**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-Q**

 

**(Mark one)**

**ý****          ****QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**Forthe quarterly period ended May 31, 2005**

 

**or**

 

**o****          ****TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934**

 

**Forthe transition period from                         to                         .**

 

**Commission file number 000-51096**

 

**Golden OvalEggs, LLC**

(Exact name of registrant as specified in its charter)

 
| **DELAWARE**                                                     | ** ** | **20-0422519**                           |
|------------------------------------------------------------------|------------|------------------------------------------|
| (State or other  jurisdiction  of incorporation or organization) |       | (I.R.S. employer  identification number) |

 
| **340  Dupont Avenue N.E.**               | ** ** | **56284**  |
|-------------------------------------------|------------|------------|
| **Renville,  MN**                         |       | (Zip code) |
| (Address of principal  executive offices) |       |       |

 

**Telephone:(320) 329-8182**

(Registrant’s telephonenumber, including area code)

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes ýNo o

 

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act).  Yes oNo ý

 

As of July 14,2005, there were 4,581,832 units issued and outstanding.

 

 

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**TABLEOF CONTENTS**

 
| **PART I.    FINANCIAL INFORMATION**                                                              | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                       | ** ** |
| Item 1.    Financial Statements                                                                        |       |
|                                                                                                             |       |
| Item  2.   Management’s Discussion and Analysis of Financial Condition  and Results of Operations |       |
|                                                                                                             |       |
| Item  3.   Quantitative and Qualitative Disclosures About Market Risk                                  |       |
|                                                                                                             |       |
| Item  4.   Controls and Procedures                                                                     |       |
|                                                                                                             |       |
| **PART II.    OTHER INFORMATION**                                                                 | ** ** |
| ** **                                                                                                       | ** ** |
| Item  1.   Legal Proceedings                                                                           |       |
|                                                                                                             |       |
| Item  2.   Unregistered Sales of Equity Securities and Use of Proceeds                                 |       |
|                                                                                                             |       |
| Item  3.   Defaults Upon Senior Securities                                                             |       |
|                                                                                                             |       |
| Item  4.   Submission of Matters to a Vote of Security Holders                                         |       |
|                                                                                                             |       |
| Item  5.   Other Information                                                                           |       |
|                                                                                                             |       |
| Item 6.    Exhibits                                                                                    |       |
|                                                                                                             |       |
|                                                                                                             | Signatures |   |
|                                                                                                                  |            |  |

 

i

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# **PART I.  FINANCIALINFORMATION**

 

**GOLDENOVAL EGGS, LLC**

**ConsolidatedBalance Sheets**

**May 31,2005 and August 31, 2004**

**(InThousands)**

**Item 1. Financial Statements**

 
| ** **                          | ** ** | **(Unaudited)**  | ** ** | **(Audited)**       | ** ** |
|-------------------------------------|------------|------------------|------------|---------------------|------------|
| ** **                          | ** ** | **May 31,** | ** ** | **August 31,** | ** ** |
| ** **                          | ** ** | **2005**         | ** ** | **2004**            | ** ** |
| Assets                              |       |             |       |                |       |
|                                |       |             |       |                |       |
| Current assets                      |       |             |       |                |       |
| Cash and cash equivalents           |       | $                | 1,448      |                | $          | 7,642 |   |
| Accounts receivable                 |       | 4,720            |       | 5,920               |       |
| Inventories                         |       | 11,240           |       | 9,171               |       |
| Restricted cash                     |       | 1,602            |       | 2,272               |       |
| Other current assets                |       | 198              |       | 921                 |       |
| Total current assets                |       | 19,208           |       | 25,926              |       |
|                                |       |             |       |                |       |
| Property, plant and equipment       |       |             |       |                |       |
| Land and land improvements          |       | 9,890            |       | 7,936               |       |
| Buildings                           |       | 33,486           |       | 25,406              |       |
| Equipment                           |       | 51,709           |       | 39,115              |       |
| Construction in progress            |       | 8,601            |       | 14,181              |       |
|                                |       | 103,686          |       | 86,638              |       |
| Accumulated depreciation            |       | (35,923          | )          | (31,495             | )          |
| Total property, plant and equipment |       | 67,763           |       | 55,143              |       |
|                                |       |             |       |                |       |
| Other assets                        |       |             |       |                |       |
| Restricted cash                     |       | 2,595            |       | 3,481               |       |
| Investments                         |       | 1,471            |       | 1,512               |       |
| Intangible assets, net              |       | 1,829            |       | 1,380               |       |
| Note receivable                     |       | 37               |       | 23                  |       |
| Total other assets                  |       | 5,932            |       | 6,396               |       |
|                                |       |             |       |                |       |
| Total assets                        |       | $                | 92,903     |                | $          | 87,465 |   |

