**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM 10-Q**

**x****                             ****QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

**Forthe quarterly period ended November 30, 2006;**

**OR**

**o****                                ****TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

**forthe transition period from         TO          **

**GoldenOval Eggs, LLC**

(Exact name ofregistrant as specified in its charter)

| **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 telephonenumber, including area code)

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes x No o

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer or a non-accelerated filer. Seedefinition of “accelerated filer” and “large accelerated filer” inRule 12b-2 of the Exchange Act.
| Large Accelerated Filer  o |   | Accelerated Filer o |   | Non-Accelerated Filer x |
|---------------------------------|--------|---------------------|--------|-------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o No x

Indicate by checkmark if the registrant is not required to file reports pursuant toSection 13 or Section 15(d) of the Exchange Act.

Yes o  No x

As of January 10, 2007, there were 4,721,527 of the Company’sClass A Units and 697,350 of the Company’s Class B Units issued andoutstanding.

 

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**TABLEOF CONTENTS**

Golden Oval Eggs, LLC

Form 10-Q

For The Quarter Ended November 30, 2006

 
| 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 OVAL EGGS, LLC**

**Consolidated Condensed Balance Sheets**

**November 30, 2006 and August 31, 2006**

**(InThousands)**

(Unaudited)
| ** **                                | ** ** | **November 30,  2006** | ** ** | **August 31,  2006** | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|
| Assets                                    |       |                        |       |                      |       |
| Current assets                            |       |                        |       |                      |       |
| Cash and cash  equivalents                |       | $                           | 231        |                      | $          | 222 |   |
| Accounts  receivable                      |       | 16,946                      |       | 14,854                    |       |
| Inventories                               |       | 15,727                      |       | 16,005                    |       |
| Restricted cash                           |       | 1,111                       |       | 779                       |       |
| Other current  assets                     |       | 1,137                       |       | 1,076                     |       |
| Total current assets                      |       | 35,152                      |       | 32,936                    |       |
|                                      |       |                        |       |                      |       |
| Property, plant and  equipment            |       |                        |       |                      |       |
|                                      |       |                        |       |                      |       |
| Land and land  improvements               |       | 11,642                      |       | 11,553                    |       |
| Buildings                                 |       | 40,673                      |       | 40,669                    |       |
| Leasehold  Improvements                   |       | 864                         |       | 860                       |       |
| Equipment                                 |       | 72,693                      |       | 72,312                    |       |
| Construction in  progress                 |       | 105                         |       | 57                        |       |
|                                      |       | 125,977                     |       | 125,451                   |       |
| Accumulated  depreciation                 |       | (48,523                     | )          | (45,622                   | )          |
| Total property, plant  and equipment, net |       | 77,454                      |       | 79,829                    |       |
|                                      |       |                        |       |                      |       |
| Other assets                              |       |                        |       |                      |       |
| Investments                               |       | 1,464                       |       | 1,576                     |       |
| Intangible  assets, net                   |       | 20,250                      |       | 20,724                    |       |
| Goodwill                                  |       | 22,858                      |       | 22,858                    |       |
| Note receivable                           |       | 77                          |       | 77                        |       |
| Total other assets                        |       | 44,649                      |       | 45,235                    |       |
|                                      |       |                        |       |                      |       |
| Total assets                              |       | $                           | 157,255    |                      | $          | 158,000 |   |

 

Seeaccompanying notes to consolidated condensed financial statements

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| ** **                                        | ** ** | **November 30,  2006** | ** ** | **August 31,  2006** | ** ** |
|---------------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|
| Liabilities and Members’ Equity              |       |                        |       |                      |       |
| Current  liabilities                              |       |                        |       |                      |       |
| Revolving line of credit                          |       | $                           | 5,671      |                      | $          | 3,869 |   |
| Accounts payable                                  |       | 10,325                      |       | 7,665                     |       |
| Accrued interest                                  |       | 1,611                       |       | 812                       |       |
| Accrued compensation                              |       | 1,473                       |       | 1,485                     |       |
| Other current liabilities                         |       | 2,477                       |       | 2,877                     |       |
| Current maturities of long-term debt              |       | 9,461                       |       | 9,461                     |       |
| Total current  liabilities                        |       | 31,018                      |       | 26,169                    |       |
|                                              |       |                        |       |                      |       |
| Long-term debt,  less current maturities          |       | 92,111                      |       | 94,257                    |       |
|                                              |       |                        |       |                      |       |
| Members’ equity                              |       |                        |       |                      |       |
| Members’ equity                              |       | 33,183                      |       | 36,701                    |       |
| Non-controlling interest in consolidated entities |       | 943                         |       | 873                       |       |
| Total members’  equity                       |       | 34,126                      |       | 37,574                    |       |
| Total liabilities and  members’ equity       |       | $                           | 157,255    |                      | $          | 158,000 |   |

