**UNITED STATES SECURITIES AND EXCHANGE COMMISSION****Washington, D.C.20549**

**Form 10-Q**

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

 

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|-------------------------------------------------------|
| **For the quarterly period  ended November 24, 2007** |
| **or**                                                |

 

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

 

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|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **For the transition  period from             to           .** |
| ** **                                                                                                                                                         |

**Commissionfile number 333-111407**

 

**NATIONALBEEF PACKING COMPANY, LLC***(Exact name of registrant as specified in its charter)*

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

**12200North Ambassador Drive KansasCity, MO 64163 (Addressof principal executive offices)**

**Telephone:(800) 449-2333 (Registrant’stelephone number, including area code)**

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

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

LargeAccelerated Filer o               Accelerated Filer o             Non-AcceleratedFiler þ

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

                There is no market forthe Registrant’s equity.  As of December 31, 2007, there were 127,748,923 ClassA units and 19,474,520 Class B units outstanding.     

 

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|     | TABLE OF CONTENTS

** **

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

and Results of Operations. | 9            |
|     |                                                                                           |         |
| Item 3.  | Quantitative and Qualitative Disclosures About Market Risk.                                    | 15           |
|     |                                                                                           |         |
| Item 4T. | Controls and Procedures.                                                                       | 16           |
|     |                                                                                           |         |
|     |                                                                                           |         |
| PART II. | OTHER INFORMATION                                                                              |         |
|     |                                                                                           |         |
| Item 1.  | Legal Proceedings.                                                                             | 17           |
|     |                                                                                           |         |
| Item 1A. | Risk Factors.                                                                                  | 17           |
|     |                                                                                           |         |
| Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds.                                   | 17           |
|     |                                                                                           |         |
| Item 3.  | Defaults Upon Senior Securities.                                                               | 17           |
|     |                                                                                           |         |
| Item 4.  | Submission of Matters to a Vote of Security Holders.                                           | 17           |
|     |                                                                                           |         |
| Item 5.  | Other Information.                                                                             | 17           |
|     |                                                                                           |         |
| Item 6.  | Exhibits.                                                                                 | 17           |
|     |                                                                                           |         |
|     | Signatures.                                                                                    | 18           |

 

 

                                

Unless the context indicates orotherwise requires, the terms “National Beef,” “NBP,” “Company,” “we,” “our,”and “us” refer to National Beef Packing Company, LLC and its consolidatedsubsidiaries.  As used in this report, the term “U.S. Premium Beef” refers toU.S. Premium Beef, LLC, a Delaware limited liability company, formerly U.S.Premium Beef, Ltd., a Kansas cooperative, which owns a majority interest inNational Beef.  

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**PART I.  FINANCIAL INFORMATION**

** **

**Item 1.  Financial Statements.**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

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**NATIONAL BEEFPACKING COMPANY, LLC**

**AND SUBSIDIARIES**

** **

**Consolidated Balance Sheets**

**(in thousands)**

 

| ** **                                                                                                                                                                                          | **November 24, 2007** |                                                                                 | **August 25, 2007** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------|--------------------------------------------------------------------------------------|---------------------|
| ** **                                                                                                                                                                                          | **(unaudited)**       |                                                                                 |                |
| **Assets**                                                                                                                                                                                          |                  |                                                                                 |                |
| Current  assets:                                                                                                                                                                                    |                  |                                                                                 |                |
| Cash  and cash equivalents                                                                                                                                                                          | $                     | 18,813                                                                               |                | $ |             30,444 |
| Accounts  receivable, less allowance for returns

         and doubtful accounts of $4,400 and

         $4,642, respectively | 174,960               |                                                                                 | 189,725             |
| Due  from affiliates                                                                                                                                                                                | 4,162                 |                                                                                 | 4,394               |
| Other  receivables                                                                                                                                                                                  | 9,931                 |                                                                                 | 8,389               |
| Inventories                                                                                                                                                                                         | 189,258               |                                                                                 | 177,244             |
| Other  current assets                                                                                                                                                                               | 14,769                |                                                                                 | 14,144              |
| Total  current assets                                                                                                                                                                               | 411,893               |                                                                                 | 424,340             |
|                                                                                                                                                                                                |                  |                                                                                 |                |
|     Property, plant and  equipment, at cost                                                                                                                                          | 383,694               |                                                                                 | 372,148             |
| Less  accumulated depreciation                                                                                                                                                                      | 107,645               |                                                                                 | 99,358              |
|  Net  property, plant, and equipment                                                                                                                                                           | 276,049               |                                                                                 | 272,790             |
| Goodwill                                                                                                                                                                                            | 80,042                |                                                                                 | 80,042              |
| Other  intangibles, net of accumulated amortization of

