**UNITED STATES SECURITIES ANDEXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**Form 10-Q**

 
| **(Mark one)**                          |
|-----------------------------------------|
| ý                                  | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                    | ** ** |
|                                    | **For the  quarterly period ended February 28, 2005** |
|                                    | ** ** |
| **or**                                  |
|                                    | ** ** |
| o                                       | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                    | ** ** |
|                                    | **For the  transition period from                        to                               .** |
|                                    | ** ** |
| **Commission file number****000-51096** |

 

**Golden Oval Eggs, LLC**

(Exact name of registrant as specified in itscharter)

 
| **DELAWARE**                                                    | ** ** | **20-0422519**                           |
|-----------------------------------------------------------------|------------|------------------------------------------|
| (State or other jurisdiction  of incorporation or organization) | ** ** | (I.R.S. employer  identification number) |
|                                                            | ** ** |                                     |
| **340 Dupont Avenue N.E.  Renville, MN**                        | ** ** | **56284**                                |
| (Address of principal executive offices)                        | ** ** | (Zip code)                               |
|                                                            | ** ** |                                     |
| **Telephone: (320) 329-8182**                                   |
| (Registrant’s telephone number, including area  code)      |

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes ý No o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).  Yes o No ý

 

As of April 14, 2005, therewere 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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# **PARTI.  FINANCIAL INFORMATION**

 

## **Item 1.  Financial Statements**

 

**GOLDEN OVAL EGGS, LLC**

 

**Consolidated Balance Sheets**

 

**February 28, 2005 and August 31,2004**

 

**(In Thousands)**

 
| ** **                          | ** ** | **(Unaudited)  February 28,  2005** | ** ** | **(Audited)  August 31,  2004** | ** ** |
|-------------------------------------|------------|-------------------------------------|------------|---------------------------------|------------|
| Assets                              |       |                                |       |                            |       |
|                                |       |                                |       |                            |       |
| Current assets                      |       |                                |       |                            |       |
| Cash and cash equivalents           |       | $                                   | 833        |                            | $          | 7,642 |   |
| Accounts receivable                 |       | 4,019                               |       | 5,920                           |       |
| Inventories                         |       | 10,091                              |       | 9,171                           |       |
| Restricted cash                     |       | 1,264                               |       | 2,272                           |       |
| Other current assets                |       | 386                                 |       | 921                             |       |
| Total current assets                |       | 16,593                              |       | 25,926                          |       |
|                                |       |                                |       |                            |       |
| Property, plant and equipment       |       |                                |       |                            |       |
| Land and land improvements          |       | 9,890                               |       | 7,936                           |       |
| Buildings                           |       | 32,275                              |       | 25,406                          |       |
| Equipment                           |       | 48,611                              |       | 39,115                          |       |
| Construction in progress            |       | 8,138                               |       | 14,181                          |       |
|                                |       | 98,914                              |       | 86,638                          |       |
| Accumulated depreciation            |       | (34,312                             | )          | (31,495                         | )          |
| Total property, plant and equipment |       | 64,602                              |       | 55,143                          |       |
|                                |       |                                |       |                            |       |
| Other assets                        |       |                                |       |                            |       |
| Restricted cash                     |       | 2,904                               |       | 3,481                           |       |
| Investments                         |       | 1,389                               |       | 1,512                           |       |
| Intangible assets, net              |       | 1,884                               |       | 1,380                           |       |
| Note receivable                     |       | 37                                  |       | 23                              |       |
| Total other assets                  |       | 6,214                               |       | 6,396                           |       |
|                                |       |                                |       |                            |       |
| Total assets                        |       | $                                   | 87,409     |                            | $          | 87,465 |   |

 