 

Seeaccompanying notes to consolidated condensed financial statements

2

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**GOLDEN OVAL EGGS, LLC**

**Consolidated Condensed Statements of Operations**

**For the Periods Ended November 30, 2006 and 2005**

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

**(Unaudited)**
| ** **                                                          | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                          | ** ** | **November  30,**                | ** ** | **November  30,** | ** ** |
| ** **                                                          | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| Net sales                                                           |       | $                                | 48,617     |   | $ | 19,033 |   |
|                                                                |       |                             |       |   |   |
| Cost of goods  sold                                                 |       | 44,395                           |       | 15,183 |   |
|                                                                |       |                             |       |   |   |
| Gross profit                                                        |       | 4,222                            |       | 3,850 |   |
|                                                                |       |                             |       |   |   |
| Operating  expenses                                                 |       | 5,182                            |       | 2,116 |   |
|                                                                |       |                             |       |   |   |
| Income (loss) from  operations                                      |       | (960                             | )          | 1,734 |   |
|                                                                |       |                             |       |   |   |
| Other income  (expense)                                             |       |                             |       |   |   |
| Interest (expense)                                                  |       | (2,722                           | )          | (507 | ) |
| Non-controlling  interest in income (loss) of consolidated entities |       | (62                              | )          | 5 |   |
| Other income                                                        |       | 80                               |       | 351 |   |
| Total other  expense                                                |       | (2,704                           | )          | (151 | ) |
|                                                                |       |                             |       |   |   |
| Net income  (loss)                                                  |       | $                                | (3,664     | ) | $ | 1,583 |   |
|                                                                |       |                             |       |   |   |
| Weighted average  members’ units outstanding                   |       | 5,420                            |       | 4,689 |   |
|                                                                |       |                             |       |   |   |
| Net income  (loss) per members’ unit, basic and diluted        |       | $                                | (0.68      | ) | $ | 0.34 |   |
|                                                                |       |                             |       |   |   |
| Distributions per unit                                              |       | $                                | —     |   | $ | — |   |

 

