-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EIEED2kCwKnC6a096fchJMG94Kdn2WTr3facWsb8q7+zzMycDOZrOrjbuREX0+Fd RDRc3waEXIj11PlOoB848w== 0001003297-09-000098.txt : 20090415 0001003297-09-000098.hdr.sgml : 20090415 20090415132122 ACCESSION NUMBER: 0001003297-09-000098 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20090228 FILED AS OF DATE: 20090415 DATE AS OF CHANGE: 20090415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U. S. Premium Beef, LLC CENTRAL INDEX KEY: 0001289237 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - LIVESTOCK & ANIMAL SPECIALTIES [0200] IRS NUMBER: 201576986 FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-115164 FILM NUMBER: 09750452 BUSINESS ADDRESS: STREET 1: 12200 NORTH AMBASSADOR DRIVE, SUITE 501 CITY: KANSAS CITY STATE: MO ZIP: 64163 BUSINESS PHONE: 816-713-8800 MAIL ADDRESS: STREET 1: 12200 NORTH AMBASSADOR DRIVE, SUITE 501 CITY: KANSAS CITY STATE: MO ZIP: 64163 FORMER COMPANY: FORMER CONFORMED NAME: U. S. Premium Beef, Inc. DATE OF NAME CHANGE: 20040504 10-Q 1 uspb10q.htm Prepared by E-Services - www.edgar2.com

__________

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended February 28, 2009


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, a non-accelerated filer or a small reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer þ Small Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes oNo þ

The registrant’s units are not traded on an exchange or in any public market. As March 28, 2009, 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.	12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	19

Item 4T.	Controls and Procedures.	21


PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings.	22

Item 1A.	Risk Factors.	22

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	22

Item 3.	Defaults Upon Senior Securities.	22

Item 4.	Submission of Matters to a Vote of Security Holders.	22

Item 5.	Other Information.	22

Item 6.	Exhibits.	22

	Signatures.	24

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.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.


U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except unit data)

			February 28,		August 30,
Assets			2009		2008
			(unaudited)
Current assets:
	Cash and cash equivalents		$	72,348	$	77,399
	Accounts receivable, less allowance for returns and doubtful accounts
		of $1,768 and $1,665, respectively	165,783		218,023
	Due from affiliates		2,890		5,827
	Other receivables		6,047		5,392
	Inventories		167,530		192,480
	Other current assets		28,506		12,765
		Total current assets	443,104		511,886
Property, plant, and equipment, at cost			447,639		431,584
	Less accumulated depreciation		(152,714)		(133,436)
		Net property, plant, and equipment	294,925		298,148
Goodwill			80,642		80,642
Other intangible assets, net of accumulated amortization
	of $10,394 and $9,347, respectively		25,650		26,690
Other assets			9,736		9,710
		Total assets	$	854,057	$	927,076

Liabilities and Capital Shares and Equities
Current liabilities:
	Current installments of long-term debt		$	10,001	$	4,620
	Cattle purchases payable		50,916		65,378
	Accounts payable - trade		56,151		71,321
	Due to affiliates		355		1,004
	Accrued compensation and benefits		25,527		49,320
	Accrued insurance		13,824		12,918
	Other accrued expenses and liabilities		31,589		10,152
	Distributions payable		364		19,245
		Total current liabilities	188,727		233,958
Long-term liabilities:
	Long-term debt, excluding current installments		341,941		376,298
	Other liabilities		2,212		2,327
		Total long-term liabilities	344,153		378,625
		Total liabilities	532,880		612,583
Minority interest in National Beef Packing Company, LLC and Kansas City Steak Company, LLC			257,543		187,997
Capital shares and equities:
	Members' capital, 735,385 Class A units and 735,385 Class B units
		authorized, issued and outstanding	13,043		75,831
	Patronage notices		50,642		50,642
	Accumulated other comprehensive (loss) income		(51)		23
		Total capital shares and equities	63,634		126,496
Commitments and contingencies			-		-
		Total liabilities and capital shares and equities	$	854,057	$	927,076

See accompanying notes to consolidated financial statements.


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 28, 2009			February 23, 2008		February 28, 2009		February 23, 2008
					(unaudited)		(unaudited)		(unaudited)		(unaudited)

Net sales					$	1,298,218	$	1,305,950	$	2,727,195	$	2,704,052

Costs and expenses:
	Cost of sales				1,236,297		1,288,194		2,640,335		2,681,887
	Selling, general, and administrative expenses				10,021		13,212		22,907		24,871
	Depreciation and amortization				11,269		8,755		21,239		17,584
		Total costs and expenses			1,257,587		1,310,161		2,684,481		2,724,342

			Operating income (loss)		40,631		(4,211)		42,714		(20,290)

Other income (expense):
	Interest income				63		414		245		942
	Interest expense				(5,601)		(9,190)		(12,454)		(18,410)
	Minority owners' interest in net (income) loss of
		National Beef Packing Company, LLC			(13,236)		4,872		(11,720)		16,263
	Minority owners' interest in net income of Kansas City
		Steak Company, LLC			(546)		(421)		(717)		(446)
	Equity in loss of aLF Ventures, LLC				(24)		(25)		(49)		(50)
	Termination fee				14,572		-		14,572		-
	Other, net				(4,237)		1,541		(3,845)		1,809
			Income (loss) before taxes		31,622		(7,020)		28,746		(20,182)

Income tax expense					(192)		(530)		(561)		(1,080)
			Net income (loss)		$	31,430	$	(7,550)	$	28,185	$	(21,262)


Income (loss) per linked unit:
	Basic				$	42.74	$	(10.27)	$	38.33	$	(28.91)
	Diluted				$	42.12	$	(10.27)	$	37.77	$	(28.91)

Outstanding weighted-average Class A and Class B units:
	Basic				735,385		735,385		735,385		735,385
	Diluted				746,218		735,385		746,218		735,385

See accompanying notes to consolidated financial statements.


U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (in thousands)
					26 weeks ended		26 weeks ended
					February 28, 2009		February 23, 2008
					(unaudited)		(unaudited)
Cash flows from operating activities:
	Net income (loss)				$	28,185	$	(21,262)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization			21,239		17,584
		Termination Fee			(14,572)		-
		Loss on disposal of property, plant, and equipment			132		13
		Gain on disposal of investment			-		(1,342)
		Minority interest			12,165		(15,945)
		Changes in assets and liabilities:
			Accounts receivable		52,240		19,966
			Due from affiliates		4,194		(491)
			Other receivables		(655)		2,354
			Inventories		24,950		8,468
			Other assets		(15,773)		(454)
			Cattle purchases payable		(561)		3,232
			Accounts payable		(11,688)		8,064
			Due to affiliates		(653)		(742)
			Accrued compensation and benefits		(23,793)		(2,844)
			Accrued insurance		906		(3,714)
			Other accrued expenses and liabilities		20,069		507
				Net cash provided by operating activities	96,385		13,394
Cash flows from investing activities:
	Capital expenditures, including interest capitalized				(17,996)		(25,510)
	Termination Fee				14,572		-
	Proceeds from sale of property, plant, and equipment				894		121
	Proceeds from redemption of investment				-		1,342
				Net cash used in investing activities	(2,530)		(24,047)
Cash flows from financing activities:
	Net receipts under revolving credit lines				1,451		26,761
	Repayments of other indebtedness				(4,200)		(1,698)
	Repayments of term notes payable				(26,227)		(515)
	Change in overdraft balances				(17,383)		(12,835)
	Distributions to minority interest owners in National Beef Packing Company, LLC				(19,932)		(3,278)
	Member distributions				(32,541)		-
				Net cash (used in) provided by financing activities	(98,832)		8,435
Effect of exchange rate changes on cash					(74)		3
				Net decrease in cash	(5,051)		(2,215)
Cash and cash equivalents at beginning of the period					77,399		62,869
Cash and cash equivalents at end of the period					$	72,348	$	60,654
Supplemental cash disclosures:
	Cash paid during the period for interest				$	12,097	$	18,852
	Cash (received) paid during the period for taxes, net of $925 and $0
			refunds, respectively		$	(798)	$	979

See accompanying notes to consolidated financial statements.

