NATIONAL BEEF PACKING CO LLC - FORM 10-K

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EX-32.1 - EXHIBIT 32.1 - NATIONAL BEEF PACKING CO LLC	nbp2011827ex321.htm
EX-31.2 - EXHIBIT 31.2 - NATIONAL BEEF PACKING CO LLC	nbp2011827ex312.htm
EX-31.1 - EXHIBIT 31.1 - NATIONAL BEEF PACKING CO LLC	nbp2011827ex311.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark one)

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

For the fiscal year ended August 27, 2011

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

For the transition period from to .

Commission file number 333-111407

NATIONAL BEEF 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)

12200 North Ambassador Drive, Kansas City, MO 64163

(Address of principal executive offices)

Telephone: (800) 449-2333

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No o

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large Accelerated Filero		Accelerated Filero

Non-Accelerated Filerx		Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

There is no market for the Registrant’s equity. As of November 16, 2011, there were 203,990,136 Class A units and 15,381,317 Class B units outstanding, all of which were held by affiliates.

DOCUMENTS INCORPORATED BY REFERENCE

None

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TABLE OF CONTENTS



		Page No.

	PART I.

Item 1.	Business.	4

Item 1A.	Risk Factors.	13

Item 1B.	Unresolved Staff Comments.	20

Item 2.	Properties.	20

Item 3.	Legal Proceedings.	21

	PART II.

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	22

Item 6.	Selected Financial Data.	23

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	24

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	37

Item 8.	Financial Statements and Supplementary Data.	38

Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.	38

Item 9A.	Controls and Procedures.	38

Item 9B.	Other Information.	39

	PART III.

Item 10.	Directors, Executive Officers and Corporate Governance.	40

Item 11.	Executive Compensation.	42

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	51

Item 13.	Certain Relationships and Related Transactions, and Director Independence.	53

Item 14.	Principal Accounting Fees and Services.	53

	PART IV.

Item 15.	Exhibits and Financial Statement Schedules.	55

	Signatures.	58

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MARKET AND INDUSTRY DATA AND FORECASTS

Market data and certain industry forecasts used throughout this report were obtained from internal surveys, market research, consultant surveys, publicly available information and industry publications and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Similarly, internal surveys, industry forecasts and market research, which we believe to be reliable, based upon our management’s knowledge of the industry, have not been independently verified. Forecasts are particularly likely to be inaccurate, especially over long periods of time. In addition, we do not know what assumptions regarding general economic growth were used in preparing the forecasts we cite.

_______________________________________________________

Unless the context indicates or otherwise requires, the terms “National Beef,” “NBP,” “Company,” “we,” “our,” and “us” refer to National Beef Packing Company, LLC and its consolidated subsidiaries. As used in this report, the term “USPB” refers to U.S. Premium Beef, LLC, a Delaware limited liability company, formerly U.S. Premium Beef, Ltd., a Kansas cooperative. As used in this report, the terms “fiscal year” or “fiscal year ended” refers to our fiscal year, which ends on the last Saturday in August.

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PART I


ITEM 1.	BUSINESS

General

We are one of the largest beef processing companies in the United States, or U.S., accounting for approximately 14% of the federally inspected steer and heifer slaughter during our fiscal year ended August 27, 2011 as reported by the United States Department of Agriculture, or USDA. During the fiscal year ended August 27, 2011, we generated approximately $6.8 billion in total net sales and had net income of approximately $259.0 million.

Led by an entrepreneurial management team, we began operations in 1992 with a single facility in Dodge City, Kansas. Since then, we have successfully grown through internal expansion, selective facility acquisitions, process improvements and a focus on increasing our value-added product offerings consisting of branded boxed beef, case ready beef, portion control beef and further processed hides. We have invested approximately $478.2 million from the beginning of fiscal 2001 through the end of fiscal 2011 to expand our operations, modernize and increase the capacity of our facilities, and increase our ability to produce and sell higher margin, value-added products. In 1997, we entered into a strategic relationship with our current majority owner, U.S. Premium Beef, or USPB, an organization owned by cattle ranchers and feedlot operators. USPB members supply us with approximately 20% of the cattle we process pursuant to our contractual arrangement with USPB. Some of these members also sell us additional cattle outside of this arrangement. We do not own any USPB member cattle or feedlots. We believe the USPB relationship provides us with a competitive advantage through a consistent and dependable supply of high-quality cattle, including for processing in our value-added and other programs.

We process, package and deliver fresh and frozen beef and beef by-products for sale to customers in the U.S. and international markets. Our products include boxed beef, ground beef, hides, tallow, and other beef and beef by-products. We emphasize the sale of higher-margin, value-added beef products including branded boxed beef, case-ready beef, portion control beef, and further processed hides. We market our branded products under several trade names that we own including Black Canyon® Angus Beef ,Black Canyon® Premium Reserve, Certified Premium Beef®, Naturewell® Natural Beef, NatureSource® Natural Angus Beef, Vintage Natural Beef® and Imperial Valley® Premium Beef. In addition to brands we own, we also market value-added products under the following registered trademarks pursuant to license agreements: Certified Angus Beef®, a registered trademark of Certified Angus Beef LLC, a wholly-owned subsidiary of the American Angus Association; and Certified Hereford Beef® and Nuestro Rancho®, registered trademarks of Certified Hereford Beef, LLC.

We market our products to retailers, food service providers, distributors, further processors, and the United States military. Value-added products represented approximately 36% of our total net sales, and a substantially higher proportion of our operating profit during fiscal year 2011. We currently export our products to more than 30 countries and we have dedicated sales offices in Japan, South Korea and China. Our export sales represented approximately 13% of our net sales for the fiscal year ended August 27, 2011. According to export data from PIERS, we are currently the largest exporter of chilled beef produced in the U.S. to Japan. We also are a majority owner of Kansas City Steak Company, LLC, or Kansas City Steak, which sells portioned beef and other products directly to customers in the food service and retail channels as well as direct to consumers through the internet, direct mail and QVC.

We believe our Dodge City, Kansas and Liberal, Kansas beef processing facilities are among the highest capacity and most efficient plants in the U.S. In addition, we believe our beef processing facility in Brawley, California is among the newest in the industry. These three beef processing facilities are located to provide efficient access to a ready supply of high quality cattle. Our two case-ready facilities, which take primal cuts and further process and package meat to customer specifications, are located in Hummels Wharf, Pennsylvania and Moultrie, Georgia and service key customers in readily accessible high density population centers. We also own and operate a refrigerated and livestock transportation company, National Carriers, Inc., or National Carriers, as part of our commitment to provide high service levels to our customers and suppliers.

Our Competitive Strengths

Significant Value-Added Product Portfolio. We are a leading producer of value-added beef products. Our customers market these products under our brands as well as through their own premium private label programs. We believe our value-added products are able to command higher prices because of our ability to consistently meet product specifications, based on quality, trim, weight, size, breed or other factors tailored to the needs of our customers. We also provide marketing support for our value-added programs. We believe our value-added products and programs not only provide higher profitability, but also improve customer acquisition and retention.

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In March 2009, we expanded our value-added product portfolio through our acquisition of a wet blue tanning facility in Saint Joseph, Missouri. We sell our wet blue tanned hides to processors that produce finished leather for high quality applications in industries such as automotive, luxury goods, apparel and furniture. We believe supplementing our value-added product portfolio through further processing of a portion of our hides will generate additional profit for us.

Our total value-added sales in fiscal 2011 were approximately $2,482.2 million, comprising approximately 36% of our total net sales. This represents a compound annual growth rate of 17% from approximately $595.2 million of total value-added sales in fiscal 2002. We believe our value-added products will continue to be an important contributor to our profitability. Margins on our value-added products historically have been less volatile than margins on our commodity products.

Differentiated Cattle Supply. USPB, a limited liability company whose owners consist of cattle ranchers and feedlot operators, is contractually obligated to deliver approximately 735,000 head of cattle per year to us. We do not own any USPB member cattle or feedlots. We believe the cattle we receive from USPB members are of high quality, which is important for our value-added programs. In fiscal 2011, pursuant to our contractual arrangement with USPB, USPB members provided us with approximately 20% of the total cattle we processed. Some USPB members also sold us additional cattle outside of this arrangement. We believe this supply relationship with USPB members provides us with significant competitive advantages, including: (i) the ability to consistently provide our customers with higher margin, value-added products and (ii) a predictable supply of cattle that enhances production efficiencies.

Our two largest beef processing facilities, which represent approximately 86% of our slaughter capacity, are located in southwest Kansas. The primary market area for the purchase of cattle for those facilities includes Kansas, Texas and Oklahoma. According to information from the USDA, cattle on feed in the Kansas, Texas and Oklahoma area represented approximately 48% of the cattle on feed in the U.S. during fiscal 2011. A significant portion of USPB’s members are located in this area, further enhancing our cattle supply chain. Our third beef processing facility is located in southeastern California. An important source of cattle for this facility is an alliance of cattle producers (which alliance is a member of USPB) in Arizona and California with whom we have cattle supply agreements.

The close proximity of our facilities to large supplies of cattle gives our buyers the ability to visit feedlots on a regular basis, which enables us to develop strong working relationships with our suppliers, reduces our reliance on any one cattle supplier and lowers in-bound transportation costs.

Modern and Efficient Facilities. We have invested more than $478.2 million from the beginning of fiscal 2001 through the end of fiscal 2011 to expand our operations, modernize and increase the capacity of our facilities, and increase our ability to produce and sell higher margin, value-added products. We believe our beef processing facilities in Dodge City, Kansas and Liberal, Kansas are among the largest, most modern and efficient processing facilities in the U.S. With the acquisition of the Brawley, California plant in June 2006, we expanded our daily processing capacity to approximately 14,000 cattle per day and gained a strategic location to access more efficiently western U.S. and Asian export markets. Our two case-ready facilities in Hummels Wharf, Pennsylvania and Moultrie, Georgia, which began operating in 2001, are outfitted with state-of-the-art processing and packaging equipment that allows us to serve key customers in high density population centers in the Eastern U.S. We are in the process of an expansion project (budgeted at approximately $28.9 million) at our tannery in St. Joseph, Missouri, which is expected to be completed in 2012. This project, which was contemplated as part of our acquisition plan for the tannery assets in March 2009, is designed to increase the capacity and product capabilities of our tannery facility. We believe this facility will be one of the largest and most efficient wet blue processing plants in the world once this expansion is completed.

Customer and Channel Diversification. We have a diversified sales mix across distribution channels and customers. This approach provides multiple avenues of potential growth and reduces our dependence on any one market or customer. We sell our products to retailers, food service providers, distributors, further processors, the U.S. military, and through other channels. Across these channels, we serve over 1,100 customers worldwide, which represent most major retailers and food service providers in the U.S. In fiscal 2011, no one customer represented more than 3% of our total net sales, other than Wal-Mart and its affiliate Sam’s Club, which together represented approximately 9% of our total net sales. Our top 10 customers represented approximately 30% of our total net sales in fiscal 2011.

Export products provide us with geographic diversification and reduce our reliance on the U.S. market. Of our export sales for fiscal 2011, approximately 56% were meat and offal products. The balance was hides and other by-products, which are not generally subject to animal health, food safety or political risks.

Disciplined Financial Management. Our indebtedness of $360.4 million as of August 27, 2011 represents approximately 1.1 times our earnings before interest, taxes, depreciation and amortization, or EBITDA, for the 52 weeks ended

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August 27, 2011 (EBITDA is calculated in a substantially similar manner under our amended and restated credit facility, or the Credit Facility). This relatively low leverage provides us with significant operating and financial flexibility to respond to market conditions and to capitalize on business opportunities. A core aspect of our disciplined approach to financial management is our proprietary management information systems that enable us to make data driven, analytical decisions to operate efficiently, allocate capital prudently and manage risk.

Experienced Management Team and Workforce with Entrepreneurial Company Culture. We are led by an experienced management team. Timothy M. Klein, our Chief Executive Officer, has more than 31 years of experience in the beef processing industry and is a founding member and significant owner of NBP. The rest of our executive management team has, on average, over 25 years of industry experience and over 13 years with NBP. We believe our entrepreneurial company culture, advancement opportunities, benefits, training programs and employee safety policies contribute to relatively low employee turnover rates. Our entrepreneurial culture is evidenced by our record of growth, emphasis on individual employee accountability and company-wide focus on profitability. We have never experienced a work stoppage at any of our facilities.

Our Business Strategy

Expand Sales of Value-Added Products. Our value-added sales grew to approximately $2,482.2 million in fiscal 2011 from approximately $595.2 million in fiscal 2002, representing a compound annual growth rate of approximately 17%. We intend to continue expanding sales of value-added products by increasing our penetration with existing customers, targeting new customers that are well-suited for our value-added programs and expanding the number of value-added products we offer. We believe the investments we have already made in our value-added business, including in retail merchandising expertise, customer service and fulfillment capabilities and operational/processing technologies, along with our differentiated cattle supply chain, position us well to capitalize on this strategy. For example, we have been a leader in establishing the case-ready market, and we believe our experience will enable us to benefit from increased customer interest in the advantages case-ready products provide, such as reducing labor costs and workplace injuries associated with slicing beef, reducing food safety risks and shifting the square footage currently used by “back-of-the-store” portioning and packaging to higher profit uses. In addition to beef products, our value-added initiatives also include our wet blue tanning business. We are in the process of expanding our tanning operation, which is expected to be completed in 2012. When the project is complete, we expect to be able to process nearly all of the hides we produce at our Kansas beef processing plants.

Pursue Additional Export Opportunities. We believe international markets present a significant growth and profit opportunity for us. We believe protein demand will increase in the long term due to rising living standards and a growing middle class in developing countries. As a leading producer of beef products, we believe we are well-positioned to serve this growing global demand. According to export data from PIERS, we are currently the largest exporter of chilled beef produced in the U.S. to Japan. South Korea is another significant market for U.S. beef, and we believe we can leverage our existing relationships to grow our business there. Although the margins we realize on export sales can vary significantly by product and market, on average we currently realize higher margins on export sales than on domestic sales.

Maintain Highly Disciplined Approach to Acquisitions and Capital Expenditures. Our management team has a history of following a disciplined approach to capital investment. We have effectively executed and integrated several acquisitions in core and complementary businesses, as well as numerous capital expenditure initiatives. We believe the success of these activities is reflected in our rates of return on invested capital. We plan to continue to pursue opportunities that generate attractive returns on invested capital.

Continuing Focus on Margin Expansion. Our operating philosophy is to seek to maximize our profit on all cattle we process regardless of prevailing commodity prices or stage of the cattle cycle. We endeavor to accomplish this through management actions, such as reduction of operating costs, increasing price realization across the entire carcass and improving product yields. We believe our proprietary management information systems allow us to more accurately measure our costs and yields against relevant benchmarks and to make better processing decisions with respect to the cattle we procure in order to increase our profitability.

Industry Overview

Beef products represent the largest segment of the U.S. meat industry based on retail sales and the U.S. is the largest producer of beef in the world, producing approximately 26.4 billion pounds of beef in calendar 2010. According to the USDA, beef consumption in the United States increased from approximately 24.3 billion pounds in 1992 to approximately 26.4 billion pounds in calendar 2010, representing a compound annual growth rate of 0.5%.

Beef production, from the birth of the animal through the delivery of beef products to the end customer, is comprised of

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two primary segments: production and processing. The production segment raises cattle for slaughter and the processing segment slaughters cattle and packages beef for delivery to customers. Beef processors seek to procure cattle through multiple methods, including spot market purchases and a variety of contractual arrangements. The owners of the cattle bear the cost of feeding the cattle to the appropriate market weights and have direct financial exposure to the volatility in grain and other input costs. Beef processors are primarily “spread” operators, earning margin between the price they realize for their products and the cost of procuring and processing the cattle.

The domestic beef industry is characterized by prices that change daily based on seasonal consumption patterns and overall supply and demand for beef and other proteins in the U.S. and abroad. In general, domestic and worldwide consumer demand for beef products determines beef processors’ long-term demand for cattle. In order to operate profitably, beef processors seek to acquire cattle at the lowest possible cost and to minimize processing costs by optimizing plant utilization and minimizing the cost of packaging and other input costs. Cattle prices vary seasonally and are affected by cattle inventory levels, weather and other factors. In addition to seasonal factors, cattle prices are impacted by the longer term nature of the cattle cycle. Cattle supply in the beef industry typically follows a ten to twelve year cycle, consisting of about six to seven years of expansion followed by one to two years of consolidation and three to four years of contraction. This cycle is unique to cattle among major protein sources as other animals (such as hogs and chickens) can generate multiple offspring and have shorter incubation periods.

