##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-Q



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(Mark one)

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



For the quarterly period ended May 29, 2004



or



| ̈ | 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 333-111407



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NATIONAL BEEF PACKING COMPANY, LLC

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|DELAWARE                                                       |  | 48-1129505                             
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. employer identification number)



12200 North
Ambassador Drive

Kansas City, MO 64163

(Address of principal executive offices)



Telephone: (800) 449-2333

(Registrants telephone number, including area code)



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



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x



There is no market for the Registrants equity. As of July 12, 2004,
there were 121,849,626 Class A units and 18,810,045 Class B units outstanding.



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##### Table of Contents

TABLE OF CONTENTS



|         |  |                                                                                        |  |         
|-------- |  | -------------------------------------------------------------------------------------- |  | --------
|         |  |                                                                                        |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION                                                                  |  |         
|         |  |                                                                                       
|Item 1.  |  | Financial Statements.                                                                  |  | 1       
|         |  |                                                                                       
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations. |  | 9       
|         |  |                                                                                       
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk.                            |  | 17      
|         |  |                                                                                       
|Item 4.  |  | Controls and Procedures.                                                               |  | 18      
|         |  |                                                                                       
|PART II. |  | OTHER INFORMATION                                                                      |  |         
|         |  |                                                                                       
|Item 1.  |  | Legal Proceedings.                                                                     |  | 19      
|         |  |                                                                                       
|Item 2.  |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities.      |  | 19      
|         |  |                                                                                       
|Item 3.  |  | Defaults Upon Senior Securities.                                                       |  | 19      
|         |  |                                                                                       
|Item 4.  |  | Submission of Matters to a Vote of Security Holders.                                   |  | 19      
|         |  |                                                                                       
|Item 5.  |  | Other Information.                                                                     |  | 19      
|         |  |                                                                                       
|Item 6.  |  | Exhibits and Reports on Form 8-K.                                                      |  | 19      
|         |  |                                                                                       
|         |  | Signatures.                                                                            |  | 20      



Unless the context indicates or
otherwise requires, the terms National Beef, NBP, Company, we, our, and us refer to National Beef Packing Company, LLC and its consolidated subsidiaries.



ii



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##### Table of Contents

PART I. FINANCIAL INFORMATION



Item 1. Financial Statements.



NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES



Consolidated Balance Sheets

(in thousands)



|                                                                                                         |  |                          |         |                |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | -------------- | - | ------- | -
|                                                                                                         |  | May 29, 2004 (unaudited) |         | August 30,2003 |  
|Assets                                                                                                   |  |                          |         |                |   |         |  
|Current assets:                                                                                          |  |                          |         |                |   |         |  
|Cash and cash equivalents                                                                                |  | $                        | 23,751  |                | $ | 31,304  |  
|Accounts receivable, less allowance for returns and doubtful accounts of $6,400 and $5,134, respectively |  |                          | 159,834 |                |   | 155,858 |  
|Due from affiliates                                                                                      |  |                          | 1,804   |                |   | 732     |  
|Other receivables                                                                                        |  |                          | 3,191   |                |   | 4,143   |  
|Inventories                                                                                              |  |                          | 86,809  |                |   | 77,587  |  
|Deposits                                                                                                 |  |                          | 20,761  |                |   | 20,768  |  
|Other current assets                                                                                     |  |                          | 8,369   |                |   | 9,932   |  
|                                                                                                         |  |                          |         |                |   |         |  
|Total current assets                                                                                     |  |                          | 304,519 |                |   | 300,324 |  
|                                                                                                         |  |                          |         |                |   |         |  
|Property, plant and equipment, at cost                                                                   |  |                          | 234,100 |                |   | 212,272 |  
|Less accumulated depreciation                                                                            |  |                          | 16,662  |                |   | 1,751   |  
|                                                                                                         |  |                          |         |                |   |         |  
|Net property, plant, and equipment                                                                       |  |                          | 217,438 |                |   | 210,521 |  
|                                                                                                         |  |                          |         |                |   |         |  
|Goodwill                                                                                                 |  |                          | 78,858  |                |   | 78,858  |  
|Other intangibles, net of accumulated amortization of $1,318 and $196, respectively                      |  |                          | 30,443  |                |   | 31,565  |  
|Other assets                                                                                             |  |                          | 7,702   |                |   | 8,553   |  
|                                                                                                         |  |                          |         |                |   |         |  
|                                                                                                         |  | $                        | 638,960 |                | $ | 629,821 |  
|                                                                                                         |  |                          |         |                |   |         |  
|Liabilities and Partners/Members Capital                                                               |  |                          |         |                |   |         |  
|Current liabilities:                                                                                     |  |                          |         |                |   |         |  
|Current installments of long-term debt                                                                   |  | $                        | 8,728   |                | $ | 6,608   |  
|Cattle purchases payable                                                                                 |  |                          | 49,674  |                |   | 48,416  |  
|Accounts payable  trade                                                                                 |  |                          | 33,589  |                |   | 36,925  |  
|Due to affiliates                                                                                        |  |                          | 356     |                |   | 383     |  
|Accrued compensation and benefits                                                                        |  |                          | 10,250  |                |   | 21,026  |  
|Accrued insurance                                                                                        |  |                          | 13,683  |                |   | 16,639  |  
|Other accrued expenses and liabilities                                                                   |  |                          | 18,425  |                |   | 15,309  |  
|Distributions payable                                                                                    |  |                          | 6,449   |                |   | 22,386  |  
|                                                                                                         |  |                          |         |                |   |         |  
|Total current liabilities                                                                                |  |                          | 141,154 |                |   | 167,692 |  
|                                                                                                         |  |                          |         |                |   |         |  
|Long-term debt, excluding current installments                                                           |  |                          | 328,517 |                |   | 305,480 |  
|Other liabilities                                                                                        |  |                          | 2,689   |                |   | 3,311   |  
|                                                                                                         |  |                          |         |                |   |         |  
|Total liabilities                                                                                        |  |                          | 472,360 |                |   | 476,483 |  
|                                                                                                         |  |                          |         |                |   |         |  
|Minority interest                                                                                        |  |                          | 529     |                |   | 419     |  
|Capital subject to redemption                                                                            |  |                          | 59,466  |                |   | 53,623  |  
|Partners/Members capital:                                                                              |  |                          |         |                |   |         |  
|Partners/Members capital                                                                               |  |                          | 106,593 |                |   | 99,297  |  
|Accumulated other comprehensive income (loss)                                                            |  |                          | 12      |                |   | (1      | )
|                                                                                                         |  |                          |         |                |   |         |  
|Total Partners/Members capital                                                                         |  |                          | 106,605 |                |   | 99,296  |  
|Commitments and contingencies                                                                            |  |                          |        |                |   |        |  
|                                                                                                         |  |                          |         |                |   |         |  
|                                                                                                         |  | $                        | 638,960 |                | $ | 629,821 |  
|                                                                                                         |  |                          |         |                |   |         |  



See accompanying notes to consolidated
financial statements.



