
majority of the net proceeds to the Company from the Offering to repay a portion
of the outstanding indebtedness under the current Credit Facility. The Company
has signed commitments with respect to the construction of the expanded
facilities and purchase of Italian pasta production equipment totaling
approximately $47 million. The expansion construction is currently on schedule
and is planned to be completed in early 1998 in time to implement the CPC
Agreement and support future growth opportunities. See "Risk Factors --
Substantial Planned Investments in Milling and Production Facilities."

Selling and marketing expense incurred to support retail sales are higher
than those for institutional sales, as the Company incurs external broker
commissions, and promotional and other marketing expenses in addition to the
costs incurred by its internal retail sales force. The Company is not
responsible for selling and marketing expense related to the CPC Agreement.
Consequently, the Company expects prospective selling

23
<PAGE> 24

and marketing expense as a percentage of revenues to decrease relative to
historical levels as the Company begins to generate CPC revenues in 1998.

At June 30, 1997, the Company had a net operating loss carryforward of
approximately $26.7 million for federal income tax purposes. The net operating
loss carryforward resulted principally from the Company's significant tax
depreciation deductions related to its capital assets. Subject to certain
limitations, the Company expects this net operating loss carryforward will be
available to offset future taxable income.

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data of the
Company, expressed as a percentage of revenues, for each of the periods
presented. This table should be read in conjunction with the Financial
Statements and related Notes thereto appearing elsewhere in this Prospectus:

<TABLE>
<CAPTION>
NINE-MONTH NINE-MONTH
FISCAL YEAR ENDED CALENDAR FISCAL PERIOD PERIODS ENDED
DECEMBER 31, YEAR ENDED ENDED JUNE 30,
----------------- DECEMBER 31, SEPTEMBER 30, -----------------
1994 1995 1996 1996 1996 1997
---- ---- ------------ ------------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Retail........................... 44.6% 53.1% 59.6% 60.7% 57.5% 56.3%
Institutional.................... 55.4 46.9 40.4 39.3 42.5 43.7
----- ----- ----- ----- ----- -----
Total revenues..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- ----- -----
Cost of goods sold................. 78.3 79.5 73.7 74.6 75.8 72.5
Gross profit before plant expansion
costs............................ 21.7 20.5 26.3 25.4 24.2 27.5
Plant expansion costs.............. 0.7 2.2 -- -- 0.5 --
----- ----- ----- ----- ----- -----
Gross profit....................... 21.0 18.3 26.3 25.4 23.7 27.5
Selling and marketing expense,
including product introduction
costs............................ 5.5 5.7 17.5 18.2 13.0 10.9
General and administrative
expense.......................... 2.8 3.2 2.9 3.0 3.2 3.0
----- ----- ----- ----- ----- -----
Operating profit................... 12.7 9.4 5.9 4.2 7.5 13.6
Interest expense, net.............. 7.2 8.6 8.7 8.7 9.3 8.3
Income tax......................... 2.1 0.3 (1.1) (1.7) (0.7) 2.0
Extraordinary loss, net of income
tax.............................. 0.3 -- 1.4 1.8 1.9 --
----- ----- ----- ----- ----- -----
Net income (loss).................. 3.1% 0.5% (3.1)% (4.6)% (3.0)% 3.3%
===== ===== ===== ===== ===== =====
</TABLE>

NINE-MONTH PERIOD ENDED JUNE 30, 1997 COMPARED TO THE NINE-MONTH PERIOD
ENDED JUNE 30, 1996

Revenues. Revenues increased $7.1 million, or 8.2%, to $93.6 million for
the nine-month period ended June 30, 1997, from $86.5 million for the nine-month
period ended June 30, 1996. The increase for the nine-month period ended June
30, 1997 was primarily due to higher unit volume which was partially offset by
lower unit revenues on Pasta LaBella flavored pasta retail sales and price
reductions as a result of the pass-through of lower durum wheat costs. The
increase was lower than historical periods as the Company planned for and
achieved higher than historical capacity utilization levels which precluded more
significant unit production and sales growth. The Company believes the scheduled
1998 increases in production capacities and the start of CPC sales will result
in increased revenue growth in 1998.

Revenues for the Retail market increased $3.0 million, or 6.0%, to $52.7
million for the nine-month period ended June 30, 1997, from $49.7 million for
the nine-month period ended June 30, 1996. This increase was due to higher unit
volume, primarily from the private label category. This revenue increase was
partially offset by a lower average retail unit price primarily resulting from
volume-based price incentives on Pasta LaBella flavored pasta. The lower Pasta
LaBella flavored pasta unit price was mitigated by product sales mix
improvements in private label and club store sales.

24
<PAGE> 25
Revenues for the Institutional market increased $4.1 million, or 11.1%, to
$40.9 million for the nine-month period ended June 30, 1997, from $36.8 million
for the nine-month period ended June 30, 1996. This was primarily the result of
volume gains in ingredient and foodservice markets and Contract Sales which were
partially offset by price reductions as a result of decreases in durum wheat
costs.

Gross Profit. Gross profit increased $5.4 million, or 26.5%, to $25.8
million for the nine-month period ended June 30, 1997, from $20.4 million for
the nine-month period ended June 30, 1996. Gross profit as a percentage of
revenues increased to 27.6% for the nine-month period ended June 30, 1997 from
23.6% for the nine-month period ended June 30, 1996. These increases were the
result of (i) increases in unit volumes; (ii) lower durum wheat and packaging
material costs; and (iii) product sales mix improvements.

Selling and Marketing Expense. Selling and marketing expense decreased $1.0
million, or 8.9%, to $10.2 million for the nine-month period ended June 30,
1997, from $11.2 million for the nine-month period ended June 30, 1996. Selling
and marketing expense as a percentage of revenues decreased to 10.9% for the
nine-month period ended June 30, 1997, from 13.0% for the nine-month period
ended June 30, 1996. The decrease was primarily due to the Company's incurrence
of $2.1 million of product introduction costs for the nine-month period ended
June 30, 1997, as compared to $4.6 million for the nine-month period ended June
30, 1996. These costs were primarily related to the payment of product placement
fees or "slotting," introductory consumer sampling, couponing, advertising and
trade promotions. The decrease in product introduction costs was due to
decreased product placement fees and lower introductory selling and marketing
expense. The decrease in product introduction costs was partially offset by an
increase in other selling and marketing expense incurred to support incremental
retail Pasta LaBella flavored pasta volume and increases in private label
revenue growth.

General and Administrative Expense. General and administrative expense
increased $0.2 million, or 7.4%, to $2.9 million for the nine-month period ended
June 30, 1997, from $2.7 million for the nine-month period ended June 30, 1996,
but decreased as a percentage of revenues from 3.2% to 3.0%. The increase in
general and administrative expense was primarily due to higher administrative
and other costs needed to support sales growth.

Operating Profit. Operating profit increased $6.3 million, or 98.4%, to
$12.7 million for the nine-month period ended June 30, 1997, from $6.4 million
for the nine-month period ended June 30, 1996. Excluding product introduction
costs, operating profit increased $3.9 million, or 35.5%, to $14.9 million for
the nine-month period ended June 30, 1997, from $11.0 million for the nine-month
period ended June 30, 1996, and increased as a percentage of revenues to 15.9%
for the nine-month period ended June 30, 1997, from 12.7% for the nine-month
period ended June 30, 1996.

Interest Expense. Interest expense decreased $0.2 million, or 2.5%, to $7.8
million for the nine-month period ended June 30, 1997, from $8.0 million for the
nine-month period ended June 30, 1996. The decrease was primarily the result of
reduced borrowings under the Company's term and revolving credit facilities
resulting from the $22.3 million in proceeds realized from the April 1997
private equity financing (the "1997 Private Equity Financing").
See "-- Liquidity and Capital Resources" and "Certain Relationships and Related
Transactions."

Income Tax. Income tax increased $2.5 million for the nine-month period
ended June 30, 1997 to $1.9 million, from $(0.6) million for the nine-month
period ended June 30, 1996, and reflects an effective income tax rate of
approximately 38%.

Extraordinary Item. During the nine-month period ended June 30, 1996, the
Company incurred a $1.6 million (net of tax) extraordinary loss due to the
write-off of deferred debt issuance costs in conjunction with a partial
extinguishment and restructuring of the Company's principal bank credit
agreement. There was no such item for the nine-month period ended June 30, 1997.

Net Income. Net income increased $5.7 million to $3.1 million for the
nine-month period ended June 30, 1997, from $(2.6) million for the nine-month
period ended June 30, 1996.

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<PAGE> 26

NINE-MONTH FISCAL PERIOD ENDED SEPTEMBER 30, 1996 COMPARED TO THE
NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1995

Revenues. Revenues increased $28.3 million, or 44.4%, to $92.1 million for
the nine-month fiscal period ended September 30, 1996, from $63.8 million for
the nine-month period ended September 30, 1995. This increase was primarily due
to higher unit volume, favorable changes in product sales mix and higher average
prices resulting from the introduction of the Company's new, higher-priced Pasta
LaBella flavored pasta.

Revenues for the Retail market increased $23.1 million, or 70.4%, to $55.9
million for the nine-month fiscal period ended September 30, 1996, from $32.8
million for the nine-month period ended September 30, 1995. This increase was
due to (i) higher sales volume, with the largest increases coming from private
label and club stores customers; (ii) higher average unit prices due to the
introduction of the Company's new, higher-priced Pasta LaBella flavored pasta
into the U.S. retail grocery market; (iii) improved product sales mix in the
club store category; and (iv) the pass-through of higher durum wheat costs.

Revenues for the Institutional market increased $5.2 million, or 16.8%, to
$36.2 million for the nine-month fiscal period ended September 30, 1996, from
$31.0 million for the nine-month period ended September 30, 1995. The volume
gains in ingredient and foodservice categories were partially offset by lower
Contract Sales volumes as available production capacity was utilized by retail
sales growth. The average 1996 institutional unit price also increased due to
the pass-through of higher durum wheat costs.

Gross Profit. Gross profit increased $12.9 million, or 121.7%, to $23.5
million for the nine-month fiscal period ended September 30, 1996, from $10.6
million for the nine-month period ended September 30, 1995. Gross profit as a
percentage of revenues increased to 25.5% for the nine-month fiscal period ended
September 30, 1996, from 16.6% for the nine-month period ended September 30,
1995. These increases were primarily the result of (i) higher sales volumes;
(ii) higher average unit prices, primarily as a result of Pasta LaBella flavored
pasta sales; (iii) the absence of plant expansion costs; (iv) lower per unit
warehousing and distribution costs resulting from outsourcing logistics
functions through a new strategic alliance with Lanter Company; and (v) improved
plant efficiencies and capacity utilization, including the impact of the new
South Carolina production and distribution facilities.

Selling and Marketing Expense. Selling and marketing expense increased
$13.1 million, or 354.1%, to $16.8 million for the nine-month fiscal period
ended September 30, 1996, from $3.7 million for the nine-month period ended
September 30, 1995. Selling and marketing expense as a percentage of revenues
increased to 18.2% for the nine-month fiscal period ended September 30, 1996
from 5.7% for the nine-month period ended September 30, 1995. These increases in
selling and marketing expense were primarily due to the Company's incurrence of
$8.1 million of product introduction costs during the nine-month fiscal period
ended September 30, 1996 related to the retail introduction of the Company's
Pasta LaBella flavored pasta products. These costs included payment of product
placement fees or "slotting," introductory consumer sampling, couponing,
advertising and trade promotions. There were no comparable 1995 expenditures.
Selling and marketing expenses also increased due to Pasta LaBella flavored
pasta sales and increases in club store and private label revenues.

General and Administrative Expense. General and administrative expense
increased $0.8 million, or 40.0%, to $2.8 million for the nine-month fiscal
period ended September 30, 1996, from $2.0 million for the nine-month period
ended September 30, 1995, but decreased as a percentage of revenues from 3.2%
for the nine-month period ended September 30, 1995 to 3.0% for the nine-month
fiscal period ended September 30, 1996. The increase in general and
administrative expense was primarily due to increases in MIS expenses and
communication costs incurred to support sales growth and the commencement of
operations in South Carolina.

Operating Profit. Operating profit decreased $1.0 million, or 20.4% to $3.9
million for the nine-month fiscal period ended September 30, 1996 from $4.9
million for the nine-month period ended September 30, 1995. Excluding product
introduction costs, operating profit increased to $12.0 million, or 144.9%, from
$4.9 million and increased as a percentage of revenue to 13.0% for the
nine-month fiscal period ended September 30, 1996 from 7.7% for the nine-month
period ended September 30, 1995.

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<PAGE> 27

Interest Expense. Interest expense increased $2.7 million, or 50.9%, to
$8.0 million for the nine-month fiscal period ended September 30, 1996 from $5.3
million for the nine-month period ended September 30, 1995, due to higher
borrowing levels to finance the Company's South Carolina and Missouri capital
assets expansion and increases in working capital.

Income Tax. Income tax decreased to $(1.6) million for the nine-month
fiscal period ended September 30, 1996, from $(0.1) million for the nine-month
period ended September 30, 1995 and reflected an effective income tax rate of
approximately 38% in both periods.

Extraordinary Item. During the nine-month fiscal period ended September 30,
1996, the Company incurred a $1.6 million (net of tax) extraordinary loss due to
the write-off of deferred debt issuance costs in conjunction with a partial
extinguishment and restructuring of the Company's principal bank credit
agreement. There was no such item for the nine-month period ended September 30,
1995.

Net Income. Net income decreased $4.0 million to $(4.2) million for the
nine-month fiscal period ended September 30, 1996, from $(0.2) million for the
nine-month period ended September 30, 1995.

CALENDAR YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 1995

The calendar year ended December 31, 1996 does not conform to the Company's
fiscal year and is discussed below only for purposes of comparison with the
Company's fiscal year ended December 31, 1995.

Revenues. Revenues increased $28.7 million, or 30.9%, to $121.6 million for
the calendar year ended December 31, 1996, from $92.9 million for the fiscal
year ended December 31, 1995. This increase was due to higher unit volume,
higher average unit price from the mid-1996 introduction of the Company's new
higher-priced Pasta LaBella flavored pasta into the U.S. Retail grocery market
and improvements in product sales mix.

Revenues for the Retail market increased $23.1 million, or 46.9%, to $72.4
million for the calendar year ended December 31, 1996, from $49.3 million for
the fiscal year ended December 31, 1995. This increase was due to (i) higher
average unit prices associated with the introduction of the Company's new,
higher-priced Pasta LaBella flavored pasta into the U.S. retail grocery market
in mid-1996; (ii) higher unit volume, with the largest increases coming from the
private label and club store customers; (iii) improved product sales mix; and
(iv) the pass-through of higher durum wheat costs.

Revenues for the Institutional market increased $5.6 million, or 12.8% to
$49.2 million for the calendar year ended December 31, 1996 from $43.6 million
for the fiscal year ended December 31, 1995. The ingredient and foodservice
volume gains were partially offset by lower Contract Sales volumes as available
capacities were utilized by retail unit growth. The average 1996 institutional
unit price increased due to the pass-through of higher durum wheat costs.

Gross Profit. Gross profit increased $14.9 million, or 87.6%, to $31.9
million for the calendar year ended December 31, 1996, from $17.0 million for
the fiscal year ended December 31, 1995. Gross profit as a percentage of
revenues increased to 26.2% for the calendar year ended December 31, 1996, from
18.3% for the fiscal year ended December 31, 1995. These increases were
primarily the result of (i) higher unit volumes; (ii) higher average unit
prices, primarily due to Pasta LaBella flavored pasta sales; (iii) lower durum
wheat costs; (iv) the absence of plant expansion costs; and (v) lower per unit
warehousing and distribution costs resulting from outsourcing logistics
functions through a new strategic alliance with Lanter Company.

Selling and Marketing Expense. Selling and marketing expense increased
$16.0 million, or 301.9%, to $21.3 million for the calendar year ended December
31, 1996, from $5.3 million for the fiscal year ended December 31, 1995. Selling
and marketing expense grew as a percentage of revenue to 17.5% for the calendar
year ended December 31, 1996, from 5.7% for the fiscal year ended December 31,
1995. This increase was due to the Company's incurrence of $9.6 million of
product introduction costs during the calendar year ended December 31, 1996
related to the retail introduction of the Company's Pasta LaBella flavored pasta
products. These costs included payment of fees for product placement or
"slotting," introductory consumer sampling, couponing, advertising and trade
promotions. There were no comparable 1995 expenditures. In addition to

27
<PAGE> 28

product introduction costs, selling and marketing expenses also increased due to
the larger retail revenues associated with Pasta LaBella flavored pasta and
increases in club store and private label sales.

General and Administrative Expense. General and administrative expense
increased $0.6 million, or 20.7%, to $3.5 million for the calendar year ended
December 31, 1996 from $2.9 million for the fiscal year ended December 31, 1995,
but decreased as a percentage of revenues from 3.2% to 2.9% over the same
period. The increase in general and administrative expense was primarily due to
increases in MIS expenses and communication costs incurred to support sales
growth and the operations in South Carolina.

Operating Profit. Operating profit decreased $1.6 million, or 18.2%, to
$7.2 million for the calendar year ended December 31, 1996, from $8.8 million
for fiscal year ended December 31, 1995 and decreased as a percentage of revenue
to 5.9% for the calendar year ended December 31, 1996, from 9.4% for the fiscal
year ended December 31, 1995. Excluding product introduction costs, operating
profit increased by $8.0 million, or 90.9%, to $16.8 million for the calendar
year ended December 31, 1996, from $8.8 million for the fiscal year ended
December 31, 1995 and increased as a percentage of revenue to 13.8% for the
calendar year ended December 31, 1996 from 9.4% for the fiscal year ended
December 31, 1995.

Interest Expense. Interest expense increased $2.6 million, or 32.5% to
$10.6 million for the calendar year ended December 31, 1996 from $8.0 million
for fiscal year ended December 31, 1995, due to higher debt levels resulting
from the incremental borrowings required to finance the Company's South Carolina
and Missouri capital asset expansion and increases in working capital.

Income Tax. Income tax decreased to $(1.3) million for the calendar year
ended 1996 from $0.3 million for the fiscal year ended 1995, and reflects an
effective income tax rate of approximately 38% in both periods.

Extraordinary Item. During calendar year ended December 31, 1996, the
Company incurred a $1.6 million (net of tax) extraordinary loss due to the
write-off of deferred debt issuance costs in conjunction with a partial
extinguishment and restructuring of the Company's principal bank credit
agreement.

Net Income. Net income decreased $4.3 million to $(3.8) million for the
calendar year ended December 31, 1996, from $0.5 million for the fiscal year
ended 1995.

FISCAL YEAR ENDED DECEMBER 1995 COMPARED TO THE FISCAL YEAR ENDED DECEMBER
1994

Revenues. Revenues increased $23.4 million, or 33.7%, to $92.9 million for
the fiscal year ended December 31, 1995, from $69.5 million for the fiscal year
ended December 31, 1994. This increase was due primarily to higher unit volume
and higher average unit prices resulting from a favorable product sales mix and
price increases as a result of increases in durum wheat costs.

Revenues for the Retail market increased $18.5 million, or 60.1%, to $49.3
million for the fiscal year ended December 31, 1995, from $30.8 million for the
fiscal year ended December 31, 1994. The growth in Retail revenues was primarily
due to significant volume increases from the mid-1994 commencement of sales to
club stores and private label growth. The average 1995 retail unit price also
increased due to price increases as a result of the pass-through of higher durum
wheat costs and improved product sales mix.

Revenues for the Institutional market increased $5.3 million, or 13.8%, to
$43.6 million for the fiscal year ended December 31, 1995, from $38.3 million
for the fiscal year ended December 31, 1994. The increased net revenue resulted
primarily from (i) increased foodservice unit volume; (ii) an increase in
Contract Sales volumes; (iii) price increases made as a result of the
pass-through of higher durum wheat costs; and (iv) sales from the foodservice
introduction of higher-priced Pasta LaBella flavored pasta in the second half of
1995.

Gross Profit. Gross profit increased $2.4 million, or 16.4%, to $17.0
million for the fiscal year ended December 31, 1995, from $14.6 million for the
fiscal year ended December 31, 1994. This increase resulted primarily from
higher unit volumes. Gross profit as a percentage of revenues decreased to 18.3%
for the fiscal year ended December 31, 1995 from 21.0% for the fiscal year ended
December 31, 1994. Approximately two-thirds of the gross margin decrease was due
to incremental plant expansion costs related to the 1995

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<PAGE> 29

construction, commissioning and start-up of the South Carolina production and
distribution facilities and the Missouri distribution facility. The balance of
the gross margin decrease was a result of (i) planned short-term increases in
average unit manufacturing and logistics costs due to temporarily lower overall
capacity and higher production cost due to the opening of the South Carolina
plant, and (ii) increases in average unit packaging material costs.

Selling and Marketing Expense. Selling and marketing expense increased $1.5
million, or 39.5%, to $5.3 million for the fiscal year ended December 31, 1995,
from $3.8 million for the fiscal year ended December 31, 1994. Selling and
marketing expense as a percentage of revenues increased from 5.5% in fiscal 1994
to 5.7% in fiscal 1995, primarily as a result of retail revenue growth.

General and Administrative Expense. General and administrative expense
increased $0.9 million, or 45.0%, to $2.9 million for the fiscal year ended
December 31, 1995, from $2.0 million for the fiscal year ended December 31,
1994. General and administrative expense as a percentage of revenues increased
from 2.8% in fiscal 1994 to 3.2% in fiscal 1995, primarily due to increases in
MIS, communications, travel and other general expenses related to the
commencement of operations in South Carolina.

Operating Profit. Operating profit was $8.8 million for the fiscal year
ended December 31, 1995, unchanged from the prior fiscal year ended December 31,
1994. Excluding plant expansion costs in 1995 and 1994, operating profit
increased $1.5 million, or 16.1%, to $10.8 million for the fiscal year ended
December 31, 1995, from $9.3 million for fiscal year ended December 31, 1994,
and decreased as a percentage of revenue to 11.6% for the fiscal year ended
December 31, 1995 from 13.4% for the fiscal year ended December 31, 1994.

Interest Expense. Interest expense increased $3.0 million, or 60.0%, to
$8.0 million for the fiscal year ended December 31, 1995 from $5.0 million for
the fiscal year ended December 31, 1994, primarily due to higher debt levels
resulting from increased working capital and the financing of the Company's
South Carolina and Missouri capital asset expansion.

Income Tax. Income tax decreased $1.2 million to $0.3 million for the
fiscal year ended December 31, 1995 from $1.5 million for the fiscal year ended
December 31, 1994 and reflects an effective income tax rate of approximately 38%
in both periods.

Extraordinary Item. During the fiscal year ended December 31, 1994, the
Company incurred a $0.2 million (net of tax) extraordinary loss due to the write
off of deferred debt issuance costs in connection with a partial extinguishment
and restructuring of the Company's principal bank credit agreement. There was no
such item in 1995.

Net Income. Net income decreased $1.7 million to $0.5 million for the
fiscal year ended December 31, 1995 from $2.2 million for the fiscal year ended
December 31, 1994.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $2.6 million and working capital totaled
$13.3 million at June 30, 1997. At September 30, 1996, cash and cash equivalents
totaled $1.8 million and working capital totaled $(1.6) million. The $14.9
million increase in working capital resulted primarily from the $22.3 million
April 15, 1997 private equity financing (the "1997 Private Equity Financing")
and improvements in the Company's operating results.

