**UNITEDSTATES SECURITIES AND EXCHANGE COMMISSION****Washington****, D.C. 20549**

**FORM 10-Q**

 

| **                          (Mark one)** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                             | þ |    | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF 	THE  SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                  |   |   |   |
|                                                                                                                                                                  |   |   | **For the quarterly period  ended May 26, 2007** |
|                                                                                                                                                                  |   |   |   |
|                                                                                                                                                                  |   |   | **                                                          or**                o   **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF  	THE SECURITIES EXCHANGE ACT OF 1934**                      **For the transition  period from             to           .**
**Commissionfile 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****(Addressof principal executive offices)**

**Telephone:(866) 877-2525(Registrant’stelephone number, including area code)**

Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes þ Noo

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

LargeAccelerated Filero
Accelerated Filer		o  Non-accelerated Filer þ
Indicateby check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act). Yes o Noþ

The registrant’s unitsare not traded on an exchange or in any public market.  As of June 30, 2007, there were 735,385 Class A units and 735,385 Class B unitsoutstanding.     

 

 

**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.

9
 
Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

14
 
Item 4.

Controls and Procedures.

15
  
**PART II.**

**OTHER INFORMATION**
 
Item 1.

Legal Proceedings.

16
 
Item 1A.

Risk Factors.

16
 
Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

16
 
Item 3.

Defaults Upon Senior Securities.

16
 
Item 4.

Submission of Matters to a Vote of Security Holders.

16
 
Item 5.

Other Information.

16
 
Item 6.

Exhibits. 

16
 
Signatures.

17

 

Unless the context indicates orotherwise 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 itsconsolidated subsidiaries. As used in this report, the terms “NBP” and“National Beef” refer to National Beef Packing Company, LLC (formerly known asFarmland National Beef Packing Company, LP), a Delaware limited liabilitycompany, and “USPB” refers to U.S. Premium Beef, LLC (formerly known U.S.Premium Beef, Ltd.) prior to consolidation. 

 

 

 

ii

**PART I.  FINANCIAL INFORMATION**

**Item 1.  Financial Statements.**

 

 

 

 

 

 

 

 

 

1

                                                                                                

** **

**U.S. PREMIUM BEEF, LLC  AND SUBSIDIARIES**

**Consolidated Balance  Sheets**

(in thousands, except unit data)

**May 26,**
     
**August 26,**

**Assets**

**2007**
       
**2006**

**(unaudited)**

Current  assets:

Cash  and cash equivalents

$

60,494 

$

58,434 

Accounts  receivable, less allowance for returns and doubtful accounts

of  $2,161 and $2,412, respectively

191,232 

173,233 

Due  from affiliates

3,914 

3,391 

Other  receivables

7,596 

5,943 

Inventories

175,707 

145,009 

Other  current assets

9,496 

20,171 

Total  current assets

448,439 

406,181 

Property,  plant and equipment, at cost

361,875 

331,500 

Less  accumulated depreciation

(91,719)

(69,490)

Net  property, plant and equipment

270,156 

262,010 

Goodwill

79,542 

79,411 

Other  intangible assets, net of accumulated amortization

of  $6,730 and $5,276, respectively

29,082 

30,562 

Other  assets

6,476 

6,594 

Total  assets

$

833,695 

$

784,758 

**Liabilities and Capital  Shares and Equities**

Current  liabilities:

Current  installments of long-term debt

$

3,404 

$

3,400 

Cattle  purchases payable

67,238 

58,320 

Accounts  payable - trade

58,645 

54,449 

Due  to affiliates

398 

878 

Accrued  compensation and benefits

15,674 

27,894 

Accrued  insurance

12,744 

17,651 

Other  accrued expenses and liabilities

14,617 

12,086 

Distributions  payable

2,719 

4,880 

Total  current liabilities

175,439 

179,558 

Long-term  liabilities:

Long-term  debt, excluding current installments

453,226 

380,496 

Other  liabilities

2,765 

2,961 

Total  long-term liabilities

455,991 

383,457 

Total  liabilities

631,430 

563,015 

Minority  interest in National Beef Packing Company, LLC and Kansas City Steak, LLC

67,282 

72,956 

Capital  shares and equities:

Members'  capital, 735,385 and 735,505 Class A units and 735,385 and 735,505

Class  B units authorized, issued and outstanding, respectively

84,279 

98,092 

Patronage  notices

50,642 

50,642 

Accumulated  other comprehensive income

62 

53 

Total  capital shares and equities

134,983 

148,787 

Commitments  and contingencies

- 

- 

Total  liabilities and capital shares and equities

$

833,695 

$

784,758 

See  accompanying notes to consolidated financial statements.

** **

2

                                                                                                

**U.S. PREMIUM BEEF, LLC  AND SUBSIDIARIES**

**Consolidated Statements  of Operations**

(in thousands)
                        
**13 weeks 	ended**

**13 weeks 	ended**

**39 weeks 	ended**

**39 weeks 	ended**
                                   
**May 26, 2007**
      
**May 27, 2006**
      
**May 26, 2007**
      
**May 27, 2006**
   
**(unaudited)**

**(unaudited)**

**(unaudited)**

**(unaudited)**
                                  
Net  sales

$

1,479,676 

$

1,134,514 

$

4,066,020 

$

3,310,278 

Costs  and expenses:

Cost  of sales

1,436,361 

1,085,946 

3,993,987 

3,241,210 

Selling,  general and administrative expenses

12,491 

9,980 

33,726 

28,575 

Depreciation  and amortization

8,249 

7,095 

24,066 

20,569 

Total  costs and expenses

1,457,101 

1,103,021 

4,051,779 

3,290,354 

Operating  income

22,575 

31,493 

14,241 

19,924 

Other  income (expense):

Interest  income

475 

317 

1,569 

867 

Interest  expense

(10,632)

(8,040)

(29,788)

(23,210)

Minority  owners' interest in net (income) loss

of  National Beef Packing Co., LLC

(5,827)

(11,617)

6,497 

644 

Minority  owners' interest in net loss (income)

of  Kansas City Steak, LLC

90 

(52)

(262)

(120)

Equity  in loss of aLF Ventures, LLC

(23)

(39)

(77)

(119)

Other,  net

935 

718 

1,606 

1,962 

Income  (loss) before taxes

7,593 

12,780 

(6,214)

(52)

Income  tax (expense) benefit

(558)

128 

(1,443)

(1,048)

Net  income (loss)

$

7,035 

$

12,908 

$

(7,657)

$

(1,100)

Net  income (loss) per linked unit:

Basic

$

9.57 

$

18.66 

$

(10.41)

$

(1.59)

Diluted

$

9.42 

$

18.33 

$

(10.41)

$

(1.59)

Outstanding  weighted-average Class A and Class B units:

Basic

735,425 

691,845 

735,478 

691,845 

Diluted

746,946 

704,016 

735,478 

691,845 

See  accompanying notes to consolidated financial statements.

