**UNITED STATES SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

**Form 10-Q**

**(Mark one)**

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

 

|                                                  |
|-------------------------------------------------------|
| **For the quarterly period  ended February 23, 2008** |
| **or**                                                |

 

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

 

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

**Commissionfile number 333-111407**

 

**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 Noo

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

LargeAccelerated Filer o  Accelerated Filero             Non-AcceleratedFiler þ

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act). Yes o Noþ

There is no marketfor the Registrant’s equity.  As of March 31, 2008, there were 127,748,923Class A units and 19,474,520 Class B units outstanding.    

 

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|     | TABLE OF CONTENTS

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

and Results of Operations. | 10           |
|     |                                                                                           |         |
| Item 3.  | Quantitative and Qualitative Disclosures About Market Risk.                                    | 19           |
|     |                                                                                           |         |
| Item 4T. | Controls and Procedures.                                                                       | 20           |
|     |                                                                                           |         |
|     |                                                                                           |         |
| PART II. | OTHER INFORMATION                                                                              |         |
|     |                                                                                           |         |
| Item 1.  | Legal Proceedings.                                                                             | 21           |
|     |                                                                                           |         |
| Item 1A. | Risk Factors.                                                                                  | 21           |
|     |                                                                                           |         |
| Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds.                                   | 21           |
|     |                                                                                           |         |
| Item 3.  | Defaults Upon Senior Securities.                                                               | 21           |
|     |                                                                                           |         |
| Item 4.  | Submission of Matters to a Vote of Security Holders.                                           | 21           |
|     |                                                                                           |         |
| Item 5.  | Other Information.                                                                             | 21           |
|     |                                                                                           |         |
| Item 6.  | Exhibits.                                                                                      | 21           |
|     |                                                                                           |         |
|     | Signatures.                                                                                    | 23           |

 

 

 

 

 

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” or “USPB” refersto U.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.  

 

**                                                                                               **

| ii |
|----|

 

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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)**

 

| ** **                                                                                                                                                                                          | **February 23, 2008**           |    |                |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------|---------|---------------------|
| ** **                                                                                                                                                                                          | **(unaudited)**                 |    | **August 25, 2007** |
| **Assets**                                                                                                                                                                                          |                            |    |                |
| Current  assets:                                                                                                                                                                                    |                            |    |                |
| Cash  and cash equivalents                                                                                                                                                                          | $                               | 25,628  |                | $ | 30,444 |
| Accounts  receivable, less allowance for returns

         and doubtful accounts of $3,800 and

         $4,642, respectively | 169,762                         |    | 189,725             |
| Due  from affiliates                                                                                                                                                                                | 5,066                           |    | 4,394               |
| Other  receivables                                                                                                                                                                                  | 6,035                           |    | 8,389               |
| Inventories                                                                                                                                                                                         | 168,776                         |    | 177,244             |
| Other  current assets                                                                                                                                                                               | 14,208                          |    | 14,144              |
| Total  current assets                                                                                                                                                                               | 389,475                         |    | 424,340             |
|                                                                                                                                                                                                |                            |    |                |
|     Property, plant and  equipment, at cost                                                                                                                                          | 397,401                         |    | 372,148             |
| Less  accumulated depreciation                                                                                                                                                                      | 115,766                         |    | 99,358              |
|  Net  property, plant and equipment                                                                                                                                                            | 281,635                         |    | 272,790             |
| Goodwill                                                                                                                                                                                            | 80,042                          |    | 80,042              |
| Other  intangibles, net of accumulated amortization of

              $8,260 and $7,214, respectively                                   | 27,788                          |    | 28,659              |
| Other  assets                                                                                                                                                                                       | 9,864                           |    | 9,672               |
|                            Total assets                                | $                               | 788,804 |                | $ | 815,503 |
| **Liabilities and Members’ Capital**                                                                                                                                                           |                            |    |                |
| Current  liabilities:                                                                                                                                                                               |                            |    |                |
| Current  installments of long-term debt                                                                                                                                                             | $                               | 3,515   |                | $ | 3,391 |
| Cattle  purchases payable                                                                                                                                                                           | 62,413                          |    | 62,995              |
| Accounts  payable – trade                                                                                                                                                                      | 58,916                          |    | 60,187              |
| Due  to affiliates                                                                                                                                                                                  | 218                             |    | 355                 |
| Accrued  compensation and benefits                                                                                                                                                                  | 13,225                          |    | 16,088              |
| Accrued  insurance                                                                                                                                                                                  | 10,836                          |    | 14,550              |
| Other  accrued expenses and liabilities                                                                                                                                                             | 10,837                          |    | 11,027              |
| Distributions  payable                                                                                                                                                                              | 980                             |    | 6,405               |
|          Total current liabilities                                                                                                                               | 160,940                         |    | 174,998             |
| Long-term  debt, excluding current installments                                                                                                                                                     | 460,394                         |    | 435,455             |
| Other  liabilities                                                                                                                                                                                  | 2,428                           |    | 2,559               |
| Total  liabilities                                                                                                                                                                                  | 623,762                         |    | 613,012             |
| Minority  interest                                                                                                                                                                                  | 1,270                           |    | 952                 |
| Capital  subject to redemption                                                                                                                                                                      | 85,580                          |    | 76,938              |
| Members’  capital:                                                                                                                                                                             |                            |    |                |
| Members’  capital                                                                                                                                                                              | 78,129                          |    | 124,541             |
| Accumulated  other comprehensive income                                                                                                                                                             | 63                              |    | 60                  |
| Total  members’ capital                                                                                                                                                                        | 78,192                          |    | 124,601             |
| Commitments  and contingencies                                                                                                                                                                      | -                               |    | -                   |
|                           Total liabilities and members’ capital       | $      | 788,804 |                | $ | 815,503 |
|                                                                                                                                                                                                |                            |    |                |
| See accompanying notes to  consolidated financial statements.                                                                                                                                       |

 

 

 

| 2 |
|---|

 

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**NATIONAL BEEFPACKING COMPANY, LLC**

**AND SUBSIDIARIES**

** **

**Consolidated Statements of Operations**

**(in thousands)**

** **

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |   | **13 weeks ended**    |   | **13 weeks ended**    |   | **26 weeks ended**    |   | **26 weeks ended**    |
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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   | **February 23, 2008** |   | **February 24, 2007** |   | **February 23, 2008** |   | **February 24, 2007** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |   | **(unaudited)**       |   | **(unaudited)**       |   | **(unaudited)**       |   | **(unaudited)**       |
|  
Net  sales

 

$

1,305,950

 

