10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended February 23, 2008

or

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

For the transition period from       ___     to       ___    .

Commission file number 333-115164

U.S. PREMIUM BEEF, LLC
(Exact name of registrant as specified in its charter)

DELAWARE	20-1576986
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

12200 North Ambassador Drive
Kansas City, MO 64163(Address of principal executive offices)

Telephone: (866) 877-2525
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o Accelerated Filer o Non-accelerated Filer þ

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

The registrant’s units are not traded on an exchange or in any public market.  As of March 29, 2008, there were 735,385 Class A units and 735,385 Class B units outstanding.    

	TABLE OF CONTENTS
PART I.	FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements.	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	16
Item 4T.	Controls and Procedures.	17
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings.	18
Item 1A.	Risk Factors.	18
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	18
Item 3.	Defaults Upon Senior Securities.	18
Item 4.	Submission of Matters to a Vote of Security Holders.	18
Item 5.	Other Information.	18
Item 6.	Exhibits.	19
	Signatures.	21

Unless the context indicates or otherwise requires, the terms “the Company”, “we”, “our” and “us” refer to U.S. Premium Beef, LLC (formerly known as U.S. Premium Beef, Ltd.) and its consolidated subsidiaries. As used in this report, the terms “NBP” and “National Beef” refer to National Beef Packing Company, LLC (formerly known as Farmland National Beef Packing Company, LP), a Delaware limited liability company, and “USPB” refers to U.S. Premium Beef, LLC (formerly known U.S. Premium Beef, Ltd.) prior to consolidation.

ii

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements.

1

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except unit information)
			February 23,		August 25,
Assets			2008		2007
			(unaudited)
Current assets:
	Cash and cash equivalents		$	60,654	$	62,869
	Accounts receivable, less allowance for returns and doubtful accounts
		of $3,800 and $4,642, respectively	169,762		189,728
	Due from affiliates		5,100		4,609
	Other receivables		6,035		8,389
	Inventories		168,776		177,244
	Other current assets		14,208		14,144
		Total current assets	424,535		456,983
Property, plant, and equipment, at cost			397,656		372,404
	Less accumulated depreciation		(115,989)		(99,575)
		Net property, plant, and equipment	281,667		272,829
Goodwill			80,042		80,042
Other intangible assets, net of accumulated amortization
	of $8,260 and $7,214, respectively		27,788		28,659
Other assets			10,319		10,104
		Total assets	$	824,351	$	848,617
Liabilities and Capital Shares and Equities
Current liabilities:
	Current installments of long-term debt		$	4,545	$	4,421
	Cattle purchases payable		62,413		62,995
	Accounts payable - trade		59,300		60,257
	Due to affiliates		235		977
	Accrued compensation and benefits		15,941		18,785
	Accrued insurance		10,836		14,550
	Other accrued expenses and liabilities		11,929		11,757
	Distributions payable		254		2,708
		Total current liabilities	165,453		176,450
Long-term liabilities:
	Long-term debt, excluding current installments		462,968		438,544
	Other liabilities		2,428		2,559
		Total long-term liabilities	465,396		441,103
		Total liabilities	630,849		617,553
Minority interest in National Beef Packing Company, LLC and Kansas City Steak Company, LLC			86,850		77,890
Capital shares and equities:
	Members' capital, 735,385 Class A units and 735,385 Class B units
		authorized, issued and outstanding	55,947		102,472
	Patronage notices		50,642		50,642
	Accumulated other comprehensive income		63		60
		Total capital shares and equities	106,652		153,174
Commitments and contingencies			-		-
		Total liabilities and capital shares and equities	$	824,351	$	848,617
See accompanying notes to consolidated financial statements.

2

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except unit and per unit data)
				13 weeks ended		13 weeks ended		26 weeks ended		26 weeks ended
				February 23, 2008		February 24, 2007		February 23, 2008		February 24, 2007
				(unaudited)		(unaudited)		(unaudited)		(unaudited)
Net sales				$	1,305,950	$	1,313,319	$	2,704,052	$	2,586,344
Costs and expenses:
	Cost of sales			1,288,194		1,287,543		2,681,887		2,557,626
	Selling, general, and administrative expenses			13,212		10,801		24,871		21,235
	Depreciation and amortization			8,755		7,949		17,584		15,817
		Total costs and expenses		1,310,161		1,306,293		2,724,342		2,594,678
			Operating (loss) income	(4,211)		7,026		(20,290)		(8,334)
Other income (expense):
	Interest income			414		537		942		1,094
	Interest expense			(9,190)		(9,807)		(18,410)		(19,156)
	Minority owners' interest in net loss of National Beef
		Packing Company, LLC		4,872		1,228		16,263		12,324
	Minority owners' interest in net income of Kansas City
		Steak Company, LLC		(421)		(300)		(446)		(352)
	Equity in loss of aLF Ventures, LLC			(25)		(25)		(50)		(54)
	Other, net			1,541		382		1,809		671
			Loss before taxes	(7,020)		(959)		(20,182)		(13,807)
Income tax expense				(530)		(657)		(1,080)		(885)
			Net loss	$	(7,550)	$	(1,616)	$	(21,262)	$	(14,692)
Loss per linked unit:
	Basic			$	(10.27)	$	(2.20)	$	(28.91)	$	(19.98)
	Diluted			$	(10.27)	$	(2.20)	$	(28.91)	$	(19.98)
Outstanding weighted-average Class A and Class B units:
	Basic			735,385		735,505		735,385		735,505
	Diluted			735,385		735,505		735,385		735,505
See accompanying notes to consolidated financial statements.

3

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (in thousands)
					26 weeks ended		26 weeks ended
					February 23, 2008		February 24, 2007
					(unaudited)		(unaudited)
Cash flows from operating activities:
	Net loss				$	(21,262)	$	(14,692)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization			17,584		15,817
		Loss (gain) on disposal of property, plant, and equipment			13		(5)
		Gain (loss) on disposal of investment			(1,342)		-
		Minority interest			(15,945)		(12,111)
		Changes in assets and liabilities:
			Accounts receivable		19,966		(5,229)
			Due from affiliates		(491)		82
			Other receivables		2,354		(2,460)
			Inventories		8,468		(5,023)
			Other assets		(454)		(905)
			Cattle purchases payable		3,232		3,920
			Accounts payable		8,064		(2,461)
			Due to affiliates		(742)		(450)
			Accrued compensation and benefits		(2,844)		(13,642)
			Accrued insurance		(3,714)		(3,481)
			Other accrued expenses and liabilities		507		(1,855)
				Net cash provided by (used in) operating activities	13,394		(42,495)
Cash flows from investing activities:
	Capital expenditures, including interest capitalized				(25,510)		(21,243)
	Acquisition of business, final purchase price adjustment				-		1,248
	Proceeds from sale of property, plant and equipment				121		137
	Proceeds from redemption of investment				1,342		-
				Net cash used in investing activities	(24,047)		(19,858)
Cash flows from financing activities:
	Net receipts under revolving credit lines				26,761		71,022
	Repayments of other indebtedness / capital leases				(1,698)		(1,156)
	Payments of notes payable and fees				(515)		(7,899)
	Change in overdraft balances				(12,835)		5,274
	Distributions to minority interest owners in National Beef Packing Company, LLC				(3,278)		(5,451)
	Member distributions				-		(861)
				Net cash provided by financing activities	8,435		60,929
Effect of exchange rate changes on cash					3		7
				Net decrease in cash	(2,215)		(1,417)
Cash and cash equivalents at beginning of the period					62,869		58,434
Cash and cash equivalents at end of the period					$	60,654	$	57,017
Supplemental cash disclosures:
	Cash paid during the period for interest				$	18,852	$	20,591
	Cash paid during the period for taxes, net of refunds				$	979	$	690
See accompanying notes to consolidated financial statements.

4

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) Interim Financial Statements

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information; therefore, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included using management’s best estimates and judgments where appropriate.  These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.  The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period.  Actual results could differ materially from these estimates and judgments.  For further information, refer to the audited Consolidated Financial Statements and Notes to Consolidated Financial Statements, which are included in the Company’s Annual Report on Form 10-K on file with the Securities and Exchange Commission (SEC) for the fiscal year ended August 25, 2007.  The results of operations for the interim periods presented are not necessarily indicative of the results for a full fiscal year. 

NB Finance Corp., a wholly-owned finance subsidiary of NBP, is a co-issuer on a joint and several basis with NBP of the Senior Notes, which are NBP’s senior unsecured obligations, ranking equal in right of payment with all of its other senior unsecured obligations.  NB Finance Corp. has nominal assets and conducts no business or operations. There are no significant restrictions on the ability of subsidiaries to transfer funds to NBP.

(2) New Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157 (SFAS 157), Fair Value Measurements.  This statement establishes a single authoritative definition of fair value, sets out a framework for measuring fair value, and requires additional disclosures about fair value measurements.  SFAS 157 will apply to fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  In February 2008, however, the FASB issued FASB Staff Position 157-2 (FSP 157-2) which defers the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually).  FSP 157-2 will apply to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years.  The Company is currently evaluating the impact SFAS 157 may have, if any, on its Consolidated Financial Statements.

In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159 (SFAS 159), The Fair Value Option for Financial Assets and Financial Liabilities.  This statement provides companies with an option to report selected financial assets and liabilities at fair value.  SFAS 159 will apply to fiscal years beginning after November 15, 2007.  The Company is currently evaluating the impact SFAS 159 may have, if any, on its Consolidated Financial Statements.

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 160 (SFAS 160), Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51. SFAS 160 establishes accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary.  SFAS 160 requires noncontrolling interests held by parties other than the parent in subsidiaries be clearly identified, labeled, and presented in the consolidated balance sheet within equity, but separate from the parent's equity.   SFAS 160 is effective for fiscal years beginning after December 15, 2008.  The Company is currently assessing the impact of SFAS 160 on its Consolidated Financial Statements.