1

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| ** **                                                                                                      | ** ** | **(Unaudited)  February 28,  2005** | ** ** | **(Audited)  August 31,  2004** | ** ** |
|-----------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|---------------------------------|------------|
| Liabilities  and Owners’ Equity                                                                            |       |                                |       |                            |       |
|                                                                                                            |       |                                |       |                            |       |
| Current liabilities                                                                                             |       |                                |       |                            |       |
| Revolving line of credit                                                                                        |       | $                                   | 2,000      |                            | $          | 27 |   |
| Accounts payable                                                                                                |       | 2,221                               |       | 3,562                           |       |
| Accrued interest                                                                                                |       | 310                                 |       | 363                             |       |
| Accrued compensation                                                                                            |       | 1,057                               |       | 3,539                           |       |
| Income taxes payable                                                                                            |       | 2,685                               |       | 2,685                           |       |
| Patronage dividends payable                                                                                     |       | —                              |       | 10,250                          |       |
| Other current liabilities                                                                                       |       | 968                                 |       | 1,317                           |       |
| Current maturities of long-term debt                                                                            |       | 3,621                               |       | 2,617                           |       |
| Total current liabilities                                                                                       |       | 12,862                              |       | 24,360                          |       |
|                                                                                                            |       |                                |       |                            |       |
| Long-term debt, less current maturities                                                                         |       | 39,646                              |       | 30,335                          |       |
|                                                                                                            |       |                                |       |                            |       |
| Minority interest in consolidated  subsidiaries                                                                 |       | 1,017                               |       | 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                                                                                            |       | 33,884                              |       | —                          |       |
| Total owners’ equity                                                                                       |       | 33,884                              |       | 31,863                          |       |
|                                                                                                            |       |                                |       |                            |       |
| Total liabilities and owners’ equity                                                                       |       | $                                   | 87,409     |                            | $          | 87,465 |   |

 

2

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**GOLDEN OVAL EGGS, LLC**

 

**Consolidated Statements ofOperations**

 

**For the Periods Ended February 28,2005 and February 29, 2004**

 

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

 
| ** **                                                      | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------------------------|------------|------------------------|------------|----------------------|------------|
| ** **                                                      | ** ** | **February 28,**       | ** ** | **February 29,**     | ** ** | **February 28,** | ** ** | **February 29,** | ** ** |
| ** **                                                      | ** ** | **2005**               | ** ** | **2004**             | ** ** | **2005** | ** ** | **2004** | ** ** |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Net sales                                                       |       | $                      | 15,042     |                 | $          | 20,425 |   | $ | 32,337 |   | $ | 40,896 |   |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Cost of goods sold                                              |       | 11,835                 |       | 11,027               |       | 24,797 |   | 22,457 |   |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Gross profit                                                    |       | 3,207                  |       | 9,398                |       | 7,540 |   | 18,439 |   |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Operating expenses                                              |       | 1,708                  |       | 1,849                |       | 3,321 |   | 3,182 |   |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Income from operations                                          |       | 1,499                  |       | 7,549                |       | 4,219 |   | 15,257 |   |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Other income (expense)                                          |       |                   |       |                 |       |   |   |   |   |
| Interest expense                                                |       | (828                   | )          | (766                 | )          | (2,299 | ) | (1,544 | ) |
| Minority interest in income of consolidated  subsidiaries       |       | (95                    | )          | (118                 | )          |   |   |   |   |
| Other income                                                    |       | 108                    |       | 138                  |       | 232 |   | 257 |   |
| Total other expense                                             |       | (815                   | )          | (628                 | )          | (2,185 | ) | (1,287 | ) |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Net income                                                      |       | $                      | 684        |                 | $          | 6,921 |   | $ | 2,034 |   | $ | 13,970 |   |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Weighted average common shares or Class A  units outstanding    |       | 4,582                  |       | 4,582                |       | 4,582 |   | 4,582 |   |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Net income per common share or Class A  unit, basic and diluted |       | $                      | 0.15       |                 | $          | 1.51 |   | $ | 0.44 |   | $ | 3.05 |   |
|                                                            |       |                   |       |                 |       |   |   |   |   |
| Distributions per common share                                  |       | $                      | —     |                 | $          | — |   | $ | — |   | $ | 0.40 |   |

