**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 10-Q**

 

| **x**                                                       | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|-------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                        |                                                                                                     |
| **For the  quarterly period ended November 30, 2007;** |
|                                                        |                                                                                                     |
| **OR**                                                      |
|                                                        |                                                                                                     |
| **o**                                                       | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |

 

**for thetransition period from          TO         **

 

**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) |
|                                                             |                                      |
| **1800 Park  Avenue East**                                       |                                      |
| **Renville,  MN**                                                | **56284**                                 |
| (Address of principal  executive offices)                        | (Zip code)                                |

 

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

(Registrant’s telephone number, includingarea code)

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes x No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer or a smaller reporting company. Seedefinition of “accelerated filer” and “large accelerated filer” in Rule 12b-2of the Exchange Act.

 
| Large  Accelerated Filer o | Accelerated  Filer  o   |
|----------------------------|------------------------------|
| Non-Accelerated  Filer x   | Smaller  Reporting Company o |

 

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act.) Yes o  Nox

 

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13or Section 15(d) of the Exchange Act.

Yeso  Nox

 

Asof January 10, 2008, there were 4,733,527 of the Company’s Class AUnits and 697,350 of the Company’s Class B Units issued and outstanding.

 

 

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**TABLE OFCONTENTS**

 

Golden Oval Eggs, LLC

Form 10-Q

For The Quarter Ended November 30, 2007

 
| **Description**  | ** ** | ** **                                                                                  | ** ** | **Page** |
|------------------|------------|---------------------------------------------------------------------------------------------|------------|----------|
| **Part I**  |       | **Financial  Information**                                                                  |       |     |
| Item 1.          |       | Consolidated Condensed Financial  Statements                                                |       | 1        |
| Item 2.          |       | Management’s Discussion and  Analysis of Financial Condition and Results of Operations |       | 8        |
| Item 3.          |       | Quantitative and Qualitative  Disclosures about Market Risk                                 |       | 12       |
| Item 4.          |       | Controls and Procedures                                                                     |       | 12       |
|             |       |                                                                                        |       |     |
| **Part II** |       | **Other Information**                                                                       |       |     |
| Item 1.          |       | Legal Proceedings                                                                           |       | 12       |
| Item 1A.         |       | Risk Factors                                                                                |       | 12       |
| Item 2.          |       | Unregistered Sales of Equity  Securities and Use of Proceeds                                |       | 12       |
| Item 3.          |       | Defaults Upon Senior Securities                                                             |       | 12       |
| Item 4.          |       | Submission of Matters to a  Vote of Security Holders                                        |       | 13       |
| Item 5.          |       | Other Information                                                                           |       | 13       |
| Item 6.          |       | Exhibits                                                                                    |       | 13       |
|             |       |                                                                                        |       |     |
| **Signatures**   |       |                                                                                        |       | 13       |

 

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**PART I.  FINANCIAL INFORMATION**

 

**Item 1. Condensed Financial Statements**

 

**GOLDEN OVALEGGS, LLC**

 

**ConsolidatedCondensed Balance Sheets**

 

**November 30,2007 and August 31, 2007**

 

**(InThousands)**

 
| ** **                               | ** ** | **November 30,  2007** | ** ** | **August 31,  2007** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|
|                                     |       | **(unaudited)**             |       |                      |       |
| Assets                                   |       |                        |       |                      |       |
| Current assets                           |       |                        |       |                      |       |
| Cash and cash equivalents                |       | $                           | —     |                      | $          | — |   |
| Accounts receivable                      |       | 19,678                      |       | 18,502                    |       |
| Inventories                              |       | 18,291                      |       | 18,352                    |       |
| Restricted cash                          |       | 1,069                       |       | 783                       |       |
| Other current assets                     |       | 1,157                       |       | 1,047                     |       |
| Total current assets                     |       | 40,195                      |       | 38,684                    |       |
|                                     |       |                        |       |                      |       |
| Property, plant and equipment            |       |                        |       |                      |       |
|                                     |       |                        |       |                      |       |
| Land and land improvements               |       | 11,650                      |       | 11,649                    |       |
| Buildings                                |       | 40,761                      |       | 40,684                    |       |
| Leasehold Improvements                   |       | 896                         |       | 896                       |       |
| Equipment                                |       | 72,042                      |       | 71,906                    |       |
| Construction in progress                 |       | 85                          |       | 173                       |       |
|                                     |       | 125,434                     |       | 125,308                   |       |
| Accumulated depreciation                 |       | (59,784                     | )          | (57,103                   | )          |
| Total property, plant and equipment, net |       | 65,650                      |       | 68,205                    |       |
|                                     |       |                        |       |                      |       |
| Other assets                             |       |                        |       |                      |       |
| Investments                              |       | 1,670                       |       | 1,670                     |       |
| Intangible assets, net                   |       | 18,352                      |       | 18,826                    |       |
| Goodwill                                 |       | 22,858                      |       | 22,858                    |       |
| Note receivable                          |       | 135                         |       | 135                       |       |
| Total other assets                       |       | 43,015                      |       | 43,489                    |       |
|                                     |       |                        |       |                      |       |   |   |
| Total assets                             |       | $                           | 148,860    |                      | $          | 150,378 |   |