 

1

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**GOLDENOVAL EGGS, LLC**

**Consolidated Balance Sheets (cont.)**

 

**May 31, 2005 and August 31,2004**

 

**(InThousands)**

 
| ** **                                                                                                           | ** ** | **(Unaudited)**  | ** ** | **(Audited)**       | ** ** |
|----------------------------------------------------------------------------------------------------------------------|------------|------------------|------------|---------------------|------------|
| ** **                                                                                                           | ** ** | **May 31,** | ** ** | **August 31,** | ** ** |
| ** **                                                                                                           | ** ** | **2005**         | ** ** | **2004**            | ** ** |
| Liabilities  and Owners’ Equity                                                                                 |       |             |       |                |       |
|                                                                                                                 |       |             |       |                |       |
| Current liabilities                                                                                                  |       |             |       |                |       |
| Revolving line of credit                                                                                             |       | $                | —     |                | $          | 27 |   |
| Accounts payable                                                                                                     |       | 2,737            |       | 3,562               |       |
| Accrued interest                                                                                                     |       | 581              |       | 363                 |       |
| Accrued compensation                                                                                                 |       | 1,308            |       | 3,539               |       |
| Income taxes payable                                                                                                 |       | 380              |       | 2,685               |       |
| Patronage dividends payable                                                                                          |       | —           |       | 10,250              |       |
| Other current liabilities                                                                                            |       | 927              |       | 1,317               |       |
| Current maturities of long-term debt                                                                                 |       | 3,812            |       | 2,617               |       |
| Total current liabilities                                                                                            |       | 9,745            |       | 24,360              |       |
|                                                                                                                 |       |             |       |                |       |
| Long-term debt, less current maturities                                                                              |       | 48,877           |       | 30,335              |       |
|                                                                                                                 |       |             |       |                |       |
| Minority interest in consolidated  subsidiaries                                                                      |       | 1,075            |       | 907                 |       |
|                                                                                                                 |       |             |       |                |       |
| Owners’ equity                                                                                                  |       |             |       |                |       |
| Common stock, $.01 par value; 50,000 shares  authorized; 4,582 shares issued and outstanding at August 31, 2004 |       | —           |       | 46                  |       |
| Additional paid-in capital                                                                                           |       | —           |       | 19,923              |       |
| Qualified written notices of allocation                                                                              |       | —           |       | 7,250               |       |
| Unallocated capital reserve                                                                                          |       | —           |       | 4,644               |       |
| Members’ equity                                                                                                 |       | 33,206           |       | —              |       |
| Total owners’ equity                                                                                            |       | 33,206           |       | 31,863              |       |
|                                                                                                                 |       |             |       |                |       |
| Total liabilities and owners’ equity                                                                            |       | $                | 92,903     |                | $          | 87,465 |   |

 

2

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**GOLDEN OVAL EGGS, LLC**

 

**Consolidated Statements of Operations**

 

**For the Periods Ended May 31,2005 and May 31, 2004**

 

**(In Thousands, except per unit andper share data)**

 

