----

 

**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 June 30, 2012**

**or**

 

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

 

 

**For the transition period from             to           .**

** **

**Commission file number 333-115164**

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

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

**12200  North Ambassador Drive****Kansas  City****, MO 64163******(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 No o

 Indicate by checkmark whether the registrant has submitted electronically and posted on itscorporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of thischapter) during the preceding 12 months (or for such shorter period that the registrantwas required to submit and post such files).   Yes þ No o

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,a non-accelerated filer or a small reporting company.  See definition of “largeaccelerated filer”, “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act. (Check one):
| Large Accelerated Filer o    | Accelerated Filer o  | Non-Accelerated Filer 		þ | Small Reporting Company o |
|---------------------------------------------|---------------------------|--------------------------------|---------------------------|

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

The registrant’s unitsare not traded on an exchange or in any public market.  As of July 28, 2012,there were 735,385 Class A units and 755,385 Class B unitsoutstanding.     

 

 

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|                  | TABLE OF CONTENTS

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |         |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------|
| PART I.               | FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | **Page No.** |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 1.               | Financial Statements (unaudited).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | 1            |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 2.               | Management’s  Discussion and Analysis of Financial Condition 

and Results of Operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 10           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 3.               | Quantitative and Qualitative Disclosures About Market Risk.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 15           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 4.               | Controls and Procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 16           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| PART II.              | OTHER INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |         |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 1.               | Legal Proceedings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 17           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
|    Item 1A. | Risk Factors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 17           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 2.               | Unregistered Sales of Equity Securities and Use of Proceeds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | 17           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 3.               | Defaults Upon Senior Securities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 17           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 4.               | Submission of Matters to a Vote of Security Holders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | 17           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 5.               | Other Information.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 17           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
| Item 6.               | Exhibits.                                                                                                                                   | 17           |
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |         |
|                  | Signatures.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           | 18           |

 

 

Unless the context indicates orotherwise requires, the terms “the Company”, “we”, “our” and “us” refer to U.S.Premium Beef, LLC 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 Delawarelimited liability company, and “USPB” refers to U.S. Premium Beef, LLC prior toconsolidation. 

 

 

 

 

 

**                                                                                               **

| ii |
|----|

 

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**PART I.  FINANCIAL INFORMATION**

** **

**Item 1.  Financial Statements (unaudited).**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

| 1 |
|---|

                                                                                                

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** **

| **U.S. PREMIUM BEEF, LLC**                                                  |
|--------------------------------------------------------------------------------------------|
| **Consolidated Balance Sheets**                                                  |
| (thousands of dollars, except unit data)                          |
|                                                                                       |   |   | **June 30,** |   | **December 31,** |
| **Assets**                                                                                 | **2012** |   | **2011** |
|                                                                                       |   |   | **(unaudited)** |   |   |
| Current assets:                                                                       |   |   |   |
|                                                                                       | Cash and cash equivalents | $ | 60,795  |   | $ | 642,670  |
|                                                                                       | Accounts receivable | 384  |   | -  |
|                                                                                       | Due from affiliates | 44  |   | 2,333  |
|                                                                                       |   | Total current assets | 61,223  |   | 645,003  |
| Property, plant, and equipment, at cost                           | 244  |   | 241  |
|                                                                                       | Less accumulated depreciation | 234  |   | 231  |
|                                                                                       |   | Net property, plant, and equipment | 10  |   | 10  |
| Investment in National Beef Packing Company, LLC             | 165,723  |   | 165,696  |
| Restricted cash                                                                       | 36,943  |   | 36,943  |
| Other assets                                                                          | 373  |   | 418  |
|                                                                                       |   | Total assets | $ | 264,272  |   | $ | 848,070  |
|                                                                                       |   |   |   |   |   |
| **Liabilities and Capital Shares and Equities**                   |   |   |   |
| Current liabilities:                                                                  |   |   |   |
|                                                                                       | Accounts payable - trade | $ | 71  |   | $ | 44  |
|                                                                                       | Due to affiliates | 30  |   | 34  |
|                                                                                       | Accrued compensation and benefits | 1,853  |   | 2,559  |
|                                                                                       | Other accrued expenses and liabilities | 94  |   | 9,831  |
|                                                                                       | Patronage notices payable in cash | 236  |   | 42,160  |
|                                                                                       | Distributions payable | 198  |   | 508,936  |
|                                                                                       |   | Total current liabilities | 2,482  |   | 563,564  |
| Long-term liabilities:                                                                |   |   |   |
|                                                                                       | Accrued compensation and benefits | 3,376  |   | 3,177  |
|                                                                                       |   | Total liabilities | 5,858  |   | 566,741  |
| Capital shares and equities:                                                |   |   |   |
|                                                                                       | Members' capital, 735,385 Class A units and 755,385 Class B units |   |   |   |
|                                                                                       |   | authorized, issued and outstanding | 258,414  |   | 281,329  |
|                                                                                       |   | Total liabilities and capital shares and equities | $ | 264,272  |   | $ | 848,070  |
|                                                                                       |   |   |   |   |   |
| See accompanying notes to consolidated financial statements. |   |   |   |
|                                                                                       |   |   |   |   |   |

** **

| 2 |
|---|

 