** **

3

                                                                                                

** **

**U.S. PREMIUM BEEF, LLC  AND SUBSIDIARIES**

**Consolidated Statements  of Cash Flows**

(in thousands)
                        
**39 weeks ended**
       
**39 weeks ended**

**May 26, 2007**

**May 27, 2006**

**(unaudited)**

**(unaudited)**

Cash  flows from operating activities:

Net  loss

$

(7,657)

$

(1,100)

Adjustments  to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation  and amortization

24,066 

20,569 

Gain  on disposal of property, plant and equipment

(137)

(138)

Minority  interest

(6,373)

(660)

Changes  in assets and liabilities:

Accounts  receivable

(17,999)

17,498 

Due  from affiliates

(523)

1,636 

Other  receivables

(2,901)

(668)

Inventories

(30,698)

(29,601)

Other  assets

10,688 

(974)

Cattle  purchases payable

1,853 

2,804 

Accounts  payable

(1,620)

1,291 

Due  to affiliates

(480)

(1,078)

Accrued  compensation and benefits

(12,220)

(1,228)

Accrued  insurance

(4,907)

(1,751)

Other  accrued expenses and liabilities

2,335 

7,409 

Net  cash (used in) provided by operating activities

(46,573)

14,009 

Cash  flows from investing activities:

Capital  expenditures, including interest capitalized

(31,003)

(22,758)

Acquisition  of business, final purchase price adjustment

1,248 

- 

Acquistion  of intangible assets

- 

(675)

Proceeds  from sale of property, plant and equipment

381 

832 

Net  cash used in investing activities

(29,374)

(22,601)

Cash  flows from financing activities:

Net  receipts under revolving credit lines

42,854 

7,274 

Borrowings  of term note payable

40,000 

- 

Repayments  of other indebtedness / capital leases

(1,963)

(764)

Payments  of notes payable and fees

(8,157)

(772)

Change  in overdraft balances

12,881 

1,814 

Distributions  to minority interest owners in National Beef Packing Company, LLC

(5,862)

(2,689)

Member  distributions

(1,755)

(1,197)

Net  cash provided by financing activities

77,998 

3,666 

Effect  of exchange rate changes on cash

9 

19 

Net  increase (decrease) in cash

2,060 

(4,907)

Cash  and cash equivalents at beginning of the period

58,434 

54,428 

Cash  and cash equivalents at end of the period

$

60,494 

$

49,521 

Supplemental  cash disclosures:

Cash  paid during the period for interest

$

25,419 

$

17,595 

Cash  paid during the period for taxes, net

$

756 

$

172 

Supplemental  non-cash disclosures of investing activities:

Assets  acquired through capital lease

$

49 

$

8,697 

See  accompanying notes to consolidated financial statements.

** **

4

                                                                                                

**U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**

** **

**(1)Interim Financial Statements**

**Basisof Presentation**

The accompanying unaudited Consolidated FinancialStatements have been prepared in accordance with U.S. generally acceptedaccounting principles (GAAP) for interim financial information; therefore, theydo not include all of the information and footnotes required by GAAP forcomplete financial statements. In the opinion of management, all adjustmentsconsidered necessary for a fair presentation have been included usingmanagement’s best estimates and judgments where appropriate.  These estimatesand judgments affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements.  The estimates and judgments will also affect the reported amountsfor certain revenues and expenses during the reporting period.  Actual resultscould differ materially from these estimates and judgments.  For furtherinformation, refer to the audited Consolidated Financial Statements and Notesto Consolidated Financial Statements, which are included in the Company’s AnnualReport on Form 10-K on file with the Securities and Exchange Commission (SEC)for the fiscal year ended August 26, 2006.  The results of operations for theinterim periods presented are not necessarily indicative of the results for afull fiscal year.  

NB Finance Corp., a wholly-owned finance subsidiary ofNBP, 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 paymentwith all of its other senior unsecured obligations.  NB Finance Corp. hasnominal assets and conducts no business or operations. There are no significantrestrictions on the ability of subsidiaries to transfer funds to NBP.

**(2)New Accounting Pronouncements**

In June 2006, the Financial Accounting Standards Board(FASB) issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertaintyin Income Taxes”, to address uncertainty in income taxes recognized in anenterprise’s financial statements.  Specifically, FIN 48 prescribes (a) aconsistent recognition threshold and (b) a measurement attribute for thefinancial statement recognition and measurement of a tax position taken orexpected to be taken in a tax return, and provides related guidance onderecognition, classification, interest and penalties, accounting in interimperiods, disclosure, and transition.  FIN 48 will apply to fiscal yearsbeginning after December 15, 2006, with earlier adoption permitted.  TheCompany is evaluating the impact FIN 48 may have, if any, on its ConsolidatedFinancial Statements.