5

In December 2007, the FASB issued Statement of Financial Accounting Standard No. 141R (SFAS 141R), Business Combinations.  This statement requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date to be measured at their fair value as of that date.  An acquirer is required to recognize assets or liabilities arising from all other contingencies (contractual contingencies) as of the acquisition date, measured at their acquisition-date fair values, only if it is more likely than not that they meet the definition of an asset or a liability in FASB Concepts Statement No. 6, Elements of Financial Statements.  Any acquisition-related costs are to be expensed instead of capitalized.  The impact to the Company from the adoption of SFAS 141R in fiscal year 2009 will depend on acquisitions at the time.  This statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.

(3) Inventories

Inventories at February 23, 2008 and August 25, 2007 consisted of the following (in thousands):

		February 23, 2008		August 25, 2007
Dressed and boxed meat products		$	135,180	$	144,766
Beef by-products		17,348		19,540
Supplies		16,248		12,938
	Total inventories	$	168,776	$	177,244

(4) Comprehensive Loss

Comprehensive loss, which consists of net loss and foreign currency translation adjustments, was as follows for the periods indicated (in thousands):

		13 weeks ended February 23, 2008		13 weeks ended February 24, 2007		26 weeks ended February 23, 2008		26 weeks ended February 24, 2007
Net loss		$	(7,550)	$	(1,616)	$	(21,262)	$	(14,692)
Other comprehensive income:
Foreign currency translation adjustments		(2)		(1)		3		7
	Comprehensive loss	$	(7,552)	$	(1,617)	$	(21,259)	$	(14,685)

(5) Minority Interest 

At any time after certain dates, the earliest being July 31, 2008, the latest being July 31, 2011, certain members of NBP management and/or NBPCo Holdings, LLC have the right to request that NBP repurchase their interests, the value of which is to be determined by a mutually agreed appraisal process. If NBP is unable to effect the repurchase within a specified time, the requesting member(s) have the right to cause a sale process to commence.  The Company accounts for changes in the redemption value of these interests by accreting the change in value over the current period through the earliest redemption date of the respective interests.  At February 23, 2008, the minority interest in National Beef was revalued by an independent appraisal process, and the value was determined to be $178.2 million, which was in excess of its carrying value.  Accordingly, the carrying value of the minority interest in National Beef increased by approximately $25.5 million through accretion during the thirteen weeks ended February 23, 2008, resulting in a carrying value of $85.6 million, which is included in the accompanying Consolidated Balance Sheet as of February 23, 2008.

The redemption value of the minority interest in NBP at February 23, 2008, increased by approximately $106.1 million compared to the value at August 24, 2007 primarily as a result of the Membership Interest Purchase Agreement (the Agreement) that was entered into on February 29, 2008 with JBS S.A. (JBS).  Under the Agreement, JBS will acquire all of the outstanding membership interests in NBP for an aggregate value of $560.0 million.  Generally accepted accounting principles require that the fair value of the Company’s minority interests in NBP that are redeemable be determined at the end of each reporting period.  This change in fair value is accreted over the redemption period as discussed above.  Offsetting the change in the redemption value of the minority interest is a corresponding change in members’ capital.  See Note 9 – Subsequent Event for more information related to the Agreement.

6

(6) Income Taxes

On August 26, 2007, the Company adopted FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes.  FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  FIN 48 also provides guidance on derecognition, classifications, interest and penalties, accounting in interim periods, disclosures and transition.  As a result of the adoption, tax reserves in the amount of approximately $0.5 million were reversed during the first quarter of fiscal year 2008.

Prior to the adoption of FIN 48, the Company did not recognize accrued interest or penalties on uncertain tax positions.  Should the Company be required to accrue interest and penalties in the future, it will likely record the interest accrual to interest expense and record the penalties accrual to selling, general and administrative expense.  As of August 26, 2007, the Company did not have any amounts recorded for accrued interest and penalties on uncertain tax positions.   

The Company’s subsidiary, National Carriers, Inc. (NCI), has concluded an examination of its U.S. federal income taxes for fiscal year 2005.  Based on federal income tax statute of limitations, NCI remains subject to examination of its income taxes for fiscal years 2006 and 2007. USPB does not currently have any ongoing income tax examinations with the Internal Revenue Service or other tax authorities.

(7) Legal Proceedings

Schumacher v. Tyson Foods, et al. On July 1, 2002, a lawsuit was filed against Farmland National Beef Packing Company, L.P. (FNBPC or the predecessor to NBP), ConAgra Beef Company, Tyson Foods, Inc. and Excel Corporation in the United States District Court for the District of South Dakota seeking certification of a class of all persons who sold cattle to the defendants for cash, or on a basis affected by the cash price for cattle, during the period from April 2, 2001 through May 11, 2001 and for some period up to two weeks thereafter. The case was filed by three named plaintiffs on behalf of a putative nationwide class that plaintiffs estimate is comprised of hundreds or thousands of members. The complaint alleged that the defendants, in violation of the Packers and Stockyards Act of 1921, knowingly used, without correction or disclosure, incorrect and misleading boxed beef price information generated by the USDA to purchase cattle offered for sale by the plaintiffs at a price substantially lower than was justified by the actual and correct price of boxed beef during this period. Plaintiffs also sought recovery against all defendants under a theory of unjust enrichment. The case was certified as a class-action matter in June of 2004. The plaintiffs claimed damages against FNBPC in the amount of approximately $4.5 million plus prejudgment interest, attorneys' fees and court costs. The claim is subject to reduction in an unknown amount by the number of class members who have opted out of the class. Trial began March 31, 2006. On April 13, 2006, the jury returned a verdict in favor of FNBPC but against the other defendants. The other defendants have filed an appeal in the United States Court of Appeals for the Eighth Circuit. The plaintiffs did not appeal the verdict for the Company but no final judgment will be entered until after the appeal is decided.  The Eighth Circuit reversed the judgment against the other defendants and the District Court has dismissed plaintiffs’ complaint with prejudice.  The deadline for filing a petition for certiorari in the Supreme Court is April 29, 2008. 

The Company’s wholly owned subsidiary, NCI, has various independent contractor drivers who are involved in accidents from time to time.  Management believes the ultimate resolution of such matters should not have a material adverse effect on the Company’s financial condition, results of operations, or liquidity.

The Company is also a party to a number of other lawsuits and claims arising out of the operation of its business.  Management believes the ultimate resolution of such matters should not have a material adverse effect on the Company’s financial condition, results of operations, or liquidity.

(8) Earnings Per Unit

Basic earnings per unit (EPU) excludes dilution and is computed by dividing income or loss available to unitholders by the weighted-average number of linked Class A and Class B units outstanding for the period.  Class A units and Class B units shall be issued, redeemed, and transferred together on a one for one basis until the Board of Directors determines the extent and conditions under which Class A units and Class B units may be issued, redeemed, and transferred separately.

7

Diluted EPU reflects the potential dilution that could occur if potential unit purchase rights were exercised or contractual appreciation rights were converted into units.   Upon termination of the CEO employment agreement, at the election of the CEO, or upon mutual agreement of the Board of the Company and the CEO, the CEO may purchase up to 20,000 Class A and Class B units, or upon agreement of the CEO and the Board of Directors, the CEO may convert the contractual unit appreciation rights to up to 20,000 Class A and Class B units.  The diluted EPU reflects the circumstances of termination of the CEO employment agreement, and the election of CEO or agreement by the Board of the Company and the CEO for the CEO to purchase or convert contractual rights to the maximum 20,000 units at $55 per linked Class A and Class B unit for the periods as provided for in the CEO employment agreement.

The diluted loss per linked unit calculation in the following table excludes the effect of the 20,000 unit purchase rights noted above for the thirteen week and twenty-six week periods ending February 23, 2008 and February 24, 2007, as the effect of including them would have been anti-dilutive to the loss per linked unit calculation.

Loss Per Linked Unit Calculation
(In thousands, except unit and per unit data)	13 weeks ended February 23, 2008		13 weeks ended February 24, 2007		26 weeks ended February 23, 2008		26 weeks ended February 24, 2007
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Basic loss per unit
Loss available to unitholders (numerator)	$	(7,550)	$	(1,616)	$	(21,262)	$	(14,692)
Weighted average outstanding units (denominator)	735,385		735,505		735,385		735,505
Per unit amount	$	(10.27)	$	(2.20)	$	(28.91)	$	(19.98)
Diluted loss per unit
Loss available to unitholders (numerator)	$	(7,550)	$	(1,616)	$	(21,262)	$	(14,692)
Weighted average outstanding units	735,385		735,505		735,385		735,505
Effect of dilutive securities - unit options	-		-		-		-
Units (demoninator)	735,385		735,505		735,385		735,505
Per unit amount	$	(10.27)	$	(2.20)	$	(28.91)	$	(19.98)

(9) Subsequent Event

On February 29, 2008, JBS, NBP, USPB and the other holders of membership interests in NBP, including NBPCO Holdings, LLC and parties controlled by three executive officers, John R. Miller, Timothy M. Klein and Scott H. Smith, entered into the Agreement. Under the Agreement, JBS will acquire all of the outstanding membership interests in NBP (including the membership interests issuable pursuant to deferred equity incentive compensation agreements with NBP’s Chief Executive Officer and Chief Operating Officer) for a combination of approximately $465.0 million cash and $95.0 million in common stock of JBS (the Purchase Price).

Pursuant to the Agreement, at closing USPB and certain other members of NBP will receive their proportionate share of the Purchase Price with 80.0% to be paid in cash and 20.0% to be paid in shares of common stock of JBS (the JBS Stock), which will be freely transferable on the Novo Mercado segment of the BOVESPA stock exchange in Brazil. The number of shares of JBS Stock will be determined based on the volume weighted average of the closing per share price of the JBS Stock on the BOVESPA stock exchange during the 20 trading days prior to closing, subject to certain adjustments. Certain of NBP’s members have elected to receive or, under certain circumstances, have the right to receive their portion of the Purchase Price entirely in cash. If JBS is unable to deliver JBS Stock on an unencumbered and freely transferable basis at closing, the sellers entitled to receive the JBS Stock may still dem and to close, but be paid their proportionate share of the Purchase Price entirely in cash.