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| **U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES**                                   |
|--------------------------------------------------------------------------------------------------------|
| **Consolidated Statements of Operations**                                               |
| (thousands of dollars, except per unit and per unit data) |
|                                                                                                   |   |   |   | **13 weeks ended** |   | **13 weeks ended** |   | **26 weeks ended** |   | **26 weeks ended** |
|                                                                                                   |   |   |   | **June 30, 2012** |   | **June 25, 2011** |   | **June 30, 2012** |   | **June 25, 2011** |
|                                                                                                   |   |   |   | **(unaudited)** |   | **(unaudited)** |   | **(unaudited)** |   | **(unaudited)** |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                                                                         |   |   | $ | -  |   | $ | 1,811,591  |   | $ | -  |   | $ | 3,472,412  |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Costs and expenses:                                                                          |   |   |   |   |   |   |   |   |
|                                                                                                   | Cost of sales |   | -  |   | 1,703,172  |   | -  |   | 3,267,626  |
|                                                                                                   | Selling, general, and administrative expenses |   | 1,546  |   | 14,839  |   | 3,635  |   | 31,285  |
|                                                                                                   | Depreciation and amortization |   | 2  |   | 13,649  |   | 3  |   | 27,134  |
|                                                                                                   |   | Total costs and expenses |   | 1,548  |   | 1,731,660  |   | 3,638  |   | 3,326,045  |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   |   | Operating (loss) income |   | (1,548) |   | 79,931  |   | (3,638) |   | 146,367  |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                                      |   |   |   |   |   |   |   |   |
|                                                                                                   | Interest income |   | 9  |   | 4  |   | 35  |   | 12  |
|                                                                                                   | Interest expense |   | (17) |   | (3,365) |   | (30) |   | (6,744) |
|                                                                                                   | Equity interest in net income of National Beef Packing Company, LLC | 7,034  |   | -  |   | 4,328  |   | -  |
|                                                                                                   | Other, net |   | (106) |   | (317) |   | (106) |   | 415  |
|                                                                                                   |   |   | Income before taxes |   | 5,372  |   | 76,253  |   | 589  |   | 140,050  |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense                                                                           |   | -  |   | (819) |   | -  |   | (1,382) |
|                                                                                                   |   |   | Net income |   | 5,372  |   | 75,434  |   | 589  |   | 138,668  |
| Less: Net income attributable to noncontrolling interest in:        |   |   |   |   |   |   |   |   |
|                                                                                                   | Kansas City Steak Company, LLC |   | -  |   | (97) |   | -  |   | (140) |
|                                                                                                   | National Beef Packing Company, LLC |   | -  |   | (23,750) |   | -  |   | (44,394) |
| Net income attributable to U.S. Premium Beef, LLC                   |   | $ | 5,372  |   | $ | 51,587  |   | $ | 589  |   | $ | 94,134  |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per unit:                                                                           |   |   |   |   |   |   |   |   |
|                                                                                                   | Basic |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   | Class A units |   | $ | 0.73  |   | $ | 6.73  |   | $ | 0.08  |   | $ | 12.38  |
|                                                                                                   |   | Class B units |   | $ | 6.40  |   | $ | 58.94  |   | $ | 0.70  |   | $ | 108.46  |
|                                                                                                   | Diluted |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   | Class A units |   | $ | 0.72  |   | $ | 6.61  |   | $ | 0.08  |   | $ | 12.17  |
|                                                                                                   |   | Class B units |   | $ | 6.40  |   | $ | 58.94  |   | $ | 0.70  |   | $ | 108.46  |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding weighted-average Class A and Class B units:             |   |   |   |   |   |   |   |   |
|                                                                                                   | Basic |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   | Class A units |   | 735,385  |   | 735,385  |   | 735,385  |   | 735,385  |
|                                                                                                   |   | Class B units |   | 755,385  |   | 755,385  |   | 755,385  |   | 755,385  |
|                                                                                                   | Diluted |   |   |   |   |   |   |   |   |   |
|                                                                                                   |   | Class A units |   | 748,219  |   | 748,570  |   | 748,158  |   | 747,992  |
|                                                                                                   |   | Class B units |   | 755,385  |   | 755,385  |   | 755,385  |   | 755,385  |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.             |   |   |   |   |   |   |   |   |
|                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |

 

|   |
|--------|

3

 

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** **

| **U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES**                           |
|------------------------------------------------------------------------------------------------|
| **Consolidated Statements of Comprehensive Income**                        |
| (thousands of dollars)                                                               |
|                                                                                           |   |   |   | **13 weeks ended** |   | **13 weeks ended** |   | **26 weeks ended** |   | **26 weeks ended** |
|                                                                                           |   |   |   | **June 30, 2012** |   | **June 25, 2011** |   | **June 30, 2012** |   | **June 25, 2011** |
|                                                                                           |   |   |   | **(unaudited)** |   | **(unaudited)** |   | **(unaudited)** |   | **(unaudited)** |
| Net income                                                                                |   |   | $ | 5,372  |   | $ | 75,434  |   | $ | 589  |   | $ | 138,668  |
| Other comprehensive income:                                                          |   |   |   |   |   |   |   |   |   |
|                                                                                           | Foreign currency translation adjustments |   |   | -  |   | 11  |   | -  |   | 21  |
|                                                                                           |   | Comprehensive income |   |   | $ | 5,372  |   | $ | 75,445  |   | $ | 589  |   | $ | 138,689  |
| Comprehensive income attributable to noncontrolling interest in: |   |   |   |   |   |   |   |   |
|                                                                                           | Kansas City Steak Company, LLC |   |   | -  |   | (97) |   | -  |   | (140) |
|                                                                                           | National Beef Packing Company, LLC |   |   | -  |   | (23,750) |   | -  |   | (44,394) |
| Comprehensive income attributable to USPB                                  |   |   | $ | 5,372  |   | $ | 51,598  |   | $ | 589  |   | $ | 94,155  |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.     |   |   |   |   |   |   |   |   |
|                                                                                           |   |   |   |   |   |   |   |   |   |   |   |

** **

|   |
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4

                                                                                                

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** **

| **U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES**                         |
|----------------------------------------------------------------------------------------------|
| **Consolidated Statements of Cash Flows**                                |
| (thousands of dollars)                                                             |
|                                                                                         |   |   |   |   | **26 weeks ended** |   | **26 weeks ended** |
|                                                                                         |   |   |   |   | **June 30, 2012** |   | **June 25, 2011** |
|                                                                                         |   |   |   |   | **(unaudited)** |   | **(unaudited)** |
| Cash flows from operating activities:                                    |   |   |   |
|                                                                                         | Net income |   | $ | 589  |   | $ | 138,668  |
|                                                                                         | Adjustments to reconcile net (loss) income to net cash provided by |   |   |   |
|                                                                                         |   | operating activities: |   |   |   |
|                                                                                         |   | Depreciation and amortization | 3  |   | 27,134  |
|                                                                                         |   | Equity in net income of National Beef Packing Company, LLC | (4,328) |   | -  |
|                                                                                         |   | Distribution from National Beef Packing Company, LLC | 4,300  |   | -  |
|                                                                                         |   | Gain on disposal of property, plant, and equipment | -  |   | (596) |
|                                                                                         |   | Amortizaton of debt issuance costs | -  |   | 366  |
|                                                                                         |   | Changes in assets and liabilities: |   |   |   |
|                                                                                         |   |   | Accounts receivable | (384) |   | (17,737) |
|                                                                                         |   |   | Due from affiliates | 2,289  |   | (1,813) |
|                                                                                         |   |   | Other receivables | -  |   | (1,018) |
|                                                                                         |   |   | Inventories | -  |   | (68,944) |
|                                                                                         |   |   | Other assets | 45  |   | 26,625  |
|                                                                                         |   |   | Cattle purchases payable | -  |   | 16,148  |
|                                                                                         |   |   | Accounts payable | 27  |   | 24,272  |
|                                                                                         |   |   | Due to affiliates | (4) |   | (214) |
|                                                                                         |   |   | Accrued compensation and benefits | (507) |   | 36,537  |
|                                                                                         |   |   | Accrued insurance | -  |   | (2,606) |
|                                                                                         |   |   | Other accrued expenses and liabilities | (917) |   | (11,604) |
|                                                                                         |   |   |   | Net cash provided by operating activities | 1,113  |   | 165,218  |
| Cash flows from investing activities:                                    |   |   |   |
|                                                                                         | Capital expenditures, including interest capitalized | (3) |   | (35,693) |
|                                                                                         | Proceeds from sale of property, plant, and equipment | -  |   | 2,259  |
|                                                                                         |   | Net cash used in investing activities | (3) |   | (33,434) |
| Cash flows from financing activities:                                    |   |   |   |
|                                                                                         | Net receipts under revolving credit lines | -  |   | (167,935) |
|                                                                                         | Payments of term notes payable | -  |   | (19,015) |
|                                                                                         | Borrowings of term notes payable | -  |   | 175,000  |
|                                                                                         | Repayments of other indebtedness / capital leases | -  |   | (610) |
|                                                                                         | Payments of patronage notices | (21,868) |   | -  |
|                                                                                         | Change in overdraft balances | (19,905) |   | (23,438) |
|                                                                                         | Distributions to noncontrolling interests in National Beef Packing Company, LLC | -  |   | (40,630) |
|                                                                                         | Member distributions | (541,212) |   | (63,677) |
|                                                                                         |   |   |   | Net cash used in financing activities | (582,985) |   | (140,305) |
|                                                                                         | Effect of exchange rate changes on cash | -  |   | 21  |
|                                                                                         |   |   |   | Net decrease in cash | (581,875) |   | (8,500) |
| Cash and cash equivalents at beginning of the period | 642,670  |   | 52,030  |
| Cash and cash equivalents at end of the period       | $ | 60,795  |   | $ | 43,530  |
| See accompanying notes to consolidated financial statements.   |   |   |   |