The Company's net cash provided by operating activities totaled $14.1
million for the nine-month period ended June 30, 1997 compared to $(7.5) million
for the nine-month fiscal period ended September 30, 1996. This increase of
$21.6 million was primarily due to higher net income, reductions in net working
capital investment and reduced product introduction costs. Net cash provided by
operating activities was $5.7 million and $3.7 million for the fiscal years
ending December 31, 1995 and 1994, respectively. The $2.0 million increase in
net cash provided by operating activities in the fiscal year ending December 31,
1995 was primarily due to lower investment in net working capital.

Cash flow used in investing activities principally relates to the Company's
investments in manufacturing, distribution, milling and MIS assets. Capital
expenditures were $11.5 million and $3.0 million for the nine-month periods
ending June 30, 1997 and September 30, 1996, respectively, and were $38.8
million and $25.4 million for the fiscal years ended December 31, 1995 and 1994,
respectively. The increase in spending for the

29
<PAGE> 30

nine-month period ending June 30, 1997 was a result of the Company's initial
expenditures in the $86.0 million capital expansion program targeted for 1998
completion. This expansion is designed to meet the volume requirements of the
CPC Agreement and planned future growth opportunities. The increased spending in
1994 and 1995 was primarily the result of the construction of the Company's
South Carolina manufacturing and distribution facilities and the Missouri
distribution center.

Net cash provided by financing activities was $(1.8) million for the nine
months ended June 30, 1997 compared to $12.3 million for the nine-month fiscal
period ended September 30, 1996. The $14.1 million change is primarily a result
of the $22.3 million in net proceeds from the 1997 Private Equity Financing
offset by the $25.2 million repayment of short-term and long-term borrowings.
Net cash provided by financing activities was $33.1 million and $19.6 million
for the fiscal years ending December 31, 1995 and 1994, respectively, as a
result of borrowings required to fund the Company's capital asset expansion
programs and working capital.

In April 1997, the Company entered into an amended and restated credit
agreement with Bankers Trust Company, Morgan Stanley Senior Funding, Inc. and
various banks named therein (the "Credit Agreement"). The Credit Agreement
provides for (i) an $18.0 million term loan maturing on February 26, 2000; (ii)
a $19.9 million term loan maturing on February 26, 2002; (iii) a $54.7 million
term loan maturing on February 27, 2004; (iv) a $45.0 million term loan maturing
on February 27, 2004 to finance a portion of the Company's 1997-1998 capital
assets expansion; and (v) a $25.0 million revolving loan maturing on February
29, 2000. At June 30, 1997, $85.9 million was outstanding under the Credit
Agreement, and the Company had $45.0 million available to borrow under the $45.0
million term credit facility and $24.5 million available to borrow under the
$25.0 million revolving credit facility (subject to borrowing base limitations).
As of August 31, 1997, $87.9 million was outstanding under the Credit Agreement.
Interest on borrowings is based on the London Interbank Offer Rate (LIBOR), plus
a credit margin of 300 to 375 basis points. At June 30, 1997, the three-month
LIBOR rate was 5.8%, and the Company's aggregate, weighted average bank debt
borrowing rate was 9.3%. The current Credit Agreement contains restrictive
covenants that, among other things, limit the Company's ability to incur debt,
sell assets, make capital expenditures and pay dividends. Management does not
expect these limitations to have a material effect on the Company's business or
results of operations. The Company is in compliance with all financial covenants
contained in the Credit Agreement and believes it will continue to be in
compliance during fiscal 1997.

The Company plans to use a majority of its net proceeds from the Offering
to repay outstanding indebtedness incurred under the Company's Credit Facility.
The balance of such proceeds will be used to fund a portion of the Company's
planned $86 million (of which $17 million has been incurred and paid) capital
expansion of its milling and production facilities designed to meet the
significant volume requirements of the CPC Agreement and planned future growth
opportunities. The Company intends to finance the remainder of its capital
expansion program and fund future working capital needs with a combination of
the balance of the net proceeds to the Company from the Offering and borrowings,
either under the existing Credit Facility or under a new credit agreement with
its lenders (the "New Credit Agreement") to be entered into following the
closing of the Offering. The Company has received from its lenders a commitment
letter for a new $150 million unsecured revolving credit facility which will
replace the existing Credit Facility. The commitment letter provides that
interest on borrowings under the new credit facility will be based on, at the
Company's option, either LIBOR plus a credit margin of 37.5 to 175 basis points
or Bankers Trust Company's base rate plus a credit margin of 0 to 50 basis
points. There can be no assurance as to whether or when such new credit facility
will be completed or as to the terms of such facility.

The Company expects to incur an extraordinary charge related to the
write-off of deferred debt issuance costs in connection with the extinguishment
of the existing credit facility and the establishment of the new credit
facility. The unamortized balance of deferred debt issuance costs at June 30,
1997 was $3,597,000.

The commitment letter contemplates that the New Credit Agreement will
contain restrictive covenants similar to those in the current Credit Agreement
with respect to limits on the Company's ability to incur debt, sell assets, make
capital expenditures and pay dividends. Management does not expect these
limitations to have a material effect on the Company's business or results of
operations. The Company is in compliance with all financial covenants contained
in the current Credit Agreement.

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<PAGE> 31

The Company expects that future cash requirements will principally be for
capital expenditures, repayments of indebtedness under the Credit Agreement and
working capital requirements. As of June 30, 1997, the Company had commitments
to purchase Italian pasta production equipment and expand the milling,
production and distribution facilities totaling approximately $49.7 million and
durum wheat purchase commitments totaling approximately $6.3 million. Management
believes that net cash provided by operating activities, net cash provided by
financing activities and the net proceeds of the Offering will be sufficient to
meet the Company's expected capital and liquidity needs for the foreseeable
future.

RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share," which is required to be adopted by the Company on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. If SFAS No. 128 had been
implemented by the Company at June 30, 1997, the impact on the calculation of
earnings per share would not have been material.

EFFECT OF INFLATION AND INTEREST RATE FLUCTUATIONS

Historically, inflation has not had a material effect on the Company, other
than to increase its cost of borrowing. In general, the Company has been able to
increase the majority of customer sales prices to recover significant increases
in the prices of raw materials. However, changes in prices of the Company's
pasta products and the pass-through of higher durum wheat costs to certain
customers historically have lagged price increases in the Company's raw material
costs.

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<PAGE> 32

BUSINESS

OVERVIEW

AIPC is the third largest and one of the fastest-growing producers and
marketers of pasta in North America. The Company commenced operations in 1988
with the North American introduction of new, highly-efficient durum wheat
milling and pasta production technology. Management believes that the Company's
singular focus on pasta, vertically-integrated facilities, continued
technological improvements and development of a highly-skilled workforce enable
AIPC to produce high-quality pasta at costs below those of many of its
competitors. Management believes that the combination of the Company's cost
structure, the average age of its competitors' North American pasta production
equipment and the growing pasta consumption in North America creates significant
opportunities for continued growth. The Company's revenue and operating income
excluding product introduction costs were $121.6 million and $16.7 million,
respectively, for the calendar year ended December 31, 1996, and grew at CAGRs
of 33% and 33%, respectively, over the five-year period ended December 31, 1996.
During the nine-month period ended June 30, 1997, the Company had revenue of
$93.6 million and an operating margin excluding product introduction costs of
15.9%.

The Company has rapidly established a significant market presence in North
America by developing strategic customer relationships with food industry
leaders that have substantial pasta requirements. The Company has a long-term
supply agreement with Sysco, the nation's largest marketer and distributor of
foodservice products. In 1998, AIPC will become the exclusive producer of
Mueller's, the largest pasta brand in the United States, pursuant to a recent
long-term manufacturing and distribution agreement with CPC. CPC has announced
its intention to close its current pasta production facility by December 1997.
AIPC is also the primary supplier of pasta to Sam's Club, the largest club store
chain in the United States, and supplies private label and branded pasta to six
of the 10 largest grocery retailers in the United States, including Wal*Mart,
A&P, Publix, Albertsons, American Stores and Winn-Dixie. In addition, AIPC has
developed supply relationships with leading food processors, such as Pillsbury,
General Mills and Kraft Foods, which use the Company's pasta as an ingredient in
branded food products.

The Company produces more than 80 dry pasta shapes in two
vertically-integrated production and distribution facilities, strategically
located in Excelsior Springs, Missouri and Columbia, South Carolina. The
construction of the Missouri plant in 1988 represented the first use in North
America of a vertically-integrated, high-capacity pasta plant using Italian
pasta production technology. Management believes that this plant continues to be
among the most efficient and highly-automated pasta facilities in North America.
The South Carolina plant, which commenced operations in 1995, produces only
pasta shapes conducive to high-volume production and employs a highly-skilled,
self-managed workforce. Management believes that the South Carolina plant is the
most efficient pasta facility in North America in terms of productivity and
conversion cost per pound. To meet the significant volume requirements of the
CPC Agreement and support future growth, the Company commenced a capital
expenditure program in 1997 to nearly double the Company's annual pasta
production capacity and add a highly-automated durum wheat mill to its South
Carolina plant, with completion scheduled for 1998.

OPERATING STRATEGY

- Continue to Lead the Industry as a Low Cost Producer of High Quality
Pasta. AIPC has successfully implemented production and capital investment
strategies designed to achieve low-cost production of high-quality
products. AIPC has distinguished itself from most major pasta producers by
vertically integrating the durum wheat milling function with the production
process, thereby allowing the Company to manage the grain procurement
process and better control the consistency, quality and cost of its raw
materials. The Company has invested in new pasta making technology, process
controls and the development of a largely self-managed work force.
Management believes that its facilities are among the

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most efficient pasta production facilities in North America in terms of
productivity and conversion cost per pound. AIPC actively manages plant
capacity utilization to optimize its fixed asset base and profitability
through Contract Sales to government agencies and other customers. The
Company believes that its vertically-integrated processes and pasta
production equipment produces pasta of superior color, texture, flavor and
consistency. AIPC's logistics strategy enables the Company to realize
significant distribution cost savings through its strategically-located
distribution centers. The Company expects to realize additional operating
efficiencies through the completion of the current expansion program at its
South Carolina and Missouri facilities and ongoing improvement programs.
See "-- Facilities and Expansion."

- Expand Customer-Driven Strategy. The Company is committed to
developing and maintaining strategic relationships with customers who (i)
are food industry leaders requiring a significant volume of high-quality
pasta; (ii) have committed marketing and sales resources to growing their
pasta business; and (iii) pursue long-term supply arrangements. The Company
has pursued this strategy since commencing operations in 1988, beginning
with an agreement with Sysco. For almost a decade, the Company has been
Sysco's primary pasta supplier. In addition, since 1994, the Company has
been the primary pasta supplier to Sam's Club. AIPC currently supplies
private-label and branded products to over 20 retail grocery customers,
including many of the largest U.S. grocery retailers. AIPC also supplies
pasta to leading food processors such as Pillsbury, General Mills and Kraft
for use as a food ingredient. Starting in 1998, the Company will become the
sole producer of Mueller's, the largest pasta brand in the United States,
under the CPC Agreement. Management believes that these strategic
relationships increase operating efficiencies, enhance AIPC's investment in
new technology, create distribution synergies, and enable closer
involvement in its customers' pasta businesses.

- Provide Superior Customer Service. The Company develops and enhances
customer relationships by providing superior service and technical support
for its customers. The Company has invested heavily in the development of a
broad range of customer service programs, including electronic data
interchange (EDI) and efficient consumer response (ECR) programs which
streamline the order, invoicing and inventory management functions. AIPC
uses its customer response services and category management expertise,
based in part on data supplied by A.C. Nielsen Co. ("Nielsen"), to assist
customers in their supply management and merchandising decisions. AIPC's
inventory management system is designed to optimize customer lead time,
order fill rate and inventory turnover. To provide its customers with
benefits in both transportation cost and delivery time, the Company has
strategically located its distribution centers in Missouri, South Carolina
and California. The Company provides marketing, technical and service
support to its customers by assisting customers with supply and category
management decisions, producing pasta to its customers' specifications and
making operational recommendations to its customers using pasta as an
ingredient in their food products. AIPC is the only pasta producer to
sponsor an annual durum milling and pasta production technology forum, at
which industry experts conduct a training and development program for the
manufacturing and research and development personnel of food companies.

GROWTH STRATEGY

The Company continues to implement its growth strategy, which builds on the
Company's operating strategy and industry trends. Key elements of the Company's
growth strategy are to:

- Successfully Implement CPC Business Expansion. The Company was
recently selected to be the exclusive producer of CPC's Mueller's brand
pasta, the largest pasta brand in North America. Upon completion of AIPC's
planned capacity expansion in 1998, management anticipates CPC's annual
volume requirements will represent an approximately 60% increase over the
Company's fiscal 1997 production run rate. Management believes that the
Company's experience in servicing large pasta supply agreements and its
current capacity expansion program will enable AIPC to meet the current CPC
volume requirements and support potential future growth.

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be outsourced to more efficient producers of high-quality pasta, such as
AIPC. Management has identified additional strategic opportunities with
commercial users and marketers of pasta which may result in incremental
growth, new product development and cost savings opportunities in the
future.

- Secure Additional Private Label Customers. The Company intends to
continue to grow its private label customer base and secure additional
private label customers by continuing to offer quality products,
competitive pricing, category management and superior customer service.
Management believes that AIPC's prospects for growth in the private label
market have been enhanced since Borden, historically the largest private
label supplier in North America, publicly announced its intention to exit
the private label pasta business in 1997.

- Continue Product Innovation. In 1995, the Company introduced Pasta
LaBella flavored pasta, a line of all natural, full-flavored pasta products
utilizing patented flavoring technology and AIPC's proprietary production
process. In addition to pursuing increased sales with institutional
customers, the Company is exploring potential sales and marketing alliances
to expand retail distribution of Pasta LaBella flavored pasta. AIPC also
intends to continue assisting its customers with innovative products and
packaging, and the development of additional value-added products intended
to generate higher margins than traditional pasta products.

PASTA INDUSTRY

North American pasta consumption exceeded 5.0 billion pounds in 1995 and is
expected to grow based on industry and trade sources and the Company's own
analysis. The pasta industry consists of two primary customer markets: (i)
Retail, which includes grocery stores, club stores and mass merchants that sell
branded and private label pasta to consumers; and (ii) Institutional, which
includes both foodservice distributors that supply restaurants, hotels, schools
and hospitals, as well as food processors that use pasta as a food ingredient.
In 1996, the supermarket portion of the Retail market accounted for
approximately 1.3 billion pounds, of which branded and private label pasta
accounted for 1.0 billion and 0.3 billion pounds, respectively. Foodservice
distributors, food processors and the U.S. government in the Institutional
market accounted for the remainder of the volume, approximately 3.7 billion
pounds, in 1996.

The expected increase in North American consumption is primarily
attributable to the widespread recognition that pasta is an inexpensive,
convenient and nutritious food. The U.S. Department of Agriculture places pasta
on the foundation level of its pyramid of recommended food groups. Products such
as flavored pasta, prepared sauces, boxed pasta dinners, and both frozen and
shelf-stable prepared pasta entrees support consumers' lifestyle demands for
convenient at-home meals. Pasta continues to grow in popularity in restaurants
as Americans continue to dine away from home more frequently.

Customer Markets

Retail. Hershey, Borden and CPC together represent a majority of the
branded Retail market. Hershey, which primarily competes in the branded Retail
market and whose retail brands include Ronzoni, San Giorgio, Skinner and
American Beauty, is the industry leader and produced 24.5% of the total pounds
sold in the branded Retail market for the 52 weeks ended June 30, 1997. Borden,
which produced 21.5% of the total pounds sold in the Retail market for the 52
weeks ended June 30, 1997, has announced its intention to shift its strategy to
focus on its branded pasta and sauce products, which include Creamette, Prince,
Catelli, Merlino's and Anthony's, and to exit private label pasta production and
sales. CPC participates in the Retail market with Mueller's, the oldest and
largest pasta brand in the United States. AIPC directly participates in the
branded Retail market by producing and distributing Pasta LaBella flavored pasta
and will indirectly participate in such market by processing and distributing
Mueller's brand pasta for CPC. During 1998, CPC will transfer substantially all
of its Mueller's brand pasta production to AIPC. See "-- Production and Supply
Agreements."

Between the first quarter of 1994 and the second quarter of 1997, sales of
private label pasta products increased from 18.6% to 21.5% of the total pounds
of pasta sold in the Retail market. Management believes that sales of private
label pasta products will continue to grow at a rate in excess of the overall
Retail pasta

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market. After Borden's departure from the private label market, AIPC will be one
of the leading suppliers in the remaining fragmented market. Management believes
that the private label category offers significant growth and profit
opportunities to retailers and efficient producers. Retailers often prefer
high-quality private label products to branded products because private label
products typically enable retailers to generate higher margins and maintain
greater control of in-store merchandising. While consumers traditionally have
viewed private label products as having lower quality than branded products,
management believes that new high-quality private label products have begun to
change this perception. Management attributes some of this change in the private
label market to the increasingly upscale image, improved packaging, higher
product quality and competitive prices of private label products.

Institutional. The Institutional market includes both foodservice
distributors that supply restaurants, hotels, schools and hospitals, as well as
food processors that use pasta as a food ingredient. Traditional foodservice
customers include businesses and organizations, such as Sysco and JP
Foodservice, Inc., that sell products to restaurants, healthcare facilities,
schools, hotels and industrial caterers. Most foodservice distributors obtain
their supply of pasta from third party producers such as AIPC. The foodservice
market is highly-fragmented and is served by numerous regional and local food
distributors, including both "traditional" foodservice customers and chain
restaurant customers. Sysco, the nation's largest foodservice marketer and
distributor of foodservice products and one of the nation's largest commercial
purchasers of pasta products, serves approximately 10% of the foodservice
customers in the United States and has more than double the revenues of the next
largest foodservice distributor.

The Institutional market also includes sales to food processors who use
pasta as an ingredient in their food products such as frozen dinner entrees and
side dishes, dry side dish mixes, canned soups and single-serve meals. Large
food processors that use pasta as a food ingredient include Kraft Foods,
American Home Food Products Corporation, Stouffers Corp., Campbell Soup Company,
ConAgra, Inc., Pillsbury and General Mills. The consistency and quality of the
color, starch release, texture, cooking consistency, and gluten and protein
content of pasta produced for food processors is crucial to their products'
success. As a result, food processors have stringent specifications for these
attributes.

The size of the Institutional market is affected by the number of food
processors that elect to produce pasta internally rather than outsourcing their
production. Historically, most pasta used by food processors was manufactured
internally for use in food processors' own products. Management believes,
however, that an increasing number of food processors may discontinue the
internal production of their own pasta and outsource their production to more
efficient producers such as AIPC.

Pasta Production Capacity

Management believes that pasta producers have historically rationalized
their existing production facilities. Within the past several years, however,
there has been an increase in some pasta producers' capital reinvestment. Upon
completion of the planned expansion, AIPC will have increased its production
capacity to 620 million pounds since commencing operations in 1988. Several
domestic pasta producers have recently completed production facility additions
or announced their intention to increase domestic production capacity. In
addition to AIPC's planned capital expansion, management believes that these
capacity additions represent more than 200 million pounds in aggregate. Dakota
Growers recently increased the capacity of its durum wheat mill and has
announced plans to complete a pasta production capacity expansion in excess of
100 million pounds by the end of 1997. Hershey is believed to have recently
added approximately 50 million pounds of pasta capacity to its facility in
Winchester, Virginia. In September 1997, Barilla announced plans to build a
pasta plant near Ames, Iowa with an estimated annual pasta capacity over 200
million pounds. Two major pasta producers have also recently announced planned
reductions in pasta production capacity. Borden announced that it will close or
sell five of its ten North American pasta plants by the end of 1997, and CPC
intends to eliminate its capacity of approximately 180 million pounds by the end
of 1997. AIPC and Dakota Growers are currently the only major pasta producers
that own vertically-integrated milling and pasta production facilities. Barilla
has announced that its new, vertically-integrated Iowa pasta plant will include
milling, production and warehouse facilities.

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Management estimates pasta imported from foreign producers during 1996
represented approximately 17% of the U.S. dry pasta market, and that of this
amount, approximately two-thirds originated from producers in Italy and Turkey.
The primary foreign suppliers of pasta with which the Company competes are
Barilla and De Cecco.

Pricing pressures from Turkish and Italian pasta producers aggressively
targeting the U.S. markets have adversely affected returns and earnings of some
U.S. producers in recent years. In 1996, pasta imported from Italy accounted for
approximately $140 million in sales, or around 8.0% of the U.S. pasta market. In
1996, a U.S. Department of Commerce investigation revealed that several Italian
and Turkish producers were engaging in unfair trade practices by selling pasta
at less than fair value in the U.S. markets and benefitting from subsidies from
their respective governments. Effective July 1996, the U.S. International Trade
Commission imposed anti-dumping duties ranging from 2.8% to 46.7% on Italian
imports and from 56.8% to 63.3% on Turkish imports, as well as countervailing
duties ranging from 1.2% to 11.2% on Italian imports and from 3.9% to 15.8% on
Turkish imports. Although Italian and Turkish importers still participate in the
major U.S. customer markets, management believes that these duties have
significantly reduced the volume of low-priced pasta from Italy and Turkey. See
"Risk Factors -- Competition."

Raw Materials

Pasta's primary ingredient is semolina, which is extracted from durum wheat
through a milling process. Almost all domestic pasta producers purchase semolina
from third party milling companies. Durum wheat is used exclusively for pasta.
Each variety of durum wheat has its own unique set of protein, gluten content,
moisture, density, color and other attributes which affect the quality and other
characteristics of the semolina. The Company blends semolina from different
wheat varieties as needed to meet customer specifications.

Durum wheat used in United States pasta production generally originates
from Canada, North Dakota, Montana, Arizona and California. Although durum wheat
can be purchased directly from farmers or grower-owned cooperatives, most
milling companies purchase durum wheat on a commodity exchange. AIPC and Dakota
Growers are the only major producers of pasta in North America that have
vertically integrated milling and production facilities. See "Raw Materials and
Supplies."

PRODUCTS

AIPC's product line, comprising over 1,000 stock-keeping units ("SKUs"),
includes long goods such as spaghetti, linguine, fettuccine, angel hair and
lasagna, and short goods such as elbow macaroni, mostaccioli, rigatoni, rotini,
ziti and egg noodles. In many instances, the Company produces pasta to its
customers' specifications. AIPC makes over 80 different shapes and sizes of
pasta products in over 160 package configurations, including bulk packages for
institutional customers and small individually-wrapped packages for retail sale
to individual consumers. AIPC contracts with third parties for the production of
certain pasta shapes, such as retail lasagna and canneloni, which are
specialized products, but which are necessary to offer customers a full range of
pasta products. Purchased pasta represented less than 2% of AIPC's total unit
volume in fiscal 1996.

In fiscal 1995, AIPC introduced a product line of all natural,
full-flavored pasta marketed under the Pasta LaBella brand. Pasta LaBella
flavored pasta is principally marketed as a branded product to grocery retailers
and to Sysco. AIPC's all-natural, full-flavored dry pasta is available in a
variety of flavors including tomato basil, lemon pepper, pesto, roasted garlic
and herb, roasted bell pepper/roasted garlic, and cracked black pepper.
Management believes that AIPC's use of patented flavoring ingredients under an
exclusive license and a proprietary manufacturing process allows the Company to
provide superior product quality and flavor delivery compared to competitive
flavored pasta products. Pasta LaBella flavored pasta was recognized as one of
the top 10 new products in the United States in 1996 by Food Processing
Magazine.