Consummation of the Agreement is subject to customary conditions, including approval of the Agreement by the members of USPB and the shareholders of JBS and the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and possible approvals by certain foreign jurisdictions.  On March 14, 2008, at a Special Meeting of Members, USPB’s members approved the Agreement and the transactions contemplated under the Agreement.  The shareholders of JBS are to vote on the Agreement no later than April 11, 2008.

8

The Agreement contains certain termination rights and provides that under certain circumstances, JBS or NBP may be required to pay NBP or JBS, respectively, a termination fee of $25 million plus certain costs.  The parties have agreed on the payment of certain fees and expenses, including those related to antitrust filings and compliance.

9

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

The following discussion should be read in conjunction with our Consolidated Financial Statements and related notes and other financial information appearing elsewhere in this report.

Disclosure Regarding Forward-Looking Statements

This report contains “forward-looking statements,” which are subject to a number of risks and uncertainties, many of which are beyond our control. Forward-looking statements are typically identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and similar expressions. Actual results could differ materially from those contemplated by these forward-looking statements as a result of many factors, including the satisfaction of all conditions to close the transaction with JBS S.A. (JBS) described below under Recent Developments, economic conditions generally and in our principal markets, the availability and prices of live cattle and commodities, food safety, livestock disease, including the identification of cattle with Bovine Spongiform Encephalopathy (BSE), competitive practices and consolidation in the cattle production and processing industries, actions of domestic or foreign governments, hedging risk, changes in interest rates and foreign currency exchange rates, consumer demand and preferences, the cost of compliance with environmental and health laws, loss of key customers, loss of key employees, labor relations, consolidation among our customers and the potential inability to receive the anticipated benefits from the acquisition of the processing facility in Brawley, CA.  

In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking information contained in this report will in fact transpire. Readers are cautioned not to place undue reliance on these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors.  See also the Risk Factors in Item 1A. Business of the Company’s Annual Report for the year ended August 25, 2007 on Form 10-K and the Risk Factors section of the Proxy Statement, which were filed with the Securities and Exchange Commission on November 14, 2007 and March 4, 2008, respectively, for other important factors that could cause actual results to differ materially from those in any such forward-looking statements, and which should be read in conjunction with this report.

Industry Outlook

The cattle herd in the United States remains in a no-growth phase.  The increased cost of production and uncertainty about future costs has led to a lack of growth in the beef cattle segment.  Although the dairy cattle segment is also challenged by rapidly increasing costs, the dairy herd continues to grow due to its ability to pass through higher production costs.  The cattle on feed supplies are nearly 2.0% above the prior year supplies and should remain above prior year levels into the early summer before contracting for the remainder of the summer and early fall.

Beef Export Markets

Export markets for U.S. beef products remain significantly constrained since the discovery of a case of BSE in the State of Washington in December 2003, as well as other isolated cases.  In July 2006, Japan agreed to reopen its market to U.S. beef from cattle aged 20 months and younger.  South Korea announced a provisional opening of its border to U.S. beef from animals 30 months and younger in September 2006, however, its border was subsequently closed on October 5, 2007 and has not reopened.  These constraints and uncertainties have had a negative impact on beef margins.

We cannot presently assess the full economic impact of the consequences of BSE on the U.S. beef packing industry or on its operations.  Existing or new import restrictions or additional regulatory restrictions or disruptions in domestic consumer demand for beef may continue to have a material adverse affect on our revenues and net income.

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Recent Developments

Production Cutbacks:  On December 12, 2007, NBP announced production cutbacks to 32-36 hours at its beef processing facilities in Liberal and Dodge City, Kansas.  Production cuts began that week and have reduced slaughter by approximately 10,000 to 15,000 head per week.  Management’s decision to regulate production hours is driven by market conditions.

Membership Interest Purchase Agreement with JBS: On February 29, 2008, JBS, NBP, USPB and the other holders of membership interests in NBP, including NBPCO Holdings, LLC and parties controlled by three executive officers, John R. Miller, Timothy M. Klein and Scott H. Smith, entered into a Membership Interest Purchase Agreement (the Agreement). Under the Agreement, JBS will acquire all of the outstanding membership interests in NBP (including the membership interests issuable pursuant to deferred equity incentive compensation agreements with NBP’s Chief Executive Officer and Chief Operating Officer) for a combination of approximately $465.0 million cash and $95.0 million in common stock of JBS (the Purchase Price).

Pursuant to the Agreement, at closing USPB and certain other members of NBP will receive their proportionate share of the Purchase Price with 80.0% to be paid in cash and 20.0% to be paid in shares of common stock of JBS (the JBS Stock), which will be freely transferable on the Novo Mercado segment of the BOVESPA stock exchange in Brazil. The number of shares of JBS Stock will be determined based on the volume weighted average of the closing per share price of the JBS Stock on the BOVESPA stock exchange during the 20 trading days prior to closing, subject to certain adjustments. Certain of NBP’s members have elected to receive or, under certain circumstances, have the right to receive their portion of the Purchase Price entirely in cash. If JBS is unable to deliver JBS Stock on an unencumbered and freely transferable basis at closing, the sellers entitled to receive the JBS Stock may still demand to close, but be paid their proportionate share of the Purchase Pr ice entirely in cash.

Consummation of the Agreement is subject to customary conditions, including approval of the Agreement by the members of USPB and the shareholders of JBS and the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and possible approvals by certain foreign jurisdictions.  On March 14, 2008, at a Special Meeting of Members, USPB’s members approved the Agreement and the transactions contemplated under the Agreement.  The shareholders of JBS are to vote on the Agreement no later than April 11, 2008.

The Agreement contains certain termination rights and provides that under certain circumstances, JBS or NBP may be required to pay NBP or JBS, respectively, a termination fee of $25 million plus certain costs.  The parties have agreed on the payment of certain fees and expenses, including those related to antitrust filings and compliance.

Results of Operations

Thirteen weeks ended February 23, 2008 compared to thirteen weeks ended February 24, 2007

General.  Net loss for the thirteen weeks ended February 23, 2008 was $7.6 million compared to a net loss of $1.6 million for the thirteen weeks ended February 24, 2007, an increased loss of $6.0 million.  Net sales were lower in the thirteen weeks ended February 23, 2008 compared to those of the prior period primarily due to reduced production at our beef processing plants.  The number of cattle processed during the current thirteen week period was 8.3% less than the same period of last year.

Total costs and expenses of $1,310.2 million and $1,306.3 million for the thirteen weeks ended February 23, 2008 and February 24, 2007, respectively, were 100.3% as a percent of sales for the thirteen weeks ended February 23, 2008 compared to 99.5% for the thirteen weeks ended February 24, 2007.  High cattle prices contributed to an erosion of gross margin resulting in a decrease in operating income of approximately $11.4 million. 

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Net Sales.  Net sales were $1,306.0 million for the thirteen weeks ended February 23, 2008 compared to $1,313.3 million for the thirteen weeks ended February 24, 2007, a decrease of $7.3 million, or 0.6%.  Net sales were lower in the thirteen weeks ended February 23, 2008 compared to those of the prior period primarily due to reduced production at our beef processing plants.  The number of cattle processed during the current thirteen week period was 8.3% less than the same period of last year.

Cost of Sales.  Cost of sales was $1,288.2 million for the thirteen weeks ended February 23, 2008 compared to $1,287.5 million for the thirteen weeks ended February 24, 2007, an increase of $0.7 million, or 0.1%.   The increase was primarily a result of increased live cattle prices that were approximately 4.7% higher due to the continued tight supply of market-ready cattle and to the cattle being heavier, at average weights 0.6% more, than the same period of last year.  Partially offsetting the increase in cattle prices was a decrease in cattle processing by approximately 8.3% for the current thirteen week period as compared to the same period of fiscal year 2007.

Selling, General, and Administrative Expenses.  Selling, general, and administrative expenses were $13.2 million for the thirteen weeks ended February 23, 2008 compared to $10.8 million for the thirteen weeks ended February 24, 2007, an increase of $2.4 million or 22.2%.  The increase reflects an increase in legal expense of approximately $1.2 million, which was primarily related to the proposed transaction with JBS, an increase in payroll and related expenses of approximately $0.9 million, due mainly to increases in bonus and salaries, an increase in repairs and maintenance expense of approximately $0.2 million, and an increase of approximately $0.1 million in advertising expense.

Depreciation and Amortization Expense.  Depreciation and amortization expenses were $8.8 million for the thirteen weeks ended February 23, 2008 compared to $7.9 million for the thirteen weeks ended February 24, 2007, an increase of $0.9 million, or 11.4%.  Depreciation expense increased due to assets being placed into service, primarily at the Dodge City and Brawley beef plants, during fiscal year 2007.

Operating Loss.  Operating loss was $4.2 million for the thirteen weeks ended February 23, 2008 compared to operating income of $7.0 million for the thirteen weeks ended February 24, 2007, a decrease of $11.2 million.  The decrease resulted primarily from higher cattle costs during the second quarter of fiscal year 2008 as compared to the same period of last year. 

Interest Expense.  Interest expense was $9.2 million for the thirteen weeks ended February 23, 2008 compared to $9.8 million for the thirteen weeks ended February 24, 2007, a decrease of $0.6 million, or 6.1%.  The decrease in interest expense during the thirteen weeks ended February 23, 2008 as compared to the same period in fiscal year 2007 was due primarily to lower interest rates on our variable rate debt, a decrease of approximately 192 basis points.  Offsetting this decrease in interest rates was an increase in the weighted average of variable rate debt of approximately $18.7 million at February 23, 2008 as compared to February 24, 2007.

Minority Owners’ Interest in Net Loss of National Beef Packing Company, LLC.  Minority owners interest in the net loss of NBP was $4.9 million for the thirteen weeks ended February 23, 2008 compared to $1.2 million for the thirteen weeks ended February 24, 2007, an increase of $3.7 million.  The increase in minority owners’ interest in the net loss of NBP was due to increased net loss at NBP, which occurred primarily from higher cattle costs during the second quarter of fiscal year 2008 as compared to the same period of last year.