1



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##### Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES



Consolidated Statement of Operations

(in thousands)



|                                                                         |  |                                                   |           |   |                                                              |   |         |                                                    |  |   |                                                              |   |  |   |           |  
|------------------------------------------------------------------------ |  | ------------------------------------------------- | --------- | - | ------------------------------------------------------------ | - | ------- | -------------------------------------------------- |  | - | ------------------------------------------------------------ | - |  | - | --------- | -
|                                                                         |  | Successor Entity                                  |           |   | Predecessor Entity                                           |   |         | Successor Entity                                   |  |   | Predecessor Entity                                           |  
|                                                                         |  | National BeefPacking Company, LLCand Subsidiaries |           |   | Farmland National Beef Packing Company, L.P. andSubsidiaries |   |         | National Beef Packing Company,LLC and Subsidiaries |  |   | Farmland National Beef Packing Company, L.P. andSubsidiaries |  
|                                                                         |  | 13 weeks ended May 29, 2004(unaudited)            |           |   | 14 weeks ended May 31, 2003(unaudited)                       |   |         | 39 weeks ended May 29, 2004(unaudited)             |  |   | 39 weeks ended May 31, 2003(unaudited)                       |  
|Net sales                                                                |  | $                                                 | 1,018,740 |   |                                                              | $ | 999,079 |                                                    |  | $ | 3,009,082                                                    |   |  | $ | 2,643,060 |  
|Costs and expenses:                                                      |  |                                                   |           |   |                                                              |   |         |                                                    |  |   |                                                              |   |  |   |           |  
|Cost of sales                                                            |  |                                                   | 987,084   |   |                                                              |   | 967,558 |                                                    |  |   | 2,918,517                                                    |   |  |   | 2,566,372 |  
|Selling, general, and administrative                                     |  |                                                   | 8,582     |   |                                                              |   | 7,871   |                                                    |  |   | 23,347                                                       |   |  |   | 18,836    |  
|Depreciation and amortization                                            |  |                                                   | 5,090     |   |                                                              |   | 5,469   |                                                    |  |   | 16,710                                                       |   |  |   | 14,423    |  
|                                                                         |  |                                                   |           |   |                                                              |   |         |                                                    |  |   |                                                              |   |  |   |           |  
|Total costs and expenses                                                 |  |                                                   | 1,000,756 |   |                                                              |   | 980,898 |                                                    |  |   | 2,958,574                                                    |   |  |   | 2,599,631 |  
|                                                                         |  |                                                   |           |   |                                                              |   |         |                                                    |  |   |                                                              |   |  |   |           |  
|Operating income                                                         |  |                                                   | 17,984    |   |                                                              |   | 18,181  |                                                    |  |   | 50,508                                                       |   |  |   | 43,429    |  
|Other income (expense):                                                  |  |                                                   |           |   |                                                              |   |         |                                                    |  |   |                                                              |   |  |   |           |  
|Interest income                                                          |  |                                                   | 119       |   |                                                              |   | 115     |                                                    |  |   | 438                                                          |   |  |   | 436       |  
|Interest expense                                                         |  |                                                   | (6,295    | ) |                                                              |   | (1,445  | )                                                  |  |   | (18,489                                                      | ) |  |   | (4,082    | )
|Minority owners interest in net (income) loss of Kansas City Steak, LLC |  |                                                   | (12       | ) |                                                              |   | 27      |                                                    |  |   | (210                                                         | ) |  |   | (74       | )
|Equity in loss of aLF Ventures, LLC                                      |  |                                                   | (149      | ) |                                                              |   | (252    | )                                                  |  |   | (655                                                         | ) |  |   | (978      | )
|Other, net                                                               |  |                                                   | 188       |   |                                                              |   | 158     |                                                    |  |   | 1,977                                                        |   |  |   | 2,778     |  
|                                                                         |  |                                                   |           |   |                                                              |   |         |                                                    |  |   |                                                              |   |  |   |           |  
|Income before taxes                                                      |  |                                                   | 11,835    |   |                                                              |   | 16,784  |                                                    |  |   | 33,569                                                       |   |  |   | 41,509    |  
|Income tax benefit (expense)                                             |  |                                                   | (641      | ) |                                                              |   | 2       |                                                    |  |   | (1,539                                                       | ) |  |   | (10       | )
|                                                                         |  |                                                   |           |   |                                                              |   |         |                                                    |  |   |                                                              |   |  |   |           |  
|Net income                                                               |  | $                                                 | 11,194    |   |                                                              | $ | 16,786  |                                                    |  | $ | 32,030                                                       |   |  | $ | 41,499    |  
|                                                                         |  |                                                   |           |   |                                                              |   |         |                                                    |  |   |                                                              |   |  |   |           |  



See accompanying notes to consolidated
financial statements.



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NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES



Consolidated Statement of Cash Flows

(in thousands)



|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|--------------------------------------------------------------------------------- |  | --------------------------------------------------- | ------- | - | ------------------------------------------------------------ | - | ------- | -
|                                                                                  |  | Successor Entity                                    |         |   | Predecessor Entity                                           |  
|                                                                                  |  | National Beef Packing Company, LLC and Subsidiaries |         |   | Farmland National Beef Packing Company, L.P.and Subsidiaries |  
|                                                                                  |  | 39 weeks ended May 29, 2004(unaudited)              |         |   | 39 weeks ended May 31, 2003 (unaudited)                      |  
|Cash flows from operating activities:                                             |  |                                                     |         |   |                                                              |   |         |  
|Net income                                                                        |  | $                                                   | 32,030  |   |                                                              | $ | 41,499  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                                     |         |   |                                                              |   |         |  
|Depreciation and amortization                                                     |  |                                                     | 16,710  |   |                                                              |   | 14,423  |  
|Loss on disposal of property, plant, and equipment                                |  |                                                     | 123     |   |                                                              |   | 7       |  
|Minority interest                                                                 |  |                                                     | 110     |   |                                                              |   | 34      |  
|Change in assets and liabilities:                                                 |  |                                                     |         |   |                                                              |   |         |  
|Accounts receivable                                                               |  |                                                     | (3,976  | ) |                                                              |   | (25,673 | )
|Due from affiliates                                                               |  |                                                     | (1,072  | ) |                                                              |   | 165     |  
|Other receivables                                                                 |  |                                                     | 952     |   |                                                              |   | (2,233  | )
|Inventories                                                                       |  |                                                     | (9,222  | ) |                                                              |   | (7,589  | )
|Deposits                                                                          |  |                                                     | 7       |   |                                                              |   | (927    | )
|Other assets                                                                      |  |                                                     | 2,414   |   |                                                              |   | (2,349  | )
|Accounts payable                                                                  |  |                                                     | (1,719  | ) |                                                              |   | 2,613   |  
|Due to affiliates                                                                 |  |                                                     | (27     | ) |                                                              |   | (2,452  | )
|Accrued compensation and benefits                                                 |  |                                                     | (10,776 | ) |                                                              |   | (4,446  | )
|Accrued insurance                                                                 |  |                                                     | (2,956  | ) |                                                              |   | 6,736   |  
|Accrued expenses and liabilities                                                  |  |                                                     | 2,494   |   |                                                              |   | 2,295   |  
|Cattle purchases payable                                                          |  |                                                     | 115     |   |                                                              |   | (558    | )
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Net cash provided by operating activities                                         |  | $                                                   | 25,207  |   |                                                              | $ | 21,545  |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Cash flows from investing activities:                                             |  |                                                     |         |   |                                                              |   |         |  
|Capital expenditures, including interest capitalized                              |  |                                                     | (23,835 | ) |                                                              |   | (28,233 | )
|Acquisition of business                                                           |  |                                                     |        |   |                                                              |   | (5,025  | )
|Proceeds from sale of property, plant, and equipment                              |  |                                                     | 1,207   |   |                                                              |   | 320     |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Net cash used in investing activities                                             |  | $                                                   | (22,628 | ) |                                                              | $ | (32,938 | )
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Cash flows from financing activities:                                             |  |                                                     |         |   |                                                              |   |         |  
|Net receipts under revolving credit lines and note payable                        |  |                                                     | 25,157  |   |                                                              |   | 18,289  |  
|Change in overdraft balances                                                      |  |                                                     | (474    | ) |                                                              |   | 7,637   |  
|Partnership distributions                                                         |  |                                                     |        |   |                                                              |   | (19,931 | )
|Member distributions                                                              |  |                                                     | (34,828 | ) |                                                              |   |        |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Net cash (used in)/provided by financing activities                               |  | $                                                   | (10,145 | ) |                                                              | $ | 5,995   |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Effect of exchange rate changes on cash                                           |  |                                                     | 13      |   |                                                              |   | 1       |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Net decrease in cash                                                              |  |                                                     | (7,553  | ) |                                                              |   | (5,397  | )
|Cash and cash equivalents at beginning of period                                  |  |                                                     | 31,304  |   |                                                              |   | 30,746  |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                                                   | 23,751  |   |                                                              | $ | 25,349  |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Cash paid during the period for interest                                          |  | $                                                   | 12,616  |   |                                                              | $ | 3,779   |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  
|Cash paid during the period for taxes                                             |  | $                                                   | 598     |   |                                                              | $ | 26      |  
|                                                                                  |  |                                                     |         |   |                                                              |   |         |  



See accompanying notes to consolidated
financial statements.