See accompanying notes to consolidated condensed financial statements

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**GOLDEN OVAL EGGS, LLC**

**Consolidated Condensed Statements of Cash Flows****For the Periods Ended November 30, 2006 and2005**

**(In Thousands)****(Unaudited)**
| ** **                                                                               | ** ** | **Three Months Ended** | ** ** |
|------------------------------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                                               | ** ** | **November 30,**            | ** ** | **November 30,** | ** ** |
| ** **                                                                               | ** ** | **2006**                         | ** ** | **2005** | ** ** |
| Cash flows from  operating activities                                                    |       |                             |       |   |   |
| Net income                                                                               |       | $                                | (3,664     | ) | $ | 1,583 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities        |       |                             |       |   |   |
| Depreciation                                                                             |       | 2,901                            |       | 1,828 |   |
| Amortization                                                                             |       | 474                              |       | 55 |   |
| Gain on sale of property, plant & equipment                                     |       | 1                                |       | (1 | ) |
| Non-controlling interest in income of consolidated  entities, net of distributions       |       | 70                               |       | (8 | ) |
| Changes in operating assets and liabilities                                              |       |                             |       |   |   |
| Accounts receivable                                                                      |       | (2,092                           | )          | (1,450 | ) |
| Inventories                                                                              |       | 278                              |       | 112 |   |
| Other current assets                                                                     |       | (61                              | )          | 66 |   |
| Accounts payable                                                                         |       | 2,660                            |       | (350 | ) |
| Accruals and other current liabilities                                                   |       | 533                              |       | (141 | ) |
| Net cash  provided by operating activities                                               |       | 1,100                            |       | 1,694 |   |
|                                                                                     |       |                             |       |   |   |
| Cash flows from  investing activities                                                    |       |                             |       |   |   |
| Purchases of property, plant and equipment                                               |       | (528                             | )          | (945 | ) |
| Proceeds from sale of property, plant and equipment                                      |       | 1                                |       | 9 |   |
| Retirement of investment in other cooperatives                                           |       | 112                              |       | 24 |   |
| Net cash used by  investing activities                                                   |       | (415                             | )          | (912 | ) |
|                                                                                     |       |                             |       |   |   |
| Cash flows from  financing activities                                                    |       |                             |       |   |   |
| Net increase in revolving line of credit                                                 |       | 1,802                            |       | 24 |   |
| Payments of long-term debt                                                               |       | (2,146                           | )          | (620 | ) |
| Decrease (increase) in restricted cash                                                   |       | (332                             | )          | (336 | ) |
| Net cash  provided (used) by financing activities                                        |       | (676                             | )          | (932 | ) |
| Net increase (decrease)  in cash and cash equivalents                                    |       | 9                                |       | (150 | ) |
| Cash and cash  equivalents - beginning of period                                         |       | 222                              |       | 690 |   |
| Cash and cash  equivalents - end of period                                               |       | $                                | 231        |   | $ | 540 |   |
|                                                                                     |       |                             |       |   |   |
| Supplementary  disclosures of cash flow information                                      |       |                             |       |   |   |
| Cash paid during the period for:                                                         |       |                             |       |   |   |
| Interest, net of capitalized interest of $40 and $56  during 2007 and 2006, respectively |       | $                                | 1,942      |   | $ | 1,035 |   |
| Supplementary  disclosures of non-cash transactions                                      |       |                             |       |   |   |
| Stock issued as officer compensation                                                     |       | $                                | 159        |   | 649 |   |
| Forfeiture of  stock compensation of departing officer                                   |       | (13                              | )          | — |   |

 

  Seeaccompanying notes to consolidated condensed financial statements

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**GOLDEN OVAL EGGS, LLC**

**Notes to Consolidated Condensed Financial Statements**

**November 30, 2006 and August 31, 2006**

**(In Thousands Except Unit Data)**

1. Organization Golden Oval Eggs, LLC (the “Company”) was organized as a Delaware limitedliability company to effect the reorganization of Midwest Investors ofRenville, Inc. (the “Cooperative”) effective August 31, 2004.  The Cooperative was incorporated as acooperative under the laws of the state of Minnesota in March 1994. TheCompany operates as the Cooperative’s successor and its operations are acontinuance of the operations of the Cooperative. The accompanying consolidatedcondensed financial statements for all periods presented are those of theCompany.

2.Basis of Presentation  The accompanying consolidated condensedbalance sheet as of August 31, 2006, which has been derived from auditedconsolidated financial statements, and the unaudited interim consolidatedcondensed financial statements at November 30, 2006 and for the three-monthperiods ended November 30, 2006 and 2005 of the Company have been prepared inaccordance with generally accepted accounting principles for interim financialreporting and Securities and Exchange Commission rules and regulations.  Certain information normally included infinancial statements and related footnotes prepared in accordance withgenerally accepted accounting principles has been condensed or omitted pursuantto the rules and regulations of the Securities and Exchange Commission.  The consolidated condensed financialstatements reflect all adjustments (consisting only of normal recurringadjustments) which are, in the opinion of management, necessary for a fairpresentation of the financial position and operating results for the interimperiods presented. These consolidated condensed financial statements should beread in conjunction with Management’s Discussion and Analysis of FinancialCondition and the consolidated financial statements and notes thereto included inthe Company’s Annual Report on Form 10-K for the year ended August 31,2006. The results of operations for the period ended November 30, 2006 are notnecessarily indicative of results to be expected for any other interim periodor for the entire year.