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 30, 2008. 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 December 2007, the FASB issued SFAS 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. 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. The impact to the Company from the adoption of SFAS 141R in fiscal year 2010 will depend on acquisitions at the time.

In December 2007, the FASB issued SFAS 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 SFAS 160 may have, if any, on its consolidated financial statements.

In February 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position 157-2, which defers the effective date of SFAS No. 157 (SFAS 157), Fair Value Measurements for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statement on a recurring basis (at least annually). FASB Staff Position 157-2 is effective for fiscal years beginning after November 15, 2008. Management believes the adoption of Staff Position 157-2 will not have a material impact on the Company’s financial position or net earnings.

(3) Termination of Membership Interest Purchase Agreement with JBS

On February 29, 2008, JBS S.A. (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 (Sellers), entered into a Membership Interest Purchase Agreement (MIPA), as amended from time to time. Under the MIPA, if the closing of the transactions contemplated under the MIPA had not occurred for any reason on or before the date 360 days after the date of execution of the MIPA, either JBS or the Sellers could terminate the MIPA. Accordingly, on February 19, 2009, the Sellers delivered a termination notice to JBS to terminate the MIPA effective as of February 23, 2009. On February 23, 2009, JBS paid USPB a termination fee of $14.6 million, its share of the $19.9 million termination fee paid to the Sellers. Subsequent to the termination of the MIPA, the Company wrote off approximately $1.5 million of legal fees related to the MIPA in February 2009, which are included in other, net.

(4) Inventories

Inventories at February 28, 2009 and August 30, 2008 consisted of the following (in thousands):


	February 28, 2009		August 30, 2008

Dressed and boxed meat products	$	115,421	$	144,885
Beef by-products	25,319		20,886
Supplies and other	26,790		26,709
	$	167,530	$	192,480

(5) Comprehensive Income (Loss)

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


		13 weeks ended February 28, 2009		13 weeks ended February 23, 2008		26 weeks ended February 28, 2009		26 weeks ended February 23, 2008
Net income (loss)		$	31,430	$	(7,550)	$	28,185	$	(21,262)
Other comprehensive (loss) income:
Foreign currency translation adjustments		(8)		(2)		(74)		3
	Comprehensive income (loss)	$	31,422	$	(7,552)	$	28,111	$	(21,259)

(6) 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. On April 13, 2009, NBP entered into two Unit Redemption Agreements pursuant to Section 12.5 of its Limited Liability Company Agreement, dated as of August 6, 2003 (as amended from time to time, the “LLC Agreement”) to redeem at agreed upon redemption prices all of the membership interests in NBP that are owned or controlled by NBP’s Chief Executive Officer, John R. Miller, and an affiliate of NBP’s General Counsel, Scott H. Smith (referred to herein as “Mr. Smith”), as well as 25% of the membership interests in NBP that are owned by affiliates of NBP’s President and Chief Operating Officer, Timothy M. Klein. As a result, Mr. Miller and his affiliate received approximately $91.3 million for their units and Mr. Smith’s affiliate received approximately $22.8 million for its units and they are no longer members of NBP although each retained their position with NBP. Mr. Klein’s affiliates received approximately $11.4 million for their redeemed units, and he retained his position with NBP as well.

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 28, 2009, the value of the minority interest in National Beef was determined to be $255.6 million, which was in excess of its carrying value. Accordingly, the carrying value of the minority interest in National Beef increased by approximately $58.4 million through accretion during the twenty-six weeks ended February 28, 2009, resulting in the $255.6 million carrying value, which is included in the accompanying consolidated balance sheet as of February 28, 2009.

Generally accepted accounting principles require the Company to determine the fair value of the minority owners’ interest at the end of each reporting period. To the extent that this value increases, this change in fair value is accreted over the redemption period as discussed above. In the past, NBP used Stern Brothers Valuation Advisors to assist management in measuring fair value of the minority owners’ interest. Effective February 28, 2009, management used the agreed upon redemption prices that were used in the Unit Redemption Agreements discussed above in measuring the fair value of the minority interest.

The redemption value of the minority interest in NBP at February 28, 2009, increased by approximately $83.7 million compared to the value at August 30, 2008 primarily as a result of the Company’s improved financial performance. Offsetting the change in the value of the minority interest is a corresponding change in members’ capital.

(7) Contingencies

NBP’s wholly owned subsidiary, National Carriers, Inc., has various independent contractor drivers who are involved in accidents from time to time, which in the aggregate could result in a material liability for NBP.

NBP is 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 NBP’s financial condition, results of operations, or liquidity.

The U.S. Department of Justice, joined by state attorneys general from seventeen states filed a civil antitrust suit against JBS and NBP on October 20, 2008 in the U.S. District Court for the Northern District of Illinois, Eastern Division, seeking a permanent injunction against the proposed acquisition of NBP by JBS, along with an award in the amount of their costs and attorneys’ fees. On November 13, 2008, Ranchers Cattlemen Action Legal Fund and United Stockgrowers of America and the Organization for Competitive Markets filed a civil antitrust suit against JBS and NBP in the U.S. District Court for the Northern District of Illinois, Eastern Division, seeking a permanent injunction against the proposed acquisition of NBP by JBS. Subsequent to the termination of the proposed acquisition in February 2009, these suits have been dismissed.

(8) Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157 (SFAS 157), Fair Value Measurements. This statement establishes a single authoritative definition of fair value to be used when accounting rules require the use of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurement. SFAS 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

On August 31, 2008, the Company adopted portions of SFAS 157, Fair Value Measurements, except for the non-financial assets and liabilities within the scope of the deferral provided by FASB Staff Position 157-2 as discussed in Note 2.

SFAS 157 establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows:

• Level 1 – quoted prices in active markets for identical assets or liabilities accessible by the reporting entity.

• Level 2 – observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 – unobservable inputs for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available.

The following table details the assets and liabilities measured at fair value on a recurring basis as of February 28, 2009 and also the level within the fair value hierarchy used to measure each category of assets.


(in thousands)
Description	February 28, 2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Other current assets - derivatives	$	10,007	$	10,007	$	-	$	-

Other accrued expenses and liabilities - derivatives	$	20,799	$	12,327	$	8,472	$	-

Minority owners' interest	$	255,634	$	-	$	255,634	$	-

Due to the fact the NBP’s equity is not traded, there are typically significant unobservable inputs used in valuing redemption value of the minority interest in NBP. With the appraisal election notices received on February 2, 2009, and the subsequent agreement on price between certain redeeming NBP members and NBP, the agreed upon price was deemed to provide a significant observable input to assist in the valuation of all interests subject to future redemption. For a more detailed discussion of minority owners’ interest and the key inputs we use to value it, refer to Note 6. The table below represents the Company’s minority owners’ interest measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as defined in SFAS 157 and transfer to Level 2 as of February 28, 2009.


Fair Value Measurements Using Significant Unobservable Inputs (Level 3)

(in thousands)	Minority Owners' Interest

Balance at August 30, 2008	$	186,533
Allocation of year-to-date net income	11,720
Class A priority distribution	(1,051)
Valuation adjustment	58,433
Transfers to Level 2	(255,635)
Balance at February 28, 2009	$	-

In February 2007, the FASB issued SFAS 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. This statement was effective for the Company as of August 31, 2008; however, the Company did not elect the option to report any of the selected financial assets and liabilities at fair value.

(9) Disclosure about Derivative Instruments and Hedging Activities

As part of NBP’s ongoing operations, NBP is exposed to market risks such as changes in commodity prices. To manage these risks, NBP may enter into the following derivative transactions pursuant to its established policies:

• Forward purchase contracts for cattle for use in the beef plants

• Exchange traded futures contracts for cattle

• Exchange traded futures contracts for grain

While management believes each of these instruments help mitigate various market risks, they are not designated and accounted for as hedges as a result of the extensive recordkeeping requirements associated with hedge accounting. Accordingly, the gains and losses associated with the change in fair value of the instruments are recorded to net sales and cost of sales in the period of change. Certain firm commitments for live cattle purchases and all firm commitments for boxed beef sales are treated as normal purchases and sales and not recorded at fair value.