 

Seeaccompanying notes to consolidated condensed financial statements

 

1

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| ** **                                         | ** ** | **November 30,  2007** | ** ** | **August 31,  2007** | ** ** |
|----------------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|
| ** **                                         | ** ** | **(unaudited)**             | ** ** | ** **                | ** ** |
| Liabilities  and Members’ Equity              |       |                        |       |                      |       |
| Current liabilities                                |       |                        |       |                      |       |
| Revolving line of credit                           |       | $                           | 12,072     |                      | $          | 11,884 |   |
| Accounts payable                                   |       | 15,762                      |       | 14,221                    |       |
| Accrued interest                                   |       | 3,640                       |       | 2,988                     |       |
| Accrued compensation                               |       | 1,985                       |       | 1,824                     |       |
| Other current liabilities                          |       | 2,062                       |       | 2,595                     |       |
| Current maturities of long-term debt               |       | 9,522                       |       | 9,522                     |       |
| Total current liabilities                          |       | 45,043                      |       | 43,034                    |       |
|                                               |       |                        |       |                      |       |
| Long-term debt, less current maturities            |       | 83,994                      |       | 84,727                    |       |
|                                               |       |                        |       |                      |       |
| Members’ equity                               |       |                        |       |                      |       |
| Members’ equity                               |       | 18,785                      |       | 21,612                    |       |
| Non-controlling interest in consolidated  entities |       | 1,038                       |       | 1,005                     |       |
| Total members’ equity                         |       | 19,823                      |       | 22,617                    |       |
| Total liabilities and members’ equity         |       | $                           | 148,860    |                      | $          | 150,378 |   |

 

Seeaccompanying notes to consolidated condensed financial statements

 

2

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**GOLDEN OVALEGGS, LLC**

 

**ConsolidatedCondensed Statements of Operations**

 

**For thePeriods Ended November 30, 2007 and 2006**

 

**(InThousands, except per unit data)**

**(Unaudited)**

 
| ** **                                                          | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **November 30,  2007**      | ** ** | **November 30,  2006** | ** ** |
|                                                                |       |                             |       |   |   |   |   |
| Net sales                                                           |       | $                                | 53,203     |   | $ | 48,617 |   |
|                                                                |       |                             |       |   |   |
| Cost of goods sold                                                  |       | 49,118                           |       | 44,395 |   |
|                                                                |       |                             |       |   |   |
| Gross profit                                                        |       | 4,085                            |       | 4,222 |   |
|                                                                |       |                             |       |   |   |
| Operating expenses                                                  |       | 4,442                            |       | 5,182 |   |
|                                                                |       |                             |       |   |   |
| Loss from operations                                                |       | (357                             | )          | (960 | ) |
|                                                                |       |                             |       |   |   |
| Other income (expense)                                              |       |                             |       |   |   |
| Interest (expense)                                                  |       | (2,729                           | )          | (2,722 | ) |
| Non-controlling interest in income (loss)  of consolidated entities |       | (23                              | )          | (62 | ) |
| Other income                                                        |       | 352                              |       | 80 |   |
| Total other expense                                                 |       | (2,400                           | )          | (2,704 | ) |
|                                                                |       |                             |       |   |   |
| Net loss                                                            |       | $                                | (2,757     | ) | $ | (3,664 | ) |
|                                                                |       |                             |       |   |   |
| Weighted average members’ units outstanding                    |       | 5,431                            |       | 5,420 |   |
|                                                                |       |                             |       |   |   |
| Net loss per members’ unit, basic and  diluted                 |       | $                                | (0.51      | ) | $ | (0.68 | ) |
|                                                                |       |                             |       |   |   |
| Distributions per unit                                              |       | $                                | —     |   | $ | — |   |

 

See accompanying notes toconsolidated condensed financial statements

 

3

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**GOLDEN OVALEGGS, LLC**

 