3. Inventories  Pullet and layer hen inventories are stated at the cost ofproduction, which includes the costs of the chicks, feed, overhead and labor.Layer hen flock costs are capitalized to the point at which the pullet goesinto production and are amortized over the productive lives of the flocks,generally 18 to 24 months. Feed, supplies and liquid egg inventories are statedat the lower of cost (first-in, first-out) or market. Inventories consisted ofthe following:
| ** **                | ** ** | **November 30,  2006** | ** ** | **August 31,  2006** | ** ** |
|---------------------------|------------|-----------------------------|------------|---------------------------|------------|
| Hens and pullets          |       | $                           | 9,996      |                      | $          | 10,050 |   |
| Eggs and egg  products    |       | 3,580                       |       | 3,409                     |       |
| Feed, supplies  and other |       | 2,151                       |       | 2,546                     |       |
| Total inventories         |       | $                           | 15,727     |                      | $          | 16,005 |   |

 

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4.Financing Agreement   On September 13, 2004, the Companyentered into a credit agreement. The credit agreement included a $55,000 lineof credit, of which $10,000 is a revolving line of credit and the remaining$45,000 is term debt.  EffectiveNovember 30, 2005, the Company and its lender signed the first amendmentto the above credit agreement. The effect of this amendment was to extend thetermination date of the revolving line of credit to November 30, 2006 andto change certain restrictive covenants.

OnJune 30, 2006, the Company entered into an amended and restated creditagreement which provided additional financing relating to the purchased certainassets and assumed certain liabilities of MoArk, LLC, Cutler at Abbeville,L.L.C., Hi Point Industries, LLC, L&W Egg Products, Inc., NorcoRanch, Inc. and MoArk Egg Corporation (collectively, “Seller”) relating tothe Seller’s business of manufacturing, marketing, selling and distributingliquid egg products for $60 million, which is more fully described in theCompany’s Annual Report on Form 10-K for the year ended August 31, 2006 and isreferred to in this Quarterly Report on Form 10-Q as the “MoArk Acquisition”.  The amended and restated credit agreementprovides for a $93,000 line of credit, consisting of a $15,000 revolving noteand $78,000 in term notes, and also modified certain restrictive covenantscontained in the prior credit agreement, as amended. As of November 30, 2006,the Company was not in compliance with covenants relating to its current ratio,working capital, leverage, and fixed charge coverage. The Company did meetcovenants relating to minimum net worth and risk management. The Companyrequested waivers relating to the current ratio, working capital, leverage, andfixed charge coverage covenants and received waivers effective as of November30, 2006.  The Company is current on allinterest and principal repayment requirements. In addition to $38,000 in fundsobtained from the amended and restated credit agreement, the Company funded aportion of the purchase price for the MoArk Acquisition through the issuance ofa note to the parent of the Seller, Land O’ Lakes, Inc., for an aggregate of$17,000, and the issuance of $5,000 of equity in the form of 697,350 of theCompany’s newly created Class B Units.

5. Stock BasedCompensation   As of September 1, 2006, 20,895 Class A Units, witha fair value of $159, were issued as partial payment of incentive compensationearned during fiscal 2006 under the employment agreements with such officers.These bonuses were previously recognized and accrued at the time they wereearned. On April 1, 2006, 14,000 Class A Units, with a fair value of $98were issued to the board of managers as compensation earned during fiscal 2006and 2005. This compensation was recognized and accrued during the periods inwhich it was earned.

On December 16, 2004,the FASB issued SFAS No. 123R, “Share-Based Payment”, which is a revisionof SFAS No. 123 and supersedes Accounting Principles Board OpinionNo. 25. SFAS No. 123R requires all share-based payments to employees,including grants of employee stock options, to be valued at fair value on thedate of grant, and to be expensed over the applicable vesting period. Pro formadisclosure of the income statement effects of share-based payments is no longeran alternative. SFAS No. 123R is effective for all stock-based awardsgranted on or after July 1, 2005. In addition, companies must alsorecognized compensation expense related to any awards that are not fully vestedas of the effective date. Compensation expense for the unvested awards will bemeasured based on the fair value of the awards previously calculated indeveloping the pro forma disclosures in accordance with the provision of SFASNo. 123. On March 25, 2005, the SEC staff issued Staff AccountingBulletin (“SAB”) 107, which summarizes the staff’s views regarding theinteraction between SFAS No. 123R and certain SEC rules andregulations and provides additional guidance regarding the valuation ofshare-based payment arrangements for public companies. In addition, onApril 15, 2005, the SEC amended Rule 4-01(a) of Regulation S-Xregarding the date the Company is required to comply with the standard, whichis March 1, 2006. The adoption of SFAS No. 123R, as interpreted bySAB 107, did not have a material impact on the Company’s consolidated resultsof operations.