 

3

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**GOLDEN OVAL EGGS, LLC**

 

**Consolidated Statements of CashFlows**

 

**For the Periods Ended February 28,2005 and February 29, 2004**

 

**(In Thousands)(Unaudited)**

 
| ** **                                                                        | ** ** | **Six Months Ended** | ** ** |
|-----------------------------------------------------------------------------------|------------|----------------------|------------|
| ** **                                                                        | ** ** | **February 28,**     | ** ** | **February 29,** | ** ** |
| ** **                                                                        | ** ** | **2005**             | ** ** | **2004** | ** ** |
| Cash flows from operating activities                                              |       |                 |       |   |   |
| Net income                                                                        |       | $                    | 2,034      |   | $ | 13,970 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities |       |                 |       |   |   |
| Depreciation                                                                      |       | 2,817                |       | 2,169 |   |
| Amortization                                                                      |       | 965                  |       | 113 |   |
| Loss on sale of PPE                                                               |       | —               |       | 5 |   |
| Equity in income of unconsolidated  subsidiary                                    |       | —               |       | (92 | ) |
| Changes in operating assets and liabilities                                       |       |                 |       |   |   |
| Accounts receivable                                                               |       | 1,901                |       | (482 | ) |
| Inventories                                                                       |       | (920                 | )          | (1,251 | ) |
| Other current assets                                                              |       | 535                  |       | (553 | ) |
| Accounts payable                                                                  |       | (1,341               | )          | 39 |   |
| Accruals and other current liabilities                                            |       | (2,884               | )          | 786 |   |
| Minority interest                                                                 |       | 110                  |       | — |   |
| Net cash provided by operating activities                                         |       | 3,217                |       | 14,704 |   |
|                                                                              |       |                 |       |   |   |
| Cash flows from investing activities                                              |       |                 |       |   |   |
| Purchases of property, plant and equipment                                        |       | (12,277              | )          | (4,529 | ) |
| Advances of notes receivable                                                      |       | (14                  | )          | — |   |
| Proceeds from sale of property, plant and  equipment                              |       | 1                    |       | 3 |   |
| Purchase of investment in United Mills                                            |       | —               |       | (132 | ) |
| Retirement of investment in United Mills                                          |       | —               |       | 121 |   |
| Retirement of investment in Other Coops                                           |       | 123                  |       | 180 |   |
| Payments of deferred debt financing costs                                         |       | (1,469               | )          | — |   |
| Net cash used by investing activities                                             |       | (13,636              | )          | (4,357 | ) |
|                                                                              |       |                 |       |   |   |
| Cash flows from financing activities                                              |       |                 |       |   |   |
| Net increase (decrease) in revolving line  of credit                              |       | 1,973                |       | (20 | ) |
| Proceeds from issuance of long-term debt                                          |       | 32,550               |       | — |   |
| Payments of long-term debt                                                        |       | (22,235              | )          | (228 | ) |
| Decrease (increase) in restricted cash                                            |       | 1,585                |       | (1,620 | ) |
| Distributions to patrons                                                          |       | (10,263              | )          | (1,824 | ) |
| Net cash provided (used) by financing  activities                                 |       | 3,610                |       | (3,692 | ) |
|                                                                              |       |                 |       |   |   |
| Net increase (decrease) in cash and cash  equivalents                             |       | (6,809               | )          | 6,655 |   |
|                                                                              |       |                 |       |   |   |
| Cash and cash equivalents - beginning of  period                                  |       | 7,642                |       | 2,429 |   |
|                                                                              |       |                 |       |   |   |
| Cash and cash equivalents - end of period                                         |       | $                    | 833        |   | $ | 9,084 |   |

 

4

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**GOLDEN OVAL EGGS, LLC**

 

**Selected Information –Substantially all Disclosures Required byAccounting Principles Generally Accepted in the United States of America arenot Included**

 