During the past few decades, consumer demand for beef products in the U.S. has grown in line with population growth, which is a key driver of aggregate demand. We believe consumer demand for U.S. exports in international markets is driven not only by population growth, but also by economic growth. As international consumers’ economic circumstances improve, they increasingly shift their diets to protein. The ability of the U.S. beef industry to supply the growing international demand has been hindered in certain international markets following the discovery in 2003 and 2004 of isolated cases of Bovine Spongiform Encephalopathy, or BSE (also commonly referred to as mad cow disease), which resulted in the temporary closing of those markets to U.S. beef. Industry-wide export sales, however, have been increasing from 2004 through mid-2010, trending toward their pre-2003 levels.

In recent years, one U.S. beef processor eliminated approximately two million head per year of slaughter capacity in four plants. These eliminations represented a reduction of approximately 7% of total U.S. industry-wide capacity based on information from Cattle Buyers Weekly, an industry publication, and have helped improve the supply/demand balance of beef in the U.S. and export markets. We currently do not expect the industry to experience a material increase in capacity for the foreseeable future.

Our Business Segments

The Company reports in two business segments: Core Beef and Other. The Company measures segment profit as operating income. Financial information about those segments may be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Core Beef

Products, Sales and Marketing

The majority of our revenues are generated from the sale of fresh meat either as a boxed beef product or a case-ready product. Boxed beef and case-ready products accounted for approximately 89% of our revenues in fiscal 2011. In addition, we sell beef by-products to the variety meat, feed processing, fertilizer and pet food industries. We also supply cattle hides, including hides further processed by our subsidiary National Beef Leathers, LLC, or NBL, to tanners who primarily supply the automotive, luxury goods, apparel and furniture industries for both domestic and international use. The seasonal demand for beef products is generally highest in the summer and spring months as weather patterns permit more outdoor activities and there is an increased demand for higher value items that are grilled, such as steaks. As a result, boxed beef prices tend to be at seasonal highs during the summer and spring.

We emphasize the sale of higher-margin, branded beef products, and we market these products under several brand names including Black Canyon® Angus Beef, Black Canyon® Premium Reserve, Certified Premium Beef®, Naturewell® Natural Beef, NatureSource® Natural Angus Beef, Vintage Natural Beef®, and Imperial Valley® Premium Beef. In addition to the brands we own, we also market value-added products under the following registered trademarks pursuant to license agreements: Certified Angus Beef®, a registered trademark of Certified Angus Beef LLC, a wholly-owned subsidiary of the American Angus Association; and Certified Hereford Beef® and Nuestro Rancho®, registered trademarks of Certified Hereford Beef, LLC.

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We continue to focus on adding further processing, specialized cutting, packaging and other value-added components to our products that generate higher profitability. In 2001, we opened two state-of-the-art case-ready facilities, which enabled us to expand margins by producing additional quantities of value-added products using the beef we process. Our case-ready operations further process our boxed beef products by trimming and cutting our products into individual portions. These portions are then packaged to increase the shelf life of these products versus traditional packaging methods.

Our wet blue tanning facility (acquired in 2009) sells processed hides to tanners that produce finished leather for high quality applications in industries such as automotive, luxury goods, apparel and furniture. Wet blue tanning refers to the first step in further processing raw and brine-cured hides into tanned leather. The name is derived from the process that results in the further processed hides having a blue coloring.

During fiscal 2011, we sold our beef products to more than 900 customers located in the U.S. and more than 30 foreign countries. We market our beef products through several channels, including:


•	national and regional retailers, including supermarket chains, independent grocers, club stores, wholesalers and distributors such as Publix, Winn Dixie, Kroger, Sam's Club, Costco, C&S Grocers, Associated Wholesale Grocers, Porky Products and Sherwood Foods;


•	national retailers such as Wal-Mart, who purchase a substantial portion of our case-ready and branded products;


•	the food service industry, including food service distributors, hotel chains and other institutional customers such as Sysco, U.S. Foodservice and Food Services of America;


•	further processors, including Oscar-Mayer, Sara Lee and ConAgra;


•	the United States military; and


•	international markets, including Mexico, Japan, South Korea, Canada, China (for hides), Hong Kong, Egypt and Taiwan.

Exports to Mexico and a number of other foreign markets have been limited to boxed beef products from cattle younger than 30 months subsequent to the December 23, 2003 discovery of a single case of BSE in Washington state. Many international importers, such as Japan and South Korea (who were two of our largest export markets for edible beef products in fiscal year 2003), closed their borders to U.S. edible beef products after this report of BSE. In July 2006, Japan agreed to reopen its market to U.S. beef from cattle 20 months and younger. In September 2006, South Korea announced it would resume the importation of U.S. boneless beef from cattle less than 30 months of age. South Korea has closed its borders to U.S. beef from time to time as a result of alleged findings of products shipped to South Korea by U.S. export businesses that are not allowed by South Korea. Additional information regarding the Company’s export sales and long-lived assets in foreign markets is set forth in Note 13, Business Segments of the notes to the consolidated financial statements in Item 8.

The sales office for domestic operations is located in our headquarters building in Kansas City, Missouri. Our sales team in this office is responsible for selling and coordinating the movement of approximately 50.6 million pounds of boxed beef products per week to our customers nationwide. This centralized sales concept allows us to respond quickly to customer requests for pricing and load information. We have also integrated the satellite tracking capabilities of refrigerated carriers into our website allowing customers to track shipments in process. While providing significant customer advantages, our centralized sales concept also enables our sales force to share key market intelligence in a manner that allows them to react to changing market conditions in an efficient manner.

The sales office for international operations is located in Chicago, Illinois. This office coordinates all aspects of sales, pricing and shipping to all destinations outside of the United States. We also have three satellite offices in Japan, South Korea and China (for hides) that assist in the coordination of sales in those regions. Historically, two of our largest international markets for edible beef products have been in Japan and South Korea while our largest international market for hides has been in China.

Our marketing efforts include engaging in business-to-business programming and communications to create preferences for our products among our customers. In addition, we support our value-added, branded beef business through in-store merchandising and feature advertising support.

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Raw Materials and Procurement

Our primary raw material for our processing plants is live cattle. Seasonal factors affect the price we pay for livestock, with live cattle prices tending to be at seasonal highs during the summer and fall. Because of higher consumption, more favorable growing conditions and the housing of animals in feedlots for the winter months, there are generally more cattle available in the summer and fall.

During fiscal 2011, we obtained approximately 20% of the cattle we processed from USPB members using the USPB pricing grid pursuant to our contractual arrangement with USPB. During fiscal 2010 and 2009, we obtained approximately 20% and 19%, respectively, of the cattle we processed from USPB members using the USPB pricing grid. Our arrangement with USPB provides us with a consistent supply of high-quality cattle. For information regarding this agreement, see Item 13, Certain Relationships and Related Transactions and Note 9, Related Party Transactions to our consolidated financial statements in Item 8. We purchase cattle through cash bids and other arrangements from cattle producers in our primary and secondary markets. In addition to our arrangement with USPB, we have other, non-affiliated supplier arrangements that provide us with high-quality cattle. We believe we are a first choice processor for suppliers seeking to attain premium pricing for their high-quality cattle and cattle suppliers view us more favorably than our competitors due to our business model, which emphasizes building relationships and cooperating with suppliers and paying a premium for high-quality cattle. During fiscal 2011, we had approximately 1,000 suppliers provide us with cattle. We believe our relationships with USPB members and other suppliers have resulted in such suppliers improving their methods to produce more high-quality cattle and sell more of their high-quality cattle to us.

Each cattle supplier must verify its use of antibiotics or other agricultural chemicals follows the manufacturer’s intended purpose. They must also confirm they use only Federal Drug Administration, or FDA-approved pharmaceutical compounds and comply with dosage and administrative standards. Furthermore, each cattle supplier must confirm they do not use feed containing animal-based protein products. Many of our producers participate in state beef quality assurance training programs and have established certification and verification practices. These programs emphasize meeting and/or exceeding the USDA, FDA and live animal Best Practice guidelines. Using guidelines established by National Cattleman’s Beef Association, or NCBA, beef safety and quality assurance programs are administered by various state beef associations. State associations certifying our suppliers include, among others, Texas Cattle Feeders Association, Kansas Livestock Association, California Cattlemen Association, Arizona Cattle Feeders Association and Nebraska Cattlemen’s Association.

Processing Facilities and Operations

We operate a total of five beef processing facilities in the U.S. Our Liberal, Kansas and Dodge City, Kansas facilities are among the largest in the industry and are geographically positioned near our suppliers to efficiently source raw materials by reducing transportation costs. Our Brawley, California facility is among the newest in the industry, and geographically positioned to give us greater access to customers in the Western U.S. and Asia. Our case-ready facilities in Hummels Wharf, Pennsylvania and Moultrie, Georgia are located in close proximity to key customers in high density population centers in the Eastern U.S. resulting in decreased delivery times. Our case-ready facilities are also located in areas with a highly-skilled and cost-effective labor force. Our wet blue tanning facility is located in St. Joseph, Missouri. This facility is located in relative proximity to our two Kansas beef processing facilities and is at the junction of major transportation routes. We have begun and continue to invest in this recently acquired facility to improve its production capabilities and better align it to serve our expanded ongoing hide processing capacity needs. See Item 2, Properties for further information about these facilities.

Cattle delivered to our facilities are generally processed into beef products within 36 hours after arrival. On average, in a typical week, approximately 87% of the boxed beef expected to be produced from the cattle we process is committed to sale before the cattle are delivered to our facilities. Our facilities utilize modern, highly automated equipment to process and package beef products. We have invested more than $478.2 million from the beginning of fiscal year 2001 through the end of fiscal 2011 to expand our operations, modernize and increase the capacity of our facilities and increase our ability to produce and sell higher margin, value-added products. The design of our facilities emphasizes worker safety to ensure compliance with all regulations and to reduce worker injury and turnover. Additionally, we have placed a substantial amount of ammonia piping on the roof versus in the production areas, not in response to regulatory requirements, but in the interest of worker safety. These and other changes designed the workplace to better fit our employees. All expansions are reviewed by internal personnel, including our Corporate Environmental Director, Vice President of Safety, Vice President of Technical Services, Vice President of Engineering and Corporate Project Engineer, for regulatory compliance prior to construction. Our facilities are also intended to reduce waste products and emissions and dispose of waste in accordance with applicable environmental standards.

We distribute our beef products domestically directly from our processing facilities and case-ready facilities. We utilize

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our subsidiary National Carriers and third party carriers to deliver our products to our customers.

Other

Products, Sales and Marketing

We also sell value-added beef products through our portion control business, Kansas City Steak. Kansas City Steak provides premium-quality trimmed and cut individual portions both directly to customers in the food service and retail channels as well as direct to consumers through the internet, direct mail and QVC. National Carriers currently operates approximately 1,200 refrigerated and livestock trailers. NBP contracts substantially all of its in-bound and approximately 26% of its out-bound freight services from National Carriers. In February 2008, we began providing third-party logistics services to the transportation industry through our wholly-owned subsidiary National Elite Transportation, LLC, or National Elite. Logistics services involve arranging for another company to transport freight for our customers to reduce overall transportation costs while we retain the billing, collection and customer management responsibilities. We believe these transportation services enable us to provide superior customer service and enhance our ability to be a consistent, reliable and timely supplier, particularly of our value-added products.

Raw Materials and Procurement

The primary raw material for our Kansas City Steak processing facility is boxed beef. Approximately 27% of Kansas City Steak’s boxed beef purchases are made through contractual agreements predetermined by the customer for whom the product is produced. These contractual agreements are typically one year in duration and stipulate from whom the boxed beef can be purchased. In fiscal 2011, approximately 46% of Kansas City Steak’s boxed beef was purchased from NBP. The balance of Kansas City Steak’s raw material is purchased at our discretion on the open market from primary and secondary suppliers with similar quality and yield grade specifications as required under our contracts.

Processing Facilities and Operations

Kansas City Steak processes trimmed and cut individual portions at a processing facility in Kansas City, Kansas. See Item 2, Properties for further information about this facility. National Carriers has offices located in Liberal, Kansas and Dodge City, Kansas, both of which are within close proximity to our beef processing facilities in those locations, enabling us to efficiently transport product thereby reducing transportation costs. National Carriers also has offices in Denison, Iowa, Springdale, Arkansas, and Dallas, Texas as well as administrative offices located in Kansas City, Missouri. National Elite has an office in Springdale, Arkansas.

Competition

The beef processing industry is highly competitive. Competition exists both in the purchase of live cattle, as well as in the sale of beef products. Our products compete with a large number of other protein sources, including pork and poultry, but our principal competition comes from other beef processors, including Tyson Foods, Inc., Cargill Incorporated, and JBS USA LLC. Management believes the principal competitive factors in the beef processing industry are price, quality, food safety, customer service, product distribution, technological innovations and brand loyalty. In particular, we focus on quality, food safety, customer service and the offering of value-added programs on an ongoing basis. Some of our competitors have substantially larger beef operations, greater financial and other resources and wider recognition for their consumer branded products than we do.

Regulation

Our operations are subject to extensive regulation by the USDA, the Grain Inspection Packers and Stockyards Administration, or GIPSA, the FDA, the U.S. EPA and other state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising and labeling of our products, including food safety standards. Recently, the food safety practices and procedures in the beef processing industry have been subject to more intense scrutiny and oversight by the USDA. For example, on January 12, 2004, the Food Safety and Inspection Services, or FSIS, published an interim final rule on Specified Risk Materials, or SRMs, and requirements for non-ambulatory disabled cattle due to the finding of BSE in routine testing. We immediately implemented the appropriate programs/policies to ensure compliance with FSIS rules. FSIS published a final rule on July 13, 2007, making permanent the interim regulations issued in January 2004 that prohibits the slaughter of non-ambulatory disabled cattle, requires the description and removal of SRMs that are considered to be inedible, and restricts the use of captive bolt stunners that deliberately inject compressed air into the cranium of an animal. We work closely with the USDA and other regulatory agencies to help ensure our operations comply with all applicable food safety laws and regulations.

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Our domestic operations are subject to the Packers and Stockyards Act of 1921, or PSA. This statute generally prohibits meat packers in the livestock industry from engaging in certain practices including violations of the PSA’s prompt payment provisions. In general (unless otherwise agreed in writing by our livestock suppliers), this statute requires us to make full payment for our livestock purchases in the case of cash sales before the close of the next business day following the purchase and transfer of possession of the livestock we purchase, or, in the case of a cash purchase on a carcass or ‘‘grade and yield’’ basis, that we make full payment of the purchase price not later than the close of the first business day following determination of the purchase price. Any delay or attempt to delay payment as required by the PSA will be deemed an unfair practice in violation of the statute. Under the PSA, we must hold in trust for the benefit of our unpaid livestock suppliers all livestock we purchase in cash sales (as well as all inventories of, or receivables for or proceeds from, meat, meat food products or livestock products derived from these cash sales) until the sellers have received full payment. As of August 27, 2011, NBP LLC has secured a bond of $35.9 million to satisfy these requirements.

On June 22, 2010, GIPSA published a proposed rule that would add new regulations under the PSA. Among other things, the proposed rule would eliminate the requirement that GIPSA or livestock producers demonstrate competitive harm to prove violations of Sections 202(a) and 202(b) of the PSA, which sections limit unfair, unjustly discriminatory or deceptive practices and undue or unreasonable preferences or advantages in livestock purchasing practices. Elimination of this requirement could have a significant impact on cattle procurement and marketing practices in the beef processing industry. In particular, it could impair our ability to pay premiums for cattle that meet the quality standards for our value-added or export programs, thus affecting how we (i) procure cattle for these programs and (ii) process and market value-added and exported products. We cannot predict whether the proposed rule or some modified rule will be adopted or the extent of the effect of any such rule on the beef processing industry or on our operations or financial results.

Our Dodge City, Kansas and Liberal, Kansas facilities are subject to Title V permitting pursuant to the federal Clean Air Act and the Kansas Air Quality Act and implementing regulations. These permits expired on January 25, 2010, but were administratively extended pending renewal by the Kansas Department of Health and Environment, or KDHE, of our renewal applications. Our Brawley and St. Joseph plants are subject to secondary air permits which are in place. The Moultrie and Hummels Wharf plants are subject only to certain reporting requirements. Our Dodge City, Liberal, Hummels Wharf, Moultrie and Brawley, facilities are subject to Clean Air Act Risk Management Plan requirements relating to our use of ammonia as a refrigerant. In February 2010, KDHE requested the Liberal plant submit a construction permit application and a ‘‘Best Available Control Technology,’’ or BACT, analysis for a bone dryer that was installed in the Liberal plant in 1981 by a prior owner of the Liberal plant. We have completed the BACT analysis and have submitted a construction permit for the bone dryer pursuant to KDHE’s request.