Other, net.  Other, net non-operating income was $1.5 million for the thirteen weeks ended February 23, 2008 compared to other, net non-operating income of $0.4 million for the thirteen weeks ended February 24, 2007, an increase of $1.1 million.  The increase in other, net non-operating income was primarily related to $1.3 million in proceeds received in redemption of an investment interest in which NBP’s basis had previously been written down to zero.

Income Tax Expense.  Income tax expense was $0.5 million for the thirteen weeks ended February 23, 2008 compared to $0.7 million for the thirteen weeks ended February 24, 2007.  Income tax expense is recorded on income from National Carriers, Inc., which is organized as a Subchapter C Corporation.

Twenty-six weeks ended February 23, 2008 compared to twenty-six weeks ended February 24, 2007

General.  Net loss for the twenty-six weeks ended February 23, 2008 was $21.3 million compared to net loss of $14.7 million for the twenty-six weeks ended February 24, 2007, an increased loss of $6.6 million.  Net sales were higher in the twenty-six weeks ended February 23, 2008 compared to those of the prior period primarily due to an average increase in sales prices per head of approximately 6.5%.  The number of cattle processed during the current twenty-six week period was 1.4% less than the same period of last year.

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Total costs and expenses of $2,724.3 million and $2,594.7 million for the twenty-six weeks ended February 23, 2008 and February 24, 2007, respectively, were 100.8% as a percent of sales for the twenty-six weeks ended February 23, 2008 compared to 100.3% for the twenty-six weeks ended February 24, 2007.  Continued high cattle prices contributed to an erosion of the gross margin for the current twenty-six week period as compared to the same period of last year. 

Net Sales.  Net sales were $2,704.1 million for the twenty-six weeks ended February 23, 2008 compared to $2,586.3 million for the twenty-six weeks ended February 24, 2007, an increase of $117.8 million, or 4.6%.  The moderate increase in net sales resulted primarily from an average increase in sales prices per head of 6.5% in the twenty-six weeks ended February 23, 2008 than the same period in the prior year while the volume of cattle processed decreased by approximately 1.4%.

Cost of Sales.  Cost of sales was $2,681.9 million for the twenty-six weeks ended February 23, 2008 compared to $2,557.6 million for the twenty-six weeks ended February 24, 2007, an increase of $124.3 million, or 4.9%.  The increase was a result of increased live cattle prices that were approximately 4.8% higher due to the continued tight supply of market-ready cattle and to the cattle being heavier, at average weights 0.7% more, than the twenty-six week period of last year.  Partially offsetting this increase was decreased cattle processing of approximately 1.4% for the current twenty-six week period as compared to the same period of fiscal year 2007.

Selling, General, and Administrative Expenses.  Selling, general, and administrative expenses were $24.9 million for the twenty-six weeks ended February 23, 2008 compared to $21.2 million for the twenty-six weeks ended February 24, 2007, an increase of $3.7 million, or 17.5%.  The increase for this period is primarily due an approximate $1.7 million increase in legal fees, an increase in payroll and benefit expenses of approximately $1.5 million and an increase in advertising expense of approximately $0.3 million. 

Depreciation and Amortization Expense.  Depreciation and amortization expenses were $17.6 million for the twenty-six weeks ended February 23, 2008 compared to $15.8 million for the twenty-six weeks ended February 24, 2007, an increase of $1.8 million, or 11.4%.  Depreciation expense increased due to assets being placed into service, primarily at the Dodge City and Brawley beef plants, during fiscal year 2007.

Operating Loss.  Operating loss was $20.3 million for the twenty-six weeks ended February 23, 2008 compared to operating loss of $8.3 million for the twenty-six weeks ended February 24, 2007, an increased loss of $12.0 million.  The increased operating loss in the current twenty-six week period resulted primarily from higher cattle prices as compared to the same period of last year.

Interest Expense.  Interest expense was $18.4 million for the twenty-six weeks ended February 23, 2008 compared to $19.2 million for the twenty-six weeks ended February 24, 2007, a decrease of $0.8 million, or 4.2%.  The decrease in interest expense during the twenty-six weeks ended February 23, 2008 as compared to the same period in fiscal year 2007 was due primarily to lower interest rates on our variable rate debt, a decrease of approximately 147 basis points.  Offsetting this decrease in interest rates was an increase in the weighted average of variable rate debt of approximately $42.8 million at February 23, 2008 as compared to February 24, 2007.

Minority Owners’ Interest in Net Loss of National Beef Packing Company, LLC.  Minority owners interest in the net loss of NBP was $16.3 million for the twenty-six weeks ended February 23, 2008 compared to $12.3 million for the twenty-six weeks ended February 24, 2007, an increase of $4.0 million.  The increase in minority owners’ interest in the net loss of NBP was due to increased net loss at NBP, which occurred primarily from higher cattle costs during the first twenty-six weeks of fiscal year 2008 as compared to the same period of last year.

Other, net.  Other, net non-operating income was $1.8 million for the twenty-six weeks ended February 23, 2008 compared to other, net non-operating income of $0.7 million for the twenty-six weeks ended February 24, 2007, an increase of $1.1 million.  The increase in other, net non-operating income was primarily related to $1.3 million in proceeds received in redemption of an investment interest in which NBP’s basis had previously been written down to zero.

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Income Tax Expense.  Income tax expense was $1.1 million for the twenty-six weeks ended February 23, 2008 compared to $0.9 million for the twenty-six weeks ended February 24, 2007, an increase of $0.2 million, or 22.2%.  Income tax expense is recorded on income from National Carriers, Inc., which is organized as a Subchapter C Corporation.

Liquidity and Capital Resources

As of February 23, 2008, we had net working capital of $259.0 million, which included $0.3 million in distributions payable, and cash and cash equivalents of $60.7 million.  As of August 25, 2007, we had net working capital of $280.5 million, which included $2.7 million in distributions payable, and cash and cash equivalents of $62.9 million.  NBP’s primary sources of liquidity are cash flow from operations and available borrowings under its amended and restated credit facility.

As of February 23, 2008, we had $467.5 million of long-term debt, of which $4.5 million was classified as a current liability.  As of February 23, 2008, NBP’s amended and restated credit facility consisted of a $202.6 million term loan, all of which was outstanding, and a $200.0 million revolving line of credit loan, which had outstanding borrowings of $65.1 million, outstanding letters of credit of $60.6 million and available borrowings of $74.3 million, based on the most restrictive financial covenant calculations.  Cash flows from operations and borrowings under the amended and restated credit facility have funded working capital requirements, acquisitions, capital expenditures and other general corporate purposes.  NBP was in compliance with all of the financial covenants under its amended and restated credit facility as of February 23, 2008.

In addition to outstanding borrowings under the amended and restated credit facility, the Company had outstanding senior notes of $160.0 million, borrowings under industrial revenue bonds of $20.7 million, a term loan with CoBank, of which approximately $3.6 million was outstanding, and capital leases and other obligations of $15.5 million as of February 23, 2008.

NBP believes that available borrowings under its amended and restated credit facility and cash provided by operating activities will be sufficient to support its working capital, capital expenditures and debt service requirements for the foreseeable future.  NBP’s ability to generate sufficient cash, however, is subject to certain general economic, financial, industry, legislative, regulatory and other factors beyond its control.  For a review of the obligations that affect liquidity, please see the Cash Payment Obligations table in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended August 25, 2007.

USPB may purchase a portion of its outstanding Class A and Class B units from time to time in accordance with the limits imposed under the CoBank Credit Agreement.

Operating Activities

Net cash provided by operating activities in the twenty-six weeks ended February 23, 2008 was $13.4 million compared to net cash used in operating activities of $42.5 million in the twenty-six weeks ended February 24, 2007. The improvement was primarily due net cash being provided in operating activities through accounts receivable, inventory, and accounts payable in the current year while net cash was used in operating activities through accounts receivable, inventory, accounts payable and accrued compensation and benefits in the same comparable period of last year.

Investing Activities

Net cash used in investing activities was $24.0 million in the twenty-six weeks ended February 23, 2008 compared to $19.9 million in the twenty-six weeks ended February 24, 2007.  This increase in cash used was primarily attributable to an increase in expenditures for property, plant and equipment related to improving operating efficiencies, primarily at our Liberal and Dodge City facilities, in the current year.

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Financing Activities

Net cash provided by financing activities was $8.4 million in the twenty-six weeks ended February 23, 2008 compared to $60.9 million in the twenty-six weeks ended February 24, 2007.  The change was primarily attributed to a $44.2 million difference in revolving credit borrowings and an $18.1 million change in the impact of overdraft balances which was partially offset by $7.4 million in repayments on our term note, made in the 2007 period that did not recur in the 2008 period during the current twenty-six week period as compared to the same period of last year.

Amended and Restated Senior Credit Facility

Effective July 25, 2007, NBP amended and restated its existing senior credit facility with a consortium of banks.  The facility now consists of a $202.6 million term loan that matures in May 2016 and a $200.0 million revolving line of credit loan that matures in July 2012 that is subject to certain borrowing base limitations. 

Borrowings under the facility bear interest at LIBOR or the Base Rate, plus the applicable margin.  The applicable margin for the revolving line of credit will be based on borrowing base availability with grids greater than $150.0 million, $50.0 to $150.0 million and less than $50.0 million.  As of February 23, 2008, the interest rate for the revolving loan was approximately 4.8%.   The applicable margin for the term loan was also revised to a grid basis with different margins for Funded Debt to EBITDA ratios greater than 3.50 to 1.00 and less than 3.50 to 1.00.  As of February 23, 2008, the interest rate for the term loan was approximately 5.3%.

The revolving line of credit and the term loan will have no financial covenants unless the borrowing base availability is less than $50.0 million for five consecutive business days or less than $35.0 million on any single business day during any fiscal quarter.  If the borrowing base availability falls below these amounts, a fixed charge ratio of 1:15 to 1:00 must be maintained at the end of each subsequent fiscal quarter until the borrowing base availability has been greater than or equal to $50.0 million for 90 consecutive days.  NBP was not subject to the fixed charge ratio test at February 23, 2008.  The advance rates under the borrowing base are 90% on eligible accounts and 70% on eligible inventory.