**February 28, 2005 and August 31,2004**

 

**(In Thousands)**

 

1.                     On August 31, 2004, Midwest Investors ofRenville, Inc. (the “Cooperative”) converted from a Minnesota cooperative intoa limited liability company, Golden Oval Eggs, LLC (the “Company”). The Companyoperates as the Cooperative’s successor and its operations are a continuance ofthe operations of the Cooperative. Therefore, the consolidated financialstatements of the Cooperative as of August 31, 2004 and for the six monthperiod ended February 29, 2004 are comparative to the consolidated financialstatements of the Company as of and for the six month period ended February 28,2005.

 

2.                     In the opinion of management, the accompanyingunaudited consolidated financial statements contain all adjustments which areof a normal and recurring nature necessary to present fairly the financialposition of Golden Oval Eggs, LLC (the “Company”) as of February 28, 2005 andAugust 31, 2004 and the results of its operations for the three-month andsix-month periods ended February 28, 2005 and February 29, 2004.

 

3.                     The results of operations for the periods endedFebruary 28, 2005 and February 29, 2004 are not necessarily indicative of theresults expected for the full year.

 

4.                     Pullet inventories are stated at the cost ofproduction which includes the costs of the chicks, feed, overhead andlabor.  Layer hen inventories are statedat the cost of production which includes the cost of the pullets, feed,overhead and labor.  Layer hen flocks arecapitalized to the point at which the pullet goes into production or arepurchased and are amortized over the productive lives of the flocks, generally18 to 24 months.  Feed, supplies andliquid egg inventories are stated at the lower of cost (first-in, first-out) ormarket.  Inventories consisted of thefollowing:

 
| ** **               | ** ** | **(Unaudited)  February 28,  2005** | ** ** | **(Audited)  August 31,  2004** | ** ** |
|--------------------------|------------|-------------------------------------|------------|---------------------------------|------------|
|                     |       |                                |       |                            |       |
| Hens and pullets         |       | $                                   | 8,652      |                            | $          | 8,280 |   |
| Eggs and egg products    |       | 291                                 |       | 179                             |       |
| Feed, supplies and other |       | 1,148                               |       | 712                             |       |
|                     |       |                                |       |                            |       |
| Total inventories        |       | $                                   | 10,091     |                            | $          | 9,171 |   |

 

5.                     The preparation of consolidated financial statementsin conformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and the disclosure ofcontingent 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’sDiscussion and Analysis of Financial Condition and Results of Operations.**

 

**Forward-LookingStatements**

 

This report containsforward-looking statements based upon assumptions by the management of GoldenOval Eggs, LLC (the “Company”, “Golden Oval” or “we”), a Delaware limitedliability company, as of the date of this Quarterly Report, includingassumptions about risks and uncertainties faced by the Company. When used inthis report, the words “believe,” “expect,” “anticipate,” “will,” “estimate” andsimilar verbs or expressions are intended to identify such forward-lookingstatements. If management’s assumptions prove incorrect or should unanticipatedcircumstances arise, the Company’s actual results could differ materially fromthose anticipated. These differences could be caused by a number of factors orcombination of factors including, but not limited to, those factors describedin the “Risk Factors” section of the Company’s Form 10-K for the yearended August 31, 2004.  Readers arestrongly urged to consider such factors when evaluating any forward-lookingstatement. The Company undertakes no obligation to update any forward-lookingstatements in this report to reflect future events or developments.

 

**Summary**

** **

Golden Oval Eggs, LLC (“we”,“us”, “our”, or the “Company”) is a Delaware limited liability company,primarily engaged in the business of producing, processing and distributing eggproducts.  The Company operates two in-line egg-breaking facilities, onein Renville, Minnesota and the other in Thompson, Iowa and is currently rankedin the top 15 in the nation for production of shell eggs.  We currentlyproduce 93% of the shell eggs we break with the rest purchased throughthird-party producers.