**ConsolidatedCondensed Statements of Cash Flows****For the Periods Ended November 30, 2007and 2006**

 

**(InThousands)****(Unaudited)**

 
| ** **                                                                               | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                               | ** ** | **November 30,**            | ** ** | **November 30,** | ** ** |
| ** **                                                                               | ** ** | **2007**                         | ** ** | **2006** | ** ** |
| Cash flows from operating activities                                                     |       |                             |       |   |   |
| Net loss                                                                                 |       | $                                | (2,757     | ) | $ | (3,664 | ) |
| Adjustments to reconcile net income to net  cash provided by operating activities        |       |                             |       |   |   |
| Depreciation                                                                             |       | 2,681                            |       | 2,901 |   |
| Amortization                                                                             |       | 474                              |       | 474 |   |
| Gain on sale of property, plant &  equipment                                    |       | —                           |       | 1 |   |
| Non-controlling interest in income of  consolidated entities, net of distributions       |       | 33                               |       | 70 |   |
| Changes in operating assets and liabilities                                              |       |                             |       |   |   |
| Accounts receivable                                                                      |       | (1,246                           | )          | (2,092 | ) |
| Inventories                                                                              |       | 61                               |       | 278 |   |
| Other current assets                                                                     |       | (110                             | )          | (61 | ) |
| Accounts payable                                                                         |       | 1,541                            |       | 2,660 |   |
| Accruals and other current liabilities                                                   |       | 280                              |       | 533 |   |
| Net cash provided by operating activities                                                |       | 957                              |       | 1,100 |   |
|                                                                                     |       |                             |       |   |   |
| Cash flows from investing activities                                                     |       |                             |       |   |   |
| Purchases of property, plant and equipment                                               |       | (126                             | )          | (528 | ) |
| Proceeds from sale of property, plant and  equipment                                     |       | —                           |       | 1 |   |
| Retirement of investment in other  cooperatives                                          |       | —                           |       | 112 |   |
| Net cash used by investing activities                                                    |       | (126                             | )          | (415 | ) |
|                                                                                     |       |                             |       |   |   |
| Cash flows from financing activities                                                     |       |                             |       |   |   |
| Net increase in revolving line of credit                                                 |       | 188                              |       | 1,802 |   |
| Payments of long-term debt                                                               |       | (733                             | )          | (2,146 | ) |
| Increase in restricted cash                                                              |       | (286                             | )          | (332 | ) |
| Net cash used by financing activities                                                    |       | (831                             | )          | (676 | ) |
| Net increase (decrease) in cash and cash  equivalents                                    |       | —                           |       | 9 |   |
| Cash and cash equivalents - beginning of  period                                         |       | —                           |       | 222 |   |
| Cash and cash equivalents - end of period                                                |       | $                                | —     |   | $ | 231 |   |
|                                                                                     |       |                             |       |   |   |
| Supplementary disclosures of cash flow  information                                      |       |                             |       |   |   |
| Cash paid during the period for:                                                         |       |                             |       |   |   |
| Interest, net of capitalized interest of  $51 and $40 during 2007 and 2006, respectively |       | $                                | 2,660      |   | $ | 1,942 |   |
| Supplementary disclosures of non-cash  transactions                                      |       |                             |       |   |   |
| Stock issued as officer compensation                                                     |       | $                                | —     |   | 159 |   |
| Forfeiture of stock compensation of  departing officer                                   |       | —                           |       | (13 | ) |

 

See accompanying notes toconsolidated condensed financial statements

 

4

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**GOLDEN OVALEGGS, LLC**

 

**Notes toConsolidated Condensed Financial Statements**

 

**November 30,2007 and August 31, 2007**

 

**(InThousands Except Unit Data)**

 

1.Organization  Golden Oval Eggs, LLC (the “Company”) was organizedas a Delaware limited liability company to effect the reorganization of MidwestInvestors of Renville, Inc. (the “Cooperative”) effective August 31,2004.  The Cooperative was incorporated as a cooperative under the laws ofthe state of Minnesota in March 1994. The Company operates as theCooperative’s successor and its operations are a continuance of the operationsof the Cooperative. The accompanying consolidated condensed financialstatements for all periods presented are those of the Company.