 

$

1,313,319

 

 

$

2,704,052

 

 

$

2,586,344

 

 
Costs  and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 
Cost  of sales

 

1,288,194

 

 

1,287, 543

 

 

2,681,887

 

 

2,557,626

 

 
Selling,  general and administrative

 

10,671

 

 

9,721

 

 

21,446

 

 

19,580

 

 
Depreciation  and amortization

 

8,751

 

 

7,945

 

 

17,577

 

 

15,811

 

 
      Total costs and expenses

 

1,307,616

 

 

1,305,209

 

 

2,720,910

 

 

2,593,017

 

 
Operating  income (loss)

 

                      (1,666

)

 

8,110

 

 

(16,858

)

 

(6,673

)

 
Other  income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 
Interest  income

 

135

 

 

174

 

 

305

 

 

370

 

 
Interest  expense

 

(9,120

)

 

(9,712

)

 

(18,262

)

 

(18,962

)

 
Minority  owners' interest in net

     income of  Kansas City Steak

     Company, LLC

 

(421

)

 

(300

)

 

(446

)

 

(352

)

 
Equity  in loss of aLF Ventures, LLC

 

(25

)

 

(25

)

 

(50

)

 

(54

)

 
Other,  net

 

1,538

 

 

379

 

 

1,805

 

 

677

 

 
Loss  before taxes

 

(9,559

)

 

(1,374

)

 

(33,506

)

 

(24,994

)

 
  Income tax expense 

 

(530

)

 

(657

)

 

(1,080

)

 

(885

)

 
Net  loss

 

$

(10,089

)

 

$

(2,031

)

 

$

(34,586

)

 

$

(25,879

)

 
 

 

 

 

 

 

 

 

 

 

 

 
 

 

 

 

 

 

 

 

 

 

 

 
See accompanying notes to consolidated financial  statements.

 

** **

** **

** **

** **

 

3

 

 

 

 

 

 

** NATIONAL BEEFPACKING COMPANY, LLC**

**AND SUBSIDIARIES**

** **

**Consolidated Statements of Cash Flows**

**(in thousands)**

 

 

 

**26 weeks ended**

 

**26 weeks ended**

 

 

**February 23, 2008**

 

**February 24, 2007**

 

 

**(unaudited)**

 

**(unaudited)**

Cash flows from operating activities:

			 

 

			 

 

  Net loss

 

$        			

(34,586)

 

$

(25,879)

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

 

 

 

 

  Depreciation and amortization

 

17,577 

 

15,811 

  Loss / (gain) on disposal of property, plant and  equipment

 

                       13 

 

(5)

  (Gain) / loss on disposal of investment

 

(1,342)

 

- 

  Minority interest

 

318 

 

213 

  Change in assets and liabilities:

 

  

 

 

       Accounts receivable

 

19,963 

 

(5,226)

       Due from affiliates

 

(672)

 

(574)

       Other receivables

 

2,354 

 

(2,460)

       Inventories

 

8,468 

 

(5,023)

       Other assets

 

(431)

 

(896)

       Cattle purchases payable

 

3,232 

 

3,920 

       Accounts payable

 

7,750 

 

(2,444)

       Due to affiliates

 

(137)

 

43 

       Accrued compensation and benefits

 

(2,863)

 

(11,731)

       Accrued insurance

 

(3,714)

 

(3,481)

       Other accrued expenses and liabilities

 

(321)

 

(1,892)

           Net cash provided by / (used in) operating  activities

 

15,609 

 

(39,624)

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Capital expenditures, including interest capitalized

 

(25,510)

 

(21,200)

Acquisition of businesses, final purchase price  adjustment

 

- 

 

1,248 

Proceeds from sale of property, plant and equipment

 

121 

 

137 

Proceeds from redemption of investment

 

1,342 

 

- 

                Net cash used in investing activities

 

(24,047)

 

(19,815)

 

 

 

 

 

Cash flows from financing activities:

 

  

 

 

Net receipts under revolving credit lines

 

26,761 

 

71,022 

Repayments of term note payable
			 
- 

 

(7,384)

Change in overdraft balances

 

(12,835)

 

5,274 

Repayments of other indebtedness

 

(1,698)

 

(1,156)

Member distributions

 

(8,609)

 

(13,464)

                Net cash provided by financing  activities

 

3,619 

 

54,292 

 

 

 

 

 

Effect of exchange rate changes on cash

 

3 

 

7 

                     Net decrease in cash

 

(4,816)

 

(5,140)

Cash and cash equivalents at beginning of period

 

30,444 

 

32,686 

Cash and cash equivalents at end of period

 

$

25,628 

 

$

27,546 

 

 

  

 

 

Supplemental disclosures:

 

 

 

 

Cash paid during the period for interest

 

$

18,693 

 

$

20,388 

Cash  paid during the period for taxes

 

 

979 

 

 

690 

 

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 acceptedaccounting principles (GAAP) for interim financial information; therefore, theydo not include all of the information and footnotes required by GAAP forcomplete financial statements. In the opinion of management, all adjustmentsconsidered necessary for a fair presentation have been included usingmanagement’s best estimates and judgments where appropriate.  These estimatesand judgments affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements.  The estimates and judgments will also affect the reported amountsfor certain revenues and expenses during the reporting period.  Actual resultscould differ materially from these estimates and judgments.  For furtherinformation, refer to the audited Consolidated Financial Statements and Notesto Consolidated Financial Statements, which are included in NBP’s Annual Report on Form 10-K on filewith the Securities and Exchange Commission (SEC) forthe fiscal year ended August 25, 2007.  The results of operations for theinterim periods presented are not necessarily indicative of the results for afull fiscal year.  

 

NB Finance Corp., a wholly-owned finance subsidiary ofNBP, is a co-issuer on a joint and several basis with NBP of the Senior Notes,which are 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**

 

In July 2006, the Financial Accounting Standards Board(FASB) issued Interpretation No. 48 (FIN 48), *Accounting for Uncertainty inIncome Taxes, an Interpretation of FASB Statement No. 109*.  FIN 48 providesguidance on the financial statement recognition and measurement of a tax positiontaken or expected to be taken in a tax return.  FIN 48 also provides guidanceon derecognition, classifications, interest and penalties, accounting ininterim periods, disclosures and transition.  FIN 48 is effective for fiscalyears beginning after December 15, 2006.  The Company adopted the provisions ofFIN 48 effective August 26, 2007, which had no impact on the financialstatements of the 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 toexamination of its income taxes for fiscal years 2006 and 2007.    