 

The Company’s outputconsists of liquid whole egg, liquid egg white and liquid egg yolk. The eggproducts produced by the Company are sold on a direct basis to companies whofurther process the raw liquid egg into various finished egg products such asdried eggs, frozen, hard cooked, extended shelf-life liquid, pre-cooked eggpatties, specialty egg products, etc. Institutional, food service, restaurants,and food manufacturers in turn purchase these further processed products.

 

The Company expects itsproduction to reach 180 million pounds in fiscal 2005 and will reach 225million pounds upon completion of the second phase of the Thompsonfacility.  The second phase, currentlyunder construction, is expected to be complete by February 2006.

 

The Company’s operatingincome or loss is materially affected by wholesale liquid egg prices, which canfluctuate widely and are outside of the company’s control.  Liquid eggs are a commodity product andprices fluctuate in response to supply/demand factors.  The company also sells a portion of itsproducts under contract at non-market prices. Depending upon market circumstances, the prices generated by the Company’snon-market volume tend to be less or more than what the prevailing open marketprices would generate.

 

The company’s cost ofproduction is materially affected by feed costs, which average approximately 40% of the company’s total costs. Approximately 60% of these feed costs are

 

6

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incurred in the procurementof corn and soybean meal.  The cost ofthese ingredients is affected by a number of supply and demand factors such ascrop production and weather, and other factors, such as the level of grainexports, over which the company has no control.

 

**ResultsOf Operations**

** **

*Net Sales.*  Net sales for the second quarter of fiscal2005 were $15.0 million, a decrease of $5.4 million, or 26.4%, as comparedto net sales of $20.4 million for the second quarter of fiscal 2004.  Although total eggs sold increased during thecurrent fiscal 2005 quarter as compared to the second quarter of fiscal 2004,the price per pound decreased.  Poundssold for second quarter 2005 were 42.3 million, an increase of 4.9 millionpounds, or 13.1% as compared to the second quarter of fiscal 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 and one new layer barn brought on during thebeginning of the first quarter of fiscal 2005.  The company’s average selling price per pound for the second quarter offiscal 2005 was $.331, compared to $.546 for the second quarter of fiscal 2004,a decrease of $.215 per pound or 39.4%. The effect of the increased production and the decreased average sellingprice was a decrease in net sales of $6.4 million.  There was an increase in net sales of $1.0million as compared to the second quarter of 2004, the result of theimplementation of FASB Interpretation 46, which consolidated variable interestentities during the second quarter of fiscal 2005.  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 coupled with adecrease in the demand for eggs relating to high protein/low carbohydratediets.

 

Net sales for the first twoquarters of fiscal 2005 were $32.3 million, a decrease of $8.6 million, or21.0%, as compared to net sales of $40.9 million for the first two quarters offiscal 2004.  As with the currentquarter, total pounds sold increased while the price per pound decreased.  Pounds sold during the first two quarters offiscal 2005 totaled 85.7 pounds, an increase of 10.1 million or 13.4% ascompared to the first two quarters of fiscal 2004.  The company’s average selling price per poundwas $.350 for the first two quarters of fiscal 2005, a decrease of $.191 perpound or 35.3% as compared to $.541 for the first two quarters of fiscal 2004.

 

*Cost ofgoods sold.*  Costof goods sold for the second quarter of fiscal 2005 was $11.8 million, anincrease of $0.8 million, or 7.3% as compared to the second quarter of fiscal2004.  The increase is the net of anincrease in the cost of feed, additional cost of goods associated with 3 newlayer barns, the effect of consolidation of variable interest entities and adecrease in the cost of eggs purchased from third parties for the Company’soff-line production.  Feed cost increased$.6 million during the first quarter of fiscal 2005 as compared to the previousyear.  This increase was the result ofcorn and soybean hedging activity.  Shelleggs purchased for the off-line production decreased in cost by $1.1 million.  This decrease in cost was reflective of thedrop in egg prices as discussed in the net sales section of the MD&A.  $.3 million of the increase was the result ofthe implementation of FASB Interpretation 46. The rest of the increase was the result of the 3 additional barns addedto the Thompson facility.