All of our plants are indirect dischargers of wastewater to publicly-owned treatment works and are subject to requirements under the federal Clean Water Act and corresponding state laws and implementing municipal laws as well as agreements or permits with municipal or county authorities. We have an agreement with the City of Liberal for wastewater and storm water treatment and are working with the City regarding expansion of the City’s treatment facilities to address new and more stringent discharge requirements that will apply to the City’s discharge in the context of the renewal of the City’s discharge permit. Depending upon the ultimate cost of the required upgrade, there may be significant expenditures associated with the expansion of the City’s treatment facilities. We have an agreement with the City of Moultrie and The Joint Development Authority of Brooks, Colquitt, Grady, Mitchell and Thomas Counties for treatment of wastewater from the Moultrie plant, and we have a pretreatment permit from the City of Moultrie for treatment of wastewater from the Moultrie plant. This permit was reissued in March 2010, and we are making the capital improvements needed to meet new phosphorus limits that are in the reissued permit. Estimated capital expenditures associated with the treatment of phosphorus in our wastewater at Moultrie are estimated at approximately $3.0 million, of which approximately $2.7 million was spent during fiscal years 2010 and 2011, with the remaining included in our 2012 capital expenditure budget. We have upgraded our treatment facilities at the Brawley plant to provide treatment that meets the ammonia requirements of the Brawley City Ordinance and we are in the process of making improvements that will allow us to consistently meet the total suspended solids limits in such Ordinance. The City of Brawley is in the process of upgrading its publicly-owned treatment works in order to comply with its direct discharge permit, including requirements for ammonia and nutrient controls.

Storm water discharges from our plants are regulated pursuant to general permits issued by the respective states with the exception of Missouri which does not have a general permit program available to our St. Joseph tannery. The Missouri Department of Natural Resources made a comprehensive storm water inspection at the tannery in April-May 2009 and in an inspection report and Notice of Violation requested that the plant submit an application for storm water discharges which previously had been determined to be discharged to the City publicly-owned treatment works and, thus, not requiring a permit. We submitted the requested permit application in November 2009.

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Our Dodge City, Liberal, Hummels Wharf, and St. Joseph plants are supplied by water from supply wells on our property. We purchase water from the City of Moultrie and the City of Brawley and some water is purchased from the City of St. Joseph, all pursuant to municipal water rate structures. We have purchased irrigation water rights for the majority of water needed at our Dodge City plant which originally were governed by renewable term permits. We have since converted the renewable term permits into certificates of appropriation. We hold public water supply permits allowing us to supply potable water to our employees at our Dodge City, Kansas and Liberal, Kansas facilities. The public water supply permits do not have expiration dates.

All of our facilities generate solid wastestreams, including small quantities of hazardous wastes. While we are subject to laws that provide for strict, and in certain circumstances joint and several, liability for remediation of hazardous substances at contaminated sites, which could include current or former facilities or other sites where wastes we generated have been disposed, we have not received any demands nor are we aware that we have any liability at such sites under the Comprehensive Environmental Response, Compensation and Liability Act, or Superfund, or state counterparts.

Our plants are subject to community right to know reporting requirements under the Superfund Amendments and Reauthorization Act of 1986, which requires yearly filings as to the substances used on the plant premises. We also report accidental releases of hazardous substances pursuant to the Superfund law and amendments and state law counterparts.

In fiscal 2011, we incurred expenses of approximately $4.1 million in environmentally-related capital expenditures, of which approximately $1.1 million was spent for wastewater improvements at our Moultrie plant.

In addition to the environmental matters discussed above, from time to time we receive notices from regulatory authorities and others asserting that we are not in compliance with some laws and regulations. In some instances, litigation ensues.

Employees

As of August 27, 2011, we had approximately 9,100 employees, of which approximately 44% are represented by collective bargaining agreements. Approximately 2,800 employees at our Liberal, Kansas facility are represented by the United Food and Commercial Workers International Union under a collective bargaining agreement scheduled to expire December 16, 2012. Approximately 1,100 employees at our Brawley, California facility are jointly represented by the United Food and Commercial Workers International Union and the Teamsters International Union under a collective bargaining agreement scheduled to expire on December 8, 2013. Approximately 90 employees at our St. Joseph, Missouri facility are represented by the United Cereal Workers of the United Food and Commercial Workers International Union under a collective bargaining agreement scheduled to expire on May 18, 2014.

The employees at our Dodge City, Kansas facility have voted in favor of union representation in a two day National Labor Relations Board-supervised secret ballot election. The tally of ballots, released November 5, 2011, was in favor of representation by the United Food and Commercial Workers International Union. The union has been certified as the representative of a bargaining unit of approximately 2,600 employees in production and maintenance, shipping and receiving, grounds keeping and the warehouse. The election was conducted on November 3, 2011 and November 4, 2011.

We consider our relations with our employees and the United Food and Commercial Workers International Union and the Teamsters International Union and the United Cereal Workers of the United Food and Commercial Workers International Union to be good.

Food Safety

Food safety is one of our top priorities. We believe our food safety process utilizes many of the industry’s most effective intervention technologies. These intervention technologies are coupled with our ongoing efforts to incorporate and promote “best practices” throughout our production process to enhance product quality and to produce safe, wholesome beef products. Our food safety system incorporates a multiple hurdle strategy that includes multiple hot water thermal pasteurization cabinets, anti-microbial washes, organic rinses, in-line steam vacuums, specific carcass trimming procedures, detailed carcass and product monitoring standard operating procedures, and a rigorous cold chain management system. We support our food safety process in each of our major processing facilities with on-site microbiological laboratories. These on-site laboratories conduct microbial tests, monitor facility processes, test intervention efficacies, and validate that all of our processes are meeting design parameters.

Intellectual Property

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We hold a number of trademarks and domain names we believe are material to our business and which are registered with the United States Patent and Trademark Office, including National Beef®, BioLogic® Food Safety System, Black Canyon® Angus Beef, Black Canyon® Premium Reserve, Certified Premium Beef®, Naturewell® Natural Beef, NatureSource® Natural Angus Beef, Vintage Natural Beef®, Imperial Valley® Premium Beef, Leading the Way in Quality Beef®, Royal Blue® Leather, Regal Blue Leather®, Radiant Blue Leather®, and W.E.L.L Initiatives®. We have also registered the National Beef® trade name and trademark in most of the foreign countries to which we sell our products. Currently, we have a number of trademark registrations pending in the U.S. and in foreign countries. In addition to trademark protection, we attempt to protect our unregistered marks and other proprietary information under trade secret laws, employee and third-party non-disclosure agreements and other laws and methods of protection. All other trademarks or trade names referred to in this report are the property of their respective owners.

Management Information Systems

We have developed proprietary management information systems tailored to our business processes which help enable us to make coordinated, data driven decisions and enable us to operate more profitably. For example, we use individual carcass data (including information on weight, grade and breed as well as historical information with respect to similar animals) to make decisions regarding the appropriate products to process from each carcass, taking into account current supply and demand. Furthermore, coordinated information systems help the procurement department to anticipate the quality and quantity of cattle it needs to procure to fill sales orders in the short term, and the sales department to tailor its sales efforts to take into account changes in available supply. Our sophisticated systems also permit our sales force to readily compare orders by location to trailer capacity to reduce transportation costs by better using trailer capacity. In addition, our management information systems at our plants have been developed to fit our operating and maintenance needs, thereby reducing training time for our employees and simplifying the work order process.

Legal Proceedings

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


1A.	RISK FACTORS

Our business operations and the implementation of our business strategy are subject to significant risks inherent in our business, including, without limitation, the risks and uncertainties described below. The occurrence of any one or more of the risks or uncertainties described below could have a material adverse effect on our financial condition, results of operations and cash flows. While we believe we have identified and discussed below the key risk factors affecting our business, there may be additional risks and uncertainties that are not presently known or are not currently believed to be significant that may adversely affect our business, operations, industry, financial position and financial performance in the future.

Risks Related to Our Industry and Our Business

Outbreaks of disease affecting livestock can adversely affect demand for our products and the supply of cattle and thereby adversely affect our business.

We are subject to risks relating to animal health and disease control. An outbreak of disease affecting livestock, such as BSE (also commonly referred to as mad cow disease) or foot-and-mouth disease could result in restrictions on sales of products to our customers or purchases of livestock from our suppliers. Also, outbreaks of these diseases, or the perception by the public that such an outbreak has occurred or other concerns regarding such disease, whether or not resulting in regulatory action, can lead to cancellation of orders by our customers and create adverse publicity that may have a material adverse effect on consumer demand and, as a result, on our results of operations. Furthermore, an outbreak of disease could lead to widespread destruction of cattle, which could have a negative impact on us.

If our products or products made by others using our products become contaminated or are alleged to be contaminated, we may be subject to product liability claims and product recalls that would adversely affect our business.

We may be subject to significant liability potentially in excess of applicable liability insurance policy limits if the consumption of any of our products or products made by others using our products causes injury, illness or death due to contamination or otherwise. In addition, we may in the future recall products in the event our products are or may be

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contaminated, spoiled or inappropriately labeled. Contamination of our products or those of our competitors also may create adverse publicity or cause consumers to lose confidence in the safety and quality of our products that could negatively affect our business. We may encounter the same risks of contamination or negative publicity if a third party tampers with our products. Allegations of contamination of our products may also be harmful to us even if such allegations are untrue. The occurrence of any of these risks may increase our costs and decrease demand for our products, which could negatively affect our business, financial condition, results of operations and cash flows. Organisms producing food borne illnesses are generally found in the environment and there is a risk that as a result of food processing they could be present in our products. For example, E. coli is one of many food borne bacteria commonly associated with beef products. Once contaminated products have been shipped for distribution and consumption, illness or death may result if pathogens are present or increase due to handling or temperatures, and are not otherwise eliminated at the further processing, food service or consumer level. There can be no assurance that we will not be required to perform product recalls, or that product liability claims will not be asserted against us, in the future.

Our margins may be negatively impacted by fluctuating raw material and utility costs, selling prices, changes in our relationships with our suppliers and other factors that are outside of our control.

Our margins are dependent on the price at which our beef products can be sold and the price we pay for our raw materials, among other factors. These prices can vary significantly over a relatively short period of time as a result of a number of factors, including the relative supply and demand for live cattle and beef products, as well as the market for competing or complimentary products, such as pork and poultry. In addition, closure of international markets to U.S. beef product exports as a result of the December 23, 2003 BSE discovery negatively affected U.S. beef product margins, as certain by-products, classified as Specific Risk Materials, or SRMs, have been banned from use in feedstocks and the human food chain. Some of these products previously enjoyed a market in foreign countries.

The supply and market price of the livestock that constitute our principal raw material and represent the substantial majority of our cost of goods sold are dependent upon a variety of factors over which we have little or no control, including fluctuations in the size of herds maintained by producers, the relative cost of feed and energy, weather and livestock diseases. In addition, we purchase approximately 52% of the cattle we process on the open market. If we do not attract and maintain acceptable relationships with growers, the quantity, quality or pricing of our supply of cattle could be negatively affected.

Severe price swings in raw materials, and the resulting impact on the prices we charge for our products, have at times had, and may in the future have, a material adverse effect on our financial condition, results of operations and cash flows. If we experience increased costs, we may not be able to pass them along to our customers. In addition, our costs for utilities, such as energy and water may fluctuate over time.

Our international operations expose us to political and economic risks in foreign countries, as well as to risks related to currency fluctuations and could negatively affect our sales to customers in foreign countries and our operations and assets in such countries.

In fiscal 2011, exports, primarily to Mexico, Japan, South Korea, Canada, China (for hides), Hong Kong, Egypt, and Taiwan accounted for approximately 12.6% of our total net sales and these sales on average had a higher margin than our sales generally. A reduction in our international sales would likely adversely affect our margins. In addition, our international activities expose us to risks not faced by companies that limit themselves to the domestic market. One significant risk is that the international operations may be affected by tariffs, other trade protection or food safety measures and import or export licensing requirements.

An example of a risk related to our international operations is BSE, as discussed above in Item 1, Business — Industry Overview — Beef Export Markets.

Other risks associated with our international activities include:


•	changes in foreign currency exchange rates and inflation or deflation in the foreign countries in which we operate;


•	the closing of borders by foreign countries to the import of our products due to disease or other perceived health or food safety issues;


•	exchange controls;


•	changes in tariffs;

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•	changes in political or economic conditions in a specific country or region, particularly in emerging markets;


•	trade restrictions imposed by countries with respect to the importation of our products, including actions taken in connection with trade disputes;


•	potentially negative consequences from changes in regulatory requirements; and


•	international conflict, including terrorist acts, which could significantly impact our financial condition and results of operations.

The occurrence of any of these events could increase our costs, lower demand for our products or limit our operations, which could have a material adverse effect on our business, financial condition, results of operations or prospects.

Compliance with environmental regulations could result in significant costs and failure to comply with environmental regulations and our use of hazardous substances, including at National Beef Leather’s tannery facility, could result in civil as well as criminal penalties, liability for damages and negative publicity.

Our operations are subject to extensive and increasingly stringent regulations, including those relating to wastewater and stormwater discharges, air emissions, waste handling and disposal and remediation of soil and groundwater contamination that are administered by the U.S. Environmental Protection Agency, or EPA and state, local and other authorities. In many areas, these laws and regulations are becoming increasingly stringent. Failure to comply with these laws and regulations can have serious consequences for us, including criminal as well as civil and administrative penalties and negative publicity. We have incurred and will continue to incur significant capital and operating expenditures to adapt to more stringent regulations and to avoid violations of these laws and regulations. Additional environmental requirements imposed in the future could result in currently unanticipated investigations, assessments or expenditures, and may require us to incur significant additional costs. Because the nature of these potential future charges is unknown, management is not able to estimate the magnitude of any future costs and we have not accrued any reserve for any potential future costs.

Some of our facilities have been in operation for many years. During that time, we and previous owners of these facilities have generated and disposed of wastes that are or may be considered hazardous or may have polluted the soil or groundwater at our facilities, including adjacent properties. The discovery of previously unknown contamination of property underlying or in the vicinity of our present or former properties or manufacturing facilities and/or waste disposal sites could require us to incur material unforeseen expenses. Occurrences of any of these events may have a material adverse effect on our business, financial condition, results of operations and cash flows.

In most locations, our processing facilities rely on municipal or other regional governmental agencies for our water supply and for the treatment of our wastewater discharges. These entities themselves are subject to environmental laws regarding the quality of their water discharges, and must meet permit limits. If permit limits become more stringent, upgrades and capital improvements to these municipal treatment facilities are likely. In those locations where we are a significant volume discharger, it is possible we may be asked to contribute toward the costs of such upgrades, or we may become subject to significant increases in water or sewer charges in order for such upgrade costs to be recouped.

Our indebtedness could adversely affect our business and our liquidity position.

As of August 27, 2011, we had $360.4 million of long-term debt, of which $38.5 million was classified as a current liability. As of August 27, 2011, our Credit Facility consisted of a $375.0 million term loan, $342.3 million of which was outstanding, a $250.0 million revolving line of credit loan, which had no outstanding borrowings, outstanding letters of credit of $24.1 million and available borrowings of $225.9 million, based on the most restrictive financial covenant calculations. In addition, as of August 27, 2011, we had outstanding industrial revenue bonds of $12.2 million and capital leases and other obligations of $5.9 million.

Our indebtedness may increase from time to time in the future for various reasons, including fluctuations in operating results, working capital requirements, capital expenditures and potential acquisitions.

Our indebtedness, together with additional future indebtedness we may incur, and restrictive covenants contained in the Credit Facility could:


•	make it difficult for us to satisfy our obligations, including making interest payments on our debt obligations;

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•	limit our ability to obtain additional financing to operate our business;


•	require us to dedicate a substantial portion of our cash flow to payments on our debt, reducing our ability to use our cash flow to fund capital expenditures and working capital and other general operational requirements;


•	limit our flexibility to plan for and react to changes in our business and the beef processing industry;


•	place us at a competitive disadvantage relative to some of our competitors that have less debt than us;


•	limit our ability to pursue acquisitions; and


•	increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates, changes in cattle prices or a downturn in our business or the economy.