The borrowings under the revolving loan are available for NBP’s working capital requirements, capital expenditures and other general corporate purposes.  The amended and restated credit facility is secured by a first priority lien on substantially all of NBP’s assets.  The principal amount outstanding under the term loan is due and payable in equal installments of approximately $3.5 million on the last business day of each June and December commencing on June 30, 2011.  All outstanding amounts of the term loan are due and payable on May 30, 2016.  Prepayment is allowed at any time.

The amended and restated credit facility contains customary affirmative covenants, including, without limitation, conduct of business, the maintenance of insurance, compliance with laws, maintenance of properties, keeping of books and records, and the furnishing of financial statements.  The facility also contains customary negative covenants, including without limitation, restrictions on the following:  distributions, mergers, sale of assets, investments and acquisitions, encumbrances, indebtedness, affiliate transactions, and ERISA matters.

The amended and restated credit facility contains customary events of default, including without limitation, failure to make payment when due, materially incorrect representations and warranties, breach of covenants, events of bankruptcy, default of other indebtedness that would permit acceleration of such indebtedness, the occurrence of one or more unstayed or undischarged judgments in excess of $3.0 million, changes in custody or control of NBP’s property, changes in control of NBP, the failure of any of the loan documents to remain in full force, and NBP’s failure to properly fund its employee benefit plans.  The facility also includes customary provisions protecting the lenders against increased cost or loss of yield resulting from changes in tax, reserve, capital adequacy and other requirements of law.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The principal market risks affecting our business are exposure to changes in prices for commodities, such as livestock and boxed beef, and interest rate risk.

Commodities. NBP uses various raw materials, many of which are commodities. Raw materials are generally available from several different sources, and NBP presently believes that it can obtain them as needed.  Commodities are subject to price fluctuations that may create price risk. When appropriate, NBP may hedge commodities in order to mitigate this price risk. While this may tend to limit NBP’s ability to participate in gains from commodity price fluctuations, it also tends to reduce the risk of loss from changes in commodity prices. NBP reflects commodity contract gains and losses as adjustments to the basis of underlying commodities purchased; gains or losses are recognized in the statement of operations as a component of costs of goods sold.

NBP purchases cattle for use in its processing businesses. When appropriate, NBP enters into forward purchase contracts at prices determined prior to the delivery of the cattle. The commodity price risk associated with these activities can be hedged by selling (or buying) the underlying commodity, or by using an appropriate commodity derivative instrument. The particular hedging instrument NBP uses depends on a number of factors, including availability of appropriate derivative instruments.

NBP sells commodity beef products in its business. Commodity beef products are subject to price fluctuations that may create price risk. When appropriate, NBP enters into forward sales contracts at prices determined prior to shipment. NBP may hedge the commodity price risk associated with these activities in order to mitigate this price risk. While this may tend to limit NBP’s ability to participate in gains from commodity price fluctuations, it also tends to reduce the risk of loss from changes in commodity beef prices. NBP reflects commodity contract gains and losses as adjustments to the basis of underlying commodities sold; gains or losses are recognized in the statement of operations as a component of net sales.

NBP may use futures contracts in order to reduce exposure associated with entering into firm commitments to purchase live cattle at prices determined prior to delivery of the cattle as well as firm commitments to sell certain beef products at sales prices determined prior to shipment. In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, NBP accounts for futures contracts and their related firm purchase commitments at fair value. Certain firm commitments for live cattle purchases and all firm commitments for boxed beef sales are treated as “normal purchases and sales” and not marked to market.  SFAS No. 133 imposes extensive recordkeeping requirements in order to treat a derivative instrument as a hedge for accounting purposes. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the instrument and the related change in fair value of the underlying commitment. For derivatives that qualify as effective hedges, the change in fair value has no net effect on earnings until the hedged transaction affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value does affect current period net earnings.

While management believes each of these instruments help mitigate various market risks, they are not designated and accounted for as hedges under SFAS No. 133 as a result of the extensive recordkeeping requirements of that statement. Accordingly, the gains and losses associated with the change in fair value of all futures contracts and the gains and losses associated with changes in the market value of certain of the firm commitments not designated as normal purchases are recorded to income and expense in the period of change.

NBP uses a sensitivity analysis to evaluate the effect that changes in the market value of commodities will have on these commodity derivative instruments.  As of February 23, 2008, the potential change in fair value of applicable commodity prices, assuming a hypothetical 10% decrease in the underlying commodity price, was $0.2 million.  As of August 25, 2007, the potential change in fair value of applicable commodity prices, assuming a hypothetical 10% decrease in the underlying commodity price, was $5.2 million.

Foreign Operations.  Transactions denominated in a currency other than an entity’s functional currency may expose that entity to currency risk.  Although NBP operates in international markets including Japan, South Korea, and China, product sales are predominately made in United States dollars, and therefore, currency risks are limited.

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Interest Rates. As a result of the Company’s normal borrowing and leasing activities, our operating results are exposed to fluctuations in interest rates, which we manage primarily through our regular financing activities. We generally maintain limited investments in cash and cash equivalents. 

We have long-term debt with variable interest rates. Short-term debt is primarily comprised of the current portion of long-term debt maturing twelve months from the balance sheet date.  Our variable interest expense is sensitive to changes in the general level of interest rates. As of February 23, 2008, the weighted average interest rate on our $292.0 million of variable rate debt was approximately 5.0%.

We had total interest expense of approximately $18.4 million during the twenty-six week period ending February 23, 2008.  The estimated increase in interest expense from a hypothetical 200 basis point increase in applicable variable interest rates would have been approximately $2.7 million in the twenty-six week period ending February 23, 2008.

Item 4T.  Controls and Procedures.

We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the Consolidated Financial Statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) under supervision and with the participation of management, including our Chief Executive Officer and Chief Reporting and Compliance Officer. Based upon that evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Reporting and Compliance Officer concluded that our disclosure controls and procedures were effective in alerting them, in a timely manner, to material information required to be included in our periodic Securities and Exchange Commission filings.  There have been no changes in our internal controls over financial reporting during the thirteen weeks ended February 23, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.  The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For information regarding legal proceedings, see Note 7. Legal Proceedings to our Consolidated Financial Statements included in Part I- Item 1 of this Form 10-Q.

Item 1A. Risk Factors.

Other than the satisfaction of closing conditions to complete the Agreement, the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended August 25, 2007 have not materially changed.  Please refer to the Company’s report on Form 10-K for the fiscal year ended August 25, 2007 to consider those risk factors.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

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

A Special Meeting of Members of USPB was held on March 14, 2008.  January 26, 2008 was fixed as the record date for determining those members of the Company entitled to vote at the Special Meeting and any adjournments or postponements of the meeting.  Two proposals were presented for member consideration.  The first was to consider and vote upon a proposal to adopt and approve the Membership Interest Purchase Agreement, dated as of February 29, 2008, among JBS S.A. (JBS), National Beef Packing Company, LLC (NBP), and the several members of NBP, including the Company, and approve the transactions contemplated.  The second proposal was to grant the persons named as proxies discretionary authority to vote to adjourn the Special Meeting, if necessary, for the purpose of soliciting additional proxies to vote in favor of the approval and adoption of the Membership Interest Purchase Agreement and approval of the proposed transaction.

Under the Company’s Certificate of Formation, Limited Liability Company Agreement and applicable Delaware law, the affirmative vote of members holding a majority of the voting power of each class of units was required to approve the purchase agreement.  The members holding Class A units are each entitled to one vote per member, and the members holding Class B units are each entitled to one vote per Class B unit owned by such member.  For the Class A units, out of 447 votes, 421 voted for the first proposal and 420 voted for the second proposal.  For the Class B units, out of 735,305 votes, 729,715 voted for the first proposal and 727,215 voted for the second proposal. 

Item 5. Other Information.

None.        

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Item 6. Exhibits.

(A) Exhibits

2.1	Membership Interest Purchase Agreement dated February 29, 2008 between JBS S.A.; National Beef Packing Company, LLC; U.S. Premium Beef, LLC; French Basin Land and Cattle Co., LLC; TKK Investments, LLC; S‑B Enterprises V, LLC; TMKCo, LLC; John R. Miller; Timothy M. Klein; and NBPCO Holdings, LLC (incorporated by reference to Exhibit 20.1 to Form 8-K (File No. 333-115164) filed with the Commission on March 4, 2008).
2.2	First Amendment of Membership Interest Purchase Agreement dated as of March 24, 2008, among JBS, S.A.; National Beef Packing Company, LLC; U.S. Premium Beef, LLC; French Basin Land and Cattle Co., LLC; TKK Investments, LLC; S-B Enterprises V, LLC; TMKCO, LLC; John R. Miller; Timothy M. Klein and NBPCO Holdings, LLC (filed herewith).
2.3	Second Amendment of Membership Interest Purchase Agreement dated as of April 3, 2008, among JBS, S.A.; National Beef Packing Company, LLC; U.S. Premium Beef, LLC; French Basin Land and Cattle Co., LLC; TKK Investments, LLC; S-B Enterprises V, LLC; TMKCO, LLC; John R. Miller; Timothy M. Klein and NBPCO Holdings, LLC (filed herewith).
3.0	Limited Liability Company Agreement of U.S. Premium Beef, LLC (incorporated herein by reference to Appendix D to the voting materials – prospectus contained in U.S. Premium Beef, Inc. Registration Statement on Form S-4 (File No. 333-115164) filed with the SEC on August 5, 2004).
3.1	Amendment to the Limited Liability Company Agreement of U.S. Premium Beef, LLC, dated as of March 27, 2008 (filed herewith).
10.1	Cattle Purchase and Sale Agreement dated February 29, 2008 between National Beef Packing Company, LLC, Swift & Company, and U.S. Premium Beef, LLC (incorporated by reference to Exhibit 20.1 to Form 8-K (File No. 333-115164) filed with the Commission on March 4, 2008).
10.2	Amended and Restated Lease Agreement dated April 11, 2006 between Joint Development Authority of Brooks, Colquitt, Grady, Mitchell and Thomas Counties and National Beef Packing Company, LLC (incorporated herein by reference to Exhibit 10.1 to Form 10-Q (File No. 333-111407) filed by National Beef Packing Company, LLC with the SEC on April 3, 2008).
20.1	Proxy Statement regarding proposed transaction sent by U.S. Premium Beef, LLC to it members on or about March 4, 2008 (incorporated by reference to Exhibit 20.1 to Form 8-K (File No. 333-115164) filed with the Commission on March 4, 2008).
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

19

32.2 Certification of the Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

20

SIGNATURES

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

U.S. Premium Beef, LLC
By:	/s/ Steven D. Hunt
	Steven D. Hunt Chief Executive Officer (Principal Executive Officer)

By:	/s/ Scott J. Miller
	Scott J. Miller  Chief Reporting and Compliance Officer (Principal Financial and Accounting Officer)

Date: April 4, 2008

21

EX-2.2

Exhibit 2.2

FIRST AMENDMENT OF

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS FIRST AMENDMENT, dated effective as of March 24, 2008 (this “Amendment”), to the Membership Interest Purchase Agreement, dated as of February 29, 2008 (as amended, supplemented or otherwise modified from time to time, the “MIPA”), among JBS S.A., National Beef Packing Company, LLC, U.S. Premium Beef, LLC, French Basin Land and Cattle Co., LLC, TKK Investments, LLC, S-B Enterprises V, LLC, TMKCO, LLC, John R. Miller, Timothy M. Klein and NBPCO Holdings, LLC.  Unless otherwise defined herein, terms used herein shall have the meanings assigned thereto in the MIPA.