 

2.Basis of Presentation  The accompanying consolidated condensed balancesheet as of August 31, 2007, which has been derived from auditedconsolidated financial statements, and the unaudited interim consolidatedcondensed financial statements at November 30, 2007 and for thethree-month periods ended November 30, 2007 and 2006 of the Company havebeen prepared in accordance with generally accepted accounting principles forinterim financial reporting and Securities and Exchange Commission rules andregulations.  Certain information normally included in financialstatements and related footnotes prepared in accordance with generally acceptedaccounting principles has been condensed or omitted pursuant to the rules andregulations of the Securities and Exchange Commission.  The consolidatedcondensed financial statements reflect all adjustments (consisting only ofnormal recurring adjustments) which are, in the opinion of management,necessary for a fair presentation of the financial position and operatingresults for the interim periods presented. These consolidated condensedfinancial statements should be read in conjunction with Management’s Discussionand Analysis of Financial Condition and the consolidated financial statementsand notes thereto included in the Company’s Annual Report on Form 10-K forthe year ended August 31, 2007. The results of operations for the period endedNovember 30, 2007 are not necessarily indicative of results to be expectedfor any other interim period or for the entire year.

 

3.Inventories   Pullet and layer hen inventories are stated atthe cost of production, which includes the costs of the chicks, feed, overheadand labor. Layer hen flock costs are capitalized at the point at which thepullet goes into production and are amortized over the productive lives of theflocks, generally 18 to 24 months. Feed, supplies and liquid egg inventoriesare stated at the lower of cost (first-in, first-out) or market. Inventoriesconsisted of the following:

 
| ** **               | ** ** | **November 30,  2007** | ** ** | **August 31,  2007** | ** ** |
|--------------------------|------------|-----------------------------|------------|---------------------------|------------|
| ** **               | ** ** | **(unaudited)**             | ** ** | ** **                | ** ** |
| Hens and pullets         |       | $                           | 10,586     |                      | $          | 10,766 |   |
| Eggs and egg products    |       | 5,054                       |       | 4,046                     |       |
| Feed, supplies and other |       | 2,651                       |       | 3,540                     |       |
| Total inventories        |       | $                           | 18,291     |                      | $          | 18,352 |   |

 

5

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4.Financing Agreements   Golden Oval Eggs, LLC, MidwestInvestors of Iowa and GOECA, LP are parties to a Credit Agreement that was originallyentered into on September 13, 2004, and subsequently amended.  With the last amendment effective December 13,2007, the maturity date of $2,500 of a short term revolving note was extendedfrom December 14, 2007 to March 1, 2008 and the commencement date ofcertain financial covenants was also extended to March 1, 2008.  We have historically financed our workingcapital needs through the Credit Agreement and, to the extent of our cash flow,from operations.  The Credit Agreement,as amended, requires the Company, among other things, to generate monthlyEBITDA of at least $850 for the term of the Credit Agreement.  The Company was in compliance with allcovenants under the Credit Agreement for each month in the quarter ended November 30,2007 and as of November 30, 2007.

 

OnDecember 13, 2007, the Company received a commitment from a new lender torefinance all debt outstanding under the Credit Agreement.  The term ofthe new arrangement is for six years effective with the closing, which isanticipated to take place in the first half of calendar 2008.  The Companybelieves terms of this agreement will provide for more a more favorablerepayment schedule than the Credit Agreement.  The lender’s commitment issubject to various terms and conditions and the definitive loan agreements willbe subject to negotiation and execution by the lender and the Company.

 

5.Stock Based Compensation

 

The Company has bonus and compensation plans in place formanagement.  Under these agreementsmanagement may receive up to 50% of certain performance bonuses in the form of Class AUnits.  The Company accrues formanagement bonuses during the year based upon the estimated amount that will beearned by year end.  Upon approval by theBoard of Managers, the bonuses are paid to management.  The number of units to be issued is basedupon the higher of the book or market value of the Class A Units at thetime the bonus is awarded.  For the threemonths ended November 30, 2007 and2006, a total of 0 and 20,895 Class A Units were issued tomanagement at a per unit value of $7.63 for the 20,895 units in 2006.

 

The Class A Units are nontransferable and subject to forfeitureratably over the following three years. The employee must be employed on the anniversary date of issuance to avoidforfeiture.  In the event thattermination of the employee occurs, the Company will record any forfeiture ofunits as a reduction to compensation expense in the period in which theforfeiture occurs.  There were noforfeitures for the three months ended November 30, 2007.  There were forfeitures of 2,045 for the threemonths ended November 30, 2006.

 

The members of the Board of Managers are granted 2,000 Class AUnits for each year served on the board following each year of service.  The Company recognizes compensation expensefor these awards based upon the fair value on the date they are granted.  For the three months ended November 30,2007 and 2006 no units were awarded to the Board of Managers.