The occurrence of any one of these events could have a material adverse effect on our business, financial condition and results of operations or cause a significant decrease in our liquidity and impair our ability to pay amounts due on our indebtedness.

The Credit Facility contains, among other things, restrictive covenants that will limit our and our subsidiaries’ ability to finance future operations or capital needs or to engage in other business activities. The Credit Facility restricts, among other things, our ability and the ability of our subsidiaries to:


•	incur additional indebtedness or issue guarantees;


•	create liens on our assets;


•	make distributions on or redeem equity interests;


•	make investments;


•	transfer or sell properties or other assets; and


•	engage in mergers, consolidations or acquisitions.

In addition, the Credit Facility requires us to meet specified financial ratios and tests under certain circumstances.

If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital or restructure debt. Our ability to generate cash and make scheduled payments or refinance our obligations depends on our successful financial and operating performance, which depend upon prevailing economic conditions and other factors, many of which are beyond our control.

Our operating results could be negatively impacted by our hedging and derivative positions.

We use derivative financial instruments and other hedging strategies in an attempt to reduce our exposure to various market risks, including changes in commodity prices. We hold certain positions that do not qualify as hedges for financial reporting purposes. These positions are marked to fair value, and the unrealized gains and losses are reported in earnings at each reporting date. Therefore, losses on these contracts will adversely affect our reported operating results. The use of such instruments may ultimately limit our ability to benefit from favorable commodity price movements, which may adversely affect our reported operating results.

We generally do not have long-term contracts with our customers, and, as a result, the prices at which we sell our beef products are subject to market forces.

We generally do not have long-term sales arrangements with our customers and, as a result, the prices at which we sell products to them are determined in large part by market forces. Our customers, mostly excluding those with which we have long-term contracts, place orders for products on an as-needed basis and, as a result, their order levels have varied from period to period in the past and may vary significantly in the future. The loss of one or more of our key customers, a significant decline in the number of orders from one or more of our key customers or a significant decrease in beef product prices for a

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sustained period of time could have a material adverse effect on our business, financial condition or results of operations.

Wal-Mart’s failure to continue purchasing from us could have a material adverse effect on our sales.

Sales to Wal-Mart Stores, Inc., or Wal-Mart, and its affiliate, Sam’s Club, represented approximately 9% of our total net sales in fiscal year 2011. Our contractual agreement with Wal-Mart expired on January 31, 2004, and we have not entered into a new agreement. If Wal-Mart and its affiliates do not continue to purchase from us, it could have a material adverse effect on our sales, financial position, results of operations and cash flows.

We are subject to extensive governmental regulation and our noncompliance with or changes in applicable requirements could adversely affect our business, financial condition, results of operations and cash flows.

In addition to the environmental regulations discussed above, our operations are subject to extensive regulation and oversight by the USDA (including GIPSA), the FDA, and other state, local and foreign authorities regarding the processing, packaging, storage, distribution, advertising and labeling of our products, including food safety standards. Our domestic operations are subject to the PSA. This statute generally prohibits meat packers in the livestock industry from engaging in certain practices including violations of the PSA’s prompt payment provisions. In general (unless otherwise agreed in writing by our livestock suppliers), this statute requires us to make full payment for our livestock purchases in the case of cash sales before the close of the next business day following the purchase and transfer of possession of the livestock we purchase, or, in the case of a cash purchase on a carcass or ‘‘grade and yield’’ basis, that we make full payment of the purchase price not later than the close of the first business day following determination of the purchase price. On June 22, 2010, GIPSA published a proposed rule that would add new regulations under the PSA. Among other things, the proposed rule would eliminate the requirement that GIPSA or livestock producers demonstrate competitive harm to prove violations of Sections 202(a) and 202(b) of the PSA, which sections limit unfair, unjustly discriminatory or deceptive practices and undue or unreasonable preferences or advantages in livestock purchasing practices. Elimination of this requirement could have a significant impact on cattle procurement and marketing practices in the beef processing industry. In particular, it could impair our ability to pay premiums for cattle that meet the quality standards for our value-added or export programs, thus affecting how we (i) procure cattle for these programs and (ii) process and market value-added and exported products. We cannot predict whether the proposed rule or some modified rule will be adopted or the extent of the effect of any such rule on the beef processing industry or on our operations or financial results.

Recently, the food safety practices and procedures in the meat processing industry have been subject to more intense scrutiny and oversight by the USDA. Food safety standards, processes and procedures are subject to the USDA Hazard Analysis Critical Control Point program, which includes compliance with the Public Health Security and Bioterrorism Preparedness and Response Act of 2002. In hopes of reducing the development and spread to humans of dangerous antibiotic-resistant bacteria, the Obama administration announced in July 2009 that it would seek to ban routine use of antibiotics, which are fed to farm animals to encourage growth.

We are also subject to a variety of immigration, labor and worker safety laws and regulations, including those relating to the hiring and retention of employees. Our failure to comply with applicable laws and regulations could subject us to administrative penalties and injunctive relief, civil remedies, including fines, injunctions, interruption of our operations, recalls of our products or seizures of our properties, as well as potential criminal sanctions or personal injury or other damage claims. These remedies, changes in the applicable laws and regulations or discovery of currently unknown conditions could increase our costs and limit our business operations.

Failure to successfully implement our business strategy may impede our plans to increase revenues, margins and cash flow.

Our revenues, margins and cash flows will not increase as planned if we fail to implement the key elements of our strategy, and our ability to successfully implement this strategy is dependent at least in part on factors beyond our control. For example, the willingness of consumers to purchase value-added products depends in part on economic conditions. In periods of economic uncertainty, consumers tend to purchase more private label or less-expensive products. Thus, if we encounter periods of economic uncertainty, the sales volume for our value-added products could suffer. Also, we may not be successful in identifying favorable international expansion opportunities.

Changes in consumer preferences could adversely affect our business.

The food industry in general is subject to changing consumer trends, demands and preferences. Our products compete with other protein sources, such as pork and poultry, and other foods. Trends within the food industry change often and our failure to anticipate, identify or react to changes in these trends could lead to, among other things, reduced demand and price

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reductions for our products, and could have a material adverse effect on our business, financial condition, results of operations and cash flows. In addition, we do not have any other material lines of business or other sources of revenue to rely upon if we are unable to efficiently process and sell beef products or if the market for beef declines. This lack of diversification means that we may not be able to adapt to changing market conditions or withstand any significant decline in the beef industry.

The beef processing industry is highly competitive and our customers might not continue to purchase our products from us or prices we receive for our products could fluctuate or be adversely impaired by actions taken by our competitors.

The beef processing industry is highly competitive. Competition exists both in the purchase of live cattle and in the sale of beef products. In addition, our products compete with a number of other protein sources, including pork and poultry.

Our principal competition arises from other beef processors, including Tyson Foods, Inc., Cargill Meat Solutions and JBS USA LLC. The principal competitive factors in the beef processing industry are price, quality, food safety, product distribution, technological innovations and brand loyalty. Our ability to be an effective competitor will depend on our ability to compete on the basis of these characteristics. Some of our competitors have substantially larger beef operations, greater financial and other resources and wider recognition for their consumer branded products than we do. There can be no assurance that we will be able to compete effectively with these companies, and our ability to compete could be adversely affected by our debt levels.

Extreme weather or other forces beyond our control could negatively impact our business.

Natural disasters, fire, bioterrorism, pandemic or extreme weather, including droughts, floods, excessive cold or heat, hurricanes or other storms, could impair the health or growth of livestock or interfere with our operations due to power outages, fuel shortages, water shortages, damage to our production and processing facilities or disruption of transportation channels, among other things. Any of these factors, as well as disruptions in our information systems, could have an adverse effect on our financial results.

The sales of our beef products are subject to seasonal variations and, as a result, our quarterly operating results may fluctuate.

The beef industry is characterized by prices that change based on seasonal consumption patterns. The highest period of demand for our products is usually the summer and spring months when weather patterns permit more outdoor activities and there is increased demand for higher value items that are grilled, such as steaks. In addition, because of higher consumption, more favorable growing conditions and the housing of animals in feedlots for the winter months, there are generally more cattle available in the summer and fall. As a result of these seasonal fluctuations, our revenue and profitability tend to be higher for our third and fourth fiscal quarters ended May and August, respectively, than for our first and second fiscal quarters ended November and February, respectively. However these seasonal patterns may vary substantially from year to year.

We depend on the service of key individuals, the loss of whom could materially harm our business.

Our success will depend, in part, on the efforts of our officers and other key employees. In addition, the market for qualified personnel is competitive and our future success will depend on our ability to attract and retain these personnel. With the exception of our Chief Executive Officer, we do not have long-term employment agreements with our officers or maintain key-person insurance on any officer. The loss of the services of any of our key employees or the failure to attract and retain employees could have a material adverse effect on our business, results of operations and financial condition.

Our performance depends on favorable labor relations with our employees. Any deterioration of those relations or increase in labor costs could adversely affect our business.

As of August 27, 2011, we had approximately 9,100 employees worldwide. Approximately 2,800 employees at our Liberal, Kansas facility are represented by the United Food and Commercial Workers International Union under a collective bargaining agreement that expires on December 16, 2012. Approximately 1,100 employees at our Brawley, California facility are jointly represented by the United Food and Commercial Workers International Union and Teamsters International Union under a collective bargaining agreement that expires on December 8, 2013. Approximately 90 employees at our St. Joseph, Missouri facility are represented by the United Cereal Workers of the United Food and Commercial Workers International Union under a collective bargaining agreement scheduled to expire on May 18, 2014.

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representation by the United Food and Commercial Workers International Union. The union has been certified as the representative of a bargaining unit of approximately 2,600 employees in production and maintenance, shipping and receiving, grounds keeping and the warehouse. The election was conducted on November 3, 2011 and November 4, 2011.

A labor-related work stoppage by our unionized employees could limit our ability to process and ship our products or increase our costs, which could adversely affect our results of operations and financial condition. In addition, it is possible that any labor union efforts to organize employees at our non-unionized facilities might be successful and that any labor-related work stoppages at these non-unionized facilities in the future could adversely affect our results of operations and financial condition. In general, any significant increase in labor costs, deterioration of employee relations, slowdowns or work stoppages at any of our locations, whether due to union activities, employee turnover or otherwise, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

The consolidation of our retail and food service customers may put pressures on our operating margins.

In recent years, the trend among our retail and food service customers, such as supermarkets, warehouse clubs and food service distributors, has been towards consolidation. These consolidations, along with the entry of mass merchants into the grocery industry, have resulted in customers with increasing negotiating strength who tend to exert pressure on us with respect to pricing terms, product quality and new products. As the customer base continues to consolidate, competition for the business of fewer customers is expected to intensify. If we do not negotiate favorable terms of sale with our customers and implement appropriate pricing to respond to these trends, or if we lose our existing large customers, our profitability could decrease.

We may not be able to successfully complete acquisitions, affecting our ability to grow, or integrate completed and future acquisitions, which could result in failure to achieve our expected acquisition benefits, the disruption of our business and an increase in our costs.

We continually explore opportunities to acquire related businesses, some of which could be material to us. Our ability to continue to grow may depend upon identifying and successfully acquiring attractive companies, effectively integrating these companies, achieving cost efficiencies and managing these businesses as part of our Company.

We may not be able to effectively execute on acquisitions or integrate acquired companies and successfully implement appropriate operational, financial and management systems and controls to achieve the benefits expected to result from these acquisitions. Our efforts to integrate these businesses could be affected by a number of factors beyond our control, such as regulatory developments, general economic conditions and increased competition. In addition, the process of integrating these businesses could cause the interruption of, or loss of momentum in, the activities of our existing business. The diversion of management’s attention and any delays or difficulties encountered in connection with the integration of these businesses or relating to legacy liabilities of businesses acquired by us could negatively impact our business and results of operations. Further, the benefits we anticipate from acquisitions may not develop.

Our operations are subject to the general risks of litigation.

We are involved on an ongoing basis in litigation arising in the ordinary course of business or otherwise. Trends in litigation may include class actions involving consumers, employees or injured persons, and claims related to commercial, labor, employment, antitrust, securities or environmental matters. These actions could also divert the attention of our management team and expose us to significant liability and adverse publicity, which might adversely affect our brands, reputation and/or customer preference for our products. Due to the unpredictable nature of litigation, it is not possible to predict the ultimate outcome of any potential lawsuits, and we may be held liable for significant judgments, or other losses, that are not fully covered by our insurance, and could have a material adverse effect on our business.

Deterioration of economic conditions could negatively impact our business.

Our business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates, energy availability and costs (including fuel surcharges) and the effects of governmental initiatives to manage economic conditions. Any such changes could adversely affect the demand for our products or the cost and availability of our needed raw materials and packaging materials, thereby negatively affecting our financial results.

A downturn in the U.S. economy may result in reduced demand for certain of our products, downward pressure on prices and shifts to less profitable private label products. Moreover, any material reduction in demand for our products in our key export markets (Japan and South Korea) could have an adverse effect on our results of operations.

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The recent disruptions and instability in credit and other financial markets and deterioration of national and global economic conditions, could, among other things:


•	make it more difficult or costly for us to obtain financing for our operations or investments or to refinance our debt in the future;


•	cause our lenders to depart from prior credit industry practice and make more difficult or expensive the granting of any technical or other waivers under our credit agreements to the extent we may seek them in the future;


•	impair the financial condition of some of our customers, suppliers or counterparties to our derivative instruments, thereby increasing customer bad debts, non-performance by suppliers or counterparty failures negatively impacting our treasury operations; and


•	negatively impact global demand for beef products, which could result in a reduction of sales, operating income and cash flows.

Risks Related to U.S. Premium Beef

USPB has a majority interest in our Company and, through their representative on our Board of Managers, has the ability to significantly influence our business and affairs; USPB’s interests could conflict with other stakeholders.

USPB owns a majority interest in our Company of approximately 69.3% of the Class B interests, as well as Class A and Class A-1 interests, with an aggregate face amount of approximately $150.5 million. As a result, USPB has the ability, through the actions of its representative on our Board of Managers, to cast the majority vote on many matters related to the business and affairs of our Company. However, pursuant to our limited liability company agreement, USPB’s ability to cause us to take certain major corporate actions without the consent of NBPCo Holdings and management is limited.

We purchase a portion of our cattle through USPB and its producer-owners and, because USPB has a majority interest in our Company, we may not be able to resolve conflicts with respect to these purchases on the most favorable terms to us.

USPB's producer-owners provided us with approximately 20% of our cattle requirements in fiscal year 2011 through the pricing grid process as more fully described in Item 13, Certain Relationships and Related Transactions. Conflicts of interest may arise between USPB and us relating to our cattle purchases. If a dispute arises with USPB, the settlement of the dispute may not be on terms as favorable to us as if we were dealing with an unaffiliated party.


ITEM 1B.	UNRESOLVED STAFF COMMENTS

Not applicable.


ITEM 2.	PROPERTIES

We own our Liberal, Kansas, Dodge City, Kansas, Brawley, California, Hummels Wharf, Pennsylvania, Moultrie, Georgia, and St. Joseph, Missouri facilities, as well as our National Carriers headquarters in Irving, Texas. We lease our headquarters facility in Kansas City, Missouri (which includes approximately 27,200 square feet of office space), and our Kansas City Steak processing facility in Kansas City, Kansas. We also have short-term leases in place for our offices in Chicago, Illinois, Denison, Iowa, Springdale, Arkansas, Tokyo, Japan, Seoul, South Korea, and Guangzhou, China. The Credit Facility is secured by a first priority lien on substantially all of our real and personal property. The table below provides additional information regarding our primary facilities:



Location		Daily Processing Capacity
Processing Facilities (Core Beef):
Liberal, Kansas		6,000 head
Dodge City, Kansas		6,000 head
Brawley, California		2,000 head

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Location		Approximate Square Footage
Case-Ready Facilities (Core Beef):
Hummels Wharf, Pennsylvania		90,000 square feet
Moultrie, Georgia		112 ,000 square feet
Tannery Facility (Core Beef):
St. Joseph, Missouri		221,000 square feet
Kansas City Steak Facility (Other):
Kansas City, Kansas		63,000 square feet


ITEM 3.	LEGAL PROCEEDINGS

For information regarding legal proceedings, see Note 12, Legal Proceedings, to our consolidated financial statements included in Item 8 of this report. In addition, see Item 1, Business — Regulation for information regarding information requests, investigations and proceedings pertaining to environmental matters.