** **

|  

 

 

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

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

** **

**(1)Interim Financial Statements**

**Basisof Presentation**

The accompanying unaudited Consolidated Financial Statementshave been prepared in accordance with U.S. generally accepted accountingprinciples (GAAP), for interim financial information; therefore, they do notinclude all of the information and footnotes required by GAAP for completefinancial statements. In the opinion of management, all adjustments considerednecessary for a fair presentation have been included using management’s bestestimates and judgments where appropriate.  These estimates and judgmentsaffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements.  Theestimates and judgments will also affect the reported amounts for certainrevenues and expenses during the reporting period.  Actual results could differmaterially from these estimates and judgments.  For further information, referto the audited Consolidated Financial Statements and Notes to ConsolidatedFinancial Statements, which are included in the Company’s Annual Report on Form 10-KT on file with the Securities and Exchange Commission (SEC), forthe transition period ended December 31, 2011.  The results of operations forthe interim periods presented are not necessarily indicative of the results fora full fiscal year. 

As a result of the transaction with Leucadia NationalCorporation (Leucadia) on December 30, 2011 in which Leucadia purchased56.2415% of the membership interests in National Beef Packing Company, LLC (NBP)from the Company, the Company’s financial statements are no longer consolidatedwith NBP.  USPB’s remaining 15.0729% investment in NBP is accounted for usingthe equity method of accounting as the Company has the ability to exercisesignificant influence, but does not have financial or operational control. In thethirteen and twenty-six week periods ended June 25, 2011, the Company’sconsolidated financial statements included the accounts of USPB and itsmajority owned subsidiary, NBP, and its direct and indirect subsidiaries. Allsignificant intercompany accounts and transactions were eliminated inconsolidation.

Historically,the Company’s fiscal year consisted of a 52 or 53 week period, which ended onthe last Saturday in August.  With the closing of the transaction with Leucadia,the Company’s fiscal year-end changed from the last Saturday in August to thelast Saturday in December.  The Company will file annual reports for each 52week or 53 week period ended on the last Saturday in December, beginning withthe 52 week period ended December 29, 2012.

**(2)Members’ Capital**

Thefollowing table represents a reconciliation of Members’ Capital for the twenty-sixweek period ended June 30, 2012 (thousands of dollars). 

| Balance at December 31, 2011                                                                                        | $         | 281,329  |
|-----------------------------------------------------------------------------------------------------------------------------------------|-----------|---------------|
| Allocation of net income for the twenty-six week period ended June 30, 2012 | 589  |
| Member distributions                                                                                                               | (23,504)  |
| Balance at June 30, 2012                                                                                            | $         | 258,414  |

** **

** (3)Disclosure about Derivative Instruments and Hedging Activities**

As part of NBP’s ongoing operations, NBP is exposed tomarket risks such as changes in commodity prices.  To manage these risks, NBPmay enter into the following derivative instruments pursuant to its establishedpolicies:
    -  Forward purchase contracts forcattle for use in the beef plants
    -  Exchange traded futures contractsfor cattle 
    -  Exchange traded futures contractsfor grain 

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6 |
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While NBP management believes each of theseinstruments helps mitigate various market risks, they are not designated andaccounted for as hedges as a result of the extensive recordkeeping requirementsassociated with hedge accounting.  Accordingly, the gains and losses associatedwith the change in fair value of the instruments are recorded to net sales andcost of goods sold in the period of change.  Certain firm commitments for livecattle purchases and all firm commitments for boxed beef sales are treated asnormal purchases and sales and not recorded at fair value.

Thefollowing table presents the impact of derivative instruments on the ConsolidatedStatement of Operations for the thirteen and twenty-six week periods ended June30, 2012 and June 25, 2011 (thousands of dollars):
| **Derivatives Not**            |   | **Location of Gain (Loss)** |   |                                                                                                  |                         |    |                         |    |                         |      |
|-------------------------------------|--------|--------------------------------------------|--------|-------------------------------------------------------------------------------------------------------|------------------------------|---------|------------------------------|---------|------------------------------|-----------|
| **Designated as Hedging** |   | **Recognized in Income on** |   |                                                                                                  |                         |    |                         |    |                         |      |
| **Instruments**                     |   | **Derivatives**                            |   | **Amount of Gain (Loss) Recognized in Income On Derivatives** |
|                                |   |                                       |   |                                                                                                  | **13 weeks ended** |    | **13 weeks ended** |    | **26 weeks ended** |      | **26 weeks ended** |
|                                |   |                                       |   |                                                                                                  | **June 30, 2012**  |    | **June 25, 2011**  |    | **June 30, 2012**  |      | **June 25, 2011** |
|                                |   |                                       |   |                                                                                                  |                         |    |                         |    |                         |      |   |
| Commodity contracts            |   | Net sales                             |   | $                                                                                                     | -                       |    | $                            | (2,349) |                         | $         | -  |   | $ | (2,682) |
| Commodity contracts            |   | Cost of sales                    |   | -                                                                                                |                         | (1,420) |                         | -  |                         | 101  |
|                                | Total  |                                       |   |                                                                                                  | $                            | -  |                         | $       | (3,769)                      |      | $ | -  |   | $ | (2,581) |

** **

**(4)Income Attributable to USPB Per Unit**

Under the LLC structure, earnings of the Company areto be distributed to unitholders based on their proportionate share ofunderlying equity, and, as a result, income attributable to USPB per unit (EPU)has been presented in the accompanying Consolidated Statements of Operationsand in the table that follows.

Basic EPU excludesdilution and is computed by first allocating a portion of net income (loss) attributableto USPB to Class A units and the remainder is allocated to Class B units.  Forthe thirteen and twenty-six week periods ended June 30, 2012 and June 25, 2011,income was allocated 10% to the Class A’s and 90% to the Class B’s.  Income (loss)allocated to the Class A and Class B units is then divided by theweighted-average number of Class A and Class B units outstanding for the periodto determine the basic EPU for each respective class of unit.  