In September 2006, the SEC staff issued StaffAccounting Bulletin No. 108 (SAB 108), “Considering the Effects of Prior YearMisstatements when Quantifying Misstatements in Current Year FinancialStatements.”  Traditionally there have been two widely recognized methods forquantifying the effects of financial statement misstatements:  the “roll-over”method and the “iron-curtain” method.  The roll-over method focuses primarilyon the impact of a misstatement on the income statement, including thereversing effect of prior year misstatements.  The iron-curtain method focusesprimarily on the effect of correcting the period-end balance sheet with lessemphasis on the reversing effects of prior year errors on the incomestatement.  In SAB 108, the SEC staff established an approach that is commonlyreferred to as a “dual approach” as the SEC now requires quantification of errorsunder both the iron-curtain and the roll-over methods.  SAB 108 was adopted bythe Company during the first quarter of fiscal year 2007.  The adoption of SAB108 did not have any effect on the Company’s financial position, net earningsor prior year financial statements

.In September 2006, the FASB issued Statement ofFinancial Accounting Standard No. 157 (SFAS 157), “Fair Value Measurements”. This statement establishes a single authoritative definition of fair value,sets out a framework for measuring fair value, and requires additionaldisclosures about fair value measurements.  SFAS 157 defines fair value as “theprice that would be received to sell an asset or paid to transfer a liabilityin an orderly transaction between market participants at the measurement date.” SFAS 157 will apply to fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  The Company is currently evaluatingthe impact SFAS 157 may have, if any, on its Consolidated Financial Statements.

5

                                                                                               

 

In February 2007, the FASB issued Statement ofFinancial Accounting Standard No. 159 (SFAS 159), “The Fair Value Option forFinancial Assets and Financial Liabilities”.  This statement provides companieswith an option to report selected financial assets and liabilities at fairvalue.  SFAS 159 will apply to fiscal years beginning after November 15, 2007.  The Company is currently evaluating the impact SFAS 159 may have, ifany, on its Consolidated Financial Statements.

**(3)Inventories**

Inventories at May 26, 2007 and August 26, 2006 consisted of the following (in thousands):

** **

**May 26, 2007**

**August 26, 2006**

Dressed and boxed  beef

$

137,857 

$

117,712 

Beef by-products

24,696 

15,180 

Supplies

13,154 

12,117 

Total inventories

$

175,707 

$

145,009 

** **

** (4)Comprehensive Income (Loss)**

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

**13 weeks ended**

**13 weeks ended**

**39 weeks ended**

**39 weeks ended**
                  
**May 26, 2007**
      
**May 27, 2006**
      
**May 26, 2007**
      
**May 27, 2006**

Net income (loss)

$

7,035 

$

12,908 

$

(7,657)

$

(1,100)

Other  comprehensive income:

Foreign currency  translation adjustments

2 

4 

9 

19 

Comprehensive  income (loss)

$

7,037 

$

12,912 

$

(7,648)

$

(1,081)

**(5)Minority Interest **

At any time after certain dates, the earliest beingJuly 31, 2008, the latest being July 31, 2011, certain members of NBP managementand/or NBPCo Holdings, LLC have the right to request that NBP repurchase theirinterests, the value of which is to be determined by a mutually agreedappraisal process. If NBP is unable to effect the repurchase within a specifiedtime, the requesting member(s) have the right to cause a sale process tocommence.  The Company accounts for changes in the redemption value of theseinterests by accreting the change in value over the current period through theearliest redemption date of the respective interests. At May 26, 2007, the minority interest in National Beef was revalued by an independent appraisal process,and the value was determined to be $72.1 million, which was in excess of itscarrying value.  Accordingly, the carrying value of the minority interest inNational Beef increased by approximately $0.9 million through accretion duringthe thirteen weeks ended May 26, 2007, resulting in a carrying value of $66.4 million,which is included in the accompanying Consolidated Balance Sheet as of May 26, 2007. 
**(6)Contingencies**
*Schumacher v. Tyson Foods, et al. *On July 1, 2002, a lawsuit was filed against FarmlandNational Beef Packing Company, L.P. (FNBPC or the predecessor to NBP), ConAgraBeef Company, Tyson Foods, Inc. and Excel Corporation in the United StatesDistrict Court for the District of South Dakota seeking certification of aclass of all persons who sold cattle to the defendants for cash, or on a basisaffected by the cash price for cattle, during the period from April 2, 2001through May 11, 2001 and for some period up to two weeks thereafter. The casewas filed by three named plaintiffs on behalf of a putative nationwide classthat plaintiffs estimate is comprised of hundreds or thousands of members. Thecomplaint alleged that the defendants, in violation of the Packers andStockyards Act of 1921, knowingly used, without correction or disclosure,incorrect and misleading boxed beef price information generated by the USDA topurchase cattle offered for sale by the plaintiffs at a price substantiallylower than was justified by the actual and correct price of boxed beef duringthis period. Plaintiffs also sought recovery against all defendants under atheory of unjust enrichment.  The case was certified as a class-action matterin June of 2004. The plaintiffs claimed damages against FNBPC in the amount ofapproximately $4.5 million plus prejudgment interest, attorneys’ fees and courtcosts.  The claim is subject to reduction in an unknown amount by the number ofclass members who have opted out of the class.  Trial began March 31, 2006.  On April 13, 2006, the jury returned a verdict in favor of FNBPC but against the other defendants.  The courthas not yet entered a final judgment or appealable order as to FNBPC and, untilit does, the time for plaintiffs to file an appeal against FNBPC does not beginto run.  However, the court did enter a final order granting judgments againstthe other three defendants on the jury’s verdict and those defendants havefiled an appeal in the United States Court of Appeals for the Eighth Circuit. 

 

6

                                                                                               
 
 NBP’s wholly owned subsidiary, NationalCarriers, Inc., has various independent contractor drivers who are involved inaccidents from time to time, which in the aggregate could result in a materialliability for the Company.

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

**(7)  United States BSE Outbreak**

On December 23, 2003, it was announced by the UnitedStates Department of Agriculture (USDA) that a single Holstein dairy cow wasdiscovered in the state of Washington to have tested positive for bovinespongiform encephalopathy (BSE).  The origin of the animal was subsequentlytraced to a farm in Canada.  Shortly after the announcement, several countries,including Japan, representing a substantial share of NBP’s export business,closed their borders to the importation of edible beef products from the United States.  Certain by-products have been classified as Specified Risk Materials(SRMs), and have been banned from use in feedstocks and the human food chain.Some of these products previously enjoyed a market in foreign countries.  Theclosure of most foreign markets to U.S. beef following the discovery of thiscow in Washington state, and lack of alternative U.S. markets for many productswhich previously were exported, negatively impacted the revenue per head realizedby the U.S. beef packing industry.