**(Unaudited)**

 
| ** **                                                                  | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                                                  | ** ** | **May 31,**       | ** ** | **May 31,**      | ** ** | **May 31,** | ** ** | **May 31,** | ** ** |
| ** **                                                                  | ** ** | **2005**               | ** ** | **2004**              | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Net sales                                                                   |       | $                      | 15,678     |                  | $          | 21,344 |   | $ | 48,015 |   | $ | 62,240 |   |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Cost of goods sold                                                          |       | 13,802                 |       | 13,291                |       | 38,599 |   | 35,748 |   |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Gross profit                                                                |       | 1,876                  |       | 8,053                 |       | 9,416 |   | 26,492 |   |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Operating expenses                                                          |       | 2,078                  |       | 1,844                 |       | 5,399 |   | 5,026 |   |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Income (loss) from operations                                               |       | (202                   | )          | 6,209                 |       | 4,017 |   | 21,466 |   |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Other income (expense)                                                      |       |                   |       |                  |       |   |   |   |   |
| Interest expense                                                            |       | (854                   | )          | (748                  | )          | (3,153 | ) | (2,292 | ) |
| Minority interest in income of consolidated  subsidiaries                   |       | (38                    | )          |                  |       | (156 | ) |   |   |
| Other income                                                                |       | 416                    |       | 78                    |       | 648 |   | 335 |   |
| Total other expense                                                         |       | (476                   | )          | (670                  | )          | (2,661 | ) | (1,957 | ) |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Net income (loss)                                                           |       | $                      | (678       | )                     | $          | 5,539 |   | $ | 1,356 |   | $ | 19,509 |   |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Weighted average common shares or  Class A units outstanding           |       | 4,582                  |       | 4,582                 |       | 4,582 |   | 4,582 |   |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Net income (loss) per common share or  Class A unit, basic and diluted |       | $                      | (0.15      | )                     | $          | 1.21 |   | $ | 0.30 |   | $ | 4.26 |   |
|                                                                        |       |                   |       |                  |       |   |   |   |   |
| Distributions per common share                                              |       | $                      | —     |                  | $          | — |   | $ | — |   | $ | 0.40 |   |

 

3

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**GOLDENOVAL EGGS, LLC**

**ConsolidatedStatements of Cash Flows**

**Forthe Periods Ended May 31, 2005 and May 31, 2004**

**(InThousands)**

**(Unaudited)**

 
| ** **                                                                        | ** ** | **Nine Months Ended** |       |
|-----------------------------------------------------------------------------------|------------|-----------------------|------------|
| ** **                                                                        | ** ** | **May 31,**      | ** ** | **May 31,** |   |
| ** **                                                                        | ** ** | **2005**              | ** ** | **2004** |   |
| Cash flows from operating activities                                              |       |                  |       |   |   |
| Net income                                                                        |       | $                     | 1,356      |   | $ | 19,509 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities |       |                  |       |   |   |
| Depreciation                                                                      |       | 4,428                 |       | 3,276 |   |
| Amortization                                                                      |       | 1,020                 |       | 169 |   |
| Loss on sale of PPE                                                               |       | —                |       | 61 |   |
| Equity in income of unconsolidated  subsidiary                                    |       | —                |       | (92 | ) |
| Changes in operating assets and liabilities                                       |       |                  |       |   |   |
| Accounts receivable                                                               |       | 1,200                 |       | 13 |   |
| Inventories                                                                       |       | (2,069                | )          | (1,950 | ) |
| Other current assets                                                              |       | 723                   |       | 148 |   |
| Accounts payable                                                                  |       | (825                  | )          | 324 |   |
| Accruals and other current liabilities                                            |       | (4,708                | )          | 1,424 |   |
| Minority interest                                                                 |       | 168                   |       | — |   |
| Net cash provided by operating activities                                         |       | 1,293                 |       | 22,882 |   |
|                                                                              |       |                  |       |   |   |
| Cash flows from investing activities                                              |       |                  |       |   |   |
| Purchases of property, plant and equipment                                        |       | (17,049               | )          | (10,046 | ) |
| Advances of notes receivable                                                      |       | (14                   | )          | — |   |
| Proceeds from sale of property, plant and  equipment                              |       | 1                     |       | 4 |   |
| Purchase of investment in United Mills                                            |       | —                |       | (204 | ) |
| Retirement of investment in United Mills                                          |       | —                |       | 180 |   |
| Retirement of investment in Other Coops                                           |       | 41                    |       | 235 |   |
| Payments of deferred debt financing costs                                         |       | (1,469                | )          | — |   |
| Net cash used by investing activities                                             |       | (18,490               | )          | (9,831 | ) |
|                                                                              |       |                  |       |   |   |
| Cash flows from financing activities                                              |       |                  |       |   |   |
| Net increase (decrease) in revolving line  of credit                              |       | (27                   | )          | (20 | ) |
| Proceeds from issuance of long-term debt                                          |       | 42,550                |       | — |   |
| Payments of long-term debt                                                        |       | (22,813               | )          | (255 | ) |
| Decrease (increase) in restricted cash                                            |       | 1,556                 |       | (1,276 | ) |
| Distributions to patrons                                                          |       | (10,263               | )          | (1,833 | ) |
| Net cash provided (used) by financing  activities                                 |       | 11,003                |       | (3,384 | ) |
|                                                                              |       |                  |       |   |   |
| Net (decrease) in cash and cash equivalents                                       |       | (6,194                | )          | 9,667 |   |
|                                                                              |       |                  |       |   |   |
| Cash and cash equivalents - beginning of  period                                  |       | 7,642                 |       | 2,429 |   |
|                                                                              |       |                  |       |   |   |
| Cash and cash equivalents - end of period                                         |       | $                     | 1,448      |   | $ | 12,096 |   |