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##### Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1) Interim Financial Statements



Basis of Presentation



The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United
States of America (GAAP) for interim financial information; therefore, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. For further information, refer to the Consolidated Financial Statements and Notes to Consolidated Financial Statements for the fiscal year ended August 30, 2003 (Prospectus) on file
with the Securities and Exchange Commission (SEC) in the prospectus filed on April 2, 2004 pursuant to Rule 424(b)(3). The results of operations for the interim periods presented are not necessarily indicative of the results for a full
fiscal year. Certain prior year amounts have been reclassified in order to conform to the current year presentation.



As described in Note 3 to the Consolidated Financial Statements for the fiscal year ended August 30, 2003 set forth in the Prospectus, effective August 7,
2003, U.S. Premium Beef, Ltd. acquired a controlling interest in Farmland National Beef Packing Company, L.P. (FNBPC or Predecessor) and formed National Beef Packing Company, LLC (NBP or Successor) in
a transaction accounted for as a purchase (the Transaction). As a result of the Transaction, the consolidated financial information for the thirteen and thirty-nine weeks ended May 29, 2004 (Successor Period) is presented on a new basis
of accounting and is, therefore, not comparable to the consolidated financial information for the fourteen and thirty-nine week periods ended May 31, 2003 (Predecessor Period).



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



(2)
Inventories



Inventories at May 29, 2004 and August 30,
2003 consisted of the following (in thousands):



|                       |  |             |        |                |   |       
|---------------------- |  | ----------- | ------ | -------------- | - | ------
|                       |  | May 29,2004 |        | August 30,2003
|Dressed and boxed beef |  | $           | 68,310 |                | $ | 60,781
|Beef by-products       |  |             | 9,061  |                |   | 8,738 
|Supplies               |  |             | 9,438  |                |   | 8,068 
|                       |  |             |        |                |   |       
|Total inventory        |  | $           | 86,809 |                | $ | 77,587
|                       |  |             |        |                |   |       



(3) Acquisition of National
Carriers, Inc.



On March 28, 2003, FNBPC acquired National
Carriers, Inc. (National Carriers), a refrigerated and livestock contract carrier service with terminals in Liberal, Kansas; Dallas, Texas; and Denison, Iowa, for approximately $13.4 million, including the assumption of approximately
$8.4 million of indebtedness. The purchase price has been allocated to the assets acquired and liabilities assumed and the operating results of National Carriers are reflected in NBPs consolidated financial statements subsequent to the date of
acquisition. The pro forma effect of this acquisition was not material to the consolidated financial statements of NBP for the thirty-nine weeks ended May 31, 2003.



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##### Table of Contents

(4) Comprehensive Income



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



|                                         |  |                                                  |        |                                                           |   |        |                                                  |  |                                                           |        |  |   |       
|---------------------------------------- |  | ------------------------------------------------ | ------ | --------------------------------------------------------- | - | ------ | ------------------------------------------------ |  | --------------------------------------------------------- | ------ |  | - | ------
|                                         |  | Successor Entity                                 |        | Predecessor Entity                                        |   |        | Successor Entity                                 |  | Predecessor Entity                                       
|                                         |  | National BeefPackingCompany, LLCand Subsidiaries |        | Farmland NationalBeef PackingCompany,L.P. andSubsidiaries |   |        | National BeefPackingCompany, LLCand Subsidiaries |  | FarmlandNational BeefPackingCompany, L.P.and Subsidiaries
|                                         |  | 13 weeks endedMay 29, 2004                       |        | 14 weeks endedMay 31, 2003                                |   |        | 39 weeks endedMay 29, 2004                       |  | 39 weeks endedMay 31, 2003                               
|Net income                               |  | $                                                | 11,194 |                                                           | $ | 16,786 |                                                  |  | $                                                         | 32,030 |  | $ | 41,499
|Other comprehensive income (loss):       |  |                                                  |        |                                                           |   |        |                                                  |  |                                                           |        |  |   |       
|Foreign currency translation adjustments |  |                                                  | 4      |                                                           |   | (1     | )                                                |  |                                                           | 13     |  |   | 1     
|                                         |  |                                                  |        |                                                           |   |        |                                                  |  |                                                           |        |  |   |       
|Comprehensive income                     |  | $                                                | 11,198 |                                                           | $ | 16,785 |                                                  |  | $                                                         | 32,043 |  | $ | 41,500
|                                         |  |                                                  |        |                                                           |   |        |                                                  |  |                                                           |        |  |   |       



(5) Contingencies



On July 1, 2002, a lawsuit was filed against the Predecessor, ConAgra
Beef Company, Tyson Foods, Inc. and Excel Corporation in the United States District Court for the District of South Dakota seeking certification of a class of all persons who sold cattle to the defendants for cash, or on a basis affected by the cash
price for cattle, during the period from April 2, 2001 through May 11, 2001 and for some period up to two weeks thereafter. The case was filed by three named plaintiffs on behalf of a putative nationwide class that plaintiffs estimate is comprised
of hundreds or thousands of members. The complaint alleges that the defendants, in violation of the Packers and Stockyards Act of 1921, knowingly used, without correction or disclosure, incorrect and misleading boxed beef price information generated
by the USDA to purchase cattle offered for sale by the plaintiffs at a price substantially lower than was justified by the actual and correct price of boxed beef during this period. The plaintiffs seek damages in excess of $50.0 million from all
defendants as a group on behalf of the class. FNBPC answered the complaint and joined with the three other defendants in moving to dismiss this action. An amended complaint was filed and FNBPC joined in the other defendants motion to dismiss.
The joint motion to dismiss was denied, and the judge ruled that the plaintiffs adequately alleged a violation of the Packers and Stockyards Act of 1921. The case was certified as a class-action matter in June, 2004. Accordingly, the lawsuit will
proceed to trial. Management believes that FNBPC acted properly and lawfully in dealings with cattle producers. Management is currently unable to evaluate the outcome of this matter or to estimate the amount of potential loss, if any. In accordance
with SFAS No. 5, Accounting for Contingencies, NBP has not established a loss accrual associated with this claim.



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



(6) Capital Subject to Redemption



At any time after certain dates, the earliest being August 6, 2008, the latest being August 6, 2011, certain members of management and/or NBPCo Holdings
have the right to request that NBP repurchase their interests, the value of which is to be determined pursuant to a mutually agreed appraisal process. If NBP is unable to effect the repurchase within a specified time, the requesting member(s) have
the right to cause the Company to retain a financial advisor to sell the Company at such price and on such terms and conditions as may be approved by the requesting members. NBP accounts for changes in the redemption value of these interests by
accreting the change over the period from the date of issuance to the earliest redemption date of the interest using the interest method. At May 29, 2004, the Capital subject to redemption was revalued by an independent appraisal
process, and the value was determined to be $54.8



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##### Table of Contents

million. Under the interest method, the carrying value of the Capital subject to redemption has been reduced
by approximately $0.2 million to $59.5 million, as reflected in the accompanying Consolidated Balance Sheet as of May 29, 2004.



(7) Segments



The Company reports in two business segments: Core Beef and Other. The Company measures segment profit as operating income.



Core Beefthe majority of NBPs revenues are generated from
the sale of fresh meat, which include chuck cuts, rib cuts, loin cuts, round cuts, thin meats, ground beef, and other products. In addition, we also sell beef by-products to the variety meat, feed processing, fertilizer and pet food industries.