The reopening of U.S. export markets was furtherhampered by discovery in 2005 of a second case of BSE in the U.S. as well as additional precautions required by some other importing countries.  InDecember 2005, Japan opened their border to U.S. beef but subsequently closed ita short time later as a result of a U.S. packer erroneously shipping a productnot approved for export to Japan.  On July 26, 2006, Japan agreed to reopen its market to U.S. beef aged 20 months and younger after aninspection of U.S. beef processing plants.  Shipments of U.S. beef to Japan commenced in August 2006.  In September 2006, Korea announced aprovisional opening of their border to U.S. beef, but restrictions imposed withthe reopening have created uncertainty regarding amounts of beef that mayqualify.

Neither USPB nor NBP can presentlyassess the full economic impact of the consequences of BSE on the U.S. beef packing industry or on the Company’s operations.  Existing or new import restrictionsor additional regulatory restrictions or disruptions in domestic consumerdemand for beef may continue to have a material adverse affect on the Company’srevenues and net income.

**(8)Earnings Per Unit**

Basic EPU excludesdilution and is computed by dividing income or loss available to unitholders bythe weighted-average number of linked Class A and Class B units outstanding forthe period.  Class A units and Class B units shall be issued, redeemed, andtransferred together on a one for one basis until the Board of Directorsdetermines the extent and conditions under which Class A units and Class Bunits may be issued, redeemed, and transferred separately.

7

                                                                                               

 

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

The diluted income (loss) per linked unit calculationin the following table excludes the effect of the 20,000 unit purchase rightsnoted above for the 39 week periods ending May 26, 2007 and May 27, 2006,respectively, as the effect of including them would have been anti-dilutive tothe loss per linked unit calculation. 

* *

**Income (Loss) Per Linked Unit Calculation**
                  
(In thousands,  except unit and per unit data)

13 Weeks Ended

39 Weeks Ended

May 26, 2007

May 27, 2006

May 26, 2007

May 27, 2006

(unaudited)

(unaudited)

(unaudited)

(unaudited)

**Basic income  (loss) per unit**

Income available  to unitholders (numerator)

$

7,035 

$

12,908 

$

(7,657)

$

(1,100)

Outstanding units  (denominator)

735,425 

691,845 

	735,478 

691,845 

     Per unit amount

$

9.57 

$

18.66 

$

(10.41)

$

(1.59)

**Diluted income  (loss) per unit**

Income available  to unitholders (numerator)

$

7,035 

$

12,908 

$

(7,657)

$

(1,100)

Outstanding units

735,425 

691,845 

735,478 

691,845 

Effect of  dilutive securities - unit options

11,521 

12,171 

- 

- 

     Units  (demoninator)

746,946 

704,016 

735,478 

691,845 

     Per unit amount

$

9.42 

$

18.33 

$

(10.41)

$

(1.59)

** **

 

 

8

**Item 2.  Management’sDiscussion and Analysis of Financial Condition and Results of Operations.**

**DisclosureRegarding Forward-Looking Statements**

This report contains“forward-looking statements,” which are subject to a number of risks anduncertainties, many of which are beyond our control. Forward-looking statementsare typically identified by the words “believe,” “expect,” “anticipate,”“intend,” “estimate” and similar expressions. Actual results could differmaterially from those contemplated by these forward-looking statements as aresult of many factors, including economic conditions generally and in ourprincipal markets, the availability and prices of live cattle and commodities,food safety, livestock disease, including the identification of cattle withBSE, competitive practices and consolidation in the cattle production andprocessing industries, actions of domestic or foreign governments, hedgingrisk, changes in interest rates and foreign currency exchange rates, consumerdemand and preferences, the cost of compliance with environmental and healthlaws, loss of key customers, loss of key employees, labor relations,consolidation among our customers and the potential inability to receive theanticipated benefits from the acquisition of the processing facility inBrawley, CA.  

In light of these risks anduncertainties, there can be no assurance that the results and eventscontemplated by the forward-looking information contained in this report willin fact transpire. Readers are cautioned not to place undue reliance on theseforward-looking statements. We do not undertake any obligation to update orrevise any forward-looking statements. All subsequent written or oralforward-looking statements attributable to us or persons acting on our behalfare expressly qualified in their entirety by these factors.  Please review the *RiskFactors* in *Item 1. Business* of the Company’s Annual Report forthe year ended August 26, 2006 on Form 10-K filed with the Securities andExchange Commission for other important factors that could cause actual resultsto differ materially from those in any such forward-looking statements, andwhich should be read in conjunction with this report.

**Industry Outlook**

Continued relatively high fedcattle prices, along with limited access to key export markets, has resulted ina difficult environment for beef industry participants.  In general, domesticcattle supplies have been anticipated to improve over the next two to threeyears, however, recent increases in feeding costs have threatened the speed andmagnitude at which the cattle supply is expected to grow.  With uncertaintyregarding international market access and the realization of improved cattlesupplies, the timing of margin improvements remains uncertain.

**Recent Developments**

On December 23, 2003, it was announced by the UnitedStates Department of Agriculture (USDA) that a single Holstein dairy cow wasdiscovered in the state of Washington to have tested positive for bovinespongiform encephalopathy (BSE).  The origin of the animal was subsequentlytraced to a farm in Canada.  Shortly after the announcement, several countries,including Japan, representing a substantial share of NBP’s export business,closed their borders to the importation of edible beef products from the United States.  Certain by-products have been classified as Specified Risk Materials(SRMs), and have been banned from use in feedstocks and the human food chain.Some of these products previously enjoyed a market in foreign countries.  Theclosure of most foreign markets to U.S. beef following the discovery of thiscow in Washington state, and lack of alternative U.S. markets for many productswhich previously were exported, negatively impacted the revenue per headrealized by the U.S. beef packing industry.