 

4

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**GOLDEN OVAL EGGS, LLC**

 

**Selected Information – Substantiallyall Disclosures Required by**

**Accounting Principles GenerallyAccepted in the United States of America are not Included**

 

**May 31, 2005 and August 31,2004**

**(In Thousands)**

 

1.             OnAugust 31, 2004, Midwest Investors of Renville, Inc. (the “Cooperative”)converted from a Minnesota cooperative into a limited liability company, GoldenOval Eggs, LLC (the “Company”).  TheCompany operates as the Cooperative’s successor and its operations are acontinuance of the operations of the Cooperative.  Therefore, the consolidated financialstatements of the Cooperative as of August 31, 2004 and for the nine monthperiod ended May 31, 2004 are comparative to the consolidated financialstatements of the Company as of and for the nine month period ended May 31,2005.

 

2.             In the opinion of management, theaccompanying unaudited consolidated financial statements contain all adjustmentswhich are of a normal and recurring nature necessary to present fairly thefinancial position of the Company as of May 31, 2005 and August 31,2004 and the results of its operations for the three-month and nine-monthperiods ended May 31, 2005 and May 31, 2004.

 

### 3.             Theresults of operations for the periods ended May 31, 2005 and May 31,2004 are not necessarily indicative of the results expected for the full year.

###  

### 4.             Pulletinventories are stated at the cost of production which includes the costs of thechicks, feed, overhead and labor.  Layerhen inventories are stated at the cost of production which includes the cost ofthe pullets, feed, overhead and labor. Layer hen flocks are capitalized to the point at which the pullet goesinto production or are purchased and are amortized over the productive lives ofthe flocks, generally 18 to 24 months. Feed, supplies and liquid egg inventories are stated at the lower ofcost (first-in, first-out) or market. Inventories consisted of the following:

###  

| ** **               | ** ** | **(Unaudited)**  | ** ** | **(Audited)**       | ** ** |
|--------------------------|------------|------------------|------------|---------------------|------------|
| ** **               | ** ** | **May 31,** | ** ** | **August 31,** | ** ** |
| ** **               | ** ** | **2005**         | ** ** | **2004**            | ** ** |
|                     |       |             |       |                |       |
| Hens and pullets         |       | $                | 9,372      |                | $          | 8,280 |   |
| Eggs and egg products    |       | 330              |       | 179                 |       |
| Feed, supplies and other |       | 1,538            |       | 712                 |       |
|                     |       |             |       |                |       |
| Total inventories        |       | $                | 11,240     |                | $          | 9,171 |   |

 

5.             OnSeptember 13, 2004, the Company entered into a new financingagreement.  The new agreement includes a$55,000 line of credit, of which $10,000 is a revolving line of credit and theremaining $45,000 is term debt.  Duringthe nine months ended May 31, 2005, the Company drew $42,000 on this lineof credit, $21,656 of which was used to extinguish the 2000 bonds.