6

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6. Use of Estimates  The preparation of consolidated condensed financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the consolidated condensed financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ materially from those estimates.

7.Intangibles and Goodwill   On June 30, 2006, the Companycompleted the MoArk Acquisition.  Thepurchase price consisted of $38,000 paid in cash, the issuance by the Companyof a $17,000 promissory note, and $5,000 paid by the issuance of 697,350newly-created Class B Units. Also on June 30, 2006, the Companyentered into an amended and restated credit agreement, as described in Note4.  The Company has allocated the purchaseprice in accordance with SFAS 141 “Business Combinations” and recorded $19,000of intangible assets to be amortized over the relevant life of the underlyingassets, and $22,800 in goodwill that is not amortized, but will be tested atleast annually for impairment under SFAS 142, “Goodwill and Other IntangibleAssets.”  Although only annual testing isrequired under SFAS 142, management considered whether  indicators of impairment were present inlight of the loss for the quarter ended November 30, 2006.  After such review, management concluded thatno indicators of impairment were present and accordingly no adjustment in thecarrying value of the goodwill was recognized.

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

**Forward-LookingStatements**

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 suchforward-looking statements.  If ourmanagement’s assumptions prove incorrect or should unanticipated circumstancesarise, our actual results could differ materially from those anticipated. Thesedifferences could be caused by a number of factors or combination of factorsincluding, but not limited to, those factors described in Part I, Item 1A. “RiskFactors” section of the Company’s Annual Report on Form 10-K for the yearended August 31, 2006, as well as those identified in other filings withthe Securities and Exchange Commission. Readers are strongly urged to consider such factors when evaluating anyforward-looking statement. The Company undertakes no obligation to update anyforward-looking statements to reflect future events or developments.

The following is adiscussion and analysis of our financial condition and results of operations asof and for the three month periods ended November 30, 2006 and 2005. This sectionshould be read in conjunction with the condensed financial statements andrelated notes in Item 1 of this Quarterly Report and our Annual Report on Form10-K for the year ended August 31, 2006.

**Summary**

Golden Oval Eggs, LLC is aDelaware limited liability company, primarily engaged in the business ofproducing, processing, marketing and distributing egg products. The Companyoperates seven production facilities in the United States.  On June 30, 2006, the Company closed itspreviously announced acquisition of certain asset of MoArk, LLC and itssubsidiaries relating to the business of manufacturing, marketing, selling anddistributing liquid egg products, as more fully described in the Company’sAnnual Report on Form 10-K for the year ended August 31, 2006.  With the completion of the MoArk Acquisition,the Company moved into the further processed egg business.

 The Company produces a wide range of eggproducts, from unpasteurized liquid eggs, further processed egg products forother food manufacturers, and finished goods for sale to retailers and foodservice customers.  Products are sold toother food manufacturers, restaurants, supermarkets and foodservicedistributors.

The Company producesapproximately half of its annual needs from eggs produced at layer barns at theCompany’s Renville, Minnesota and Thompson, Iowa facilities.  The remainder is satisfied from purchases ofeggs or liquid product in market based transactions.

The Company’s operatingincome or loss is materially affected by wholesale liquid egg prices, andpricing of further processed products which can fluctuate widely and areoutside of the Company’s control. Liquid eggs are a commodity product andprices fluctuate in response to supply/demand factors. The Company also sells aportion of its products under contracts at non-market prices. Depending uponmarket circumstances, the prices generated by the Company’s non-market volumetend to be less or more than what the prevailing open market prices wouldgenerate.