               $7,737 and $7,214, respectively                             | 28,243                |                                                                                 | 28,659              |
| Other  assets                                                                                                                                                                                       | 9,167                 |                                                                                 | 9,672               |
|                            Total assets                                | $                     | 805,394                                                                              |                | $ | 815,503 |
| **Liabilities and Members’ Capital**                                                                                                                                                           |                  |                                                                                 |                |
| Current  liabilities:                                                                                                                                                                               |                  |                                                                                 |                |
| Current  installments of long-term debt                                                                                                                                                             | $                     |               3,513 |                | $ | 3,391 |
| Cattle  purchases payable                                                                                                                                                                           | 79,604                |                                                                                 | 62,995              |
| Accounts  payable – trade                                                                                                                                                                      | 72,803                |                                                                                 | 60,187              |
| Due  to affiliates                                                                                                                                                                                  | 87                    |                                                                                 | 355                 |
| Accrued  compensation and benefits                                                                                                                                                                  | 12,962                |                                                                                 | 16,088              |
| Accrued  insurance                                                                                                                                                                                  | 14,873                |                                                                                 | 14,550              |
| Other  accrued expenses and liabilities                                                                                                                                                             | 17,184                |                                                                                 | 11,027              |
| Distributions  payable                                                                                                                                                                              | 980                   |                                                                                 | 6,405               |
|          Total current liabilities                                                                                                                               | 202,006               |                                                                                 | 174,998             |
| Long-term  debt, excluding current installments                                                                                                                                                     | 424,579               |                                                                                 | 435,455             |
| Other  liabilities                                                                                                                                                                                  | 2,384                 |                                                                                 | 2,559               |
| Total  liabilities                                                                                                                                                                                  | 628,969               |                                                                                 | 613,012             |
| Minority  interest                                                                                                                                                                                  | 969                   |                                                                                 | 952                 |
| Capital  subject to redemption                                                                                                                                                                      | 65,346                |                                                                                 | 76,938              |
| Members’  capital:                                                                                                                                                                             |                  |                                                                                 |                |
| Members’  capital                                                                                                                                                                              | 110,045               |                                                                                 | 124,541             |
| Accumulated  other comprehensive income                                                                                                                                                             | 65                    |                                                                                 | 60                  |
| Total  members’ capital                                                                                                                                                                        | 110,110               |                                                                                 | 124,601             |
| Commitments  and contingencies                                                                                                                                                                      | -                     |                                                                                 | -                   |
|                           Total liabilities and members’ capital       | $                     | 805,394                                                                              |                | $ | 815,503 |
|                                                                                                                                                                                                |                  |                                                                                 |                |
| See accompanying notes to  consolidated financial statements.                                                                                                                                       |                  |                                                                                 |

 

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**NATIONAL BEEFPACKING COMPANY, LLC**

**AND SUBSIDIARIES**

** **

**Consolidated Statements of Operations**

**(in thousands)**

** **

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | **November 24, 2007** |                     | **November 25, 2006** |
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |   | **(unaudited)**       |      | **(unaudited)**       |
|  
Net  sales

 

$

1,398,102 

 

$

1,273,025 

 

 
Costs  and expenses:

 

 

 

 

 

 
Cost  of sales

 

1,393,692 

 

1,269,925 

 

 
Selling,  general and administrative

 

10,775 

 

9,859 

 

 
Depreciation  and amortization

 

8,826 

 

7,866 

 

 
      Total costs and expenses

 

1,413,293 

 

1,287,650 

 

 
Operating  loss 

 

(15,191)

 

(14,625)

 

 
Other  income (expense):

 

 

 

 

 

 
Interest  income

 

170 

 

196 

 

 
Interest  expense

 

(9,142)

 

(9,250)

 

 
Minority  owners' interest in net

     income of  Kansas City Steak Company, LLC

 

(25)

 

(52)

 

 
Equity  in loss of aLF Ventures, LLC

 

(25)

 

(29)

 

 
Other,  net

 

266 

 

140 

 

 
Loss  before taxes

 

(23,947)

 

(23,620)

 

 
   Income tax expense 

 

(549)

 

(228)

 
 
Net  loss   $
(24,496)
   $
(23,848)
   
 
 

 

 

 

 

 
 

 

 

 

 

 
See  accompanying notes to consolidated financial statements.
 
** **

** **

 

3

 

 

 

 

** NATIONAL BEEFPACKING COMPANY, LLC**

**AND SUBSIDIARIES**

** **

**Consolidated Statements of Cash Flows**

**(in thousands)**

** **

 

**13 weeks ended**

 

**13 weeks ended**

 

**November 24, 2007**

 

**November 25, 2006**

 

**(unaudited)**

      

**(unaudited)**

Cash  flows from operating activities:

 

 

 

Net loss

$

(24,496)

 

$

(23,848)

Adjustments to reconcile net loss to net cash used in

   operating activities:

 

 

 

  Depreciation and amortization

8,826 

 

7,866 

  (Gain) loss on disposal of property, plant and  equipment

(2)

 

27 

  Minority interest

17 

 

52 

  Change in assets and liabilities:

 

 

 

     Accounts receivable

14,765 

 

9,009 

     Due from affiliates

232 

 

139 

     Other receivables

(1,542)

 

1,321 

     Inventories

(12,014)

 

6,298 

     Other assets

(235)

 

(1,652)

     Cattle purchases payable

6,679 

 

4,604 

     Accounts payable

2,571 

 

(2,900)

     Due to affiliates

(268)

 

(10)

     Accrued compensation and benefits

(3,126)

 

(13,042)

     Accrued insurance

323 

 

109 

     Other accrued expenses and liabilities

5,982 

 

2,247 

        Net cash used in operating activities

(2,288)

 

(9,780)

 

 

 

 

Cash flows from investing activities:

 

 

 

Capital expenditures, including interest capitalized

(11,558)

 

(9,901)

Proceeds from sale of property, plant and equipment

6 

 

55 

            Net cash used in investing activities

(11,552)

 

(9,846)

 

 

 

 

Cash flows from financing activities:

 

 

 

Net (payments) receipts under revolving credit lines

(9,648)

 

15,536 

Change in overdraft balances

19,975 

 

13,184 

Repayments of other indebtedness/capital leases

(1,106)

 

(823)

Member distributions

(7,017)

 

(11,872)

            Net cash provided by financing activities

2,204 

 

16,025 

 

 

 

 

Effect of exchange rate changes on cash

5 

 

8 

                Net decrease in cash

(11,631)

 

(3,593)

Cash and cash equivalents at beginning of period

30,444 

 

28,664 

Cash and cash equivalents at end of period

$

18,813 

 

$

25,071 

 

 

 

 

Supplemental disclosures:

 

 

 

     Cash paid during the period for interest

$

5,346 

 

$

7,019 

     Cash paid during the period for taxes

$

525 

 

$

53 

Supplemental non-cash disclosures of investing and 

 

 

 

  financing activities:

 

 

 

 

 

     Receivable for final purchase price adjustment

$

- 

 

$

1,302 

 

See accompanying notes to consolidated financial  statements.
 