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PART II


ITEM 5.	MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no established public trading market for any class of common equity of National Beef Packing Company, LLC. As of November 16, 2011, there were four record holders of Class A, Class A1 and/or Class B interests.

Cash distributions are paid not later than 30 days after the close of the tax year quarter end to the interest holders of Class A and Class A1 shares on a priority basis, and to the holders of Class B shares to make tax payments, to the extent permitted by our senior lenders and the indenture governing our senior notes. See Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The payment of any other cash distributions would be made only from assets legally available for that purpose and would depend on the Company’s financial condition, results of operations, and other factors then deemed relevant by the Board of Managers.

During the Company's fiscal quarters ended February 26, 2011 and February 27, 2010, the Company paid cash distributions to certain members in the aggregate of $150 million and $15 million, respectively, in addition to its normal cash distributions to members for tax payments. The Company did not make any other special distributions during its two most recent fiscal years.

For a discussion of equity compensation plans, see Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

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ITEM 6.	SELECTED FINANCIAL DATA

The following table sets forth selected consolidated financial and other data for, and as of the end of, each of the fiscal years in the five-year period ended August 27, 2011. The selected consolidated financial information for the five fiscal years ended August 27, 2011 (statement of operations data) and as of the five fiscal years ended August 27, 2011, August 28, 2010, August 29, 2009, August 30, 2008, and August 25, 2007 (balance sheet data) has been derived from our audited consolidated financial statements included elsewhere in this filing or from prior years filing, which was adjusted for the presentation requirements of Accounting Standards Codification (“ASC”) 810 — Consolidation, which was adopted by the Company as of August 30, 2009 with retrospective application to the historical years presented. Our fiscal year ends on the last Saturday in August.

The following table (amounts in millions) should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 8, Financial Statements and Supplementary Data (including the accompanying notes) contained elsewhere in this report.



	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009			53 weeks ended August 30, 2008			52 weeks ended August 25, 2007
Statements of Operations Data
Net sales	$	6,849.5		$	5,807.9		$	5,449.3		$	5,847.3		$	5,578.5
Costs and expenses:
Cost of sales	6,473.3			5,438.0			5,187.1			5,612.4			5,444.0
Selling, general and administrative	52.0			49.3			43.1			43.7			42.5
Depreciation and amortization	51.2			49.6			44.4			36.4			32.4
Operating income	273.0			271.0			174.7			154.8			59.6
Other income (expense):
Interest income	—			—			0.2			0.5			0.7
Interest expense	(11.7		)	(14.8		)	(23.3		)	(34.0		)	(39.4		)
Other, net	0.2			(7.3		)	(6.5		)	5.7			1.3
Total other expense, net	(11.5		)	(22.1		)	(29.6		)	(27.8		)	(37.4		)
Income tax expense	2.5			0.9			0.9			1.8			1.9
Net income	259.0			248.0			144.2			125.2			20.3
Less net income attributable to noncontrolling interest in income of Kansas City Steak Company, LLC	(0.5		)	(0.9		)	(1.3		)	(0.7		)	(0.3		)
Net income attributable to controlling interest in income of consolidated entity	$	258.5		$	247.1		$	142.9		$	124.5		$	20.0
Selected Balance Sheet Data
Working capital (1)	$	233.2		$	180.2		$	145.0		$	209.6		$	249.3
Total assets	$	998.8		$	912.7		$	809.1		$	875.9		$	815.5
Long-term debt, including current maturities	$	360.4		$	246.5		$	298.8		$	377.8		$	438.8
Capital subject to redemption	$	351.1		$	291.7		$	183.4		$	186.5		$	76.9
Other Financial Data
Beef sold (pounds in billions)	4.0			4.1			3.9			4.0			4.1
Capital expenditures	$	68.3		$	49.5		$	40.8		$	59.9		$	41.7
Member distributions	$	290.1		$	147.0		$	78.3		$	43.1		$	22.1

______________________________


(1)	Working capital represents the excess of current assets over current liabilities.

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ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this report. In addition to historical information, the following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. Our actual results could differ materially from those anticipated by such forward-looking information due to the factors discussed under Item 1A, Risk Factors, Item 7, Disclosure Regarding Forward-Looking Statements and elsewhere in this report.

Disclosure Regarding Forward-Looking Statements

This report contains “forward-looking statements,” which are subject to a number of risks and uncertainties, many of which are beyond our control. Forward-looking statements are typically identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and similar expressions. Actual results could differ materially from those contemplated by these forward-looking statements as a result of many factors, including economic conditions generally and in our principal markets, the availability and prices of live cattle and commodities, food safety, livestock disease, including the identification of cattle with BSE, competitive practices and consolidation in the cattle production and processing industries, actions of domestic or foreign governments, hedging risk, changes in interest rates and foreign currency exchange rates, consumer demand and preferences, the cost of compliance with environmental and health laws, loss of key customers, loss of key employees, labor relations, and consolidation among our customers.

In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking information contained in this report will in fact transpire. Readers are cautioned not to place undue reliance on these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Please review Item 1A, Risk Factors, included in this report, for other important factors that could cause actual results to differ materially from those in any such forward-looking statements.

Overview

We are one of the largest beef processing companies in the U.S., accounting for approximately 14% of the federally inspected steer and heifer slaughter during our fiscal year ended August 27, 2011 as reported by the USDA. We process, package and deliver fresh and frozen beef and beef by-products for sale to customers in the United States and international markets. Our products include boxed beef, ground beef, hides, tallow and other beef and beef by-products. In addition, we sell value-added beef and beef by-products, including branded boxed beef, case-ready beef, portion control beef and further processed hides. We market our products to retailers, food service providers, distributors, further processors and the United States military. We believe our relationship with USPB is a competitive advantage within the industry and provides us with a consistent and dependable supply of high-quality cattle, including for processing in value-added and other programs.

In July 1992, John R. Miller, Timothy M. Klein and Scott H. Smith, or the Management Team, in partnership with Farmland Industries, Inc., or Farmland, purchased the assets of Hyplains Dressed Beef, Inc. of Dodge City, Kansas. Upon completion of the purchase, the Management Team formed Hyplains Beef, LLC and commenced a $20.0 million expansion project to add boxed beef processing operations to the Dodge City facility. In December 1992, the management team assumed responsibility for the day-to-day operations of National Beef Packing Company, L.P. and, with Farmland, purchased its assets in April 1993. In 1995, Hyplains Beef, LLC and National Beef Packing Company, L.P. were merged into Farmland National Beef Packing Company, L.P., or FNBPC. In 1997, USPB purchased the interest in FNBPC then owned by the Management Team and became partners with Farmland.

In December 1997, FNBPC acquired what became a 75% interest in Kansas City Steak Company, LLC, or Kansas City Steak, a portion control steak cutting operation. In March 2003, FNBPC acquired National Carriers, Inc., or National Carriers, a refrigerated and livestock transportation company, from Farmland. Effective August 6, 2003, USPB acquired a controlling interest in FNBPC and formed NBP.

Effective May 30, 2006, NBP completed the acquisition of substantially all of the assets of Brawley Beef, LLC (Brawley Beef), consisting of a state-of-the-art beef processing facility in Brawley, California pursuant to the Contribution Agreement with Brawley Beef and National Beef California, LP, or NBC. NBC is a limited partnership formed with National Carriers, a wholly-owned subsidiary of NBP, acting as its general partner. Brawley Beef was an alliance of cattle producers in Arizona and California who owned the beef processing facility and supplied it with cattle. The facility commenced operations in December 2001.

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National Beef Leathers, LLC, a wholly-owned subsidiary of NBP, purchased certain assets of a wet blue tannery located in St. Joseph, Missouri from Prime Tanning in March 2009.

Financial Statement Accounts

Net Sales. Our net sales are generated from sales of boxed beef, case-ready beef, chilled and frozen export beef, portion control beef and beef by-products. Our net sales are affected by the volume of animals processed and the value we extract from each animal. The value we extract from cattle processed, referred to as the cut-out value, is affected by beef prices and product mix, as value-added products and export sales typically generate higher prices and operating margins. Our value-added products contribute significantly more, in terms of profits, than our traditional boxed beef products and are an important component of our profitability. Wholesale beef prices fluctuate seasonally because of higher demand during the summer months. Wholesale beef prices also fluctuate because of changes in supply and demand for competing proteins and other foods, as well as changes in cattle supply, which have typically followed a ten to twelve year cycle, consisting of about six to seven years of expansion followed by one to two years of consolidation and three to four years of contraction. While we expect the supply of cattle to expand at some point in the next few years, we do not expect any growth in the near term. In addition, beef and by-product sales are affected by the general economic environment and other factors.

Cost of Sales. Our cost of sales is comprised of the cost of livestock and plant costs such as labor, packaging and utilities, and other facility expenses. Total livestock costs are a function of the volume of animals processed and the price paid for each animal. Cattle prices vary over time and are affected by production cycles, weather, feed prices and other factors that affect the supply of and demand for livestock. Cut-out value is a measure of the sales value of a beef carcass expressed on a per hundred weight basis. Historically, changes in cut-out values and corresponding livestock costs have been positively correlated.

Selling, General and Administrative Expenses. Selling expenses consist primarily of salaries, trade promotions, advertising, commissions and other marketing costs. General and administrative costs consist primarily of general management, insurance and professional expenses.

Overall Industry Outlook

Growing global demand and increases in beef exports continue to provide underlying demand support for record cattle and beef prices. Meanwhile, drought-accelerated placements continue to keep total cattle on feed supplies above the prior year, which is expected to continue through the first quarter of 2012. Herd liquidation in the southern plains continues to offset slight gains in other areas. The lack of any measurable moisture persists in limiting winter grazing while hay shortages keep beef cow culling very active in this very important cow-calf region. Nationally, the US cattle herd continues to shrink and is expected to keep the supply situation very supportive to cattle and beef prices through 2012 and potentially 2013.

Beef Export Markets

Export markets for U.S. beef products remain constrained since the discovery of a single case of BSE in the State of Washington in December 2003, as well as other isolated cases. In July 2006, Japan agreed to reopen its market to U.S. beef from cattle aged 20 months and younger. South Korea announced a provisional opening of its border to U.S. beef from animals 30 months and younger in September 2006 but subsequently closed its border again in October 2007. South Korea reopened its border and started inspecting U.S. beef near the end of June 2008. These constraints and uncertainties have historically had a negative impact on beef demand during the periods in which they occurred.

We cannot presently assess the full economic impact of the consequences of BSE on the U.S. beef packing industry or on our operations. Existing or new import restrictions or additional regulatory restrictions or disruptions in domestic and foreign consumer demand for beef may have a material adverse effect on our revenues and net income.

In December 2010, the USDA announced that China has agreed to resume talks with the United States regarding beef market access and that technical talks will resume with the goal of re-opening China’s market for U.S. beef under the age of 30 months in 2011. We cannot presently assess the full economic impact of the re-opening of China’s market to age verified beef on the U.S. beef packing industry or our operations, and there can be no assurance that such talks will occur or result in re-opening of China’s market to U.S. beef products.

In March 2011, a major earthquake followed by a tsunami hit the east coast of Japan and caused significant damage to

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parts of the country. A portion of our export sales are delivered to Japan, and while we cannot presently assess the full long-term economic impact of the earthquake and tsunami on our operations, so far there have been few interruptions.

Critical Accounting Policies and Estimates

The following discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, our management evaluates and revises its estimates based on historical experience and other assumptions we believe are reasonable under the circumstances. Actual results may differ from those estimates. Changes in our estimates could materially affect our results of operations and financial condition for any particular period. Our fiscal year ends on the last Saturday in August. We believe our most critical accounting policies are as follows:

Allowance for Returns and Doubtful Accounts. The allowance for returns and doubtful accounts reflects reserves for customer receivables to reduce receivables to amounts expected to be collected. Management uses significant judgment in estimating uncollectible amounts. In estimating uncollectible amounts, management considers factors such as current overall economic conditions, industry-specific economic conditions, historical customer performance, and anticipated customer performance. Specific accounts are also reviewed for collectability. While management believes these processes effectively address our exposure to doubtful accounts, changes in the economy, industry or specific customer conditions may require adjustment to the recorded allowance for doubtful accounts. Management uses significant judgment in estimating amounts expected to be returned. Management considers factors such as historical performance and customer conditions in estimating return amounts.

Inventory Valuation. Inventories consist primarily of meat products and supplies. Product inventories are considered commodities and are based on quoted commodity prices, which approximate net realizable value. Supply and other inventories are valued on the basis of first-in, first-out, specific or average cost methods. Product inventories are relieved from inventory utilizing the first-in, first-out method. Management periodically reviews inventory balances and purchase commitments to estimate if inventories will be sold at amounts (net of estimated selling costs) less than their carrying amounts. If actual results differ from management estimates with respect to the selling of inventories at amounts less than their carrying amounts, we would adjust our inventory balances accordingly.

Goodwill and Other Intangible Assets. We recognize excess cost over the fair value of the net tangible and identifiable intangible assets acquired in a reporting unit, and record this excess as goodwill. We calculate the fair value of the applicable reporting unit using estimates of future cash flows. All of our goodwill has been allocated to the Core Beef segment. In accordance with the provisions included within Intangibles — Goodwill and Other under ASC 350, we assess goodwill and other indefinite life intangible assets annually for impairment. If there is impairment, the carrying amount of goodwill and other intangible assets is written down to the implied fair value. For goodwill, this test involves comparing the fair value of each reporting unit to the unit’s book value to determine if any impairment exists. Goodwill and other indefinite life intangible assets were tested for impairment, and, as of August 27, 2011, management determined there was no impairment.

Workers’ Compensation Accrual. We incur certain expenses associated with workers’ compensation. In order to measure the expense associated with these costs, management must make a variety of estimates including employee accidents incurred but not yet reported to us. The estimates used by management are based on our historical experience as well as current facts and circumstances.

Automobile Liability Accrual. We incur certain expenses associated with automobile liability. In order to measure the expense associated with these costs, management must make a variety of estimates to determine the ultimate cost to us related to incurred accidents. The estimates used by management are based on our historical experience as well as current facts and circumstances.

Valuation of Capital Subject to Redemption. Historically, NBP has had agreements whereby certain of its members have had the right to require that NBP repurchase their interests. This has resulted in a portion of its equity being classified as capital subject to redemption. At any time after certain dates, the earliest being July 31, 2010, the latest being July 31, 2011, affiliates of our President and Chief Executive Officer, Timothy M. Klein, and/or NBPCo Holdings have the right to require that NBP repurchase their interests, the value of which is to be determined by a specified formula or a mutually agreed process. If NBP is unable to effect the repurchase within a specified time, the requesting member(s) have the right to cause a sale process to commence. On April 13, 2009, NBP entered into two Unit Redemption Agreements (the “Unit Redemption

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Agreements”) pursuant to Section 12.5 of NBP’s limited liability company agreement to redeem at agreed upon redemption prices all of the membership interests in NBP that were owned or controlled by NBP’s former Chief Executive Officer, John R. Miller, and an affiliate of its former General Counsel, Scott H. Smith, as well as 25% of the membership interests in NBP that were owned by affiliates of Mr. Klein. As a result, Mr. Miller and Mr. Smith and their affiliates received approximately $91.3 million and $22.8 million, respectively, for their units and are no longer members of NBP. Mr. Klein’s affiliates received approximately $11.4 million for their redeemed units. On June 2, 2010, NBP entered into a Unit Redemption Agreement to redeem at agreed upon redemption prices approximately 5% of the membership interests in NBP that were owned by Mr. Klein’s affiliates. As a result, Mr. Klein’s affiliates received $8.0 million for their redeemed units.

At August 27, 2011, the value of the capital subject to redemption was determined to be $351.1 million, which was equal to its carrying value. The total value of the capital subject to redemption at August 27, 2011, increased by approximately $53.8 million through valuation changes compared to the value at August 28, 2010, resulting in the $351.1 million carrying value, as reflected in the accompanying consolidated balance sheet as of August 27, 2011. Offsetting the change in the value of the capital subject to redemption is a corresponding change in the members’ capital.

Generally accepted accounting principles require NBP to determine the fair value of the capital subject to redemption at the end of each reporting period. As the latest redemption period discussed above, was in July 2011, the carrying value of the capital subject to redemption is equal to its fair value. Management has considered previous redemption prices, valuations of peer companies and other factors in measuring the fair value of the capital subject to redemption for units held by NBPCo Holdings as of August 27, 2011. The capital subject to redemption held by Mr. Klein’s affiliates as of August 27, 2011 was valued based upon a contractually stipulated valuation formula.

