Table ofContents

 

 

 

**UNITED STATESSECURITIES 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 February 28,2009;**

 

**OR**

 

| **o** | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934** |
|-------|----------------------------------------------------------------------------------------------------------|

 

**for the transition period from         TO         **

 

**The New Midwest Company LLC**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                                    | ** ** | **20-0422519**                           |
|-----------------------------------------------------------------|------------|------------------------------------------|
| (State or other jurisdiction of incorporation or  organization) |       | (I.R.S. employer identification  number) |
|                                                            |       |                                     |
| **209 North Main Street**                                       |       |                                     |
| **Renville, MN**                                                | ** ** | **56284**                                |
| (Address of principal executive offices)                        |       | (Zip code)                               |

 

Telephone: **(320) 329-3363**

(Registrant’s telephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(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

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes o No o

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See definition of “acceleratedfiler,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2of the Exchange Act.

 

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

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act.)

Yes o  No x

 

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Exchange Act.

Yes o  No x

 

As of April 24,2009, there were 6,430.499 of the Company’s Class A Units issued and outstanding.

 

 

 

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**TABLE OFCONTENTS**

 

The New Midwest Company LLC

(formerly Golden Oval Eggs, LLC)

Form 10-Q

For The Quarter Ended February 28, 2009

 
| **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                                 |   | 14 |
| Item 4.          |       | Controls and  Procedures                                                                    |   | 14 |
|             |       |                                                                                        |   |   |
| **Part II** | ** ** | **Other Information**                                                                       |   |   |
| Item 1.          |       | Legal Proceedings                                                                           |   | 14 |
| Item 1A.         |       | Risk Factors                                                                                |   | 15 |
| Item 2.          |       | Unregistered  Sales of Equity Securities and Use of Proceeds                                |   | 16 |
| Item 3.          |       | Defaults Upon  Senior Securities                                                            |   | 16 |
| Item 4.          |       | Submission of  Matters to a Vote of Security Holders                                        |   | 16 |
| Item 5.          |       | Other Information                                                                           |   | 16 |
| Item 6.          |       | Exhibits                                                                                    |   | 16 |
|             |       |                                                                                        |   |   |
| **Signatures**   |       |                                                                                        |   | 17 |
|                  |            |                                                                                             |  |  |  |  |

 

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**PART I.    FINANCIAL INFORMATION**

 

**Item 1. Condensed Financial Statements**

 

**The New Midwest Company LLC**

 

**Consolidated Condensed Balance Sheets**

**February 28, 2009 and August 31,2008**

 

**(In Thousands)**

 
| ** **                               | ** ** | **February 28,  2009** | ** ** | **August 31,  2008** | ** ** |
|------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|
|                                     |       | **(unaudited)**             |       |                      |       |
| Assets                                   |       |                        |       |                      |       |
| Current assets                           |       |                        |       |                      |       |
| Cash and cash equivalents                |       | $                           | 735        |                      | $          | 4,289 |   |
| Accounts receivable                      |       | 11,319                      |       | 15,861                    |       |
| Inventories                              |       | 22,175                      |       | 21,783                    |       |
| Restricted cash                          |       | 975                         |       | 2,212                     |       |
| Other current assets                     |       | 1,432                       |       | 1,229                     |       |
| Total current assets                     |       | 36,636                      |       | 45,374                    |       |
|                                     |       |                        |       |                      |       |
| Property, plant and equipment            |       |                        |       |                      |       |
|                                     |       |                        |       |                      |       |
| Land and land improvements               |       | 11,649                      |       | 11,649                    |       |
| Buildings                                |       | 40,798                      |       | 40,279                    |       |
| Leasehold improvements                   |       | 378                         |       | 943                       |       |
| Equipment                                |       | 71,422                      |       | 72,275                    |       |
| Construction in progress                 |       | 2,353                       |       | 317                       |       |
|                                     |       | 126,600                     |       | 125,463                   |       |
| Accumulated depreciation                 |       | (71,925                     | )          | (67,674                   | )          |
| Total property, plant and equipment, net |       | 54,675                      |       | 57,789                    |       |
|                                     |       |                        |       |                      |       |
| Other assets                             |       |                        |       |                      |       |
| Investments                              |       | 1,658                       |       | 1,733                     |       |
| Intangible assets, net                   |       | 13,218                      |       | 13,962                    |       |
| Goodwill                                 |       | 22,858                      |       | 22,858                    |       |
| Note receivable                          |       | 480                         |       | 248                       |       |
| Total other assets                       |       | 38,214                      |       | 38,801                    |       |
|                                     |       |                        |       |                      |       |
| Total assets                             |       | $                           | 129,525    |                      | $          | 141,964 |   |

 

See accompanying notes toconsolidated condensed financial statements

 