 

Below is a summary of unit activity pursuant to these compensationplans for the three months ended November 30th, 2007.

 
| ** **           | ** ** | **2007**  | ** ** | **2006**    | ** ** |
|----------------------|------------|-----------|------------|-------------|------------|
|                 |       | **Units** | ** ** | **Dollars** | ** ** | **Units** | ** ** | **Dollars** |   |
|                 |       |      |       |        |       |   |   |   |   |
| Issued to management |       | —    |       | $           | —     |   | 20,895 |   | $ | 159 |   |
| Issued to directors  |       | —    |       | —      |       | — |   | — |   |
| Forfeitures          |       | —    |       | —      |       | (2,045 | ) | (13 | ) |
|                 |       |      |       |        |       |   |   |   |   |
| Total                |       | —    |       | $           | —     |   | 18,850 |   | $ | 146 |   |

 

6

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6.Use of Estimates   The preparation of consolidated condensedfinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities andthe disclosure of contingent assets and liabilities at the date of theconsolidated condensed financial statements and the reported amounts ofrevenues and expenses during the reporting period. Actual results could differmaterially from those estimates.

 

7.Capital Resources and Liquidity   The Company is a party to anAmended and Restated Credit Agreement, as amended, with Metropolitan LifeInsurance Company as lender and CoBank, ACB as lender and administrative agent(the “Credit Agreement”).  The Company has had limited access to capitalunder the Credit Agreement and the lenders under the Credit Agreement have modifiedcertain financial covenants in order to allow compliance with these covenantsby the Company.  As part of its efforts to obtain a refinancing of theCredit Agreement, the Company has completed the following steps:

 

OnDecember 13, 2007, the Company received a commitment from a new lender torefinance all debt outstanding under the Credit Agreement.  The term ofthe new arrangement is for six years effective with the closing, which isanticipated to take place in the first half of calendar 2008.  The Companybelieves terms of this agreement will provide for more a more favorablerepayment schedule than the Credit Agreement.  The lender’s commitment issubject to various terms and conditions and the definitive loan agreements willbe subject to negotiation and execution by the lender and the Company.

 

OnDecember 13, 2007, the Company entered into an extension agreement withthe lenders under the Credit Agreement that extends the termination date of a$2,500,000 short-term revolving note issued under our Restated and AmendedCredit Agreement from December 14, 2007 to March 1, 2008.  Thecommencement of the effective date of financial covenants under the CreditAgreement has also been delayed from December 15, 2007 to March 1,2008.

 

7

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**Item 2. Management’s Discussion andAnalysis of Financial Condition and Results of Operations.**

 

**Forward-Looking Statements**

 

ThisManagement’s Discussion and Analysis of Financial Condition and Results ofOperations contains, in addition to historical information, forward-lookingstatements that are based on current expectations, beliefs, intentions orfuture strategies of the management of Golden Oval Eggs, LLC (“we”, “us”, “our”,or the “Company”). When used in this Management’s Discussion and Analysis ofFinancial Condition and Results of Operations or elsewhere in this QuarterlyReport on Form 10-Q, the words “believe,” “expect,” “anticipate,” “will,” “estimate”and similar verbs or expressions are intended to identify such forward-lookingstatements.  If our management’s assumptions prove incorrect or shouldunanticipated circumstances arise, our actual results could differ materiallyfrom those anticipated. These differences could be caused by a number offactors or combination of factors including, but not limited to, those factorsdescribed in Part I, Item 1A. “Risk Factors” section of the Company’sAnnual Report on Form 10-K for the year ended August 31, 2007, aswell as those identified in other filings with the Securities and ExchangeCommission.  Readers are strongly urged to consider such factors whenevaluating any forward-looking statement. The Company undertakes no obligationto update any forward-looking statements to reflect future events ordevelopments.

 

Thefollowing is a discussion and analysis of our financial condition and resultsof operations as of and for the three month periods ended November 30,2007 and 2006. This section should be read in conjunction with the condensedfinancial statements and related notes in Item 1 of this Quarterly Report andour Annual Report on Form 10-K for the year ended August 31, 2007.

 

**Summary**

 

GoldenOval Eggs, LLC is a Delaware limited liability company, primarily engaged inthe business of producing, processing, marketing and distributing egg products.The Company operates seven production facilities in the United States.  It maintains its headquarters in Renville,Minnesota and a sales office in Plymouth, Minnesota.

 

TheCompany produces a wide range of egg products, from unpasteurized liquid eggs,further processed egg products for other food manufacturers, and finished goodsfor sale to retailers and food service customers.  Products are sold toother food manufacturers, restaurants, supermarkets and foodservice distributors.