The reopening of U.S. export markets was furtherhampered by discovery in 2005 of a second case of BSE in the U.S. as well as additional precautions required by some other importing countries.  InDecember 2005, Japan opened their border to U.S. beef but subsequently closed ita short time later as a result of a U.S. packer erroneously shipping a productnot approved for export to Japan.  On July 26, 2006, Japan agreed to reopen its market to U.S. beef aged 20 months and younger after aninspection of U.S. beef processing plants.  Shipments of U.S. beef to Japan commenced in August 2006.  In September 2006, Korea announced aprovisional opening of their border to U.S. beef, but restrictions imposed withthe reopening have created uncertainty regarding amounts of beef that mayqualify.

9

 

Neither USPB nor NBP can presentlyassess the full economic impact of the consequences of BSE on the U.S. beef packing industry or on the Company’s operations.  Existing or new importrestrictions or additional regulatory restrictions or disruptions in domesticconsumer demand for beef may continue to have a material adverse affect on theCompany’s revenues and net income.

**Resultsof Operations**

***Thirteen weeks ended May 26, 2007 compared to thirteen weeks ended May 27, 2006***

*General.*  Net income for the thirteen weeks ended May 26, 2007 was $7.0 million compared to net income of $12.9 million for the thirteenweeks ended May 27, 2006, a reduction of $5.9 million.  Sales were higher inthe thirteen weeks ended May 26, 2007 compared to those of the prior period dueto an increase in the number of cattle processed of approximately 20.4%, ofwhich 15.2% came as a result of the acquisition of Brawley Beef, LLC during thefourth quarter of fiscal year 2006.  

Total costs and expenses of $1,457.1 million and $1,103.0million for the thirteen weeks ended May 26, 2007 and May 27, 2006, respectively, were 98.5% as a percent of sales for the thirteen weeks ended May 26, 2007 compared to 97.2% for the thirteen weeks ended May 27, 2006.  An increase of approximately 15.6% in live cattle prices put pressure on gross margins, whichresulted in operating income that was $8.9 million less for the current thirteenweek period than operating income for the same period of the prior year.

*Net Sales*. Net sales were $1,479.7 million for the thirteen weeks ended May 26, 2007 compared to $1,134.5 million for the thirteen weeks ended May 27, 2006, an increase of $345.2 million, or 30.4%.  The increase in net sales resultedprimarily from a 20.4% increase in the number of cattle processed, of which15.2% was due to the acquisition of Brawley Beef, LLC, at average weights equalto the same period of the prior year.  

*Cost of Sales*. Cost of sales was $1,436.4 million for the thirteen weeks ended May 26, 2007 compared to $1,085.9 million for the thirteen weeks ended May 27, 2006, an increase of $350.5 million, or 32.3%.  The increase resulted primarilyfrom an increase of approximately 20.4% in the number of live cattle purchased,of which approximately 15.2% came as a result of  the acquisition of BrawleyBeef, LLC, of approximately 20.4% and an approximate 15.6% increase in livecattle prices.

*Selling, General and Administrative Expenses*.  Selling, general and administrative expenses were $12.5million for the thirteen weeks ended May 26, 2007 compared to $10.0 million for the thirteen weeks ended May 27, 2006, an increase of $2.5 million, or 25.0%. The increase primarily reflects an increase in payroll and related expenses ofapproximately $1.3 million, an increase in legal expense of approximately $0.7million associated mostly with acquisition due diligence expenses, an increaseof approximately $0.4 million in bad debt expense, and an approximate $0.2million increase in repairs and maintenance.  The acquisition of Brawley Beef,LLC on May 30, 2006 has contributed to the increased selling, general andadministrative expenses incurred during the current thirteen week period ascompared to the same period of last year.

*Depreciation and Amortization Expense*.  Depreciation and amortization expenses were $8.2million for the thirteen weeks ended May 26, 2007 compared to $7.1 million for the thirteen weeks ended May 27, 2006, an increase of $1.1 million, or 15.5%. The acquisition of Brawley Beef, LLC contributed $0.6 million to the increasein depreciation expense for this period.  Depreciation expense also increaseddue to assets being placed into service, primarily at the Dodge City andLiberal beef plants, during the fourth quarter of fiscal year 2006 and thefirst, second and third quarters of fiscal year 2007.

*Operating Income (Loss)*.  Operating income was $22.6 million for the thirteenweeks ended May 26, 2007 compared to income of $31.5 million for the thirteenweeks ended May 27, 2006, a decrease of $8.9 million.  The lower operatingincome resulted primarily from higher live cattle prices during the thirdquarter of fiscal year 2007 as compared to the same period of the prior yearwithout similar increases in the selling prices of beef products.    

*Interest Expense*.  Interest expense was $10.6 million for the thirteen weeks ended May 26, 2007 compared to $8.0 million for the thirteen weeks ended May 27, 2006, an increase of $2.6 million, or 32.5%.  The increase in interest expense was dueprimarily to an increase in the weighted average amounts outstanding ofvariable rate debt of approximately $111.3 million for the thirteen weeks ended May 26, 2007, as compared to the same period in fiscal year 2006, mostly as aresult of the Brawley Beef, LLC acquisition.  Interest expense also increaseddue to higher interest rates on our variable rate debt, an increase ofapproximately 64 basis points, for the thirteen weeks May 26, 2007 as compared to the same period of the prior year.

 

10

*Other, net. *Other,net non-operating income was $0.9 million for the thirteen weeks ended May 26, 2007 compared to $0.7 million for the thirteen weeks ended May 27, 2006, an increase of $0.2 million.

*Income Tax (Expense) Benefit*.  Income tax expense was $0.6 million for thethirteen weeks ended May 26, 2007 compared to income tax benefit of $0.1million for the thirteen weeks ended May 27, 2006, an increase in expense of $0.7 million.  Income tax expense increased due to more income recorded byNational Carriers, Inc., which is organized as a Subchapter C Corporation, inthe current period compared to the same period last year.