NBP enters into certain commodity derivatives, primarily with a diversified group of highly rated counterparties. The maximum amount of loss due to the credit risk of the counterparties, should the counterparties fail to perform according to the terms of the contracts, is deemed to be immaterial as of February 28, 2009 as all derivatives in an asset position are exchange-traded contracts. The exchange-traded contracts have been entered into under a master netting agreement. None of the derivatives entered into have credit-related contingent features. NBP has $17.6 million in cash collateral posted on its derivative liabilities.

The following table presents the fair values as discussed in Note 8 and other information regarding derivative instruments not designated as hedging instruments as of February 28, 2009 (in thousands of dollars):


	Derivative Asset			Derivative Liability
	As of February 28, 2009			As of February 28, 2009
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value

Commodity contracts	Other current assets	$	10,007	Accrued expenses and other liabilities	$	20,799
Total		$	10,007		$	20,799

The following table presents the impact of derivative instruments on the Consolidated Statement of Operations for the thirteen and twenty-six week periods ended February 28, 2009 (in thousands of dollars):


Derivatives Not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in Income on Derivatives	Amount of Gain (Loss) Recognized in Income On Derivatives
		13 weeks ended February 28, 2009		26 weeks ended February 28, 2009

Commodity contracts	Net sales	$	(6,025)	$	(29,549)
Commodity contracts	Cost of sales	6,850		9,813
Total		$	825	$	(19,736)

(10) Earnings Per Linked Unit

Basic earnings per linked 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.

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 and twenty-six week periods ending February 23, 2008, as the effect of including them would have been anti-dilutive to the loss per linked unit calculation.


Income (Loss) Per Linked Unit Calculation

(In thousands, except unit and per unit data)	13 weeks ended February 28, 2009		13 weeks ended February 23, 2008		26 weeks ended February 28, 2009		26 weeks ended February 23, 2008
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Basic income (loss) per linked unit
Income (loss) available to unitholders (numerator)	$	31,430	$	(7,550)	$	28,185	$	(21,262)

Weighted average outstanding units (denominator)	735,385		735,385		735,385		735,385

Per linked unit amount	$	42.74	$	(10.27)	$	38.33	$	(28.91)

Diluted income (loss) per linked unit
Income (loss) available to unitholders (numerator)	$	31,430	$	(7,550)	$	28,185	$	(21,262)

Weighted average outstanding units	735,385		735,385		735,385		735,385
Effect of dilutive securities - unit options	10,833		-		10,833		-
Linked units (demoninator)	746,218		735,385		746,218		735,385

Per linked unit amount	$	42.12	$	(10.27)	$	37.77	$	(28.91)

(11) Subsequent Events

On March 9, 2009, the Company’s newly formed, wholly-owned subsidiary, National Beef Leathers, LLC, acquired certain assets and assumed certain liabilities of Prime Tanning Corp. located in St. Joseph, Missouri. This transaction expands the Company’s value-based marketing strategy into the quality wet blue hide category.

Effective April 13, 2009, USPB’s Credit Agreement was amended to provide for a $10 million revolving line of credit which will mature on April 30, 2011. The Company will use the new facility for working capital and general corporate purposes. Borrowings under the revolving line of credit will bear interest at LIBOR or the Base Rate, plus the applicable margin. The applicable margin will be the same as NBP’s Credit Facility for Line of Credit Loans plus 25 basis points.

On April 13, 2009, NBP entered into two Unit Redemption Agreements pursuant to Section 12.5 of its LLC Agreement to redeem at agreed upon redemption prices all of the membership interests in NBP that are owned or controlled by NBP’s Chief Executive Officer, John R. Miller, and Mr. Smith, as well as 25% of the membership interests in NBP that are owned by affiliates of NBP’s President and Chief Operating Officer, Timothy M. Klein. As a result, Mr. Miller and his affiliate received approximately $91.3 million for their units and Mr. Smith’s affiliate received approximately $22.8 million for its units and they are no longer members of NBP although each retained their position with NBP. Mr. Klein’s affiliates received approximately $11.4 million for their redeemed units, and he retained his position with NBP as well.

In connection with these transactions, the NBP LLC Agreement was amended to provide that (i) the existing appraisal process for the valuation of NBP to be used for the remaining units controlled by Mr. Klein for his rights under Section 12.5 of the NBP LLC Agreement has been replaced with an amount equal to a two-year average of NBP’s EBITDA (as defined in the NBP LLC Agreement) multiplied by six minus NBP’s outstanding debt; and (ii) for purposes of redemption or liquidation, the Class B units controlled by Mr. Klein will be paid a non-dilution premium.

In order to partially finance such redemptions, NBP created a new series of Class A units (referred to as “Class A1 Units”) that were issued to USPB and NBPCO Holdings, LLC for approximately $55.8 million and $19.6 million, respectively. Class A1 Units are nonvoting and are entitled to a priority distribution of 7% per year on the face amount of the Class A1 Units payable with payment in kind Class A1 Units in lieu of cash if NBP’s EBITDA does not meet certain tests. For purposes of determining Class B ownership for liquidation or redemption, the Class A1 Units will be deemed to be converted to Class B units at a ratio stated in the NBP LLC Agreement, but will remain Class A1 Units after such determination.

As a result of these transactions, the ownership of NBP’s Class B voting interests is as follows:


Beneficial Owner	Class B Interest (1)	Percentage of Class

U.S. Premium Beef, LLC	12,537,001.0612	69.3527%
NBPCo Holdings, LLC	4,468,723.0518	24.7203%
Timothy M. Klein Affiliates	1,071,429.0000	5.9270%

(1) For purposes of a redemption or liquidation event assuming no redemptions of any Class A1 Units.

NBP also financed a portion of the redemptions with $50.0 million of new borrowings under the revolving line of credit of its existing credit facility (as amended, the "Credit Facility"). NBP’s Credit Facility was amended on April 13, 2009 to permit these redemptions, increase the borrowings under the term loan by up to $75.0 million, increase the revolving line of credit by $25.0 million, increase the interest rates of the term loan and revolving line of credit, shorten the maturity date of the term loan to July 2012 and revise the payment schedule of the term loan, among other things. The related financing charges, an upfront fee of approximately $0.7 million and an arrangement fee of approximately $0.5 million, will be amortized over the life of the loan.

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 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 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 or suppliers, loss of key employees, labor relations, and consolidation among our customers.

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 30, 2008 on Form 10-K filed with the Securities and Exchange Commission 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

Concern about consumer spending and the demand for all proteins, specifically beef, will continue to dominate the industry outlook over the coming months. Declining cattle and competing meat supplies have been well documented and should be supportive to prices, however, demand continues to take center stage. The global economic concerns remain unchanged while the value of the U.S. dollar has declined and could begin to be supportive to beef exports while slowing the recent improvements in import volume. Beef by-products remain under severe pressure and it will take several months before inventories become manageable on several key items. Boxed beef will continue to be required to carry a larger percentage of total processing returns, particularly relative to the levels realized over the past two years.

Recent Developments

Continued world financial instability and foreign currency deviations have decreased the demand and value of certain industry products and inventories.

On February 19, 2009, the Company and the other holders of the NBP membership interests, including NBPCO Holdings and parties controlled by three executive officers, John R. Miller, Timothy M. Klein and Scott H. Smith (Sellers), delivered a termination notice to JBS S.A. (JBS) to terminate the Membership Interest Purchase Agreement, as amended (MIPA) effective as of February 23, 2009. On February 23, 2009, JBS paid to the Sellers a termination fee in the amount of $19.9 million as per the terms of the MIPA. Subsequent to the termination of the MIPA, the Company wrote off approximately $1.5 million of legal fees related to the MIPA in February 2009, which are included in other, net.

On April 13, 2009, NBP entered into two Unit Redemption Agreements pursuant to Section 12.5 of its Limited Liability Company Agreement, dated as of August 6, 2003 (as amended from time to time, the “LLC Agreement”) to redeem at agreed upon redemption prices all of the membership interests in NBP that are owned or controlled by NBP’s Chief Executive Officer, John R. Miller, and an affiliate of NBP’s General Counsel, Scott H. Smith (referred to herein as “Mr. Smith”), as well as 25% of the membership interests in NBP that are owned by affiliates of NBP’s President and Chief Operating Officer, Timothy M. Klein. As a result, Mr. Miller and his affiliate received approximately $91.3 million for their units and Mr. Smith’s affiliate received approximately $22.8 million for its units and they are no longer members of NBP although each retained their position with NBP. Mr. Klein’s affiliates received approximately $11.4 million for their redeemed units, and he retained his position with NBP as well.