Otherthe Other segment of NPB consists of the
operations of National Carriers, Inc., a refrigerated and livestock contract carrier company and Kansas City Steak Company, LLC, a portion control steak cutting operation.



The following table represents segment results for the periods indicated (in thousands):



|                                |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  
|------------------------------- |  | -------------------------------------------------- | --------- | - | ----------------------------------------------------------- | - | --------- | ------------------------------------------------- |  | - | ------------------------------------------------------------ | - |  | - | --------- | -
|                                |  | Successor Entity                                   |           |   | Predecessor Entity                                          |   |           | Successor Entity                                  |  |   | Predecessor Entity                                           |  
|                                |  | National Beef Packing Company, LLC andSubsidiaries |           |   | Farmland National Beef PackingCompany, L.P. andSubsidiaries |   |           | National Beef Packing Company,LLC andSubsidiaries |  |   | Farmland National Beef Packing Company, L.P. andSubsidiaries |  
|                                |  | 13 weeks ended May 29, 2004                        |           |   | 14 weeks ended May 31, 2003                                 |   |           | 39 weeks ended May 29, 2004                       |  |   | 39 weeks ended May 31, 2003                                  |  
|Net sales                       |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  
|Core Beef                       |  | $                                                  | 1,032,582 |   |                                                             | $ | 1,000,452 |                                                   |  | $ | 3,062,580                                                    |   |  | $ | 2,642,546 |  
|Other                           |  |                                                    | 41,558    |   |                                                             |   | 29,065    |                                                   |  |   | 123,433                                                      |   |  |   | 44,552    |  
|Eliminations                    |  |                                                    | (55,400   | ) |                                                             |   | (30,438   | )                                                 |  |   | (176,931                                                     | ) |  |   | (44,038   | )
|                                |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  
|Total                           |  | $                                                  | 1,018,740 |   |                                                             | $ | 999,079   |                                                   |  | $ | 3,009,082                                                    |   |  | $ | 2,643,060 |  
|                                |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  
|Operating income                |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  
|Core Beef                       |  |                                                    | 16,251    |   |                                                             |   | 18,096    |                                                   |  |   | 45,409                                                       |   |  |   | 42,715    |  
|Other                           |  |                                                    | 1,733     |   |                                                             |   | 85        |                                                   |  |   | 5,099                                                        |   |  |   | 714       |  
|                                |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  
|Total                           |  |                                                    | 17,984    |   |                                                             |   | 18,181    |                                                   |  |   | 50,508                                                       |   |  |   | 43,429    |  
|                                |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  
|Interest income                 |  |                                                    | 119       |   |                                                             |   | 115       |                                                   |  |   | 438                                                          |   |  |   | 436       |  
|Interest expense                |  |                                                    | (6,295    | ) |                                                             |   | (1,445    | )                                                 |  |   | (18,489                                                      | ) |  |   | (4,082    | )
|Other income (expense)          |  |                                                    | 39        |   |                                                             |   | (94       | )                                                 |  |   | 1,322                                                        |   |  |   | 1,800     |  
|                                |  |                                                    |           |  
|Minority interest income (loss) |  |                                                    | (12       | ) |                                                             |   | 27        |                                                   |  |   | (210                                                         | ) |  |   | (74       | )
|                                |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  
|Total income before taxes       |  | $                                                  | 11,835    |   |                                                             | $ | 16,784    |                                                   |  | $ | 33,569                                                       |   |  | $ | 41,509    |  
|                                |  |                                                    |           |   |                                                             |   |           |                                                   |  |   |                                                              |   |  |   |           |  



|             |  |              |         |   |              |   |         |  
|------------ |  | ------------ | ------- | - | ------------ | - | ------- | -
|             |  | May 29, 2004 |         |   | May 31, 2003 |  
|Assets       |  |              |         |   |              |   |         |  
|Core Beef    |  | $            | 613,810 |   |              | $ | 433,215 |  
|Other        |  |              | 27,086  |   |              |   | 21,056  |  
|Eliminations |  |              | (1,936  | ) |              |   | (4,329  | )
|             |  |              |         |   |              |   |         |  
|Total        |  | $            | 638,960 |   |              | $ | 449,942 |  
|             |  |              |         |   |              |   |         |  



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(8) United States BSE Outbreak



On December 23, 2003, it was announced by the United States Department of Agriculture (USDA) that a single Holstein dairy
cow was discovered in the state of Washington to have tested positive for Bovine Spongiform Encephalopathy, or BSE. The origin of the animal was subsequently traced to a farm in Canada. Shortly after the announcement, several countries representing
a substantial share of NBPs export business closed their borders to the importation of edible beef products from the United States. Responding to the loss of export markets, live cattle prices in the United States declined by approximately 18%
within 3 days. In the fiscal year ended August 30, 2003, NBPs total export sales were approximately 17.2% of total sales, including sales of non-food beef products such as hides.



During the second quarter we recorded charges to earnings totaling approximately $18.8 million due to the market impacts of
the closure of international borders as a result of the BSE discovery in late December. These charges, recorded in sales and cost of sales in our Consolidated Statement of Operations, reflect: (1) volatility in the U.S. markets for finished goods
and live cattle, with an impact noted in immediate margin erosion resulting from a rapid fall in cutout or sales values; (2) some product already destined for foreign markets re-routed for resale in the U.S., generally at prices lower than their
original export value; and (3) lower value for certain inventory items which had been in the production pipeline and had not yet left the U.S. as they have no comparable domestic market. Certain by-products have been classified as Specified Risk
Materials (SRMs), and have been banned from use in feedstocks and the human food chain. Some of these products previously enjoyed a market in foreign countries. The impacts of BSE were positively offset, in part, by strong domestic
demand for beef products.



In addition, the USDA and the Food
Safety Inspection Service (FSIS) published new regulations in response to the discovery of BSE in the state of Washington. These new regulations, among other things, govern the removal of SRMs during slaughter, cover the ban on the slaughtering of
non-ambulatory animals for human food use, set forth the prohibition on the production of mechanically separated meat and ban certain techniques used in the slaughter process. The USDA also issued a notice announcing that FSIS inspectors will not
mark ambulatory cattle that have been targeted for BSE surveillance testing as inspected and passed until negative test results are obtained. We do not anticipate that these new regulations, individually or in the aggregate, will have a
material adverse effect on our business.



While exports of some
beef products have commenced once again to Mexico, we cannot anticipate the duration of other continuing beef import bans or whether additional countries may impose similar restrictions. Thus far, the effect of resumed export of beef products to
Mexico has been marginal on the United States beef industry. Fed cattle slaughter levels in the United States for the thirteen weeks ended May 29, 2004 fell approximately 5.6% below year-ago levels, reflecting constrained cattle supplies and reduced
demand for export products.



The United States Department of
Agriculture (USDA) has published a proposed rule revising its policy to keep the U.S. border closed to live animals for processing in the U.S. The comment period for this proposed rule closed on April 7, 2004 and publication of a final rule was
anticipated within a reasonable time following closure of the comment period. In the interim, Ranchers Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF - a northern states cattle producers organization) was
successful in obtaining an injunction against the USDA allowing importation of certain beef products produced in Canada pursuant to this rule, because USDA did not follow the Administrative Procedures Act prior to issuing its order
allowing such action. The injunction has slowed progress toward publication of any final rule, which now is not expected until late July or August at the earliest.



A United States/Japanese Commission was formed to look at the optimal science based approach to resolving the
issues between the U.S. and Japan. The commission is expected to hold its last meeting in mid-to-late July. Following this meeting, it is anticipated that trade representatives from the United States and Japan will continue their discussions on
reopening of the Japanese market to imported beef products from the United States. However, we are not able to predict when or if those discussions will achieve that result.



7



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##### Table of Contents

We cannot presently assess the full economic impact of the consequences of BSE on the U.S. beef industry
or on our operations. Our revenues and net income may be materially adversely affected in the event existing import restrictions continue indefinitely, additional countries announce similar restrictions, additional regulatory restrictions are put
into effect or domestic consumer demand for beef declines substantially.