New Accounting Policies

In May 2011, the Financial Accounting Standards Board, or FASB, issued Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS under ASU 2011-04, or ASU 2011-04. ASU 2011-04 amends ASC 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. ASU 2011-04 will be effective for the Company's third quarter of fiscal 2012. The amendments in ASU 2011-04 are to be applied prospectively. The adoption of ASU 2011-04 is not expected to have a material effect on the Company's consolidated financial statements, but may require certain additional disclosures.

In June 2011, the FASB issued Presentation of Comprehensive Income under ASU 2011-05 or ASU 2011-05. ASU 2011-05 requires the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. ASU 2011-05 will be effective for the Company's first quarter of fiscal 2013. The adoption of ASU 2011-05 is not expected to have a material effect on the Company's condensed consolidated financial statements, but may require a change in the presentation of the Company's comprehensive income from the statement of members' (deficit)/capital, where it is currently disclosed, to the presentation of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The amendments in ASU 2011-05 are to be applied retrospectively. The adoption of ASU 2011-05 is not expected to have a material effect on the Company's consolidated financial statements.

In September 2011, the FASB issued Testing Goodwill for Impairment under ASU2011-08, which is intended to reduce the cost and complexity of the annual goodwill impairment test by providing entities with the option of performing a qualitative assessment to determine whether impairment testing is necessary. The revised standard will be effective for annual and interim goodwill impairment tests performed beginning in the first quarter of fiscal 2013, with early adoption permitted under certain circumstances. The Company is currently evaluating options related to early adoption.

Results of Operations

The following table shows consolidated statements of operations data for the periods indicated (amounts in millions):

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	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009
Net sales	$	6,849.5		$	5,807.9		$	5,449.3
Costs and expenses:
Cost of sales	6,473.3			5,438.0			5,187.1
Selling, general and administrative	52.0			49.3			43.1
Depreciation and amortization	51.2			49.6			44.4
Operating income	273.0			271.0			174.7
Other income (expense):
Interest income	—			—			0.2
Interest expense	(11.7		)	(14.8		)	(23.3		)
Other, net	0.2			(7.3		)	(6.5		)
Total other expense, net	(11.5		)	(22.1		)	(29.6		)
Income tax expense	2.5			0.9			0.9
Net income	259.0			248.0			144.2
Less net income attributable to noncontrolling interest in income of Kansas City Steak Company, LLC	(0.5		)	(0.9		)	(1.3		)
Net income attributable to the controlling interest in income of consolidated entity	$	258.5		$	247.1		$	142.9

Our fiscal year is the 52 or 53 week period ending on the last Saturday in August.

Fiscal Year Ended August 27, 2011 Compared to Fiscal Year Ended August 28, 2010

General. Net income for the fiscal year ended ended August 27, 2011 was approximately $259.0 million compared to net income of approximately $248.0 million for the fiscal year ended August 28, 2010, an increase of approximately $11.0 million, or 4.4%.

Total costs and expenses of approximately $6,576.5 million for the fiscal year ended August 27, 2011, were 96.0% of net sales compared to approximately $5,536.9 million for the fiscal year ended August 28, 2010, or 95.3% of net sales. Continued stable demand for beef products and increases in cattle prices during the the fiscal year 2011 as compared to the fiscal 2010 resulted in an increase in the percentage of total costs to net sales during the period.

Net Sales. Net sales were approximately $6,849.5 million for the fiscal year ended August 27, 2011 compared to approximately $5,807.9 million for the fiscal year ended August 28, 2010, an increase of approximately $1,041.6 million, or 17.9%. The increase in net sales resulted primarily from a 16.7% increase in the net sales per head during the fiscal year ended August 27, 2011 compared to the same period in the prior year, as the demand for beef products remained strong, and price of beef products increased during the period.

Cost of Sales. Cost of sales was approximately $6,473.3 million for the fiscal year ended August 27, 2011 compared to approximately $5,438.0 million for the fiscal year ended August 28, 2010, an increase of approximately $1,035.3 million, or 19.0%. The increase was primarily a result of an approximately 19.1% increase in average cattle prices during the period compared to the prior period.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $52.0 million for the fiscal year ended August 27, 2011 compared to approximately $49.3 million for the fiscal year ended August 28, 2010, an increase of approximately $2.7 million, or 5.5%. This increase is primarily the result of an approximately $1.9 million increase in salaries, an approximately $1.0 million increase in travel related expenditures, offset by an approximately $0.8 million reduction in bad debt expense.

Depreciation and Amortization Expense. Depreciation and amortization expenses were approximately $51.2 million for the fiscal year ended August 27, 2011 compared to approximately $49.6 million for the fiscal year ended August 28, 2010, an increase of approximately $1.6 million, or 3.2%. Depreciation expense increased due to assets being placed into service during fiscal year 2011, primarily at our three beef plants and two case ready plants.

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Operating Income. Operating income was approximately $273.0 million for the fiscal year ended August 27, 2011 compared to operating income of approximately $271.0 million for the fiscal year ended August 28, 2010, an increase of approximately $2.0 million, or 0.7%.

Interest Expense. Interest expense was $11.7 million for fiscal year 2011 compared to $14.8 million for fiscal year 2010, a decrease of $3.1 million, or 20.9%. The decrease in interest expense during fiscal year 2011 as compared to the fiscal year 2010 was due primarily to a decrease of approximately 1.39% of the average daily interest rate during the period.

Other, net. Other, net non-operating income was $0.2 million in the fiscal year ended August 27, 2011 compared to other, net non-operating expense of $7.3 million in the fiscal year ended August 28, 2010, an increase of $7.5 million. Other non-operating income, net for fiscal year 2011 primarily includes approximately $1.5 million of income related to gains on the sale of fixed assets, offset by an expense of approximately $0.8 million related to an abandoned IPO effort. Other non-operating expense, net for fiscal year 2010 primarily includes approximately $2.4 million related to tannery litigation and approximately $2.2 million related to an abandoned IPO effort. In addition, other non-operating expense, net includes approximately $3.3 million accrued for a potential settlement of a dispute with the city of Dodge City, Kansas pertaining to the transfer of certain water rights.

Income Tax Expense/Benefit. Income tax expense was $2.5 million for the fiscal year ended August 27, 2011 compared to income tax expense of $0.9 million for the same period of fiscal year 2010, an increase of $1.6 million resulting from an increase in taxable income at National Carriers. Income tax expense is recorded on taxable income from National Carriers, which is organized as a C Corporation, and the apportioned taxable income of NBP by certain states which impose privilege taxes.

Net Income. As a result of the factors described above, net income for fiscal year 2011 was approximately $259.0 million compared to net income of approximately $248.0 million for fiscal year 2010, an increase of approximately $11.0 million.

Fiscal Year Ended August 28, 2010 Compared to Fiscal Year Ended August 29, 2009

Net Sales. Net sales increased approximately $358.6 million or 6.6% in fiscal year 2010 compared to fiscal year 2009 primarily due to an approximate 1.8% increase in the volume of cattle processed and an approximate 5.9% increase in the average sales price per head processed.

Cost of Sales. Cost of sales was approximately $5,438.0 million for fiscal year 2010 compared to $5,187.1 million in fiscal 2009, an increase of approximately $250.9 million, or 4.8%. The increase in cost of sales for the period resulted primarily from an approximately 1.8% increase in the volume of cattle processed during the fiscal year, and an increase of approximately 3.8% in average live cattle prices as compared to the prior fiscal year.

Selling, General and Administrative Expenses. Selling, general, and administrative expenses were $49.3 million for fiscal the year ended August 28, 2010 compared to $43.1 million for the fiscal year ended August 29, 2009, an increase of approximately $6.2 million, or 14.4%. The increase for the period is primarily attributable to an increase in bad debt expense of approximately $1.7 million, increase in consulting of approximately $1.3 million, increase in salaries of approximately $1.3 million, increase in marketing of approximately $1.3 million and an increase in travel related expense of approximately $0.6 million.

Depreciation and Amortization Expense. Depreciation and amortization expenses were approximately $49.6 million in the 2010 fiscal year compared to $44.4 million in the 2009 fiscal year, an increase of approximately $5.2 million or 11.7%. Depreciation expense increased primarily due to approximately $36.7 million of assets being placed in service, primarily at our three beef plants and two case ready plants, during fiscal year 2010.

Operating Income. Operating income was $271.0 million for fiscal year 2010, an increase of $96.3 million, or 55.1%, from $174.7 million in fiscal year 2009. The increase in operating income for the fiscal year ended August 28, 2010, resulted primarily from an approximately 1.5% decrease in operating costs as a percentage of net sales from the fiscal year ended August 29, 2009.

Interest Expense. Interest expense was $14.8 million for fiscal year 2010 compared to $23.3 million for fiscal year 2010, a decrease of $8.5 million, or 36.5%. The decrease in interest expense during the 52 week period of fiscal 2010 as compared to the 52 week period of fiscal 2009 was due primarily to the purchase and cancellation of an aggregate principal amount of our Senior Notes of approximately $66.9 million during the second quarter of fiscal 2010.

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Other, net. Other, net non-operating expense was $7.3 million in fiscal year 2010 compared to other, net non-operating expense of $6.5 million in fiscal year 2009, an increase of $0.8 million or 12.3%.

Income Tax Expense. Income tax expense was $0.9 million for fiscal year 2010 as compared to $0.9 million for fiscal year 2009. Income tax expense is recorded on taxable income from National Carriers, which is organized as a C Corporation. The effective tax rate for National Carriers was relatively consistent for both fiscal years 2010 and 2009.

Net Income. As a result of the factors described above, net income for fiscal year 2010 was approximately $248.0 million compared to net income of approximately $144.2 million for fiscal year 2009, an increase of approximately $103.8 million.

Segment Results

The Company’s operating segments are based on segment profit and evaluated by the Chief Executive Officer, who also serves as the Chief Operating Decision Maker. Segment profit is measured as operating income for NBP’s two reporting segments, Core Beef and Other, based on the definitions provided in ASC 280, Segment Reporting.

Core Beef—the majority of NBP’s revenues are generated from the sale of fresh meat, which include chuck cuts, rib cuts, loin cuts, round cuts, thin meats, ground beef, and other products. In addition, we sell beef by-products including hides to the variety meat, feed processing, fertilizer, pet food and leather tanning industries. Aggregation criteria were applied to determine the constituents of the Core Beef segment.

Other—the Other segments of NBP consists of the operations of National Carriers, National Elite, a provider of transportation logistics services, and Kansas City Steak.

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

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

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	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009
Net sales:
Core beef	$	7,003,430		$	5,927,646		$	5,494,866
Other	246,964			228,119			239,406
Eliminations	(400,927		)	(347,836		)	(284,994		)
Total net sales	$	6,849,467		$	5,807,929		$	5,449,278
Depreciation and amortization:
Core beef	$	47,622		$	46,521		$	42,128
Other	3,573			3,095			2,240
Total depreciation and amortization	$	51,195		$	49,616		$	44,368
Operating income:
Core beef	$	268,192		$	266,848		$	167,394
Other	4,765			4,166			7,323
Total operating income	272,957			271,014			174,717
Interest income	15			37			173
Interest expense	(11,708		)	(14,769		)	(23,344		)
Other, net	305			(7,344		)	(6,468		)
Total income before taxes	$	261,569		$	248,938		$	145,078
	August 27, 2011			August 28, 2010
Assets:
Core beef	$	950,354		$	868,902
Other	50,067			44,776
Eliminations	(1,656		)	(986		)
Total assets	$	998,765		$	912,692

Fiscal Year Ended August 27, 2011 Compared to Fiscal Year Ended August 28, 2010

Core Beef

Net Sales. Net sales for Core Beef were approximately $7,003.4 million in fiscal year 2011 compared to approximately $5,927.6 million in fiscal year 2010, an increase of $1,075.8 million or 18.1%. The increase in net sales resulted primarily from a 16.7% increase in the net sales per head during the fiscal year ended August 27, 2011 compared to the same period in the prior year, as the demand for beef products remained strong, and price of beef products increased during the period.

Depreciation and Amortization. Depreciation and amortization of Core Beef was approximately $47.6 million in fiscal year 2011 as compared to approximately $46.5 million in fiscal year 2010, an increase of $1.1 million or 2.4%. Depreciation expense increased due to assets being placed into service at our three beef processing plants and two case ready plants during fiscal year 2011.

Operating Income. Operating income for Core Beef was approximately $268.2 million in fiscal year 2011 compared to $266.8 million in fiscal year 2010, an increase of $1.4 million or 0.5%.

Other

Net Sales. Net sales for Other were $247.0 million in fiscal year 2011 compared to $228.1 million in fiscal year 2010, a increase of $18.9 million or 8.3%. The increase was due to an increase in sales at both our transportation operation and at our portion control beef facility during fiscal year 2011 as compared to fiscal year 2010.

Depreciation and Amortization. Depreciation and amortization for Other was $3.6 million in fiscal year 2011 as compared to $3.1 million in fiscal year 2010, an increase of $0.5 million or 16.1%. Depreciation expense increased due to assets being placed into service, primarily at our transportation company during fiscal year 2011.

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Operating Income. Operating income for Other was $4.8 million in fiscal year 2011 compared to $4.2 million in fiscal year 2010, an increase of $0.6 million or 14.3%. The increase in operating income was primarily due to increased sales at both our transportation operation and portion control beef facility, as well as a decrease in selling, general, and administrative expenses at our transportation operation during the fiscal year ended August 27, 2011.

Fiscal Year Ended August 28, 2010 Compared to Fiscal Year Ended August 29, 2009

Core Beef

Net Sales. Net sales for Core Beef were approximately $5,927.6 million in fiscal year 2010 compared to approximately $5,494.9 million in fiscal year 2009, an increase of $432.7 million or 7.9%. Net sales increased primarily due to an approximately 1.8% increase in the volume of cattle processed and an approximately 5.9% increase in the average sales per head processed during fiscal year 2010 as compared to fiscal year 2009.

Depreciation and Amortization. Depreciation and amortization of Core Beef was approximately $46.5 million in fiscal year 2010 as compared to approximately $42.1 million in fiscal year 2009, an increase of $4.4 million or 10.5%. Depreciation expense increased due to assets being placed into service at our three beef processing plants and two case ready plants during fiscal year 2010.

Operating Income. Operating income for Core Beef was approximately $266.8 million in fiscal year 2010 compared to $167.4 million in fiscal year 2009, an increase of $99.4 million or 59.4%. The improvement in operating income during the 52 week period of fiscal year 2010 resulted primarily from an increase in sales price per head processed of beef products of approximately 5.9%, partially offset by an increase in live cattle prices of approximately 3.8%.

Other

Net Sales. Net sales for Other were $228.1 million in fiscal year 2010 compared to $239.4 million in fiscal year 2009, a decrease of $11.3 million or 4.7%. The decrease was primarily due to decreased fuel surcharge revenues at our transportation operation, partially offset by a slight increase in sales at our portion control beef facility during fiscal year 2010 as compared to fiscal year 2009.

Depreciation and Amortization. Depreciation and amortization for Other was $3.1 million in fiscal year 2010 as compared to $2.2 million in fiscal year 2009, an increase of $0.9 million or 40.9%. Depreciation expense increased due to assets being placed into service, primarily at our transportation company during fiscal year 2010.

Operating Income. Operating income for Other was $4.2 million in fiscal year 2010 compared to $7.3 million in fiscal year 2009, a decrease of $3.1 million or 42.5%. The decrease in operating income was primarily due to lower sales and higher depreciation expense from our transportation operation and higher depreciation expense at our portion control beef facility during the fiscal year ended August 28, 2010.

Liquidity and Capital Resources

As of August 27, 2011, we had net working capital (the excess of current assets over current liabilities) of approximately $233.2 million, which included cash and cash equivalents of $50.7 million, with $26.3 million in distributions payable. As of August 28, 2010, we had net working capital of approximately $180.2 million, which included cash and cash equivalents of $20.4 million, with $27.4 million in distributions payable. Our primary sources of liquidity are cash flow from operations and available borrowings under our amended and restated credit facility, or Credit Facility.

As of August 27, 2011, we had $360.4 million of long-term debt, of which $38.5 million was classified as a current liability. As of August 27, 2011, our Credit Facility consisted of a $375.0 million term loan, of which $342.3 million was outstanding and a $250.0 million revolving line of credit loan, which had no outstanding borrowings, outstanding letters of credit of $24.1 million and available borrowings of $225.9 million, based on the most restrictive financial covenant calculations. Cash flows from operations and borrowings under our Credit Facility have funded our acquisitions, working capital requirements, capital expenditures and other general corporate purposes. We were in compliance with all of our financial covenants under our Credit Facility as of August 27, 2011.