As a result of these transactions, the ownership of NBP’s Class B voting interests is as follows:


Beneficial Owner	Class B Interest (1)	Percentage of Class

U.S. Premium Beef, LLC	12,537,001.0612	69.3527%
NBPCo Holdings, LLC	4,468,723.0518	24.7203%
Timothy M. Klein Affiliates	1,071,429.0000	5.9270%

(1) For purposes of a redemption or liquidation event assuming no redemptions of any Class A1 Units.

Beef Export Markets

Export markets for U.S. beef products remain 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. In April 2008, our Brawley facility was suspended from shipping beef to Japan following the discovery of a short loin that included a portion of a spinal column, a specified risk material, prohibited by Japan. Our Brawley facility was subsequently cleared to resume shipments to Japan on September 19, 2008. 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 in October 2007. South Korea reopened its border and started inspecting U.S. beef near the end of June 2008. Our Dodge City facility was removed from the eligible supplier list to Mexico on December 23, 2008 for two days for an alleged ink issue in September 2008 which we believe to be untrue and unfounded. 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 our 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.

Results of Operations

Thirteen weeks ended February 28, 2009 compared to thirteen weeks ended February 23, 2008

General. Net income for the thirteen weeks ended February 28, 2009 was approximately $31.4 million compared to a net loss of $7.6 million for the thirteen weeks ended February 23, 2008, an improvement of $39.0 million. Total costs and expenses of approximately $1,257.6 million and $1,310.2 million for the thirteen weeks ended February 28, 2009 and February 23, 2008, respectively, were 96.9% as a percent of sales for the thirteen weeks ended February 28, 2009 compared to 100.3% for the thirteen weeks ended February 23, 2008. A relatively stable demand for beef products and a decline in cattle prices during the second quarter of fiscal year 2009 as compared to the same period of fiscal year 2008 allowed the sales prices to cover the cost of the live cattle that we processed.

Net Sales. Net sales were approximately $1,298.2 million for the thirteen weeks ended February 28, 2009 compared to approximately $1,306.0 million for the thirteen weeks ended February 23, 2008, a decrease of approximately $7.8 million, or 0.6%. The slight decrease in net sales resulted primarily from an average decrease in sales prices per head of 0.5% in the thirteen weeks ended February 28, 2009 than the same period in the prior year while the volume of cattle processed remained relatively unchanged.

Cost of Sales. Cost of sales was approximately $1,236.3 million for the thirteen weeks ended February 28, 2009 compared to approximately $1,288.2 million for the thirteen weeks ended February 23, 2008, a decrease of approximately $51.9 million, or 4.0%. The decrease was primarily a result of decreased live cattle prices that were approximately 8.8% lower than the same period of last year.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were $10.0 million for the thirteen weeks ended February 28, 2009 compared to $13.2 million for the thirteen weeks ended February 23, 2008, a decrease of $3.2 million, or 24.2%. The decrease reflects a decrease in legal expenses of approximately $3.4 million, which are lower primarily as a result of $2.1 million in legal fees associated with the MIPA that were reclassed to other, net in the current quarter. Also contributing to the decrease was a decrease in travel and related expenses of approximately $0.2 million and a decrease in consulting expense of approximately $0.2 million. Offsetting these decreases was an increase in the provision for bad debts of approximately $0.5 million and an increase in payroll, bonus, and related expenses of approximately $0.5 million.

Depreciation and Amortization Expense. Depreciation and amortization expenses were approximately $11.3 million for the thirteen weeks ended February 28, 2009 compared to approximately $8.8 million for the thirteen weeks ended February 23, 2008, an increase of approximately $2.5 million, or 28.4%. Depreciation expense increased due to assets being placed into service, primarily at our three beef plants and two case ready plants, during fiscal year 2008 and to assets being placed into service, primarily at our two Kansas beef plants, late in the first quarter of fiscal year 2009.

Operating Income/Loss. Operating income was approximately $40.6 million for the thirteen weeks ended February 28, 2009 compared to an operating loss of approximately $4.2 million for the thirteen weeks ended February 23, 2008, an improvement of approximately $44.8 million. The increased operating income resulted from a relatively stable demand for beef products and lower cattle prices which allowed the sales prices to cover the cost of the live cattle that we processed during the second quarter of fiscal year 2009 as compared to the same period of last year.

Minority Owners’ Interest in NBP. Minority interest in the net income of NBP for the thirteen weeks ended February 28, 2009 was $13.2 million compared to a net loss for the thirteen weeks ended February 23, 2008 of $4.9 million, a change of $18.1 million. The minority interest in NBP represents the minority owners’ equity in NBP’s earnings.

Interest Expense. Interest expense was approximately $5.6 million for the thirteen weeks ended February 28, 2009 compared to $9.2 million for the thirteen weeks ended February 23, 2008, a decrease of $3.6 million, or 39.1%. The decrease in interest expense during the thirteen weeks ended February 28, 2009 as compared to the same period last year was due primarily to the purchase and cancellation of our Senior Notes of approximately $30.6 million and $2.3 million during the fourth quarter of fiscal year 2008 and the first quarter of fiscal year 2009, respectively. The repayment of approximately $25.7 million of our term note in December 2008 also contributed to the decline in interest expense for the current quarter. In addition, the weighted average principal amount of our variable rate debt decreased by approximately $20.1 million at February 28, 2009 as compared to February 23, 2008. Also contributing to the decrease in interest expense was lower interest rates on our variable rate debt, a decrease of approximately 347 basis points, during the thirteen weeks ended February 28, 2009 as compared to the same period of last year.

Termination Fee. A termination fee in the amount of $14.6 million was received in the thirteen week period ending February 28, 2009 as a result of the termination of the MIPA, discussed in further detail in Note 3 to our Consolidated Financial Statements included in Part I- Item 1 of this Form 10-Q.

Other, net. Other, net non-operating expense was approximately $4.2 million for the thirteen weeks ended February 28, 2009 compared to other, net non-operating income of approximately $1.5 million for the thirteen weeks ended February 23, 2008, a decrease of approximately $5.7 million. The decrease in other, net non-operating income was primarily related to the reclass of approximately $2.1 million in legal fees from selling, general, and administrative expenses and the write-off of approximately $1.5 million of legal fees, both of which were related to the termination of the MIPA in February 2009. Also contributing to the decrease was the approximate $0.7 million write-off of obsolete parts at our case ready facilities during the current quarter. In addition, we had recorded $1.3 million in proceeds received in redemption of an investment interest in which our basis had previously been written down to zero during the second quarter of fiscal year 2008 which did not recur in the current quarter.

Income Tax Expense. Income tax expense was $0.2 million for the thirteen weeks ended February 28, 2009 compared to $0.5 million for the same period of fiscal year 2008, a decrease of $0.3 million, or 60.0%. Beginning in calendar year 2008, some states in which we conduct business, modified their business taxes, using net income, or a modification of net income, as the basis. The modification of these state taxes necessitated the inclusion of approximately $0.1 million of these business taxes in income tax expense during the thirteen weeks ended February 28, 2009 as compared to the same period of fiscal year 2008. A decrease in income taxes for the period of approximately $0.4 million was related to our subsidiary, National Carriers, Inc. (NCI). Income tax expense is recorded on income from NCI, which is organized as a C Corporation.

Twenty-six weeks ended February 28, 2009 compared to twenty-six weeks ended February 23, 2008

General. Net income for the twenty-six weeks ended February 28, 2009 was approximately $28.2 million compared to a net loss of approximately $21.3 million for the twenty-six weeks ended February 23, 2008, an improvement of approximately $49.5 million. Net sales were higher in the twenty-six weeks ended February 28, 2009 compared to those of the prior period primarily due to an average increase in sales prices per head of approximately 2.8%. The number of cattle processed during the current twenty-six week period was 1.6% less than the same period of last year.