** **

4

 

 

**NATIONAL BEEF PACKING COMPANY, LLC AND SUBSIDIARIES**

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

** **

** **

**(1)Interim Financial Statements**

** **

**Basisof Presentation**

 

The accompanying unaudited Consolidated FinancialStatements have been prepared in accordance with U.S. generally accepted accountingprinciples (GAAP) for interim financial information; therefore, they do notinclude all of the information and footnotes required by GAAP for completefinancial statements. In the opinion of management, all adjustments considerednecessary for a fair presentation have been included using management’s bestestimates and judgments where appropriate.  These estimates and judgmentsaffect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements.  Theestimates and judgments will also affect the reported amounts for certainrevenues and expenses during the reporting period.  Actual results could differmaterially from these estimates and judgments.  For further information, referto the audited Consolidated Financial Statements and Notes to ConsolidatedFinancial Statements, which are included in NBP’s Annual Report on Form 10-K on file withthe Securities and Exchange Commission (SEC) for the fiscal year ended August 25,2007.  The results of operations for the interim periods presented are notnecessarily indicative of the results for a full fiscal year.  Certain prioryear amounts have been reclassified in order to conform to the current yearpresentation, as further discussed in the most recent Annual Report on Form10-K.

 

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

 

 

**(2)New Accounting Pronouncements**

** **

                InJuly 2006, the Financial Accounting Standards Board (FASB) issued InterpretationNo. 48, *Accounting for Uncertainty in Income Taxes, an Interpretation of FASBStatement No. 109* (FIN 48).  FIN 48 provides guidance on the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return.  FIN 48 also provides guidance on derecognition,classifications, interest and penalties, accounting in interim periods,disclosures and transition.  FIN 48 is effective for fiscal years beginningafter December 15, 2006.  The Company adopted the provisions of FIN 48effective August 26, 2007, which had no impact on the financial statements ofthe Company. 

 

                TheCompany’s subsidiary, National Carriers, Inc. (NCI), has concluded anexamination of its U.S. federal income taxes for the 2005 fiscal year.  Basedon federal income tax statute of limitations, NCI remains subject to examinationof its income taxes for fiscal years 2006 and 2007.     

** **

                InSeptember 2006, the FASB issued Statement of Financial Accounting Standard No.157 (SFAS 157), *Fair Value Measurements*.  This statement establishes asingle authoritative definition of fair value, sets out a framework formeasuring fair value, and requires additional disclosures about fair valuemeasurements.  SFAS 157 defines fair value as “the price that would be receivedto sell an asset or paid to transfer a liability in an orderly transactionbetween market participants at the measurement date.”  SFAS 157 will apply tofiscal years beginning after November 15, 2007, and interim periods withinthose fiscal years.  NBP is currently evaluating the impact SFAS 157 may have,if any, on its consolidated financial statements.

 

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

 

5

 

 

 

**(3)Inventories**

 

Inventories at November 24, 2007 and August 25, 2007consisted of the following (in thousands):

 

 

**November 24, 2007**

** **

**August 25, 2007**

Dressed  and boxed meat products

 $

155,410

 

	$

144,766

Beef  by-products

 

18,584

** **

** **

19,540

Supplies

 

15,264

** **

** **

12,938

      Total inventory

 $

189,258

 

 $

177,244

 

** **

** (4)Comprehensive Loss**

 

Comprehensive loss, which consists of net loss andforeign currency translation adjustments, was as follows for the periodsindicated (in thousands):

 

 

**13 weeks ended**

** **

**13 weeks ended**

 

**November 24, 2007**

** **

**November 25, 2006**

Net loss 

$

(24,496)

 

$

(23,848)

Other comprehensive income:

 

 

 

Foreign  currency translation adjustments

5 

 

8 

     Comprehensive loss 

$

(24,491)

 

$

(23,840)

** **

** **

**(5)Contingencies**

*                Schumacherv. Tyson Foods, et al.* On July 1,2002, a lawsuit was filed against Farmland National Beef Packing Company, L.P.(FNBPC or the predecessor to NBP), ConAgra Beef Company, Tyson Foods, Inc. andExcel Corporation in the United States District Court for the District of SouthDakota seeking certification of a class of all persons who sold cattle to thedefendants 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 periodup to two weeks thereafter. The case was filed by three named plaintiffs on behalfof a putative nationwide class that plaintiffs estimate is comprised ofhundreds or thousands of members. The complaint alleged that the defendants, inviolation of the Packers and Stockyards Act of 1921, knowingly used, withoutcorrection or disclosure, incorrect and misleading boxed beef price informationgenerated by the USDA to purchase cattle offered for sale by the plaintiffs ata price substantially lower than was justified by the actual and correct priceof boxed beef during this period. Plaintiffs also sought recovery against alldefendants under a theory of unjust enrichment. The case was certified as aclass-action matter in June of 2004. The plaintiffs claimed damages againstFNBPC in the amount of approximately $4.5 million plus prejudgment interest,attorneys' fees and court costs. The claim is subject to reduction in anunknown amount by the number of class members who have opted out of the class.Trial began March 31, 2006. On April 13, 2006, the jury returned a verdict infavor of FNBPC but against the other defendants. The other defendants havefiled an appeal in the United States Court of Appeals for the Eighth Circuit. Theappeal was argued on November 14, 2007.  No decision has been made.  Theplaintiffs did not appeal the verdict for the Company but no final judgmentwill be entered until after the appeal is decided.