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| ** **                                        | ** ** | **February 28,  2009** | ** ** | **August 31,  2008** | ** ** |
|---------------------------------------------------|------------|-----------------------------|------------|---------------------------|------------|
| ** **                                        | ** ** | **(unaudited)**             | ** ** | ** **                | ** ** |
| Liabilities and Members’  Equity             |       |                        |       |                      |       |
| Current liabilities                               |       |                        |       |                      |       |
| Revolving line of credit                          |       | $                           | 16,310     |                      | $          | 16,261 |   |
| Accounts payable                                  |       | 6,861                       |       | 9,531                     |       |
| Accrued interest                                  |       | 438                         |       | 500                       |       |
| Accrued compensation                              |       | 1,455                       |       | 3,005                     |       |
| Other current liabilities                         |       | 1,846                       |       | 2,720                     |       |
| Current maturities of long-term debt              |       | 63,374                      |       | 67,526                    |       |
| Total current liabilities                         |       | 90,284                      |       | 99,543                    |       |
|                                              |       |                        |       |                      |       |
| Long-term debt, less current maturities           |       | 6,316                       |       | 6,420                     |       |
|                                              |       |                        |       |                      |       |
| Members’ equity                              |       |                        |       |                      |       |
| Members’ equity                              |       | 31,541                      |       | 34,852                    |       |
| Non-controlling interest in consolidated entities |       | 1,394                       |       | 1,149                     |       |
| Total members’ equity                        |       | 32,925                      |       | 36,001                    |       |
| Total liabilities and members’ equity        |       | $                           | 129,525    |                      | $          | 141,964 |   |

 

See accompanying notes toconsolidated condensed financial statements

 

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** **

**The New Midwest Company LLC**

 

**Consolidated Condensed Statements ofOperations**

 

**For the Periods Ended February 28,2009 and February 29, 2008**

 

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

**(Unaudited)**

 
| ** **                                                  | ** ** | **Three Months Ended** | ** ** | **Six Months Ended** | ** ** |
|-------------------------------------------------------------|------------|----------------------------------|------------|--------------------------------|------------|
| ** **                                                  | ** ** | **February 28,  2009**      | ** ** | **February 29,  2008**    | ** ** | **February 28,  2009** | ** ** | **February 29,  2008** | ** ** |
| Net sales                                                   |       | $                                | 40,315     |                           | $          | 55,335 |   | $ | 92,712 |   | $ | 108,538 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Cost of goods sold                                          |       | 38,712                           |       | 51,949                         |       | 86,854 |   | 101,067 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Gross profit                                                |       | 1,603                            |       | 3,386                          |       | 5,858 |   | 7,471 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Operating expenses                                          |       | 3,188                            |       | 8,877                          |       | 7,649 |   | 13,319 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Loss from operations                                        |       | (1,585                           | )          | (5,491                         | )          | (1,791 | ) | (5,848 | ) |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Other income (expense)                                      |       |                             |       |                           |       |   |   |   |   |
| Interest expense                                            |       | (1,353                           | )          | (2,480                         | )          | (3,077 | ) | (5,209 | ) |
| Non-controlling interest in income of consolidated entities |       | (154                             | )          | (81                            | )          | (143 | ) | (104 | ) |
| Other income                                                |       | 269                              |       | 342                            |       | 1,574 |   | 694 |   |
| Forgiveness of debt                                         |       | —                           |       | 17,000                         |       | — |   | 17,000 |   |
| Total other income (expense)                                |       | (1,238                           | )          | 14,781                         |       | (1,646 | ) | 12,381 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Net income (loss)                                           |       | $                                | (2,823     | )                              | $          | 9,290 |   | $ | (3,437 | ) | $ | 6,533 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Weighted average Members’ units outstanding            |       | 5,509                            |       | 5,431                          |       | 5,508 |   | 5,431 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Net income (loss) per Members’ unit, basic             |       | $                                | (0.51      | )                              | $          | 1.71 |   | $ | (0.62 | ) | $ | 1.20 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Net income (loss) per Members’ unit, diluted           |       | $                                | (0.51      | )                              | $          | 1.67 |   | $ | (0.62 | ) | $ | 1.17 |   |
|                                                        |       |                             |       |                           |       |   |   |   |   |
| Distributions per unit                                      |       | $                                | —     |                           | $          | — |   | $ | — |   | $ | — |   |

 

See accompanying notes to consolidated condensedfinancial statements

 

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** **

**The New Midwest Company LLC**

 