 

6.             The preparation of consolidated financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and the disclosureof contingent assets and liabilities at the date of the consolidated financialstatements and the reported amounts of revenues and expenses during thereporting period.  Actual results coulddiffer from those estimates.

 

5

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## **Item 2.**    Management’s Discussion and Analysis ofFinancial Condition and Results of Operations.

## ** **

**Forward-LookingStatements**

** **

This report contains forward-looking statements basedupon assumptions by the management of Golden Oval Eggs, LLC (the “Company”, “GoldenOval” or “we”), a Delaware limited liability company, as of the date of thisQuarterly Report, including assumptions about risks and uncertainties faced bythe Company. When used in this report, the words “believe,” “expect,” “anticipate,”“will,” “estimate” and similar verbs or expressions are intended to identifysuch forward-looking statements. If management’s assumptions prove incorrect orshould unanticipated circumstances arise, the Company’s actual results coulddiffer materially from those anticipated. These differences could be caused bya number of factors or combination of factors including, but not limited to, thosefactors described in the “Risk Factors” section of the Company’s Form 10-Kfor the year ended August 31, 2004. Readers are strongly urged to consider such factors when evaluating anyforward-looking statement. The Company undertakes no obligation to update anyforward-looking statements in this report to reflect future events ordevelopments.

 

**Summary**

** **

Golden Oval Eggs, LLC (“we”, “us”, “our”, or the “Company”)is a Delaware limited liability company, primarily engaged in the business ofproducing, processing and distributing egg products.  The Company operatestwo in-line egg-breaking facilities, one in Renville, Minnesota and the otherin Thompson, Iowa and is currently ranked in the top 15 in the nation forproduction of shell eggs.  We currently produce 93% of the shell eggs webreak with the rest purchased through third-party producers.

 

The Company’s output consists of liquid whole egg,liquid egg white and liquid egg yolk. The egg products produced by the Companyare sold on a direct basis to companies who further process the raw liquid egginto various finished egg products such as dried eggs, frozen, hard cooked,extended shelf-life liquid, pre-cooked egg patties, specialty egg products,etc. Institutional, food service, restaurants, and food manufacturers in turnpurchase these further processed products.

 

The Company expects its production to reach 180million pounds in fiscal 2005 and will reach 225 million pounds upon completionof the second phase of the Thompson facility. The second phase, currently under construction, is expected to becompleted by February 2006.

 

The Company’s operating income or loss is materiallyaffected by wholesale liquid egg prices, which can fluctuate widely and areoutside of the Company’s control.  Liquideggs are a commodity product and prices fluctuate in response to supply/demandfactors.  The Company also sells aportion of its products under contract at non-market prices.  Depending upon market circumstances, theprices generated by the Company’s non-market volume tend to be less or morethan what the prevailing open market prices would generate.

 

The Company’s cost of production is materiallyaffected by feed costs, which average approximately 40 % of the Company’s totalcosts.  Approximately 60% of these feedcosts are

 

6

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incurred in the procurement of corn and soybeanmeal.  The cost of these ingredients isaffected by a number of supply and demand factors such as crop production andweather, and other factors, such as the level of grain exports, over which theCompany has no control.

 

**ResultsOf Operations**

** **

*Net Sales.*  Net consolidated sales for the third quarterof fiscal 2005 were $15.7 million, a decrease of $5.7 million, or 26.5%,as compared to net consolidated sales of $21.3 million for the third quarter offiscal 2004.  Although total eggs soldincreased during the current fiscal 2005 quarter as compared to fiscal 2004,the price per pound decreased.  Poundssold for third quarter 2005 were 45.5 million, an increase of 6.7 millionpounds, or 17.1% as compared to third quarter 2004.  The increase in production was the result oftwo new layer barns that were brought on at the Thompson facility during thefourth quarter of fiscal 2004, one new layer barn brought on during thebeginning of the first quarter of fiscal 2005 and two new layer barns broughton during the third quarter of fiscal 2005.  The Company’s average selling price per pound for the third quarter offiscal 2005 was $.318, compared to $.550 for the third quarter of fiscal 2004,a decrease of $.232 per pound or 42.2%. The effect of the increased production and the decreased average sellingprice was a decrease in net sales of $6.9 million for egg products.  There was an increase in net sales of $1.2million as compared to the third quarter of 2004, which was the result of theimplementation of FASB Interpretation 46, which consolidated variable interestentities during the fourth quarter of fiscal 2004.  The Company’s average selling price is theblended price for liquid whole eggs, liquid egg whites and liquid eggyolks.  The decrease in the averageselling price was the result of an increase in the supply of eggs nationwidecoupled with a decrease in the demand for eggs relating to high protein/lowcarbohydrate diets.