W I T N E S S E T H :

WHEREAS, pursuant to Section 5.16(a) of the Agreement, JBS was required to promptly and duly call, give notice of, convene and hold a meeting of its shareholders within 30 days of the date of the MIPA, for the purpose of obtaining approval of the transactions contemplated thereby;

WHEREAS, JBS did not timely fulfill the requirement stipulated in Section 5.16(a), having convened a meeting of its shareholders for the intended purpose to be held on April 2, 2008, as a result of which the requirement that the transaction contemplated by the Agreement be approved within 30 days also cannot be fulfilled;

WHEREAS, in order to provide a solution to the problem described above which cannot be cured, JBS has requested an amendment to the Agreement in order to assure compliance with the covenants contained in Section 5.16;

WHEREAS, the Sellers are willing to agree to such amendment of Section 5.16 and to amend the corresponding right to terminate in Section 7.1(g)(ii) and Section 7.3(c)(iii) that exists by virtue of the failure of JBS timely to fulfill the conditions established in Section 5.16;

WHEREAS, the Parties agree that with the adoption of this Amendment as of March 24, 2008, that there is no breach of the MIPA relating to Section 5.16 and therefore no right of the Sellers to terminate the MIPA under Sections 7.1(b)(ii) and 7.1(g)(ii) under conditions existing as of March 24, 2008;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, JBS, the Sellers and National hereby agree as follows:

1.   Waivers.  To the extent and only to the extent that a breach resulted from the failure by JBS to timely convene a meeting of shareholders to approve the transaction contemplated by the MIPA prior to the adoption by the Parties of this Amendment, the Sellers hereby waive any breach of the MIPA arising from violation of Section 5.16 of the MIPA, and the related termination rights provided in respect thereof under Section 7.1(b)(ii), Section 7.1(g)(ii) and Section 7.3(c)(iii).                                                             

Signature Copy

NBP MEMBERS/JBS S.A.  1^ST AMENDMENT MIPA

2.    Amendments.  The Sellers, National and JBS hereby agree to amend Section 5.16(a), Section 7.1(g)(ii) and Section 7.3(c)(iii) of the MIPA with existing words and language stricken and new language underlined as provided below: 

            5.16     JBS Shareholder Approval.  Buyer shall promptly after the date of this Agreement give all required notices and take all action necessary to notify its shareholders of a meeting to seek approval of the transactions contemplated hereby and mail to its shareholders information relevant to their vote and as required under the applicable law.  The Board of Directors of Buyer shall:

(a)        promptly and duly call, give notice of, convene and hold a meeting of its shareholders, which meeting shall be held within 30 days of the date of the Agreement not later than April 2, 2008, for the purpose of obtaining approval of the transactions contemplated hereby;

(b)        recommend to its shareholders approval of the contemplated transactions under this Agreement; and

(c)        take all commercially reasonable action to solicit and obtain shareholder approval.

7.1       Termination.

(g)        Either Party; Failure of Member/Shareholder Approval.

Buyer or Sellers may terminate this Agreement if:

(i)         the members of USPB do not approve the transactions contemplated under this Agreement by 30 days after execution of this Agreement; or

(ii)        the shareholders of JBS fail to approve the transactions contemplated under this Agreement by 30 days after execution of this Agreement on or before April 2, 2008.

Buyer and Sellers agree to promptly notify each other in writing upon approval of the transactions by their respective shareholders and members, and if the Party elects to terminate the Agreement as provided under this Section 7.1(g);

7.3       Termination Fee.

(c)        Buyer provides the Financing Representation to Sellers and then Buyer does not have adequate financing to pay amounts due at the Closing under Section 7.1(d);

2 Signature Copy

NBP MEMBERS/JBS S.A.  1^ST AMENDMENT MIPA

then Buyer shall pay or cause to be paid to National by 60 days after occurrence of an event in Section 7.3(a), (b), or (c) a cash amount equal to $25,000,000 plus all costs of National and Sellers incurred in the United States related to the negotiation and implementation of the transactions under this Agreement included in a written notice from Sellers to Buyer including costs of legal counsel, consultants, advisors, data room, due diligence, and printing (the “Termination Fee”), provided, however, that the Termination Fee shall not be paid by Buyer in the event that:

(i)         this Agreement is terminated pursuant to Section 7.1(a) (Mutual Termination) or Section 7.1(e) (Buyer’s Termination);

(ii)        the Members of USPB fail to approve this Agreement and the contemplated transactions under this Agreement by 30 days after execution of the Agreement;

(iii)       the shareholders of JBS fail to approve this Agreement and the contemplated transactions under this Agreement by 30 days after execution of this Agreement on or before April 2, 2008;

(iv)       the FTC or DOJ, in response to the notifications required under Section 5.10(a), unconditionally disapprove the transactions contemplated in the Transaction Documents such that no possible appeal or remedy, including any sale, divestiture of disposition of assets or businesses, remains available to Buyer to effect the resolution of objections or concerns by the FTC or DOJ;

(v)        Sellers terminate this Agreement after acceptance of a Superior Proposal; or

(vi)       an Act of God occurs and Buyer terminates this Agreement pursuant to Section 7.1(f).

3.  Representation and Warranties.  JBS, as of the date hereof and after giving effect to the Amendment contained herein, hereby confirms, reaffirms and restates that the representations and warranties made by it in the MIPA are true and correct in all material respects all as if made on the effective date of this Amendment.

4.  Conditions to Effectiveness.  This Amendment shall become effective as of March 24, 2008 upon the time when the parties shall have exchanged fully signed counterparts of this Amendment.

3 Signature Copy

NBP MEMBERS/JBS S.A.  1^ST AMENDMENT MIPA

5.  Limited Effect.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Sellers or National under the MIPA, nor constitute a waiver of any other provision of the MIPA or any other Transaction Document.  Except as expressly amended, waived, modified and supplemented herein, all of the provisions and covenants of the MIPA and the other Transaction Documents are and shall continue to remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed.  Each reference to the “MIPA” contained in the MIPA and in each of the Transaction Documents (howsoever “MIPA” is therein defined) shall be deemed to refer to the MIPA as amended and modified by this Amendment.

6.  Governing Law; Counterparts.  (a) This Amendment and the rights and obligations of the Parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware.

(b) This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  This Amendment may be delivered by facsimile transmission or PDF electronic transmission of the relevant signature pages of this Amendment.

[the remainder of this page intentionally left blank]

4 Signature Copy

NBP MEMBERS/JBS S.A.  1^ST AMENDMENT MIPA

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.

SELLERS:                                                     U.S. PREMIUM BEEF, LLC

By:   /s/ Steven D. Hunt                                              

            Name: Steven D. Hunt                                   

            Title: Chief Executive Officer                        

FRENCH BASIN LAND & CATTLE CO., LLC

By: /s/ John R. Miller                                                    

            Name: John R. Miller                                    

            Title: Manager                                               

TKK INVESTMENTS, LLC

By:  /s/ Timothy M. Klein                                              

            Name:  Timothy M. Klein                                 

            Title: Manager                                                  

TMKCo, LLC

By:  /s/ Timothy M. Klein                                              

            Name:  Timothy M. Klein                                 

            Title: Manager                                                  

S-B ENTERPRISES V, LLC

By: /s/ Scott H. Smith                                                  

            Name:  Scott H. Smith                                    

            Title: Manager                                                 

5 Signature Copy

NBP MEMBERS/JBS S.A.  1^ST AMENDMENT MIPA

/s/ John R. Miller                                                                 

JOHN R. MILLER

 /s/ Timothy M. Klein                                                          

TIMOTHY M. KLEIN

NBPCO HOLDINGS, LLC

By:   /s/ Richard A. Jochum                                                 

            Name:  Richard A. Jochum                                      

            Title:  Vice President, General Counsel                    

BUYER:                                                         JBS S.A.

By:   /s/ Wesley M. Batista                                            

            Name:Wesley M. Batista                                   

            Title:                                                                 

NATIONAL:                                                  NATIONAL BEEF PACKING COMPANY, LLC

By:  /s/ John R. Miller                                                    

            Name: John R. Miller                                         

            Title:  Chief Executive Officer                             

6 Signature Copy

EX-2.3

SECOND AMENDMENT OF

MEMBERSHIP INTEREST PURCHASE AGREEMENT

THIS SECOND AMENDMENT, dated effective as of April 3, 2008 (this “Amendment”), to the Membership Interest Purchase Agreement, dated as of February 29, 2008 (as amended, supplemented or otherwise modified from time to time, the “MIPA”), among JBS S.A. (“JBS”), National Beef Packing Company, LLC, U.S. Premium Beef, LLC, French Basin Land and Cattle Co., LLC, TKK Investments, LLC, S-B Enterprises V, LLC, TMKCO, LLC, John R. Miller, Timothy M. Klein and NBPCO Holdings, LLC.  Unless otherwise defined herein, terms used herein shall have the meanings assigned thereto in the MIPA.