**Consolidated Condensed Statements ofCash Flows****For the Periods Ended February 28, 2009and February 29, 2008**

(In Thousands)(Unaudited)

 
| ** **                                                                                 | ** ** | **Six Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------------|------------|
| ** **                                                                                 | ** ** | **February 28,  2009**    | ** ** | **February 29,  2008** | ** ** |
| Cash flows from operating activities                                                       |       |                           |       |   |   |
| Net income (loss)                                                                          |       | $                              | (3,437     | ) | $ | 6,533 |   |
| Adjustments to reconcile net income to net cash provided by operating  activities          |       |                           |       |   |   |
| Depreciation                                                                               |       | 5,086                          |       | 5,376 |   |
| Amortization                                                                               |       | 744                            |       | 948 |   |
| Gain on sale of property, plant & equipment                                       |       | (181                           | )          | — |   |
| Asset impairment                                                                           |       | —                         |       | 3,531 |   |
| Gain on debt forgiveness                                                                   |       | —                         |       | (17,000 | ) |
| Stock vesting (SFAS 123R)                                                                  |       | 116                            |       | 26 |   |
| Changes in operating assets and liabilities                                                |       |                           |       |   |   |
| Accounts receivable                                                                        |       | 4,542                          |       | (887 | ) |
| Inventories                                                                                |       | (392                           | )          | (1,393 | ) |
| Other current assets                                                                       |       | (203                           | )          | (414 | ) |
| Accounts payable                                                                           |       | (2,670                         | )          | 1,124 |   |
| Accruals and other current liabilities                                                     |       | (2,486                         | )          | 1,313 |   |
| Minority interest                                                                          |       | 245                            |       | 125 |   |
| Net cash provided (used) by operating activities                                           |       | 1,364                          |       | (718 | ) |
|                                                                                       |       |                           |       |   |   |
| Cash flows from investing activities                                                       |       |                           |       |   |   |
| Purchases of property, plant and equipment                                                 |       | (2,163                         | )          | (152 | ) |
| Proceeds from sale of property, plant and equipment                                        |       | 372                            |       | — |   |
| Advance of note receivable                                                                 |       | (232                           | )          | (162 | ) |
| Retirement of investment in other cooperatives                                             |       | 75                             |       | 37 |   |
| Net cash used by investing activities                                                      |       | (1,948                         | )          | (277 | ) |
|                                                                                       |       |                           |       |   |   |
| Cash flows from financing activities                                                       |       |                           |       |   |   |
| Net increase in revolving line of credit                                                   |       | 49                             |       | 2,811 |   |
| Payments of long-term debt                                                                 |       | (4,256                         | )          | (1,484 | ) |
| (Increase) decrease in restricted cash                                                     |       | 1,237                          |       | (332 | ) |
| Net cash provided (used) by financing activities                                           |       | (2,970                         | )          | 995 |   |
| Net increase (decrease) in cash and cash equivalents                                       |       | (3,554                         | )          | — |   |
| Cash and cash equivalents - beginning of period                                            |       | 4,289                          |       | — |   |
| Cash and cash equivalents - end of period                                                  |       | $                              | 735        |   | $ | — |   |
|                                                                                       |       |                           |       |   |   |
| Supplementary disclosures of cash flow information                                         |       |                           |       |   |   |
| Cash paid during the period for:                                                           |       |                           |       |   |   |
| Interest, net of capitalized interest of $152 and $109 during 2009  and 2008, respectively |       | $                              | 3,077      |   | $ | 1,962 |   |
| Supplementary disclosures of non-cash transactions                                         |       |                           |       |   |   |
| Debt forgiveness                                                                           |       | $                              | —     |   | 17,000 |   |
| Warrant issued for 880,492 Class A Convertible Preferred Units                        |       | —                         |       | 3,242 |   |
| Forefiture of stock compensation by departing employee                                     |       | 33                             |       |   |   |
| Class A units issued as payment of accrued officer bonus                              |       | 202                            |       | — |   |

 

See accompanying notes toconsolidated condensed financial statements

 

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** **

**The New Midwest Company LLC**

 

**Notes to Consolidated CondensedFinancial Statements**

 

**February 28, 2009 and August 31,2008**

 

**(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 of Renville, Inc.(the “Cooperative”) effective August 31, 2004.  The Cooperative wasincorporated as a cooperative under the laws of the state of Minnesota in March 1994.The Company 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.

 

On March 30, 2009,Golden Oval Eggs, LLC (the “Company”) and its affiliates GOECA, LP, GOEMCA, Inc.,and Midwest Investors of Iowa, Cooperative (collectively “Seller”) completedthe sale of all or substantially all of its assets used in its business ofproducing, processing, and distributing value added egg products (the “AssetSale”) to Rembrandt Enterprises, Inc. (the “Purchaser”) for a purchaseprice of $122,987,000. The Asset Sale was conducted pursuant to the terms andconditions previously disclosed by the Company of a Purchase and Sale Agreement(the “Purchase Agreement”) dated December 15, 2008 among Seller andPurchaser. The Purchase Agreement was filed as Exhibit 10.20 to theCompany’s Annual Report on Form 10-K as filed on December 23, 2008with the Securities and Exchange Commission for the fiscal year ended August 31,2008. The cash payment received by the Company at closing was $118,687,000 with$2,500,000 held back in connection with the Closing Working Capital Adjustment,as described in the Purchase Agreement, and an additional $1,800,000 held backin connection with certain adjustments agreed to by the parties.