Diluted EPU reflects the potential dilution that couldoccur if potential Class A unit purchase rights were exercised or contractualappreciation rights were converted into units.   Upon termination of the CEOemployment agreement and until eighteen months after the 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 Aunits, or upon agreement of the CEO and the Board of the Company, the CEO mayconvert the contractual unit appreciation rights to up to 20,000 Class Aunits.  The diluted EPU reflects the circumstances of termination of the CEOemployment agreement, and the election of the CEO or agreement by the Board ofthe Company and the CEO for the CEO to purchase or convert contractual rightsto the maximum 20,000 Class A units at $55 per unit for the periods as providedin the CEO employment agreement. 

Certain affiliates of NBP’s current Chief ExecutiveOfficer, Timothy M. Klein (collectively referred to herein as the “KleinAffiliates”) entered into a unit redemption agreement on April 13, 2009 whichprovided the right at any time after July 31, 2011, to request that NBPrepurchase their interests, the value of which was to be determined by aspecified formula.  This formula-based valuation differed from estimates offair value from period to period.  When the differences between the estimatedfair value of the non-controlling interest in NBP held by the Klein Affiliatesand the formula-based valuation are appropriately considered this reduces theamount of net earnings allocated to NBP’s owners and thus to the Company’sunitholders for their proportionate share.  The difference between the twovalues for the thirteen and twenty-six week periods ended June 25, 2011 isreflected in the table below.  The units subject to the unit redemptionagreement were redeemed as part of the Leucadia transaction and do not have animpact on the EPU calculation for the thirteen and twenty-six week periodsended June 30, 2012.

 

 

 
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| **Income Per Unit Calculation**                                                |                         |          |                         |          |                         |          |                         |
|-----------------------------------------------------------------------------------------------|------------------------------|---------------|------------------------------|---------------|------------------------------|---------------|------------------------------|
|                                                                                          |                         |          | **13 weeks ended** |          | **13 weeks ended** |          | **26 weeks ended** |   | **26 weeks ended** |
| (thousands of dollars, except unit and per unit data) | **June 30, 2012**  |          | **June 25, 2011**  |          | **June 30, 2012**  |          | **June 25, 2011**  |
|                                                                                          |                         |          |                         |          |                         |          |                         |   |   |
| **Basic income per unit**                                                      |                         |          |                         |          |                         |          |                         |
| Income attributable to USPB available to                             |                         |          |                         |          |                         |          |                         |
|                                                                                          | unitholders (numerator) |          |                         |          |                         |          |                         |   |
|                                                                                          |                         | Class A  | $                            | 537      |                         | $             | 4,947                   |   | $ | 59  |   | $ | 9,104  |
|                                                                                          |                         | Class B  | $                            | 4,835    |                         | $             | 44,525                  |   | $ | 530  |   | $ | 81,933  |
|                                                                                          |                         |          |                         |          |                         |          |                         |   |   |
| Weighted average outstanding units (denominator)                          |                         |          |                         |          |                         |          |                         |
|                                                                                          | Class A                 | 735,385  |                         | 735,385  |                         | 735,385  |                         | 735,385  |
|                                                                                          | Class B                 | 755,385  |                         | 755,385  |                         | 755,385  |                         | 755,385  |
|                                                                                          |                         |          |                         |          |                         |          |                         |   |   |
| Per unit amount                                                                     |                         |          |                         |          |                         |          |                         |
|                                                                                          | Class A                 | $             | 0.73                    |          | $                            | 6.73     |                         | $ | 0.08  |   | $ | 12.38  |
|                                                                                          | Class B                 | $             | 6.40                    |          | $                            | 58.94    |                         | $ | 0.70  |   | $ | 108.46  |
|                                                                                          |                         |          |                         |          |                         |          |                         |   |   |
| **Diluted income per unit:**                                                   |                         |          |                         |          |                         |          |                         |
| Income attributable to USPB available to                             |                         |          |                         |          |                         |          |                         |
|                                                                                          | unitholders (numerator) |          |                         |          |                         |          |                         |   |
|                                                                                          |                         | Class A  | $                            | 537      |                         | $             | 4,947                   |   | $ | 59  |   | $ | 9,104  |
|                                                                                          |                         | Class B  | $                            | 4,835    |                         | $             | 44,525                  |   | $ | 530  |   | $ | 81,933  |
|                                                                                          |                         |          |                         |          |                         |          |                         |   |   |
| Weighted average outstanding Class A units                           | 735,385                 |          | 735,385                 |          | 735,385                 |          | 735,385                 |
| Effect of dilutive securities - Class A unit options  | 12,834                  |          | 13,185                  |          | 12,773                  |          | 12,607                  |
|                                                                                          | Units (denominator)     | 748,219  |                         | 748,570  |                         | 748,158  |                         | 747,992  |
|                                                                                          |                         |          |                         |          |                         |          |                         |   |   |
| Weighted average outstanding Class B units                           | 755,385                 |          | 755,385                 |          | 755,385                 |          | 755,385                 |
| Effect of dilutive securities - Class B unit options  | -                       |          | -                       |          | -                       |          | -                       |
|                                                                                          | Units (denominator)     | 755,385  |                         | 755,385  |                         | 755,385  |                         | 755,385  |
|                                                                                          |                         |          |                         |          |                         |          |                         |   |   |
| Per unit amount                                                                     |                         |          |                         |          |                         |          |                         |
|                                                                                          | Class A                 | $             | 0.72                    |          | $                            | 6.61     |                         | $ | 0.08  |   | $ | 12.17  |
|                                                                                          | Class B                 | $             | 6.40                    |          | $                            | 58.94    |                         | $ | 0.70  |   | $ | 108.46  |
|                                                                                          |                         |          |                         |          |                         |          |                         |   |   |

 

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**(5)Investment in National Beef Packing Company, LLC**

As of December 31, 2011, USPB’sinvestment in NBP is accounted for using the equity method of accounting as theCompany has the ability to exercise significant influence, but does not havefinancial or operational control.  Below is a summary of the results ofoperations for NBP for the thirteen and twenty-six week periods ended June 30,2012 and June 25, 2011 (thousands of dollars):