** **

                InDecember 2007, the FASB issued Statement of Financial Accounting Standard No.141R (SFAS 141R), *Business Combinations”. *This statement requires anacquirer to recognize the assets acquired, the liabilities assumed, and anynoncontrolling interest in the acquiree at the acquisition date to be measuredat their fair value as of that date.  An acquirer is required to recognizeassets or liabilities arising from all other contingencies (contractualcontingencies) as of the acquisition date, measured at their acquisition-datefair values, only if it is more likely than not that they meet the definitionof an asset or a liability in FASB Concepts Statement No. 6, *Elements ofFinancial Statements.*  Any acquisition-related costs are to be expensedinstead of capitalized.  The impact to the Company from the adoption of SFAS141R in fiscal year 2009 will depend on acquisitions at the time.  Thisstatement applies prospectively to business combinations for which theacquisition date is on or after the beginning of the first annual reportingperiod beginning on or after December 15, 2008.

 

5

 

 

 

 

 

 

                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 will apply to fiscal years beginning after November 15,2007, and interim periods within those fiscal years.  In February 2008,however, the FASB issued FASB Staff Position 157-2 (FSP 157-2) which defers theeffective date of SFAS 157 for nonfinancial assets and nonfinancialliabilities, except for items that are recognized or disclosed at fair value inan entity’s financial statements on a recurring basis (at least annually).  FSP157-2 will apply to fiscal years beginning after November 15, 2008, and interimperiods within those fiscal years.  NBP is currently evaluating the impact SFAS157 may have, if any, on its consolidated financial statements.

 

                InFebruary 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.

 

In December 2007, the FASB issued Statement No. 160,*Noncontrolling Interests in Consolidated Financial Statements - an Amendment ofARB No. 51*(SFAS 160).  SFAS 160establishes accounting and reporting standards for the noncontrolling interest(minority interest) in a subsidiary.  SFAS 160 requires noncontrollinginterests held by parties other than the parent in subsidiaries be clearlyidentified, labeled, and presented in the consolidated balance sheet withinequity, but separate from the parent's equity.   SFAS 160 iseffective for fiscal years beginning after December 15, 2008.  The Companyis currently assessing the impact SFAS 160 may have, if any, on itsconsolidated financial statements.

 

 

**(3)Inventories**

 

Inventories at February 23, 2008 and August 25, 2007consisted of the following (in thousands):

 

 

**February 23, 2008**

** **

**August 25, 2007**

Dressed  and boxed beef

$

                       135,180

 

$

                144,766

Beef  by-products

 

17,348

** **

** **

19,540

Supplies

 

16,248

** **

** **

12,938

     Total inventory

$

                        168,776

 

$

                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**

** **

**26 weeks ended**

** **

**26 weeks ended**

 

**February 23, 2008**

** **

**February 24, 2007**

** **

**February 23, 2008**

** **

**February 24, 2007**

Net  loss

$			

(10,089)

 

$ 

(2,031)

 

$			

(34,586)

 

$ 

(25,879)

Other  comprehensive loss:

 

 

 

 

 

 

 

   Foreign currency translation

     adjustments

                          (2)

 

                          (1)

 

3 

 

                         7 

Comprehensive  loss

$ 

(10,091)

 

$			

(2,032)

 

$  			

(34,583)

 

$  			

(25,872)

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

**(5)Capital Subject to Redemption  **

** **

At any time after certain dates, the earliest beingJuly 31, 2008, the latest being July 31, 2011, certain members of managementand/or NBPCo Holdings, LLC have the right to request that NBP repurchase theirinterests, the value of which is to be determined by a mutually agreedappraisal process. If NBP is unable to effect the repurchase within a specifiedtime, the requesting member(s) have the right to cause a sale process tocommence.  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 February 23, 2008, the“Capital subject to redemption” was revalued by an independent appraisalprocess, and the value was determined to be $178.2 million, which was in excessof its carrying value.  Accordingly, the carrying value of the “Capital subjectto redemption” increased by approximately $25.5 million through accretion duringthe thirteen weeks ended February 23, 2008, resulting in the $85.6 millioncarrying value, as reflected in the accompanying Consolidated Balance Sheet asof February 23, 2008.

** **

The value of the capital subject to redemption atFebruary 23, 2008, increased by approximately $106.1 million compared to thevalue at August 25, 2007 primarily as a result of the indication of fair valuefrom the Membership Interest Purchase Agreement (the Agreement) that wasentered into on February 29, 2008 with JBS S.A. (JBS).  Under the agreement,JBS will acquire all of the outstanding membership interests in NBP for anaggregate value of $560.0 million.  Generally accepted accounting principlesrequire the Company to determine the fair value of the capital subject toredemption at the end of each reporting period.  This change in fairvalue is accreted over the redemption period as discussed above.  Offsettingthe change in the value of the minority interest is a corresponding change inmembers’ capital.  See Note 8 – *Subsequent Event* for more informationrelated to the Agreement. 

**(6)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 onbehalf of 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 an unknownamount by the number of class members who have opted out of the class. Trialbegan March 31, 2006. On April 13, 2006, the jury returned a verdict in favorof FNBPC but against the other defendants. The other defendants have filed anappeal in the United States Court of Appeals for the Eighth Circuit. Theplaintiffs did not appeal the verdict for the Company but no final judgmentwill be entered until after the appeal is decided.  The Eighth Circuitreversed the judgment against the other defendants and the District Court hasdismissed plaintiffs’ complaint with prejudice.  The deadline for filing apetition for certiorari in the Supreme Court is April 29, 2008.

**               **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.

** **

 

7

 

 

 

 

 

 

**(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.

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

 

 

**13 weeks ended**

** **

**13 weeks ended**

** **

**26 weeks ended**

** **

**26 weeks ended**

 

**February 23, 2008**

 

**February 24, 2007**

 

**February 23, 2008**

 

**February 24, 2007**

Net sales:

 

 

 

 

 

 

 

Core  beef

$           1,306,957 

 

$           1,305,862 

 

$           2,706,242 

 

$            2,577,006 

Other  (1)

61,379 

 

                 59,736 

 

 113,029 

 

              114,154 

Eliminations  (1)

      (62,386)

 

(52,279)

 

(115,219)

 

             (104,816)

      Total net sales

$           1,305,950 

 

$           1,313,319 

 

$           2,704,052 

 

$            2,586,344 

 

 

 

 

 

 

 

 

Operating (loss) income:

 

 

 

 

 

 

 

Core  beef

$                (4,819)

 

$                 5,037 

 

$              (21,428)

 

$              (11,522)