8



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##### Table of Contents

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



Disclosure Regarding Forward-Looking Statements



This report contains forward-looking statements, which are subject to a number of risks and uncertainties, many of which are beyond our
control. Forward-looking statements are typically identified by the words believe, expect, anticipate, intend, estimate and similar expressions. Actual results could differ materially from
those contemplated by these forward-looking statements as a result of many factors, including economic conditions generally and in our principal markets, the availability and prices of live cattle and commodities, food safety, livestock disease,
competitive practices and consolidation in the cattle production and processing industries, actions of domestic or foreign governments, hedging risk, changes in interest rates and foreign currency exchange rates, consumer demand and preferences, the
cost of compliance with environmental and health laws, loss of key customers, loss of key employees, labor relations and consolidation among our customers. In light of these risks and uncertainties, there can be no assurance that the results and
events contemplated by the forward-looking information contained in this report will in fact transpire. Readers are cautioned not to place undue reliance on these forward-looking statements. We do not undertake any obligation to update or revise any
forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Please review the Risk Factors in our
prospectus filed with the SEC on April 2, 2004 pursuant to Rule 424(b)(3) (Prospectus) for other important factors that could cause actual results to differ materially from those in any such forward-looking statements.



Outlook



Continued short supplies of live cattle available for slaughter as well as the lack of key export markets for sale of beef
products have pressured industry margins for the latter part of our third quarter and the early part of our fourth quarter, compared to the same period in the prior year. These conditions lead us to believe that the results of the thirteen weeks
ending August 28, 2004 may not compare favorably with the results of the thirteen weeks ended August 30, 2003.



Recent Developments



On
December 23, 2003, it was announced by the United States Department of Agriculture (USDA) that a single Holstein dairy cow was discovered in the state of Washington to have tested positive for Bovine Spongiform Encephalopathy, or BSE. The origin of
the animal was subsequently traced to a farm in Canada. Shortly after the announcement, several countries representing a substantial share of NBPs export business closed their borders to the importation of edible beef products from the United
States. Responding to the loss of export markets, live cattle prices in the United States declined by approximately 18% within 3 days. In the fiscal year ended August 30, 2003, NBPs total export sales were approximately 17.2% of total sales,
including sales of non-food beef products such as hides.



During the second quarter we recorded charges to earnings totaling approximately $18.8 million due to the market impacts of the closure of international borders as a result of the BSE discovery in late December. These charges, recorded in
sales and cost of sales in our Consolidated Statement of Operations, reflect: (1) volatility in the U.S. markets for finished goods and live cattle, with an impact noted in immediate margin erosion resulting from a rapid fall in cutout or sales
values; (2) some product already destined for foreign markets re-routed for resale in the U.S., generally at prices lower than their original export value; and (3) lower value for certain inventory items which had been in the production pipeline and
had not yet left the U.S. as they have no comparable domestic market. Certain by-products have been classified as Specified Risk Materials (SRMs), and have been banned from use in feedstocks and the human food chain. Some of these
products previously enjoyed a market in foreign countries. The impacts of BSE were positively offset, in part, by strong domestic demand for beef products.



In addition, the USDA and the Food Safety Inspection Service (FSIS) published new regulations in response to the discovery of BSE in the state of
Washington. These new regulations, among other things, govern the removal of SRMs during slaughter, cover the ban on the slaughtering of non-ambulatory



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##### Table of Contents

animals for human food use, set forth the prohibition on the production of mechanically separated meat and ban certain
techniques used in the slaughter process. The USDA also issued a notice announcing that FSIS inspectors will not mark ambulatory cattle that have been targeted for BSE surveillance testing as inspected and passed until negative test
results are obtained. We do not anticipate that these new regulations, individually or in the aggregate, will have a material adverse effect on our business.



While exports of some beef products have commenced once again to Mexico, we cannot anticipate the duration of other continuing beef import bans or whether
additional countries may impose similar restrictions. Thus far, the effect of resumed export of beef products to Mexico has been marginal on the United States beef industry. Fed cattle slaughter levels in the United States for the thirteen weeks
ended May 29, 2004 fell approximately 5.6% below year-ago levels, reflecting constrained cattle supplies and reduced demand for export products.



The United States Department of Agriculture (USDA) has published a proposed rule revising its policy to keep the U.S. border closed to live animals for
processing in the U.S. The comment period for this proposed rule closed on April 7, 2004 and publication of a final rule was anticipated within a reasonable time following closure of the comment period. In the interim, Ranchers Cattlemen Action
Legal Fund United Stockgrowers of America (R-CALF - a northern states cattle producers organization) was successful in obtaining an injunction against the USDA allowing importation of certain beef products produced in Canada
pursuant to this rule, because USDA did not follow the Administrative Procedures Act prior to issuing its order allowing such action. The injunction has slowed progress toward publication of any final rule, which now is not expected
until late July or August at the earliest.



A United
States/Japanese Commission was formed to look at the optimal science based approach to resolving the issues between the U.S. and Japan. The commission is expected to hold its last meeting in mid-to-late July. Following this meeting, it
is anticipated that trade representatives from the United States and Japan will continue their discussions on reopening of the Japanese market to imported beef products from the United States. However, we are not able to predict when or if those
discussions will achieve that result.



We cannot presently
assess the full economic impact of the consequences of BSE on the U.S. beef industry or on our operations. Our revenues and net income may be materially adversely affected in the event existing import restrictions continue indefinitely, additional
countries announce similar restrictions, additional regulatory restrictions are put into effect or domestic consumer demand for beef declines substantially.



On December 21, 2003, a new four year collective bargaining agreement was ratified with the United Food and Commercial Workers and approximately 2,800
employees at the Liberal, Kansas facility.



As described in
Note 3 to the Consolidated Financial Statements for the fiscal year ended August 30, 2003 set forth in the Prospectus, effective August 7, 2003, U.S. Premium Beef, Ltd. acquired a controlling interest in Farmland National Beef Packing Company, L.P.
(FNBPC or Predecessor) and formed National Beef Packing Company, LLC (NBP or Successor) in a transaction accounted for as a purchase (the Transaction).



On March 28, 2003, FNBPC acquired National Carriers, Inc. (National
Carriers), a refrigerated and livestock contract carrier service with terminals in Liberal, Kansas; Dallas, Texas; and Denison, Iowa, for approximately $13.4 million, including the assumption of approximately $8.4 million of indebtedness. The
purchase price has been allocated to the assets acquired and liabilities assumed and the operating results of National Carriers are reflected in NBPs consolidated financial statements subsequent to the date of acquisition.



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Results of Operations



Thirteen weeks ended May 29, 2004 compared to fourteen weeks ended May 31, 2003



General. Net income for the thirteen weeks ended May 29, 2004 was $11.2 million compared to $16.8 million for the
fourteen weeks ended May 31, 2003, a decrease of $5.6 million or 33.3%. The thirteen weeks in 2004 contained higher sales compared to the prior year period due to an approximate 8.3% increase in boxed beef and beef product prices, and the inclusion
of sales from National Carriers for the full quarter in 2004 compared to partial quarter inclusion in 2003. Tighter cattle supplies and the loss of key export markets due to BSE pressured beef margins, which were somewhat offset by the reduced
number of cattle processed due to one less week in the current period.



Total costs and expenses as a percent of sales remained relatively stable at 98.2% for both the thirteen weeks ended May 29, 2004 and the fourteen weeks ended May 31, 2003, while operating income decreased $0.2 million. Interest expense
increased by $4.9 million primarily as a result of the Transaction for the thirteen weeks ended May 29, 2004, as compared to the fourteen weeks ended May 31, 2003. Depreciation and amortization expense decreased $0.4 million due to one less week in
the thirteen week period ending May 29, 2004, partially offset by increases resulting from the Transaction.