|                                                                                                                     |                                                           |                                                              |                                    |                          | **13 weeks ended** |            | **13 weeks ended** |            | **26 weeks ended** |            | **26 weeks ended** |
|--------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------|-------------------------------------------------------------------|-----------------------------------------|-------------------------------|------------------------------|-----------------|------------------------------|-----------------|------------------------------|-----------------|------------------------------|
|                                                                                                                     |                                                           |                                                              |                                    |                          | **June 30, 2012**  |            | **June 25, 2011**  |            | **June 30, 2012**  |            | **June 25, 2011**  |
| Net sales                                                                                                           |                                                           | $                                                                 | 1,913,616                          |                          | $                            | 1,811,591  |                         | $               | 3,704,171               |            | $                            | 3,472,412  |
|                                                                                                                     |                                                           |                                                              |                                    |                          |                         |            |                         |            |                         |            |                         |
| Costs and expenses:                                                                                            |                                                           |                                                              |                                    |                          |                         |            |                         |
|                                                                                                                     |                                                           | Cost of sales                                           | 1,828,328                          |                          | 1,703,172               |            | 3,600,547               |            | 3,267,626               |
|                                                                                                                     |                                                           | Selling, general, and administrative expenses | 14,359                             |                          | 13,185                  |            | 28,393                  |            | 25,984                  |
|                                                                                                                     |                                                           | Depreciation and amortization                           | 20,757                             |                          | 12,800                  |            | 41,065                  |            | 25,436                  |
|                                                                                                                     |                                                           |                                                              | Total costs and expenses | 1,863,445                |                         | 1,729,157  |                         | 3,670,005  |                         | 3,319,046  |
|                                                                                                                     |                                                           |                                                              |                                    |                          |                         |            |                         |            |                         |            |                         |
|                                                                                                                     |                                                           |                                                              |                                    | Operating income         | 50,171                  |            | 82,434                  |            | 34,166                  |            | 153,366                 |
|                                                                                                                     |                                                           |                                                              |                                    |                          |                         |            |                         |            |                         |            |                         |
| Other income (expense):                                                                                        |                                                           |                                                              |                                    |                          |                         |            |                         |
|                                                                                                                     |                                                           | Interest income                                              | 7                                  |                          | 1                       |            | 11                      |            | 6                       |
|                                                                                                                     |                                                           | Interest expense                                             | (3,284)                                 |                          | (3,356)                      |            | (6,300)                      |            | (6,725)                      |
|                                                                                                                     |                                                           | Other, net                                                   | 42                                 |                          | (286)                        |            | 1,463                   |            | 436                     |
|                                                                                                                     |                                                           |                                                              |                                    | Income before taxes | 46,936                  |            | 78,793                  |            | 29,340                  |            | 147,083                 |
|                                                                                                                     |                                                           |                                                              |                                    |                          |                         |            |                         |            |                         |            |                         |
| Income tax expense                                                                                             | (317)                                                          |                                                              | (819)                                   |                          | (737)                        |            | (1,325)                      |
|                                                                                                                     |                                                           |                                                              |                                    | Net income               | 46,619                  |            | 77,974                  |            | 28,603                  |            | 145,758                 |
| Less: net income (loss) attributable to Kansas City Steak Company, LLC | 44                                                        |                                                              | (97)                                    |                          | 108                     |            | (140)                        |
|                                                                                                                     | Net income attributable to NBP             | $                                                                 | 46,663                             |                          | $                            | 77,877     |                         | $               | 28,711                  |            | $                            | 145,618  |
|                                                                                                                     |                                                           |                                                              |                                    |                          |                         |            |                         |            |                         |            |                         |
|                                                                                                                     | NBP's net income attributable to USPB | $                                                                 | 7,034                              |                          | $                            | 54,127     |                         | $               | 4,328                   |            | $                            | 101,224  |
|                                                                                                                     |                                                           |                                                              |                                    |                          |                         |            |                         |            |                         |            |                         |

** **

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

The following discussion shouldbe read in conjunction with our consolidated financial statements and relatednotes and other financial information appearing elsewhere in this report.

**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-lookingstatements are typically identified by the words “believe,” “expect,”“anticipate,” “intend,” “estimate” and similar expressions.  Actual resultscould differ materially from those contemplated by these forward-lookingstatements as a result of many factors, including economic conditions generallyand in our principal markets, the availability and prices of live cattle andcommodities, food safety issues, livestock disease, including theidentification of cattle with Bovine Spongiform Encephalopathy, or BSE, productcontamination and recall concerns, competitive practices and consolidation inthe cattle production and processing industries and among our customers,actions of domestic or foreign governments, hedging risk, changes in interestrates and foreign currency exchange rates, trade barriers and exchangecontrols, consumer demand and preferences, the cost of compliance withenvironmental and health laws, loss of key customers, loss of key employees,labor relations, and consolidation among our customers. 

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 PartII. Item 1A, *Risk Factors*, included in this report, for other importantfactors that could cause actual results to differ materially from those in anysuch forward-looking statements.

**Recent Events **

On December 5, 2011, USPB andthe other members of NBP entered into a Membership Interest Purchase Agreementwith Leucadia National Corporation (Purchase Agreement), pursuant to which Leucadiaagreed to purchase from USPB and NBPCo Holdings a substantial portion of theissued and outstanding membership interests in NBP.  

The transactions contemplated bythe Purchase Agreement were completed on December 30, 2011.  Pursuant to thePurchase Agreement, Leucadia purchased 56.2415% of the membership interests inNBP (National Interests) from the Company for approximately $646.8 million and19.8775% of the National Interests from NBPCo Holdings for approximately $228.6million.  As contemplated by the Purchase Agreement and pursuant to pre-existingput rights, NBP purchased from TKK Investments, LLC (TKK) and TMKCo, LLC (TMKCo)all National Interests owned by TKK and TMKCo for approximately $75.9 million. Simultaneously, Leucadia sold to TMK Holdings, LLC 0.6522% of the NationalInterests for $7.5 million.  Following consummation of the various transactionscontemplated by the Purchase Agreement, the parties now own the followingpercentage membership interests in NBP: Leucadia 78.9477%; the Company15.0729%; NBPCo Holdings 5.3272%; and TMK Holdings, LLC 0.6522%.

When the transaction closed, theCompany received consideration of approximately $646.8 million; of that amountapproximately $609.8 million was immediately paid to USPB in cash.  Theremaining amount of approximately $37.0 million was deposited in an escrowaccount to satisfy potential indemnification claims from Leucadia under the PurchaseAgreement.  If no indemnification claims arise during a period of two yearsafter the closing of the Purchase Agreement, those remaining funds (or any portionremaining after payment of any indemnification claims) will be distributed toUSPB.  USPB distributed a portion of the cash consideration received at closingto each unitholder in the amount of approximately $70 (before applicable taxwithholding, if any) for each USPB Class A unit and $617 for each USPB Class Bunit held by such unitholder.  The total distribution to Class A and Class Bunitholders was approximately $517.7 million.  The Company also paid all outstandingpatronage notices, which totaled approximately $42.1 million.  In addition, theCompany’s fiscal year has been changed to the last Saturday in December.  

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As part of the transactions withLeucadia, the Company entered into a Cattle Purchase and Sale Agreement with NBP,pursuant to which the Company will facilitate the delivery of cattle from theCompany’s unitholders and associates to NBP.  NBP, in the aggregate, willpurchase on an annual basis, a base amount of 735,385 head of cattle annually,subject to an adjustment of plus or minus 10%.  The Cattle Purchase and SaleAgreement will remain in effect for an initial term of five years.  

In connection with completion ofthe transactions governed by the Purchase Agreement, the Company entered into aPledge Agreement with NBP (Pledge Agreement).  The Pledge Agreement was enteredinto in order to secure the payment and performance of the Company’sobligations under the Cattle Purchase and Sale Agreement.  Under the terms ofthe Pledge Agreement, the Company has granted NBP a perfected security interestin and to the Company’s Membership Interests in NBP (Collateral), subject onlyto the prior first priority security interest in the Collateral held by CoBank,ACB (CoBank), up to a maximum principal amount of $15.0 million plus feesand expenses, pursuant to the Pledge Agreement dated July 26, 2011 by andbetween the Company and CoBank.