 

Net sales for the first three quarters of fiscal 2005were $48.0 million, a decrease of $14.2 million, or 22.9%, as compared to netsales of $62.2 million for the first three quarters of fiscal 2004.  As with the current quarter, total poundssold increased while the price per pound decreased.  Pounds sold during the first three quartersof fiscal 2005 totaled 131.1 million pounds, an increase of 16.7 million, or14.6%, as compared to fiscal 2004.  TheCompany’s average selling price per pound was $.339 for the first threequarters of fiscal 2005, a decrease of $.205 per pound, or 37.7%, as comparedto $.544 for fiscal 2004.

 

*Cost of goods sold.*  Costof goods sold for the third quarter of fiscal 2005 was $13.8 million, an increaseof $0.5 million, or 3.8% as compared to the third quarter of fiscal 2004.  The increase is the net of a decrease in thecost of feed, additional cost of goods associated with 5 new layer barns, theeffect of consolidation of variable interest entities and a decrease in thecost of eggs purchased from third parties for the Company’s off-lineproduction.  Feed cost decreased $0.6million during the third quarter of fiscal 2005 as compared to the previousyear.  This decrease was the result of adrop in corn and soy bean meal prices. Shell eggs purchased for the off-line production decreased in cost by$0.9 million.  This decrease in cost wasreflective of the drop in egg prices as discussed in the net sales section ofthe MD & A.  $0.7 million of theincrease was the result of the implementation of FASB Interpretation 46.  The rest of the increase was the result ofthe 5 additional barns added to the Thompson facility.

 

Cost of goods sold for the first three quarters offiscal 2005 was $38.6 million, an increase of $2.9 million or 8.0%, as comparedto $35.7 million for the same period for fiscal 2004.

 

7

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*Operating expenses.* Operatingexpenses for the third quarter of fiscal 2005 were $2.1 million, an increase of$0.2 million, or 12.7 %, as compared to the third quarter of fiscal 2004.  Administration salaries and fringes increased$0.2 million for the third quarter of fiscal 2005 as compared to fiscal 2004while the corporate bonus accrual decreased $0.6 million as compared to theprior year.  Professional fees increased$0.1 million for the third quarter of 2005 as compared to the same period offiscal 2004.  $0.4 million of the totaloperating expenses increase was the result of the consolidation of the variableinterest entities due to the implementation of FASB Interpretation 46.

 

For the first three quarters of fiscal 2005 operatingexpenses were $5.4 million, an increase of $0.4 million, or 7.4%, as comparedwith $5.0 million for fiscal 2004.

 

*Total other expense.*  Totalother expense for the third quarter of fiscal 2005 was $0.5 million, a decreaseof $0.2 million, or 29.0%, as compared to the third quarter of fiscal2004.  Other income increased $0.3million from our share of a settlement of a class action suit involvingvitamins purchased for feed from 1994 to 1999. $0.1 million of the increase relates to increased interest costsrelating to increased debt balances associated with the Thompson expansion.

 

For the first three quarters of fiscal 2005, totalother expense was $2.7 million, an increase of $0.7 million as compared to anexpense of $2.0 million for fiscal 2004. Along with the increase mentionedabove, the Company wrote off the value of the bond issue costs associated withthe 2000 bonds that were paid off in September 2004.  The book value of those costs was $0.8million.

 

*Income Taxes. *Asa limited liability company, the Company expects to be treated as a partnershipfor federal income tax purposes and therefore will pay no federal income tax asits members will pay tax on their pro-rata share of the LLC’s net income.