Net Sales. Net sales were $1,018.7 million for the thirteen weeks ended May 29, 2004 compared to $999.1 million for the fourteen weeks ended May
31, 2003, an increase of $19.6 million or 2.0%. The increase resulted primarily from an approximate 8.3% increase in boxed beef and beef product prices despite the loss of key export markets, and the full period inclusion of sales from National
Carriers, somewhat offset by an approximate 4.7% reduction in the number of cattle processed due to one less week in the current quarter.



Cost of Sales. Cost of sales was $987.1 million for the thirteen weeks ended May 29, 2004 compared to $967.6 million for the fourteen weeks ended
May 31, 2003, an increase of $19.5 million or 2.0%. The increase resulted primarily from an approximate 9.5% increase in average cattle prices over the previous year due to fewer live cattle available for slaughter, offset by one less week in the
current period.



Selling, General and Administrative
Expenses. Selling, general and administrative expenses were $8.6 million for the thirteen weeks ended May 29, 2004 compared to $7.9 million for the fourteen weeks ended May 31, 2003, an increase of $0.7 million or 8.9%. The current year reflects
an increase in professional and contract services of $0.9 million and an additional $0.5 million of selling, general and administrative expenses associated with the full period inclusion of National Carriers, partly offset by approximately $0.6
million due to one less week in the current period.



Depreciation and Amortization Expense. Depreciation and amortization expenses were $5.1 million for the thirteen weeks ended May 29, 2004 compared to $5.5 million for the fourteen weeks ended May 31, 2003, a decrease of $0.4 million
or 7.3%. The decrease is attributable to one less week of depreciation in the thirteen week period ending May 29, 2004, offset by $0.4 million of incremental amortization resulting from the Transaction.



Operating Income. Operating income was $18.0 million for the thirteen
weeks ended May 29, 2004 compared to $18.2 million for the fourteen weeks ended May 31, 2003, a decrease of $0.2 million or 1.1%. The thirteen weeks ended May 29, 2004 as a whole showed slightly improved gross margins over the prior year period,
offset by higher selling, general and administrative expenses. This improvement was due to the full period inclusion of National Carriers, Inc. counterbalanced by a decline in the operating income of our beef plants due to difficult market
conditions in the beef industry. Operating income, as a percentage of net sales, was 1.8% for both the thirteen weeks ended May 29, 2004 and the fourteen weeks ended May 31, 2003.



Interest Expense. Interest expense was $6.3 million for the thirteen weeks ended May 29, 2004 compared to $1.4
million for the fourteen weeks ended May 31, 2003, an increase of $4.9 million. The increase was due primarily to the higher level of borrowings in the thirteen weeks ended May 29, 2004 as a result of the Transaction, somewhat offset by one less
week recorded in the current period.



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##### Table of Contents

Income Tax Expense. Income tax expense of $0.6 million for the thirteen weeks ended May 29, 2004
compared to an income tax benefit that was negligible for the fourteen weeks ended May 31, 2003, an increase of $0.6 million. The increase was primarily due to the acquisition of National Carriers and the associated income tax expense on income from
that entity, which is organized as a C Corporation.



Thirty-nine weeks
ended May 29, 2004 compared to thirty-nine weeks ended May 31, 2003



General. Net income for the thirty-nine weeks ended May 29, 2004 was $32.0 million compared to $41.5 million for the thirty-nine weeks ended May 31, 2003, a decrease of $9.5 million or 22.9%. The single largest
factor in the decrease was the $14.4 million increase in interest expense. Sales and cost of sales were higher, principally due to the higher live cattle prices and higher selling prices of beef products resulting from strong domestic beef demand.
Operating income increased $7.1 million or 16.4% over the prior year period, partially due to the full period inclusion of National Carriers. For the period as a whole, in spite of somewhat tighter cattle supplies and the corresponding higher live
cattle prices, market demand for beef products continued to be strong enough to offset virtually all of these increases, even with the loss of key export markets for most of the period.



Net sales. Net sales for the thirty-nine weeks ended May 29, 2004 were $3,009.1 million compared to $2,643.1 million
for the thirty-nine weeks ended May 31, 2003, an increase of $366.0 million or 13.8%. The majority of this increase was due to an approximate 17.7% increase in selling prices for beef products, partially offset by lower weights on live cattle which
translates to fewer pounds of beef products sold in the period, and the full period inclusion of sales from National Carriers.



Cost of sales. Cost of sales for the thirty-nine weeks ended May 29, 2004 were $2,918.5 million compared to $2,566.4 million for the thirty-nine
weeks ended May 31, 2003, an increase of $352.1 million or 13.7%. The majority of the increase in cost of sales came as a result of a 19.7% increase in the average price of cattle, partially offset by an approximate 3.5% decrease in average live
cattle weights. A portion of the increase was also attributed to the full period additional costs related to National Carriers.



Selling, General and Administrative Expenses. Selling, general and administrative expenses for the thirty-nine weeks ended May 29, 2004 were $23.3
million compared to $18.8 million for the thirty-nine weeks ended May 31, 2003, an increase of $4.5 million or 23.9%. Approximately $3.1 million of the increase is attributable to the selling, general and administrative expenses of National Carriers
included in the thirty-nine weeks ended May 29, 2004. Additionally, for the current year, professional and contract services increased $0.9 million and payroll and related expenses increased approximately $0.5 million compared to the thirty-nine
weeks ended May 31, 2003.



Depreciation and Amortization
Expense. Depreciation and amortization expenses for the thirty-nine weeks ended May 29, 2004 were $16.7 million compared to $14.4 million for the thirty-nine weeks ended May 31, 2003, an increase of $2.3 million or 16.0%. The majority of the
increase is attributable to the additional depreciation and amortization incurred as a result of the Transaction.



Operating Income. Operating income for the thirty-nine weeks ended May 29, 2004 was $50.5 million compared to $43.4 million for the thirty-nine
weeks ended May 31, 2003, an increase of $7.1 million or 16.4%. The increase was due to improved sales values resulting from favorable market conditions and domestic demand for beef products and the full period inclusion of National Carriers for the
thirty-nine weeks ended May 29, 2004. Operating income, as a percentage of net sales, was 1.7% for the thirty-nine weeks ended May 29, 2004 and 1.6% for the thirty-nine weeks ended May 31, 2003.



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##### Table of Contents

Interest Expense. Interest expense for the thirty-nine weeks ended May 29, 2004 was $18.5 million
compared to $4.1 million for the thirty-nine weeks ended May 31, 2003, an increase of $14.4 million. This increase is due primarily to the increased borrowings and higher average interest rates attributable to the Transaction.



Other, net. Other, net was $2.0 million for the thirty-nine weeks
ended May 29, 2004 compared to $2.8 million for the thirty-nine weeks ended May 31, 2003, a decrease of $0.8 million or 28.6%. In 2004, we received $1.2 million through the demutualization of a company which held annuities for NBP employees. In
2003, we received approximately $2.2 million as a result of settlement of a vitamin supplement anti-trust litigation.



Income Tax Expense. Income tax expense was $1.5 million for the thirty-nine weeks ended May 29, 2004 compared to a negligible amount for the
thirty-nine weeks ended May 31, 2003, an increase of $1.5 million. The increase was primarily due to the acquisition of National Carriers and the associated income tax expense on income from that entity, which is organized as a C Corporation.



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##### Table of Contents

Segment Results



The Company reports in two business segments: Core Beef and Other. The Company measures segment profit as operating income.



Core Beefthe majority of NBPs revenues are generated from
the sale of fresh meat, which include chuck cuts, rib cuts, loin cuts, round cuts, thin meats, ground beef, and other products. In addition, we also sell beef by-products to the variety meat, feed processing, fertilizer and pet food industries.



Otherthe Other segment of NPB consists of the
operations of National Carriers, Inc., a refrigerated and livestock contract carrier company and Kansas City Steak Company, LLC, a portion control steak cutting operation.