Total costs and expenses of approximately $2,684.5 million and $2,724.3 million for the twenty-six weeks ended February 28, 2009 and February 23, 2008, respectively, were 98.4% as a percent of sales for the twenty-six weeks ended February 28, 2009 compared to 100.8% for the twenty-six weeks ended February 23, 2008. A relatively stable demand for beef products and lower cattle prices allowed for increased sales prices to cover the cost of the live cattle that we processed during the twenty-six week period of fiscal year 2009 as compared to the same period of fiscal year 2008.

Net Sales. Net sales were approximately $2,727.2 million for the twenty-six weeks ended February 28, 2009 compared to approximately $2,704.1 million for the twenty-six weeks ended February 23, 2008, an increase of approximately $23.1 million, or 0.9%. The slight increase in net sales resulted primarily from an average increase in sales prices per head of 2.8% in the twenty-six weeks ended February 28, 2009 as compared to the same period in the prior year while the volume of cattle processed decreased by approximately 1.6%. Partially offsetting the increase in average sales prices per head was an approximate $12.2 million loss on the fair value adjustment on cattle futures contracts that we entered into during the first quarter of fiscal year 2009 to offset the risk of fixed-price sales commitments. This $12.2 million loss excludes the impact from related physical purchase and sales transactions which will impact future periods operating results.

Cost of Sales. Cost of sales was approximately $2,640.3 million for the twenty-six weeks ended February 28, 2009 compared to approximately $2,681.9 million for the twenty-six weeks ended February 23, 2008, a decrease of approximately $41.6 million, or 1.6%. The decrease was primarily a result of decreased live cattle prices that were approximately 3.5% lower than the twenty-six week period of last year. Also contributing to this decrease was decreased cattle processing of approximately 1.6% for the current twenty-six week period ended February 28, 2009 as compared to the same period of fiscal year 2008.

Selling, General, and Administrative Expenses. Selling, general, and administrative expenses were $22.9 million for the twenty-six weeks ended February 28, 2009 compared to $24.9 million for the twenty-six weeks ended February 23, 2008, a decrease of $2.0 million, or 8.0%. The decrease for this period is primarily due to an approximate $2.0 million decrease in legal fees, which are lower primarily as a result of $2.1 million in legal fees associated with the MIPA that were reclassed to other, net. Also contributing to the decrease was a decrease in advertising expense of approximately $0.3 million, a decrease in travel and related expenses of approximately $0.3 million, and an approximate $0.2 million decrease in consulting expense. Partially offsetting these decreases was an increase in payroll, bonus, and benefit expenses of approximately $1.5 million and an approximate $0.5 million increase in the provision for bad debts during the current period as compared to the same period of last year.

Depreciation and Amortization Expense. Depreciation and amortization expenses were approximately $21.2 million for the twenty-six weeks ended February 28, 2009 compared to approximately $17.6 million for the twenty-six weeks ended February 23, 2008, an increase of approximately $3.6 million, or 20.5%. Depreciation expense increased due to assets being placed into service, primarily at our three beef plants and two case ready plants, during fiscal year 2008 and to assets being placed into service, primarily at our two Kansas beef plants, late in the first quarter of fiscal year 2009.

Operating Income/Loss. Operating income was approximately $42.7 million for the twenty-six weeks ended February 28, 2009 compared to operating loss of approximately $20.3 million for the twenty-six weeks ended February 23, 2008, an improvement of approximately $63.0 million. The improved operating income resulted from a relatively stable demand for beef products and lower cattle prices which allowed the sales prices to cover the cost of the live cattle that we processed in the current twenty-six week period as compared to the same period of last year.

Minority Owners’ Interest in NBP. Minority interest in the net income of NBP for the twenty-six weeks ended February 28, 2009 was $11.7 million compared to a net loss for the twenty-six weeks ended February 23, 2008 of $16.3 million, a change of $28.0 million. The minority interest in NBP represents the minority owners’ equity in NBP’s earnings.

Interest Expense. Interest expense was approximately $12.5 million for the twenty-six weeks ended February 28, 2009 compared to $18.4 million for the twenty-six weeks ended February 23, 2008, a decrease of approximately $5.9 million, or 32.1%. The decrease in interest expense during the twenty-six weeks ended February 28, 2009 as compared to the same period last year was due primarily to the purchase and cancellation of our Senior Notes of approximately $30.6 million and $2.3 million during the fourth quarter of fiscal year 2008 and the first quarter of fiscal year 2009, respectively. The repayment of approximately $25.7 million of our term note in December 2008 also contributed to the decline in interest expense for the twenty-six week period. In addition, the weighted average principal amount of our variable rate debt decreased by approximately $19.9 million at February 28, 2009, as compared to February 23, 2008. Also contributing to the decrease in interest expense was lower interest rates on our variable rate debt, a decrease of approximately 290 basis points, during the twenty-six weeks ended February 28, 2009 as compared to the same period of last year.

Termination Fee. A termination fee in the amount of $14.6 million was received in the twenty-six week period ending February 28, 2009 as a result of the termination of the MIPA, discussed in further detail in Note 3 to our Consolidated Financial Statements included in Part I- Item 1 of this Form 10-Q.

Other, net. Other, net non-operating expense was approximately $3.8 million for the twenty-six weeks ended February 28, 2009 compared to other, net non-operating income of approximately $1.8 million for the twenty-six weeks ended February 23, 2008, a decrease of approximately $5.6 million. The decrease in other, net non-operating income was primarily related to the reclass of approximately $2.1 million in legal fees from selling, general, and administrative expenses and the write-off of approximately $1.5 million of legal fees, both of which were related to the termination of the MIPA in February 2009. Also contributing to the decrease was the approximate $0.7 million write-off of obsolete parts at our case ready facilities during the current quarter. In addition, we had recorded $1.3 million in proceeds received in redemption of an investment interest in which our basis had previously been written down to zero during the twenty-six week period of fiscal year 2008 as compared to the same period of fiscal year 2009.

Income Tax Expense. Income tax expense was $0.6 million for the twenty-six weeks ended February 28, 2009 compared to $1.1 million for the same period of fiscal year 2008, a decrease of $0.5 million, or 45.5%. Beginning in calendar year 2008, some states in which we conduct business, modified their business taxes, using net income, or a modification of net income, as the basis. The modification of these state taxes necessitated the inclusion of approximately $0.1 million of these business taxes in income tax expense during the twenty-six weeks ended February 28, 2009 as compared to the same period of fiscal year 2008. A decrease in income taxes for the period of approximately $0.7 million was related to our subsidiary, National Carriers, Inc. (NCI). Income tax expense is recorded on income from NCI, which is organized as a C Corporation.

Liquidity and Capital Resources

As of February 28, 2009, we had net working capital of $254.4 million, which included $0.4 million in distributions payable, and cash and cash equivalents of $72.3 million. As of August 30, 2008, we had net working capital of $277.9 million, which included $19.2 million in distributions payable, and cash and cash equivalents of $77.4 million. Our primary sources of liquidity are cash flow from operations and available borrowings under the amended and restated credit facility (Credit Facility).

As of February 28, 2009, we had $351.9 million of long-term debt, $10.0 million of which was classified as a current liability. As of February 28, 2009, NBP’s Credit Facility consisted of a $176.9 million term loan, all of which was outstanding, and a $200.0 million revolving line of credit loan, which had outstanding borrowings of $12.8 million, outstanding letters of credit of $42.2 million and available borrowings of $145.0 million, based on the most restrictive financial covenant calculations. Cash flows from operations and borrowings under NBP’s Credit Facility have funded its working capital requirements, acquisitions, capital expenditures, and other general corporate purposes. NBP was in compliance with all of the financial covenants under its Credit Facility as of February 28, 2009.

Effective April 13, 2009, NBP amended its Credit Facility to increase the available borrowings under the facility by increasing the revolving line of credit by $25.0 million and the term loan by up to $75.0 million. NBP used $50.0 million from the revolver and $75.5 million from the issuance of Class A1 Units to finance the redemption of the membership interests from certain members of management and their affiliates pursuant to their rights under the NBP LLC Agreement.

In addition to outstanding borrowings under the Credit Facility, the Company had outstanding borrowings under industrial revenue bonds of $20.7 million, Senior Notes of $127.1 million, a term loan with CoBank, of which approximately $2.5 million was outstanding, and capital lease and other obligations of $11.9 million as of February 28, 2009.