 

2. Basis ofPresentation  The accompanying consolidated condensed balance sheet asof August 31, 2008, which has been derived from audited consolidatedfinancial statements, and the unaudited interim consolidated condensedfinancial statements at February 28, 2009 and for the three-month periodsended February 28, 2009 and February 29, 2008 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 financial statementsand related footnotes prepared in accordance with generally accepted accountingprinciples 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, 2008. The results of operations for the periodended February 28, 2009 are not necessarily indicative of results to beexpected for any other interim period or for the entire year. The statementswere prepared on a going concern basis and do not reflect the sale ofsubstantially all of the assets of the company on March 30, 2009, onemonth after the reporting period.  Noprovisions for any contingent liabilities, such as success fees, acceleratedvesting of benefits, severance payments or other transaction costs arereflected in the reporting period.  Sincethe sale price equaled the carrying value of the assets sold and liabilitiesassumed, no adjustment for fair value is reflected.

 

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:

 
| ** **               | ** ** | **February 28,  2009** | ** ** | **August 31,  2008** | ** ** |
|--------------------------|------------|-----------------------------|------------|---------------------------|------------|
|                     |       | **(unaudited)**             |       |                      |       |
| Hens and pullets         |       | $                           | 16,044     |                      | $          | 14,024 |   |
| Eggs and egg products    |       | 3,339                       |       | 3,987                     |       |
| Feed, supplies and other |       | 2,792                       |       | 3,772                     |       |
| Total inventories        |       | $                           | 22,175     |                      | $          | 21,783 |   |

 

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4. FinancingAgreements   Golden Oval Eggs, LLC, Midwest Investors of IowaCooperative and GOECA, LP are parties to a Credit Agreement that was originallyentered into on September 13, 2004, and subsequently amended.  Withthe last amendment effective August 29, 2008, the maturity date of $2,500of a short term revolving note was extended from July 31, 2008 to March 1,2009 and the commencement date of certain financial covenants was also extendedto March 1, 2009.  We have historically financed our working capitalneeds through the Credit Agreement and, to the extent of our cash flow, fromoperations.  The Credit Agreement, as amended, requires the Company, amongother things, to generate monthly EBITDA of at least $1,000 for the term of theCredit Agreement.  In addition, the amendment requires payments into anescrow account to fund improvements to wastewater processing facilities at theThompson, Iowa location.  The amounts required and made are $200 per monthfor September, October and November and $100 for December. TheCompany was in compliance with all covenants under the Credit Agreement foreach month tested in the quarter ended February 28, 2009 and as of February 29,2008.  Included in the amendment is a requirement that any funds from asale of the Company be utilized to repay all indebtedness on or before March 1,2009.  The requirement was extended until April 15, 2009.  Accordingly, all bank debt has beenclassified as a current liability.  TheCompany concluded the sale of substantially all of its assets on March 30,2009.  Please see Form 8-K dated March 30,2009 for a fuller discussion of the sale.

 

5. Stock BasedCompensation   The Company has bonus and compensation plans in placefor management.  Under these agreements management may receive up to 50%of certain performance bonuses in the form of Class A Units.  TheCompany accrues for management bonuses during the year based upon the estimatedamount that will be earned by year end.  Upon approval by the Board ofManagers, the bonuses are paid to management.  The number of units to beissued is based upon the estimated value of the Class A Units at the timethe bonus is awarded.  For the three months ended February 28, 2009,44,876 Class A Units were awarded to management at a value of $4.50 perUnit.  For the three months ended February 29,2008, no Class A Units were issued to management.

 

The Class A Unitsare nontransferable and subject to forfeiture ratably over the following threeyears.  The employee must be employed on the anniversary date of issuanceto avoid forfeiture.  In the event that termination of the employeeoccurs, the Company will record any forfeiture of units as a reduction tocompensation expense in the period in which the forfeiture occurs.  Therewere no forfeitures for the three months ended February 28, 2009 nor forthe quarter ended February 29, 2008. In the event of a change of control, the vesting periodaccelerates.  Please see Schedule 14A,the Definitive Proxy Statement, pages 35 and 36, for a more completediscussion.  In the event of a change ofcontrol, the vesting of the units granted is accelerated. No compensationexpense for recognition of the accelerated vesting has been included in thepresentation.

 

The members of the Boardof Managers are granted 2,000 Class A Units for each year served on theboard following each year of service.  The Company recognizes compensationexpense for these awards based upon the fair value on the date they aregranted.  For the three months ended February 28, 2009 and February 29,2008 no units were awarded to the Board of Managers.