***Thirty-nine weeks ended May 26, 2007 compared to thirty-nine weeksended May 27, 2006***

*General*. Net loss for the thirty-nine weeks ended May 26, 2007 was $7.7 million compared to a net loss of $1.1 million for the thirty-nine weeks ended May 27, 2006, an increased loss of $6.6 million.  Sales and cost of sales were higher inthe thirty-nine weeks ended May 26, 2007 than those of the prior year period primarilydue to an increase of approximately 19.2% in the number of cattle processed, ofwhich approximately 12.6% came as a result of the acquisition of Brawley Beef,LLC during the fourth quarter of fiscal year 2006.  

Total costs and expenses of $4,051.8 million and $3,290.4million for the thirty-nine weeks ended May 26, 2007 and May 27, 2006, respectively, were 99.7% as a percent of sales for the thirty-nine weeksended May 26, 2007 compared to 99.4% for the thirty-nine weeks ended May 27, 2006.  Higher live cattle prices put pressure on gross margins for the currentthirty-nine week period as compared to the same period of the prior year.  Inaddition, interest expense increased as a result of increased borrowings athigher interest rates.

*Net Sales*. Net sales were $4,066.0 million for the thirty-nine weeks ended May 26, 200 7 compared to $3,310.3 million for the thirty-nine weeks ended May 27, 2006, an increase of $755.7 million, or 22.8%.  The increase resulted primarilyfrom an increase of approximately 19.2% in the number of cattle processed, ofwhich approximately 12.6% came as a result of  the acquisition of Brawley Beef,LLC, in the thirty-nine weeks ended May 26, 2007 at weights that averaged approximately 1.1% higher than the same period in the prior year.  Improvedcustomer demand for beef products also contributed to the increase in net salesfor the thirty-nine week period ended May 26, 2007 as compared to the same period of the prior year.   

*Cost of Sales*. Cost of sales was $3,994.0 million for the thirty-nine weeks ended May 26, 2007 compared to $3,241.2 million for the thirty-nine weeks ended May 27, 2006, an increase of $752.8 million, or 23.2%.  The increase resulted primarilyfrom an increase in the number of cattle purchased of approximately 19.2%, ofwhich 12.6% was due to the acquisition of Brawley Beef, LLC, during thisthirty-nine week period of 2007 at average cattle weights approximately 1.1%higher than in the same period of the prior year, and an approximate 3.8% increasein live cattle prices as compared to the same period of 2006.

*Selling, General and Administrative Expenses*.  Selling, general and administrative expenses were $33.7million for the thirty-nine weeks ended May 26, 2007 compared to $28.6 million for the thirty-nine weeks ended May 27, 2006, an increase of $5.1 million, or 17.8%. The increase for this period is primarily due to an increase in payroll andbenefit expenses of approximately $2.4 million, an approximate $0.7 millionincrease in bad debt expense, an increase in legal fees of approximately $0.7million associated mostly with acquisition due diligence expenses, an increasein advertising expense of approximately $0.5 million, and an approximate $0.3million increase in repairs and maintenance, partially offset by a decrease inexpenses related to the CEO’s options of $0.5 million.  The acquisition ofBrawley Beef, LLC on May 30, 2006 has contributed to the increased selling,general and administrative expenses incurred during the current thirty-nineweek period as compared to the same period of the prior year.

*Depreciation and Amortization Expense*.  Depreciation and amortization expenses were $24.1million for the thirty-nine weeks ended May 26, 2007 compared to $20.6 million for the thirty-nine weeks ended May 27, 2006, an increase of $3.5 million, or 17.0%. The addition of the Brawley plant contributed $1.8 million to the increase indepreciation expense for this thirty-nine week period as compared to the sameperiod of the prior year.  Depreciation expense also increased due to assetsbeing placed into service, primarily at the Dodge City and Liberal beef plants,during the fourth quarter of fiscal year 2006 and the first, second and thirdquarters of fiscal year 2007.

 

11

*Operating Income*.  Operating income was $14.2 million for the thirty-nine weeks ended May 26, 2007 compared to $19.9 million for the thirty-nine weeks ended May 27, 2006, a decrease of $5.7 million.  The decline in operating income during thecurrent thirty-nine week period resulted primarily from higher live cattleprices as compared to the same period of the prior year without similarincreases in the selling price of beef products.  

*Interest Expense*.  Interest expense was $29.8 million for the thirty-nine weeks ended May 26, 2007 compared to $23.2 million for the thirty-nine weeks ended May 27, 2006, an increase of $6.6 million, or 28.4%.  The increase was due primarily to anincrease in the weighted average amounts outstanding of variable rate debt ofapproximately $80.8 million, mostly as a result of the Brawley Beef, LLCacquisition, for the thirty-nine weeks ended May 26, 2007, as compared to the same period in fiscal year 2006.  Interest expense also increased due tohigher interest rates on our variable rate debt, an increase of approximately105 basis points, during the thirty-nine weeks of fiscal year 2007 as comparedto the same period of the prior year.

*Other, net.* Other, net non-operating income was $1.6 million for the thirty-nine weeksended May 26, 2007 compared to non-operating income of $2.0 million for thethirty-nine weeks ended May 27, 2006, a decrease of $0.4 million.  Thethirty-nine weeks ended May 27, 2006 included $0.6 million in income resulting fromthe settlement of a lawsuit related to corrugated packaging materials.

 *Income Tax (Expense) Benefit*.  Income taxexpense was $1.4 million for the thirty-nine weeks ended May 26, 2007 compared to $1.0 million for the thirty-nine weeks ended May 27, 2006, an increase of $0.4 million, or 40.0%.  Income tax expense is recorded on income from NationalCarriers, Inc., which is organized as a Subchapter C Corporation.

**Liquidity and Capital Resources**

As of May 26, 2007, we had net working capital of $273.0million, which included $2.7 million in distributions payable, and cash andcash equivalents of $60.5 million, including $4.2 million restricted to IRBapproved expenditures. As of August 26, 2006 we had net working capital of $226.6 million, which included $4.9 millionin distributions payable, and cash and cash equivalents of $58.4 million,including $4.0 million restricted to IRB approved expenditures.  NBP’s primarysources of liquidity are cash flow from operations and available borrowingsunder its amended and restated credit facility.