** **

** **

** **

6

 

 

 

**               **The Company’s wholly owned subsidiary, NCI, hasvarious independent contractor drivers who are involved in accidents from timeto time.  Management believes the ultimate resolution of such matters shouldnot have a material adverse effect on our financial condition, results ofoperations or liquidity.

** **

NBP is also a party to a number of lawsuits and claimsarising out of the operation of our business. Management believes the ultimateresolution of such matters should not have a material adverse effect on ourfinancial condition, results of operations or liquidity.

** **

** **

**(6)Capital Subject to Redemption  **

** **

At any time after certain dates, the earliest being July31, 2008, the latest being July 31, 2011, certain members of management and/orNBPCo Holdings, LLC have the right to request that NBP repurchase theirinterests, the value of which is to be determined by a mutually agreedappraisal process. If NBP is unable to effect the repurchase within a specifiedtime, the requesting member(s) have the right to cause a sale process tocommence.  NBP accounts for changes in the redemption value of these interestsby accreting the change in value over the current period through the earliestredemption date of the respective interests. At November 24, 2007, the “Capitalsubject to redemption” was revalued by an independent appraisal process, andthe value was determined to be $66.2 million, which was in excess of itscarrying value.  Accordingly, the carrying value of the “Capital subject toredemption” increased by approximately $0.2 million through accretion duringthe thirteen weeks ended November 24, 2007, resulting in the $65.3 millioncarrying value, as reflected in the accompanying Consolidated Balance Sheet as ofNovember 24, 2007.

 

 

**(7) Segments**

** **

TheCompany’s operating segments are based on segment profit and evaluated by the ChiefExecutive Officer, who also serves as the Chief Operating Decision Maker (CODM). Segment profit is measured as operating income for NBP’s two reportingsegments, Core Beef and Other, based on the definitions provided in SFAS No.131, *Disclosures about Segments of an Enterprise and Related Information*. 

*Core Beef*—the majority of NBP’s revenues are generated from thesale 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 beefby-products to the variety meat, feed processing, fertilizer and pet foodindustries. Aggregation criteria were applied to determine the constituents ofthe Core Beef segment.

*Other*—the Other segment of NBP consists of the operationsof National Carriers, Inc., a refrigerated and livestock contract carriercompany, and Kansas City Steak Company, LLC, a portion control steak cuttingoperation. 

*Eliminations*—this line item includes eliminations of inter-segmentand intra-segment activity resulting from the consolidation process.

 

7

 

 

 

 

 

 

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

 

 

**13 weeks ended**

** **

**13 weeks ended**

 

**November 24, 2007**

 

**November 25, 2006**

 

 

 

 

Net sales:

 

 

 

Core  beef

$

1,399,284 

 

$

         1,271,144 

Other

51,650 

 

                     54,418 

Eliminations

(52,832)

 

(52,537)

 

 

 

 

     Total net sales

$

1,398,102 

 

$

        1,273,025 

 

 

 
 
Operating (loss) income:

 

 

 

Core  beef

$

(16,610)

 

$

(16,402)

Other

1,419 

 

1,777 

 

 

 

 

      Total operating loss

 

(15,191)

 

 

(14,625)

 

 

 

 

Interest income

 

170 

 

 

196 

Interest expense

(9,142)

 

(9,250)

Other income 

241 

 

111 

Minority interest 

(25)

 

(52)

 

 

 

 

      Total loss before  taxes

$

(23,947)

 

$

(23,620)

 

 

 

 

 

**November 24, 2007**

 

**November 25, 2006**

Assets:

 

 

 

Core  beef

$

765,696 

 

$

710,422 

Other

40,535 

 

31,114 

Eliminations

(837)

 

(381)

      Total assets

$

805,394 

 

$

741,155 

** **

** **

** **

8

 

 

 

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

** **

                The following discussion should be read inconjunction with our consolidated financial statements and related notes andother financial information appearing elsewhere in this report.

** **

** **

**DisclosureRegarding Forward-Looking Statements**

** **

This report contains“forward-looking statements,” which are subject to a number of risks anduncertainties, many of which are beyond our control. Forward-looking statementsare typically identified by the words “believe,” “expect,” “anticipate,”“intend,” “estimate” and similar expressions. Actual results could differmaterially from those contemplated by these forward-looking statements as aresult of many factors, including economic conditions generally and in ourprincipal markets, the availability and prices of live cattle and commodities,food safety, livestock disease, including the identification of cattle withBovine Spongiform Encephalopathy (BSE), competitive practices and consolidationin the cattle production and processing industries, actions of domestic orforeign governments, hedging risk, changes in interest rates and foreign currencyexchange rates, consumer demand and preferences, the cost of compliance withenvironmental and health laws, loss of key customers, loss of key employees,labor relations, consolidation among our customers and the potential inabilityto receive the anticipated benefits from the Brawley Beef acquisition. 

 

In light of these risks anduncertainties, there can be no assurance that the results and eventscontemplated by the forward-looking information contained in this report willin fact transpire. Readers are cautioned not to place undue reliance on theseforward-looking statements. We do not undertake any obligation to update orrevise any forward-looking statements. All subsequent written or oralforward-looking statements attributable to us or persons acting on our behalfare expressly qualified in their entirety by these factors.  See also the*RiskFactors* in Item 1A. Business of our Annual Report for the year ended August25, 2007 on Form 10-K filed with the Securities and Exchange Commission for otherimportant factors that could cause actual results to differ materially fromthose in any such forward-looking statements, and which should be read inconjunction with this report.