The following table represents segment results for the periods indicated (in thousands):



|                                |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  
|------------------------------- |  | -------------------------------------------------- | --------- | - | ----------------------------------------------------------- | - | --------- | -------------------------------------------------- |  | - | ------------------------------------------------------------ | - |  | - | --------- | -
|                                |  | Successor Entity                                   |           |   | Predecessor Entity                                          |   |           | Successor Entity                                   |  |   | Predecessor Entity                                           |  
|                                |  | National Beef Packing Company, LLCand Subsidiaries |           |   | Farmland National Beef PackingCompany, L.P. andSubsidiaries |   |           | National Beef Packing Company,LLC and Subsidiaries |  |   | Farmland National Beef Packing Company, L.P. andSubsidiaries |  
|                                |  | 13 weeks ended May 29, 2004                        |           |   | 14 weeks ended May 31, 2003                                 |   |           | 39 weeks endedMay 29, 2004                         |  |   | 39 weeks ended May 31, 2003                                  |  
|Net sales                       |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  
|Core Beef                       |  | $                                                  | 1,032,582 |   |                                                             | $ | 1,000,452 |                                                    |  | $ | 3,062,580                                                    |   |  | $ | 2,642,546 |  
|Other                           |  |                                                    | 41,558    |   |                                                             |   | 29,065    |                                                    |  |   | 123,433                                                      |   |  |   | 44,552    |  
|Eliminations                    |  |                                                    | (55,400   | ) |                                                             |   | (30,438   | )                                                  |  |   | (176,931                                                     | ) |  |   | (44,038   | )
|                                |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  
|Total                           |  | $                                                  | 1,018,740 |   |                                                             | $ | 999,079   |                                                    |  | $ | 3,009,082                                                    |   |  | $ | 2,643,060 |  
|                                |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  
|Operating income                |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  
|Core Beef                       |  |                                                    | 16,251    |   |                                                             |   | 18,096    |                                                    |  |   | 45,409                                                       |   |  |   | 42,715    |  
|Other                           |  |                                                    | 1,733     |   |                                                             |   | 85        |                                                    |  |   | 5,099                                                        |   |  |   | 714       |  
|                                |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  
|Total                           |  |                                                    | 17,984    |   |                                                             |   | 18,181    |                                                    |  |   | 50,508                                                       |   |  |   | 43,429    |  
|                                |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  
|Interest income                 |  |                                                    | 119       |   |                                                             |   | 115       |                                                    |  |   | 438                                                          |   |  |   | 436       |  
|Interest expense                |  |                                                    | (6,295    | ) |                                                             |   | (1,445    | )                                                  |  |   | (18,489                                                      | ) |  |   | (4,082    | )
|Other income (expense)          |  |                                                    | 39        |   |                                                             |   | (94       | )                                                  |  |   | 1,322                                                        |   |  |   | 1,800     |  
|                                |  |                                                    |           |  
|Minority interest income (loss) |  |                                                    | (12       | ) |                                                             |   | 27        |                                                    |  |   | (210                                                         | ) |  |   | (74       | )
|                                |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  
|Total income before taxes       |  | $                                                  | 11,835    |   |                                                             | $ | 16,784    |                                                    |  | $ | 33,569                                                       |   |  | $ | 41,509    |  
|                                |  |                                                    |           |   |                                                             |   |           |                                                    |  |   |                                                              |   |  |   |           |  



|             |  |              |         |   |              |   |         |  
|------------ |  | ------------ | ------- | - | ------------ | - | ------- | -
|             |  | May 29, 2004 |         |   | May 31, 2003 |  
|Assets       |  |              |         |   |              |   |         |  
|Core Beef    |  | $            | 613,810 |   |              | $ | 433,215 |  
|Other        |  |              | 27,086  |   |              |   | 21,056  |  
|Eliminations |  |              | (1,936  | ) |              |   | (4,329  | )
|             |  |              |         |   |              |   |         |  
|Total        |  | $            | 638,960 |   |              | $ | 449,942 |  
|             |  |              |         |   |              |   |         |  



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##### Table of Contents

Thirteen weeks ended May 29, 2004 compared to fourteen weeks ended May 31, 2003



Core Beef



Net Sales. Net sales for Core Beef were $1032.6 million for the thirteen weeks ended May 29, 2004 compared to
$1,000.5 million for the fourteen weeks ended May 31, 2003, an increase of $32.1 million or 3.2%. The increase resulted primarily from an approximate 8.3% increase in the average net selling price of beef products despite the loss of key export
markets due to BSE, somewhat offset by an approximate 4.7% reduction in the number of cattle processed due to one less week in the current period.



Operating income. Operating income for Core Beef was $16.3 million for the thirteen weeks ended May 29, 2004 compared to $18.1 million for the
fourteen weeks ended May 31, 2003, a decrease of $1.8 million or 9.9%. The decrease resulted primarily from pressured margins in the beef industry over the previous year and one less week of processing in the thirteen weeks ended May 31, 2003.



Other



Net Sales. Net sales for Other were $41.6 million for the thirteen
weeks ended May 29, 2004 compared to $29.1 million for the fourteen weeks ended May 31, 2003, an increase of $12.5 million or 43.0%. The increase was primarily a result of the acquisition of National Carriers in March 2003.



Operating income. Operating income for Other was $1.7 million for the
thirteen weeks ended May 29, 2004 compared to $0.1 million for the fourteen weeks ended May 31, 2003, an increase of $1.6 million. The increase was due primarily to the acquisition of National Carriers in March 2003, which contributed an additional
$1.5 million in operating income as compared to the same period a year ago.



Thirty-nine weeks ended May 29, 2004 compared to thirty-nine weeks ended May 31, 2003



Core Beef



Net Sales. Net sales for Core Beef were $3,062.6 million for the thirty-nine weeks ended May 29, 2004 compared to $2,642.5 million for the thirty-nine weeks ended May 31, 2003, an increase of $420.1 million or 15.9%. The increase
resulted primarily from an approximate 17.7% increase in the average net selling price of beef products, offset by a 1.6% reduction in the number of cattle processed and despite the loss of key export markets due to BSE.



Operating income. Operating income for Core Beef was $45.4 million for
the thirty-nine weeks ended May 29, 2004 compared to $42.7 million for the thirty-nine weeks ended May 31, 2003, an increase of $2.7 million or 6.3%. The increase was due primarily to improved demand for beef products partially offset by increased
raw material costs. Operating income in the current year was further reduced by higher selling, general and administrative expense and depreciation and amortization expense.



Other



Net Sales. Net sales for Other were $123.4 million for the thirty-nine weeks ended May 29, 2004 compared to $44.6 million for the thirty-nine weeks
ended May 31, 2003, an increase of $78.8 million. The increase was primarily a result of the acquisition of National Carriers in March 2003.



Operating income. Operating income for Other was $5.1 million for the thirty-nine weeks ended May 29, 2004 compared to $0.7 million for the
thirty-nine weeks ended May 31, 2003, an increase of $4.4 million. The acquisition of National Carriers in March 2003 contributed an additional $3.9 million of operating income in the current year.



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##### Table of Contents

Liquidity and Capital Resources



As of May 29, 2004, we had net working capital of $163.4 million, which included $6.4 million in distributions payable, and
cash and cash equivalents of $23.8 million. At August 30, 2003, we had net working capital of $132.6 million, which included $22.4 million in distributions payable, and cash and cash equivalents of $31.3 million. Our primary sources of liquidity are
cash flows from operations and available borrowings under our amended credit facility.



As of May 29, 2004, we had $337.2 million of long-term debt, of which $8.7 million was classified as a current liability. As of May 29, 2004, there were outstanding borrowings of $42.6 million, outstanding letters of
credit of $33.0 million and available borrowings of $64.4 million under our $140.0 million amended credit facility. Borrowings under our amended credit facility have funded our working capital requirements, capital expenditures and other general
corporate purposes.



In addition to outstanding borrowings
under our amended credit facility, we had outstanding borrowings under industrial revenue bonds of $13.9 million, senior notes of $160.0 million, term loans of $120.3 million and capital leases and other obligations of $0.4 million as of May 29,
2004.