W I T N E S S E T H :

WHEREAS, pursuant to Section 5.16(a) of the Agreement, JBS was required to promptly and duly call, give notice of, convene and hold a meeting of its shareholders within 30 days of the date of the MIPA, for the purpose of obtaining approval of the transactions contemplated thereby;

WHEREAS, pursuant to the First Amendment of the MIPA dated March 24, 2008, the parties amended Sections 5.16(a), 7.1(g) and 7.3(c) to provide that JBS would hold its shareholder meeting on or before April 2, 2008;

WHEREAS, at the April 2, 2008 JBS shareholders meeting the requisite quorum was not available to officially approve the transaction necessitating the issuance of a second invitation meeting to be held on April 11, 2008; as a result, the requirement that the transaction contemplated by the Agreement be approved on or before April 2, 2008 cannot be fulfilled;

WHEREAS, in order to provide a solution to the problem described above which cannot be cured, JBS has requested an amendment to the Agreement in order to assure compliance with the covenants contained in Section 5.16;

WHEREAS, the Sellers are willing to agree to such amendment of Section 5.16 and to amend the corresponding right to terminate in Section 7.1(g)(ii) and Section 7.3(c)(iii) that exists by virtue of the failure of JBS timely to fulfill the conditions established in Section 5.16;

WHEREAS, the Parties agree that with the adoption of this Amendment as of April 3, 2008, that there is no breach of the MIPA relating to Section 5.16 and therefore no right of the Sellers to terminate the MIPA under Sections 7.1(b)(ii) and 7.1(g)(ii) under conditions existing as of April 3, 2008;

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, JBS, the Sellers and National hereby agree as follows:

Signature Copy

NBP MEMBERS/JBS S.A.  2ND AMENDMENT MIPA

1.   Waivers.  To the extent and only to the extent that a breach resulted from the failure by JBS to timely convene a meeting of shareholders to approve the transaction contemplated by the MIPA prior to the adoption by the Parties of this Amendment, the Sellers hereby waive any breach of the MIPA arising from violation of Section 5.16 of the MIPA, and the related termination rights provided in respect thereof under Section 7.1(b)(ii), Section 7.1(g)(ii) and Section 7.3(c)(iii).

2.    Amendments.  The Sellers, National and JBS hereby agree to amend Section 5.16(a), Section 7.1(g)(ii) and Section 7.3(c)(iii) of the MIPA through the First Amendment of the MIPA with existing words and language stricken and new language underlined as provided below: 

            5.16     JBS Shareholder Approval.  Buyer shall promptly after the date of this Agreement give all required notices and take all action necessary to notify its shareholders of a meeting to seek approval of the transactions contemplated hereby and mail to its shareholders information relevant to their vote and as required under the applicable law.  The Board of Directors of Buyer shall:

(a)        promptly and duly call, give notice of, convene and hold a meeting of its shareholders, which meeting shall be held not later than April 2 11, 2008, for the purpose of obtaining approval of the transactions contemplated hereby;

(b)        recommend to its shareholders approval of the contemplated transactions under this Agreement; and

(c)        take all commercially reasonable action to solicit and obtain shareholder approval.

7.1       Termination.

(g)        Either Party; Failure of Member/Shareholder Approval.

Buyer or Sellers may terminate this Agreement if:

(i)         the members of USPB do not approve the transactions contemplated under this Agreement by 30 days after execution of this Agreement; or

(ii)        the shareholders of JBS fail to approve the transactions contemplated under this Agreement on or before April 2 11, 2008.

Buyer and Sellers agree to promptly notify each other in writing upon approval of the transactions by their respective shareholders and members, and if the Party elects to terminate the Agreement as provided under this Section 7.1(g);

7.3       Termination Fee.

(c)        Buyer provides the Financing Representation to Sellers and then Buyer does not have adequate financing to pay amounts due at the Closing under Section 7.1(d);

2 Signature Copy

NBP MEMBERS/JBS S.A.  2ND AMENDMENT MIPA

then Buyer shall pay or cause to be paid to National by 60 days after occurrence of an event in Section 7.3(a), (b), or (c) a cash amount equal to $25,000,000 plus all costs of National and Sellers incurred in the United States related to the negotiation and implementation of the transactions under this Agreement included in a written notice from Sellers to Buyer including costs of legal counsel, consultants, advisors, data room, due diligence, and printing (the “Termination Fee”), provided, however, that the Termination Fee shall not be paid by Buyer in the event that:

(i)         this Agreement is terminated pursuant to Section 7.1(a) (Mutual Termination) or Section 7.1(e) (Buyer’s Termination);

(ii)        the Members of USPB fail to approve this Agreement and the contemplated transactions under this Agreement by 30 days after execution of the Agreement;

(iii)       the shareholders of JBS fail to approve this Agreement and the contemplated transactions under this Agreement on or before April 2 11, 2008;

(iv)       the FTC or DOJ, in response to the notifications required under Section 5.10(a), unconditionally disapprove the transactions contemplated in the Transaction Documents such that no possible appeal or remedy, including any sale, divestiture of disposition of assets or businesses, remains available to Buyer to effect the resolution of objections or concerns by the FTC or DOJ;

(v)        Sellers terminate this Agreement after acceptance of a Superior Proposal; or

(vi)       an Act of God occurs and Buyer terminates this Agreement pursuant to Section 7.1(f).

3.  Representation and Warranties.  JBS, as of the date hereof and after giving effect to the Amendment contained herein, hereby confirms, reaffirms and restates that the representations and warranties made by it in the MIPA are true and correct in all material respects all as if made on the effective date of this Amendment.

4.  Conditions to Effectiveness.  This Amendment shall become effective as of April 3, 2008 upon the time when the parties shall have exchanged fully signed counterparts of this Amendment.

3 Signature Copy

NBP MEMBERS/JBS S.A.  2ND AMENDMENT MIPA

5.  Limited Effect.  The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of the Sellers or National under the MIPA, nor constitute a waiver of any other provision of the MIPA or any other Transaction Document.  Except as expressly amended, waived, modified and supplemented herein, all of the provisions and covenants of the MIPA and the other Transaction Documents are and shall continue to remain in full force and effect in accordance with the terms thereof and are hereby in all respects ratified and confirmed.  Each reference to the “MIPA” contained in the MIPA and in each of the Transaction Documents (howsoever “MIPA” is therein defined) shall be deemed to refer to the MIPA as amended and modified by this Amendment.

6.  Governing Law; Counterparts.  (a) This Amendment and the rights and obligations of the Parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware.

(b) This Amendment may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.  This Amendment may be delivered by facsimile transmission or PDF electronic transmission of the relevant signature pages of this Amendment.

[the remainder of this page intentionally left blank]

4 Signature Copy

NBP MEMBERS/JBS S.A.  2ND AMENDMENT MIPA

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.

SELLERS:                                                     U.S. PREMIUM BEEF, LLC

By:   /s/ Steven D. Hunt                                              

            Name: Steven D. Hunt                                   

            Title: Chief Executive Officer                        

FRENCH BASIN LAND & CATTLE CO., LLC

By: /s/ John R. Miller                                                    

            Name: John R. Miller                                    

            Title: Manager                                               

TKK INVESTMENTS, LLC

By:  /s/ Timothy M. Klein                                              

            Name:  Timothy M. Klein                                 

            Title: Manager                                                  

TMKCo, LLC

By:  /s/ Timothy M. Klein                                              

            Name:  Timothy M. Klein                                 

            Title: Manager                                                  

S-B ENTERPRISES V, LLC

By: /s/ Scott H. Smith                                                  

            Name:  Scott H. Smith                                    

            Title: Manager                                                 

5 Signature Copy

NBP MEMBERS/JBS S.A.  2ND AMENDMENT MIPA

/s/ John R. Miller                                                                 

JOHN R. MILLER

 /s/ Timothy M. Klein                                                          

TIMOTHY M. KLEIN

NBPCO HOLDINGS, LLC

By:   /s/ Richard A. Jochum                                                 

            Name:  Richard A. Jochum                                      

            Title:  Vice President, General Counsel                    

BUYER:                                                         JBS S.A.

By:   /s/ Joesley M. Batista                                             

            Name: Joesley M. Batista                                  

            Title: Presidente /CEO                                       

NATIONAL:                                                  NATIONAL BEEF PACKING COMPANY, LLC

By:  /s/ John R. Miller                                                    

            Name: John R. Miller                                         

            Title:  Chief Executive Officer                             

6 Signature Copy

EX-3.1

U.S. Premium Beef, LLC	Limited Liability Company Agreement
	Appendix C

Appendix C

Amended as of March 27, 2008

UNIT TRANSFER POLICY
OF
U.S. PREMIUM BEEF, LLC

Section 1.1. Definitions, Applicability.

(a)        Definitions.  The definitions of the Limited Liability Company Agreement (the “Agreement”) of U.S. Premium Beef, LLC (the “Company”) and Appendix E of the Agreement apply to this Unit Transfer Policy (the “Policy”).

(b)        Applicability.  This Policy and Section 3.8 of the Agreement and the other applicable provisions of the Agreement apply to all Transfers of Units of the Company.

(c)        Intent of Policy.  It is the intent of this Policy as it relates to any Transfers that: (1) the tax status of the Company is the same as for a partnership; (2) this Company preserve its partnership tax status by complying with Regulations, Section 1.7704-1, et seq., and any amendments; and (3) to the extent possible, this Policy shall be read and interpreted to prohibit the free transferability of Units.

Section 2.1. Complete Prohibition On Certain Transfers Of Units.

Notwithstanding any other provisions of this Policy, the following Transfers will be prohibited and the Board of Directors will have no authority to approve any of the following Transfers:

(1) a Transfer in violation of the Securities Act or any state securities or blue sky laws applicable to the Company or the Interest to be transferred;

(2) a Transfer that would cause the Company to be considered a publicly traded partnership under Section 7704(b) of the Code;

(3) a Transfer that would cause the Company to lose its status as a partnership for federal income tax purposes; or

(4) a Transfer that would cause a termination of the Company for federal income tax purposes.