As of May 26, 2007, we had $456.6 million of long-termdebt, of which $3.4 million was classified as a current liability. As of May 26, 2007, NBP’s amended and restated credit facility consisted of $202.6 million termloan and a $170.0 million revolving line of credit loan, which had outstandingborrowings of $61.7 million, outstanding letters of credit of $56.2 million andavailable borrowings of $52.0 million, based on the most restrictive financialcovenant calculations.  Cash flow from operations and borrowings under NBP’samended and restated credit facility have funded its working capitalrequirements, acquisitions, capital expenditures and other general corporatepurposes.  NBP was in compliance with all of the financial covenants under itsamended and restated credit facility as of May 26, 2007.

In addition to outstanding borrowings under theamended and restated credit facility, the Company had outstanding senior notesof $160.0 million, borrowings under industrial revenue bonds of $20.7 million,a term loan with CoBank, of which approximately $4.3 million was outstanding,and capital leases and other obligations of $7.3 million as of May 26, 2007. 

*OperatingActivities*

Net cash used in operating activities in the thirty-nineweeks ended May 26, 2007 was $46.6 million compared to net cash provided by operatingactivities of $14.0 million in the thirty-nine weeks ended May 27, 2006. The increase in net cash used in operating activities was primarily due to an increasein working capital requirements in the current period resulting from theacquisition of the Brawley plant, higher beef inventory volumes and higheraccounts receivable balances combined with a larger net loss in the currentyear compared to the same period last year.

 

12

*InvestingActivities*

Net cash used in investing activities was $29.4 millionin the thirty-nine weeks ended May 26, 2007 compared to $22.6 million in the thirty-nineweeks ended May 27, 2006.  This increase in cash used was primarily attributableto an increase in expenditures for property, plant and equipment related toimproving operating efficiencies, primarily at our Liberal, Dodge City, andBrawley facilities in the current year.

*FinancingActivities*

Net cash provided by financing activities was $78.0million in the thirty-nine weeks ended May 26, 2007 compared to $3.7 million in the thirty-nine weeks ended May 27, 2006.  The change was primarily attributedto a $35.6 million increase in revolving credit borrowings and a $40.0 millionincrease in our term note borrowings in the thirty-nine week change of fiscalyear 2007 as compared to the thirty-nine week change in fiscal year 2006.

*Amendedand Restated Senior Credit Facility*

Effective June 1, 2006, NBP amended and restated its existing senior credit facility with a consortium of banks.  The seniorcredit facility consists of a $170.0 million term loan that matures in May 2016and a $160.0 million revolving line of credit loan that matures in May 2011that is subject to certain borrowing base limitations.   The term loan containsa provision whereby a portion of annual unallocated cash flow proceeds will beused to pay down certain outstanding borrowings under the facility.  InDecember 2006, this amount was calculated to be $7.4 million, and accordingly,this amount was used to reduce the amount outstanding under the term loan.  On March 21, 2007, NBP amended its credit facility further to exercise a provision to expandthe available credit under the facility by $50.0 million.  NBP’s term loan was increased by $40.0 million to $202.6million and the revolving line of credit was increased by $10.0 million to$170.0 million. 

The borrowings under the revolving loan are availablefor NBP’s working capital requirements, acquisitions, capital expenditures andother general corporate purposes.  NBP’s amended and restated credit facilityis secured by a first priority lien on substantially all of NBP’s assets.  Theprincipal amount outstanding under the term loan is payable in semi-annualinstallments on the last business day of each June and December commencing June30, 2011 in equal installments of approximately $3.5 million, with any and allremaining principal outstanding being due and payable on the maturity date in May2016.  Prepayment is allowed at any time.

NBP’s amended and restated credit facility containscovenants that limit NBP’s ability to incur additional indebtedness, sell ordispose of assets, pay certain dividends and prepay or amend certainindebtedness, among other matters.  NBP’s amended and restated credit facilityalso contains a provision for a conversion to more favorable interest rates andmore restrictive financial covenants on the earlier of (a) August 25, 2007 or (b) NBP’s election (Conversion Date).  Currently, the interestrate for the term loan is (a) the Base Rate (as defined in the creditagreement) plus 75 basis points or (b) the LIBOR Rate (as defined in the creditagreement) plus 275 basis points, or a combination of these rates at NBP’selection.  As of May 26, 2007, the interest rate for the term loan was equal to8.125%.  Currently, the interest rate for the revolving loan is (a) the BaseRate plus 50 basis points or (b) the LIBOR Rate plus 250 basis points, or acombination of these rates at NBP’s election.  As of May 26, 2007, the interest rate for the revolving loan was equal to 8.013%.  After the ConversionDate, the interest rate for the term loan and revolving loan will be determinedby reference to a matrix of rates keyed to NBP’s funded debt to EBITDA (as definedin the credit agreement) ratio.

13

                                                                                               

NBP’s amended and restated credit facility imposescertain financial covenants.  Until the Conversion Date, NBP is required to (i)have as of the end of each fiscal quarter a minimum four-quarter rolling EBITDAof $60.0 million and (ii) maintain at all times a minimum Borrowing BaseAvailability of at least $25.0 million.  After the Conversion Date, NBP isrequired to maintain at all times a specified maximum funded debt to EBITDAratio, a maximum senior secured funded debt to EBITDA ratio, a minimumfour-quarter rolling EBITDA and a minimum four-quarter rolling debt servicecoverage ratio.  In addition, NBP’s annual net capital expenditures are limitedto $50 million in each fiscal year.

NBP’s amended and restated credit facility containscustomary affirmative covenants, including furnishing financial statements,maintenance of insurance, conduct of business, maintenance of properties, andcompliance with laws.  The facility also contains customary negative covenants,including covenants restricting NBP’s ability to pay certain distributions,incur additional indebtedness, merge with another entity, sell or disposeassets, and make investments or acquire assets, among other restrictions.