 

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6. Earnings per Share  Basic net income (loss) per unit was calculated by dividing net income (loss)by the weighted average number of Class A common units outstanding duringthe period. Diluted net income (loss) per unit was calculated by dividingnet income (loss) by the weighted average number of Class A common unitsoutstanding during the period plus the dilutive effects of the Warrant.Convertible Class A Preferred units representing 146,749 units wereincluded in the calculation of diluted net income per members’ unit.

 
| ** **                                 | ** ** | **February 28,  2009** | ** ** | **February 29,  2008** | ** ** |
|--------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| Numerator                                  |       |                        |       |                        |       |
| Net income (loss)                          |       | $                           | (3,437     | )                           | $          | 6,533 |   |
|                                       |       |                        |       |                        |       |
| Denominator                                |       |                        |       |                        |       |
| Weighted average units outstanding         |       | 5,509                       |       | 5,431                       |       |
|                                       |       |                        |       |                        |       |
| Diluted weighted average units outstanding |       | 5,509                       |       | 5,578                       |       |
|                                       |       |                        |       |                        |       |
| Basic profit (loss) per share              |       | $                           | (0.62      | )                           | $          | 1.20 |   |
|                                       |       |                        |       |                        |       |
| Diluted profit (loss) per share            |       | $                           | (0.62      | )                           | $          | 1.17 |   |

 

7. 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.

 

8. Capital Resourcesand Liquidity and Sale of Substantially All Assets.   The Company wasa party to an Amended and Restated Credit Agreement, as amended, withMetropolitan Life Insurance Company as lender and CoBank, ACB as lender andadministrative agent (the “Credit Agreement”).  Commencing in March 2008the Company had undertaken the pursuit of strategic alternatives as requiredunder its credit agreements.  On March 30, 2009, the Companyconcluded the transaction to sell substantially all of its assets to RembrandtEnterprises, Inc. for $122,987 and the assumption of certain liabilities,with a subsequent adjustment for working capital and other matters as agreed bythe parties.  The Company used the proceeds of the sale to satisfy all ofits obligations to lenders under its credit agreements.  As part of thetransation, the Company changed its name to “The New Midwest Company LLC”.  The transaction is more fully described on Form 8-Kdated March 30, 2009.

 

9. Legal Proceedings.   Please refer to pages 61 and 62 of Schedule 14A Definitive Proxy Statementdated March 10, 2009 for a full description of legal matters.

 

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

 

**Forward-LookingStatements**

 

This Management’sDiscussion and Analysis of Financial Condition and Results of Operationscontains, in addition to historical information, forward-looking statementsthat are based on current expectations, beliefs, intentions or futurestrategies of the management of Golden Oval Eggs, LLC (“we”, “us”, “our”, orthe “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, 2008, aswell as those identified in other filings with the Securities and ExchangeCommission, in particular Form 14 A the Proxy in which unit holderapproval was sought for the sale of substantially all of the assets of theCompany.  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.

 

The following is adiscussion and analysis of our financial condition and results of operations asof and for the three month periods ended February 28, 2009 and February 29,2008. This section should be read in conjunction with the condensed financialstatements and related notes in Item 1 of this Quarterly Report and our AnnualReport on Form 10-K for the year ended August 31, 2008 and Schedule14A definitive Proxy Statement dated March 10, 2009.

 

**Summary**

 

Golden Oval Eggs, LLC isa Delaware limited liability company, primarily engaged in the business ofproducing, processing, marketing and distributing egg products. The Companyoperates five production facilities in the United States.  It maintainsits headquarters in Renville, Minnesota and a sales office in Plymouth,Minnesota.

 

The Company produces awide range of egg products, from unpasteurized liquid eggs, further processedegg products for other food manufacturers, and finished goods for sale toretailers and food service customers.  Products are sold to other foodmanufacturers, restaurants, supermarkets and foodservice distributors.

 

The Company producesapproximately two-thirds of its annual needs from eggs produced at layer barnsat the Company’s Renville, Minnesota and Thompson, Iowa facilities.  Theremainder is satisfied from purchases of eggs or liquid product under a varietyof pricing arrangements with third partiers.

 

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.

 

The Company’s cost ofproduction is materially affected by feed, purchased egg and liquid egg costs,which averaged well over half of the Company’s total production costs in thesecond quarter of fiscal 2009.

 

On March 30, 2009, the company soldsubstantially all of its assets.  Thecompany continued to operate in the usual and ordinary course up to the close, andthe purchaser continued operations without interruption.  No transaction costs or other gains or lossesrelating to the transaction are reflected in the results of operations for thereporting period.

 

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**Resultsof Operations**

 

Results of Operations —Second Quarter Fiscal Year 2009 Compared to Second Quarter Fiscal Year 2008

 

 *Net Sales*              Netsales for the second quarter of fiscal 2009 were $40.3 million, a decline of$15.0 million, or 27.1% below the second quarter in the prior fiscal year.Pounds sold in the second quarter were 64.2 million, a decrease of 5.4 million,or 7.8 % less than the same period year ago.  The average selling priceper pound sold decreased from $0.745 to $0.579, a decrease of $0.166, or 22.3%, as a result of lower selling prices experienced in an environment of sharplylower demand and priced liquid egg markets.