QUALITY

The Company believes that its state-of-the-art, Italian pasta production
equipment is capable of producing the highest quality pasta. AIPC's products are
produced to satisfy the specifications of the Company's customers as well as its
own product specifications, which management believes are among the highest in
the industry. The Company's pasta is distinguished by a rich, natural "wheaty"
taste and a

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consistently smooth and firm ("al dente") texture with a minimum amount of white
spots or dark specks. AIPC evaluates the quality of its products through: (i)
internal laboratory evaluation of AIPC products against competitive products on
physical characteristics, including color, speck count, shape and consistency,
and cooking performance, including starch release, protein content and bite; and
(ii) competitive product comparisons that AIPC's customers perform on a regular
basis.

The Company submits its production facilities to semi-annual inspections by
the American Institute of Baking ("AIB"), the leading United States baking, food
processing and allied industries evaluation agency for sanitation and food
safety. The Company consistently has achieved the AIB's highest "Superior"
rating. The Company also implemented a comprehensive Hazard Analysis Critical
Control Point ("HAACP") program five years ago to continuously monitor and
improve the safety, quality and cost-effectiveness of the Company's facilities
and products. The Company believes that having an AIB rating of "Superior" and
meeting HAACP standards have helped the Company attract new business and
strengthen existing customer relationships.

PRODUCTION AND SUPPLY AGREEMENTS

The Company has established itself as one of the largest producers of dry
pasta in North America by establishing strategic production, supply and
distribution arrangements with several food industry leaders, including CPC and
Sysco.

Under the CPC Agreement, CPC will close its current facilities dedicated to
the production of Mueller's brand pasta and, beginning in 1998, AIPC will become
the exclusive producer of Mueller's, with the exception of two specialty items
which CPC currently purchases from another supplier. CPC is a global food
company, and its Mueller's pasta line is the oldest and largest pasta brand in
the United States with an annual sales volume averaging approximately 200
million pounds over the last five years. AIPC will be paid on a "cost plus"
basis in an amount equal to total actual cost of production plus a guaranteed
profit per pound of pasta produced. CPC has guaranteed minimum purchase volumes
of 175 million pounds annually for nine years. AIPC may also benefit from
additional cost savings resulting from improved productivity. The term of the
contract is through December 31, 2006 with a three-year renewal term at the
option of CPC. Without CPC's consent, AIPC may not produce branded retail pasta
for Borden, Hershey or Barilla, and is limited to the production of an aggregate
of 12 million pounds of branded pasta products annually for other producers. The
CPC Agreement may be terminated by CPC upon certain events, including (i) a
failure by AIPC to satisfy certain minimum production requirements for any
reason other than the fault of CPC or events demonstrably beyond AIPC's control,
or (ii) AIPC's merger with, or sale of substantially all of its assets to,
Borden, Hershey or Barilla.

Pursuant to the Sysco Agreement, AIPC is the primary supplier of pasta for
Sysco and has the exclusive right to supply pasta to Sysco for sale under
Sysco's name. Sysco, which operates from approximately 65 operations and
distribution facilities nationwide, provides products and services to
approximately 230,000 restaurants, hotels, schools, hospitals, and other
institutions, as well as the U.S. government. For the nine-month fiscal year
ended September 30, 1996, sales attributed to Sysco represented approximately
27% of the Company's net revenues. Sysco recently exercised its option to renew
its agreement with AIPC for an additional three years through June 30, 2000, and
has options to renew the agreement for additional three-year periods through
June 30, 2006. AIPC products are sold to Sysco on a cost-plus basis, with annual
adjustments based on the prior year's costs. Under the Sysco Agreement, AIPC may
not supply pasta products to any business other than Sysco in the United States,
Mexico or Canada that operates as, or sells to, institutions and businesses
which provide food for consumption away from home (i.e. foodservice businesses)
without Sysco's prior consent. In 1996, Sysco honored the Company as one of the
10 best of its 1,300 suppliers. The Sysco Agreement may be terminated by Sysco
upon certain events, including a substantial casualty to or condemnation of
AIPC's Missouri plant.

RAW MATERIALS AND SUPPLIES

AIPC's ability to produce high-quality pasta generally begins with its
purchasing durum wheat directly from farmers and grower-owned cooperatives in
Canada, North Dakota, Montana, Arizona and California,

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rather than from grain exchanges. This direct purchasing method ensures that the
extracted semolina meets AIPC's specifications since each variety of durum wheat
has its own unique set of milling and pasta making characteristics. The Company
has several sources for durum wheat and is not dependent on any one supplier. As
a result, the Company believes that it has adequate sources of supply for durum
wheat. The Company occasionally buys and sells semolina to balance its milling
and production requirements.

Durum wheat is a cash crop whose average monthly market price has
fluctuated from a low of $5.18 per bushel to a high of $7.49 per bushel in the
last four years. Durum wheat does not have a related futures market to hedge
against such price fluctuations. The Company manages its durum wheat cost risk
through long-term contracts and other arrangements with its customers and
advance purchase contracts for durum wheat which are generally less than six
months' duration. Long-term supply agreements and other customer arrangements
which allow for the pass-through of durum wheat cost changes in certain
circumstances represented approximately 60% of AIPC's total revenue for the
nine-month period ended June 30, 1997. Management believes that the Company will
significantly increase the percentage of revenues pursuant to contracts which
include provisions for sales price adjustments as it begins to generate CPC
revenues in 1998. Between June 30, 1997 and October 6, 1997, the market price of
durum wheat increased by approximately 21% from $5.60 per bushel to $6.75 per
bushel. See "Risk Factors -- Raw Materials" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

AIPC purchases its packaging supplies, including poly-cellophane,
paperboard cartons, boxes and totes from third parties. Management believes the
Company has adequate sources of packaging supplies.

FACILITIES AND EXPANSION

Production Facilities. AIPC's pasta production plants are located near
Kansas City in Excelsior Springs, Missouri, and in Columbia, South Carolina. The
Company's facilities are strategically located to support North American
distribution of AIPC's products and benefit from the rail and interstate highway
infrastructure. At June 30, 1997, the Company's facilities had combined annual
milling and production capacity of approximately 300 million pounds of durum
semolina and 330 million pounds of pasta.

The Company has pursued a capacity expansion strategy over the past several
years. During 1994, the Company completed a $30.0 million expansion of the
Missouri plant, increasing production capacity more than 70% to 230 million
pounds per year and, at the same time, increased its durum wheat milling
capacity over 100% to support pasta production of approximately 300 million
pounds per year. In 1995, the Company added approximately 100 million pounds of
pasta capacity by constructing its South Carolina plant.

AIPC has commenced an $86.0 million capital expenditure program to increase
its current pasta production capacity by 90% from 330 million pounds per year to
620 million pounds per year in 1998. The additional capacity at the Missouri
facility will combine high-speed, high-output pasta production lines with the
ability to produce a full range of products, and will include a distribution
center expansion. The capital expenditures program also includes the
construction of a durum wheat mill in South Carolina which adjoins the existing
plant facility, a 200% increase in the facility's pasta production capacity, and
a doubling of the capacity of the South Carolina distribution facility. See "Use
of Proceeds" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" and "Risk
Factors -- Substantial Planned Investment in Milling and Production Facilities."

The additional capacity will be used to produce Mueller's brand pasta and
take advantage of other market opportunities. By the second quarter of fiscal
1998, AIPC will assume production of substantially all of CPC's Mueller's pasta,
which management estimates will require a minimum production capacity of 200
million pounds a year. CPC's guaranteed annual minimum purchases of 175 million
pounds pursuant to the CPC Agreement will utilize approximately 60% of the
Company's newly-added capacity.

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The following chart illustrates the historical and budgeted growth of
AIPC's milling and pasta production capacity:

[Performance Graph]

Each of the Company's major capacity expansion programs has been completed on
schedule and within budget, and has delivered the targeted levels of output and
efficiency. See "Risk Factors -- Substantial Planned Investments in Milling and
Production Facilities" and "Management of Growth and Implementation of CPC
Business."

Milling and Pasta Production Processes. Durum wheat is currently delivered
to AIPC's mill in Missouri by railcar directly from the durum wheat elevators in
the northern United States and Canada under a long-term rail contract. The wheat
is then unloaded, blended and pre-cleaned. Next, the moisture content of the
wheat is raised to the optimal level required for milling (the "tempering
process"). The cleaned and tempered wheat is then conveyed to the mill where
grinding, sifting, and purifying processes extract the purest possible semolina.
The semolina milling is controlled from a central control room located in the
mill where a single AIPC team member monitors and directs the mill's entire
milling, cleaning and storage process. Semolina is then pneumatically
distributed from the mill to AIPC's pasta production facility in Missouri and,
through the use of a leased fleet of 33 dedicated railcars, transferred to South
Carolina.

After being mixed with water, the semolina is extruded into the desired
shapes and travels through computer-controlled high-temperature dryers and
stabilized at room temperature. The Company's entire pasta production process is
controlled by programmable logic controllers which enable all of the production
lines to be operated and monitored by minimal staff. The pasta is then packaged
in a wide variety of packaging configurations on highly-automated film, carton
and bulk packaging systems and forwarded through automated conveyors to the
distribution center to be palletized and stored prior to shipment.

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The Company's vertically-integrated milling and pasta production process is
depicted in the following chart:

AIPC'S MILLING AND PASTA PRODUCTION PROCESS

MILLING AND PASTA PRODUCTION PROCESS GRAPH

Distribution. The Company's three distribution centers are strategically
located in South Carolina, Missouri and Southern California to serve a national
market. The Company currently owns the distribution center adjoining its
Missouri plant and leases its distribution center in South Carolina as well as
space in a public warehouse in Pomona, California. The Company completed
construction of the integrated warehousing and distribution facilities at its
Missouri and South Carolina facilities during 1995. The warehousing and
distribution facilities are integrated with the Company's production facilities
which allows cased, finished products to be automatically conveyed via enclosed
case conveying systems from the production facilities to the distribution
centers for automated palletization and storage until shipping. The combination
of integrated facilities and multiple distribution centers enables AIPC to
realize significant distribution cost savings and provides lead time, fill rate
and inventory management advantages to its customers. The operation of the
Missouri and South Carolina distribution centers is outsourced under a long-term
agreement with Lanter Company, a firm specializing in warehouse and logistics
management services.

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SALES AND MARKETING

AIPC actively markets its products through approximately 15 internal sales
and marketing staff and approximately 30 independent food brokers and
distributors throughout the United States. AIPC's senior management is directly
involved in the selling process in all customer markets. The Company's sales and
marketing strategy is to provide superior quality, complete product offering,
distinctive packaging specifically tailored to customers' needs, competitive
pricing and superior customer service to attract new customers and grow existing
customers' pasta sales.

One of the Company's core strengths has been the development of strong
customer relationships and the establishment of a reputation as a technical and
service expert in the pasta field. As part of its overall customer service
strategy, AIPC uses its category management expertise to assist customers in
their supply management decisions regarding pasta and new products. The
Company's category management experts use on-line Nielsen's supermarket data to
drive pasta category growth by recommending pricing, SKU sets and shelf spacing
to both private label and branded customers. AIPC representatives also assist
food processors in incorporating AIPC's pasta as an ingredient in its customers'
food products. The Company sponsors an annual "Pasta Technology Forum" which is
a training and development program for its customers' production and new product
personnel. AIPC also produces and distributes a quarterly newsletter, the Pasta
Advisor, to its institutional customers which contains recommendations regarding
storage, conveying, cooking and ingredient combination. In addition to technical
education, the Company provides dedicated technical support to its customers by
making recommendations regarding the processing of pasta in their facilities.
AIPC believes that these value-added activities provide customers with a better
appreciation and awareness of the Company and its products.

The Company consistently demonstrates its commitment to customer service
through the development of enhanced customer service programs. Examples of these
programs include the creation by AIPC of an ECR model which uses EDI and vendor
replenishment programs to assist its key retail customers, and category
management services for its private label and branded customers. These programs
also enable the Company to more accurately forecast production and sales demand,
enabling higher utilization of production capacities and lower average unit
costs. AIPC has also created a dedicated sales force for Sysco, its largest
customer, to provide regional sales support.

MANAGEMENT INFORMATION SYSTEMS

The Company's production, distribution, sales and marketing operations are
supported by an IBM AS400-based computer system. The system utilizes licensed
BPCS manufacturing software which has been tailored to the Company's management
processes and integrates its production, purchasing, order entry, inventory
management, distribution and accounting systems. The Company's MIS were recently
upgraded in anticipation of the Company's growth and desire to continue to offer
its customers value-added, efficient services. The Company has invested
substantial amounts in EDI and ECR to streamline the order, invoicing and
inventory management functions. The Company believes that its recent hardware
and software upgrades have adequately addressed the systems operations issues
relating to the year 2000.

COMPETITION

The Company operates in a highly competitive environment against numerous
well-established national, regional and foreign companies, and many smaller
companies. The Company's competitors include both independent pasta producers
and pasta divisions and subsidiaries of large food products companies. The
Company competes in the procurement of raw materials, the development of new
products and product lines, the improvement and expansion of previously
introduced products and product lines and the production, marketing and
distribution of its products. AIPC's products compete with a broad range of food
products, both in the retail and institutional customer markets. Competition in
these markets generally is based on product quality and taste, pricing,
packaging and customer service and logistics capabilities. The Company believes
that it currently competes favorably with respect to these factors. See "Risk
Factors -- Competition" and "Business -- Pasta Industry."

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AIPC's direct competitors include large multi-national companies such as
Hershey and Borden and other competitors such as Dakota Growers, Philadelphia
Macaroni and Zerega's. The Company also competes against foreign companies such
as Italian pasta producers De Cecco and Barilla and competes, indirectly,
against food processors such as Kraft Foods, General Mills, Inc., American Home
Food Products Corporation, Campbell Soup Company and Stouffers Corp., that
produce pasta internally as an ingredient for use in their food products. See
"-- Industry."

TRADEMARKS AND PATENTS

The Company holds a number of federally registered and common law
trademarks which it considers to be of considerable value and importance to its
business including: AIPC American Italian Pasta Company, American Italian, and
Pasta LaBella. The Company has registered the AIPC American Italian Pasta
Company(R), Pasta LaBella(R), Montalcino(R) and other trademarks with the U.S.
Patent and Trademark Office. AIPC has filed a registration application with the
U.S. Patent and Trademark Office for the Calabria(TM) and Heartland(TM)
trademarks. A patent application is currently pending with respect to the
proprietary flavoring process for Pasta LaBella flavored pasta.

REGULATION

The Company is subject to various laws and regulations relating to the
operation of its production facilities, the production, packaging, labeling and
marketing of its products and pollution control, including air emissions, which
are administered by federal, state, and other governmental agencies. The
Company's production facilities are subject to inspection by the U.S. Food and
Drug Administration and Occupational Safety and Health Administration, the
Missouri Department of Natural Resources and the South Carolina Department of
Health and Environmental Control.

EMPLOYEES

As of June 30, 1997, the Company employed 287 full-time persons, of whom
134 were salaried employees and 153 were hourly employees. The Company's
employees are not represented by any labor unions. AIPC considers its employee
relations to be good.

LEGAL PROCEEDINGS

The Company currently is not a party to any material litigation nor is it
aware of any litigation threatened against it which, if commenced and adversely
determined, would likely have a material adverse effect upon the business or
financial condition of the Company.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information concerning each of the
directors and executive officers of the Company as of the date of this
Prospectus:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Horst W. Schroeder........................ 56 Chairman of the Board of Directors
Timothy S. Webster........................ 35 President and Chief Executive Officer;
Director
Norman F. Abreo........................... 47 Executive Vice President -- Operations
David E. Watson........................... 42 Executive Vice President and Chief
Financial Officer
David B. Potter........................... 38 Senior Vice President -- Procurement
Jonathan E. Baum.......................... 37 Director
David Y. Howe............................. 33 Director
Robert H. Niehaus......................... 42 Director
Amy S. Rosen.............................. 27 Director
James A. Schlindwein...................... 68 Director
Lawrence B. Sorrel........................ 38 Director
Richard C. Thompson....................... 46 Director
</TABLE>

Horst W. Schroeder has served as Chairman of the Board of Directors of the
Company since June 1991, and as a Director of the Company since August 1990.
Since 1990, Mr. Schroeder has been President of HWS & Associates, Inc., a Hilton
Head, South Carolina management consulting firm owned by Mr. Schroeder. Prior to
founding HWS & Associates, Mr. Schroeder served the Kellogg Company, a
manufacturer and marketer of ready-to-eat and other convenience food products,
in various capacities for more than 20 years, most recently as President and
Chief Operating Officer. He is a manager of PSF Holdings, L.L.C. and has served
as Chairman of the Board of its wholly-owned subsidiary, Premium Standard Farms,
Inc., a vertically-integrated pork producer, since 1996.

Timothy S. Webster has served as President of the Company since June 1991,
as President and Chief Executive Officer of the Company since May 1992, and as a
Director since June 1989. Mr. Webster joined the Company in April 1989, and
served as Chief Financial Officer from May 1989 to December 1990 and as Chief
Operating Officer from December 1990 to June 1991. In addition, in August 1997
Mr. Webster assumed responsibility for managing the Company's sales and
marketing functions. Prior to joining the Company, Mr. Webster was a manager
with the Entrepreneurial Services Group of Arthur Young and Company (a
predecessor firm to Ernst & Young LLP) from April 1987 to April 1989.

Norman F. Abreo joined the Company in December 1991, serving initially as
the Company's Vice President -- Manufacturing. He became Senior Vice President
- -- Operations in June 1995, and Executive Vice President -- Operations in June
1997. Prior to joining the Company, he was Plant Manager for the Coca-Cola
Enterprises, Inc. plant in New Orleans, Louisiana, from December 1987 to
December 1991; Director of Operations for Borden Pasta Group from December 1985
to December 1987; and Plant Manager of the Borden Pasta Group's New Orleans
facility from March 1979 to December 1985.

David E. Watson joined the Company in June 1994 as its Senior Vice
President and Chief Financial Officer. He was promoted to Executive Vice
President and Chief Financial Officer in June, 1997. Prior to joining AIPC, Mr.
Watson spent 18 years with the accounting firm of Arthur Andersen & Co., most
recently as partner-in-charge of its Kansas City and Omaha Business Consulting
Group practice. Mr. Watson is a certified public accountant.

David B. Potter joined the Company in 1993 as its Director of Procurement.
He was named Vice President in 1994 and Senior Vice President -- Procurement in
June 1997. Before joining the Company, Mr. Potter had worked in numerous areas
of Hallmark Cards and its subsidiary, Graphics International Trading Company,
from 1981 to 1993, most recently as Business Logistics Manager.

43
<PAGE> 44

Jonathan E. Baum has served as a Director of the Company since 1994. He has
been the Chairman and Chief Executive Officer of George K. Baum & Company, an
investment banking firm, since 1994. Previously, he had been a Vice President
with Salomon Brothers Inc.

David Y. Howe has served as a Director of the Company since 1995. He is a
Vice President of Citicorp Venture Capital, Ltd., a venture capital firm, where
he has been employed since 1993. From 1990 to 1993, he had been employed by
Butler Capital, a private investment company. He is also a director of Aetna
Industries, Inc., Brake-Pro, Inc., Cable Systems International, Inc.,
Copes-Vulcan, Inc., Pen-Tab Industries, Inc., Milk Specialties Company and
LifeStyle Furnishings, Ltd.

Robert H. Niehaus has served as a Director of the Company since 1992. He
has been a Managing Director of Morgan Stanley & Co. Incorporated since 1990. He
is also Managing Director and a Director of The Morgan Stanley Leveraged Equity
Fund II, Inc., the general partner of MSLEF, and Morgan Stanley Capital Partners
III, Inc., the general partner of the general partner of the MSCP Funds. He is
also a director of Fort James Corporation, Silgan Corporation, Silgan Holdings
Inc., Waterford Wedgewood UK, plc, of which he is the Chairman, and Waterford
Crystal Ltd.

Amy S. Rosen has served as a Director of the Company since April, 1997. She
is an Associate of Morgan Stanley & Co. Incorporated, where she has been
employed since 1994. Ms. Rosen also is an Associate of Morgan Stanley Capital
Partners III, Inc., the general partner of the general partner of the MSCP
Funds. Previously, she was employed by The Blackstone Group for two years.

James A. Schlindwein has served as a Director of the Company since 1995.
Prior to his retirement in September 1994, Mr. Schlindwein served as Executive
Vice President-Merchandising Services and Director of Sysco Corporation, a
national institutional foodservice distributor, where he had served since 1980.
He is also a director of Riser Foods, Inc.

Lawrence B. Sorrel has served as a Director of the Company since 1992. He
is a Managing Director of Morgan Stanley & Co. Incorporated where he has been
employed since 1986. He is also Managing Director and a Director of Morgan
Stanley Capital Partners III, Inc., the general partner of the general partner
of the MSCP Funds, and The Morgan Stanley Leveraged Equity Fund II, Inc., the
general partner of MSLEF. He is also a director of Emmis Broadcasting
Corporation, Vanguard Health Systems, Inc., LifeTrust America, Inc., and The
Compucare Company.

Richard C. Thompson has served as a Director of the Company since 1986. Mr.
Thompson is an experienced entrepreneur and, since 1993, has been President and
Chief Executive Officer of Thompson's Pet Pasta Products, Inc., a pet food
producer. He is the founder of the Company and served as its President from May
1986 to June 1991.

COMPOSITION OF BOARD OF DIRECTORS

Upon consummation of the Offering, it is anticipated that the Company's
Board of Directors will consist of nine directors, divided into three classes,
with the members of each class to serve for staggered three-year terms. The
initial term of the first class will expire at the annual meeting of
stockholders to be held in 1998, the initial term of the second class will
expire in 1999 and the initial term of the third class will expire in 2000.
Messrs. Schlindwein and Howe and Ms. Rosen will be included in the first class,
Messrs. Baum, Niehaus and Thompson will be included in the second class and
Messrs. Webster, Schroeder and Sorrel will be included in the third class.
Directors will hold office for a term of three years and will serve until their
successors are elected and qualified. Officers are elected annually by the Board
of Directors and serve until their successors are duly elected and qualified.
The Company intends to increase the size of the Board by adding two additional
independent directors in the future.

COMPENSATION OF DIRECTORS

Messrs. Schlindwein and Thompson currently are the only directors who
receive fees for serving as directors of the Company. Messrs. Schlindwein and
Thompson each receive a fee of $3,000 for attendance at each meeting of the
Board of Directors, with no additional amounts payable with respect to separate

44
<PAGE> 45

committee meetings. None of the other directors of the Company is paid
directors' fees for serving on the Board of Directors or its committees. All
directors are reimbursed for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors and meetings of Board
committees.

COMMITTEES OF THE BOARD

Under the Company's By-laws, the Board of Directors may establish one or
more committees, appoint one or more members of the Board of Directors to serve
on each committee, fix the exact number of committee members, fill vacancies,
change the composition of the committee, impose or change the duties of the
committee and terminate the committee. The Board of Directors has established an
Audit Committee and a Compensation Committee. Each such committee has two or
more members who serve at the pleasure of the Board of Directors.