Other

              3,153 

 

 3,073 

 

                 4,570 

 

4,849 

      Total operating (loss)

        income

                 (1,666)

 

8,110 

 

                  (16,858)

 

                      (6,673)

 

 

 

 

 

 

 

 

Interest income

135 

 

                       174 

 

305 

 

              370 

Interest expense

(9,120)

 

(9,712)

 

(18,262)

 

             (18,962)

Other income, net

1,513 

 

                354 

 

1,755 

 

                623 

Minority interest

(421)

 

(300)

 

(446)

 

                   (352)

      Total loss before taxes

$               (9,559)

 

$              (1,374)

 

$              (33,506)

 

$              (24,994)

 

 

 

 

 

 

 

 

 

**February 23, 2008**

** **

**February 24, 2007**

** **

** **

** **

** **

Assets:

 

 

 

 

 

 

 

Core  beef

$               751,672 

 

$               734,708 

 

 

 

 

Other

37,462 

 

                   29,117 

 

 

 

 

Eliminations

(330)

 

                     7,133 

 

 

 

 

      Total assets

$               788,804 

 

$               770,958 

 

 

 

 

** **

1)  Net sales – Other, as previously presented in NBP’sfinancial statements, was decreased by $0.1 million with an offsetting increaseto Net sales – Eliminations for the thirteen and twenty-six week periods endedFebruary 24, 2007 to correctly present the impact of transfer pricingadjustments.

** **

8

 

 

 

 

 

 

**(8)Subsequent Event**

** **

**               **On February 29, 2008, the Company, JBS, USPB, our majority owner, and the other holders of the Company’s membership interests, including NBPCO Holdings, LLC (NBPCO) and parties controlled by three executive officers, John R. Miller, Timothy M. Klein and Scott H. Smith, entered into the Agreement. Under the Agreement, JBS will acquire all of the Company’s outstanding membership interests (including the membership interests issuable pursuant to deferred equity incentive compensation agreements with our Chief Executive Officer and Chief Operating Officer) for a combination of approximately $465.0 million cash and $95.0 million in common stock of JBS (the Purchase Price).

 

                Pursuant to the Agreement, at closing USPB and certain other members of the Company will receive their proportionate share of the Purchase Price with 80.0% to be paid in cash and 20.0% to be paid in shares of common stock of JBS (the JBS Stock), which will be freely transferable on the Novo Mercado segment of the BOVESPA stock exchange in Brazil. The number of shares of JBS Stock will be determined based on its volume weighted average closing price during the 20 trading days prior to closing, subject to certain adjustments. Certain of the Company’s members have elected to receive or, under certain circumstances, have the right to receive their portion of the Purchase Price entirely in cash. If JBS is unable to deliver JBS Stock on an unencumbered and freely transferable basis at closing, the sellers may still demand to close, but be paid entirely in cash.

 

                Consummation of the Agreement is subject to customary conditions, including approval of the Agreement by the members of USPB and the shareholders of JBS and the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and possible approvals by certain foreign jurisdictions.  The members of USPB approved the Agreement on March 14, 2008.

** **

                TheAgreement contains certain termination rights and provides that under certaincircumstances, JBS or the Company may be required to pay the Company’s membersor the members of JBS, respectively, a termination fee of $25 million pluscertain costs.  The parties have agreed on the payment of certain fees andexpenses, including those related to antitrust filings and compliance.

 

 

 

** **

  9

 

 

 

 

 

 

**Item2.  Management’s Discussion and Analysis of Financial Condition and Results ofOperations.**

** **

                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 the satisfaction of all conditions to closethe transaction with JBS S.A. ( JBS) described below under “RecentDevelopments,” economic conditions generally and in our principal markets, theavailability and prices of live cattle and commodities, food safety, livestockdisease, including the identification of cattle with Bovine SpongiformEncephalopathy (BSE), competitive practices and consolidation in the cattleproduction and processing industries, actions of domestic or foreigngovernments, 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 endedAugust 25, 2007 on Form 10-K filed with the Securities and Exchange Commissionfor other important factors that could cause actual results to differmaterially from those in any such forward-looking statements, and which shouldbe read in conjunction with this report.

 

**IndustryOutlook**

 

The cattle herd in the United States remains in ano-growth phase.  The increased cost of production and uncertainty about futurecosts has led to a lack of growth in the beef cattle segment.  Although thedairy cattle segment is also challenged by rapidly increasing costs, the dairyherd continues to grow due to its ability to pass through higher productioncosts.  The cattle on feed supplies are nearly 2.0% above the prior year suppliesand should remain above prior year levels into the early summer beforecontracting for the remainder of the summer and early fall.

 

**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 other isolated cases.  In July2006, Japan agreed to reopen its market to U.S. beef from cattle aged 20 monthsand younger.  South Korea announced a provisional opening of its border to U.S.beef from animals 30 months and younger in September 2006, however, its borderwas subsequently closed on October 5, 2007 and has not reopened.  Theseconstraints and uncertainties have had a negative impact on beef margins.

                We 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 our revenuesand net income.

** **

** **

** **

** **

10

 

 

 

 

 

 

**RecentDevelopments**

 

               *ProductionCutbacks:*  On December 12, 2007, we announced production cutbacks to 32-36hours at our beef processing facilities in Liberal and Dodge City, Kansas. Production cuts began that week and have reduced slaughter by approximately10,000 to 15,000 head per week.  Management’s decision to regulate productionhours is driven by market conditions.

 

                *Membership Interest Purchase Agreement with JBS:*On February 29, 2008, we, JBS, USPB, our majority owner, and the other holders of our membership interests, including NBPCO Holdings, LLC (NBPCO) and parties controlled by three executive officers, John R. Miller, Timothy M. Klein and Scott H. Smith, entered into a Membership Interest Purchase Agreement (the Agreement). Under the Agreement, JBS will acquire all of our outstanding membership interests (including the membership interests issuable pursuant to deferred equity incentive compensation agreements with our Chief Executive Officer and Chief Operating Officer) for a combination of approximately $465.0 million cash and $95.0 million in common stock of JBS (the Purchase Price).

 

                Pursuant to the Agreement, at closing USPB and certain other members of ours will receive their proportionate share of the Purchase Price with 80.0% to be paid in cash and 20.0% to be paid in shares of common stock of JBS (the JBS Stock), which will be freely transferable on the Novo Mercado segment of the BOVESPA stock exchange in Brazil. The number of shares of JBS Stock will be determined based on its volume weighted average closing price during the 20 trading days prior to closing, subject to certain adjustments. Certain of our members have elected to receive or, under certain circumstances, have the right to receive their portion of the Purchase Price entirely in cash. If JBS is unable to deliver JBS Stock on an unencumbered and freely transferable basis at closing, the sellers may still demand to close, but be paid entirely in cash.