**BeefExport Markets**

OnApril 24, 2012, the U.S. Department of Agriculture's (USDA) Animal and PlantHealth Inspection Service (APHIS) confirmed the nation's fourth case of bovinespongiform encephalopathy (BSE) in a dairy cow from central California. Confirmatory results using immunohistochemistry and western blot testsconfirmed the animal was positive for atypical BSE, a very rare form of thedisease not generally associated with an animal consuming infected feed. The animal was never presented for slaughter for human consumption, so at notime presented a risk to the food supply or human health.

Exportmarkets for U.S. beef products remain constrained since the discovery of asingle case of BSE in the State of Washington in December 2003, as well asother isolated cases.  In July 2006, Japan agreed to reopen its market to U.S.beef from cattle aged 20 months and younger.  South Korea announced aprovisional opening of its border to U.S. beef from animals 30 months andyounger in September 2006 but subsequently closed its border again in October2007.  South Korea reopened its border and started inspecting U.S. beef nearthe end of June 2008.  These constraints and uncertainties have historicallyhad a negative impact on beef demand during the periods in which they occurred.

We cannot presently assess the full economic impact ofthe consequences of BSE on the U.S. beef packing industry or on NBP’soperations.  Existing or new import restrictions or additional regulatoryrestrictions or disruptions in domestic and foreign consumer demand for beefmay have a material adverse effect on NBP’s revenues and net income.

**Investment in National Beef Packing Company, LLC**

As of December 31, 2011, USPB’sinvestment in NBP is accounted for using the equity method of accounting as theCompany has the ability to exercise significant influence, but does not havefinancial or operational control.  

NBP’s profitability is dependent, in large part, onthe spread between its cost for live cattle, the primary raw material for itsbusiness, and the value received from selling boxed beef and otherproducts.  Because NBP operates in a large and liquid market, it does nothave much influence over the price it pays for cattle or the selling price itreceives for the products it produces.  NBP’s profitability typicallyfluctuates seasonally as well as cyclically, with relatively higher margins inthe spring and summer months and during times of cattle herd expansion.

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The USDA regularly reports market values for cattle,beef, offal and other products produced by ranchers, farmers and beefprocessors.  Generally, NBP expects its profitability to improve as theratio of the USDA comprehensive boxed beef cutout (a weekly reported measure ofthe total value of all USDA inspected beef primal cuts, grind and trim producedfrom fed cattle) to the USDA 5-area weekly average slaughter cattle priceincreases and for profitability to decline as the ratio decreases.  Theratio during the twenty-six weeks ended June 30, 2012 was the lowest ratio forthe corresponding periods during the past ten years.  Due in part to thedeclining U.S. cattle herd, during this period average cattle prices increasedto record levels; however, NBP’s revenue per head did not keep pace with therise in the cost for cattle, resulting in reduced margins.  In May 2012,the ratio began to improve seasonally, which resulted in higher margins.

Thedrought across much of the country has caused prices for corn, hay and certainother cattle feedstuffs to increase and pastures to wither; as such some cattleproducers are reducing the size of their herds.  Since NBP’s profitabilityis primarily dependent upon the spread between what it pays for cattle and theprice it receives for its products, along with the efficiency of its processingfacilities, it has not yet been significantly impacted by the current droughtconditions.  However, if the drought causes the beef cow herd to further decline,it could result in the price NBP pays for fed cattle to increase more than itcould pass along in the form of higher selling prices for its products, thuscausing profitability to be negatively impacted.

Aspart of NBP’s operations, it is exposed to market risks from changes in certaincommodity prices.  To manage these risks, NBP may enter into forwardpurchase contracts for cattle and exchange traded futures and options contractsfor cattle or grain.  While these instruments are intended to mitigate marketrisks, they are not designated and accounted for as hedges; accordingly, thegains and losses associated with changes in fair value of derivative financialinstruments are recorded in net sales or cost of goods sold in the period ofchange.  

**USPB Results of Operations**

As a result of the Purchase Agreement, which is discussed furtherin *Recent Events* above, USPB’s financial statements were not consolidatedwith NBP’s for the thirteen and twenty-six week periods ended June 30, 2012. Unless otherwise indicated, all changes in financial statement line itemsbetween the thirteen and twenty-six week periods ended June 30, 2012 and June25, 2011 are due to this change in reporting. 

***Thirteen weeks ended June 30, 2012 compared to thirteen weeks ended June25, 2011***

*Net Sales*.  Net sales were $0.0million for the thirteen weeks ended June 30, 2012 compared toapproximately $1,811.6 million forthe thirteen weeks ended June 25, 2011.    

*Cost of Sales*. Cost of sales were $0.0 million for the thirteenweeks ended June 30, 2012 compared to approximately $1,703.2 million for thethirteen weeks ended June 25, 2011.    

*Selling, General and Administrative Expenses*.  Selling, general andadministrative expenses were approximately $1.5 million for the thirteen weeks endedJune 30, 2012 compared to approximately $14.8 million for the thirteen weeksended June 25, 2011, a decrease of approximately $13.3 million.  The $14.8 million inthe prior year included $1.7 million in selling, general and administrativeexpenses attributable to USPB.  From that perspective, USPB’s selling, generaland administrative expenses were $0.2 million less than the same period a yearago.  That decrease is primarily due to lower compensation expense on thephantom unit plans.

*Depreciation and Amortization Expense*.  Depreciation andamortization expenses were approximately $0.0 million for the thirteen weeksended June 30, 2012 compared to approximately $13.6 million for the thirteen weeksended June 25, 2011.             

*Operating (Loss) Income.*  Operating loss wasapproximately $1.5 million for thethirteen weeks ended June 30, 2012 compared to operating income ofapproximately $79.9 million forthe thirteen weeks ended June 25, 2011, a decrease of approximately $81.4 million.    

*Interest Expense*.  Interest expense was $0.0 million for the thirteen weeks ended June30, 2012 compared to $3.4 million for the thirteen weeks ended June 25, 2011.  

*Equity Interest in Net Income of National Beef PackingCompany, LLC*.  Equity in NBP was incomeof $7.0 million for the thirteen weeks ended June 30, 2012 compared to $0.0million for the thirteen weeks ended June 25, 2011.  Asof December 31, 2011, USPB is carrying its 15.0729% investment in NBP under theequity method of accounting.

 

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*Income Tax Expense*.  Income tax expense was $0.0 million and $0.8 million for thethirteen weeks ended June 30, 2012 and June 25, 2011,respectively.   Income tax expense in the prior year period wasrecorded on taxable income from National Carriers, which is organized as a CCorporation and the apportioned taxable income of NBP by certain states whichimpose privilege taxes.  