The Compensation Committee is responsible for reviewing and making
recommendations to the Board of Directors with respect to the salaries, bonuses,
and other compensation paid to key employees and officers of the Company,
including the terms and conditions of their employment, and administers all
stock option and other benefit plans (except with respect to participation by
executive officers in stock option and other equity incentive plans of the
Company which will be made by the Board of Directors or a committee comprised
solely of outside directors, unless otherwise specified in the applicable plan
documents) affecting key employees' and officers' direct and indirect
remuneration. Currently, Messrs. Niehaus, Schroeder and Sorrel serve on the
Compensation Committee.

The Audit Committee is responsible for reviewing the Company's financial
statements, audit reports, internal financial controls and the services
performed by the Company's independent public accountants, and for making
recommendations with respect to those matters to the Board of Directors. Messrs.
Schlindwein and Baum serve on the Audit Committee.

45
<PAGE> 46

EXECUTIVE COMPENSATION

The following table summarizes compensation information with respect to the
President and Chief Executive Officer ("CEO") of the Company and each of the
Company's most highly-compensated executive officers for services rendered
during the fiscal year ended September 30, 1997 and the nine-month fiscal year
ended September 30, 1996 (collectively, with the CEO, the "Named Executive
Officers"):

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
FISCAL PERIOD COMPENSATION
COMPENSATION AWARDS
-------------------- ------------
FISCAL SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION PERIOD(1) SALARY($) BONUS($) UNDERLYING OPTIONS(#) COMPENSATION
--------------------------- --------- --------- -------- --------------------- ------------
<S> <C> <C> <C> <C> <C>
Timothy S. Webster................. 1997 $282,596 (2) 84,622 $ 7,151(3)
President and 1996 185,615 $125,000 -- 4,967(3)
Chief Executive Officer
Horst W. Schroeder................. 1997 183,700 (2) 84,622 --
Chairman of the Board 1996 98,047 40,000 -- 330,000(4)
David E. Watson.................... 1997 159,931 (2) -- 5,244(5)
Executive Vice President and 1996 119,510 37,500 -- 4,484(5)
Chief Financial Officer
Norman F. Abreo.................... 1997 137,423 (2) -- 3,223(5)
Executive Vice 1996 99,856 37,500 -- 1,226(5)
President--Operations
David B. Potter.................... 1997 105,954 (2) 15,330 4,872(5)
Senior Vice 1996 78,000 29,000 -- 2,777(5)
President--Procurement
Daniel R. Keller................... 1997 165,923 -- 45,990 1,462(5)
Former Senior Vice President --
Sales and Marketing(6)
</TABLE>

- -------------------------
(1) For purposes of the foregoing table, the Company's 1996 fiscal year extended
from January 1, 1996 until September 30, 1996 and the Company's 1997 fiscal
year extended from October 1, 1996 to September 30, 1997.

(2) The Company has not yet determined the amount of bonuses payable for the
1997 fiscal year.

(3) Includes payments under the American Italian Pasta Company Retirement
Savings Plan and premiums in the amount of $518 paid by the Company on a
split-dollar life insurance policy.

(4) Represents a bonus which Mr. Schroeder is required to repay to the extent
that he provides less than 30 days of service during any calendar year
ending on or prior to December 31, 1998. Mr. Schroeder's service during the
1996 and 1997 fiscal years resulted in $82,000 and $110,000, respectively,
of such bonus being no longer subject to such contingent repayment
obligation.

(5) Represents payments under the American Italian Pasta Company Retirement
Savings Plan.

(6) Mr. Keller served in such capacity from October 1996 to August 1997, when
his employment with the Company terminated. All of his options were
cancelled in connection with such termination of employment.

46
<PAGE> 47

The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers during the fiscal year
ended September 30, 1997:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------- POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION --------------------------
NAME GRANTED 1997 PER SHARE DATE 5% 10%
---- ---------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Timothy S. Webster............... 84,622 32.9% $ 7.02 4/15/07 $373,593 $946,757
Horst W. Schroeder............... 84,622 32.9 7.02 4/15/07 373,593 946,757
David E. Watson.................. -- -- -- -- -- --
Norman F. Abreo.................. -- -- -- -- -- --
David B. Potter.................. 15,330 6.0 12.23 1/07/07 117,909 298,804
Daniel R. Keller(2).............. 45,990 17.9 12.23 10/25/06 353,727 896,413
</TABLE>

- -------------------------
(1) The amounts shown as potential realizable values are based on assumed
annualized rates of appreciation in the price of the Common Stock of five
percent and ten percent over the term of the options, as set forth in the
rules of the Securities and Exchange Commission. Actual gains, if any, on
stock option exercises are dependent upon the future performance of the
Common Stock. There can be no assurance that the potential realizable values
reflected in this table will be achieved.
(2) All such options were cancelled in connection with Mr. Keller's termination
of employment in August 1997.

The following table sets forth certain information with respect to stock
options granted to each of the Named Executive Officers that were outstanding at
September 30, 1997:

AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
---------------------------------------------------------
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME UPON EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Timothy S. Webster...... -- -- 263,169 136,953 $3,352,903 $1,282,729
Horst W. Schroeder...... -- -- 263,169 136,953 3,352,903 1,282,729
David E. Watson......... -- -- 44,899 44,752 457,267 390,339
Norman F. Abreo......... -- -- 53,937 35,713 575,492 272,114
David B. Potter......... -- -- 9,811 20,849 101,433 120,281
Daniel R. Keller........ -- -- -- -- -- --
</TABLE>

- -------------------------
(1) Based on the initial public offering price of $18 per share.

EMPLOYMENT AGREEMENTS

Mr. Webster. Mr. Webster has entered into an employment agreement with the
Company effective upon the consummation of the Offering and terminating
September 30, 2002. Under the agreement, Mr. Webster is entitled to an annual
base salary of $330,000, subject to annual adjustment by the Board. Mr. Webster
is also eligible to receive annual bonuses at the discretion of the Board under
the Company's 1996 Salaried Bonus Plan (the "Bonus Plan"). Upon consummation of
the Offering, Mr. Webster is to be granted options to purchase shares of Class A
Common Stock equal to 3% of the shares of Common Stock outstanding immediately
prior to the Offering, on a fully diluted basis, at the initial public offering
price. If Mr. Webster's employment is terminated without cause, due to his
disability or if he resigns for good reason, he is to receive payments equal to
two times his then-current base salary and bonus. Mr. Webster has agreed not to
compete with the Company for two years after termination of employment, subject
to the receipt by Mr. Webster of certain severence payments, in some cases at
the election of the Company. All stock options awarded to Mr. Webster will vest
(i) immediately upon a termination of his employment without cause or his
resignation for good reason; (ii) if the employment agreement expires and the
Company does not offer Mr. Webster a new

47
<PAGE> 48

agreement on terms no less favorable than those in the current agreement; or
(iii) upon a change of control (as defined in the agreement). The Company has
agreed to nominate Mr. Webster for election to its Board of Directors in
accordance with the terms of the Stockholders Agreement.

Mr. Schroeder. Mr. Schroeder has entered into an employment agreement with
the Company effective upon the consummation of the Offering and terminating the
third anniversary of the Offering. Under the agreement, Mr. Schroeder will serve
as Chairman of the Board and is entitled to receive base compensation of $4,000
per day of service to the Company, subject to a minimum payment of $120,000 per
year. Pursuant to a prior agreement, the Company paid to Mr. Schroeder a signing
bonus of $330,000 on January 1, 1996. In the event Mr. Schroeder does not render
services to the Company through December 31, 1998 because he voluntarily
terminates, refuses to provide services under his current agreement, or is
terminated for cause, Mr. Schroeder is required to repay the portion of the
signing bonus which relates to the period of the original term for which he does
not render services. Mr. Schroeder is also eligible to participate in the
Company's Bonus Plan. If Mr. Schroeder terminates his agreement for good reason,
including a "change of control" as defined in the Shareholders Agreement, dated
October 30, 1992 by and among the Company and its shareholders, he is entitled
to receive payment of all unpaid amounts due for service rendered, as well as an
additional amount equal to the unpaid balance due for the remainder of the term
of the agreement and an additional payment equal to $2,000 multiplied by the
number of days of service remaining under the term, which in no event shall be
more than 30 days during any calendar year. In addition, upon termination of
employment for good reason, the unvested portion of Mr. Schroeder's options
under the Company's stock option plans will become immediately vested. Upon the
closing of the Offering, Mr. Schroeder will be granted options to purchase
shares of the Company's Class A Common Stock equal to at least 2% of the
Company's outstanding Common Stock, on a fully-diluted basis, at the initial
public offering price. Mr. Schroeder has agreed not to compete with the Company
for a period of two years after termination of his employment.

Messrs. Watson, Abreo and Potter. Messrs. Watson, Abreo and Potter have
entered into employment agreements with the Company effective upon the
consummation of the Offering and terminating on the third anniversary of the
Offering. Such agreements are renewable automatically for successive one-year
terms, unless the Company gives the employee at least six months' prior written
notice of non-renewal. The agreements entitle Messrs. Watson, Abreo and Potter
to annual base salaries of $180,000, $160,000 and $125,000, respectively
(subject to annual merit increase reviews by the Board of Directors), and annual
bonuses at the discretion of the Board of Directors in accordance with the terms
of the Bonus Plan. Upon the consummation of the Offering, Messrs. Watson, Abreo
and Potter will each receive options to purchase 61,320, 61,320 and 33,726
shares, respectively, of Class A Common Stock at the initial public offering
price. In the event of termination of employment without cause or resignation
for good reason, or in the event their employment is terminated by the Company
without cause within six months after a change in control, Messrs. Watson, Abreo
and Potter are each entitled to the greater of (i) one-year's annual base salary
and bonus or (ii) annual base salary and bonus for the remainder of the initial
employment term under their respective employment agreements. The employment
agreements also contain one-year covenants not to compete after any termination
of employment. All stock options awarded to each of Messrs. Watson, Abreo and
Potter will vest immediately upon (i) resignation for good reason or (ii) a
change in control of the Company.

SEVERANCE AGREEMENT

In connection with Mr. Daniel Keller's resignation as the Company's Senior
Vice President -- Sales and Marketing effective August 29, 1997, the Company and
Mr. Keller entered into a severance agreement pursuant to which the Company is
to pay Mr. Keller an amount equal to $90,000 and to forgive Mr. Keller's
remaining relocation loan balance in the amount of $30,330. In addition, the
Company agreed to waive its repurchase option regarding the 3,563 shares of
Class A Common Stock owned by Mr. Keller in exchange for his repayment of the
remaining balance due under the promissory note relating to his purchase of the
shares.

48
<PAGE> 49

1996 SALARIED BONUS PLAN

The Company maintains the Bonus Plan for certain salaried employees of the
Company, including the Named Executive Officers. The Bonus Plan permits these
employees to earn cash performance bonus awards of up to a percentage of their
respective salaries as determined by the Board of Directors, or by management on
the Board's behalf. The amount of any bonus is based upon the Company's
performance and the individual performance of such participant. See
"Management--Executive Compensation."

STOCK OPTION PLANS

1992 NON-STATUTORY STOCK OPTION PLAN

On October 29, 1992, the Company's Board of Directors and stockholders
adopted the American Italian Pasta Company Non-Statutory Stock Option Plan (the
"1992 Plan"). The purpose of the 1992 Plan is to secure for the Company and its
stockholders the benefits of the incentive inherent in stock ownership by
officers and other key employees of the Company.

The 1992 Plan is administered by the Compensation Committee of the Board of
Directors. The Compensation Committee has the power and sole discretion to
determine the persons to whom options are granted and the number of shares
covered by those options, subject in each case to the limitations set forth in
the 1992 Plan. Options may be granted under the 1992 Plan only to officers and
key employees of the Company. The period during which an option may be exercised
(not to exceed 13 years), and the time at which it becomes exercisable, is fixed
by the Compensation Committee at the time the option is granted. Options granted
under the 1992 Plan are not transferable by the holder other than by will or the
laws of descent and distribution.

The number of shares which may be issued and sold pursuant to options
granted under the 1992 Plan may not exceed 1,201,880 shares (subject to
adjustment for stock dividends, stock splits, combinations or reclassifications
of shares, or similar transactions). No consideration is paid to the Company by
any optionee in exchange for the grant of an option. The per share exercise
price for an option granted under the 1992 Plan is determined by the
Compensation Committee.

Certain provisions of the 1992 Plan may have the effect of discouraging or
delaying possible takeover bids. In the event of a "Change of Control," all of
the outstanding options automatically become immediately exercisable in full. A
"Change of Control" is generally defined to take place when disclosure of such a
change would be required by the proxy rules promulgated by the Securities and
Exchange Commission or when (i) certain persons acquire beneficial ownership of
25% or more of the combined voting power of the Company's voting securities,
(ii) less than a majority of the directors are persons who were either nominated
or selected by the Board of Directors, (iii) a merger involving the Company in
which the Company's stockholders own less than 80% of the voting stock of the
surviving corporation; or (iv) a liquidation of the Company or sale of
substantially all the assets of the Company occurs. In the event that the
Company is not the surviving corporation of any merger, consolidation,
reorganization or acquisition by another corporation, outstanding options under
the 1992 Plan may be assumed, or replaced with new options of comparable value,
by the surviving corporation. If the surviving corporation does not assume or
replace outstanding options, or in the event the Company is liquidated or
dissolved, then subject to certain limitations, each holder of outstanding
options may exercise all or part of such options (even if the options would not
otherwise have been exercisable in full) during the period beginning 30 days
before the event triggering the acceleration, and ending on the day before such
event.

Generally, the exercise price of an option is at least equal to the fair
market value of the Common Stock on the date of grant. As of the date of this
Prospectus, options to purchase 1,132,049 shares of Common Stock at exercise
prices ranging from $2.33 to $12.23 per share (with a weighted average exercise
price of $6.68 per share) were issued and outstanding under the 1992 Plan. The
outstanding options under the 1992 Plan expire at dates ranging from October
2002 to April 2007. None of the executive officers of the Company have exercised
any options prior to the date of this Prospectus.

49
<PAGE> 50

1993 NON-QUALIFIED STOCK OPTION PLAN

The American Italian Pasta Company 1993 Non-Qualified Stock Option Plan
(the "1993 Plan") was adopted by the Board of Directors and approved by the
stockholders of the Company effective December 8, 1993. The 1993 Plan was
adopted to compensate and provide incentives for mid-level managers of the
Company.

The 1993 Plan is also administered by the Compensation Committee. The
Compensation Committee has full and final authority in its discretion, subject
to the provisions of the 1993 Plan and applicable law, to determine the
individuals to whom and the time or times at which options shall be granted and
the number of shares of Common Stock covered by each option. Options may be
granted under the 1993 Plan to mid-level management. The period during which an
option may be exercised (not to exceed ten years), and the time at which it
becomes exercisable is fixed by the Compensation Committee at the time the
option is granted. Options granted under the 1993 Plan are not transferrable by
the holder other than by will or the laws of dissent and distribution.

The number of shares which may be issued and sold pursuant to options
granted under the 1993 Plan may not exceed 82,783 shares (subject to adjustment
for stock dividends, stock splits, combinations or reclassifications of shares
or similar transactions). No consideration is paid to the Company by any
optionee in exchange for the grant of an option. The per share exercise price
for an option granted under the 1993 Plan is determined by the Compensation
Committee.

In the event of any merger, recapitalization, consolidation, split-up,
spin-off, repurchase, distribution or similar transaction effecting the Common
Stock, the Compensation Committee may take such action as in its sole discretion
that deems appropriate. The Compensation Committee may authorize the issuance or
assumption of options or similar rights in connection with any such transaction
whether or not the Company is a surviving or continuing corporation, and upon
such terms and conditions as it may deem appropriate.

The exercise price of an option is generally at least equal to the fair
market value of the Common Stock on the date of grant. As of the date of this
Prospectus, options to purchase 46,665 shares of Common Stock at exercise prices
ranging from $4.92 to $12.23 per share (with a weighted average exercise price
of $10.28 per share) were issued and outstanding under the 1993 Plan. The
outstanding options under the 1993 Plan expire at dates ranging from December
2003 to December 2006.

1997 EQUITY INCENTIVE PLAN

The Company has adopted the American Italian Pasta Company 1997 Equity
Incentive Plan (the "Equity Incentive Plan" or "1997 Plan"). Under the 1997
Plan, the Board or a committee designated by the Board (the Board or committee,
as the case may be, the "Committee") is authorized to grant nonqualified stock
options, incentive stock options, reload options, stock appreciation rights
("SARs"), shares of restricted Common Stock ("restricted shares"), performance
shares, performance units and shares of Common Stock awarded as a bonus ("bonus
shares") (all of the foregoing collectively, "Awards"). There are 2,000,000
shares of Common Stock reserved for issuance under the Equity Incentive Plan.

Eligibility and Conditions of Grants. All employees (including officers),
directors and consultants of the Company or any subsidiary are eligible to
receive Awards at the discretion of the Committee. The Committee is authorized,
subject to certain limits specified in the Equity Incentive Plan, to determine
to whom and on what terms and conditions Awards shall be made including, but not
limited to, the vesting and term of options.

Stock Options. The option exercise price must be determined by the
Committee at the time of grant and set forth in the award agreement, but such
exercise price must be at least 100% of the fair market value of a share of
Common Stock on the date of grant. (In the case of options to be granted in
connection with the Offering, such fair market value will equal the price at
which the Class A Common Stock is offered to the public.) The option exercise
price may be paid by any one or more of the following in the discretion of the
Committee: (i) cash, (ii) check, (iii) wire transfer, (iv) shares of Common
Stock that have been held for at least 6 months or that were purchased on the
open market, or (v) a "cashless" exercise pursuant to a sale through a broker of
all or a portion of the shares. The Committee also has discretion to have the
Company

50
<PAGE> 51

make or guarantee loans to the grantees for the exercise price. The Committee
will determine the term and vesting schedule for options at the time of grant.
Options can be granted as either nonstatutory options (pursuant to which
grantees would receive taxable income, and the Company would receive a
compensation expense deduction, when options are exercised) or as incentive
stock options (ISOs) (which, subject to certain conditions, would offer more
favorable tax consequences to grantees, but not the Company).

Stock Appreciation Rights. Upon exercise of a stock appreciation right, the
grantee shall receive a payment equal to the appreciation in value of the Common
Stock between the grant date and the exercise date. The benefit will be payable
in cash or Common Stock.

Restricted Shares. Restricted shares will be forfeited unless the
conditions set by the Committee at the time of grant are satisfied or are
waived. The Committee will determine whether or not a grantee shall be required
to pay for such restricted shares and, if so, what such price shall be.

Performance Shares/Performance Units. To the extent that the performance
goals specified by the Committee in a grant of performance shares or performance
units have been achieved, then a benefit shall be paid after the end of the
performance-measuring period specified by the Committee. The amount of the
benefit of performance shares is based on the percentage attainment of the
performance goals multiplied by the value of a share of Common Stock at the end
of the performance period. The value of performance units is based on the
achievement of performance goals multiplied by the unit value stabilized by the
Committee at the time of grant. No benefit is payable on either performance
shares or performance units if the minimum performance goals have not been met.
The benefit will be payable in cash or Common Stock.

Bonus Shares. Bonus shares can be granted without cost and without
restriction in amounts and subject to such terms and conditions as the Committee
may in its discretion determine.

Other. Options and stock appreciation rights may have a maximum term of 10
years. The effect of a change of control, the termination of a grantee's
employment or the death or permanent disability of a grantee will be determined
by the Committee at the time of grant and be set forth in the award agreement.
Both Awards and Shares acquired pursuant to the exercise or vesting of Awards
are subject to transfer restrictions as set forth in the 1997 Plan. The Plan may
be amended by the Board without: (i) stockholder approval except in the event of
an increase in the number of shares available for Awards; (ii) the consent of
the Award holder unless such amendment would adversely affect such holder; or
(iii) as otherwise may be required under stock exchange listing requirements or
any other regulatory or legal requirement. The Equity Incentive Plan will
terminate when shares available for grant under the plan have been exhausted,
except in no event will incentive stock options be granted on or after the 10th
anniversary of the earlier of (i) the date the Equity Incentive Plan was
adopted; and (ii) the date the Equity Incentive Plan was approved by the
Stockholders of the Company. Shares acquired pursuant to the 1997 Plan by
persons who are parties to the Stockholders Agreement will be subject to certain
restrictions under the Stockholders Agreement. In addition, the Compensation
Committee may, in its discretion, condition the grant of any Award under the
1997 Plan on the consent of the recipient of such Award to become bound by the
Stockholders Agreement.

401(K) PROFIT SHARING PLAN

The Company adopted the American Italian Pasta Company Retirement Savings
Plan (the "401(k) Plan") effective January 1, 1992. In general, employees of the
Company who have completed one year of service (as defined in the 401(k) Plan)
are eligible to participate in the 401(k) Plan. Participants may make
contributions to the 401(k) Plan by voluntarily reducing their salary from the
Company up to a maximum of 12% of total compensation or $9,500 (or such higher
amount as is prescribed by the Secretary of the Treasury for cost of living
adjustments), whichever is less, and the Company matches such contributions to
the extent of 50% of the first 6% of a participant's salary reduction. The
Company's matching contributions vest 25% per year and are 100% vested after 4
years of service. In addition to matching contributions, the Company may
contribute additional amounts determined by it in its sole discretion which are
allocated to a participant's account in the proportion that such participant's
compensation bears to the total compensation of all participants for the plan
year. These additional contributions vest in the same manner as the matching

51
<PAGE> 52

contributions. Subject to certain conditions and limitations, participants of
the 401(k) Plan may elect to invest up to 50% of their matching contribution
accounts into shares of Common Stock of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

All compensation decisions during the fiscal period ended September 30,
1996 for each of the Named Executive Officers were made by the Compensation
Committee of the Board of Directors. Mr. Schroeder, Chairman of the Board, is a
member of the Compensation Committee. See "Certain Relationships and Related
Transactions."

Following the consummation of the Offering, decisions with respect to the
base salary and cash bonuses paid to executive officers will be made by the
Compensation Committee and decisions with respect to the participation of
executive officers in stock option and other equity incentive plans of the
Company will be made by the Board of Directors or a committee comprised solely
of outside directors.

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<PAGE> 53

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STOCKHOLDERS AGREEMENT

Effective upon the consummation of the Offering, the Company, the Morgan
Stanley Stockholders, Citicorp Venture Capital, Ltd. and CCT Partners III, L.P.
(collectively "Citicorp"), affiliated entities of George K. Baum & Company
("GKB"), and Messrs. Schroeder, Schlindwein, Thompson, Webster, Watson, Abreo
and Potter and certain other existing stockholders of the Company (collectively,
the "Existing Stockholders") have amended their existing Stockholders Agreement,
which sets forth certain rights and obligations of such Existing Stockholders.
The amended Stockholders Agreement provides that until December 31, 1998
Existing Stockholders (other than the Morgan Stanley Stockholders and certain
management stockholders) may not sell or pledge any shares of Common Stock
except through the exercise of their "piggyback" registration rights, to certain
permitted transferees, or concurrently with certain private sales of Common
Stock by the Morgan Stanley Stockholders. After December 31, 1998, the Existing
Stockholders (other than the Morgan Stanley Stockholders and certain employee
shareholders) will also be entitled to sell their shares in market transactions
and through the exercise of their "demand" registration rights and Citicorp and
Mr. Thompson will also be permitted to sell shares of Common Stock in private
transactions, subject to the Company's right of first refusal. The amended
Stockholders Agreement will not limit sales by the Morgan Stanley Stockholders.