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The Company’s cost of productionis materially affected by feed, purchased egg and liquid egg costs, whichaveraged approximately 48% of the Company’s total costs in the firstquarter.  As a result of the MoArkacquisition, feed has dropped from 36% of cost of goods sold to 14%, reducingdirect exposure to volatile corn and soybean markets. Agricultural commodityprices influence purchased eggs and open market liquid egg prices although notnecessarily in the same direction at the same time.

**Results ofOperations**

*Net Sales* Net sales for the first quarter of fiscal2007 were $48.6 million, an increase of $29.6 million, equal to more than twoand one-half times the first quarter in the prior fiscal year.  The increase is due primarily to the inclusionof results from operations acquired in the MoArk Acquisition, which wascompleted in the fourth quarter of fiscal 2006. Additionally an increase in pounds sold due to the completion of theThompson, Iowa production facility was offset by a decline in average sellingprices for whole liquid eggs.  Poundssold in the first quarter were 107.3 million, an increase of 55.7 million, or107.8% over the same period year ago. Pounds from the acquired facilities accounted for 95.5% of the increase,with the additional production gained from completion of the last of stage ofconstruction at the Thompson, Iowa facility accounting for the remainder.  The average selling price per pound soldincreased from $0.342 to $0.432, an increase of $0.090, or 26.3%, as a resultof selling further processed products from the acquired facilities at higheraverage selling prices than first stage products.

*Cost ofgoods sold.* Cost ofgoods sold for the first quarter of fiscal 2007 was $44.4 million, an increaseof $29.2 million, or 192.4%, as compared to the first quarter of fiscal2006.  The increase is due primarily tothe inclusion of the MoArk businesses as described above, which accounted forapproximately 96% of the increase.  The balanceis due to the completion of the Thompson, Iowa expansion project and anincrease in feed costs per ton, which had an unfavorable impact of $(0.7)million in the Minnesota and Iowa facilities. In general, cost trends were unfavorable, as the cost of whole eggspurchased to produce liquid eggs rose while the open market price of liquid eggproducts did not respond proportionately.

*Operatingexpenses.* Operatingexpenses for the first quarter of fiscal 2007 were $5.2 million, an increase of$3.1 million, or 144.9%, as compared to the first quarter of fiscal 2006.  The increase is due primarily to theadditional sales, management and administrative employee expense associatedwith the MoArk Acquisition, as the majority of the employees at the acquiredfacilities became Golden Oval employees. Additionally, $0.4 million of the increase is due to amortization ofintangible assets and deferred financing costs also associated with the MoArkAcquisition.  Operating expenses declinedas a percent of net sales from 11.1% to 10.7%.

*Totalother expense.* Totalother expense for the first quarter of fiscal 2007 was $2.7 million, anincrease of $2.6 million from the prior year period.  Interest expense increased $2.2 million yearon year as a result of interest on the $55.0 of debt proceeds used to fund theMoArk Acquisition, including non-cash interest of $0.5 million on the noteissued to Land O’Lakes, Inc., the parent of the seller in the MoArkAcquisition.  Other income declined $0.3million due to activities at variable interest entities included in theconsolidated results.

*IncomeTaxes.  * As alimited liability company, the Company expects to be treated as a partnershipfor federal income tax purposes. Therefore, the Company will pay no federalincome tax and instead, the Company’s members will include their pro-rata shareof the Company’s net income as an item of income for the purposes of their ownfederal income tax returns.

*Net Income*.  Operations for the first quarterended November 30, 2006 resulted in a loss of $(3.7)million, or a loss of($0.68) per basic and diluted members’ unit, as compared to net income of $1.6million, or

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$0.34  per basic and diluted members’ unit for thequarter ended November 30, 2005. First quarter of fiscal year 2007 results perunit include the impact of issuing 697,350 units of Class B Units inconjunction with the MoArk Acquisition, each of which is convertible at theoption of the holder into the Company’s Class A Units.

As a result of the MoArkAcquisition in the fourth quarter of fiscal 2006, the Company expects revenuesin the second and third quarters of fiscal 2007 to increase substantially ascompared to the prior year periods. MoArk has historically sold over 200 million pounds of egg productsannually. The Company expects that this historical production will continue forthe balance of the Company’s fiscal year 2007.