We believe that available borrowings under our amended
credit facility and cash provided by operating activities will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future. Our ability to generate sufficient cash, however, is subject
to certain general economic, financial, industry, legislative, regulatory and other factors beyond our control.



The following is a reconciliation of EBITDA to net income for the specified periods (in thousands):



|                              |  |                                                   |        |   |                                                             |   |        |                                                   |  |   |                                                             |   |  |   |        |  
|----------------------------- |  | ------------------------------------------------- | ------ | - | ----------------------------------------------------------- | - | ------ | ------------------------------------------------- |  | - | ----------------------------------------------------------- | - |  | - | ------ | -
|                              |  | Successor Entity                                  |        |   | Predecessor Entity                                          |   |        | Successor Entity                                  |  |   | Predecessor Entity                                          |  
|                              |  | National Beef PackingCompany, LLC andSubsidiaries |        |   | Farmland National Beef PackingCompany, L.P. andSubsidiaries |   |        | National Beef PackingCompany, LLC andSubsidiaries |  |   | Farmland National Beef PackingCompany, L.P. andSubsidiaries |  
|                              |  | 13 weeks ended May 29, 2004                       |        |   | 14 weeks ended May 31, 2003                                 |   |        | 39 weeks ended May 29, 2004                       |  |   | 39 weeks ended May 31, 2003                                 |  
|Net income                    |  | $                                                 | 11,194 |   |                                                             | $ | 16,786 |                                                   |  | $ | 32,030                                                      |   |  | $ | 41,499 |  
|                              |  |                                                   |        |  
|Interest income               |  |                                                   | (119   | ) |                                                             |   | (115   | )                                                 |  |   | (438                                                        | ) |  |   | (436   | )
|Interest expense              |  |                                                   | 6,295  |   |                                                             |   | 1,445  |                                                   |  |   | 18,489                                                      |   |  |   | 4,082  |  
|Depreciation and amortization |  |                                                   | 5,090  |   |                                                             |   | 5,469  |                                                   |  |   | 16,710                                                      |   |  |   | 14,423 |  
|Taxes expense (benefit)       |  |                                                   | 641    |   |                                                             |   | (2     | )                                                 |  |   | 1,539                                                       |   |  |   | 10     |  
|                              |  |                                                   |        |   |                                                             |   |        |                                                   |  |   |                                                             |   |  |   |        |  
|EBITDA(1)                     |  | $                                                 | 23,101 |   |                                                             | $ | 23,583 |                                                   |  | $ | 68,330                                                      |   |  | $ | 59,578 |  
|                              |  |                                                   |        |   |                                                             |   |        |                                                   |  |   |                                                             |   |  |   |        |  

---

|(1) | EBITDA represents earnings before net interest, taxes, depreciation and amortization. EBITDA is presented because management believes that it is helpful to
investors, securities analysts and other interested parties in evaluating our performance as compared to the performance of other companies in our industry. EBITDA, with adjustments specified in our amended credit facility, is also the basis for
calculating our financial debt covenants under our amended credit facility and for calculating whether we may incur additional indebtedness under the indenture governing our senior notes. Accordingly, management believes that EBITDA is a useful
indicator of our ability to incur and service debt obligations. EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States of America. It should not be considered an alternative to net
income or income from operations or any other measure of performance derived in accordance with generally accepted accounting principles. Our computation of EBITDA may not be comparable to other similarly titled measures computed by other companies
because all companies do not calculate EBITDA in the same fashion.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Operating Activities



Net cash provided by operating activities in the thirty-nine weeks ended May 29, 2004 increased to $25.2 million compared to $21.5 million in the
thirty-nine weeks ended May 31, 2003, primarily the result of a decrease in working capital used, offset by lower net income in the current year period.



Investing Activities



Net cash used in investing activities was $22.6 million in the thirty-nine weeks ended May 29, 2004 compared to $32.9 million in the thirty-nine weeks
ended May 31, 2003. This decrease in cash used was primarily attributable to $4.4 million less in expenditures for property, plant and equipment in the current year, and the acquisition of National Carriers in March 2003.



Financing Activities



Net cash used through financing activities was $10.1 million in the thirty-nine weeks ended May 29, 2004 compared to net
cash provided through financing activities of $6.0 million in the thirty-nine weeks ended May 31, 2003. The change was attributed to a $14.9 million increase in cash distributions for member taxes and an $8.1 million reduction in the overdraft
balance, offset by a $6.9 million increase in revolving credit borrowings.



Bank Covenant Compliance



Our amended
senior credit facility contains covenants that limit our ability to incur additional indebtedness, sell or dispose of assets, pay certain dividends and prepay or amend certain indebtedness among other matters. In addition, this facility also
contains financial covenants currently requiring us to:



| |  | Not exceed a maximum funded debt to EBITDA ratio of 4.25x;
| | - | ----------------------------------------------------------



| |  | Not exceed a maximum senior secured funded debt to EBITDA ratio of 2.50x;
| | - | -------------------------------------------------------------------------



| |  | Maintain a minimum four quarter EBITDA of $90 million; and
| | - | ----------------------------------------------------------



| |  | Not fall below a minimum fixed charge coverage ratio of 1.15x.
| | - | --------------------------------------------------------------



As defined in our amended credit facility, EBITDA contains specified adjustments. On May 29, 2004, we were in compliance with all financial covenant
ratios.



Item 3. Quantitative and Qualitative Disclosures About Market Risk.



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



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



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



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##### Table of Contents

We sell commodity beef products in our business. Commodity beef products are subject to price
fluctuations that may create price risk. When appropriate, we enter into forward sales contracts at prices determined prior to shipment. While this may tend to limit our ability to participate in gains from commodity price fluctuations, it also
tends to reduce the risk of loss from changes in commodity beef prices. We reflect commodity contract gains and losses as adjustments to the basis of underlying commodities sold; gains or losses are recognized in the statement of operations as a
component of net sales.



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



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



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



We have short-term and long-term debt with variable interest rates. Short-term debt is primarily comprised of the current portion of long-term debt
maturing twelve months from the balance sheet date. Short-term debt also includes our revolving credit line used to finance working capital requirements, capital expenditures and general corporate purposes.



Our exposure to these aforementioned market risks has not materially changed
since August 30, 2003.



Item 4. Controls and Procedures



We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use
or disposition. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) under supervision and with the participation of
management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures were effective in alerting them, in a timely manner, to material information required to be included in our periodic Securities and Exchange Commission filings. There have been no changes in our internal
controls over financial reporting during the thirteen weeks ended May 29, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and
procedures is based in part upon certain assumptions about the likelihood of future events.



18



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##### Table of Contents

PART II. OTHER INFORMATION



Item 1. Legal Proceedings



For
information regarding legal proceedings, see Note 5, Contingencies to our consolidated financial statements included in Part I- Item 1 of this Form 10-Q.



Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities



None.



Item 3. Defaults Upon Senior Securities



None.



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



None.



Item 5. Other Information



None.



Item 6. Exhibits and Reports on Form 8-K



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



| | 31.1 | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | ------------------------------------------------------------------------------------------------------



| | 31.2 | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
| | ---- | ------------------------------------------------------------------------------------------------------



| | 32.1 | Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------



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



|(B) | Reports on Form 8-K
|--- | -------------------



During the quarter ended May 29, 2004, the Company furnished a Report on Form 8-K under Item 9, dated April 13, 2004, relating to the conference call to
discuss the Companys second quarter financial performance.



19



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##### Table of Contents

SIGNATURES



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



National Beef Packing Company, LLCBy:

/s/ JOHN R. MILLERJohn R. Miller Chief Executive Officer and Manager (Principal Executive Officer)By:

/s/ JAY D. NIELSENJay D. Nielsen Chief Financial Officer (Principal Financial and Accounting Officer)




Date: July 13, 2004



20