 

TheCompany produces approximately half of its annual needs from eggs produced atlayer barns at the Company’s Renville, Minnesota and Thompson, Iowafacilities.  The remainder is satisfied from purchases of eggs or liquidproduct under a variety of pricing arrangements with third partiers.

 

TheCompany’s operating income or loss is materially affected by wholesale liquidegg prices, and pricing of further processed products which can fluctuatewidely and are outside of the Company’s control. Liquid eggs are a commodityproduct and prices fluctuate in response to supply/demand factors. The Companyalso sells a portion of its products under contracts 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.

 

8

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TheCompany’s cost of production is materially affected by feed, purchased egg andliquid egg costs, which averaged approximately 63% of the Company’s total productioncosts in the first quarter of fiscal 2008.

 

**Results of Operations**

 

*Net Sales* Net sales for the first quarter of fiscal 2008 were $53.2 million, anincrease of $4.6 million, or 9.4% over the first quarter in the prior fiscalyear. Pounds sold in the first quarter were 78.7 million, a decrease of 28.5million, or 26.6% less than the same period year ago.  The decrease is dueto a significant reduction of the Millersburg, Ohio facility egg supply (20.3 millionpounds) which resulted in an impairment charge in the fiscal year ended August 31,2007.  Additional causes of the declineare a decrease in pounds available to sell from production sourced from theCompany’s own flocks as bird numbers were reduced to comply with increasedspace requirements under its animal care programs (5.4 million pounds), adecrease in sales pounds as certain low margin businesses were exited (2.5million pounds), and a net reduction of volume in all other product sales (0.3million pounds).  The average selling price per pound sold increased from$0.432 to $0.673, an increase of $0.241, or 55.8%, as a result higher sellingprices executed in an environment of sharply increased liquid egg markets, aswell as an improved product mix.

 

*Cost of goods sold.* Cost of goods sold for the first quarter of fiscal 2008 was $49.1 million,an increase of $4.7 million, or 10.6%, as compared to the first quarter offiscal 2007.  The increase is due to increases of feed, purchased eggs andpurchased liquid eggs of $10.4 million offset by reductions in operating costsof $2.3 million in all locations still operating, a reduction of $1.3 milliondue to reduced operating levels in Millersburg, for which an impairment chargewas taken in the fourth quarter of fiscal 2007, and $1.8 million of reduced impactfor the results of operations from the variable interest entity, United Mills,included in the consolidated financial statements.

 

*Operating expenses.* Operating expenses for the first quarter of fiscal 2008 were $4.4million, a decrease of $0.7 million, or 14.3%, as compared to the first quarterof fiscal 2007.  The decline is primarily attributable to a reduction indiscretionary spending in the amount of $0.6 million with the balance spreadacross numerous accounts.

 

*Total other expense.* Total other expense for the first quarter offiscal 2008 was $2.4 million, a decrease of $(0.3) million from the prior yearperiod.  Interest expense was unchanged at $2.7 million.  Otherincome increased $0.3 million due to the timing of sales of manure from thechicken barns, as the sales were reported in the second quarter in the priorfiscal year.

 

*Income Taxes.  * As a limited liability company, the Companyexpects to be treated as a partnership for federal income tax purposes.Therefore, the Company will pay no federal income tax and instead, the Company’smembers will include their pro-rata share of the Company’s net income or loss asan item of income for the purposes of their own federal income tax returns.

 

*Net Income*.  Operations for the first quarter ended November 30, 2007resulted in a loss of $(2.7) million, or a loss of ($0.51) per basic anddiluted members’ unit, as compared to a loss of $(3.7) million, or $(0.68) perbasic and diluted members’ unit for the quarter ended November 30, 2006.

 

TheCompany’s financial performance in the current quarter may not be indicative offuture quarters due to seasonal factors and volatility in both selling prices andcost of materials purchased, as well as industry factors in an intenselycompetitive industry.