 

 

**IndustryOutlook**

Thecattle herd in the United States (U.S.) remains in a no-growth phase. Following the drought of 2006 in the central U.S., an extreme dryness in thesoutheastern states resulted in cow herd liquidation in that region during2007.  Retention of females to replenish and grow the U.S. cattle herd remains slow,resulting in long-term cattle supplies that show no appreciable sign of growth inoverall fed cattle supplies over the next two to three years.  Meanwhile,cattle on feed supplies have returned to approximately the same level as thesame time last year. Anticipated higher live cattle weights should supportexpectations for year over year beef production gains during the first half of2008 before trending back below 2007 levels for the remainder of 2008.

 

**RecentDevelopments**

** **

                Negotiationsfor the collective bargaining agreement with the United Food and CommercialWorkers Union, Local 2 for the Liberal, Kansas facility to replace the prioragreement that expired on December 16, 2007 were completed in December 2007. The newly ratified agreement provides for a five-year term expiring in December2012.  The new agreement includes changes in wages and benefits that allow usto continue to be cost competitive within the beef industry while ensuring theability to attract and retain employees.  

 

 

9

 

 

**BeefExport Markets **

Export markets for U.S. beef productsremain significantly constrained since the discovery of a case of BSE in theState of Washington in December 2003, as well as several other isolated cases. In July 2006, Japan agreed to reopen its market to U.S. beef from cattle aged20 months and younger.  In September 2006, South Korea announced a provisionalopening of its border to U.S. beef from animals 30 months and younger, however,restrictions imposed with the reopening have prompted further border closingsfrom time to time.  These constraints and uncertainties have had a negativeimpact on beef margins.

                NBP cannotpresently assess the full economic impact of the consequences of BSE on theU.S. beef packing industry or on its operations.  Existing or new importrestrictions or additional regulatory restrictions or disruptions in domesticconsumer demand for beef may continue to have a material adverse affect on theCompany’s revenues and net income.

** **

**Resultsof Operations**

** **

***Thirteen weeks ended November 24, 2007 compared to thirteen weeks endedNovember 25, 2006***

 

*General.* Net loss for the thirteen weeks ended November 24, 2007 was $24.5 millioncompared to net loss of $23.8 million for the thirteen weeks ended November 25,2006, a change of $0.7 million.  Sales and cost of sales were both higher inthe thirteen weeks ended November 24, 2007 than those of the prior year period primarilydue to an approximate 5.9% increase in the number of cattle processed, higherlive cattle prices that were approximately 4.9% more and heavier cattle ataverage weights 0.8% more than the same period of fiscal 2007.  

 

Although sales increased by approximately 9.8%compared to the same period in the prior year, cost of sales also increased byapproximately 9.7% along with an approximate 10.2% increase in selling, generaland administrative expenses and an approximate 12.2% increase in depreciationexpense, resulting in an increase in operating loss of $0.6 million.  Theincrease in cost of sales was primarily due to an increase in cattle processedat live cattle prices that were approximately 4.9% higher and cattle weighingan average of 0.8% more than the same period in the prior year.  Total costsand expenses of $1,413.3 million and $1,287.6 million for the thirteen weeksended November 24, 2007 and November 25, 2006, respectively, were 101.1% as apercent of sales for both periods.  

 

*Net Sales*. Net sales were $1,398.1 million for the thirteen weeks ended November 24, 2007compared to $1,273.0 million for the thirteen weeks ended November 25, 2006, anincrease of $125.1 million or 9.8%.  The increase in net sales principally resultedfrom an approximate 5.9% increase in the number of cattle processed during thethirteen weeks ended November 24, 2007.  

 

               *Costof Sales*.  Cost of sales was $1,393.7 million for the thirteen weeks ended November24, 2007 compared to $1,269.9 million for the thirteen weeks ended November 25,2006, an increase of $123.8 million or 9.7%.  The increase was a result of acombination of increased cattle processing of approximately 5.9%, higher livecattle prices that were approximately 4.9% more and heavier cattle at averageweights 0.8% more than the same period of fiscal 2007.  The 4.9% increase incattle prices for this period resulted from a continued tight supply ofmarket-ready cattle.

 

               *Selling,General and Administrative Expenses*.  Selling, general and administrativeexpenses were $10.8 million for the thirteen weeks ended November 24, 2007compared to $9.8 million for the thirteen weeks ended November 25, 2006, an increaseof $1.0 million or 10.2%.  The increase reflects an increase in payroll andrelated expenses of approximately $0.6 million, an increase in marketing andadvertising expense of approximately $0.3 million, an approximate $0.2 millionincrease in legal fees, an approximate $0.1 million increase in dues andsubscription expense, and an increase in travel expenses of approximately $0.1million, which were offset by a decrease of approximately $0.2 million in baddebt expense and a decrease in repairs and maintenance expense of approximately$0.2 million.

               

10

 

 

*Depreciation and Amortization Expense*.  Depreciation and amortization expenses were $8.8 millionfor the thirteen weeks ended November 24, 2007 compared to $7.9 million for thethirteen weeks ended November 25, 2006, an increase of $0.9 million or 12.2%.  Mostof the increase was due to increased depreciation expense resulting from assetsbeing placed into service, primarily at the Dodge City and Brawley beef plants,during fiscal year 2007.

* *

*Operating Loss.* An operating loss of $15.2 million was incurred for the thirteen weeks ended November24, 2007 compared to an operating loss of $14.6 million for the thirteen weeksended November 25, 2006, an increased loss of $0.6 million.  The increaseresulted primarily from a lower sales volume at our portion control meatfacility.  

 

               *InterestExpense*.  Interest expense was $9.1 million for the thirteen weeks ended November24, 2007 compared to $9.3 million for the thirteen weeks ended November 25, 2006,a slight decrease of $0.2 million or 1.2%.  The decrease in interest expenseduring the thirteen weeks ended November 24, 2007 as compared to the sameperiod in fiscal 2007 was due primarily to lower interest rates on our variablerate debt, a decrease of approximately 53 basis points, during the thirteenweeks ended November 24, 2007 as compared to the same period in fiscal 2007. Offsetting this decrease in interest rates was an increase in the weightedaverage of variable rate debt of approximately $38.0 million at November 24,2007 as compared to November 25, 2006.  