Section 2.2. Class A And Class B Units May Not Be Transferred Separately.

C-1

U.S. Premium Beef, LLC	Limited Liability Company Agreement
	Appendix C

For the period when Class A and Class B Units must be Transferred together under Section 3.2(b) of the Agreement, a Class A Unit may not be Transferred separately from a Class B Unit and a Class B Unit may not be transferred separately from a Class A Unit.

Section 3.1. Conditions To Permitted Transfers.

(a)        Requirement.  A Transfer shall not be treated as a Permitted Transfer unless and until the conditions in this Section are satisfied.

(b)        Conveyance Documents.  Except in the case of a Transfer involuntarily by operation of law, the transferor and transferee shall execute and deliver to the Company documents and instruments of conveyance as may be necessary or appropriate in the opinion of legal counsel to the Company to effect such Transfer, including for transfers after February 29, 2008 that may receive distributions or allocations under Section 3.2(b), a Unit Transfer Agreement in a form approved by legal counsel to the Company.  In the case of a Transfer of Units involuntarily by operation of law, the Transfer shall be confirmed by presentation to the Company of legal evidence of the Transfer, in form and substance satisfactory to legal counsel to the Company, which may include documents and agreements with the Company to make the transfer effective. In all cases, the Company shall be reimbursed by the transferor and/or transferee for all costs and expenses that it reasonably incurs in connection with the Transfer.

(c)        Tax Information.  The transferor and transferee shall furnish the Company with the transferee’s taxpayer identification number, sufficient information to determine the transferee’s initial tax basis in the Units transferred, and any other information reasonably necessary to permit the Company to file all required federal and state tax returns and other legally required information statements or returns. In addition, the transferee must consent to the use of the method and convention of allocating Profits and Losses for the year of the transfer that is specified in the Unit Transfer Policy.  Without limiting the generality of the foregoing, the Company shall not be required to make any Distribution otherwise provided for in the Agreement with respect to any Transferred Units until it has received this information.

(d)        Securities Compliance.  Except in the case of a Transfer of Units involuntarily by operation of law, either (1) the Units are registered under the Securities Act, and any applicable state securities laws, or (2) if requested by the Board of Directors in its discretion, the transferor provides an opinion of legal counsel, which opinion and legal counsel shall be reasonably satisfactory to the Board of Directors, to the effect that the Transfer is exempt from all applicable registration requirements and that the Transfer will not violate any applicable laws regulating the Transfer of securities.

(e)        Does Not Cause Company To Be Investment Company.  Except in the case of a Transfer of Units involuntarily by operation of law, if requested by the Board of Directors in its sole discretion, the transferor shall provide an opinion of legal counsel, which opinion and legal counsel shall be reasonably satisfactory to the Board of Directors, to the effect that the Transfer will not cause the Company to be deemed to be an “investment company” under the Investment Company Act of 1940.

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U.S. Premium Beef, LLC	Limited Liability Company Agreement
	Appendix C

(f)        Does Not Cause Company To Be Publicly Traded Partnership.  Except in the case of a Transfer of Units involuntarily by operation of law, if requested by the Board of Directors in its discretion, the transferor shall provide an opinion of legal counsel, which opinion and legal counsel shall be reasonably satisfactory to the Board of Directors, to the effect that such Transfer will not cause the Company to be deemed to be a “publicly-traded limited partnership” under applicable provisions of the Code.

(g)        Transferee Is Not A Competitor Of The Company.  Except in the case of a Transfer of Units involuntarily by operation of law, the Board must determine (in its sole discretion) that the transferee is not a competitor of the Company or the Company’s Affiliates, or an Affiliate of a competitor of the Company or a Person who as a Unitholder or Member would or may be detrimental to the interests of the Company.  The Unitholder and proposed transferee shall submit information requested by the Board to make the determination.

(h)        Tax Status Compliance.  Unless otherwise approved by the Board of Directors, a Transfer of Units shall not be made except upon terms which would not, in the opinion of legal counsel chosen by and mutually acceptable to the Board and the transferor, result in the termination of the Company within the meaning of Section 708 of the Code or cause the application of the rules of Sections 168(g)(1)(B) and 168(h) of the Code or similar rules to apply to the Company.  In determining whether a particular proposed Transfer will result in a termination of the Company, legal counsel to the Company shall take into account the existence of prior written commitments to Transfer and the commitments shall always be given precedence over subsequent proposed Transfers.

(i)         Suspension Of Transfers After Dissolution Event.  No notice or request initiating the procedures contemplated by this Section may be given by Unitholder after a Dissolution Event has occurred.

(j)         Board May Waive Conditions.  Subject to Section 2.1 of this Policy, the Board of Directors shall have the authority to waive any legal opinion or other condition required in this Section.

Section 3.2. Distributions And Allocations In Respect To Transferred Units.

C-3

U.S. Premium Beef, LLC	Limited Liability Company Agreement
	Appendix C

(a)        General Rule.  Except for distributions and allocations in Section 3.2(b), if any Unit is transferred in compliance with the Transfer Restrictions, then Profits and Losses, each item thereof, and all other items attributable to the Units for the fiscal year of the Transfer shall be divided and allocated between the transferor and the transferee by taking into account their varying interests during the fiscal year in accordance with Code Section 706(d).  Solely for purposes of making the allocations, the Company shall use a method and convention that divides and allocates the Profits, Losses and items between the transferor and transferee based on the portion of the 52-53 week taxable year that has elapsed prior to the Transfer determined by recognizing the Transfer as of the first day of the 52-53 week taxable quarter during which the notice, documentation and information and approval requirements of the Transfer have been substantially complied with.  For this calculation, Profits, Losses and items thereof for the 52-53 week taxable year shall be apportioned to the first three quarters on the basis of taxable income estimates used in determining Distributions made during the following quarter and any remaining amount shall be apportioned to the fourth quarter.  Solely for purposes of determining whether the transferor or transferee is entitled to a Distribution, all Distributions made on or before the last day of the 52-53 week taxable quarter during which the requirements have been substantially complied with shall be made to the transferor and all Distributions thereafter shall be made to the transferee.  The purpose of this method and convention is that Distributions are likely to be based on the estimated taxable income of the previous quarter and the Board believes that allocations will be better and more equitably aligned with Distributions.  The Board shall have the power and authority to adopt another reasonable method and/or convention with respect to the allocations and Distributions by resolution or by amending this Section; provided, that reasonable notice of any change is given to the Unitholders in advance of the change.  Neither the Company, the Board, any Director nor any Unitholder shall incur any liability for making allocations and Distributions in accordance with the provisions of this Section, whether or not the Board or any Director or the Company or any Unitholder has knowledge of any Transfer of ownership of any interest in the Company.  The Unitholders acknowledge that the method and convention designated in this Section 3.2 constitutes an “agreement among the partners” within the meaning of Regulations, Section 1.706-1.

(b)        Distributions and Allocations Related To Sale of NBP Interests.  Notwithstanding the general provisions in Section 3.2(a), for any allocations or Distributions attributable to the transactions under the Membership Interest Purchase Agreement dated February 29, 2008 entered into by and between JBS S.A. and the Company and other members of National Beef Packing Company (“MIPA”), the allocation of profits and losses and Distributions of proceeds from those MIPA transactions shall be made to the transferee of unit transfer transactions approved by the Board after February 29, 2008 and prior to the allocation or Distribution.

Section 3.3. Other Rules Regarding Transfers.

(a) Market Of Units Not Made.  A Unitholder may not: (1) make a market in Units; (2) Transfer its Units on an established securities market, a secondary market (or the substantial equivalent of those markets) within the meaning of Code Section 7704(b) (and any Regulations, proposed Regulations, revenue rulings, or other official pronouncements of the Internal Revenue Service or Treasury Department that may be promulgated or published); and (3) in the event the Regulations, revenue rulings, or other pronouncements treat any or all arrangements which facilitate the selling of Company interests and which are commonly referred to as “matching services” as being a secondary market or substantial equivalent of a secondary market, Transfer any Units through a matching service that is not approved in advance by the Company.  A Unitholder may not Transfer any Units to any Person unless the Person agrees to be bound by the Transfer Restrictions and to Transfer the Units only to Persons who agree to be similarly bound.

(b) Units Acquired For Unitholder’s Account.  The acquisition of Units by a Unitholder shall be deemed to be a representation and warranty to the Company and the other Unitholders, that the Unitholder’s acquisition of Units is made as principal for the Unitholder’s own account and not for resale or distribution of the Units to others in violation of securities laws as determined by the Company and its legal counsel.

C-4

U.S. Premium Beef, LLC	Limited Liability Company Agreement
	Appendix C

1^ST Amendment To Section 3.2   Approved   September 29, 2004

2^ND Amendment To Section 3.2   Approved   March 27, 2008

C-5

EX-31.1

 EXHIBIT 31.1

CERTIFICATIONS

I, Steven D. Hunt, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of U.S. Premium Beef, LLC;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/ Steven D. Hunt
	Steven D. Hunt Chief Executive Officer

Date: April 4, 2008

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Scott J. Miller, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of U.S. Premium Beef, LLC;

     2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

     a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):

     a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:	/s/  Scott J. Miller
	Scott J. Miller Chief Reporting and Compliance Officer (Principal Financial and Accounting Officer)

Date: April 4, 2008

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 In connection with the Quarterly Report of U.S. Premium Beef, LLC (the Company) on Form 10-Q for the period ended February 23, 2008 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Steven D. Hunt, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Steven D. Hunt
	Steven D. Hunt Chief Executive Officer

Date: April 4, 2008

EX-32.2

 

EXHIBIT 32.2

CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 In connection with the Quarterly Report of U.S. Premium Beef, LLC (the Company) on Form 10-Q for the period ended February 23, 2008 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Scott J. Miller, Chief Reporting and Compliance Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Scott J. Miller
	Scott J. Miller Chief Reporting and Compliance Officer (Principal Financial and Accounting Officer)

Date: April 4, 2008