NBP believes that available borrowings under its Credit Facility and cash provided by operating activities will be sufficient to support working capital, capital expenditures, and debt service requirements for the foreseeable future. NBP is required to purchase or redeem $100.0 million of its outstanding Senior Notes on ore before December 31, 2009. 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 30, 2008.

Operating Activities

Net cash provided by operating activities in the twenty-six weeks ended February 28, 2009 was approximately $96.4 million compared to approximately $13.4 million in the twenty-six weeks ended February 23, 2008. The $83.0 million change was primarily due to a net income of approximately $28.2 million during the twenty-six week period of fiscal year 2009 as compared to the net loss of $21.3 million during the same period of fiscal year 2008. Also contributing to the improvement was net cash being provided in operating activities through accounts receivable, inventory, and other accrued expenses and liabilities which was offset by net cash used in operating activities through accrued compensation and benefits, accounts payable, and other assets in the current year.

Investing Activities

Net cash used in investing activities was approximately $2.5 million in the twenty-six weeks ended February 28, 2009 compared to approximately $24.0 million in the twenty-six weeks ended February 23, 2008. This decrease in cash used was primarily attributable to a reduction in expenditures for property, plant, and equipment and the receipt of the termination fee discussed in further detail in Note 3 to our Consolidated Financial Statements included in Part I- Item 1 of this Form 10-Q.

Financing Activities

Net cash used in financing activities was approximately $98.8 million in the twenty-six weeks ended February 28, 2009 compared to net cash provided by financing activities of approximately $8.4 million in the twenty-six weeks ended February 23, 2008. The change was primarily attributed to an approximate $49.2 million increase in distributions paid of which $16.6 million was paid to the minority owners in NBP, an approximate $25.3 million decrease in revolving credit borrowings, and approximately $25.7 million in repayments on the term note during the current twenty-six week period as compared to the same period of last year.

Amended and Restated Senior Credit Facility

Effective April 13, 2009, NBP’s Credit Facility was amended to permit the redemption of its membership interests in the amount of $125.5 million, including the authorization and issuance of Class A1 Units to help fund the redemption. In addition, the terms of the Credit Facility were amended to: (1) increase the borrowings under the Credit Facility by up to $100.0 million; (2) increase the applicable margin on the rates of interest of the term loan and revolving line of credit; (3) revise the payment schedule of the term loan; (4) shorten the maturity date of the term loan; (5) remove the restrictions on purchasing the Senior Notes and require the repurchase or redemption of $100 million of NBP’s Senior Notes; (6) increase the amount of capital expenditures NBP can make in any fiscal year from $50 million to $60 million, or $65 million if NBP expends less than $55 million in the immediately preceding fiscal year; and (7) add a financial covenant requiring NBP to maintain a Funded Debt to EBITDA ratio. The related financing charges, an upfront fee of approximately $0.8 million and an arrangement fee of approximately $0.5 million, will be amortized over the life of the loan.

Once the applicable collateral provisions are satisfied, the Credit Facility will consist of up to $251.9 million under a term loan that matures in July 2012 and a revolving line of credit loan of $225.0 million that matures in July 2012 that is subject to certain borrowing base limitations.

Borrowings under the Credit Facility bear interest at LIBOR or the Base Rate, plus the applicable margin. The applicable margin for the revolving line of credit and the term loan 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 April 14, 2009, the interest rates for the revolving loan and the term loan were approximately 5.75% and 6.00%, respectively.

Our funded debt to EBITDA ratio is not to be more than 3.75 to 1.00 at the end of each fiscal quarter. If 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, 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. The advance rates under the borrowing base are 90% on eligible accounts and 70% on eligible inventory. As of April 14, 2009, the Company had met the borrowing base availability requirements under its Credit Facility.

The borrowings under the revolving loan are available for NBP’s working capital requirements, capital expenditures and other general corporate purposes including the purchase of $100.0 million of NBP’s Senior Notes on or before December 31, 2009. The 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 $2.5 million on the last business day of each June and December commencing December 2009 through December 2010 after which payments increase to approximately $4.8 million. All outstanding amounts of the term loan are due and payable on July 25, 2012. Prepayment is allowed at any time.

The 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 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.

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 sales.

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 (SFAS 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 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 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. NBP believes that sensitivity analysis more appropriately reflects the potential market value exposure associated with the use of derivative instruments. As of February 28, 2009, the potential change in the fair value of applicable commodity prices, assuming a hypothetical 10% decrease in the underlying commodity price in each year, was $17.1 million. As of August 30, 2008, the potential change in fair value of applicable commodity prices, assuming a hypothetical 10% decrease in the underlying commodity price, was $1.2 million. This significant change was primarily due to the cattle futures contracts that we entered into during the first quarter of fiscal year 2009 to offset the risk of fixed-price sales commitments.

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 and South Korea, product sales are predominately made in United States dollars, and therefore, currency risks are limited.

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 28, 2009, the weighted average interest rate on our $212.9 million of variable rate debt was approximately 2.1%.

We had total interest expense of approximately $12.5 million during the twenty-six week period ending February 28, 2009. The estimated increase in interest expense from a hypothetical 200 basis point increase in applicable variable interest rates would have been approximately $2.5 million in the twenty-six week period ending February 28, 2009.

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 28, 2009 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.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

The risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended August 30, 2008 have not materially changed. Please refer to the Company’s report on Form 10-K for the fiscal year ended August 30, 2008 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.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

(A)

Exhibits

3.1(a)	Amendment of a portion of Section 6.6 of National Beef Packing Company, LLC Agreement (incorporated herein by reference to Exhibit 3.1(a) to Form 10-Q (File No. 333-111407) filed with the SEC on April 15, 2009).

3.1(b)	Amendment of a portion of Section 12.5 of National Beef Packing Company, LLC Agreement (incorporated herein by reference to Exhibit 3.1(b) to Form 10-Q (File No. 333-111407) filed with the SEC on April 15, 2009).

3.1(c)	Summary of Class A1 Units (incorporated herein by reference to Exhibit 3.1(c) to Form 10-Q (File No. 333-111407) filed with the SEC on April 15, 2009).

10.1		Fourth Amendment to Membership Interest Purchase Agreement dated as of February 19, 2009, 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).

10.2		Eighth Amendment to Credit Agreement, dated April 13, 2009, effective as of May 30, 2006, by and among U.S. Premium Beef, LLC and CoBank, ACB, as agent for the benefit of the syndication parties (filed herewith).

10.3		Unit Redemption Agreement dated as of April 13, 2009, among National Beef Packing Company, LLC and Timothy M. Klein, TKK Investments, LLC and TMKCo, LLC (incorporated herein by reference to Exhibit 10.2 to Form 10-Q (File No. 333-111407) filed with the SEC on April 15, 2009).

10.4		Unit Redemption Agreement dated as of April 13, 2009, among National Beef Packing Company, LLC and John R. Miller, French Basin Land and Cattle Co., LLC, and S-B Enterprises V, LLC (incorporated herein by reference to Exhibit 10.3 to Form 10-Q (File No. 333-111407) filed with the SEC on April 15, 2009).

10.5		Second Amendment to the Sixth Amended and Restated Credit Agreement dated as of April 13, 2009 by and among NBP and certain agents, lenders and issuers (incorporated herein by reference to Exhibit 10.4 to Form 10-Q (File No. 333-111407) filed with the SEC on April 15, 2009).

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of the Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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 (filed herewith).

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 (filed herewith).

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 15, 2009

EX-10 2 ex10-1.htm Exhibit 10.1

Exhibit 10.1

FOURTH AMENDMENT

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Fourth Amendment (“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 is effective as of February 19, 2009 (the “Effective Date”). Unless otherwise defined in this Amendment, terms used in this Amendment shall have the meanings assigned in the MIPA (as amended by this Amendment) and includes JBS S.A. which is defined as “Buyer.”

WITNESSETH:

WHEREAS, Buyer and Sellers agree that the transactions under the MIPA will not be consummated, the Closing will not occur and the MIPA will be terminated under Section 7.1(i), and Buyer will pay the Termination Fee to Sellers as provided in Section 7.3, as amended below.