Effective June 4, 2010, we amended and restated the Credit Facility to increase the maximum borrowings under the facility by increasing the revolving line of credit to $250 million and the availability under the term loan to $375 million

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($342.3 million of which was outstanding as of August 27, 2011). Based on the borrowing base tests in the amended and restated Credit Facility, $225.9 million of the revolving line of credit was available at August 27, 2011.

On June 10, 2011, the Company's Credit Facility was amended and restated to: (1) reduce the applicable margin by up to 0.75% for “LIBOR Rate” advances and “Base Rate” advances, (2) revise the “fixed charge coverage ratio” covenant provisions to provide the Company credit of up to $30 million for maintaining net asset borrowing base levels that exceed the lenders' aggregate credit commitments under the Credit Facility and (3) extend the maturity date of the Credit Facility to June 4, 2016.

In addition to outstanding borrowings under the Credit Facility, we had outstanding borrowings under industrial revenue bonds of $12.2 million and capital lease and other obligations of $5.9 million as of August 27, 2011.

Capital spending through fiscal 2012 is expected to be approximately $75.0 million. These expenditures are planned primarily for plant expansion (including funding a portion of the remaining expansion costs for our St. Joseph plant), equipment renewals and improvements. We believe available borrowings under the Credit Facility and cash provided by operating activities will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future. Our ability to generate sufficient cash, however, is subject to certain general economic, financial, industry, legislative, regulatory and other factors beyond our control. For a review of our obligations that affect liquidity, please see the ‘‘Cash Payment Obligations’’ table below.

Operating Activities

Net cash provided by operating activities was $273.4 million in fiscal 2011 as compared to $244.5 million in fiscal 2010. The $28.9 million increase was primarily due to approximately $11.0 million of additional net income in fiscal 2011 as compared to fiscal 2010, and an increase in the change in other assets and inventories by approximately $50.5 million, and $13.8 million respectively. These increases were offset by a decrease in the change in accrued compensation and benefits and other accrued expenses by approximately $28.7 million and $20.9 million respectively.

Net cash provided by operating activities was $244.5 million in fiscal year 2010 as compared to $264.3 million in fiscal year 2009. The $19.8 million decrease was primarily due to changes in inventory and accounts receivable of approximately $74.8 million and $55.4 million, respectively, which more than offset the approximately $103.9 million in additional net income in fiscal year 2010 as compared to fiscal year 2009.

Investing Activities

Net cash used in investing activities was $63.2 million in fiscal 2011 as compared to $48.1 million in fiscal 2010, an increase of $15.1 million. The increase was primarily due to an increase in capital expenditures by approximately $18.8 million during 2011 compared to 2010, offset by an increase in proceeds from the sale of property, plant and equipment of approximately $3.7 million in 2011 compared to 2010.

Net cash used in investing activities was $48.1 million in fiscal year 2010 as compared to $50.4 million in fiscal year 2009, a decrease of $2.3 million. The decrease was primarily attributable to the acquisition of National Beef Leathers for approximately $11.0 million during 2009, offset by approximately $8.7 million additional capital expenditures during 2010 compared to 2009.

Financing Activities

Net cash used in financing activities was approximately $179.9 million in fiscal 2011 compared to net cash used in financing activities of $193.3 million in fiscal 2010. The decrease in cash used in financing activities was primarily attributable to an approximate $119.2 million decrease in net payments on the term loan, and a $66.9 million purchase and cancelation of senior notes during fiscal 2010. These changes are offset by an increase in revolver payments of $24.8 million, as well as an increase in member distributions of approximately $143.2 million.

Net cash used in financing activities was approximately $193.3 million in fiscal year 2010 compared to net cash used in financing activities of $222.0 million in fiscal 2009. The decrease in cash used in financing activities was primarily attributable to an approximate $125.5 million redemption of member capital in the prior fiscal year compared to an $8.0 million redemption in the current year, an additional $48.8 million in net borrowings on the term loan, primarily related to the amended and restated Credit Facility on June 4, 2010, and approximately $32.8 million change in overdraft balances at August 28, 2010 as compared to August 29, 2009. These decreases were partially offset by an approximate $75.5 million member capital contribution during the fiscal year ended August 29, 2009, an approximate $68.7 million increase in member distributions paid

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in the current year, a $20.0 million reduction in net borrowings under the revolving loan, and the purchase and cancellation of approximately $66.9 million in aggregate principal amount of our Senior Notes compared to the purchase of only $62.5 million of our Senior notes in the prior fiscal year.

Credit Facility

Effective as of June 4, 2010, the Credit Facility was amended and restated to: (1) increase the borrowings under the Credit Facility by providing for a term loan facility of up to $375 million and a revolving line of credit of up to $250 million; (2) reduce the applicable margin on the rates of interest of the term loan and revolving line of credit; (3) revise the payment schedule of the term loan; (4) extend the maturity date of the Credit Facility to June 4, 2015; (5) remove limitations on capital expenditures; (6) add new financial covenants regarding adjusted net worth and a fixed charge coverage ratio; and (7) add two wholly owned subsidiaries, National Beef California, LP and National Carriers, Inc., as loan parties and guarantors. The lender financing charges for the amended and restated Credit Facility of approximately $4.2 million are being amortized over the life of the loan.

On June 10, 2011, the Company's Credit Facility was amended and restated to: (1) reduce the applicable margin by up to 0.75% for “LIBOR Rate” advances and “Base Rate” advances, (2) revise the “fixed charge coverage ratio” covenant provisions to provide the Company credit of up to $30 million for maintaining net asset borrowing base levels that exceed the lenders' aggregate credit commitments under the Credit Facility in the calculation of the fixed charge coverage ratio and (3) extend the maturity date of the Credit Facility to June 4, 2016. The related financing charges of approximately $0.8 million will be amortized over the life of the loan.

The borrowings under the Credit Facility bear interest at LIBOR or the Base Rate, plus the applicable margin. The applicable margin for the revolving line of credit and the term loan will be as set forth on a grid based on different ratios of funded debt to EBITDA. As of August 27, 2011, the interest rates for the term loan was approximately 1.96%.

The borrowings under the revolving loan are available for our working capital requirements, capital expenditures and other general corporate purposes. The advance rates under the borrowing base are 90% on eligible accounts and 70% on eligible inventory. The Credit Facility is secured by a first priority lien on substantially all of our assets and the assets of our subsidiaries.

Effective as of the June 10, 2011 amendment, the principal amount outstanding under the term loan is due and payable in equal quarterly installments of $9.25 million. All outstanding loan amounts are due and payable on June 4, 2016. Prepayment of the loans is allowed at any time.

The Credit Facility contains customary affirmative covenants relating to NBP LLC and its subsidiaries, including, without limitation, conduct of business, maintenance of insurance, compliance with laws, maintenance of properties, keeping of books and records, and the furnishing of financial statements. The facility also contains customary negative covenants relating to NBP LLC and its subsidiaries, including, without limitation, restrictions on: distributions, mergers, asset sales, investments and acquisitions, encumbrances, affiliate transactions, and ERISA matters. The ability of NBP LLC and its subsidiaries to engage in other business, incur debt or grant liens is also restricted.

The Credit Facility contains customary events of default, including, without limitation, failure to make payment when due, materially incorrect representations and warranties, breach of covenants, events of bankruptcy, default of other indebtedness that would permit acceleration of such indebtedness, the occurrence of one or more unstayed or undischarged judgments in excess of $3.0 million, changes in custody or control of the Company’s property, changes in control of the Company, failure of any of the loan documents to remain in full force, and the Company’s failure to properly fund its employee benefit plans. The Credit Facility also includes customary provisions protecting the lenders against increased costs or loss of yield resulting from changes in tax, reserve, capital adequacy and other requirements of law.

Industrial Revenue Bonds

Effective December 30, 2004, we entered into a transaction with the City of Dodge City, Kansas, designed to provide NBP property tax savings. Under the transaction, the City issued $102.3 million in bonds due in December 2019, used the proceeds to purchase our Dodge City facility (“the facility”) and leased the facility to us for an identical term under a capital lease. We purchased the City’s bonds with proceeds of our term loan under the Credit Facility. Because the City has assigned the lease to the bond trustee for our benefit as the sole bondholder, we effectively control enforcement of the lease against ourselves. As a result of the capital lease treatment, the facility will remain a component of property, plant and equipment in our consolidated balance sheet. As a result of the legal right of offset, the capital lease obligation and the corresponding bond

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investments will be eliminated in consolidation. The transaction provides us with property tax exemptions for the leased facility that, after netting payments to the City and local school district under payment in lieu of tax agreements, result in an annual property tax savings of approximately 25%. The facility remains subject to a prior mortgage and security interest in favor of the lenders under the Credit Facility. Additional revenue bonds may be issued to cover the costs of certain improvements to this facility. The total amount of revenue bonds authorized for issuance is $120.0 million.

The cities of Liberal and Dodge City, Kansas issued an aggregate of $13.8 million of industrial development revenue bonds on our behalf to fund the purchase of equipment and construction of improvements at our facilities in those cities. These bonds were issued in 1999 and 2000 in four series of $1.0 million, $1.0 million, $6.0 million and $5.9 million and are due on demand or on February 1, 2029, March 1, 2027, March 1, 2015 and October 1, 2009, respectively. Because each series of bonds is backed by a letter of credit under our Credit Facility, these due-on-demand bonds have been presented as non-current obligations until twelve months prior to their maturity. As of August 27, 2011, the amount outstanding on the $6.0 million series of bonds had been reduced to $3.4 million, and the $5.9 million series were paid at maturity on October 1, 2009. Pursuant to a lease agreement, we lease the facilities, equipment and improvements from the respective cities and make lease payments in the amount of principal and interest due on the bonds.

The bonds issued in 1999 and 2000 are variable rate demand obligations that bear interest at a rate that is adjusted weekly, which rate will not exceed 10% per annum. The average per annum interest rate for each series of bonds was 0.3% in fiscal 2011. We have the option to redeem a series of bonds at any time for an amount equal to the principal plus accrued interest to the date of such redemption. The holders of the bonds have the option to tender the bonds upon seven days’ notice for an amount equal to par plus accrued interest. To the extent the remarketing agent for the bonds is unable to resell any of the bonds that are tendered, the remarketing agent will use the letter of credit to fund such tender.

In connection with the Brawley Beef acquisition, we assumed the obligation under a Trust Indenture securing $6.8 million in California Pollution Control Financing Authority Tax-Exempt variable rate demand solid waste disposal revenue bonds dated as of October 1, 2001. The bonds bear a rate that is adjusted weekly, which rate will not exceed 12% per annum. The average per annum interest rate for this series of bonds for fiscal 2011 was 0.3%. These bonds have a maturity date of October 1, 2016. We have the option to redeem all or a portion of the bonds at any time for an amount equal to the principal plus accrued interest to the date of such redemption. The holders of the bonds have the option to tender the bonds upon seven days’ notice for an amount equal to par plus accrued interest. To the extent the remarketing agent for the bonds is unable to resell any of the bonds that are tendered, the remarketing agent will use the letter of credit to fund such tender.

On December 17, 2010, National Beef Leathers, LLC, or Leathers, a subsidiary of NBP, entered into various agreements with the city of St. Joseph, Missouri, designed to provide NBP property tax savings. Under the transaction, the city of St. Joseph issued $14.5 million in bonds due in December 2022, used the proceeds to purchase our equipment within our Leathers facility and subsequently leased the equipment back to us for an identical term under a capital lease. We purchased the city of St. Joseph bonds with proceeds of our term loan under the Credit Facility. Because the city of St. Joseph has assigned the lease to the bond trustee for our benefit as the sole bondholder, we effectively control enforcement of the lease against ourselves. As a result of the capital lease treatment, the equipment will remain a component of property, plant and equipment in NBP’s consolidated balance sheet. As a result of the legal right of offset, the capital lease obligation and the corresponding bond investments will be eliminated in consolidation.

Utilities Commitment

Effective December 30, 2004, we finalized an agreement with the City of Dodge City, Kansas, whereby in consideration of certain improvements made to the city water and wastewater systems we have committed to make a series of service charge payments totaling $19.3 million over a 20 year period. Payments of $0.8 million, $1.7 million and $1.4 million were made in fiscal years 2011, 2010, and 2009, respectively. Payments under the commitment for fiscal years 2012 through 2016 will be $0.8 million per year, with the remaining balance of $6.5 million to be paid in subsequent years.

10 ½% Senior Notes

During fiscal year 2010 we purchased and cancelled the remaining approximately $66.9 million of our senior notes.

Cash Payment Obligations

The following table describes our cash payment obligations as of August 27, 2011 (in thousands):

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	Total		Year 1 FY12		Year 2 FY13		Year 3 FY14		Year 4 FY15		Year 5 FY16		After Year 5
Term loan facility	$	342,250	$	37,000	$	37,000	$	37,000	$	37,000	$	194,250	$	—
Interest on long-term debt (1)	24,868		6,506		5,766		5,026		4,286		3,284		—
Revolving credit facility	—		—		—		—		—		—		—
Industrial Revenue Bonds	12,245		—		—		—		3,430		—		8,815
Capital leases (including interest)	6,544		1,775		1,745		3,024		—		—		—
City of Brawley loan	80		40		40		—		—		—		—
Operating leases	40,824		12,811		9,592		8,578		5,228		1,953		2,662
Purchase commitments	17,695		17,695		—		—		—		—		—
Cattle commitments (2)	73,407		73,407		—		—		—		—		—
Utilities commitment	10,573		820		818		816		816		815		6,488
Total	$	528,486	$	150,054	$	54,961	$	54,444	$	50,760	$	200,302	$	17,965

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(1)	Computed based on scheduled maturities and current effective interest rates.


(2)	We make a verbal commitment to cattle producers to purchase cattle about one week in advance of delivery of the live animals to our plants, with the actual price paid for the cattle determined after the cattle are delivered and inspected at our facilities. This amount approximates our outstanding cattle commitments at August 27, 2011.

Off-Balance Sheet Arrangements

As of August 27, 2011 we did not have any significant off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

Inflation

We believe our results of operations are not materially affected by moderate changes in the inflation rate. Inflation and changing prices did not have a material effect on our operations in fiscal 2011, 2010 and 2009. Severe increases in inflation, however, could affect the global and U.S. economies and could have an adverse affect on our business, financial condition and results of operations.

Seasonality and Fluctuations in Operating Results

Our operating results are influenced by seasonal factors in the beef industry. These factors affect the price we pay for livestock as well as the ultimate price at which we sell our products. The seasonal demand for beef products is highest in the summer and spring months as weather patterns permit more outdoor activities and there is an increased demand for higher value items that are grilled, such as steaks. Both live cattle prices and boxed beef prices tend to be at seasonal highs during the summer and fall. Because of higher consumption, more favorable growing conditions and the housing of animals in feedlots for the winter months, there are generally more cattle available in the summer and fall.

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ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Disclosures

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

Commodities. We use various raw materials, many of which are commodities. Raw materials are generally available from several different sources, and we presently believe we can obtain them as needed. Commodities are subject to price fluctuations that may create price risk. From time to time, we may hedge commodities in order to mitigate this price risk. While this may tend to limit our ability to participate in gains from commodity price fluctuations, it also tends to reduce the risk of loss from changes in commodity prices. To the extent the contracts are not designated as normal purchases, we reflect commodity contract gains and losses as adjustments to the basis of underlying commodities purchased; gains or losses are recognized in the statement of operations as a component of costs of goods sold.

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

We sell commodity beef products in our business. Commodity beef products are subject to price fluctuations that may create price risk. From time to time, we enter into forward sales contracts at prices determined prior to shipment. We may hedge the commodity price risk associated with these activities in order to mitigate this price risk. While this may tend to limit our ability to participate in gains from commodity price fluctuations, it also tends to reduce the risk of loss from changes in commodity beef prices. To the extent the contracts are not designated as normal sales, we reflect commodity contract gains and losses as adjustments to the basis of underlying commodities sold; gains or losses are recognized in the statement of operations as a component of net sales.

From time to time, we purchase cattle futures and options contracts. Our primary use of these contracts is to partially determine our future input costs when we have committed forward sales purchase orders from customers at a specified fixed price. The longest duration futures contract owned is sixteen months. In accordance with ASC 815 Derivatives and Hedging, as amended, we account for futures contracts and their related firm purchase commitments at fair value. Certain firm commitments for live cattle purchases and all firm commitments for boxed beef sales are treated as “normal purchases and sales” and not marked to market. ASC 815 imposes extensive recordkeeping requirements in order to treat a derivative instrument as a hedge for accounting purposes. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the instrument and the related change in fair value of the underlying commitment. For derivatives that qualify as effective hedges, the change in fair value has no net effect on earnings until the hedged transaction affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value does affect current period net earnings.