 

Cost of goods sold for thefirst two quarters of fiscal 2005 was $24.8 million, an increase of $2.3million or 10.4%, as compared to $22.5 million for the same period for fiscal2004.

 

7

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*Operatingexpenses.* Operatingexpenses for the second quarter of fiscal 2005 were $1.7 million, a decrease of$.1 million or 7.6 % as compared to the second quarter of fiscal 2004.  Administration salaries and fringes increased$.1 million in fiscal 2005 as compared to fiscal 2004 while the corporate bonusaccrual decreased $.5 million as compared to the prior year.  Professional fees decreased $.2 million forthe second quarter of 2005 as compared to the same period of fiscal 2004.  $.5 million of the increase was the result ofthe consolidation of the variable interest entities due to the implementationof FASB Interpretation 46.

 

For the first two quartersof fiscal 2005 operating expenses were $3.3 million, an increase of $.1 millionor 4.3% as compared with $3.2 million for fiscal 2004.

 

*Totalother expense.*  Totalother expense for the second quarter of fiscal 2005 was $.8 million, anincrease of $.2 million or 30.0% as compared to second quarter of fiscal2004.  $.1 million of the increaserelates to increased interest costs relating to increased debt balances associatedwith the Thompson expansion.  The rest ofthe increase is reflective of the minority interest in income of consolidatedsubsidiaries.

 

For the first two quartersof fiscal 2005, total other expense was $2.2 million, an increase of $.9million as compared to an expense of $1.3 million for fiscal 2004. Along withthe increase mentioned above, the company wrote off the value of the bond issuecosts associated 2000 bonds that were paid off in September 2004.  The book value of those costs was $.8 million.

 

* Income Taxes. *As a limited liability company, the Companyexpects to be treated as a partnership for federal income tax purposes andtherefore will pay no federal income tax as its members will pay tax on theirpro-rata share of the LLC’s net income.

 

*Net Income*.   Asa result of the above, net income for the second quarter ended February 28,2005 was $.7 million, or $.15 per basic and diluted Class A unit, compared tonet income of $6.9 million, or $1.51 per basic and diluted common share for thequarter ended February 29, 2004.  As apercent of net sales, net income was 4.5% for the quarter ended February 28, 2005, compared to net income of 33.9%for the quarter ended February 29, 2004.

 

For the two quarters endedFebruary 28, 2005, net income was $2.0 million, or $.44 per basic and dilutedshare, compared to $14.0 million, or $3.05 per basic and diluted share for thecomparable period in fiscal 2004.  As apercent of sales, the current fiscal period had a 6.3% net income, compared toa 34.2% for the same period last year.

 

8

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**Liquidityand Capital Resources**

 

The Company’s workingcapital at February 28, 2005 was $3.7 million compared to $1.6 million atAugust 31, 2004.    The Company’s current ratio was 1.3 at February28, 2005 compared to 1.1 at August 31, 2004. On September 13, 2004, the Companyentered into a new financing agreement with CoBank.  The new agreementgives the company a $55 million line of credit of which $10 million is arevolving line of credit and the remaining $45 million will be term debt. The $10 million revolving line of credit replaced the  $5.5 millionworking capital line of credit with US Bank and is collateralized by accountsreceivable and inventories.  This revolving credit line, which protectsthe Company from seasonal cash fluctuations, terminates on September 16,2005.  The $45 million term piece will have a 10 year maturity and will beused to pay off the 2000 bonds and to fund the current construction at the Thompsonsite.  $32 million of the $45 million has been drawn as of November 30,2004.  A $10 million draw is expected tooccur during May 2005 and the final $3 million will be drawn in December of2005.  The Company expects that cash flowfrom operations and proceeds from its existing credit lines will be sufficientto fund 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 thecompany entered into a note with the USDA and Heartland Power for $.6million.  This note has a ten yearmaturity and was used to purchase and is collateralized by two 250,000 bushelgrain bins at the Thompson facility.