 

                Consummation of the Agreement is subject to customary conditions, including approval of the Agreement by the members of USPB and the shareholders of JBS and the expiration or termination of the applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and possible approvals by certain foreign jurisdictions.  The members of USPB approved the Agreement on March 14, 2008.

** **

                TheAgreement contains certain termination rights and provides that under certaincircumstances, JBS or we may be required to pay our members or the members ofJBS, respectively, a termination fee of $25 million plus certain costs.  Theparties have agreed on the payment of certain fees and expenses, includingthose related to antitrust filings and compliance.

** **

** **

**Resultsof Operations**

** **

***Thirteen weeks ended February 23, 2008 compared to thirteen weeks endedFebruary 24, 2007***

 

*General.* Net loss for the thirteen weeks ended February 23, 2008 was approximately $10.1million compared to a net loss of approximately $2.0 million for the thirteenweeks ended February 24, 2007, an increased loss of approximately $8.1 million. Net sales were lower in the thirteen weeks ended February 23, 2008 compared tothose of the prior period primarily due to reduced production at our beefprocessing plants.  The number of cattle processed during the current thirteenweek period was 8.3% less than the same period of last year. 

 

Total costs and expenses of approximately $1,307.6 millionand $1,305.2 million for the thirteen weeks ended February 23, 2008 and February24, 2007, respectively, were 100.1% as a percent of sales for the thirteenweeks ended February 23, 2008 compared to 99.4% for the thirteen weeks ended February24, 2007.  High cattle prices contributed to an erosion of gross marginresulting in a decrease in operating income of approximately $9.8 million.

 

*Net Sales*. Net sales were approximately $1,306.0 million for the thirteen weeks ended February23, 2008 compared to approximately $1,313.3 million for the thirteen weeksended February 24, 2007, a decrease of approximately $7.3 million, or 0.6%.  OurCore Beef segment experienced a slight increase in net sales due to increasedaverage sales prices per head which more than offset the decreased volume of cattleprocessed during the quarter as compared to the same period of fiscal 2007. Net sales in total decreased, however, as the increase in the Core Beefsegment’s net sales was driven by intercompany sales that were eliminated inconsolidation.  

 

 

11

 

 

 

 

 

 

 

               *Costof Sales*.  Cost of sales was approximately $1,288.2 million for thethirteen weeks ended February 23, 2008 compared to approximately $1,287.5 millionfor the thirteen weeks ended February 24, 2007, an increase of approximately $0.7million, or 0.1%.   The increase was primarily a result of increased livecattle prices that were approximately 4.7% higher due to the continued tightsupply of market-ready cattle and to the cattle being heavier, at averageweights 0.6% more, than the same period of last year.  Partially offsetting theincrease in cattle prices was a decrease in cattle processing by approximately8.3% for the current thirteen week period as compared to the same period offiscal 2007.

 

               *Selling,General and Administrative Expenses*.  Selling, general and administrativeexpenses were approximately $10.7 million for the thirteen weeks ended February23, 2008 compared to approximately $9.7 million for the thirteen weeks ended February24, 2007, an increase of approximately $1.0 million, or 10.3%.  The increase primarilyreflects an increase in payroll and related expenses of approximately $0.3 million,due mainly to increases in salaries, an increase in repairs and maintenanceexpense of approximately $0.2 million, an increase in legal expense of approximately$0.2 million, and an increase of approximately $0.1 million in advertisingexpense.  

 

               *Depreciationand Amortization Expense*.  Depreciation and amortization expenses were approximately$8.8 million for the thirteen weeks ended February 23, 2008 compared to approximately$7.9 million for the thirteen weeks ended February 24, 2007, an increase of approximately$0.9 million, or 11.4%.  Depreciation expense increased due to assets beingplaced into service, primarily at the Dodge City and Brawley beef plants, duringthe fiscal year 2007.

* *

*Operating Income/Loss*.  Operating loss was approximately $1.7 million forthe thirteen weeks ended February 23, 2008 compared to operating income of approximately$8.1 million for the thirteen weeks ended February 24, 2007, a decrease of approximately$9.8 million.  The decreased operating income resulted primarily from highercattle costs during the second quarter of fiscal 2008 as compared to the sameperiod of last year.  

 

               *InterestExpense*.  Interest expense was approximately $9.1 million for the thirteenweeks ended February 23, 2008 compared to approximately $9.7 million for the thirteenweeks ended February 24, 2007, a decrease of approximately $0.6 million, or 6.2%. The decrease in interest expense during the thirteen weeks ended February 23,2008 as compared to the same period in fiscal 2007 was due primarily to lowerinterest rates on our variable rate debt, a decrease of approximately 192 basispoints.  Offsetting this decrease in interest rates was an increase in theweighted average of variable rate debt of approximately $19.7 million atFebruary 23, 2008 as compared to February 24, 2007.

 

               *Other,net. *Other, net non-operating income was approximately $1.5 million forthe thirteen weeks ended February 23, 2008 compared to other, net non-operatingincome of approximately $0.4 million for the thirteen weeks ended February 24,2007, an increase of approximately $1.1 million.  The increase in other, net non-operatingincome was primarily related to $1.3 million in proceeds received in redemptionof an investment interest in which our basis had previously been written downto zero.  

 

               *IncomeTax Expense*.  Income tax expense was approximately $0.5 million for thethirteen weeks ended February 23, 2008 compared to income tax expense of approximately$0.7 million for the thirteen weeks ended February 24, 2007, a decrease inexpense of approximately $0.2 million.  Income tax expense is recorded onincome from National Carriers, Inc., which is organized as a C Corporation.

** **

** **

12

 

 

 

 

 

 

***Twenty-six weeks ended February 23, 2008 compared to twenty-six weeksended February 24, 2007***

 

*General.* Net loss for the twenty-six weeks ended February 23, 2008 was approximately $34.6million compared to a net loss of approximately $25.9 million for the twenty-sixweeks ended February 24, 2007, an increased loss of approximately $8.7 million. Net sales were higher in the twenty-six weeks ended February 23, 2008 comparedto those of the prior period primarily due to an average increase in salesprices per head of approximately 6.5%.  The number of cattle processed duringthe current twenty-six week period was 1.4% less than the same period of lastyear. 