**Liquidityand Capital Resources**

TheCompany’s working capital at November 30, 2006 was $4.0 million compared to$6.8 million at August 31, 2006.   The Company’s current ratio was1.13 at November 30, 2006 compared to 1.26 at August 31, 2006. On June 30,2006 the Company entered into an amended and restated credit agreement withCoBank ACB and the Metropolitan Life Insurance Company.  The amended and restated credit agreementprovided $38.0 million in new debt to finance the MoArk Acquisition and amendedcertain restrictive covenants contained in the prior agreement, asamended.  The Company is current on allinterest and principal payments although it did not meet certain restrictivecovenants regarding current ratio, working capital, leverage and fixed costcoverage (as discussed in Note 4 and described below) for the quarter endingNovember 30, 2006.  The Company requestedwaivers relating to the current ratio, working capital, leverage, and fixedcharge coverage covenants and received waivers effective as of November 30,2006. The amended and restated credit agreement provides for a $93,000,000 lineof credit, consisting of a $15.0 million revolving note that terminates onApril 30, 2007 and $78.0 million in term notes due beginning in 2014.  At the written request of the Company, therevolving note commitment may be renewed for any number of successive one-yearperiods in the sole discretion of the revolving note lenders, in which case thetermination date shall be extended for a period corresponding to each suchrenewal, if any. In January 2007, the Company requested a renewal of therevolving note. The Company has collateral in excess of the cap used todetermine availability on the revolving loan portion of its facility.  The Company may require significantadditional capital resources in order to proceed with potential futureexpansions or to otherwise respond to competitive pressures in theindustry.   In addition, the Company mayseek additional capital from an offering of our equity securities or byincurring additional indebtedness, or both.  No assurance can be giventhat additional working capital will be obtained in an amount that issufficient for the Company’s needs, in a timely manner or on terms andconditions acceptable to the Company or its members.  TheCompany’s financing needs are based upon management estimates as to futurerevenue and expense. Our business plan and our financing needs are also subjectto change based upon, among other factors, market and industry conditions,our ability to increase cash flow from operations and our ability tocontrol costs and expenses.  Our efforts to raise additionalfunds from the sale of equity may be hampered by the fact that oursecurities are illiquid and are subject to restrictions on transfer. Ourefforts to raise additional funds from incurring additional indebtednessmay be hampered by the fact that the Company has significant outstandingindebtedness and all of the Company’s assets are pledged to itslenders to secure existing debt.

The Company’s long-term debtat November 30, 2006, including current maturities, was $101.6 millioncompared to $103.7 million at August 31, 2006. As of November 30,2006, $5.7 million has been drawn against the $15.0 revolving line of credit,compared to $3.9 million as of August 31, 2006. Substantially all tradereceivables and inventories collateralize the Company’s line of credit andproperty, plant and equipment collateralize the Company’s long-term debt underits credit agreement and the note issued to Land O’Lakes, Inc.  The Company is required by certain provisionsof its credit agreements to maintain (1) a minimum tangible net worth ofnot less than $28.8 million plus 40% of earnings plus 100% of

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equity contributed afterSeptember 1, 2005; (2) a minimum current ratio of not less than 1.25 to1.0; (3) working capital of no less than $7.0 million; (4) aleverage ratio of less than 6.50 to 1.0; (5) a fixed charge coverage rationo less than 1.00 to 1; and have a certain amount of product under contractsbased on the current ratio of the Company. In addition, these provisionsrestrict the Company’s ability to make distributions, create liens, incurindebtedness and sell assets and properties. The Company requested waiversrelating to the current ratio, working capital, leverage, and fixed chargecoverage covenants and received waivers effective as of November 30, 2006.

Net cash flow fromoperations was $1.1 million for the first quarter of fiscal 2007 comparedto $1.7 million in the first quarter of fiscal 2006. Principal payments onlong-term debt were $2.1 million and additions to fixed assets were $0.5million.  There were no distributions tounit holders during the first quarter of fiscal 2007.  An additional $0.3 million was added torestricted cash to provide for the principal payment on the 1999 and 2001 bondsdue in July 2007.  Effective September 1, 2006, we issued 20,895Class A units to pay $.2 million in management bonuses. The managementbonuses were earned and accrued during fiscal year 2006. On April 1,2006, 14,000 Class A Units were issued to pay $0.1 million in Board ofDirectors compensation. The Board of Director’s compensation was earned andaccrued during fiscal years 2005 and 2006.