The amended Stockholders Agreement grants the Existing Stockholders certain
demand registration rights. In addition, the Existing Stockholders are entitled,
subject to certain limitations, to register shares of Common Stock in connection
with certain registration statements filed by the Company for its own account or
the account of its stockholders. The amended Stockholders Agreement will contain
customary terms and provisions with respect to, among other things, registration
procedures and certain rights to indemnification granted by the parties
thereunder in connection with any such registration.

Pursuant to the Stockholders Agreement (as amended and restated effective
upon the consummation of the Offering), MSLEF II has the right to designate two
director nominees so long as the Morgan Stanley Stockholders own at least 25% of
the outstanding Common Stock or one director nominee so long as the Morgan
Stanley Stockholders own at least 5% but less than 25% of the outstanding Common
Stock. In addition, MSCP has the right to designate two director nominees so
long as the Morgan Stanley Stockholders own at least 35% of the outstanding
Common Stock or one director nominee so long as the Morgan Stanley Stockholders
own at least 5% but less than 35% of the outstanding Common Stock. Whenever the
Morgan Stanley Stockholders own at least 5% but less than 10% of the outstanding
Common Stock, they will jointly be entitled to designate one director nominee.
The number of directors designated by the Morgan Stanley Stockholders will
increase proportionately if the size of the Board of Directors is increased in
the future. In addition, the Stockholders Agreement will provide that the
Chairman of the Board and the President and Chief Executive Officer shall also
be designated as director nominees. The Existing Stockholders will agree to vote
all of their shares of Class A Common Stock in favor of the director nominees
designated pursuant to the Stockholders Agreement. At least two members of the
Board of Directors will be independent directors. So long as the Morgan Stanley
Stockholders own 10% of the outstanding shares of Common Stock, the Morgan
Stanley Stockholders may designate one member of each Board committee.

The amended Stockholders Agreement provides that so long as the Morgan
Stanley Stockholders own at least 25% of the outstanding shares of Common Stock,
neither the Company nor its subsidiaries (if any) will take any of the following
significant actions without the approval of the Board of Directors and the
Morgan Stanley Stockholders: (i) the appointment or removal of the Chairman of
the Board; (ii) any merger, consolidation or other similar business combination
(except for certain subsidiary-level mergers involving acquisitions valued below
$30 million); (iii) any disposition of a majority of the Company's tangible
assets; (iv) subject to certain exceptions, any change in the authorized capital
or recapitalization, or the creation of any new classes of capital stock, or the
sale, distribution, exchange, redemption of capital stock or capital stock
equivalents; (v) any amendment to the charter or by-laws or any change in
jurisdiction of incorporation; (vi) the approval of any dissolution or plan of
liquidation; (vii) any general assignment for the benefit of creditors or the
institution of any bankruptcy or insolvency proceeding; (viii) the declaration
of any dividend or any redemption or repurchase of any such capital stock
(except dividends paid-in-kind and repurchases

53
<PAGE> 54

made pursuant to employee benefit plans or employment agreements); (ix) in
certain circumstances, the creation, issuance, assumption, guarantee or
incurrence of indebtedness that increases the aggregate amount of indebtedness
existing on the date of the amended Stockholders Agreement by at least $30
million; (x) the termination of Ernst & Young LLP or the selection of another
auditor; (xi) any strategic acquisition of, or investment in the assets or a
business of, a third party with a fair market value of $30 million or more;
(xii) acquisition or construction of new pasta production facilities with a cost
in excess of $30 million; (xiii) any adoption of a shareholder rights plan; or
(xiv) any commitment to do any of the foregoing actions. In addition, as long as
the Morgan Stanley Stockholders own at least 25% of the outstanding Common
Stock, at least one of the directors designated by the Morgan Stanley
Stockholders must approve the appointment of the Chief Executive Officer or the
Chief Financial Officer.

The amended Stockholders Agreement provides that certain transfers of
shares by the Existing Stockholders (other than the Morgan Stanley Stockholders)
are subject to the approval of the Board of Directors and, for so long as the
Morgan Stanley Stockholders own at least 10% of the shares of Common Stock, the
Morgan Stanley Stockholders.

After giving effect to the Offering, the Morgan Stanley Stockholders will
own approximately 39.6% of the Common Stock of the Company (32.5% if the
over-allotment option granted to the U.S. Underwriters is exercised in full).
The Company's Charter provides that, if at any time after consummation of the
Offering, the Morgan Stanley Stockholders own in excess of 49% of the
outstanding Class A Common Stock, such excess shares will be automatically
converted into an equal number of shares of Class B Common Stock.

1997 PRIVATE EQUITY FINANCING

In April 1997, the Company sold an aggregate of 3,174,528 shares of Old
Class A Common Stock (as defined in "Description of Capital Stock -- General")
to current stockholders of the Company for an aggregate purchase price of
$22,291,947, or $7.02 per share, determined by an independent valuation firm to
be fair value for the shares. The MSCP Funds purchased a total of 2,563,323
shares for $18,000,000. Affiliated entities of GKB, including Excelsior
Investors, LLC ("Excelsior") in which Mr. Thompson has a minority interest,
purchased 427,219 shares for $2,999,861. These shares include 330,952 shares
purchased by Excelsior. Mr. Schroeder, a Director of the Company, purchased
49,056 shares for $344,480. Mr. Schlindwein, also a Director of the Company, and
his wife purchased 28,483 shares for $200,000, individually and indirectly
through JSS Management Company, Ltd., of which each of Mr. and Mrs. Schlindwein
are general partners. In addition, a group of executive officers of the Company
contributed an aggregate of $729,996 to the Company for 103,957 shares,
including $142,159 by Mr. Webster, $298,535 by Mr. Watson, $36,472 by Mr. Abreo
and $91,472 by Mr. Potter. In connection with these sales and purchases, the
Company loaned an aggregate of $297,513 to these executive officers to finance
their stock purchases, including $112,159 to Mr. Webster, $48,535 to Mr. Watson,
$36,472 to Mr. Abreo and $21,472 to Mr. Potter. Each of these loans are
evidenced by a promissory note made payable to the Company and secured by shares
of Old Class A Common Stock. Such loans are to be repaid over a period of three
years commencing upon termination of the transfer restrictions applicable to
such shares under the Stockholders Agreement. Such loans bear interest at the
then applicable federal rate.

FINANCIAL ADVISORY SERVICES

Messrs. Niehaus and Sorrel and Ms. Rosen, all Directors of the Company, are
employed by Morgan Stanley & Co. Incorporated. In 1997, Morgan Stanley Senior
Funding, Inc., an affiliate of Morgan Stanley & Co. Incorporated, one of the
U.S. Underwriters, served as the documentation agent under the agreements
relating to the Company's Credit Facility, and acted as an arranger for the
Credit Facility for which it received a fee in the amount of $311,875.

Since 1994, the Company has paid fees to George K. Baum & Company's
Investment Banking Division for investment banking and financial advisory
services and has paid George K. Baum & Company Professional Investment Advisors
Division fees for investment advice provided with respect to the 401(k) Plan.

54
<PAGE> 55

Jonathan E. Baum, a Director of the Company, owns all voting shares of George K.
Baum Holdings, Inc., which owns 100% of George K. Baum & Company, one of the
U.S. and International Underwriters.

MANAGEMENT INDEBTEDNESS

In April 1995 and April 1997, the Company loaned funds to Messrs. Webster,
Watson, Abreo and Potter to purchase shares of Old Common Stock and Old Class A
Common Stock at prices ranging between $4.92 and $7.02 per share, respectively.
Each loan was evidenced by a promissory note bearing interest at the then
applicable federal rate and payable in equal installments over three years
commencing upon termination of the transfer restrictions applicable to such
shares under the Stockholders Agreement. The table below sets forth the
aggregate number of shares purchased with funds loaned by the Company, the
original aggregate loan amounts, and the aggregate loan balances as of June 30,
1997.

<TABLE>
<CAPTION>
NUMBER OF ORIGINAL LOAN LOAN BALANCE AT
EXECUTIVE OFFICER SHARES BALANCE JUNE 30, 1997
- ----------------- --------- ------------- ---------------
<S> <C> <C> <C>
Timothy S. Webster...................................... 21,339 $138,559 $120,959
David E. Watson......................................... 14,269 84,735 60,602
Norman F. Abreo......................................... 7,217 46,422 39,789
David B. Potter......................................... 5,083 31,422 24,789
</TABLE>

CONSULTING AGREEMENT WITH HWS & ASSOCIATES, INC.

Pursuant to a consulting agreement between the Company and HWS &
Associates, Inc. ("HWS"), a management consulting firm of which Mr. Schroeder,
Chairman of the Board of Directors, is the sole owner, the Company paid to HWS
$301,197 during fiscal 1994, and $133,359 during fiscal 1995, respectively for
management consulting services performed and travel expenses incurred on behalf
of the Company. The consulting arrangement terminated January 1, 1996 upon Mr.
Schroeder's execution of his employment agreement with the Company.

The Company's policy is that all transactions between the Company and its
executive officers, directors and principal stockholders be on terms no less
favorable than could be obtained from unaffiliated third parties or are subject
to the approval of the Company's disinterested directors.

PRODUCT SALES

The Company sells milling by-products to Thompson's Pet Pasta Products,
Inc., of which Richard C. Thompson, a director of the Company, is the President
and Chief Executive Officer. Such sales were $357,000 and $529,000 for the
nine-month fiscal period ended September 30, 1996 and the nine-month period
ended June 30, 1997, respectively. Such sales were on substantially the same
terms as the Company sells such products to unaffiliated third parties.

55
<PAGE> 56

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of the date of this Prospectus,
before and after giving effect to the sale of the shares of Class A Common Stock
offered hereby, by (i) each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) the
Selling Stockholders, (iii) each director of the Company, (iv) each of the Named
Executive Officers and (v) all directors and executive officers of the Company
as a group.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO THE SHARES BENEFICIALLY OWNED
OFFERING AFTER THE OFFERING
---------------------- ------------------------------------------------------------------
CLASS A CLASS B TOTAL
CLASS A CLASS A COMMON STOCK(1)(2) COMMON STOCK(1) COMMON STOCK(1)(5)
COMMON STOCK(1) SHARES
NAME OF BENEFICIAL ---------------------- BEING ---------------------- ---------------- ----------------------
OWNER NUMBER PERCENT(3) OFFERED(2) NUMBER PERCENT(4) NUMBER PERCENT NUMBER PERCENT(5)
- -------------------- --------- ---------- ---------- --------- ---------- ------ ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Morgan Stanley
Leveraged Equity
Fund II, L.P.(6)... 6,038,027 52.7% 1,375,893 4,662,134 27.8% -- -- 4,662,134 27.8%
1221 Avenue of the
Americas
New York, NY 10020
Morgan Stanley
Capital Partners
III, L.P.(6)....... 2,563,322 22.4 584,107 1,979,215 11.8 -- -- 1,979,215 11.8%
1221 Avenue of the
Americas
New York, NY 10020
Citicorp Venture
Capital, Ltd.(7)... 1,047,298 9.1 -- 1,047,298 6.2 -- -- 1,047,297 6.2
399 Park Avenue
New York, NY 10043
Richard C.
Thompson(8)........ 959,849 8.4 630,000 329,849 2.0 -- -- 329,849 2.0
16 Kansas Avenue
Kansas City, KS
66105
Horst W.
Schroeder(9)(10)... 422,461 3.6 -- 422,461 2.5 -- -- 422,461 2.5
Jonathan E.
Baum(11)........... 427,219 3.7 -- 427,219 2.5 -- -- 427,219 2.5
David Y. Howe....... -- -- -- -- -- -- -- -- --
Robert H. Niehaus... -- -- -- -- -- -- -- -- --
Amy S. Rosen........ -- -- -- -- -- -- -- -- --
James A.
Schlindwein(12).... 41,686 * -- 41,686 * -- -- 41,686 *
Lawrence B.
Sorrel............. -- -- -- -- -- -- -- -- --
Timothy S.
Webster(10)(13).... 326,127 2.8 -- 326,127 1.9 -- -- 326,127 1.9
David E.
Watson(10)......... 94,771 * -- 94,771 * -- -- 94,771 *
Norman F.
Abreo(10).......... 70,193 * -- 70,193 * -- -- 70,193 *
David B.
Potter(10)......... 24,859 * -- 24,859 * -- -- 24,859 *
All directors and
executive officers
as a group (12
persons)(10)....... 2,367,165 20.6 630,000 1,737,165 10.4 -- -- 1,737,165 10.4
</TABLE>

- -------------------------
* Less than 1%.

(1) Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options and warrants held by that person that are currently
exercisable or will become exercisable within 60 days of the date of this
Prospectus are deemed outstanding. Such shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any
other person. Except as otherwise indicated in a footnote to this table or
as to be provided in the Stockholders Agreement (see "Certain Relationships
and Related Transactions -- Stockholders Agreement"), the persons in this
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them. An aggregate of 8,876,056
shares of Common Stock (52.9% of the shares to be outstanding after the
Offering) will be subject to the Stockholders Agreement.

(2) The Morgan Stanley Stockholders have granted an option to the U.S.
Underwriters to purchase up to an aggregate of 1,185,000 shares of Class A
Common Stock to cover over-allotments, if any. Such shares

56
<PAGE> 57

will not be sold unless the U.S. Underwriters exercise the over-allotment
option, and the above table assumes that such over-allotment option will
not be exercised.

(3) Based upon 11,466,056 shares of Class A Common Stock outstanding, plus
shares of Class A Common Stock issuable upon exercise of options, warrants
and convertible securities which are included in the number of shares
beneficially owned by such person.

(4) Based upon 16,776,056 shares of Class A Common Stock to be outstanding upon
the consummation of the Offering, plus shares of Class A Common Stock
issuable upon exercise of options, warrants and convertible securities
which are included in the number of shares beneficially owned by such
person.

(5) Based upon 16,776,056 shares of Common Stock to be outstanding upon the
consummation of the Offering, plus shares of Common Stock issuable upon
exercise of options, warrants and convertible securities which are included
in the number of shares beneficially owned by such person.

(6) The general partner of MSLEF and the general partner of the general partner
of the MSCP Funds are wholly owned subsidiaries of MSDWD, the parent of
Morgan Stanley & Co. Incorporated. If the over-allotment option is
exercised in full, the Morgan Stanley Stockholders will sell an additional
1,185,000 shares of Class A Common Stock, and MSLEF and MSCP will
beneficially own 22.8% and 9.7%, respectively, of the outstanding Common
Stock.

(7) The shares beneficially owned by Citicorp Venture Capital, Ltd. include
157,103 shares held by an affiliate of Citicorp.

(8) All of such shares are held by Thompson Holdings, L.P., a limited
partnership of which Mr. Thompson is the only limited partner. Mr. Thompson
is also the president of the corporation which is the general partner of
the limited partnership.

(9) The shares beneficially owned by Mr. Schroeder include 49,056 shares held
by The Living Trust of Horst W. Schroeder and 11,406 shares held by The
Living Trust of Gisela I. Schroeder for the benefit of Mr. and Ms.
Schroeder, respectively, and members of their family, as well as 3,066
shares held by each of Bernd Schroeder and Isabel Lange, children of Mr.
and Ms. Schroeder. Mr. Schroeder has voting power, but not investment
power, with respect to all of these shares.

(10) Includes options that are currently exercisable or will become exercisable
within 60 days of the date of this Prospectus to purchase shares of Class A
Common Stock as follows: Mr. Schroeder (290,358 shares), Mr. Webster
(290,358 shares), Mr. Watson (44,899 shares), Mr. Abreo (62,976 shares),
Mr. Potter (9,811 shares), and all executive officers and directors as a
group (698,402 shares).

(11) Includes 90,748 shares held by George K. Baum Capital Partners, L.P., 5,519
shares held by George K. Baum Employee Equity Fund, L.P. and 330,952 shares
held by Excelsior Investors, LLC, the managing member of which is George K.
Baum Merchant Banc, LLC. As an officer and/or equity owner of the entities
holding such shares, Mr. Baum has voting power with respect to such shares.
Except to the extent of his equity interest in the entities holding such
shares, Mr. Baum disclaims beneficial ownership of such shares.

(12) Includes 27,441 shares held by JSS Management Company, Ltd. of which Mr.
Schlindwein is an officer and equity owner and has voting power with
respect to such shares.

(13) Includes 14,435 shares beneficially owned by Mr. Webster which are held in
various trusts for the benefit of Mr. Webster's family members, as well as
certain members of Mr. Webster's extended family. Mr. Webster has voting
power, but not investment power, with respect to all of such shares.

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<PAGE> 58

DESCRIPTION OF CAPITAL STOCK

GENERAL

Prior to the Recapitalization, the Company's authorized capital stock
consisted of 1,600,000 shares of Class A common stock, par value $.01 per share
(the "Old Class A Common Stock"), and 2,100,000 shares of common stock, without
par value (the "Old Common Stock"). The Old Class A Common Stock had a
liquidation preference over the Old Common Stock equal to the greater of the per
share purchase price of the Old Class A Common Stock or the amount holders of
Old Common Stock are entitled to upon the liquidation.

After giving effect to the Company's amendment and restatement of the
Charter prior to this Offering, the authorized capital stock of the Company
consists of 75,000,000 shares of Class A Common Stock, 25,000,000 shares of
Class B Common Stock, and 10,000,000 shares of preferred stock, par value $.001
per share, issuable in series (the "Preferred Stock"). In connection with such
amendment and restatement of the Charter, the Company effected the
Recapitalization pursuant to which each outstanding share of Old Common Stock
and Old Class A Common Stock outstanding immediately prior to the
Recapitalization has been converted into 6.132043 shares of Class A Common
Stock. From time to time, shares of Class A Common Stock held by the Morgan
Stanley Stockholders will automatically be converted pursuant to the amended
Charter into shares of Class B Common Stock on a one-for-one basis, pro rata in
proportion to the number of shares of Class A Common Stock held by all Morgan
Stanley Stockholders, to the extent necessary so that the Morgan Stanley
Stockholders do not in the aggregate own more than 49% of the then-outstanding
shares of Class A Common Stock. See "-- Common Stock -- Class A Common Stock."
This limitation on the ownership of Class A Common Stock is intended to enhance
the flexibility of the Company in entering into possible future business
combinations on terms favorable to the Company and its stockholders.

The following discussion is a summary of the more detailed provisions of
the Charter and By-Laws of the Company, forms of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part, and
of the applicable provisions of the DGCL. The term "Morgan Stanley Stockholders"
as referenced herein under the caption "Description of Capital Stock" shall have
the meaning given to it in the Company's Charter.

COMMON STOCK

After giving effect to the Offering, the Morgan Stanley Stockholders will
own, in the aggregate, 39.6% of the outstanding Class A Common Stock (32.5% if
the over-allotment option granted to the U.S. Underwriters is exercised in
full), and the Company will have 16,776,056 shares of Class A Common Stock
outstanding, assuming no outstanding options are exercised, and no shares of
Class B Common Stock outstanding.

Class A Common Stock. Holders of Class A Common Stock are entitled to one
vote for each share of Class A Common Stock on each matter submitted to a vote
of stockholders, including the election of directors. See "Certain Relationships
and Related Transactions -- Stockholders Agreement." Holders of Class A Common
Stock are not entitled to cumulative voting. Shares of Class A Common Stock have
no preemptive or other subscription rights. Shares of Class A Common Stock are
convertible only by the Morgan Stanley Stockholders into an equal number of
shares of Class B Common Stock; they are not convertible by any other holders.
After the consummation of the Offering, shares of Class A Common Stock held by
the Morgan Stanley Stockholders will, to the extent necessary so that the Morgan
Stanley Stockholders do not own more than 49% of the outstanding shares of Class
A Common Stock, be converted automatically into shares of Class B Common Stock
on a one-for-one basis, pro rata in proportion to the number of shares of Class
A Common Stock held by all Morgan Stanley Stockholders. In addition, shares of
Class A Common Stock held by the Morgan Stanley Stockholders are convertible
into an equal number of shares of Class B Common Stock, at the option of the
holder.

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<PAGE> 59

Class B Common Stock. Under the Charter, as amended, Class B Common Stock
may be held only by Morgan Stanley Stockholders. Holders of Class B Common Stock
have no right to vote on matters submitted to a vote of stockholders, except (i)
as otherwise required by law and (ii) that the holders of Class B Common Stock
shall have the right to vote as a class on any amendment, repeal or modification
to the Charter that adversely affects the powers, preferences or special rights
of the holders of the Class B Common Stock. Shares of Class B Common Stock have
no preemptive or other subscription rights and are convertible into an equal
number of shares of Class A Common Stock (x) at the option of the holder thereof
(but, after the consummation of the Offering, only to the extent that, following
such conversion, the Morgan Stanley Stockholders will not, in the aggregate, own
more than 49% of the outstanding shares of Class A Common Stock) and (y)
automatically upon the transfer of such shares by any Morgan Stanley Stockholder
to a person that is not a Morgan Stanley Stockholder.

Dividends. All holders of Common Stock are entitled to receive such
dividends or other distributions, if any, as may be declared from time to time
by the Board of Directors in its discretion out of funds legally available
therefor, subject to the prior rights of any Preferred Stock then outstanding,
and to share equally, share for share, in such dividends or other distributions
as if all shares of Common Stock were a single class. Dividends or other
distributions declared or paid in shares of Common Stock, or options, warrants
or rights to acquire such stock or securities convertible into or exchangeable
for shares of such stock, are payable to all of the holders of Common Stock
ratably according to the number of shares held by them, in shares of Class A
Common Stock to holders of that class of stock and in shares of Class B Common
Stock to holders of that class of stock. Delaware law generally requires that
dividends be paid only out of the Company's surplus or current net profits in
accordance with the DGCL. See "Dividend Policy."

Liquidation. Subject to the rights of any holders of Preferred Stock
outstanding, upon the dissolution, liquidation or winding up of the Company, the
holders of Common Stock are entitled to share equally and ratably in the assets
available for distribution after payments are made to the Company's creditors.

Other. Holders of Common Stock have no preemptive, subscription or
redemption rights. The outstanding shares of Common Stock are, and the shares of
Class A Common Stock offered by the Company hereby will be, when issued and paid
for, fully paid and nonassessable.

PREFERRED STOCK

The Company's Charter provides that the Board of Directors is authorized,
subject to certain limitations prescribed by law, without further stockholder
approval, to issue from time to time up to an aggregate of 10,000,000 shares of
Preferred Stock in one or more series and to fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such series thereof, including the dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption (including sinking
fund provisions), redemption price or prices, liquidation preferences and the
number of shares constituting any series or designations of such series. The
issuance of Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of the Company. The rights, preferences and
privileges of holders of Common Stock are subject to, and may be adversely
affected by, the rights of the holders of shares of any series of Preferred
Stock which the Company may designate and issue in the future. The Company has
no present plans to issue any shares of Preferred Stock.

DELAWARE LAW AND CERTAIN CHARTER AND BY-LAW PROVISIONS

The provisions of the Company's Charter, By-Laws and Delaware statutory law
described in this section may delay or make more difficult acquisitions or
changes in control of the Company that are not approved by the Board of
Directors. See "Risk Factors -- Possible Anti-takeover Effect of Certain
Charter, By-law and Statutory Provisions."

The Company is subject to the provisions of Section 203 of the DGCL.
Subject to certain exceptions, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless the interested
stockholder attained such status with the approval of

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the Board of Directors or unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three years
did own, 15% or more of the corporation's voting stock.