The Company believes that available borrowings underNBP’s fifth amended and restated credit facility and cash provided by operatingactivities will be sufficient to support its working capital, capitalexpenditures and debt service requirements for the foreseeable future.  NBP’sability to generate sufficient cash, however, is subject to certain generaleconomic, financial, industry, legislative, regulatory and other factors beyondtheir control.  For a review of the Company’s obligations that affectliquidity, please see the “Cash Payment Obligations” table in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of our Annual Report on Form 10-K for the year ended August 26, 2006.

**Item3. Quantitative and Qualitative Disclosures About Market Risk.**

The principal market risks affecting our business areexposure to changes in prices for commodities, such as livestock and boxedbeef, and interest rate risk.

*Commodities.*NBPuses various raw materials, many of which are commodities. Raw materials aregenerally available from several different sources, and NBP presently believesthat it can obtain them as needed.  Commodities are subject to pricefluctuations that may create price risk. When appropriate, NBP may hedgecommodities in order to mitigate this price risk. While this may tend to limit NBP’sability to participate in gains from commodity price fluctuations, it alsotends to reduce the risk of loss from changes in commodity prices. NBP reflectscommodity contract gains and losses as adjustments to the basis of underlyingcommodities purchased; gains or losses are recognized in the statement ofoperations as a component of costs of goods sold.

NBP purchases cattle for use in its processingbusinesses. When appropriate, NBP enters into forward purchase contracts atprices determined prior to the delivery of the cattle. The commodity price riskassociated with these activities can be hedged by selling (or buying) theunderlying commodity, or by using an appropriate commodity derivativeinstrument. The particular hedging instrument NBP uses depends on a number offactors, 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 pricerisk. When appropriate, NBP enters into forward sales contracts at pricesdetermined prior to shipment. NBP may hedge the commodity price risk associatedwith these activities in order to mitigate this price risk. While this may tendto limit NBP’s ability to participate in gains from commodity pricefluctuations, it also tends to reduce the risk of loss from changes incommodity beef prices. NBP reflects commodity contract gains and losses asadjustments to the basis of underlying commodities sold; gains or losses arerecognized in the statement of operations as a component of net sales.

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

14

                                                                                               

 

While management believes each of these instrumentshelp mitigate various market risks, they are not designated and accounted foras hedges under SFAS No. 133 as a result of the extensive recordkeepingrequirements of this statement. Accordingly, the gains and losses associatedwith the change in fair value of the instrument and the offsetting gains andlosses associated with changes in the market value of certain of the firmcommitments related to the futures contracts are recorded to income and expensein the period of change.

NBP uses a sensitivity analysis to evaluate the effectthat changes in the market value of commodities will have on these commodityderivative instruments.  As of May 26, 2007, the potential change in fair valueof applicable commodity prices, assuming a hypothetical 10% decrease in theunderlying commodity price, was $0.5 million.  As of August 26, 2006, the potential change in fair value of applicable commodity prices, assuming ahypothetical 10% decrease in the underlying commodity price, was $1.4 million.

*Foreign Operations*.  Transactions denominated in a currency other than an entity’sfunctional currency may expose that entity to currency risk.  Although NBP operatesin international markets including Japan, South Korea and China, 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, ouroperating results are exposed to fluctuations in interest rates, which wemanage primarily through our regular financing activities. We generallymaintain 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 debtmaturing twelve months from the balance sheet date.  Our variable interestexpense is sensitive to changes in the general level of interest rates. As of May 26, 2007, the weighted average interest rate on our $289.4 million of variable ratedebt was approximately 7.9%.

We had total interest expense of approximately $29.8million during the thirty-nine week period ending May 26, 2007.  The estimated increase in interest expense from a hypothetical 200 basis point increase inapplicable variable interest rates would have been approximately $3.7 millionin the thirty-nine week period ending May 26, 2007. 

**Item 4.  Controls and Procedures.**

We maintain a system of controlsand procedures designed to provide reasonable assurance as to the reliability ofthe Consolidated Financial Statements and other disclosures included in thisreport, as well as to safeguard assets from unauthorized use or disposition. Weevaluated the effectiveness of the design and operation of our disclosurecontrols and procedures as defined in the Securities Exchange Act of 1934Rules 13a-15(e) and 15d-15(e) under supervision and with the participation ofmanagement, including our Chief Executive Officer and Chief Reporting andCompliance Officer. Based upon that evaluation, as of the end of the periodcovered by this Quarterly Report on Form 10-Q, our Chief Executive Officer andChief Reporting and Compliance Officer concluded that our disclosure controlsand procedures were effective in alerting them, in a timely manner, to materialinformation required to be included in our periodic Securities and ExchangeCommission filings.  There have been no changes in our internal controlsover financial reporting during the thirteen weeks ended May 26, 2007 that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.  The design of any system of controls and procedures is based inpart upon certain assumptions about the likelihood of future events. 

** **

15

                                                                                               

**PARTII. OTHER INFORMATION**

**Item 1. Legal Proceedings.**

For informationregarding legal proceedings, see Note 6. *Contingencies* to our ConsolidatedFinancial Statements included in Part I- *Item 1* of this Form 10-Q.

**Item 1A. Risk Factors.**

The risk factorsset forth in our Annual Report on Form 10-K for the fiscal year ended August 26, 2006 have not materially changed.  Please refer to the Company’s report on Form10-K for the fiscal year ended August 26, 2006 to consider those risk factors.

**Item 2. UnregisteredSales of Equity Securities and Use of Proceeds.**

None.

**Item 3. Defaults UponSenior Securities.**

None. 

**Item4. Submission of Matters to a Vote of Security Holders.**

None.

**Item 5. Other Information.**

NBP may purchasea portion of its outstanding Senior Notes from time to time in accordance withthe limits imposed under the amended and restated senior credit facility. 

**Item 6. Exhibits.**

(A)
Exhibits               
31.1 

Certification of the Chief  Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.
      
31.2 

Certification of the  Principal Financial and Accounting Officer pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002.
      
32.1 

Certification of the Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
      
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.

** **

16

                                                                                               

**SIGNATURES**

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon 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: July 10, 2007 

17 |