 

Total costs and expenses of approximately $2,720.9million and $2,593.0 million for the twenty-six weeks ended February 23, 2008and February 24, 2007, respectively, were 100.6% as a percent of sales for the twenty-sixweeks ended February 23, 2008 compared to 100.3% for the twenty-six weeks endedFebruary 24, 2007.  Continued high cattle prices contributed to an erosion of thegross margin for the current twenty-six week period as compared to the sameperiod of last year.  

 

*Net Sales*. Net sales were approximately $2,704.1 million for the twenty-six weeks ended February23, 2008 compared to approximately $2,586.3 million for the twenty-six weeksended February 24, 2007, an increase of approximately $117.8 million, or 4.6%. The moderate increase in net sales resulted primarily from an average increasein sales prices per head of 6.5% in the twenty-six weeks ended February 23, 2008than the same period in the prior year while the volume of cattle processeddecreased by approximately 1.4%. 

 

               *Costof Sales*.  Cost of sales was approximately $2,681.9 million for the twenty-sixweeks ended February 23, 2008 compared to approximately $2,557.6 million forthe twenty-six weeks ended February 24, 2007, an increase of approximately $124.3million, or 4.9%.  The increase was primarily a result of increased live cattleprices that were approximately 4.8% higher due to the continued tight supply ofmarket-ready cattle and to the cattle being heavier, at average weights 0.7%more, than the twenty-six week period of last year.  Partially offsetting thisincrease was decreased cattle processing of approximately 1.4% for the currenttwenty-six week period as compared to the same period of fiscal 2007.

 

               *Selling,General and Administrative Expenses*.  Selling, general and administrativeexpenses were approximately $21.4 million for the twenty-six weeks ended February23, 2008 compared to approximately $19.6 million for the twenty-six weeks endedFebruary 24, 2007, an increase of approximately $1.8 million, or 9.2%.  Theincrease for this period is primarily due to an increase in payroll and benefitexpenses of approximately $0.9 million, an approximate $0.4 million increase inlegal fees and an increase in advertising expense of approximately $0.3 million.

 

               *Depreciationand Amortization Expense*.  Depreciation and amortization expenses were approximately$17.6 million for the twenty-six weeks ended February 23, 2008 compared to approximately$15.8 million for the twenty-six weeks ended February 24, 2007, an increase of approximately$1.8 million, or 11.4%.  Depreciation expense increased due to assets beingplaced into service, primarily at the Dodge City and Brawley beef plants, duringthe fiscal year 2007.

 

*Operating Loss*. Operating loss was approximately $16.9 million for the twenty-six weeks ended February23, 2008 compared to operating loss of approximately $6.7 million for the twenty-sixweeks ended February 24, 2007, an increased loss of approximately $10.2 million. The increased operating loss in the current twenty-six week period resulted primarilyfrom higher cattle prices as compared to the same period of last year.

 

               *InterestExpense*.  Interest expense was approximately $18.3 million for the twenty-sixweeks ended February 23, 2008 compared to approximately $19.0 million for the twenty-sixweeks ended February 24, 2007, a decrease of approximately $0.7 million, or 3.7%. The decrease in interest expense during the twenty-six weeks ended February 23,2008 as compared to the same period in fiscal 2007 was due primarily to lowerinterest rates on our variable rate debt, a decrease of approximately 147 basispoints.  Offsetting this decrease in interest rates was an increase in theweighted average of variable rate debt of approximately $43.8 million atFebruary 23, 2008 as compared to February 24, 2007.

 

 

13

 

 

 

 

 

 

               *Other,net.*  Other, net non-operating income was approximately $1.8 million forthe twenty-six weeks ended February 23, 2008 compared to other, net non-operatingincome of approximately $0.7 million for the twenty-six weeks ended February 24,2007, an increase of approximately $1.1 million.  The increase in other net non-operatingincome was primarily related to $1.3 million in proceeds received in redemptionof an investment interest in which our basis had previously been written downto zero.  

 

               *IncomeTax Expense*.  Income tax expense was approximately $1.1 million for the twenty-sixweeks ended February 23, 2008 compared to approximately $0.9 million for the twenty-sixweeks ended February 24, 2007, an increase of approximately $0.2 million, or 22.2%. Income tax expense is recorded on income from National Carriers, Inc., which isorganized 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 our 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 our 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*—our Other segment consists of the operations ofNational Carriers, Inc., a refrigerated and livestock contract carrier company,and Kansas City Steak Company, LLC, a portion control steak cutting operation.

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

 

 

 

 

14

 

 

 

 

 

 

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

 

 

**13 weeks ended**

** **

**13 weeks ended**

** **

**26 weeks ended**

** **

**26 weeks ended**

 

**February 23, 2008**

 

**February 24, 2007**

 

**February 23, 2008**

 

**February 24, 2007**

Net sales:

 

 

 

 

 

 

 

Core  beef

$           1,306,957 

 

$           1,305,862 

 

$           2,706,242 

 

$            2,577,006 

Other  (1)

61,379 

 

                 59,736 

 

 113,029 

 

              114,154 

Eliminations  (1)

      (62,386)

 

(52,279)

 

(115,219)

 

             (104,816)

      Total net sales

$           1,305,950 

 

$           1,313,319 

 

$           2,704,052 

 

$            2,586,344 

 

 

 

 

 

 

 

 

Operating (loss) income:

 

 

 

 

 

 

 

Core  beef

$                (4,819)

 

$                 5,037 

 

$              (21,428)

 

$              (11,522)

Other

              3,153 

 

 3,073 

 

                 4,570 

 

4,849 

      Total operating (loss)

        income

                 (1,666)

 

8,110 

 

                  (16,858)

 

                      (6,673)

 

 

 

 

 

 

 

 

Interest income

135 

 

                       174 

 

305 

 

              370 

Interest expense

(9,120)

 

(9,712)

 

(18,262)

 

             (18,962)

Other income, net

1,513 

 

                354 

 

1,755 

 

                623 

Minority interest

(421)

 

(300)

 

(446)

 

                   (352)

      Total loss before  taxes

$                (9,559)

 

$              (1,374)

 

$              (33,506)

 

$              (24,994)

 

 

 

 

 

 

 

 

 

**February 23, 2008**

** **

**February 24, 2007**

** **

** **

** **

** **

Assets:

 

 

 

 

 

 

 

Core  beef

$               751,672 

 

$               734,708 

 

 

 

 

Other

37,462 

 

                   29,117 

 

 

 

 

Eliminations

(330)

 

                     7,133 

 

 

 

 

      Total assets

$               788,804 

 

$               770,958 

 

 

 

 

 

1)  Net sales – Other, as previously presented in ourfinancial statements, was decreased by $0.1 million with an offsetting increaseto Net sales – Eliminations for the thirteen and twenty-six week periods endedFebruary 24, 2007 to correctly present the impact of transfer pricingadjustments.