 

*Cost ofgoods sold.*              Cost of goods sold for the secondquarter of fiscal 2009 was $38.7 million, a decrease of $13.2 million, or25.5%, as compared to the second quarter of fiscal 2008.  Thedecrease is primarily a result of decreases in the cost of feed, purchasedeggs and purchased liquid eggs.

 

*Operatingexpenses.*Operating expenses for the second quarter of fiscal 2009 were $3.2 million, adecrease of $5.7 million, or 64.1%, as compared to the second quarter of fiscal2008. The majority of the decline is due to asset impairment chargesrecorded for discontinued operations in the prior year period, as well asprovisions for withdrawal from certain unprofitable markets also in the prioryear period.

 

*Totalother income (expense).* Total other expense for the second quarter of fiscal 2009 was $1.2million, compared to income of $14.8 million in the prior year period. Theprimary reason for the decrease in total other income was the cancellation ofthe $17.0 million note we issued Land O’Lakes in connection with the amendmentof the terms of the MoArk Acquisition in the prior year period. Interestexpense decreased $1.1 million primarily due to lower interest rates and to theelimination of interest on the cancelled note.

 

*IncomeTaxes.  * Asa limited 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 or loss as an item of income for the purposes oftheir own federal income tax returns.

 

*NetIncome (Loss)*. Operations for the second quarter ended February 28, 2009 resultedin a loss of $(2.8) million, or a loss of $(0.51) per basic and diluted members’unit, as compared to a profit of $9.3 million, or $1.71 per basic members’unit and $1.67 per diluted members’ unit for the quarter ended February 29,2008.

 

The Company’s financialperformance in the current quarter may not be indicative of future quarters dueto seasonal factors and volatility in both selling prices and cost of materialspurchased, as well as industry factors in an intensely competitive industry.

 

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Results of Operations —Six Months ended February 28, 2009 Compared to Six Months ended February 29,2008

 

*NetSales              *Net sales for the first half of fiscal2009 were $92.7 million, a decrease of $15.8 million, or 14.6% less than thesales of the first half of the prior fiscal year.  The decrease isdue to lower average selling prices per pound for liquid eggs for the firsthalf of fiscal 2009 of $0.657 versus $0.735 for the first half of fiscal year2008, a decrease of $0.078, or 10.6%. Pounds sold in the first half were 130.1 million, a decrease of 18.3million, or 12.3% over the same period year ago.

 

*Cost ofGoods Sold            *Cost of goods sold for the first half offiscal 2009 was $86.8 million, a decrease of $14.2 million or 14.1% of thefigure for the first half of fiscal 2008. The decline was essentially in line with the sales decline, andattributed to lower volumes and lower commodity costs, in particular corn as itcame off the highs of the summer of 2008.

 

*OperatingExpenses           *Operating expenses for the first half offiscal 2009 were $7.6 million, a decrease of $5.7 million, or 46.2%, from thefirst half of fiscal 2008.  The decline is primarily attributable tocharges recorded in the prior year for asset impairment of $3.7 million recordedfor discontinued operations at the Abbeville and California processingfacilities, and a Land O’Lakes licensing agreement that was recorded on ourbalance sheet statements as an intangible asset, as well as provisions forexiting unprofitable markets.

 

*Total OtherIncome (Expense)         *Total other income swung to expense of$(1.6) million from income of $12.4 million, a decrease of $14.0 million forthe period.   The primary reason for the decrease in other income was thecancellation of the $17.0 million note we issued to Land O’Lakes in connectionwith the amendment of the terms of the MoArk Acquisition in the first half ofthe prior period.  Interest expense decreased by $2.1 million, due inapproximately equal measure to lower interest rates and the elimination ofinterest on the cancelled note.

 

*IncomeTaxes*    Asa limited liability company, the Company expects to be treated as a partnershipfor federal income tax purposes.  Therefore, the Company will pay nofederal income tax and instead, the Company’s members will include theirpro-rata share of the Company’s net income as an item of income for thepurposes of their own federal income tax returns.

 

*NetIncome (Loss)   *Operations for the six months ended February 28,2009 resulted in a loss of $(3.4) million, or $(0.62) per basic and dilutedmembers’ unit , as compared to a profit of $6.5 million, or $1.20 per basicmembers’ unit and $1.17 per diluted members’ unit for the same period a yearago.

 

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**Liquidityand Capital Resources**

 

 The Company’sworking capital at February 28, 2009 was $(53.6) million compared to$(54.2) million at August 31, 2008.   In both cases, amounts dueunder the credit agreements have been accelerated, as they were anticipated tobe and subsequently were paid from the proceeds of the sale of substantiallyall of the Company’s assets, anticipated to close less than twelve months fromthe end of the prior fiscal year. In both periods, absent the acceleration, theCompany’s working capital would be positive.  The Company’s current ratiowas 0.4 at February 28, 2009 compared to 0.5 at August 31, 2008, alsoaffected by the debt acceleration.  Without the acceleration, in bothperiods the Company’s current ratio would exceed 1.0.