 

               *IncomeTax Expense*.  Income tax expense was $0.5 million for the thirteen weeksended November 24, 2007 compared to $0.2 million for the thirteen weeks ended November25, 2006.  Income tax expense is recorded on income from National Carriers,Inc., which is organized as a C Corporation.

** **

** **

**SegmentResults**

** **

Ouroperating segments are based on segment profit and evaluated by the ChiefExecutive Officer, who also serves as the Chief Operating Decision Maker(CODM).  Segment profit is measured as operating income for NBP’s two reportingsegments, Core Beef and Other, based on the definitions provided in SFAS No.131, *Disclosures about Segments of an Enterprise and Related Information*. 

*Core Beef*—the majority of NBP’s revenues are generated from thesale 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 beefby-products to the variety meat, feed processing, fertilizer and pet foodindustries. Aggregation criteria were applied to determine the constituents ofthe Core Beef segment.  

*Other*—the Other segment of NBP consists of the operationsof National Carriers, Inc., a refrigerated and livestock contract carriercompany, and Kansas City Steak Company, LLC, a portion control steak cuttingoperation. 

*Eliminations*—this line item includes eliminations of inter-segmentand intra-segment activity resulting from the consolidation process.

 

11

 

 

 

 

 

 

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

 

 

**13 weeks ended**

** **

**13 weeks ended**

 

**November 24, 2007**

 

**November 25, 2006**

 

 

 

 

Net sales:

 

 

 

Core  beef

$

       1,399,284 

 

$

         1,271,144 

Other

                    51,650 

 

                     54,418 

Eliminations

(52,832)

 

(52,537)

 

 

 

 

     Total net sales

$

       1,398,102 

 

$

1,273,025 

 

 

 

 

Operating (loss) income:

 

 

 

Core  beef

$

                 (16,610)

 

$

(16,402)

Other

                      1,419 

 

1,777 

 

 

 

 

      Total operating loss

 

          (15,191)

 

 

(14,625)

 

 

 

 

Interest income

 

170 

 

 

196 

Interest expense

(9,142)

 

(9,250)

Other income 

241 

 

111 

Minority interest 

                     (25)

 

(52)

 

 

 

 

      Total loss before  taxes

$

          (23,947)

 

$

(23,620)

 

 

 

 

 

**November 24, 2007**

 

**November 25, 2006**

Assets:

 

 

 

Core  beef

$

          765,696 

 

$

710,422 

Other

                    40,535 

 

31,114 

Eliminations

(837)

 

(381)

      Total assets

$

805,394 

 

$

741,155 

 

 

***Thirteen weeks ended November 25, 2006 compared to thirteen weeks endedNovember 26, 2005***

 

***Core Beef***

 

*Net Sales*. Net sales for Core Beef were $1,399.3 million for the thirteen weeks ended November24, 2007 compared to $1,271.1 million for the thirteen weeks ended November 25,2006, an increase of $128.2 million or 10.1%.  The increase in net sales principallyresulted from an approximate 5.9% increase in the number of cattle processedduring the thirteen weeks ended November 24, 2007 as compared to the sameperiod in the prior year.    

 

*Operating Loss*. An operating loss for Core Beef of $16.6 million was incurred during thethirteen weeks ended November 24, 2007 compared to an operating loss of $16.4million during the thirteen weeks ended November 25, 2006, an increased loss of$0.2 million.  The increased loss resulted primarily from higher cost of sales asa result of increased cattle processing at live cattle prices that wereapproximately 4.9% higher, due to a continued tight supply of market-readycattle.

*** ***

*** ***

*** ***

*** ***

12

 

 

 

***Other***

 

               *NetSales*.  Net sales for Other were $51.7 million for the thirteen weeks endedNovember 24, 2007 compared to $54.4 million for the thirteen weeks ended November25, 2006, a decrease of $2.7 million or 5.0%.  The decrease was primarily dueto decreased sales volume in our portion control beef facility.

 

               *OperatingIncome*.  Operating income for Other was $1.4 million for the thirteen weeksended November 24, 2007 compared to $1.8 million for the thirteen weeks ended November25, 2006, a decrease of $0.4 million.  The decrease was due primarily to decreasedsales volume at our portion control beef facility.

 

 

**Liquidityand Capital Resources**

 

As of November 24, 2007, we had net working capital of$209.9 million, which included $1.0 million in distributions payable, and cashand cash equivalents of $18.8 million.  As of August 25, 2007, we had networking capital of $249.3 million, which included $6.4 million in distributionspayable, and cash and cash equivalents of $30.4 million.  Our primary sourcesof liquidity are cash flow from operations and available borrowings under ouramended and restated credit facility.

 

As of November 24, 2007, we had $428.1 million oflong-term debt, $3.5 million of which was classified as a current liability. Asof November 24, 2007, our amended and restated credit facility consisted of a $202.6million term loan, all of which was outstanding, and a $200.0 million revolvingline of credit loan, which had outstanding borrowings of $28.7 million,outstanding letters of credit of $55.3 million and available borrowings of $116.0million, based on the most restrictive financial covenant calculations.  Cashflows from operations and borrowings under our amended and restated creditfacility have funded our working capital requirements, acquisitions, capitalexpenditures and other general corporate purposes.  We were in compliance withall of our financial covenants under our amended and restated credit facilityas of November 24, 2007.