The Charter provides for the division of the Board of Directors into three
classes as nearly equal in size as possible with staggered three-year terms. See
"Management." Except as may be provided in any class or series of Preferred
Stock with respect to any directors elected by the holders of such class or
series, any director, or the entire Board of Directors, may be removed from
office at any time, but only for cause and only by the affirmative vote of the
holders of at least two-thirds of the voting power of all of the shares of
capital stock of the corporation then entitled to vote generally in the election
of directors, voting together as a single class, unless the removal of a
director has been requested by a shareholder who designated such director as a
nominee for election pursuant to the Stockholders Agreement, in which case such
director can be removed with or without cause by the affirmative vote of holders
of a simple majority of such shares.

The Company's Charter provides that special meetings of the stockholders
may be called at any time by resolution of the Board of Directors, the Chairman
of the Board, or the Chief Executive Officer, but may not be called by other
persons. The Charter also provides that any stockholder action may not be taken
by written consent of stockholders without a meeting, unless the action to be
effected by written consent of stockholders and the taking of such action by
written consent have been approved in advance by the Board of Directors or
unless the shareholder action involves the removal of a director nominated
pursuant to the Stockholders Agreement and the person who nominated such
director pursuant to the Stockholders Agreement votes in favor of the removal of
such director pursuant to such written consent.

The Charter further provides that stockholders may make, alter, amend, add
to or repeal the By-laws only if, in addition to any vote of the holders of any
class or series of capital stock of the Corporation required by law or the
Charter, such action is approved by the affirmative vote of the holders of at
least 80% of the voting power of all of the then outstanding shares of capital
stock of the Company entitled to vote generally in the election of directors,
voting together as a single class. The affirmative approval of at least 80% of
the voting power of all of the then outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, is also required to reduce or eliminate the number
of authorized shares of any capital stock set forth in the Charter or to amend,
repeal or adopt any provision inconsistent with specified provisions of the
Charter.

As permitted by DGCL, the Charter provides that directors of the Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director by reason of any act or
omission, except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, (iv) for any transaction from which
the director shall derive an improper personal benefit or (v) to any extent that
such liability shall not be limited or eliminated by virtue of the provisions of
Section 102(b)(7) of the DGCL or any successor thereof. In addition, the Charter
provides that the Company shall, to the fullest extent authorized by the DGCL,
as amended from time to time, indemnify and hold harmless all directors and
officers against all expense, liability and loss reasonably incurred or suffered
by such indemnitee in connection therewith. Such indemnification shall continue
as to an indemnitee who has ceased to be a director or officer and shall inure
to the benefit of the indemnitee's heirs, executors and administrators. The
right to indemnification includes the right to be advanced funds from the
Company for expenses incurred in defending any proceeding for which a right to
indemnification is applicable.

STOCKHOLDERS AGREEMENT

Pursuant to the amended Stockholders Agreement, one of the Morgan Stanley
Stockholders, MSLEF II, has the right to designate two director nominees so long
as the Morgan Stanley Stockholders own at least 25% of the outstanding Common
Stock or one director nominee so long as the Morgan Stanley Stockholders own

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<PAGE> 61

at least 10% but less than 25% of the outstanding Common Stock. In addition,
another Morgan Stanley Stockholder, MSCP, has the right to designate two
director nominees so long as the Morgan Stanley Stockholders own at least 35% of
the outstanding Common Stock or one director nominee so long as the Morgan
Stanley Stockholders own at least 10% but less than 35% of the outstanding
Common Stock. Whenever the Morgan Stanley Stockholders collectively own at least
5% but less than 10% of the outstanding Common Stock, they shall jointly be
entitled to designate one director nominee. The number of directors designated
by the Morgan Stanley Stockholders will increase proportionately if the size of
the Board of Directors is increased in the future. In addition, the amended
Stockholders Agreement provides that so long as the Morgan Stanley Stockholders
own at least 25% of the outstanding shares of Common Stock, certain significant
corporate actions will be subject to their approval in addition to that of the
Company's Board of Directors. See "Certain Relationships and Related
Transactions -- Stockholders Agreement."

LISTING

The Class A Common Stock has been approved for listing, subject to official
notice of issuance, on the New York Stock Exchange under the symbol "PLB."

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is UMB Bank, N.A.

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no public market for the Common Stock
of the Company. Sales of substantial numbers of shares of Common Stock into the
public market after the Offering, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock
prevailing from time to time or could impair the Company's future ability to
obtain capital through an offering of equity securities. The Company cannot
predict the effect, if any, that sales of shares of Common Stock, or the
availability of such shares for future sales, will have on future market prices
of the Common Stock. Such sales also may make it more difficult for the Company
to sell equity securities in the future at the time and price it deems
appropriate.

Upon consummation of the Offering, the Company will have outstanding an
aggregate of 16,776,056 shares of Common Stock assuming no exercise of
outstanding stock options. Of these shares, all of the 7,900,000 shares of
Common Stock sold in the Offering will be freely tradable without restriction or
further registration under the Securities Act by persons other than "affiliates"
of the Company as that term is defined in Rule 144 under the Securities Act (the
"Affiliates"). The remaining 8,876,056 shares of Common Stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act (the "Restricted Shares"). These Restricted Shares were
acquired in transactions exempt from registration under the Securities Act and
may not be resold unless they are registered under the Securities Act or are
sold pursuant to an applicable exemption from registration, such as Rule 144,
Rule 144(k) or Rule 701 promulgated under the Securities Act.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated in accordance with the Rule) who has beneficially
owned Restricted Shares for at least one year or any person who may be deemed an
affiliate of the Company is entitled, subject to certain conditions, to sell
within any three-month period a number of shares of which does not exceed the
greater of (i) one percent of the Company's then outstanding shares of Common
Stock (approximately 167,761 shares immediately after the Offering, assuming no
exercise of outstanding stock options) or (ii) the average weekly trading volume
of the Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner-of-sale and notice
requirements and the availability of current public information about the
Company. A person (or persons whose shares are aggregated in accordance with the
Rule) who is not an "affiliate" of the Company at any time during the 90 days
preceding a sale and who beneficially owns shares that were not acquired from
the Company or an affiliate of the Company within the past two years is entitled
to sell such shares under Rule 144(k) without regard to volume limitations,
manner of sale provisions, notice requirements or the availability of current
public information on the Company. In general, under Rule 701 as currently in
effect, any employee, consultant or advisor of the Company who purchased shares
from the

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<PAGE> 62

Company in connection with a compensatory stock or option plan or other written
agreement is eligible to resell such shares 90 days after the effective date of
this Offering in reliance on Rule 144, but without compliance with certain
restrictions, including the holding period, contained in Rule 144. The
Commission has proposed an amendment to Rule 144 which may further liberalize
the provisions of Rule 144.

Beginning 180 days after the date of this Prospectus, 8,220,330 of the
Restricted Shares will be eligible for sale on the public market under Rule 144,
provided the conditions of that rule have been met. All of such Restricted
Shares are subject to lock-up agreements with the Underwriters that prohibit
their sale or other disposition for 180 days from the date of this Prospectus
without the prior written consent of Morgan Stanley & Co. Incorporated on behalf
of the Underwriters (except with respect to shares of Common Stock held by the
Morgan Stanley Stockholders, for which prior written consent of all the U.S.
Representatives is required).

Pursuant to the Stockholders Agreement, the Company has granted the
Existing Stockholders certain "demand" registration rights with respect to the
shares of Common Stock held by the Existing Stockholders. In addition to such
demand rights, the Existing Stockholders will be entitled, subject to certain
limitations, to register shares of Common Stock in connection with a
registration statement prepared by the Company. See "Certain Relationships and
Related Transactions -- Stockholders Agreement." Each of the Existing
Stockholders has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters (except with respect to
shares of Common Stock held by the Morgan Stanley Stockholders, without the
prior written consent of all the U.S. Representatives), it will not, during the
period ending 180 days after the date of this Prospectus, make any demand for,
or exercise any right with respect to, the registration of any shares of Class A
Common Stock or any security convertible into or exercisable or exchangeable for
Class A Common Stock.

Existing Stockholders other than the Morgan Stanley Stockholders may not
sell or pledge any shares of Common Stock except in the circumstances permitted
by the Stockholders Agreement. See "Certain Relationships and Related
Transactions." Subject to the lock-up period describe above, the Morgan Stanley
Stockholders may choose to dispose of the Common Stock owned by them. The timing
of such sales or other dispositions by such stockholders (which could include
distributions to the Morgan Stanley Stockholders' limited partners) will depend
on market and other conditions, but could occur relatively soon after the
lock-up period, including pursuant to the exercise of their registration rights.
The Morgan Stanley Stockholders are unable to predict the timing of sales by any
of their limited partners in the event of a distribution to them. Such
dispositions could be privately negotiated transactions or public sales.

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CERTAIN UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS FOR NON-U.S. HOLDERS

In the opinion of Sonnenschein Nath & Rosenthal, the following is a summary
of certain of the material United States federal income and estate tax
consequences of the ownership and disposition of Class A Common Stock applicable
to "Non-United States Holders." A "Non-United States Holder" is any beneficial
owner of Class A Common Stock that, for United States federal income or estate
tax purposes, as the case may be, is a non-resident alien individual, a foreign
corporation, a foreign partnership or a foreign estate or trust as such terms
are defined in the Internal Revenue Code of 1986, as amended (the "Code"). This
summary is based on the Code and administrative and judicial interpretations as
of the date hereof, all of which are subject to change either retroactively or
prospectively. This summary does not address all aspects of United States
federal income and estate taxation that may be relevant to Non-United States
Holders in light of their particular circumstances (such as certain tax
consequences applicable to United States expatriates and pass-through entities)
and does not address any tax consequences arising under the laws of any state,
local or foreign taxing jurisdiction or the application of a particular tax
treaty. Prospective investors are urged to consult their tax advisors regarding
the United States federal, state and local income and other tax consequences,
and the non-United States tax consequences, of owning and disposing of Class A
Common Stock.

DIVIDENDS

Subject to the discussion below, any dividend paid to a Non-United States
Holder generally will be subject to United States withholding tax either at a
rate of 30% of the gross amount of the dividend or such lower rate as may be
specified by an applicable tax treaty. For purposes of determining whether tax
is to be withheld at a 30% rate, or at a reduced rate as specified by an
applicable tax treaty, under current United States Treasury Regulations the
Company ordinarily will presume that dividends paid on or before December 31,
1998 to a holder with an address in a foreign country are paid to a resident of
such country absent knowledge that such presumption is not warranted. Under such
Regulations, dividends paid on or before December 31, 1998 to a holder with an
address within the United States generally will be presumed to be paid to a
holder who is not a Non-United States Holder and will not be subject to the 30%
withholding tax, unless the Company has actual knowledge that the holder is a
Non-United States Holder.

Recently finalized United States Treasury Regulations applicable to
dividends paid after December 31, 1998 (the "Final Regulations") provide for
certain presumptions (which differ from those described above) upon which the
Company may generally rely to determine whether, in the absence of certain
documentation, a holder should be treated as a Non-United States Holder for
purposes of the 30% withholding tax described above (rather than a U.S. person
subject to the backup withholding rules discussed below). The presumptions would
not apply for purposes of granting a reduced rate of withholding under a treaty.
Under the Final Regulations, to obtain a reduced rate of withholding under a
treaty a Non-United States Holder will be required either (i) to provide an
Internal Revenue Service Form W-8 certifying such Non-United States Holder's
entitlement to benefits under a treaty together with, in certain circumstances,
additional information or (ii) satisfy certain other applicable certification
requirements. The Final Regulations also provide special rules to determine
whether, for purposes of determining the applicability of a tax treaty and for
purposes of the 30% withholding tax described above, dividends paid to a
Non-United States Holder that is an entity should be treated as paid to the
entity or those holding an interest in that entity.

Dividends received by a Non-United States Holder that are effectively
connected with a United States trade or business conducted by such Non-United
States Holder are exempt from withholding tax. However, such effectively
connected dividends are subject to regular United States income tax in the same
manner as if the Non-United States Holder were a United States person for
federal income tax purposes. Effectively connected dividends may be subject to a
different treatment under an applicable tax treaty depending on whether such
dividends are attributable to a permanent establishment of the Non-United States
Holder in the United States. A Non-United States Holder may claim exemption from
withholding under the effectively connected income exception by filing Internal
Revenue Service Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected With the Conduct of a Trade or Business in the United
States) each

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year with the Company or its paying agent prior to the payment of the dividends
for such year. The Final Regulations will replace Form 4224 with Form W-8 and
certain additional information. Effectively connected dividends received by a
corporate Non-United States Holder may be subject to an additional "branch
profits tax" at a rate of 30% (or such lower rate as may be specified by an
applicable tax treaty) of such corporate Non-United States Holder's effectively
connected earnings and profits, subject to certain adjustments.

A Non-United States Holder eligible for a reduced rate of United States
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts currently withheld by filing an appropriate claim for refund with the
United States Internal Revenue Service ("IRS").

GAIN ON DISPOSITION OF CLASS A COMMON STOCK

A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain realized upon the sale or other
disposition of Class A Common Stock unless (i) such gain is effectively
connected with a United States trade or business of the Non-United States
Holder; (ii) the Non-United States Holder is a non-resident alien individual who
holds the Class A Common Stock as a capital asset, is present in the United
States for a period or periods aggregating 183 days or more during the calendar
year in which such sale or disposition occurs, and either the non-resident alien
individual has a "tax home" in the United States or the sale is attributable to
an office or other fixed place of business maintained by the non-resident alien
individual in the United States; or (iii) the Company is or has been a "United
States real property holding corporation" for federal income tax purposes at any
time within the shorter of the five-year period ending on the date of the
disposition or such holder's holding period (the "determination period"). The
Company has determined that it is not, and does not anticipate becoming a
"United States real property holding corporation" for federal income tax
purposes. Even if the Company is a United States real property holding
corporation for federal income tax purposes at any time during the determination
period, the disposition of Class A Common Stock by a Non-United States Holder
that did not own more than five percent of the Class A Common Stock during the
determination period will not be treated as a disposition of an interest in a
United States real property holding corporation if the Class A Common Stock is
treated as "regularly traded on an established securities market" during the
calendar year. Non-United States Holders should consult applicable tax treaties,
which might result in a United States federal income tax treatment on the sale
or other disposition of Class A Common Stock different than as described above.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient, and the amount, if any, of tax withheld.
The information reporting requirements apply regardless of whether withholding
was reduced by an applicable tax treaty or if withholding was not required
because the dividends were effectively connected with a trade or business in the
United States of the Non-United States Holder. A similar report is sent to the
holder. Pursuant to tax treaties or other agreements, the IRS may make its
reports available to tax authorities in the recipient's country of residence.

Under current United States Treasury Regulations, unless the Company has
actual knowledge that a holder is a Non-United States Holder, dividends paid on
or before December 31, 1998 to a holder at an address within the United States
may be subject to backup withholding at a rate of 31% and additional information
reporting if the holder is not an "exempt recipient" as defined in Treasury
Regulations (which includes corporations) and fails to provide a correct
taxpayer identification number and other information to the Company. In
addition, backup withholding and such additional information reporting will
generally not apply to dividends paid on or before December 31, 1998 to holders
at an address outside the United States (unless the Company has knowledge that
the holder is a United States person) or to dividends paid on or before December
31, 1998 to Non-United States Holders that are either subject to the United
States withholding tax (whether at 30% or a reduced rate) or that are exempt
from such withholding because such dividends constitute effectively connected
income. For dividends paid after December 31, 1998, the Final Regulations
provide certain presumptions and other rules under which Non-United States
Holders may be subject to backup withholding and related information reporting
in the absence of required certifications.

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Under current United States Treasury Regulations, proceeds from the
disposition of Class A Common Stock by a Non-United States Holder effected by or
through a United States office of a broker will be subject to information
reporting and to backup withholding at a rate of 31% of the gross proceeds
unless such Non-United States Holder certifies under penalties of perjury as to
its name, address and status as a Non-United States Holder or otherwise
establishes an exemption. Generally, United States information reporting and
backup withholding will not apply to a payment of disposition proceeds if the
transaction is effected outside the United States by or through a non-United
States office of a broker. However, United States information reporting
requirements (but not backup withholding) will apply to a payment of disposition
proceeds where the transaction is effected outside the United States if (a) the
disposition is made through an office outside the United States of a broker that
is either (i) a United States person for United States federal income tax
purposes, (ii) a "controlled foreign corporation" for United States federal
income tax purposes, (iii) a foreign person which derives 50% or more of its
gross income for certain periods from the conduct of a United States trade or
business or (iv) effective after December 31, 1998, certain brokers that are
foreign partnerships with U.S. partners or that are engaged in a U.S. trade or
business, and (b) the broker fails to maintain documentary evidence in its files
that the holder is a Non-United States Holder and that certain conditions are
met or that the holder otherwise is entitled to an exemption.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of United States
income taxes, a refund may be obtained, provided that the required documents are
filed with the IRS.

ESTATE TAX

An individual Non-United States Holder who is treated as the owner of Class
A Common Stock at the time of such individual's death or has made certain
lifetime transfers of an interest in Class A Common Stock will be required to
include the value of such Class A Common Stock in such individual's gross estate
for United States federal estate tax purposes and may be subject to United
States federal estate tax, unless an applicable tax treaty provides otherwise.

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UNDERWRITERS

Under the terms and subject to the conditions in the Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), the U.S. Underwriters
named below for whom Morgan Stanley & Co. Incorporated, BT Alex. Brown
Incorporated, Goldman, Sachs & Co. and George K. Baum & Company are acting as
U.S. Representatives, and the International Underwriters named below for whom
Morgan Stanley & Co. International Limited, BT Alex. Brown International, a
division of Bankers Trust International PLC, Goldman Sachs International and
George K. Baum & Company are acting as International Representatives, have
severally agreed to purchase, and the Company has agreed to sell to them,
severally, the respective numbers of shares of Class A Common Stock set forth
opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated......................... 1,320,000
BT Alex. Brown Incorporated............................... 1,320,000
Goldman, Sachs & Co. ..................................... 1,320,000
George K. Baum & Company.................................. 1,320,000
Burnham Securities Inc. .................................. 80,000
Donaldson, Lufkin & Jenrette Securities Corporation....... 160,000
A.G. Edwards & Sons, Inc. ................................ 160,000
Furman Selz LLC........................................... 80,000
J.J.B. Hilliard, W.L. Lyons, Inc. ........................ 80,000
Janney Montgomery Scott Inc. ............................. 80,000
Edward D. Jones & Co., L.P. .............................. 80,000
Kirkpatrick, Pettis, Smith, Polian Inc. .................. 80,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated........ 160,000
Prudential Securities Incorporated........................ 160,000
The Robinson-Humphrey Company, Inc. ...................... 80,000
Smith Barney Inc. ........................................ 160,000
Stephens Inc. ............................................ 80,000
---------
Subtotal............................................... 6,720,000
---------
International Underwriters:
Morgan Stanley & Co. International Limited................ 295,000
BT Alex. Brown International, a division of Bankers Trust
International PLC...................................... 295,000
Goldman Sachs International............................... 295,000
George K. Baum & Company.................................. 295,000
---------
Subtotal............................................... 1,180,000
---------
Total............................................. 7,900,000
=========
</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively referred
to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several Underwriters
to pay for and accept delivery of the shares of Class A Common Stock offered
hereby are subject to the approval of certain legal matters by their counsel and
to certain other conditions. The Underwriters are obligated to take and pay for
all of the shares of Class A Common Stock offered hereby (other than those
covered by the U.S. Underwriters' over-allotment option described below) if any
such shares are taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly, any
Shares or distribute any prospectus

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<PAGE> 67

relating to the Shares outside the United States or Canada or to anyone other
than a United States or Canadian Person. Pursuant to the Agreement between U.S.
and International Underwriters, each International Underwriter has represented
and agreed that, with certain exceptions: (i) it is not purchasing any Shares
for the account of any United States or Canadian Person and (ii) it has not
offered or sold, and will not offer or sell, directly or indirectly, any Shares
or distribute any prospectus relating to the Shares in the United States or
Canada or to any United States or Canadian Person. With respect to any
Underwriter that is a U.S. Underwriter and an International Underwriter, the
foregoing representations and agreements (i) made by it in its capacity as a
U.S. Underwriter apply only to it in its capacity as a U.S. Underwriter and (ii)
made by it in its capacity as an International Underwriter apply only to it in
its capacity as an International Underwriter. The foregoing limitations do not
apply to stabilization transactions or to certain other transactions specified
in the Agreement between U.S. and International Underwriters. As used herein,
"United States or Canadian Person" means any national or resident of the United
States or Canada, or any corporation, pension, profit-sharing or other trust or
other entity organized under the laws of the United States or Canada or of any
political subdivision thereof (other than a branch located outside the United
States and Canada of any United States or Canadian Person), and includes any
United States or Canadian branch of a person who is otherwise not a United
States or Canadian Person. All shares of Class A Common Stock to be purchased by
the Underwriters under the Underwriting Agreement are referred to herein as the
"Shares".

Pursuant to the Agreement between U.S. and International Underwriters,
sales may be made between the U.S. Underwriters and International Underwriters
of any number of Shares as may be mutually agreed. The per share price of any
Shares so sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per share
amount of the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has agreed
not to offer or sell, any Shares, directly or indirectly, in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and has
represented that any offer or sale of Shares in Canada will be made only
pursuant to an exemption from the requirement to file a prospectus in the
province or territory of Canada in which such offer or sale is made. Each U.S.
Underwriter has further agreed to send to any dealer who purchases from it any
of the Shares a notice stating in substance that, by purchasing such Shares,
such dealer represents and agrees that it has not offered or sold, and will not
offer or sell, directly or indirectly, any of such Shares in any province or
territory of Canada or to, or for the benefit of, any resident of any province
or territory of Canada in contravention of the securities laws thereof and that
any offer or sale of Shares in Canada will be made only pursuant to an exemption
from the requirement to file a prospectus in the province or territory of Canada
in which such offer or sale is made, and that such dealer will deliver to any
other dealer to whom it sells any of such Shares a notice containing
substantially the same statement as is contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not offered
or sold and, prior to the date six months after the closing date for the sale of
the Shares to the International Underwriters, will not offer or sell, any Shares
to persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or otherwise in
circumstances which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (ii) it has complied and will comply with all
applicable provisions of the Financial Services Act 1986 with respect to
anything done by it in relation to the Shares in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in connection
with the offering of the Shares to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may otherwise
lawfully be issued or passed on.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly,

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in Japan or to or for the account of any resident thereof, any of the Shares
acquired in connection with the distribution contemplated hereby, except for
offers or sales to Japanese International Underwriters or dealers and except
pursuant to any exemption from the registration requirements of the Securities
and Exchange Law and otherwise in compliance with applicable provisions of
Japanese law. Each International Underwriter has further agreed to send to any
dealer who purchases from it any of the Shares a notice stating in substance
that, by purchasing such Shares, such dealer represents and agrees that it has
not offered or sold, and will not offer or sell, any of such Shares, directly or
indirectly, in Japan or to or for the account of any resident thereof except for
offers or sales to Japanese International Underwriters or dealers and except
pursuant to any exemption from the registration requirements of the Securities
and Exchange Law and otherwise in compliance with applicable provisions of
Japanese law, and that such dealer will send to any other dealer to whom it
sells any of such Shares a notice containing substantially the same statement as
is contained in this sentence.

The Underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $.78 a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $.10 a share to other Underwriters or to certain other dealers. After the
initial offering of the shares of Class A Common Stock, the offering price and
other selling terms may from time to time be varied by the Representatives.