 

Effective August 29,2008, the Company entered into an amendment to its credit agreements thatprovided for the resumption of principal payments on its Tranche A and TrancheB Term Loans, in the aggregate amount of $692,000 per month, extended thetermination date on a $2.5 million short term note to March 1, 2009,extended the termination date of the revolving line of credit to March 1,2009, and required monthly deposits into an escrow account to be used forimprovements to the Thompson, Iowa waste water processing facility.  Thepayments are $200,000 for September 2008, October 2008 and November 2008and $100,000 for December 2008.  All payments were made. The dateswere extended until April 15, 2009. The Company is also required to maintain a minimum EBITDA of $1.0million for each month through March 1, 2009.  No events of defaulthave been declared in the period ending February 28, 2009.  TheCompany is current on all interest and principal payments, including those tothe trustee for the bonds.

 

As previously reported,on December 15, 2008, the Company entered into a definitive agreement tosell substantially all of its assets for $123.75 million plus the assumption ofcertain liabilities, to be adjusted for working capital at close.  Thetransaction closed on March 30, 2009. The transaction is reported in more detail on Form 8-K dated March 30,2009.

 

The Company’s long-termdebt at February 28, 2009, including current maturities, was$69.7 million compared to $73.9 million at August 31, 2008. Asof February 28, 2009, $16.3 million has been drawn against the $17.5revolving line of credit, compared to $16.3 million as of August 31, 2008.Substantially all trade receivables and inventories collateralize the Company’sline of credit, and property, plant and equipment collateralize the Company’slong-term debt under its credit agreement. Obligations to the lenders were paid in full at closing.

 

Net cash flow providedfrom operations was $1.4 million for the first half of fiscal 2009compared to a deficit of $(0.7) million in the first half of fiscal 2008.Principal payments on long-term debt for the first half of fiscal 2009 were$4.3 million and additions to fixed assets were $2.2 million.  There wereno distributions to unit holders during the first half of fiscal 2009.  Anadditional $0.3 million was added to restricted cash to provide for principaland interest payments on the 1999 and 2001 bonds due in January 2009 andfor the next payments due in July 2009 and an additional $0.1 million wasdeposited into the escrow account to fund improvements at the Thompson, Iowawastewater processing facility.

 

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**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 assets andliabilities. 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, 2008. There have been no changes to criticalaccounting policies identified in our Annual Report on Form 10-K for theyear ended August 31, 2008.

 

**Impactof Recently Issued Accounting Pronouncements**

 

Please refer to Item 7, “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”, inour Annual Report form 10-K for the year ended August 31, 2008 for adiscussion of the impact of recently issued accounting pronouncements

 

In December 2007,the FASB approved the issuance of SFAS No. 160, *Noncontrolling Interests in Consolidated Financial Statements—anamendment**of**ARB No. 51* (“SFAS 160”). SFAS 160will change the accounting and reporting for minority interests, which will nowbe termed *noncontrolling interests*.SFAS 160 requires noncontrolling interest to be presented as a separate componentof equity and requires the amount of net income attributable to the parent andto the noncontrolling interest to be separately identified on the consolidatedstatement of operations. SFAS 160 is effective for fiscal years beginning on orafter December 15, 2008. We do not expect adoption of SFAS 160 to have anyimpact on our consolidated financial position, results of operations or cashflows.

 

In December 2007,the FASB issued SFAS No. 141 (revised 2007), *Business Combinations* (“SFAS 141R”). SFAS 141R establishesthe requirements for how an acquirer recognizes and measures the identifiableassets acquired, the liabilities assumed, any noncontrolling interest in theacquiree and the goodwill acquired. SFAS 141R also establishes disclosurerequirements for business combinations. SFAS 141R is effective for annualperiods beginning after December 31, 2008 and should be appliedprospectively for all business combinations entered into after the date ofadoption. SFAS 141R will have an impact on our accounting for businesscombinations once adopted on December 15, 2008.

 

In March 2008, theFinancial Accounting Standards Board (“FASB”) issued FASB Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities, an Amendmentto FASB Statement No. 133. FAS 161 establishes the disclosure requirementsfor derivative instruments and hedging activities and expands the disclosurerequirements of statement 133. The effective date for financial statementsissued for fiscal years and interim periods beginning after November 15,2008 which for us begins with our 2010 fiscal year. Golden Oval is reviewingFASB 161 but anticipates very little impact to the Company.