 

In addition to outstanding borrowings under ouramended and restated credit facility, we had outstanding borrowings underindustrial revenue bonds of $20.7 million, senior notes of $160.0 million andcapital lease and other obligations of $16.1 million as of November 24, 2007.

 

We believe that available borrowings under our amendedand restated credit facility and cash provided by operating activities will besufficient to support our working capital, capital expenditures and debtservice requirements for the foreseeable future.  We are authorized to purchaseup to $50.0 million of our outstanding Senior Notes from time to time inaccordance with the limits imposed under the amended and restated creditfacility.  Our ability to generate sufficient cash, however, is subject tocertain general economic, financial, industry, legislative, regulatory andother factors beyond our control.  For a review of our obligations that affectliquidity, please see the “Cash Payment Obligations” table in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations” of our Annual Report on Form 10-K for the year ended August 25, 2007.

* *

*OperatingActivities*

 

                Netcash used in operating activities in the thirteen weeks ended November 24, 2007was $2.3 million compared to net cash used in operating activities of $9.8million in the thirteen weeks ended November 25, 2006. The $7.5 million changewas due to a greater decrease in working capital balances during the firstquarter of fiscal year 2008 as compared to the decrease in working capitalbalances during the first quarter of fiscal year 2007.  This change resultedfrom greater cash inflows from accounts receivable and cash outflows foraccrued compensation, accounts payable and other accrued expenses, offset bygreater cash outflows for inventories and a slightly increased net loss. 

* *

* *

13

 

 

 

*InvestingActivities*

 

Net cash used in investing activities was $11.6million in the thirteen weeks ended November 24, 2007 compared to $9.8 millionin the thirteen weeks ended November 25, 2006.  This increase in cash used was primarilyattributable to an increase in expenditures for property, plant and equipmentin the current year.

 

*FinancingActivities*

 

                Netcash provided by financing activities was $2.2 million in the thirteen weeksended November 24, 2007 compared to net cash provided by financing activitiesof $16.0 million in the thirteen weeks ended November 25, 2006.  The change wasprimarily attributed to $9.6 million in net payments in revolving creditborrowings during the current thirteen week period as compared to $15.5 millionin net receipts in revolving credit borrowings during the same period of lastyear.  Also contributing to the change was a $6.8 million increase in theoverdraft balance and a decrease in member distributions payable of $4.9million.

 

*Amendedand Restated Senior Credit Facility*

 

                EffectiveJuly 25, 2007, we amended and restated our existing senior credit facility witha consortium of banks.  The facility now consists of a $202.6 million term loanthat matures in May 2016 and a $200.0 million revolving line of credit loanthat matures in July 2012 that is subject to certain borrowing base limitations. 

 

                Borrowingsunder the facility bear interest at LIBOR or the Base Rate, plus the applicablemargin.  The applicable margin for the revolving line of credit will be basedon borrowing base availability with grids greater than $150.0 million, $50.0 to$150.0 million and less than $50.0 million.  As of November 24, 2007, theinterest rate for the revolving loan was approximately 6.7%.   The applicablemargin for the Company’s term loan was also revised to a grid basis withdifferent margins for Funded Debt to EBITDA Ratios greater than 3.50 to 1.00and less than 3.50 to 1.00.  As of November 24, 2007, the interest rate for theterm loan was approximately 6.8%.

           The revolving line of credit and the term loan willhave no financial covenants unless the borrowing base availability is less than$50.0 million for five consecutive business days or less than $35.0 million onany single business day during any fiscal quarter.  If the borrowing baseavailability falls below these amounts, a fixed charge ratio of 1:15 to 1:00must be maintained at the end of each subsequent fiscal quarter until theborrowing base availability has been greater than or equal to $50.0 million for90 consecutive days. The Company was not subject to the fixed chargeratio test at November 24, 2007.  The advance rates under the borrowing base are 90% on eligibleaccounts and 70% on eligible inventory.

 

                Theborrowings under the revolving loan are available for the Company’s workingcapital requirements, capital expenditures and other general corporatepurposes.  The amended and restated credit facility is secured by a firstpriority lien on substantially all of the Company’s assets.  The principalamount outstanding under the term loan is due and payable in equal installmentsof approximately $3.5 million on the last business day of each June andDecember commencing on June 30, 2011.  All outstanding amounts of the term loanare due and payable on May 30, 2016.  Prepayment is allowed at any time.

                Theamended and restated credit facility contains customary affirmative covenants,including, without limitation, conduct of business, the maintenance ofinsurance, compliance with laws, maintenance of properties, keeping of books andrecords, and the furnishing of financial statements.  The facility alsocontains customary negative covenants, including without limitation,restrictions on the following:  distributions, mergers, sale of assets,investments and acquisitions, encumbrances, indebtedness, affiliatetransactions, and ERISA matters.

14

 

 

 

 

                Theamended and restated credit facility contains customary events of default,including without limitation, failure to make payment when due, materiallyincorrect representations and warranties, breach of covenants, events ofbankruptcy, default of other indebtedness that would permit acceleration ofsuch indebtedness, the occurrence of one or more unstayed or undischargedjudgments in excess of $3.0 million, changes in custody or control of theCompany’s property, changes in control of the Company, the failure of any ofthe loan documents to remain in full force, and the Company’s failure toproperly fund its employee benefit plans.  The facility also includes customaryprovisions protecting the lenders against increased cost or loss of yieldresulting from changes in tax, reserve, capital adequacy and other requirementsof law.

** **

**Item 3. Quantitative andQualitative Disclosures About Market Risk.**

* *

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

 

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

 

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

 

We sell commodity beef products in our business.Commodity beef products are subject to price fluctuations that may create pricerisk. When appropriate, we enter into forward sales contracts at pricesdetermined prior to shipment. We may hedge the commodity price risk associatedwith these activities in order to mitigate this price risk.  While this maytend to limit our ability to participate in gains from commodity pricefluctuations, it also tends to reduce the risk of loss from changes incommodity beef prices. We reflect commodity contract gains and losses asadjustments to the basis of underlying commodities sold; gains or losses arerecognized in the statement of operations as a component of net sales.