The Morgan Stanley Stockholders have granted to the U.S. Underwriters an
option, exercisable for 30 days from the date of this Prospectus, to purchase up
to an aggregate of 1,185,000 additional shares of Class A Common Stock at the
public offering price set forth on the cover page hereof, less underwriting
discounts and commissions. The U.S. Underwriters may exercise such option solely
for the purpose of covering over-allotments, if any, made in connection with the
offering of the shares of Class A Common Stock offered hereby. To the extent
such option is exercised, each U.S. Underwriter will become obligated, subject
to certain conditions, to purchase approximately the same percentage of such
additional shares of Class A Common Stock as the number set forth next to such
U.S. Underwriter's name in the preceding table bears to the total number of
shares of Class A Common Stock set forth next to the names of all U.S.
Underwriters in the preceding table.

The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Class A Common Stock offered by them.

Each of the Company and the directors, executive officers and certain other
stockholders of the Company has agreed that, without the prior written consent
of Morgan Stanley & Co. Incorporated on behalf of the Underwriters (except with
respect to shares of Common Stock held by the Morgan Stanley Stockholders, for
which prior written consent of all the U.S. Representatives is required), it
will not, during the period ending 180 days after the date of this Prospectus,
(i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of, directly or
indirectly, any shares of Class A Common Stock or any securities convertible
into or exercisable or exchangeable for Class A Common Stock (provided that such
shares or securities are either owned on the date of this Prospectus or are
hereinafter acquired prior to or in connection with the Offering) or (ii) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of the Class A Common Stock,
whether any such transaction described in clause (i) or (ii) above is to be
settled by delivery of Class A Common Stock or such other securities, in cash or
otherwise. The restrictions described in this paragraph do not apply to (a) the
sale of the Shares to the Underwriters, (b) the issuance by the Company of
shares of Common Stock upon the exercise of an option or a warrant or the
conversion of a security outstanding on the date of this Prospectus, (c) the
issuance of shares in connection with the Recapitalization, (d) the issuance of
shares in connection with the conversion from time to time of the Class A Common
Stock into Class B Common Stock (and vice versa), (e) the grants of stock
options to employees, directors or consultants pursuant to the terms of a plan
disclosed herein which first became exercisable more than 180 days after the
date of the Prospectus, (f) the issuance by the Company of shares of Common
Stock pursuant to any 401(k) plan, (g) bona fide charitable donations or estate
planning dispositions, provided that, prior to such transfer, the transferee in
any such

68
<PAGE> 69

transaction agrees in writing to be bound by the terms of this paragraph and the
form and substance of such writing has received written approval from Morgan
Stanley & Co. Incorporated or (h) transfers due to the death or disability of a
seller, provided that the transferee agrees in writing to be bound by the terms
of this paragraph and the form and substance of such writing has received
written approval from Morgan Stanley & Co. Incorporated.

In order to facilitate the offering of the Class A Common Stock, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Class A Common Stock. Specifically, the Underwriters may
over-allot in connection with the Offering, creating a short position in the
Class A Common Stock for their own account. In addition, to cover
over-allotments or to stabilize the price of the Class A Common Stock, the
Underwriters may bid for, and purchase, shares of Class A Common Stock in the
open market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an Underwriter or a dealer for distributing the Class A Common Stock
in the Offering, if the syndicate repurchases previously distributed Class A
Common Stock in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Class A Common Stock above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.

The Company, the Selling Stockholders and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act.

Upon consummation of the Offering, affiliates of Morgan Stanley & Co.
Incorporated and Morgan Stanley & Co. International Limited will own 39.6% of
the Common Stock (32.5% if the over-allotment option granted to the U.S.
Underwriters is exercised in full). No affiliates of Morgan Stanley & Co.
Incorporated and Morgan Stanley & Co. International Limited will be selling
shares of Class A Common Stock in the Offering. Currently, affiliates of Morgan
Stanley & Co. Incorporated and Morgan Stanley & Co. International Limited have
designated three members to the Board of Directors (Messrs. Niehaus and Sorrel
and Ms. Rosen). Messrs. Niehaus and Sorrel and Ms. Rosen are employees of Morgan
Stanley & Co. Incorporated. See "Management." From time to time, Morgan Stanley
& Co. Incorporated and its affiliates have provided, and continue to provide,
investment banking and financial advisory services to the Company for which they
have received customary fees and commissions.

Morgan Stanley Senior Funding, Inc., an affiliate of Morgan Stanley & Co.
Incorporated, one of the U.S. Underwriters, is the documentation agent under the
agreements relating to the Company's Credit Facility, and acted as arranger for
the Credit Facility for which it received a customary fee. Morgan Senior
Funding, Inc. also provides other general financing and banking services to the
Company and its affiliates from time to time. Bankers Trust Company, an
affiliate of BT Alex. Brown Incorporated (which is one of the U.S. Underwriters)
and BT Alex. Brown International (which is one of the International
Underwriters), is administrative agent and a lender under the Company's Credit
Facility.

The Class A Common Stock has been approved for listing, subject to notice
of issuance, on the New York Stock Exchange under the symbol "PLB." In order to
meet the requirements for listing the Class A Common Stock on the New York Stock
Exchange, the Underwriters have undertaken to meet the New York Stock Exchange's
minimum distribution, issuance and aggregate market value requirements.

Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price will be determined by
negotiations between the Company and the U.S. Representatives. Among the factors
to be considered in determining the initial public offering price will be the
future prospects of the Company and its industry in general, sales, earnings and
certain other financial and operating information of the Company in recent
periods, and the price-earnings ratios, price-sales ratios, market prices of
securities and certain financial and operating information of companies engaged
in activities similar to those of the Company. The estimated initial public
offering price range set forth on the cover page of this Preliminary Prospectus
is subject to change as a result of market conditions and other factors.

Because the partial repayment of the Credit Facility will cause a
substantial portion of the proceeds from the Offering to be paid to affiliates
of members of the National Association of Securities Dealers, Inc.

69
<PAGE> 70

("NASD") which members may participate in the U.S. Offering, the U.S. Offering
is being conducted in accordance with the requirements of Rule 2710(c)(8) of the
NASD Conduct Rules. The initial public offering price can be no higher than that
recommended by a "qualified independent underwriter" meeting certain standards.
Accordingly, Goldman, Sachs & Co. will serve in such role. In connection with
the U.S. Offering, Goldman, Sachs & Co. in its role as qualified independent
underwriter has performed due diligence investigations and reviewed and
participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus forms a part.

From time to time, George K. Baum & Company has provided, and continues to
provide, investment banking and financial advisory services to the Company for
which it has received customary fees and commissions. Upon consummation of the
Offering, one of the Company's seven directors will be a director of George K.
Baum & Company.

LEGAL MATTERS

The validity of the shares of Class A Common Stock offered hereby and
certain other matters will be passed upon for the Company by Sonnenschein Nath &
Rosenthal, Kansas City, Missouri. Certain legal matters will be passed upon for
the Underwriters by Davis Polk & Wardwell, New York, New York. Davis Polk &
Wardwell has performed, and will continue to perform, legal services for the
Morgan Stanley Stockholders and has acted as counsel to the Morgan Stanley
Stockholders in connection with their investments in the Company.

EXPERTS

The financial statements of the Company at December 31, 1995, September 30,
1996, and June 30, 1997, and for each of the two years in the period ended
December 31, 1995, for the nine-month fiscal period ended September 30, 1996 and
the nine-month period ended June 30, 1997 appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed a Registration Statement with the Securities and
Exchange Commission (the "Commission") on Form S-1 under the Securities Act with
respect to the shares of Class A Common Stock offered hereby. This Prospectus,
which constitutes a part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain items of which
are contained in schedules and exhibits to the Registration Statement as
permitted by rules of the Commission. For further information with respect to
the Company and the Class A Common Stock offered hereby, reference is made to
such Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete. With respect to each such
contract or other document filed as a part of or otherwise incorporated in the
Registration Statement, reference is made to the exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference.

Following the consummation of this Offering, the Company will be subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended, and in accordance therewith will file reports, proxy statements and
other information with the Commission. The Registration Statement, including the
schedules and exhibits thereto, as well as such reports, proxy statements and
other information filed by the Company can be inspected, without charge, and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices maintained by the Commission at Suite 1400, Citicorp Center,
500 West Madison Street, Chicago, Illinois 60661 and Seven World Trade Center,
13th Floor, New York, New York 10048. Copies of such materials can also be
obtained from the Public Reference Section of the Commission, Room 1024,

70
<PAGE> 71

Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, registration statements and certain other filings made with
the Commission through its Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system are publicly available through the Commission's site on the
Internet's World Wide Web, located at http://www.sec.gov. The Registration
Statement, including all exhibits thereto and amendments thereof, has been filed
with the Commission through EDGAR.

Following the consummation of this Offering, the Company intends to furnish
to its stockholders annual reports containing financial statements audited by an
independent certified public accounting firm and quarterly reports for each of
the first three quarters of each fiscal year containing unaudited financial
information.

71
<PAGE> 72

AMERICAN ITALIAN PASTA COMPANY

INDEX TO AUDITED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheets at December 31, 1995, September 30, 1996 and
June 30, 1997............................................. F-3
Statements of Operations for the years ended December 31,
1994 and 1995, the fiscal nine-months ended September 30,
1996 and the nine-months ended June 30, 1997.............. F-4
Statements of Stockholders' Equity for the years ended
December 31, 1994 and 1995, the fiscal nine-months ended
September 30, 1996 and the nine-months ended June 30,
1997...................................................... F-5
Statements of Cash Flows for the years ended December 31,
1994 and 1995, the fiscal nine-months ended September 30,
1996 and the nine-months ended June 30, 1997.............. F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 73

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
American Italian Pasta Company

We have audited the accompanying balance sheets of American Italian Pasta
Company (the Company) as of December 31, 1995, September 30, 1996 and June 30,
1997, and the related statements of operations, stockholders' equity and cash
flows for each of the two years in the period ended December 31, 1995, the nine-
month fiscal period ended September 30, 1996 and the nine-month period ended
June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Italian Pasta
Company at December 31, 1995, September 30, 1996 and June 30, 1997, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1995, the nine-month fiscal period ended September 30,
1996 and the nine-month period ended June 30, 1997 in conformity with generally
accepted accounting principles.

ERNST & YOUNG LLP

Kansas City, Missouri
July 25, 1997 except
Note 12, as to which
the date is October 7, 1997

F-2
<PAGE> 74

AMERICAN ITALIAN PASTA COMPANY

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS (Note 2)
Current assets:
Cash and temporary investments.......................... $ 18 $ 1,818 $ 2,612
Trade and other receivables............................. 10,709 12,494 11,616
Prepaid expenses and deposits........................... 927 1,879 2,201
Inventory............................................... 12,544 14,374 11,619
Deferred income taxes (Note 3).......................... 339 269 213
-------- -------- --------
Total current assets...................................... 24,537 30,834 28,261
Property, plant and equipment:
Land and improvements................................... 4,379 4,413 4,540
Buildings............................................... 37,382 37,491 37,491
Plant and mill equipment................................ 78,850 81,461 83,702
Furniture, fixtures and equipment....................... 3,348 3,635 4,477
-------- -------- --------
123,959 127,000 130,210
Accumulated depreciation................................ (18,580) (23,247) (27,790)
-------- -------- --------
105,379 103,753 102,420
Construction in progress................................ -- -- 7,839
-------- -------- --------
Total property, plant and equipment....................... 105,379 103,753 110,259
Deferred income taxes (Note 3)............................ 1,821 4,479 2,730
Other assets.............................................. 3,687 2,622 4,212
-------- -------- --------
Total assets.............................................. $135,424 $141,688 $145,462
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 12,102 $ 7,193 $ 6,550
Accrued expenses........................................ 2,694 3,664 4,750
Current maturities of long-term debt (Note 2)........... 3,109 8,078 3,685
Revolving line of credit facility (Note 2).............. -- 13,500 --
-------- -------- --------
Total current liabilities................................. 17,905 32,435 14,985
Long-term debt (Note 2)................................... 97,452 93,284 89,500
Commitments and contingencies (Note 4)
Stockholders' equity:
Preferred stock, $.001 par value:
Authorized shares 10,000,000......................... -- -- --
Class A common stock, $.001 par value:
Authorized shares -- 75,000,000...................... 8 8 11
Class B common stock, $.001 par value:
Authorized shares -- 25,000,000...................... -- -- --
Additional paid-in capital.............................. 32,971 33,071 55,324
Notes receivable from officers.......................... -- -- (298)
Accumulated deficit..................................... (12,912) (17,110) (14,060)
-------- -------- --------
Total stockholders' equity................................ 20,067 15,969 40,977
-------- -------- --------
Total liabilities and stockholders' equity................ $135,424 $141,688 $145,462
======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-3
<PAGE> 75

AMERICAN ITALIAN PASTA COMPANY

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED -----------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30,
------------------ ---------------------- ----------------------
1994 1995 1995 1996 1996 1997
---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
Revenues (Note 5)................... $69,465 $92,903 $63,828 $92,074 $86,514 $93,616
Cost of goods sold.................. 54,393 73,851 51,601 68,555 65,697 67,821
Plant expansion costs (Note 8)...... 484 2,065 1,640 -- 425 --
------- ------- ------- ------- ------- -------
Gross profit........................ 14,588 16,987 10,587 23,519 20,392 25,795
Selling and marketing expense,
including product introduction
costs (Note 10)................... 3,792 5,303 3,656 16,798 11,236 10,212
General and administrative
expense........................... 1,951 2,930 2,048 2,805 2,741 2,855
------- ------- ------- ------- ------- -------
Operating profit.................... 8,845 8,754 4,883 3,916 6,415 12,728
Interest expense, net............... 4,975 8,008 5,261 8,023 8,030 7,800
------- ------- ------- ------- ------- -------
Income (loss) before income tax
expense (benefit) and
extraordinary item................ 3,870 746 (378) (4,107) (1,615) 4,928
Income tax expense (benefit) (Note
3)................................ 1,484 270 (147) (1,556) (642) 1,878
------- ------- ------- ------- ------- -------
Income (loss) before extraordinary
item.............................. 2,386 476 (231) (2,551) (973) 3,050
Extraordinary item:
Loss due to early extinguishment
of long-term debt, net of
income taxes (Note 2).......... (204) -- -- (1,647) (1,647) --
------- ------- ------- ------- ------- -------
Net income (loss)................... $ 2,182 $ 476 $ (231) $(4,198) $(2,620) $ 3,050
======= ======= ======= ======= ======= =======
Net income (loss) per common share:
Before extraordinary item........... $ 0.23 $ 0.05 $ (0.24) $ 0.25
Extraordinary item.................. (0.02) -- (0.16) --
------- ------- ------- -------
Total............................... $ 0.21 $ 0.05 $ (0.40) $ 0.25
======= ======= ======= =======
Weighted-average common shares
outstanding....................... 10,401 10,445 10,473 12,176
======= ======= ======= =======
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE> 76

AMERICAN ITALIAN PASTA COMPANY

STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
NOTES
CLASS A CLASS A ADDITIONAL RECEIVABLE TOTAL
COMMON COMMON PAID-IN FROM DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES STOCK CAPITAL OFFICERS COMPENSATION DEFICIT EQUITY
------- ------- ---------- ---------- ------------ ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993... 8,179,832 $ 8 $32,679 $ -- $(144) $(15,570) $16,973
Compensation related to stock
options vesting in 1994.... -- -- -- -- 144 -- 144
Issuance of 21,401 shares of
Class A Common stock....... 21,401 -- 102 -- -- -- 102
Net income................... -- -- -- -- -- 2,182 2,182
---------- --- ------- ----- ----- -------- -------
Balance at December 31, 1994... 8,201,233 8 32,781 -- -- (13,388) 19,401
Issuance of 38,767 shares of
Class A Common stock....... 38,767 -- 190 -- -- -- 190
Net income................... -- -- -- -- -- 476 476
---------- --- ------- ----- ----- -------- -------
Balance at December 31, 1995... 8,240,000 8 32,971 -- -- (12,912) 20,067
Issuance of 20,328 shares of
Class A Common stock....... 20,328 -- 100 -- -- -- 100
Net loss..................... -- -- -- -- -- (4,198) (4,198)
---------- --- ------- ----- ----- -------- -------
Balance at September 30,
1996......................... 8,260,328 8 33,071 -- -- (17,110) 15,969
Issuance of 3,174,526 shares
of Class A Common stock,
net of issuance costs ..... 3,174,528 3 22,039 -- -- -- 22,042
Notes received from officers
in exchange for stock...... -- -- -- (298) -- -- (298)
Issuance of 31,200 shares of
Class A Common stock to
employee benefit plan...... 31,200 -- 214 -- -- -- 214
Net income................... -- -- -- -- -- 3,050 3,050
---------- --- ------- ----- ----- -------- -------
Balance at June 30, 1997....... 11,466,056 $11 $55,324 $(298) $ -- $(14,060) $40,977
========== === ======= ===== ===== ======== =======
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE> 77

AMERICAN ITALIAN PASTA COMPANY

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED --------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30
-------------------- ----------------------- -----------------------
1994 1995 1995 1996 1996 1997
---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss).................... $ 2,182 $ 476 $ (231) $ (4,198) $ (2,620) $ 3,050
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operations:
Depreciation and amortization.... 4,573 6,279 4,485 5,434 5,607 5,784
Deferred income tax expense
(benefit)..................... 1,168 264 (147) (1,556) (642) 1,878
Extraordinary loss due to early
extinguishment of long-term
debt.......................... 204 -- -- 1,647 1,647 --
Compensation related to stock
options....................... 144 -- -- -- -- --
Loss on disposal of property,
plant and equipment........... -- 439 275 -- 163 --
Changes in operating assets and
liabilities:
Trade and other receivables... (1,900) (4,586) (1,512) (1,785) (2,898) 942
Prepaid expenses and
deposits.................... (317) (364) (1,241) (952) (220) (396)
Inventory..................... (4,293) (2,814) (1,889) (1,830) (5,377) 2,755
Accounts payable and accrued
expenses.................... 2,167 6,610 3,435 (3,961) 519 443
Other......................... (238) (574) (500) (276) (334) (380)
-------- -------- -------- -------- -------- --------
Net cash provided by (used in)
operating activities............... 3,690 5,730 2,675 (7,477) (4,155) 14,076

Investing activities:
Additions to property, plant and
equipment.......................... (25,431) (38,789) (31,365) (3,041) (6,084) (11,464)
-------- -------- -------- -------- -------- --------
Net cash used in investing
activities......................... (25,431) (38,789) (31,365) (3,041) (6,084) (11,464)

Financing activities:
Additions to deferred debt issuance
costs.............................. (2,004) (71) (71) (2,083) (2,064) (2,099)
Proceeds from issuance of debt....... 58,330 40,795 22,274 86,470 106,025 3,543
Net borrowings under revolving line
of credit facility................. -- -- 9,408 13,500 -- (13,500)
Principal payments on debt and
capital lease obligations.......... (36,825) (7,848) (3,875) (85,669) (92,239) (11,720)
Proceeds from issuance of common
stock, net of issuance costs....... 102 190 167 100 -- 21,958
-------- -------- -------- -------- -------- --------
Net cash provided by (used in)
financing activities............... 19,603 33,066 27,903 12,318 11,722 (1,818)
-------- -------- -------- -------- -------- --------

Net increase (decrease) in cash and
temporary investments.............. (2,138) 7 (787) 1,800 1,483 794
Cash and temporary investments at
beginning of period................ 2,149 11 11 18 (776) 1,818
-------- -------- -------- -------- -------- --------
Cash and temporary investments at end
of period.......................... $ 11 $ 18 $ (776) $ 1,818 $ 707 $ 2,612
======== ======== ======== ======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-6
<PAGE> 78

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

American Italian Pasta Company (the Company) is a Delaware Corporation
which began operations in 1988. The Company is the third largest producer and
marketer of pasta products in the United States with manufacturing and
distribution facilities located in Excelsior Springs, Missouri and Columbia,
South Carolina.

CHANGE IN FISCAL YEAR

Effective for its 1996 fiscal year, the Company changed its fiscal year end
from December 31 to the last Friday of September or the first Friday of October.
This change resulted in a nine-month fiscal year for 1996, a 53-week year for
fiscal 1997, and a 52- or 53-week year for all subsequent fiscal years. The
Company's other fiscal quarters end on the Friday last preceding December 31,
March 31 and June 30 of each year. For purposes of the financial statements and
notes thereto, the 1996 fiscal year is described as having ended on September
30, 1996, and the nine-month 1997 and 1996 interim periods are described as
having ended on June 30.

INTERIM FINANCIAL STATEMENTS

The Company's balance sheet at June 30, 1997 and the statements of
operations and stockholders' equity and cash flows for the nine months ended
September 30, 1995, June 30, 1996 and June 30, 1997 have been prepared in
accordance with generally accepted accounting principles for interim financial
statements.

The Company has included information for the nine months ended September
30, 1995 and June 30, 1996 in the statements of operations and statements of
cash flows for comparative purposes. This information is unaudited.

REVENUE RECOGNITION

Sales of the Company's products, including pricing terms, are final upon
shipment of the goods. Accordingly, revenue is recognized at such time.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RISKS AND UNCERTAINTIES

The Company grants credit to certain customers who meet the Company's
preestablished credit requirements. Generally, the Company does not require
collateral security when trade credit is granted to customers. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations. The allowance for doubtful accounts at December 31,
1995, September 30, 1996 and June 30, 1997 was $59,000, $60,000 and $198,000,
respectively. At December 31, 1995, September 30, 1996 and June 30, 1997,
approximately 30%, 34% and 41%, respectively, of accounts receivable were due
from two customers.

Pasta is made from semolina milled from durum wheat, a class of hard amber
wheat grown in certain parts of the world and purchased by the Company from
United States and Canadian sources. The Company mills the wheat into semolina at
its Excelsior Springs plant. Durum wheat is a narrowly traded, cash only

F-7
<PAGE> 79

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
commodity crop. The Company attempts to minimize the effect of durum wheat cost
fluctuations through forward purchase contracts and raw material cost-based
pricing agreements with many of its customers. The Company's commodity
procurement and pricing practices are intended to reduce the risk of durum wheat
cost increases on profitability, but also may temporarily affect the timing of
the Company's ability to benefit from possible durum wheat cost decreases for
such contracted quantities.

FINANCIAL INSTRUMENTS

The carrying value of the Company's financial instruments, including cash
and temporary investments, accounts receivable, accounts payable and long-term
debt, as reported in the accompanying balance sheet at June 30, 1997,
approximates fair value.

ADVERTISING COSTS

The Company amortizes direct response advertising costs over the period in
which the future benefits are expected (generally six months or less).
Production costs for television advertisement are expensed upon the first
showing. Other costs of advertising and promotions are expensed as incurred.

CASH AND TEMPORARY INVESTMENTS

Cash and temporary investments include cash on hand, amounts due from banks
and highly liquid marketable securities with maturities of three months or less
at the date of purchase.