 

**Liquidity and Capital Resources**

 

TheCompany’s working capital at November 30, 2007 was $(4.8) million comparedto $(4.3) million at August 31, 2007.   The Company’s current ratiowas 0.9 at November 30, 2007 compared to 0.9 at August 31, 2007.Effective October 19, 2007 the Company entered into a second amendment toits 

 

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amendedand restated credit agreement with CoBank ACB and the Metropolitan LifeInsurance Company.  The second amendment provided $2.5 million in new shortterm debt to finance working capital needs, deferred principal payments onTranche A and Tranche B Term Loans for October and November of 2007,and amended certain restrictive covenants contained in the prior agreement, asamended.   The termination date forthe new debt was December 14, 2007. On December 13, 2007, the Company executed an extension agreementthat extended the termination date on the new debt to March 1, 2008,coterminous with the revolving line of credit contained in the credit agreement,as amended. The principal payments on Tranche A and Tranche B Term Loans aredeferred for the months of January 2008 and February 2008.  The Company is current on all interest andprincipal payments as required for the quarter ending November 30, 2007and complied with its minimum monthly EBITDA requirement as of the end of thefirst quarter of fiscal 2008. The amended and restated credit agreementprovides for a $93,000,000 line of credit, consisting of a $15.0 millionrevolving note that terminates on March 1, 2008 and $78.0 million in termnotes with principal repayment schedules resulting in retirement beginning in2014.

 

Duringfiscal year 2007 and into fiscal year 2008, the Company has sought additionalfinancing to refinance the amended and restated credit agreement.  As described below, the Company has receiveda commitment letter from a new lender. However, the Company may require significant additional capitalresources in order to proceed with potential future expansions or to otherwiserespond to competitive pressures in the industry.   In addition, theCompany may seek additional capital from an offering of our equity securitiesor by incurring additional indebtedness, or both.  Despite the commitmentletter from a new lender, no assurance can be given that additional workingcapital will be obtained in an amount that is sufficient for the Company’sneeds, in a timely manner or on terms and conditions acceptable to theCompany or its members.  The Company’s financing needs arebased upon management estimates as to future revenue and expense. Our businessplan and our financing needs are also subject to change based upon, among otherfactors, market and industry conditions, our ability to increase cashflow from operations and our ability to control costs and expenses.  Ourefforts to raise additional funds from the sale of equity may be hamperedby the fact that our securities are illiquid and are subject to restrictionson transfer. Our efforts to raise additional funds from incurringadditional indebtedness may be hampered by the fact that the Company hassignificant outstanding indebtedness and all of the Company’s assetsare pledged to its lenders to secure existing debt.

 

Aspreviously reported, on December 13, 2007 the Company received acommitment letter from a new lender.  Thecommitment is for a facility of $105 million to be used to retire all of ourexisting indebtedness under the current Credit Agreement and replace the CreditAgreement with new debt facilities on terms we believe are more favorable tous.  The commitment includes numerousconditions, including negotiation, execution and delivery of loan agreementssatisfactory to the Company and the lender and the financial performance of theCompany.

 

TheCompany’s long-term debt at November 30, 2007, including currentmaturities, was $93.5 million compared to $94.2 million at August 31,2007. As of November 30, 2007, $12.1 million has been drawn against the$15.0 revolving line of credit, compared to $11.9 million as of August 31,2007. Substantially all trade receivables and inventories collateralize theCompany’s line of credit, and property, plant and equipment collateralize theCompany’s long-term debt under its credit agreement and the note issued to LandO’Lakes, Inc.

 

Netcash flow from operations was $1.0 million for the first quarter of fiscal2008 compared to $1.1 million in the first quarter of fiscal 2007. Principalpayments on long-term debt for the first quarter of fiscal 2008 were $0.7million and additions to fixed assets were $0.1 million.  There were nodistributions to unit holders during the first quarter of fiscal 2008.  Anadditional $0.3 million was added to restricted cash to provide for principaland interest payments on the 1999 and 2001 bonds due in January 2008.

 

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** **

**Critical Accounting Policies and Estimates**

 

Theabove discussion and analysis of our results of operations and financialcondition are based upon our consolidated condensed financial statements, whichhave been prepared in accordance with accounting principles generally acceptedin the United States. The preparation of these financial statements requiresmanagement to make estimates and judgments that affect the reported amounts ofassets, liabilities, revenues and expenses, and related disclosure ofcontingent assets and liabilities. These estimates form the basis for makingjudgments about the carrying values of assets and liabilities that are notreadily 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 may change and eventhe best estimates and judgments may require adjustment. For a completedescription of the Company’s significant accounting policies, please see Note 1to the consolidated financial statements in the Company’s Annual Report on Form 10-Kfor the year ended August 31, 2007. There have been no changes to criticalaccounting policies identified in our Annual Report on Form 10-K for theyear ended August 31, 2007.