 

*Net Income*.   As a result of the above, net loss for thethird quarter ended May 31, 2005 was $0.7 million, or $0.15 per basic anddiluted unit, compared to net income of $5.5 million, or $1.21 per basic anddiluted share for the quarter ended May 31, 2004.  As a percent of net sales, net loss was 4.3%for the quarter ended May 31, 2005, compared to net income of 26.0% forthe quarter ended May 31, 2004.

 

For the three quarters ended May 31, 2005, netincome was $1.4 million, or $0.30 per basic and diluted unit, compared to $19.5million, or $4.26 per basic and diluted share for the comparable period infiscal 2004.  As a percent of sales, thecurrent fiscal period had a 2.8% net income, compared to a 31.3% for the sameperiod last year.

 

8

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**Liquidityand Capital Resources**

** **

The Company’s working capital at May 31, 2005 was$9.5 million compared to $1.6 million at August 31, 2004.    TheCompany’s current ratio was 1.97 at May 31, 2005 compared to 1.1 at August 31,2004. On September 13, 2004, the Company entered into a new financingagreement with CoBank.  The new agreement gives the company a $55 millionline of credit, of which $10 million is a revolving line of credit and theremaining $45 million will be term debt.  The $10 million revolving lineof credit replaced the  $5.5 million working capital line of creditwith US Bank and is collateralized by accounts receivable and inventories. This revolving credit line, which protects the Company from seasonal cashfluctuations, terminates on September 16, 2005.  The $45 million termpiece will have a 10 year maturity and will be used to pay off the 2000 bondsand to fund the current construction at the Thompson site.  $42 million ofthe $45 million has been drawn as of May 31, 2005.  A $10 million draw occurred during May 2005and the final $3 million will be drawn in December of 2005.  The Company expects that cash flow fromoperations and proceeds from its existing credit lines will be sufficient tofund operations, to provide adequate capital expenditures for the currentexpansion, and to make distributions to its members for at least the next 12months. The Company may require significant additional capital resources inorder to proceed with potential future expansions or to otherwise respond tocompetitive pressures in the industry.

 

On November 30, 2004, the Company entered into anote with the USDA and Heartland Power for $0.6 million.  This note has a ten year maturity and wasused to purchase and is collateralized by two 250,000 bushel grain bins at theThompson facility.

 

The Company’s long-term debt at May 31, 2005,including current maturities, was $52.7 million compared to $33.0 millionat August 31, 2004. No balances have been drawn on the Company’s revolvingline of credit as of May 31, 2005 as was the case as of August 31,2004.  Substantially all tradereceivables and inventories collateralize the Company’s line of credit andproperty, plant and equipment collateralize the Company’s long-term debt underits loan agreements. The Company is required by certain provisions of its loanagreements to maintain (1) a minimum tangible net worth of not less than$28.8 million plus 40% of earnings; (2) a minimum current ratio ofnot less than 1.25 to 1.0; (3) working capital of no less than$2.0 million; (4) a leverage ratio of less than 4.25 to 1.0; and (5) afixed charge coverage ratio no less than 1.15 to 1.  In addition, theseprovisions restrict the Company’s ability to make distributions, create liens,incur indebtedness and sell assets and properties. As of May 31, 2005, theCompany was in compliance with all covenants except the leverage ratio.  The Company has received a waiver from it’slenders for this covenant.

 

Net cash flow from operations was $1.3 millionfor the first three quarters of fiscal 2005.  $17.0 million was used for the purchase of property, plant and equipmentand $1.5 million was used to pay deferred debt costs.  $1.6 million was returned from the Company’srestricted cash account.  $42.6 millionwas received from the issuance of long-term debt and was used to pay off $22.8million of long-term debt and pay $10.3 million in distributions to ourmembers.  The net effect of this activitywas a reduction in cash of $6.2 million since August 31, 2004.

 

Management believes that non-cash working capitallevels are appropriate in the current business environment and does not expecta significant increase or reduction of non-cash working capital in the next12 months.