WHEREAS, concurrently with the execution of this Amendment, Sellers have executed and delivered a termination notice to Buyer terminating the MIPA under Section 7.1(i), with such notice and termination to be effective as of February 23, 2009 (which notice may not be withdrawn, modified or amended without the prior consent of the Buyer) (the “Termination Notice”), which date is 360 days after the date of execution of the MIPA; and

WHREAS, the Parties now wish to amend Section 7.3 of the MIPA regarding the Termination Fee.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Amendment, the Parties agree as follows:

1. Amendment to Section 7.3. The Parties agree to amend Section 7.3 of the MIPA, as previously amended, with existing language stricken and new language underlined as provided below:

Termination Fee. Notwithstanding anything in this Agreement to the contrary, if:

(a) the Closing does not occur and this Agreement is terminated;

(b) Buyer fails to provide to Sellers the Financing Representation as provided in Section 7.1(c) by March 31, 2008 or a later date as extended by Sellers in their sole discretion; or

(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);

SIGNATURE COPY

NBP MEMBERS/BUYER S.A.

FOURTH AMENDMENT TO MIPA

then Buyer shall pay or cause to be paid to Sellers ~~in proportion to their respective holdings of National Interests as set forth on Exhibit B, by 60 days~~ on February 23, 2009, assuming that Buyer has received the Termination Notice (by electronic or physical delivery) prior to such termination ~~after~~ pursuant to the occurrence of an the event in Section 7.3(a), ~~(b), or (c),~~ a cash amount allocated in proportion to each Seller’s respective holdings of National Interests as set forth in the Termination Notice equal to $25,000,000 or a lesser amount agreed to by Sellers in the executed Termination Notice (the “Termination Fee”). Payment shall be made by Buyer to Sellers by wire transfer of funds in United States dollars to the Sellers’ accounts stated in the Termination Notice. If the Termination Fee is not paid as prescribed above, then Buyer shall be required to pay the Termination Fee 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 plus any costs to collect the Termination Fee from Buyer within five business days after the receipt of written notice of the costs from Sellers (such costs, but for the avoidance of doubt, not including the Termination Fee, the "Reimbursable Costs")~~(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;

(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).

SIGNATURE COPY

NBP MEMBERS/BUYER S.A.

FOURTH AMENDMENT TO MIPA

2. Effect of Termination. The Parties agree that after full payment of the Termination Fee and Reimbursable Costs (solely to the extent and in the event such costs are required to be paid by Buyer to Sellers), in each case as provided in and subject to the terms and conditions of Section 7.3 of the MIPA, notwithstanding anything to the contrary contained in the MIPA, including without limitation Section 7.2, the MIPA will become void and of no further force or effect with no liability or obligation of the Parties under the MIPA, except that each Party (the “Receiving Party”) shall return all documentation of the other Party (the “Disclosing Party”) currently in the Receiving Party’s possession as provided with respect to Buyer under Section 7.4 of the MIPA and the obligations of the Parties under the Confidentiality Agreement as defined in the MIPA shall continue.

3. Mutual Release. Notwithstanding anything to the contrary contained in the MIPA, including without limitation Section 7.2, upon payment by Buyer of the Termination Fee and Reimbursable Costs (solely to the extent and in the event such costs are required to be paid by Buyer to Sellers), in each case as provided in and subject to the terms and conditions of Section 7.3 of the MIPA, Buyer, on the one hand, and the Sellers and National on the other, for and on its behalf, and on behalf of their respective principals, partners, shareholders, members, officers, directors, agents, attorneys, employees, insurers, successors, representatives and assigns, shall fully and forever release and discharge the other and its principals, partners, shareholders, members, officers, directors, agents, attorneys, employees, insurers, successors, representatives and assigns, from any and all claims, liabilities, demands, damages, rights, actions or causes of action, whether fixed or contingent, liquidated or unliquidated, direct or indirect, known or unknown, whether arising in contract, tort or otherwise, which arise out of the transactions contemplated by the MIPA, including, but not limited to, claims with respect to or arising out of i) any and all negotiations culminating in the execution of the MIPA, ii) the Parties’ efforts to obtain approval of the MIPA by their respective Shareholder Assembly or members, and iii) the Parties’ efforts to obtain regulatory approval of and to complete the transactions contemplated by the MIPA, and all claims that any Party might have against any other Party related to or arising from such matters, whether asserted or not, as of the date of payment of the Termination Fee and Reimbursable Costs are paid in full (solely to the extent and in the event such costs are required to be paid by Buyer to Sellers), in each case, as provided in and subject to the terms and conditions of Section 7.3. The consideration for this mutual release is a) the mutual agreement of the Buyer, and the Sellers and National, to forgo their respective legal rights with reference to any disputes or differences that have arisen or may arise in connection with the MIPA or the transactions contemplated by the MIPA, b) payment of the Termination Fee pursuant to Section 2 of this Agreement, and c) other good and valuable consideration.

4. Governing Law; Counterparts.

(a) This Amendment and the rights and obligations of the Parties 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 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.]

SIGNATURE COPY

NBP MEMBERS/BUYER S.A.

FOURTH AMENDMENT TO MIPA

IN WITNESS WHEREOF, the Parties have caused this Amendment to be duly executed and delivered as of the Effective Date.

SELLERS:	U.S. PREMIUM BEEF, LLC


	By: /s/ Steven D. Hunt
	Name: Steven D. Hunt
	Title: CEO



	FRENCH BASIN LAND & CATTLE CO., LLC


	By: /s/ John R. Miller
	Name:
	Title:



	TKK INVESTMENTS, LLC


	By: /s/ Timothy M. Klein
	Name:
	Title:



	TMKCo, LLC


	By: /s/ Timothy M. Klein
	Name:
	Title:

S-1

SIGNATURE COPY

&nbs p;

NBP MEMBERS/BUYER S.A.

FOURTH AMENDMENT TO MIPA

	S-B ENTERPRISES V, LLC


	By: /s/ Scott H. Smith
	Name: Scott H. Smith
	Title: Manager



	/s/ John R. Miller
	JOHN R. MILLER



	/s/ Timothy M. Klein
	TIMOTHY M. KLEIN



	NBPCO HOLDINGS, LLC


	By: /s/ Rich Jochum
	Name: Rich Jochum
	Title: VP, Gen Counsel & Corp. Admin.



BUYER:	JBS S.A.


	By: /s/ Wesley Mendonca Batista
	Name:
	Title:



NATIONAL:	NATIONAL BEEF PACKING COMPANY, LLC


	By: /s/ John R. Miller
	Name:
	Title:

S-2

SIGNATURE COPY

&nbs p;

EX-10 3 ex10-2.htm Exhibit 10.2

EIGHTH AMENDMENT TO CREDIT AGREEMENT

This Eight Amendment to Credit Agreement (“Amendment”) is made as of April 14, 2009, by and among U.S. PREMIUM BEEF, LLC, a Delaware limited liability company (together with its successors and assigns, the “Borrower”), and COBANK, ACB, an agricultural credit bank (“CoBank”), as Agent (in such capacity, the “Agent”) and as the sole Syndication Party as of the date of this Amendment.

RECITAL

This Amendment is made with respect to the Credit Agreement (Term Loan) dated as of November 25, 1997 (as amended, modified, supplemented, renewed or restated from time to time, the “Agreement”). Capitalized terms that are not defined in this Amendment shall have the meanings assigned to them in the Agreement. The parties desire to re-advance amounts of the Loan from time to time up to $10,000,000 in the aggregate outstanding and to otherwise amend certain provisions of the Agreement.

NOW, THEREFORE, in consideration of the foregoing and of the terms and conditions contained in this Amendment, and of any loans or extensions of credit or other financial accommodations heretofore, now or hereafter made to or for the benefit of Borrower, the parties agree as follows:

1. Borrower is presently indebted under the Loan in the amount $2,316,763.34 (said existing indebtedness may sometimes be referred to herein as “Tranche A” of the Loan). All terms of the Agreement relating to Tranche A of the Loan, including but not limited to the accrual and repayment of interest and the repayment of principal shall not be affected by this Amendment.