 

The Company’s long-term debtat February 28, 2005, including current maturities, was $43.3 millioncompared to $33.0 million at August 31, 2004. $2 million has been drawn onthe company’s revolving line of credit as of February 28, 2005 compared to zeroas of August 31, 2004.  Substantially alltrade receivables and inventories collateralize the Company’s line of creditand property, plant and equipment collateralize the Company’s long-term debtunder its loan agreements. The Company is required by certain provisions of itsloan agreements to maintain (1) a minimum tangible net worth of not lessthan $28.8 million plus 40% of earnings; (2)a minimum current ratio of notless than 1.25 to 1.0; (3) working capital of no less than$2.0 million; (4) an leverage ratio of less than 4.25 to 1.0; and(5) a fixed charge coverage ratio no less than 1.15 to 1.  Inaddition, these provisions restrict the company’s ability to makedistributions, create liens, incur indebtedness and sell assets and properties.As of February 28, 2005, the Company was in compliance with these covenants.

 

Net cash flow fromoperations was $3.2 million for the first two quarters of fiscal2005.   $12.3 million was used for thepurchase of property, plant and equipment and $1.5 million was used to paydeferred debt costs.  $2.0 million wasdrawn on the company’s revolving line of credit and $1.6 million was returnedfrom the company’s restricted cash account. $32.6 million was received from the issuance of long-term debt and wasused to pay off $22.2 million of long-term debt and pay $10.3 million indistributions to our members.  The neteffect of this activity was a reduction in cash of $6.8 million since August31, 2004.

 

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Management believes thatnon-cash working capital levels are appropriate in the current businessenvironment and does not expect a significant increase or reduction of non-cashworking capital in the next 12 months.

 

**CriticalAccounting Policies**

** **

The accompanying discussionand analysis of our results of operations and financial condition are basedupon our consolidated financial statements, which have been prepared inaccordance with principles generally accepted in the United States.  The preparation of these financial statementsrequires management to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenues and expenses, and related disclosureof contingent assets and liabilities. These estimates form the basis for making judgments about the carryingvalues of assets and liabilities that are not readily apparent from othersources.  We base our estimates andjudgments on historical experience and on various other assumptions that webelieve are reasonable under the circumstances. However, future events are subject to change and the best estimates andjudgments may require adjustment.  For acomplete description of the company’s significant accounting policies, pleasesee Note 1 to the consolidated financial statements in the company’s form 10-Kfor the 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’sDiscussion and Analysis of Financial Condition and Results of Operations”, inour Annual Report form 10-K for the year ended August 31, 2004 for a discussionof the impact of recently issued accounting pronouncements.  There were no accounting pronouncementsissued during the quarter ended February 28, 2005 that we expect will have amaterial impact on our consolidated financial statements.

 

## **Item 3.  Quantitative andQualitative Disclosures About Market Risk**

## ** **

There have been no materialchanges in the market risk reported in the Company’s Annual Report on Form 10-Kfor the fiscal year ended August 31, 2004.

 

## **Item 4.  Controls andProcedures**

## ** **

**Evaluationof Disclosure Controls and Procedures**

*** ***

The Company’s ChiefExecutive Officer, Dana Persson, and Chief Financial Officer, Doug Leifermann,have reviewed the Company’s disclosure controls and procedures as of the end ofthe period covered by this report.  Basedupon this review, these officers believe that the Company’s disclosure controlsand procedures are effective in ensuring that material information related tothe Company is made known to them by others within the Company.

 

**Changes inInternal Controls**

*** ***

There were no changes in theCompany’s internal controls or in other factors that could significantly affectthose controls during the Company’s fiscal second quarter ended February

 

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28, 2005 that havematerially affected or are reasonable likely to materially affect the Company’sinternal control over financial reporting.