 

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**CriticalAccounting Policies**

** **

The accompanying discussion and analysis of ourresults of operations and financial condition are based upon our consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States. The preparation of these consolidated financial statements requiresmanagement to make estimates and judgments that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities.  Theseestimates form the basis for making judgments about the carrying values ofassets and liabilities that are not readily apparent from other sources.  We base our estimates and judgments onhistorical experience and on various other assumptions that we believe arereasonable under the circumstances.  However,future events are subject to change and the best estimates and judgments mayrequire adjustment.  For a completedescription of the Company’s significant accounting policies, please see Note 1to the consolidated financial statements in the Company’s Form 10-K forthe year ended August 31, 2004. There have been no changes to critical accounting policies identified inour Annual Report on Form 10-K for the year ended August 31, 2004.

 

**Impactof Recently Issued Accounting Pronouncements**

** **

Please refer to Item 7, “Management’s discussion andAnalysis of Financial Condition and Results of Operations”, in our AnnualReport on Form 10-K for the year ended August 31, 2004 for adiscussion of the impact of recently issued accounting pronouncements.  There were no accounting pronouncementsissued during the quarter ended May 31, 2005 that we expect will have amaterial impact on our consolidated financial statements.

 

## **Item 3.  Quantitativeand Qualitative Disclosures About Market Risk**

## ** **

There have been no material changes in the market riskreported in the Company’s Annual Report on Form 10-K for the fiscal yearended August 31, 2004.

 

## **Item 4.  Controlsand Procedures**

## ** **

***Evaluation of DisclosureControls and Procedures***

*** ***

The Company’s Chief Executive Officer, Dana Persson,and Chief Financial Officer, Doug Leifermann, have reviewed the Company’sdisclosure controls and procedures as of the end of the period covered by thisreport.  Based upon this review, theseofficers believe that the Company’s disclosure controls and procedures areeffective in ensuring that material information related to the Company is madeknown to them by others within the Company.

 

***Changes in InternalControls***

*** ***

There were no changes in the Company’s internalcontrols or in other factors that could significantly affect those controlsduring the Company’s fiscal third quarter ended May 31, 2005 that havematerially affected or are reasonable likely to materially affect the Company’sinternal control over financial reporting.

 

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# **PART II.  OTHERINFORMATION**

# ** **

## **Item 1.  LegalProceedings**

 

None.

 

## **Item 2.  UnregisteredSales of Equity Securities and Use of Proceeds**

 

None.

 

## **Item 3.  DefaultsUpon Senior Securities**

 

None.

 

## **Item 4.  Submissionof Matters to a Vote of Security Holders**

 

## **None.**

## ** **

## **Item 5.  OtherInformation**

 

None.

 

## **Item 6.  Exhibits**

 

3.1           Certificateof Formation of Golden Oval Eggs, LLC (Incorporated by reference from theCompany’s pre-effective Amendment No. 6 to Form S-4 (File No. 333-112533)dated August 11, 2004).

 

3.2           Amendedand Restated Limited Liability Company Agreement of Golden Oval Eggs, LLC(Incorporated by reference from the Company’s pre-effective Amendment No. 6to Form S-4 (File No.  333-112533) dated August 11, 2004).

 

31.1         Certificationof the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).

 

31.2         Certificationof the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).

 

32.1         Certificationof the Chief Executive Officer pursuant to 18 U.S.C. Section 1350.

 

32.2         Certificationof the Chief Financial Officer pursuant to 18 U.S.C. Section 1350.

 

**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized.

 
|                           | Golden Oval Eggs, LLC |
|--------------------------------|-----------------------|
|                           |                  |
|                           |                  |
|                           | By:                   | /s/  Dana Persson |
|                           |                  | Dana  Persson *President, Chief Executive Officer* |
|                           | * *              | *(Principal Executive Officer)* |
| * *                       | * *              |   |
| * *                       | * *              |   |
|                           | By:                   | /s/  Doug Leifermann |
|                           |                  | Doug  Leifermann *Vice President/Chief Financial  Officer* |
| * *                       | * *              | *(Principal Financial and Accounting Officer)* |
|                           | * *              | * * |
| Date:  July 14, 2005 | * *              | * * |

 

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