2. Subject to the conditions set forth in Section 9 hereof and Sections 11.1.12, 11.1.23, 11.2.1, 11.2.9 and 11.2.10 and 11.3 of the Agreement, but otherwise the terms of the Agreement to the contrary notwithstanding, the Syndication Parties agree, each as to their Syndication Share to, in addition to Tranche A of the Loan, to re-advance amounts of the Loan previously repaid, from time to time through the Maturity Date, up to $10,000,000 in the aggregate outstanding (said re-advances may sometimes be referred to herein as “Tranche B” of the Loan). Amounts re-advanced and repaid under Tranche B of the Loan may be again re-advanced, provided that at no time shall the aggregate amount outstanding under Tranche B of the Loan exceed $10,000,000. As of the date of this Amendment the Syndication Share of CoBank is 100%. Amounts re-advanced and repaid under Tranche B of the Loan may be used by Borrower for working capital and for general corporate purposes. Notwithstanding the foregoing, during at least 30 consecutive days during each calendar year the amount outstanding under Tranche B of the Loan shall be $0. The Aggregate Commitment shall be $12,316,763.34. The amount set forth in the Note payable to CoBank shall be deemed to read $12,316,763.34 and the Agreement (as amended by this Amendment) shall govern and control over any contrary terms of the Note.

3. Terms of the Agreement to the contrary notwithstanding, as to Tranche B of the Loan the Maturity Date shall be April 30, 2011. If not due sooner by reason of acceleration, the principal amount outstanding under Tranche B of the Loan together with any unpaid interest accrued thereon, shall be due and payable on said Maturity Date.

4. Terms of the Agreement to the contrary notwithstanding, as to Tranche B of the Loan, interest shall accrue and be payable as follows:

(a) Advances may be maintained as Base Rate Advances or LIBOR Rate Advances according to the same terms and procedures as are set forth in the Sixth Amended and Restated Credit Agreement made as of the 25th day of July, 2007, as amended by the First and Second Amendments thereto (but not as may be subsequently amended unless agreed by the appropriate parties to this Agreement) by and among National Beef Packing Company, LLC, a Delaware limited liability company (“National Beef”), and the other financial institutions signatory thereto (the “National Beef Agreement”);

(b) For purposes of determining Applicable Margin (but for no other purpose), Borrowing Base Availability shall have the meaning assigned to it in the National Beef Agreement;

(c) Applicable Margin shall have the meaning assigned to it in the National Beef Agreement for Line of Credit Loans to National Beef with reference to the Borrowing Base Availability of National Beef, plus, in each case one quarter of one percent (0.25%);

(d) Interest on Advances that are maintained as Base Rate Advances shall be accrued and shall be payable in the same manner and according to the same terms as set forth for Base Rate Advances under the National Beef Agreement (making reference to the Base Rate as defined in the National Beef Agreement and the Applicable Margin);

(e) Interest on Advances that are maintained as LIBOR Rate Advances shall be accrued and shall be payable in the same manner and according to the same terms as set forth for LIBOR Rate Advances under the National Beef Agreement (making reference to the LIBOR Rate as defined in the National Beef Agreement, Interest Periods as defined in the National Beef Agreement, and the Applicable Margin); and

(f) After the occurrence of an Event Default and for so long as such Event of Default is continuing, the Agent may notify Borrower that any and all amounts due shall bear interest, from the date of such notice by the Agent and for so long as such Event of Default continues, payable on demand, at a rate per annum (the “Default Rate”) equal to the lesser of (i) with respect to a Base Rate Advance, the sum of two percent (2.0%) per annum plus the Base Rate (as defined in the National Beef Agreement) in effect from time to time plus the Applicable Margin; or (ii) with respect to a LIBOR Rate Advance, during the Interest Period (as defined in the National Beef Agreement) in which the Event of Default has occurred, the sum of two percent (2.0%) per annum plus the LIBOR Rate (as defined in the National Beef Agreement) then in effect for such LIBOR Rate Advance plus the Applicable Margin, and in Interest Periods (as defined in the National Beef Agreement) subsequent to that in which the Event of Default occurred, the Default Rate applicable to a Base Rate Advance as calculated under (i) hereof.

5. Terms of the Agreement to the contrary notwithstanding, Borrower agrees to pay to the Agent for distribution to the Syndication Parties (based on their applicable respective Syndication Shares) a quarterly non-use fee on the daily average unused amount of Tranche B of the Loan at the rate per annum of one quarter of one percent (0.25%) (the “Non-Use Fee”). The Non-Use Fee for each calendar quarter shall be due and payable in arrears on the first Business Day of each January, April, July and October hereafter through the Maturity Date applicable to the Line of Credit Loans. A pro-rated non-use fee shall be due and payable on the first Business Day of the quarter following the date of this Amendment and on the Maturity Date applicable to the Tranche B of the Loan. The Non-Use Fee shall be earned as it accrues.

6. Terms of the Agreement to the contrary notwithstanding, Working Capital and Net Worth shall be calculated on a consolidated basis.

7. Section 13.11 of the Agreement is hereby amended in its entirety to read as follows:

“13.11 Payment of Dividends. Borrower shall not, directly or indirectly, declare or pay any dividends on account of any units of any class of its equity or any of its patronage notices now or hereafter outstanding, or set aside or otherwise deposit or invest any sums for such purpose, or redeem, retire, defease, purchase or otherwise acquire any units of any class of its equity or any of its patronage notices (or set aside or otherwise deposit or invest any sums for such purpose) for any consideration other than additional units or patronage notices or apply or set apart any sum, or make any other distribution (by reduction of capital or otherwise) in respect of any such units of any class of its equity or any of its patronage notices, or make any other distribution or allocation of its earnings, surplus or assets to any holder of units of any class of its equity or any of its patronage notices, or agree to do any of the foregoing; provided, that Borrower may: (a) so long as Borrower is treated as a partnership for tax purposes, make distributions to its members on account of the federal and state income taxes that would be assessed to such members based on Borrower’s income, provided that the aggregate amount of all such distributions with respect to any calendar year may not exceed the amount of such income which would be taxable to such members for such calendar year, multiplied by the maximum applicable state and federal income tax rate for the calendar year in which taxed, and (b) in addition to the foregoing, make disbursements with respect to any units of any class of its equity or any of its patronage notices, or both; provided, that the aggregate amount of disbursements pursuant to this clause (b) shall not exceed $2,000,000 in any one calendar year.”

8. The Loan (Tranche A of the Loan and Tranche B of the Loan) shall continue to be secured as provided for in the Security Documents.

9. In addition to all other Event’s of Default set forth in the Agreement, the occurrence of a Matured Default under the National Beef Agreement shall be an Event of Default. Agent shall use its commercially reasonable best efforts to provide to Borrower any default notice or termination notice under the National Beef Agreement at the same time that such notices are delivered to National Beef.

10. This Amendment shall be effective as of its date, conditioned upon the execution and delivery to the Agent in form and substance acceptable to the Agent of: (a) this Amendment, executed by Borrower and the Agent; and (b) Secretaries Certificates from Borrower relating to resolutions, incumbency, etc; and payment of an Amendment Fee to the Agent in the amount of $25,000.

11. This Amendment shall be an integral part of the Agreement, and all of the terms set forth therein are hereby incorporated in this Amendment by reference, and all terms of this Amendment are hereby incorporated into said Agreement as if made an original part thereof. All of the terms and conditions of the Agreement, which are not modified in this Amendment, shall remain in full force and effect. To the extent the terms of this Amendment conflict with the terms of the Agreement, the terms of this Amendment shall control.

12. This Amendment may be executed in several counterparts, each of which shall be construed together as one original. Facsimile (or other electronic) signatures on this Amendment shall be considered as original signatures.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first herein above written.

U.S. PREMIUM BEEF, LLC

By: __________________________

Its: __________________________

COBANK, ACB, individually and as
Agent and Syndication Party

By: __________________________

Its: __________________________

{SIGNATURE PAGE TO EIGHTH AMENDEMENT TO CREDIT AGREEMENT}

EX-31 4 ex31-1.htm EXHIBIT 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) 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

d) 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 15, 2009

EX-31 5 ex31-2.htm EXHIBIT 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;

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 15, 2009

EX-32 6 ex32-1.htm EXHIBIT 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 28, 2009 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 15, 2009

EX-32 7 ex32-2.htm Exhibit 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 28, 2009 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 15, 2009

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