**CriticalAccounting Policies and Estimates**

The above discussion andanalysis of our results of operations and financial condition are based uponour consolidated condensed financial statements, which have been prepared inaccordance with accounting principles generally accepted in the United States.The preparation of these financial statements requires management to makeestimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosure of contingent assetsand liabilities. These estimates form the basis for making judgments about thecarrying values of assets and liabilities that are not readily apparent fromother sources. We base our estimates and judgments on historical experience andon various other assumptions that we believe are reasonable under thecircumstances. However, future events may change and even the best estimatesand judgments may require adjustment. For a complete description of the Company’ssignificant accounting policies, please see Note 1 to the consolidatedfinancial statements in the Company’s Annual Report on Form 10-K for theyear ended August 31, 2006. There have been no changes to criticalaccounting policies identified in our Annual Report on Form 10-K for theyear ended August 31, 2006.

**Impact ofRecently 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, 2006 for adiscussion of the impact of recently issued accounting pronouncements

In September 2006, theFinancial Accounting Standards Board (“FASB”) issued FASB Statement No. 157,Fair Value Measurements (“FAS 157”).  FAS157 establishes a single authoritative definition of fair value, sets out aframework for measuring fair value, and expands on required disclosures aboutfair value measurement.  FAS 157 iseffective for the Company on September 1, 2008 and will be appliedprospectively.  The provisions of FAS 157are not expected to have a material impact on our consolidated financialstatements.

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**Item 3.Quantitative and Qualitative Disclosures About Market Risk**

There have been no materialchanges in the market risk reported in the Company’s Annual Report onForm 10-K for the fiscal year ended August 31, 2006.

**Item 4.Controls and Procedures**

**Evaluationof Disclosure Controls and Procedures**

The Company’s ChiefExecutive Officer, Dana Persson, and Interim Chief Financial Officer, Thomas A.Powell, have reviewed the Company’s disclosure controls and procedures as ofthe end of the period covered by this report. Based upon this review, they haveconcluded that the Company’s disclosure controls and procedures are effective.

**Changes inInternal Control Over Financial Reporting**

There have been no changesin internal control over financial reporting that occurred during the fiscalquarter covered by this report that have materially affected, or are reasonablylikely to materially affect, the Company’s internal control over financialreporting.

**PART II.     OTHER INFORMATION**

**Item 1.Legal Proceedings**

As previously disclosed,three Notices of Violation (“NOVs”) were issued against us by the IowaDepartment of Natural Resources (“IDNR”) regarding alleged violations at ourThompson, Iowa facility of National Pollution Discharge and Elimination System(“NPDES”) permit limits for biochemical oxygen demand, total suspended solids,and ammonia nitrogen.

On December 5, 2006, theIowa Environmental Protection Commission referred the matter to the IowaAttorney General to seek appropriate relief through the courts, which couldinclude a judicial consent decree regarding a settlement on a civil penaltyamount between us and the Iowa Attorney General.  We have investigated the facts underlying theNOVs, and have met with IDNR representatives to address the resolution of theNOVs and compliance with the NPDES permit. Management intends to resolve theidentified issues through permanent improvements to the wastewater treatmentfacility and other operational changes. In addition, the Company may be subject to penalties imposed by the IowaAttorney General as a result of the alleged violations.  At this time, the cost  associated with the interim solution, permanentimprovement to the wastewater treatment facility, compliance with the NPDESpermit and the amount of penalty or fine imposed by the Iowa Attorney Generalcannot be estimated, however they may be significant, both individually and inthe aggregate.

**Item 1A.Risk Factors**

Not applicable.

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

None.

**Item 3.Defaults Upon Senior Securities**

None.

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**Item 4.Submission of Matters to a Vote 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**

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 |
|                          |   |   | 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 16, 2007 |   |   |                                         |   |

 

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