*Net Income.* Net income for the thirteen-week period ended June 30, 2012 was approximately $5.4 millioncompared to net income of approximately $75.4 million for the thirteen-weekperiod ended June 25, 2011, a decrease of approximately $70.0 million. The decrease in net income is primarily due to theCompany’s sale of a majority of its ownership interest in NBP to Leucadia andas a result of lower gross margins at NBP.  The decrease in gross marginsresulted from an approximate 8.0% increase in average cattle prices, which waspartially offset by an approximate 6.2% increase in net sales price per head. 

*Net Income Attributable to Noncontrolling Interest in NBP.*  Noncontrolling interest in the net income of NBP for the thirteen weeks ended June 30, 2012 was $0.0million compared to $23.8 million in the same period a year ago, a decrease of $23.8 million. The noncontrollinginterest in NBP represented the minority owners’ interest in NBP’s earnings while USPB was consolidating NBP.

*Net Income Attributable to USPB*.  Net income attributable to USPB for thethirteen-week period ended June 30, 2012 was approximately $5.4 millioncompared to net income of approximately $51.6 million for the thirteen-weekperiod ended June 25, 2011, a decrease of approximately $46.2 million.

***Twenty-six weeks ended June 30, 2012 compared to twenty-six weeks endedJune 25, 2011***

*Net Sales*.  Net sales were $0.0 million for the twenty-six weeks endedJune 30, 2012 compared to approximately $3,472.4 million for the twenty-sixweeks ended June 25, 2011.    

*Cost of Sales*. Cost of sales were $0.0 million for the twenty-sixweeks ended June 30, 2012 compared to approximately $3,267.6 million for thetwenty-six weeks ended June 25, 2011.    

*Selling, General and Administrative Expenses*.  Selling, general andadministrative expenses were approximately $3.6 million for the twenty-sixweeks ended June 30, 2012 compared to approximately $31.3 million for thetwenty-six weeks ended June 25, 2011, a decrease of approximately $27.7million.  The $31.3 million in the prior year included $5.3 million in selling,general and administrative expenses attributable to USPB.  From thatperspective, USPB’s selling, general and administrative expenses were $1.7million less than the same period a year ago.  That decrease is primarily dueto lower compensation expense on the phantom unit plans.  

*Depreciation and Amortization Expense*.  Depreciation andamortization expenses were approximately $0.0 million for the twenty-six weeksended June 30, 2012 compared to approximately $27.1 million for the twenty-sixweeks ended June 25, 2011.        

*Operating (Loss) Income.*  Operating loss wasapproximately $3.6 million for the twenty-six weeks ended June 30, 2012compared to operating income of approximately $146.4 million for the twenty-sixweeks ended June 25, 2011, a decrease of approximately $150.0million.    

*Interest Expense*.  Interest expense was $0.0 million for the twenty-six weeks ended June30, 2012 compared to $6.7 million for the twenty-six weeks ended June 25, 2011. 

*Equity Interest in Net Income of National Beef PackingCompany, LLC*.  Equity in NBP was incomeof $4.3 million for the twenty-six weeks ended June 30, 2012 compared to $0.0million for the twenty-six weeks ended June 25, 2011.  Asof December 31, 2011, USPB is carrying its 15.0729% investment in NBP under theequity method of accounting.

*Income Tax Expense*.  Income tax expense was $0.0 million and $1.4 million for thetwenty-six weeks ended June 30, 2012 and June 25, 2011,respectively.   Income tax expense in the prior year period wasrecorded on taxable income from National Carriers, which is organized as a CCorporation and the apportioned taxable income of NBP by certain states whichimpose privilege taxes.  

 

 
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*Net Income.* Net income for the twenty-six week period ended June 30, 2012 was approximately$0.6 million compared to net income of approximately $138.7 millionfor the twenty-six week period ended June 25, 2011, a decrease of approximately$138.1 million. The decrease in netincome is primarily due to the Company’s sale of a majority of its ownershipinterest in NBP to Leucadia and as a result of lower gross margins at NBP.  Thedecrease in NBP’s gross margins resulted from an approximate 11.5% increase inaverage cattle prices, which was partially offset by an approximate 7.4%increase in net sales price per head.

*Net Income Attributable to Noncontrolling Interest in NBP.*  Noncontrolling interest in the net income of NBP for the twenty-six weeks ended June 30, 2012 was $0.0million compared to $44.4 million in the same period a year ago, a decrease of $44.4 million. The noncontrollinginterest in NBP represented the minority owners’ interest in NBP’s earnings while USPB was consolidating NBP.

*Net Income Attributable to USPB*.  Net income attributable to USPB for the twenty-sixweek period ended June 30, 2012 was approximately $0.6 million compared tonet income of approximately $94.1 million for the twenty-six week periodended June 25, 2011, a decrease of approximately $93.5 million.

**Liquidityand Capital Resources**

As of June 30, 2012, USPB had net working capital ofapproximately $58.7 million, which included cash and cash equivalents of $60.8 million and $0.2 million in distributions payable and $0.2 million in patronage notices payable.  As of December 31,2011, we had net working capital of approximately $81.4 million, which includedcash and cash equivalents of $642.7 million, with $508.9 million indistributions payable and $42.2 million in patronage notices payable.

As of June 30, 2012, we had a $15.0million revolving term loan with CoBank, all of which was available. USPB was in compliance with all of the financialcovenants under the Credit Facilities as of June 30, 2012.

We believe that available borrowings under our Credit Facilityand cash provided by operating activities will be sufficient to support workingcapital and capital expenditures.  For a review of our obligations that affectliquidity, please see the “Cash Payment Obligations” table in “Item 7. *Management’sDiscussion and Analysis of Financial Condition and Results of Operations*”of our Annual Report on Form 10-K for the transition period ended December 31,2011.

*OperatingActivities*

Net cash provided by operating activitiesin the twenty-six weeks ended June 30, 2012 was approximately $1.1 million compared to net cashprovided by operating activities of approximately $164.4 million in the twenty-six weeksended June 25, 2011.  In the twenty-six weeks ended June 30, 2012, USPBreceived a $4.3 million tax distribution related to tax year 2012 and a $2.3million tax distribution related to tax year 2011, from NBP.  The 2011 taxdistribution was recorded as a receivable on USPB’s December 31, 2011 balancesheet.

*InvestingActivities*

Net cash used in investing activities wasapproximately $0.0 million in the twenty-sixweeks ended June 30, 2012 compared to approximately $33.4 million in the twenty-six weeksended June 25, 2011.  

*FinancingActivities*

Net cash used in financing activities wasapproximately $583.0 million inthe twenty-six weeks ended June 30, 2012 compared to net cash used in financingactivities of approximately $140.3million in the twenty-six weeks ended June 25, 2011.  The changewas primarily related to distributions to USPB’s unitholders, and theredemption of the patronage notices which occurred as a result of thetransaction with Leucadia.  Overdraftbalances in the current period primarily relate to patronage redemption checksthat were issued in December 2011 and cleared in the current twenty-six weekperiod.