 

In April 2008, theFASB issued FASB Staff Position No. FAS 142-3, *“Determination of the Useful Life of Intangible Assets”* (“FSP142-3”). FSP 142-3 amends the factors that should be considered in developingrenewal or extension assumptions used to determine the useful life of arecognized intangible asset under FASB Statement No. 142, *“Goodwill and Other Intangible Assets”* andrequires enhanced disclosures relating to: (a) the entity’s accountingpolicy on the treatment of costs incurred to renew or extend the term of arecognized intangible asset; (b) in the period of acquisition or renewal,the weighted-average period prior to the next renewal or extension (bothexplicit and implicit), by major intangible asset class and (c) for anentity that capitalizes renewal or extension costs, the total amount of costsincurred in the period to 

 

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renew or extend the termof a recognized intangible asset for each period for which a statement offinancial position is presented, by major intangible asset class. FSP 142-3must be applied prospectively to all intangible assets acquired as of andsubsequent to fiscal years beginning after December 15, 2008, and interimperiods within those fiscal years. Early adoption is prohibited. We arecurrently evaluating the impact that FAS No. 142-3 will have on ourfinancial statements.

 

The FASB issued two newstatements in May 2008, FASB Statement No. 162, The Hierarchy ofGenerally Accepted Accounting Principles and FASB Statements No. 163,Accounting for Financial Guaranty Insurance Contract, an interpretation of FASB60. FASB 162 identifies sources of accounting principles and establishes ahierarchy of accounting principles to be used in preparation of financialstatements in conformity with GAAP for non governmental entities. FASB 162 iseffective 60 days following SEC approval of Public Company Accounting OversightBoard (PCAOB) amendments to AU section 411. The Company does not anticipate anyimpact with the enactment of FASB 162. FASB 163 clarifies the recognition andmeasurement of claim liabilities in an insured financial obligation byinsurance enterprises. FASB 163 is not applicable to the Company.

 

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**Item 3. Quantitative and Qualitative Disclosures About MarketRisk**

 

There have been nomaterial changes in the market risk reported in the Company’s Annual Report on Form 10-Kfor the fiscal year ended August 31, 2007.

 

**Item 4. Controls and Procedures**

 

**Evaluationof Disclosure Controls and Procedures**

 

The Company’s ChiefExecutive Officer, Dana Persson, and Chief Financial Officer, Thomas A. Powell,have reviewed the Company’s disclosure controls and procedures as of the end ofthe period covered by this report. Based upon this review, they have concludedthat there is a continuing deficiency in the Company’s disclosure controls andprocedures as described in Part II, Item 9A “Controls and Procedures” ofthe Company’s Annual Report on Form 10-K for the year ended August 31,2008.  As a result of this deficiency, the Company’s filing of thisQuarterly Report on Form 10-Q was not timely.  As of December 15,2008, the Company has entered into a definitive agreement to sell substantiallyall of the Company’s assets to a non-reporting Company, and has chosen todevote its limited resources to the preparation of a proxy for a unit holdervote which took place on March 23, 2009. The transaction closed on March 30, 2009.

 

**Changesin Internal Control over Financial Reporting**

 

There have been nochanges in internal control over financial reporting that occurred during thefiscal quarter covered by this report that have materially affected, or arereasonably likely to materially affect, the Company’s internal control overfinancial reporting.

 

**PART II.    OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

Pleaserefer to pages 61 and 62 of Schedule 14A Definitive Proxy Statement dated March 10,2009 under the heading “Legal Proceedings” for an update.

 

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**Item 1A. Risk Factors**

 

As of the date of thisfiling, there have been no material changes in the risk factors described in Part I,Item 1A of the Company’s Annual Report on Form 10-K for the year ended August 31,2008.  Readers are urged to consider that information when analyzing thematerial contained in this report.

 

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

 

None.

 

**Item 3. Defaults Upon Senior Securities**

 

None.

 

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

 

Three matters weresubmitted to a vote of security holders as more fully described in Schedule 14ADefinitive Proxy Statement dated March 10, 2009. The special meeting washeld March 23, 2009 and all three matters were approved.  The matters were to approve the sale ofsubstantially all of the assets to Rembrandt Enterprises, Inc., to changethe name of the Company to “The New Midwest Company LLC”, and to grant certainpersons the authority to adjourn the special meeting for the purpose ofsoliciting additional proxies.

 

**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. |
|             |       |                                                                                                                                             |
| 32.1             |       | Certification of the  Chief Executive Officer and Chief Financial Officer pursuant to 18  U.S.C. Section 1350                          |

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.

 
|                          | THE NEW MIDWEST COMPANY  LLC                 |
|-------------------------------|----------------------------------------------|
|                          |                                         |
|                          |                                         |
|                          | By:                                          | /s/ Dana Persson |
|                          | President and Chief  Executive Officer       |
|                          | (Principal Executive  Officer)               |
|                          |                                         |
|                          | By:                                          | /s/ Thomas A. Powell |
|                          | Chief FinancialOfficer                       |
|                          | (Principal Financial  and AccountingOfficer) |
|                          |                                         |
| Date:  May 7,  2009 |                                         |

 

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