 

**Impact of Recently Issued Accounting Pronouncements**

 

Pleaserefer to Item 7, “Management’s Discussion and Analysis of Financial Conditionand Results of Operations”, in our Annual Report form 10-K for the year ended August 31,2007 for a discussion of the impact of recently issued accountingpronouncements

 

InSeptember 2006, the Financial Accounting Standards Board (“FASB”) issuedFASB Statement No. 157, Fair Value Measurements (“FAS 157”).  FAS 157establishes a single authoritative definition of fair value, sets out aframework for measuring fair value, and expands on required disclosures aboutfair value measurement.  The effective date of FAS 157 has been deferredone year which means the company effective date will be September 1,2009.  The provisions of FAS 157 are not expected to have a materialimpact on our consolidated financial statements.

 

InFebruary 2007, the FASB issued SFAS No. 159, “Establishing the FairValue Option for Financial Assets and Liabilities,” to permit all entities tochoose to elect to measure eligible financial instruments at fair value. SFAS No. 159 applies to fiscal years beginning after November 15,2007 with early adoption permitted for an entity that has also elected to applythe provisions of SFAS No. 157, “Fair Value Measurements.”  An entityis prohibited from retrospectively applying SFAS No. 159, unless itchooses early adoption.  Management is currently evaluating the impact ofSFAS No. 159 on its consolidated financial statements.

 

InDecember 2007, the Financial Accounting Standards Board (“FASB”) issuedFASB Statement No. 160, Noncontrolling Interests in Consolidated FinancialStatements (“FAS 160”). FAS 160 establishes accounting and reporting standardsfor the4 noncontrolling interest in a subsidiary and for the deconsolidation ofa subsidiary. The effective date of FAS 160 is for fiscal years beginning on orafter December 15, 2008. Golden Oval is reviewing  FAS 160 to determine what impact  it mayhave to the consolidated financial statements.

 

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

 

Therehave been no material changes in the market risk reported in the Company’sAnnual Report on Form 10-K for the fiscal year ended August 31, 2006.

 

**Item 4. Controls and Procedures**

 

**Evaluation of Disclosure Controls and Procedures**

 

TheCompany’s Chief Executive Officer, Dana Persson, and Chief Financial Officer,Thomas A. Powell, have reviewed the Company’s disclosure controls andprocedures as of the end of the period covered by this report. Based upon thisreview, they have concluded that there is a continuing deficiency in theCompany’s disclosure controls and procedures as described in Part II, Item9A “Controls and Procedures” of the Company’s Annual Report on Form 10-Kfor the year ended August 31, 2007. As a result of this deficiency, the Company’s filing of this QuarterlyReport on Form 10-Q was not timely. As of January 7, 2008, the Company has secured additional personnelresources to begin to address this deficiency in disclosure controls andprocedures.  The Company continues toevaluate the other possible remedial actions described in Item 9A of the Form 10-Kas well as the necessity for any of these actions.

 

**Changes in Internal Control over Financial Reporting**

 

Therehave been no changes in internal control over financial reporting that occurredduring the fiscal quarter covered by this report that have materially affected,or are reasonably likely to materially affect, the Company’s internal controlover financial reporting except for the additional resources secured to addressthe deficiency in disclosure controls and procedures noted above.

 

**PART II.    OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

None.

 

**Item 1A. Risk Factors**

 

None.

 

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

 

None.

 

**Item 3. Defaults Upon SeniorSecurities**

 

None.

 

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**Item 4. Submission of Matters to aVote of Security Holders**

 

None.

 

**Item 5. Other Information**

 

None.

 

**Item 6. Exhibits**

 
| **Exhibit  No.** | ** ** | **Description**                                                                                                                                  |
|------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|             |       |                                                                                                                                             |
| 31.1             |       | Certification  of the Chief Executive Officer pursuant to Rule 13a-14(a) or  Rule 15d-14(a) of the Exchange Act.             |
|             |       |                                                                                                                                             |
| 31.2             |       | Certification  of the Chief Financial Officer pursuant to pursuant to  Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act. |
|             |       |                                                                                                                                             |
| 32               |       | Certification  of the Chief Executive Officer and Chief Financial Officer pursuant to 18  U.S.C. Section 1350                               |

 

**SIGNATURES**

 

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

 
|                               |   | GOLDEN  OVAL EGGS, LLC                        |
|------------------------------------|--------|-----------------------------------------------|
|                               |   |                                          |
|                               |   | By:                                      | /s/  Dana Persson |
|                               |   | President  and Chief Executive Officer        |
|                               |   | (Principal  Executive Officer)                |
|                               |   |                                          |
|                               |   | By:                                      | /s/  Thomas A. Powell |
|                               |   | Vice  President and Chief Financial Officer   |
|                               |   | (Principal  Financial and Accounting Officer) |
|                               |   |                                          |
| Date:   January 22, 2008 |   |                                          |

 

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