 

# **PARTII.  OTHER INFORMATION**

## **Item 1.  Legal Proceedings**

## ** **

None.

 

## **Item 2.  Unregistered Sales ofEquity Securities and Use of Proceeds**

## ** **

None.

 

## **Item 3.  Defaults Upon SeniorSecurities**

## ** **

None.

 

## **Item 4.  Submission of Mattersto a Vote of Security Holders**

## ** **

The Annual Meeting ofmembers of Golden Oval Eggs, LLC was held on March 15, 2005.  The only matter presented for memberconsideration at the Annual Meeting was the election of seven (7) managers toserve as members of the Board of Managers of the Company.  Ten nominees stood for election to the Boardof Managers, with the seven nominees who received the greatest number of votesbeing elected to serve as members of the Board of Managers.  The three candidates receiving the most voteswere to be elected for 3-year terms, expiring at the Company’s Annual Meetingto be held in 2008. The two candidates receiving the fourth and fifth highestvote counts were to be assigned 2-year terms, expiring at the Company’s AnnualMeeting to be held in 2007. Finally, the two candidates receiving the sixth andseventh highest vote counts were to be assigned 1-year terms, expiring at theCompany’s Annual Meeting to be held in 2006.

 

Theten nominees for election to the Board of Managers were:

MikeBranstad

MarvinBreitkreutz

MarkChan

RichardA. Coonrod

ChrisEdgington

RodneyW. Hebrink

BradPetersburg

RussellS. Sampson

RandyTauer

Paul Wilson

 

In a media release providedon March 18, 2005, the Company released the results of the election of membersof the Board of Managers held at the Annual Meeting of Members on March 15,2005.  Marvin Breitkreutz, Mark Chan and Chris Edgington were reelected toserve on the Board of Managers for three year terms, ending in 2008. Rodney Hebrink and Paul Wilson were elected to the Board of Mangers for twoyear terms, ending in 2007.  (Hebrink and Wilson were 

 

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elected to the Board for thefirst time.)  Brad Petersburg and Randy Tauer were reelected to the Boardof Managers, to serve one year terms ending in 2006.

 

Following are the resultsfor the election of members of the Board of Managers:

 
| **Nominee**        | ** ** | **Votes For** |
|--------------------|------------|---------------|
| Mike Branstad      |       | 1,476,815     |
| Marvin Breitkreutz |       | 2,344,024     |
| Mark Chan          |       | 2,438,562     |
| Richard A. Coonrod |       | 1,730,791     |
| Chris Edgington    |       | 2,538,150     |
| Rodney W. Hebrink  |       | 2,325,174     |
| Brad Petersburg    |       | 2,167,168     |
| Russell S. Sampson |       | 1,079,056     |
| Randy Tauer        |       | 1,863,386     |
| Paul Wilson        |       | 2,267,306     |

 

## **Item 5.  Other Information**

 

None.

 

## **Item 6.  Exhibits**

## ** **

| 31.1   |   | Certification of the Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                 |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                     |
| 31.2   |   | Certification of the Chief  Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                 |
|   |   |                                                                                                                                                     |
| 32.1   |   | Certification of the Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |   |                                                                                                                                                     |
| 32.2   |   | Certification of the Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |

** **

**SIGNATURES**

 

Pursuant to the requirementsof the Securities Exchange Act of 1934, the registrant has duly caused thisreport to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 
|     | Golden  Oval Eggs, LLC |
|----------|------------------------|
|     |                   |   |
|     | By:                    | /s/ Dana Persson |
|     |                   | Dana Persson *President,  Chief Executive Officer* | * * |
| * * | * *               | *(Principal Executive Officer)* | * * |

 

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|     | By:      | /s/ Doug Leifermann                                       |
|----------|----------|-----------------------------------------------------------|
|     |     | Doug Leifermann *Vice  President/Chief Financial Officer* |
| * * | * * | *(Principal Financial and  Accounting Officer)*           |

 

Date:  April 13, 2005

 

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