INVENTORIES

Inventories are stated using product specific standard costs which
approximate the lower of cost or market determined on a first-in, first-out
(FIFO) basis. Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Finished goods............................... $ 8,625 $10,809 $ 7,505
Raw materials, packaging materials and
work-in-process............................ 3,919 3,565 4,114
------- ------- -------
$12,544 $14,374 $11,619
======= ======= =======
</TABLE>

PROPERTY, PLANT AND EQUIPMENT

Capital additions, improvements and major renewals are classified as
property, plant and equipment and are recorded at cost. Depreciation is
calculated for financial statement purposes using the straight-line method over
the estimated useful life of the related asset for each year as follows:

<TABLE>
<CAPTION>
NUMBER OF
YEARS
---------
<S> <C>
Land improvements........................................... 40
Buildings................................................... 30
Plant and mill equipment.................................... 20
Packaging equipment......................................... 10
Furniture, fixtures and equipment........................... 5
</TABLE>

F-8
<PAGE> 80

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
The Company capitalizes interest costs associated with the construction and
installation of plant and equipment. During the fiscal years ended December 31,
1994 and 1995, approximately $871,000 and $1,559,000 of interest cost was
capitalized, respectively. There was no interest cost capitalized in fiscal
1996. During the nine months ended June 30, 1997, approximately $136,000 of
interest cost was capitalized.

OTHER ASSETS

Other assets consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Debt issuance costs (Note 2)............................... $ 5,071 $ 2,143 $ 4,242
Package design costs....................................... 1,274 1,456 1,492
Other...................................................... 1,151 1,150 1,099
------- ------- -------
7,496 4,749 6,833
Accumulated amortization................................... (3,809) (2,127) (2,621)
------- ------- -------
$ 3,687 $ 2,622 $ 4,212
======= ======= =======
</TABLE>

Debt issuance costs relate to expenditures incurred in connection with
obtaining long-term debt. These costs are being amortized over the life of the
related debt using the effective interest rate method. Debt issuance costs, net
of accumulated amortization, were $3,597,000 at June 30, 1997.

Package design costs relate to certain incremental third party costs to
design artwork and produce die plates and negatives necessary to manufacture and
print packaging materials according to the Company's and customer's
specification. These costs are amortized ratably over a two-year period. In the
event that product packaging is discontinued prior to the end of the
amortization period, the respective package design costs are written off.
Package design costs, net of accumulated amortization, were $449,000 at June 30,
1997.

CHANGE IN ACCOUNTING POLICIES

In conjunction with its planned initial public offering, the Company
elected to expense all start up costs incurred related to the 1995/1996 plant
expansion. In addition, the Company has elected to expense all product placement
fees incurred related to the 1996/1997 introduction of flavored pasta. The
related financial statements have been restated retroactively.

INCOME TAXES

The Company accounts for income taxes in accordance with the method
prescribed by Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities, and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.

STOCK OPTIONS

The Company has elected to follow Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations
in accounting for its employee stock options and have adopted the pro forma
disclosure requirements under SFAS No. 123 "Accounting for Stock-Based
Compensation." Under APB No. 25, because the exercise price of the Company's
employee stock options is

F-9
<PAGE> 81

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
equal to or greater than the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share is calculated using the weighted-average
number of common shares and common equivalent shares, to the extent dilutive,
outstanding during the periods. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, stock issued and common stock options granted
by the Company during the 12 months preceding the filing date for its planned
initial public offering have been included in the calculation of
weighted-average common and common equivalent shares outstanding, using the
treasury stock method based on the initial public offering price of $18 per
share, as if the stock and options were outstanding for all periods presented.

2. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Term loans................................................. $ 93,750 $ 94,813 $85,938
Capital lease, 15-year term with three, five-year renewal
options, at an imputed interest rate of 12.5%............ 3,657 3,586 3,509
Capital lease, eight-year term at an imputed interest rate
of 8.5%.................................................. 2,210 2,260 2,124
Other...................................................... 944 703 1,614
-------- -------- -------
100,561 101,362 93,185
Less current portion....................................... 3,109 8,078 3,685
-------- -------- -------
$ 97,452 $ 93,284 $89,500
======== ======== =======
</TABLE>

In April 1997, the Company amended and restated its principal credit
agreement in conjunction with a sale of $22.3 million of the Company's common
stock to existing stockholders. With the net proceeds from the common stock
sale, the Company repaid then outstanding borrowings under the revolving credit
agreement and prepaid scheduled long-term debt payments due through December 31,
1997.

The amended and restated credit agreement (i) created a $45 million D term
loan which will be used in combination with the proceeds from the common stock
sale to finance the Company's expansion of capital assets; (ii) increased the
Company's revolving credit facility from $17.5 million to $25 million and (iii)
modified certain covenant provisions. At June 30, 1997, the Company had $45
million available to borrow under the D term credit facility.

Debt issuance costs of approximately $2.1 million related to the April
refinancing were capitalized as deferred debt issuance costs during 1997.

In July 1994 and February 1996, the Company refinanced certain of its
credit facilities. The unamortized balance of debt issuance costs which related
to the previous debt were written off, net of related tax benefits, as an
extraordinary loss on debt extinguishment as required by generally accepted
accounting principles. These amounts were $329,000 ($204,000 net of taxes) in
fiscal 1994 and $2.6 million ($1.6 million net of taxes) in fiscal 1996.

F-10
<PAGE> 82

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

2. LONG-TERM DEBT -- (CONTINUED)

The interest rates and principal maturity terms of the credit facility are
as follows:

<TABLE>
<CAPTION>
FINAL
FACILITY AMOUNT INTEREST RATE MATURITY DATE
-------- ------ ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Term Loan A................ $ 18,000 LIBOR + 3.00% or prime + 2.00% February 2000
Term Loan B................ 19,900 LIBOR + 3.25% or prime + 2.25% February 2002
Term Loan C................ 54,700 LIBOR + 3.75% or prime + 2.75% February 2004
Term Loan D................ 45,000 LIBOR + 3.75% or prime + 2.75% February 2004
--------
137,600
Maximum Revolving Credit
Facility................. 25,000 LIBOR + 3.00% or prime + 2.00% February 2000
--------
$162,600
========
</TABLE>

Debt principal is to be repaid in varying quarterly installments with
interest over the terms shown above.

The borrowing under the Revolving Credit Facility is limited to the lesser
of $25 million or available collateral as defined in the amended credit
agreement. At June 30, 1997, the revolving credit line had approximately $24.5
million available for future borrowings, subject to borrowing base limitations
and outstanding letters of credit.

The following information related to the revolving credit facility is
presented for the years ended December 31, 1994 and 1995, the nine-month fiscal
period ended September 30, 1996 and the nine months ended June 30, 1997.

<TABLE>
<CAPTION>
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted-average interest rate.................. 7.9% 9.0% 8.4% 8.6%
</TABLE>

Annual maturities of long-term debt and capital lease obligations for each
of the next five years ended June 30, are as follows:

<TABLE>
<CAPTION>
LONG-TERM CAPITAL
YEAR DEBT LEASES TOTAL
---- --------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
1998............................................. $ 2,875 $ 1,558
1999............................................. 6,000 1,521
2000............................................. 7,300 1,335
2001............................................. 10,150 994
2002............................................. 13,750 994
Thereafter....................................... 45,863 5,460
------- -------
85,938 11,862 $97,800
Less imputed interest............................ -- 4,615 4,615
------- ------- -------
Present value of net minimum payments............ 85,938 7,247 93,185
Less current portion............................. 2,875 810 3,685
------- ------- -------
Long-term obligations............................ $83,063 $ 6,437 $89,500
======= ======= =======
</TABLE>

The term loans and revolving credit agreement contain various restrictive
covenants which include, among other things, financial covenants requiring
minimum and cumulative earnings levels and limitations on

F-11
<PAGE> 83

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

2. LONG-TERM DEBT -- (CONTINUED)
the payment of dividends, stock purchases, and capital spending, and the
Company's ability to enter into certain contractual arrangements. In addition to
the above scheduled principal maturities, the credit agreement also provides
that excess cash flow (as annually defined) will be used to fund future
principal maturities. The facilities are secured by substantially all assets of
the Company.

The Company leases certain assets under capital lease agreements. At
December 31, 1995, September 30, 1996 and June 30, 1997, the cost of these
assets was $6,987,000, $7,128,000 and $7,949,000, respectively, and related
accumulated amortization was $155,000, $642,000 and $556,000, respectively.

3. INCOME TAXES

At June 30, 1997, the Company has net operating loss carryforwards for
federal income tax purposes that expire as follows:

The Company also has state income enterprise zone credits of approximately
$1 million that expire in 1997.

The Company has established a valuation allowance of $1,031,000 for state
enterprise zone credits that are available but are not expected to be realized.
Management believes it is more likely than not that remaining deferred tax
assets will be realized through the generation of future taxable income and
available tax planning strategies.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30,
1995 1996 1997
------------ ------------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforward.......................... $ 5,012 $ 9,730 $10,573
State enterprise zone credits............................ 1,031 1,031 1,031
AMT credit carryforward.................................. 561 561 515
Other.................................................... 1,064 1,888 1,084
------- ------- -------
Total deferred tax assets.................................. 7,668 13,210 13,203
Deferred tax liabilities:
Book basis of tangible assets greater than tax........... 4,311 6,721 8,756
Other.................................................... 166 710 473
------- ------- -------
Total deferred tax liabilities............................. 4,477 7,431 9,229
------- ------- -------
Net deferred tax assets before allowance................... 3,191 5,779 3,974
Valuation allowance for deferred tax assets................ (1,031) (1,031) (1,031)
------- ------- -------
Net deferred tax assets.................................... $ 2,160 $ 4,748 $ 2,943
======= ======= =======
</TABLE>

F-12
<PAGE> 84

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

3. INCOME TAXES -- (CONTINUED)
Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS NINE MONTHS
DECEMBER 31 ENDED ENDED
-------------- SEPTEMBER 30, JUNE 30,
1994 1995 1996 1997
---- ---- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current income tax expense............................ $ 316 $ 6 $ -- $ --
Deferred tax expense (benefit)........................ 1,134 264 (1,556) 1,878
Change in valuation allowance......................... 34 -- -- --
------ ---- ------- ------
Net income tax expense (benefit)...................... $1,484 $270 $(1,556) $1,878
====== ==== ======= ======
</TABLE>

The reconciliation of income tax computed at the U.S. statutory tax rate to
income tax expense is as follows:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS NINE MONTHS
DECEMBER 31 ENDED ENDED
-------------- SEPTEMBER 30, JUNE 30,
1994 1995 1996 1997
---- ---- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Income (loss) before income taxes..................... $3,870 $746 $(4,107) $4,928
U.S. statutory tax rate............................... x34% x34% x34% x34%
------ ---- ------- ------
Federal income tax expense (benefit) at U.S. statutory
rate................................................ 1,316 254 (1,396) 1,676
State income tax expense (benefit), net of federal tax
effect.............................................. 155 30 (165) 196
Change in valuation allowance......................... 34 -- -- --
Other, net............................................ (21) (14) 5 6
------ ---- ------- ------
Net income tax expense (benefit)...................... $1,484 $270 $(1,556) $1,878
====== ==== ======= ======
</TABLE>

4. COMMITMENTS AND CONTINGENCIES

In April 1997, the Company entered into a long-term supply arrangement in
which the Company is obligated to produce and the customer is obligated to
purchase certain minimum annual volumes of pasta products beginning in fiscal
1998. In order to fulfill its obligations under the contract, the Company will
be required to expand significantly its available production capacity.

The Company has committed approximately $86 million to expand significantly
its existing manufacturing, milling and distribution facilities. The expansion
assets are anticipated to be placed in service during fiscal 1998. As of June
30, 1997, cumulative expansion expenditures are $7,839,000, including
capitalized interest of $136,000. The remaining expansion costs will be funded
from a portion of the proceeds from the Company's common stock sale (see Note
12), available bank debt credit facilities and cash provided by operations.

The Company had durum wheat purchase commitments totaling approximately
$7.9 million, $8.0 million and $6.3 million at December 31, 1995, September 30,
1996 and June 30, 1997, respectively.

Under an agreement with its predominant rail carrier, the Company is
obligated to transport specified wheat volumes. In the event the specified
transportation volumes are not met, the Company is required to reimburse certain
rail carrier costs. The Company is in compliance with the volume obligations at
June 30, 1997.

F-13
<PAGE> 85

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

5. MAJOR CUSTOMERS

Sales to a certain customer during the years ended December 31, 1994 and
1995, the fiscal nine-months ended September 30, 1996 and the nine-months ended
June 30, 1997 represented 38%, 33%, 27% and 27% of revenues, respectively. Sales
to a second customer during the years ended December 31, 1994 and 1995, the
fiscal nine-months ended September 30, 1996 and the nine-months ended June 30,
1997 represented 12%, 23%, 19% and 21% of revenues, respectively.

6. STOCK OPTION PLAN

In October 1992, a stock option plan was established that authorizes the
granting of options to purchase up to 1,201,880 shares of the Company's no par
common stock by certain officers and key employees. In October 1993, an
additional plan was established that authorizes the granting of options to
purchase up to 82,783 shares of the Company's no par common stock. The stock
options expire 10 years from the date of grant and become exercisable over the
next five years in varying amounts depending on the terms of the individual
option agreements.

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF OPTION PRICE EXERCISE
SHARES PER SHARE PRICE EXERCISABLE
--------- ------------ -------- -----------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1993................ 565,938 $2.33-$4.92 $ 3.90 278,591
Exercised..................................... --
Granted....................................... 116,693 $4.92 $ 4.92
Canceled/Expired.............................. (9,198) $4.92 $ 4.92
---------
Outstanding at December 31, 1994................ 673,433 $2.33-$4.92 $ 4.06 374,447
Exercised..................................... --
Granted....................................... 339,562 $12.23 $12.23
Canceled/Expired.............................. --
---------
Outstanding at December 31, 1995................ 1,012,995 $2.33-$12.23 $ 6.79 455,942
Exercised..................................... --
Granted....................................... 1,226 $12.23 $12.23
Canceled/Expired.............................. (613) $12.23 $12.23
---------
Outstanding at September 30, 1996............... 1,013,608 $2.33-$12.23 $ 6.80 541,471
Exercised..................................... --
Granted....................................... 258,373 $7.02-$12.23 $ 8.82
Canceled/Expired.............................. (48,627) $4.92-$12.23 $11.95
---------
Outstanding at June 30, 1997.................... 1,223,354 $2.33-$12.23 $ 7.02 662,678
=========
</TABLE>

The following table summarizes outstanding and exercisable options at June
30, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------ ------------------------------
NUMBER WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING EXERCISE PRICE EXERCISABLE EXERCISE PRICE
--------------- ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C>
$2.33-$2.38............................... 226,456 $ 2.36 226,456 $ 2.36
$4.92..................................... 445,137 4.92 323,392 4.92
$7.02..................................... 169,244 7.02 56,415 7.02
$12.23.................................... 382,517 12.23 56,415 12.23
</TABLE>

Compensation expense totaling $144,000 was recorded during the year ended
December 31, 1994 related to the vesting of compensatory stock options.

F-14
<PAGE> 86

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

6. STOCK OPTION PLAN -- (CONTINUED)
SFAS No. 123 requires the disclosure of pro forma net income and earnings
per share for stock-based awards as if the Company had used the fair value
method of accounting for such awards. Under SFAS No. 123, the fair value is
calculated through the use of option pricing models. These models require
subjective assumptions, including future stock price volatility and expected
time to exercise, which greatly affect the calculated values. The Company's
calculations were made using the minimum value method with the following
weighted-average assumptions: expected life, 18 months following vesting; no
stock volatility; risk free interest rate of 6% and no dividends during the
expected term. Based on these calculations, the effect of applying SFAS No.
123's fair value method to the Company's stock-based awards granted subsequent
to December 15, 1994 results in pro forma net income of $3,027,000 and earnings
per share of $0.25 for the nine months ended June 30, 1997, which are not
materially different from amounts reported.

7. EMPLOYEE BENEFIT PLAN

The Company has a defined contribution plan organized under Section 401(k)
of the Internal Revenue Code covering substantially all employees. The plan
allows all qualifying employees to contribute up to the tax deferred
contribution limit allowable by the Internal Revenue Service. The Company will
match 50% of the employee contributions up to a maximum employee contribution of
6% of the employee's salary and may contribute additional amounts to the plan as
determined annually by the Board of Directors. Employer contributions related to
the plan totaled $133,000, $139,000, $124,000 and $140,000 for the years ended
December 31, 1994 and 1995, the fiscal nine-months ended September 30, 1996 and
the nine-months ended June 30, 1997, respectively.

8. PLANT EXPANSION COSTS

Plant expansion costs include incremental direct and indirect manufacturing
and distribution costs which are incurred as a result of construction,
commissioning and start-up of new capital assets. These costs are expensed as
incurred but are unrelated to current production and, therefore, reported as a
separate line item in the statement of operations. Plant expansion costs
amounted to $484,000 and $2,065,000 for the years ended December 31, 1994 and
1995, respectively.

9. SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30, JUNE 30,
1994 1995 1996 1997
------------ ------------ ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Supplemental disclosure of cash flow
information:
Cash paid for interest..................... $5,110 $9,675 $8,101 $7,520
====== ====== ====== ======
Cash paid for income taxes................... $ 250 $ 100 $ 50 $ 2
====== ====== ====== ======
</TABLE>

F-15
<PAGE> 87

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

10. PRODUCT INTRODUCTION COSTS

During 1996, the Company began distribution of its Pasta LaBella flavored
pasta products into the United States' retail grocery trade. Introduction of
these products was supported by significant advertising, promotions and other
initiatives. The Company's selling and marketing expense includes the following
product introduction costs:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, JUNE 30,
1996 1997
------------- -----------
(IN THOUSANDS)
<S> <C> <C>
Introductory advertising.............................. $3,587 $ 137
In-store product demonstrations....................... 692 307
Direct response advertising amortization.............. 166 200
Product placement fees paid........................... 3,113 1,333
Introductory trade incentives......................... 268 --
Other................................................. 296 157
------ ------
Total product introduction costs...................... $8,122 $2,134
====== ======
</TABLE>

11. NOTES RECEIVABLE FROM OFFICERS

In April 1997, certain officers of the Company acquired 42,366 shares of
common stock. At the same time, the Company loaned these officers $298,000, all
of which remains outstanding at June 30, 1997. The loans which were evidenced by
promissory notes are due in three equal installments with the final payment due
April 2000. The notes are collateralized by the pledge of shares of common stock
of the Company, may be prepaid in part or in full without notice or penalty and
bear interest at the applicable federal rate in effect on the first day of each
quarter. These loans, evidenced by promissory notes, are classified as a
reduction to stockholders equity in the accompanying balance sheet at June 30,
1997.

12. SUBSEQUENT EVENTS

PENDING PUBLIC OFFERING OF COMMON STOCK AND RECAPITALIZATION

During August 1997, the Company filed a registration statement with the
Securities and Exchange Commission for an underwritten initial public offering
(the "Offering") of 7,900,000 shares of Class A Common Stock, par value of $.001
per share (the "New Class A Common Stock"), of which 5,310,000 shares are to be
offered by the Company and 2,590,000 shares would be sold by certain selling
stockholders. Prior to consummation of the Offering, the Company amended and
restated its Charter and By-Laws and effected a recapitalization such that (i)
the common equity of the Company consists of New Class A Common Stock and Class
B Convertible Common Stock, par value $.001 per share (the "New Class B Common
Stock") and (ii) each previously-outstanding share of common stock of the
Company was converted into 6.132043 shares of New Class A Common Stock. Shares
of New Class A Common Stock held by persons other than private equity funds
sponsored by Morgan Stanley Dean Witter (the "Morgan Stanley Stockholders") and
certain related persons are not convertible into New Class B Common Stock.
Holders of New Class B Common Stock will have no right to vote on matters
submitted to a vote of stockholders, except in certain circumstances. Shares of
the New Class B Common Stock have no preemptive or other subscription rights and
are convertible into an equal number of shares of New Class A Common Stock (1)
at the option of the holder thereof to the extent that, following such
conversion, the Morgan Stanley Stockholders will not, in the aggregate, own more
than 49% of the outstanding shares of New Class A Common Stock, and (2)
automatically upon the transfer of such shares by any Morgan Stanley Stockholder
to any person that is not a Morgan Stanley Stockholder.

F-16
<PAGE> 88

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

12. SUBSEQUENT EVENTS -- (CONTINUED)

In connection with the recapitalization, the Company's Charter was amended
to provide that the Board of Directors is authorized, subject to certain
limitations prescribed by law, without further stockholder approval, to issue
from time to time up to an aggregate of 10,000,000 shares of Preferred Stock in
one or more series and to fix or alter the designations, preferences, rights and
any qualifications, limitations or restrictions of the shares of each such
series thereof, including the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption (including sinking fund provisions)
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of Preferred Stock which the
Company may designate and issue in the future. The Company has no present plans
to issue any shares of Preferred Stock.

The financial statements and notes have been retroactively restated to reflect
the stock split and new capital structure.

1997 EQUITY INCENTIVE PLAN

The Board of Directors has adopted the 1997 Equity Incentive Plan for all
employees which is to take effect upon the closing of the Offering. Under the
Plan, the Board or a committee designated by the Board is authorized to grant
nonqualified stock options, incentive stock options, reload options, stock
appreciation rights, shares of restricted Common Stock, performance shares,
performance units and shares of Common Stock awarded as a bonus. There are
2,000,000 shares of Common Stock reserved for issuance under the Plan.

REVOLVING CREDIT FACILITY

In connection with the proposed initial public offering, the Company has
received from its lender a commitment letter for a new $150 million unsecured
revolving credit facility pending successful completion of the public offering.

F-17
<PAGE> 89

AMERICAN ITALIAN PASTA COMPANY

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
JUNE 30, 1997

13. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following table sets forth certain financial data of the Company for
each thirteen week period. The financial data for each of these quarters is
unaudited but includes all adjustments, consisting of only normal recurring
adjustments, which the Company believes to be necessary for a fair presentation.
These operating results, however, are not necessarily indicative of results for
any future period.

<TABLE>
<CAPTION>
NINE-MONTH
PERIOD ENDED
DECEMBER 31, MARCH 31, JUNE 30, JUNE 30,
1996 1997 1997 1997
------------ --------- -------- ------------
(000'S OMITTED EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues.......................................... $29,547 $32,117 $31,952 $93,616
Gross profit...................................... 8,398 8,388 9,009 25,795
Operating profit.................................. 3,252 4,376 5,100 12,728
Income (loss) before income tax and extraordinary
loss............................................ 700 1,620 2,608 4,928
Net income (loss)................................. 432 1,005 1,613 3,050
Net income per common share....................... 0.04 0.10 0.13 0.27
</TABLE>

<TABLE>
<CAPTION>
NINE-MONTH
FISCAL PERIOD
ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1996 1996 1996
--------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues......................................... $24,975 $32,464 $34,635 $92,074
Gross profit..................................... 5,518 8,474 9,527 23,519
Operating profit................................. 1,754 789 1,373 3,916
Income (loss) before income tax and extraordinary
loss........................................... (867) (1,873) (1,367) (4,107)
Net income (loss)................................ (2,177) (1,150) (871) (4,198)
Net loss per common share........................ (0.21) (0.11) (0.08) (0.40)
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1995 1995 1995 1995 1995
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues.......................... $18,718 $21,676 $23,434 $29,075 $92,903
Gross profit...................... 2,953 4,216 3,418 6,400 16,987
Operating profit.................. 1,200 2,384 1,299 3,871 8,754
Income (loss) before income tax
and extraordinary loss.......... (544) 597 (431) 1,124 746
Net income (loss)................. (337) 373 (267) 707 476
Net income (loss) per common
share........................... (0.03) 0.04 (0.03) 0.07 0.05
</TABLE>

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