*MasterLoan Agreement*

 

OnJuly 28, 2011, USPB and CoBank entered into a Master Loan Agreement, RevolvingTerm Loan Supplement to the Master Loan Agreement, and Pledge Agreement.  Theseagreements replace the Amended and Restated Credit Agreement and SecurityAgreement dated June 22, 2009.

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TheMaster Loan Agreement and the Revolving Term Loan Supplement provide for a $15million revolving credit commitment.  That commitment carries a term of threeyears, maturing on June 30, 2014.  The Pledge Agreement provides CoBank with afirst-priority security interest in USPB’s membership interests in, and distributionsfrom, NBP. 

Allof the $15 million revolving credit commitment was available as of June 30,2012.  Borrowings under the revolving credit commitment bear interest at thebase rate or LIBOR rate plus applicable margin.

On December 30, 2011, in connection with the closingof the Leucadia Transaction, the Company and CoBank entered into the Consentand First Amendment to Pledge Agreement and Security Agreement, by which CoBankagreed to (i) consent to the Membership Interest Sale and the PA Distribution,(ii) release its security interest in, and liens on, the Membership Interestsbeing sold pursuant to the Membership Interest Sale, (iii) consent to theNational Beef Pledge and (iv) consent to the amendments and restatements of theNational Beef Operating Agreement and the PA Newco Operating Agreement. TheNational Beef Pledge grants National Beef a perfected security interest in andto USPB’s membership interests in, and distributions from, NBP, subject only tothe prior first priority security interest held by CoBank.

**ComparativeData**

As a result of the transaction with Leucadia onDecember 30, 2011 in which Leucadia purchased 56.2415% of the membershipinterests in NBP from the Company, the Company’s financial statements are nolonger consolidated with NBP.  As a result of the sale, USPB’s investment inNBP is accounted for using the equity method of accounting as the Company hasthe ability to exercise significant influence, but does not have financial oroperational control.  The following table provides a comparison of the Company’sstatement of operations for the thirteen and twenty-six week periods ended June30, 2012 and June 25, 2011, both of which reflect our investment in NBP underthe equity method of accounting.  
|                                                                                                                  |                                | **13 weeks ended** |                        | **13 weeks ended** |                        | **26 weeks ended** |                        | **26 weeks ended** |
|-----------------------------------------------------------------------------------------------------------------------|-------------------------------------|------------------------------|-----------------------------|------------------------------|-----------------------------|------------------------------|-----------------------------|------------------------------|
| **(Non-GAAP; thousands of dollars)**                                                                   | **June 30, 2012**         |                         | **June 25, 2011** |                         | **June 30, 2012** |                         | **June 25, 2011** |
|                                                                                                                  |                                |                         |                        |                         |                        |                         |                        |                         |
| **Statement of Operations Data:**                                                                      |                                |                         |                        |                         |                        |                         |                        |
| Net sales                                                                                                        | $                                   | -                       |                        | $                            | -                      |                         | $                           | -                       |   | $ | -  |
| Operating loss                                                                                                   | $                                   | (1,548)                      |                        | $                            | (2,503)                     |                         | $                           | (3,638)                      |   | $ | (6,999) |
| Equity interest in net income of National Beef Packing Company, LLC | $                                   | 7,034                   |                        | $                            | 54,127                 |                         | $                           | 4,328                   |   | $ | 101,224  |
| Net income                                                                                                       | $                                   | 5,372                   |                        | $                            | 51,587                 |                         | $                           | 589                     |   | $ | 94,134  |
|                                                                                                                  |                                |                         |                        |                         |                        |                         |                        |                         |
| **Statement of Cash Flow Data:**                                                                  |                                |                         |                        |                         |                        |                         |                        |
| Net cash provided by operating activities                                                    |                                |                         |                        |                         | $                           | 1,113                   |                        | $                            | 69,997  |
| Net cash used in investing activities                                                        |                                |                         |                        |                         | (3)                         |                         | -                      |
| Net cash used in financing activities                                                        |                                |                         |                        |                         | (582,985)                   |                         | (77,383)                    |
|                                                                                                                  | Net decrease in cash |                         |                        |                         |                        | $                            | (581,875)                   |                         | $ | (7,386) |
|                                                                                                                  |                                |                         |                        |                         |                        |                         |                        |                         |

** **

The decrease in net income in the thirteen andtwenty-six week periods ended June 30, 2012 as compared to the thirteen andtwenty-six week periods ended June 25, 2011 are due to the Company’s sale of amajority of its ownership interest in NBP to Leucadia and as a result of lowergross margins at NBP.  In the thirteen week period ended June 30, 2012, thedecrease in gross margins resulted from an approximate 8.0% increase in averagecattle prices, which was partially offset by an approximate 6.2% increase innet sales price per head. In the twenty-six week period ended June 30, 2012,the decrease in gross margins resulted from an approximate 11.5% increase inaverage cattle prices, which was partially offset by an approximate 7.4%increase in net sales price per head.

 

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

 

Aspart of NBP’s operations, it is exposed to market risks from changes in certaincommodity prices.  To manage these risks, NBP may enter into forwardpurchase contracts for cattle and exchange traded futures and options contractsfor cattle or grain.  While these instruments are intended tomitigate market risks, they are not designated and accounted for as hedges;accordingly, the gains and losses associated with changes in fair value ofderivative financial instruments are recorded in net sales or cost of goodssold in the period of change.

 

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The principal market risks affecting USPB’s business are exposureto interest rate risk, to the extent the company has debt outstanding.  As of June30, 2012, the company did not have any outstanding debt.

** **

**Item4.  Controls and Procedures.**

We maintain asystem of controls and procedures designed to provide reasonable assurance asto the reliability of the Consolidated Financial Statements and otherdisclosures included in this report, as well as to safeguard assets fromunauthorized use or disposition. We evaluated the effectiveness of the designand operation of our disclosure controls and procedures as defined in theSecurities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) undersupervision and with the participation of management, including our ChiefExecutive Officer and Chief Financial Officer. Based upon that evaluation, asof the end of the period covered by this Quarterly Report on Form 10-Q, our ChiefExecutive Officer and Chief Financial Officer concluded that our disclosurecontrols and procedures were effective in alerting them, in a timely manner, tomaterial information required to be included in our periodic Securities andExchange Commission filings.  There have been no changes in our internalcontrols over financial reporting during the thirteen weeks ended June 30, 2012that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.  The design of any system ofcontrols and procedures is based in part upon certain assumptions about thelikelihood of future events. 

 

 

 

 

 

 

 

 

 

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**PARTII. OTHER INFORMATION**

** **

**Item 1. Legal Proceedings.**

None. 

**Item 1A. Risk Factors.**

The risk factors setforth in our Annual Report on Form 10-KT for the transition period ended December31, 2011 have not materially changed.  Please refer to the Company’s report onForm 10-KT for the transition period ended December 31, 2011 to consider thoserisk 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.**

None.         

**Item 6. Exhibits.**

| (A)          |   | Exhibits                                                                                                                                |
|--------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------|
|  

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).

           
** **

** **

** **
   
** **

** **

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**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 Financial Officer*

*(Principal Financial and Accounting Officer)*

 

 

 

Date:August 9, 2012

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