** **

** **

** **

***Thirteen weeks ended February 23, 2008 compared to thirteen weeks endedFebruary 24, 2007***

 

***Core Beef***

 

*Net Sales*. Net sales for Core Beef were approximately $1,307.0 million for the thirteenweeks ended February 23, 2008 compared to approximately $1,305.9 million forthe thirteen weeks ended February 24, 2007, an increase of approximately $1.1million, or 0.1%.  The slight increase in net sales resulted primarily from anaverage increase in sales prices per head of 9.2% for the current thirteen weekperiod as compared to the same period of last year, partially offset by an 8.3%decrease in the number of cattle slaughtered.  

 

*Operating Loss*. The operating loss for Core Beef was approximately $4.8 million for thethirteen weeks ended February 23, 2008 compared to operating income of approximately$5.0 million for the thirteen weeks ended February 24, 2007, a decrease of approximately$9.8 million.  This operating loss resulted primarily from higher cost of salesdue to live cattle prices that were approximately 4.7% higher for the currentthirteen week period as compared to the same period of last year, partiallyoffset by an 8.3% decrease in the volume of cattle processed.

 

 

15

 

 

 

 

 

 

***Other***

 

               *NetSales*.  Net sales for Other were approximately $61.4 million for thethirteen weeks ended February 23, 2008 compared to approximately $59.7 millionfor the thirteen weeks ended February 24, 2007, an increase of approximately $1.7million, or 2.8%.  The increase was primarily due to increased sales volume inour portion control beef facility during the thirteen week period of fiscal2008 as compared to the same period of last year.

 

*Operating Income*.  Operating income for Other was approximately $3.2 million for thethirteen weeks ended February 23, 2008 compared to approximately $3.1 millionfor the thirteen weeks ended February 24, 2007, an increase of approximately $0.1million, or 3.2%.  The increase was due primarily to improved operating income ofour portion control beef facility during the thirteen week period of fiscal2008 as compared to the same period of last year.

 

 

***Twenty-six weeks ended February 23, 2008 compared to twenty-six weeksended February 24, 2007***

 

***Core Beef***

 

*Net Sales*. Net sales for Core Beef were approximately $2,706.2 million for the twenty-sixweeks ended February 23, 2008 compared to approximately $2,577.0 million forthe twenty-six weeks ended February 24, 2007, an increase of approximately $129.2million, or 5.0%.  The moderate increase in net sales resulted primarily from anaverage increase in sales prices per head of 6.5% for the twenty-six weeksended February 23, 2008 as compared to the same period of last year, partiallyoffset by a 1.4% decrease in the number of cattle slaughtered.  

 

*Operating Loss*. Operating loss for Core Beef was approximately $21.4 million for the twenty-sixweeks ended February 23, 2008 compared to operating loss of approximately $11.5million for the twenty-six weeks ended February 24, 2007, an increased loss of approximately$9.9 million.  The operating loss resulted primarily from higher cost of salesdue to live cattle prices that were approximately 4.8% higher for the current twenty-sixweek period as compared to the same period of last year, partially offset by a 1.4%decrease in the volume of cattle processed.

 

***Other***

 

               *NetSales*.  Net sales for Other were approximately $113.0 million for the twenty-sixweeks ended February 23, 2008 compared to approximately $114.2 million for the twenty-sixweeks ended February 24, 2007, a decrease of approximately $1.2 million, or 1.1%. The decrease in net sales was primarily due to a slight reduction in sales inour transportation operations while the sales volume in our portion controlbeef facility remained relatively unchanged during the twenty-six week periodof fiscal 2008 as compared to the same period of last year.

 

               *OperatingIncome*.  Operating income for Other was approximately $4.6 million for the twenty-sixweeks ended February 23, 2008 compared to approximately $4.8 million for the twenty-sixweeks ended February 24, 2007, a decrease of approximately $0.2 million.  The slightdecrease in operating income was due primarily to the slight decline in salesin our transportation operations during the twenty-six week period of fiscal2008 as compared to the same period of last year.

 

 

**Liquidityand Capital Resources**

 

As of February 23, 2008, we had net working capital ofapproximately $228.5 million, which included $1.0 million in distributionspayable and cash and cash equivalents of $25.6 million.  As of August 25, 2007,we had net working capital of approximately $249.3 million, which included $6.4million in distributions payable and cash and cash equivalents of $30.4 million. Our primary sources of liquidity are cash flows from operations and availableborrowings under our amended and restated credit facility.

 

 

16

 

 

 

 

 

 

As of February 23, 2008, we had $463.9 million oflong-term debt, of which $3.5 million was classified as a current liability. Asof February 23, 2008, our amended and restated credit facility consisted of a $202.6million term loan and a $200.0 million revolving line of credit loan, which hadoutstanding borrowings of $65.1 million, outstanding letters of credit of $60.6million and available borrowings of $74.3 million, based on the mostrestrictive financial covenant calculations.  Cash flows from operations andborrowings under our amended and restated credit facility have funded ourworking capital requirements, acquisitions, capital expenditures and othergeneral corporate purposes.  We were in compliance with all of our financialcovenants under our amended and restated credit facility as of February 23, 2008.

 

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 leases and other obligations of $15.5 million as of February 23, 2008. 

 

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. Our ability to generatesufficient cash, however, is subject to certain general economic, financial,industry, legislative, regulatory and other factors beyond our control.  For areview of our obligations that affect liquidity, please see the “Cash PaymentObligations” table in “Item 7. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations” of our Annual Report on Form10-K for the year ended August 25, 2007.

* *

*OperatingActivities*

 

                Netcash provided by operating activities in the twenty-six weeks ended February 23,2008 was approximately $15.6 million compared to net cash used in operatingactivities of approximately $39.6 million in the twenty-six weeks ended February24, 2007.  The improvement was primarily due to net cash being provided inoperating activities through accounts receivable, inventory, and accountspayable in the current year while net cash was used in operating activitiesthrough accounts receivable, inventory, accounts payable and accruedcompensation and benefits in the same comparable period of last year.

 

*InvestingActivities*

 

Net cash used in investing activities was approximately$24.0 million in the twenty-six weeks ended February 23, 2008 compared to approximately$19.8 million in the twenty-six weeks ended February 24, 2007.  This increasein cash used was primarily attributable to an increase in expenditures forproperty, plant and equipment related to improving operating efficiencies, primarilyat our Liberal and Dodge City facilities, in the current year.