 

We may use futures contracts in order to reduceexposure associated with entering into firm commitments to purchase live cattleat prices determined prior to delivery of the cattle as well as firmcommitments to sell certain beef products at sales prices determined prior toshipment. In accordance with SFAS No. 133, *Accounting for DerivativeInstruments and Hedging Activities*, as amended, we account for futurescontracts and their related firm purchase commitments at fair value. Certainfirm commitments for live cattle purchases and all firm commitments for boxedbeef sales are treated as “normal purchases and sales” and not marked tomarket.  SFAS No. 133 imposes extensive recordkeeping requirements in order totreat a derivative instrument as a hedge for accounting purposes. Derivativesqualify for treatment as hedges when there is a high correlation between thechange in fair value of the instrument and the related change in fair value ofthe underlying commitment. For derivatives that qualify as effective hedges,the change in fair value has no net effect on earnings until the hedgedtransaction affects earnings. For derivatives that are not designated ashedging instruments, or for the ineffective portion of a hedging instrument, thechange in fair value does affect current period net earnings.

 

While management believes each of these instrumentshelp mitigate various market risks, they are not designated and accounted foras hedges under SFAS No. 133 as a result of the extensive recordkeepingrequirements of this statement. Accordingly, the gains and losses associatedwith the change in fair value of all futures contracts and the gains and lossesassociated with changes in the market value of certain of the firm commitments notdesignated as normal purchases are recorded to income and expense in the periodof change.

 

15

 

 

 

 

Weuse a sensitivity analysis to evaluate the effect that changes in the marketvalue of commodities will have on these commodity derivative instruments.  Asof November 24, 2007, the potential change in fair value of applicablecommodity prices, assuming a hypothetical 10% decrease in the underlyingcommodity price, was $16.3 million.  As of August 25, 2007, the potentialchange in fair value of applicable commodity prices, assuming a hypothetical10% decrease in the underlying commodity price, was $5.2 million. 

 

               *ForeignOperations.*  Transactions denominated in a currency other than an entity’sfunctional currency may expose that entity to currency risk.  Although we operatein international markets including Japan and South Korea, product sales arepredominately made in United States dollars, and therefore, currency risks arelimited.

 

*Interest Rates.*As a result of our normal borrowing and leasing activities, our operatingresults are exposed to fluctuations in interest rates, which we manageprimarily through our regular financing activities. We generally maintainlimited investments in cash and cash equivalents.  

 

We have long-term debt with variable interest rates.Short-term debt is primarily comprised of the current portion of long-term debtmaturing twelve months from the balance sheet date.  Our variable interestexpense is sensitive to changes in the general level of interest rates.  As ofNovember 24, 2007, the weighted average interest rate on our $252.0 million ofvariable rate debt was approximately 6.6%.

 

We had total interest expense of approximately $9.1million during the thirteen week period ending November 24, 2007.  Theestimated increase in interest expense from a hypothetical 200 basis pointincrease in applicable variable interest rates would have been approximately$1.2 million in the thirteen week period ending November 24, 2007. 

 

 

**Item 4T.  Controls and Procedures**

We maintain a systemof controls and procedures designed to provide reasonable assurance as to thereliability of the Consolidated Financial Statements and other disclosuresincluded in this report, as well as to safeguard assets from unauthorized useor disposition. We evaluated the effectiveness of the design and operation ofour disclosure controls and procedures as defined in the Securities ExchangeAct of 1934 Rules 13a-15(e) and 15d-15(e) under supervision and with theparticipation of management, including our Chief Executive Officer and ChiefFinancial Officer. Based upon that evaluation, as of the end of the periodcovered by this Quarterly Report on Form 10-Q, our Chief Executive Officer andChief Financial Officer concluded that our disclosure controls and procedureswere effective in alerting them, in a timely manner, to material informationrequired to be included in our periodic Securities and Exchange Commissionfilings.  There have been no changes in our internal controls over financialreporting during the thirteen weeks ended November 24, 2007 that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.  The design of any system ofcontrols and procedures is based in part upon certain assumptions about the likelihoodof future events. 

 

16

 

 

 

 

 

 

**PARTII. OTHER INFORMATION**

**Item 1. Legal Proceedings**

                Forinformation regarding legal proceedings, see Note 5, “Contingencies” to our ConsolidatedFinancial Statements included in Part I- Item 1 of this Form 10-Q. 

**Item 1A. Risk Factors**

                Therisk factors set forth in our Annual Report on Form 10-K for the year ended August25, 2007 have not materially changed. 

**Item 2. Unregistered Sales of EquitySecurities and Use of Proceeds**

                None.

**Item 3. Defaults Upon SeniorSecurities**

                None.

**Item 4. Submission ofMatters to a Vote of Security Holders**

                None.

**Item 5. Other Information**

                None. 

 

**Item 6. Exhibits**

(A)  

  

Exhibits

  			

   

 

 

31.1 

 

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

 

 

 

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.

 

 

 

17

 

 

 

 

**SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 

 

                                                                                                  

 
National Beef Packing Company, LLC       			    
 

 

By: 

/s/ John R. Miller

 

 

 

John R. Miller*Chief Executive Officer and Manager*

*(Principal Executive Officer)*

 

 

 

By: 

/s/ Jay D. Nielsen

 

 

 

Jay D. Nielsen*Chief Financial Officer*

*(Principal Financial and Accounting Officer)*

 

 

 

Date: January 8, 2008 

18 |