* *

*FinancingActivities*

 

                Netcash provided by financing activities was approximately $3.6 million in the twenty-sixweeks ended February 23, 2008 compared to approximately $54.3 million in the twenty-sixweeks ended February 24, 2007.  The change was primarily attributed to a $44.3million difference in revolving credit borrowings and an $18.1 million changein the impact of overdraft balances which was partially offset by $7.4 millionin repayments on our term note, made in the 2007 period that did not recur inthe 2008 period, and a $4.9 million decrease in member distributions payable duringthe current twenty-six week period as compared to the same period of lastyear.  

 

*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 baselimitations.  

 

17

 

 

 

 

 

 

                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 February 23, 2008, theinterest rate for the revolving loan was approximately 4.8%.   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 February 23, 2008, the interest rate for theterm loan was approximately 5.3%.

        Therevolving line of credit and the term loan will have no financial covenantsunless the borrowing base availability is less than $50.0 million for fiveconsecutive business days or less than $35.0 million on any single business dayduring any fiscal quarter.  If the borrowing base availability falls belowthese amounts, a fixed charge ratio of 1:15 to 1:00 must be maintained at theend of each subsequent fiscal quarter until the borrowing base availability hasbeen greater than or equal to $50.0 million for 90 consecutive days.  TheCompany was not subject to the fixed charge ratio test at February 23, 2008. The advance rates under the borrowing base are 90% on eligible accounts 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 booksand records, 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.

                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.

 

 

18

 

 

 

 

 

 

**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 offactors, 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 to market. SFAS No. 133 imposes extensive recordkeeping requirements in order to treat aderivative instrument as a hedge for accounting purposes. Derivatives qualifyfor treatment as hedges when there is a high correlation between the change infair value of the instrument and the related change in fair value of theunderlying commitment. For derivatives that qualify as effective hedges, thechange in fair value has no net effect on earnings until the hedged transactionaffects earnings. For derivatives that are not designated as hedginginstruments, or for the ineffective portion of a hedging instrument, the changein fair value does affect current period net earnings.

 

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

 

Weuse a sensitivity analysis to evaluate the effect that changes in the marketvalue of commodities will have on these commodity derivative instruments.  Asof February 23, 2008, the potential change in fair value of applicablecommodity prices, assuming a hypothetical 10% decrease in the underlyingcommodity price, was $0.2 million.  As of August 25, 2007, the potential changein fair value of applicable commodity prices, assuming a hypothetical 10%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 weoperate in international markets including Japan, South Korea and China,product sales are predominately made in United States dollars, and therefore,currency risks are limited.

 

19

 

 

 

 

 

 

*Interest Rates.*As a result of our normal borrowing and leasing activities, ouroperating results are exposed to fluctuations in interest rates, which wemanage primarily through our regular financing activities. We generallymaintain limited investments in cash and cash equivalents.  

 

We have long-term debt with variable interest rates.Short-term debt is primarily comprised of the current portion of long-term debtmaturing twelve months from the balance sheet date.  Our variable interestexpense is sensitive to changes in the general level of interest rates.  As ofFebruary 23, 2008, the weighted average interest rate on our $288.4 million ofvariable rate debt was approximately 5.0%.

 

We had total interest expense of approximately $18.3 millionduring the twenty-six week period ending February 23, 2008.  The estimatedincrease in interest expense from a hypothetical 200 basis point increase inapplicable variable interest rates would have been approximately $2.7 millionin the twenty-six week period ending February 23, 2008. 

 

 

**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 disclosures includedin this report, as well as to safeguard assets from unauthorized use ordisposition. We evaluated the effectiveness of the design and operation of ourdisclosure controls and procedures as defined in the Securities Exchange Act of1934 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 Commission filings. There have been no changes in our internal controls over financial reportingduring the thirteen weeks ended February 23, 2008 that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.  The design of any system of controls and proceduresis based in part upon certain assumptions about the likelihood of futureevents. 

20

 

 

 

 

 

 

**PARTII. OTHER INFORMATION**

**Item 1.Legal Proceedings.**

                Forinformation regarding legal proceedings, see Note 6, “Contingencies” to our ConsolidatedFinancial Statements included in Part I, Item 1 of this Form 10-Q. 

**Item 1A.Risk Factors.**

                Otherthan the satisfaction of closing conditions to complete the Agreement and oursubsequent operation by JBS thereafter, the risk factors set forth in ourAnnual Report on Form 10-K for the year ended August 25, 2007 have notmaterially changed. 

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

                None.

**Item 3.Defaults UponSenior Securities.**

                None.

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

                None.

**Item 5.Other Information.**

**               **None.

** **

**Item 6. Exhibits.**

(A)

 Exhibits

		  

 

 

   

  2.1

 

Member Interest Purchase  Agreement dated as of February 29, 2008, among JBS S.A.; National Beef  Packing Company, LLC; U.S. Premium Beef, LLC; French Basin Land and Cattle  Co., LLC; TKK Investments, LLC; S-B Enterprises V, LLC; TMKCO, LLC: John R.  Miller; Timothy M. Klein; and NBPCO Holdings, LLC (incorporated by reference  to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC  on March 5, 2008).

 

 

   

  2.2

 

First Amendment of  Membership Interest Purchase Agreement dated as of March 24, 2008, among JBS,  S.A.; National Beef Packing Company, LLC; U.S. Premium Beef, LLC; French Basin  Land and Cattle Co., LLC; TKK Investments, LLC; S-B Enterprises V, LLC;  TMKCO, LLC; John R. Miller; Timothy M. Klein; and NBPCO Holdings, LLC.

 

 

   
  2.3			 Second Amendment of Membership Interest Purchase			Agreement dated as of April 3, 2008, among JBS, S.A.; National Beef Packing			Company, LLC; U.S. Premium Beef, LLC; French Basin Land and Cattle			Co., LLC; TKK Investments, LLC; S-B Enterprises V, LLC; TMKCO, LLC;			John R. Miller; Timothy M. Klein; and NBPCO Holdings, LLC.			 			 			 
10.1

 

Amended and Restated Lease  Agreement dated April 11, 2006 between Joint Development Authority of Brooks,  Colquitt, Grady, Mitchell and Thomas Counties and National Beef Packing  Company, LLC.

 

 

   

31.1 

 

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

 

21

 

 

 

 

 

 

 

 

 

 

 

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.

 

** **

22

 

 

 

 

 

 

**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: April 4, 2008 

23 |