While management believes each of these instruments help mitigate various market risks, they are not designated and accounted for as hedges under ASC 815 as a result of the extensive recordkeeping requirements of this statement. Accordingly, the gains and losses associated with the change in fair value of the instrument and the offsetting gains and losses associated with changes in the market value of certain of the firm purchase commitments related to the futures contracts are recorded to income and expense in the period of change.

We use a sensitivity analysis to evaluate the effect that changes in the market value of commodities will have on these commodity derivative instruments. We feel the sensitivity analysis appropriately reflects the potential market value exposure associated with the use of derivative instruments. As of August 27, 2011 and August 28, 2010, the potential change in the fair value of applicable commodity derivative instruments, assuming a hypothetical 10% decrease in the underlying commodity price in each year, was $11.6 million and $0.3 million, respectively.

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

We have long-term debt with variable interest rates. Short-term debt is primarily comprised of the current portion of long-term debt maturing twelve months from the balance sheet date. Our variable interest expense is sensitive to changes in the general level of interest rates. As of August 27, 2011, the weighted average interest rate on our $354.5 million of variable

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interest debt was approximately 1.90%. As of August 28, 2010, the weighted average interest rate on our $239.2 million of variable rate debt was approximately 2.77%

We had total interest expense of approximately $11.7 million, $14.8 million and $23.3 million in fiscal 2011, 2010 and 2009, respectively. The estimated increase in interest expense from a hypothetical 200 basis point increase in applicable variable interest rates would have been approximately $7.4 million, $5.6 million and $4.9 million in fiscal 2011, 2010 and 2009, respectively.

Foreign Operations. Transactions denominated in a currency other than an entity’s functional currency may expose that entity to currency risk. Although we operate in international markets including Japan, South Korea and China, product sales are predominately made in United States dollars, and therefore, currency risks are limited.


ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and notes thereto, and other information required by this Item 8 are included in this report beginning on page F-1.


ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.


ITEM 9A.	CONTROLS AND PROCEDURES

We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the consolidated financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) under supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in alerting them, in a timely manner, to material information required to be included in our periodic Securities and Exchange Commission filings. There have been no changes in our internal control over financial reporting during the thirteen weeks ended August 27, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance as to the reliability of the Company’s financial reporting and the preparation of financial statements in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:


•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;


•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and managers of the Company; and


•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the Company’s consolidated financial statements.

Internal control over financial reporting, no matter how well designed, has inherent limitations. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of

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compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of August 27, 2011. In making this assessment, management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in Internal Control — Integrated Framework.

Based on the Company’s processes and assessment, as described above, management has concluded that, as of August 27, 2011, the Company’s internal control over financial reporting was operating effectively.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.


ITEM 9B.	OTHER INFORMATION

None.

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PART III


ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Managers and Executive Officers

The following table provides certain information regarding the members of our Board of Managers and our executive officers. Each member of the Board of Managers and executive officer will hold office until a successor is elected or qualified or until the earlier of his death, resignation or removal.



	Age as of
Name	August 27, 2011	Positions
Timothy M. Klein	54	President, Chief Executive Officer and Manager

Simon P. McGee	44	Chief Financial Officer

Jay D. Nielsen	56	Chief Accounting Officer and Treasurer

Terry L. Wilkerson	60	Chief Operating Officer

David L. Grosenheider	54	Executive Vice President, Business Planning and Analysis

Monte E. Lowe	53	Executive Vice President, Sales and Marketing

Michael J. Eckman	61	Executive Vice President, Human Resources

Bret G. Wilson	52	Vice President, General Counsel and Secretary

Steven D. Hunt	52	Chairman of Board of Managers

Richard A. Jochum	51	Manager

Timothy M. Klein has served as our President and Chief Operating Officer from 1998 through 2009 and currently serves as our President and Chief Executive Officer and has served as a member of our Board of Managers since 2009. Mr. Klein served as the Executive Vice President, Sales and Procurement of the Company from 1992 through 1998. Prior to 1992, Mr. Klein served as Vice President, Planning and Analysis at Cargill Inc. and as Vice President of Operations Analysis at Armour Food Company, a subsidiary of ConAgra Foods, Inc. Mr. Klein also served as Vice President of Sales and Pricing at EA Miller, Inc., a beef slaughter and fabrication business. Mr. Klein began his career in the meat industry at IBP, inc. (a predecessor of Tyson Fresh Meats and was one of the nation’s largest beef processors), where he served as Manager of Scheduling from 1980 through 1983.

Manager Qualifications: Mr. Klein’s day-to-day leadership as the Company’s chief executive officer and his many years of experience in the beef industry, including in finance, operations and sales positions, provide him with deep knowledge of the Company’s operations and the beef industry. This experience provides special insights regarding the Company’s strategic and operational challenges and opportunities.

Simon P. McGee has served as our Chief Financial Officer since February 2011, and has previously served as our Executive Vice President, Corporate Strategy and Acquisitions from April 2010 through February 2011. Mr. McGee served as our Senior Vice President, Corporate Strategy and Acquisitions from September 2009 to April 2010 and as our Vice President, Corporate Strategy and Acquisitions from 2006 to 2009. Prior to joining the Company, from 1999 to 2006, Mr. McGee served as an investment banker with Christenberry Collet & Company, Inc., an investment banking firm providing strategic corporate finance consulting on merger and acquisition and capital markets projects for middle-market public and private corporate clients. From 1988 to 1999, Mr. McGee was the founder and majority owner of McGee Ranch Company, Inc., a seedstock and commercial cow-calf enterprise.

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Jay D. Nielsen has served as our Chief Accounting Officer and Treasurer since February 2011 and has previously served as our Chief Financial Officer from 1997 through February 2011. Mr. Nielsen joined Hyplains Beef, LLC in 1992. Mr. Nielsen’s previous experience in the meat industry includes positions at ConAgra Foods, Inc., where he served as Controller of Armour Food Company from 1988 to 1991, and at EA Miller, Inc., a beef slaughter and fabrication business, where he served as Transportation Brokerage Manager from 1986 to 1988.

Terry L. Wilkerson has served as our Chief Operating Officer since February 2011 and has previously served as our Executive Vice President, Operations of the Company from March 2006 through February 2011. Mr. Wilkerson served as the Executive Vice President, Strategic Business Development of the Company from April 2005 to March 2006. From 1998 to 2005, Mr. Wilkerson served as the Company’s Executive Vice President of Operations. Mr. Wilkerson began his career with Excel Corporation (Cargill Meat Solutions) and held various operational positions within that company from 1974 to 1998. While at Cargill, he served as HR Director, Production Superintendent, Slaughter Operations Manager, General Manager/VP, Friona Division, General Manager of the Buena Vista Poultry Complex, VP of Transportation/Logistics, and VP of Logistics/IT.

David L. Grosenheider has served as our Executive Vice President, Business Planning and Analysis since March 2006. Mr. Grosenheider served as the Company’s (i) Executive Vice President, Beef Operations from April 2005 to March 2006, (ii) Executive Vice President of Case-Ready Meats from June 2003 to April 2005, (iii) Executive Vice President of Systems and Planning from 1999 to June 2003, and (iv) Vice President of Operational Affairs of NBP LLC from 1993 to 1998. From 1987 through 1993, Mr. Grosenheider served as Manager of Scheduling and Director of Financial Planning for Swift Independent/Monfort. Mr. Grosenheider served as Controller for North Star Foods, Inc., a poultry processing company, from 1986 to 1987 and served in various accounting positions for IBP, inc. from 1979 to 1986.

Monte E. Lowe has served as our Executive Vice President, Sales and Marketing since 1993. Prior to 1993, Mr. Lowe’s previous experience in the meat industry included sales representative positions at Beef America from 1988 to 1993, at Swift/Val-Agri, Inc. from 1986 to 1987, and at IBP, inc. from 1980 to 1986.

Michael J. Eckman has served as our Executive Vice President, Human Resources since November 2001. Prior to joining the Company, Mr. Eckman served as Executive Vice President of Human Resources for Solo Cup Co. from 1999 to 2001. Mr. Eckman held numerous positions within ConAgra Foods, Inc. from 1984 through 1998, including Senior Vice President of Human Resources of ConAgra Refrigerated Foods, Vice President of Human Resources of Armour Swift Eckrich, Vice President of Human Resources of Armour Food Company and Director of Labor Relations and Employee Benefits of Banquet Frozen Foods. Mr. Eckman also served as Banquet Frozen Foods’ Director of Labor Relations and Employee Benefits when it was owned by RCA Corporation from 1978 to 1984, and held various Human Resources management positions within RCA’s Picture Tube Division from 1972 to 1977.

Bret G. Wilson has served as our Vice President, General Counsel and Secretary since September 2009. From 1994 to 2009, Mr. Wilson held numerous positions with H&R Block, Inc., a tax services and financial services company, and its subsidiaries, including Vice President and Secretary and Vice President, Corporate Development and Risk Management of H&R Block, Inc. and Vice President, Corporate Counsel of Block Financial Corporation.

Steven D. Hunt has served as the Chair of the Board of Managers of the Company since USPB acquired a majority interest in the Company on August 6, 2003. Mr. Hunt served as a member of the Board of Managers of FNBPC from 1997 to 2003. Mr. Hunt was one of the founders of USPB and has served as its Chief Executive Officer since 1996.

Manager Qualifications: Mr. Hunt’s experience as a member and the Chair of the Board of Managers and Chief Executive Officer and founder of USPB provides an extensive knowledge of the beef industry and also the specific strategic challenges and opportunities facing the Company. In addition to this knowledge and experience, Mr. Hunt’s service as the Chief Executive Officer and a founder of USPB also provides the Board of Managers with valuable insight from the perspective of someone who is in contact with a substantial number of the Company’s cattle suppliers.

Richard A. Jochum serves as one of our managers. Since March 2002, he has served as the General Counsel and Corporate Administrator of Beef Products, Inc. (BPI), which is an affiliate of NBPCo Holdings. From March 2000 to March 2002, Mr. Jochum served as the Assistant Vice President, Legal Affairs for IBP, inc. From 1994 to March 2000, Mr. Jochum served as Assistant Vice President, Personnel Administration for IBP, inc.

Manager Qualifications: Mr. Jochum has extensive legal and administrative experience at BPI and IBP, inc., a former Fortune 500 publicly traded food company that was purchased by Tyson Foods. This experience provides our Board of Managers with a broad perspective on operational and strategic aspects of the beef industry.

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Audit Committee

The Board of Managers has established an audit committee consisting of Messrs. Hunt and Jochum, even though it is not required to do so. The Board of Managers has determined that Mr. Hunt is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K promulgated by the Securities and Exchange Commission, but is not independent as defined by NASDAQ.

Code of Ethics

NBP has adopted a corporate code of ethics for its principal executive officer, principal financial officer and principal accounting officer or controller within the meaning of the rules and regulations of the Securities and Exchange Commission. A copy of the Code may be obtained, without charge, upon written request to Bret G. Wilson, Vice President, General Counsel and Secretary, National Beef Packing Company, LLC, P.O. Box 20046, Kansas City, Missouri 64195.

ITEM 11. EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

This section provides a discussion of the background and objectives of our compensation programs for senior management, including the following officers whom we refer to as our named executive officers:



Name		Title
Timothy M. Klein		President and Chief Executive Officer
Simon P. McGee		Chief Financial Officer
Jay D. Nielsen		Chief Accounting Officer
Terry L. Wilkerson		Chief Operating Officer
David L. Grosenheider		Executive Vice President, Business Planning and Analysis
Monte E. Lowe		Executive Vice President, Sales and Marketing

The descriptions of various employee benefit plans and employment-related agreements in this section are qualified in their entirety by reference to the full text or detailed descriptions of the plans and agreements, which are incorporated by reference into this Annual Report on Form 10-K.

Board of Managers and Role of Management

The Board of Managers of the Company, or the Board, has the overall responsibility for monitoring and approving the compensation programs for our named executive officers and making decisions regarding compensation to be paid or awarded to them.

Objectives and Design of Our Compensation Program

Our executive compensation program is designed to attract, retain, and reward talented executives who can contribute to our long-term success and is based on the following general principles:


•	compensation must be competitive with that offered by other companies that compete with us for executive talent;


•	differences in compensation should reflect differing levels of responsibilities; and


•	performance-based compensation should focus on critical business objectives and align pay through performance-leveraged incentive opportunities.

The Board recognizes that the engagement of strong talent in critical functions may entail recruiting new executives at times and involve negotiations with individual candidates. As a result, the Board may determine in a particular situation that it is in the best interests of the Company to negotiate compensation packages that deviate from our general compensation philosophy.

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The Board generally does not seek input from outside compensation consultants with respect to annual compensation decisions.

Elements of Our Compensation Program

Base Salaries

Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer’s scope of responsibility and accountability with the Company. Mr. Klein from time to time may have received a substantially greater portion of his total compensation in the form of incentive pay because of the incentive opportunities negotiated as part of his employment agreements described later in this section.

Annual and Long Term Incentives

We maintain an annual incentive plan called the Management Incentive Program for the purpose of providing additional incentive compensation opportunities for our management and professional employees. With the exception of Mr. Klein, all of our named executive officers participated in the Management Incentive Program for fiscal 2011. Bonuses are earned under the plan if the Company attains certain minimum profit objectives in the applicable fiscal year, and paid to participants by November 30 following the end of the applicable fiscal year. The Management Incentive Program was designed to align the interests of management towards the achievement of a common goal of maximizing net income for the Company. The common goal upon which awards are based in the Management Incentive Program is “pre-bonus net income”. “Pre-bonus net income” for the relevant business units is net income as normally calculated under generally accepted accounting principles, but before bonus expenses of the Company. Generally, no bonuses are paid under the Management Incentive Program unless the Company achieves a threshold “pre-bonus net income” determined by the Board prior to or shortly after the beginning of each fiscal year. Management may recommend to the Board, however, that bonuses be awarded notwithstanding the fact that the Company did not achieve the threshold “pre-bonus net income” in order to provide competitive compensation to employees. Under the Management Incentive Program for fiscal 2011, $20.0 million in “pre-bonus net income” had to be achieved before bonuses could be paid. The Company believes “pre-bonus net income” is an appropriate measure of Company performance to utilize in making performance-based compensation decisions as senior management uses the same measure to evaluate the day-to-day performance of the business. According to the terms of the plan, if the pre-bonus net income threshold is met, a bonus pool is established as a percentage of pre-bonus net income and allocated to the named executive officers who are plan participants in proportion with their salaries relative to other salaried employees of the Company.

We also maintain a long-term incentive plan called the Management Long-Term Incentive Plan, or LTIP. Participation is determined by the Chief Executive Officer for each fiscal year and is limited solely to key management employees who have a significant impact on the Company’s long-term, strategic results. With the exception of Mr. Klein, all of our named executive officers participated in this plan for fiscal 2011.

Prior to or shortly after the beginning of each fiscal year, our Chief Executive Officer establishes the performance goals for the fiscal year and allocates to each participant a specified portion of the total incentive pool available for award under our LTIP. In determining each participant’s portion of the total pool, the Chief Executive Officer considers the participant’s ability to influence overall performance. The more senior the employee’s position with the Company, the greater the portion of compensation that varies with performance. The Chief Executive Officer is not required to allocate the entire LTIP incentive pool for a given fiscal year and may reserve a portion to be used for discretionary awards in recognition of extraordinary individual performance. Amounts earned for any fiscal year vest in three equal installments, with the first tranche vesting at the end of the third year following the year in which the award is earned. For example, fiscal 2011 awards will vest in equal installments of 33-1/3% each following the end of fiscal years 2014, 2015 and 2016. Until paid, amounts credited under the LTIP accrue interest at the weighted cost of debt capital for the Company. An executive will receive his incentive payment in cash at the time of vesting unless he elects to defer receipt of payment by making a timely deferral election in accordance with the terms of the plan.

According to the terms of the plan, if the minimum earnings before interest and taxes, or EBIT, return on invested capital threshold is met, a bonus pool is established as a percentage of the Company’s return on invested capital and allocated to the named executive officers who are plan participants in relation to their shares granted in the plan. No bonuses will be earned under the LTIP unless the Company attains a return on capital of at least 15%. In fiscal 2011, $6,325,653 was generated under the formula used to calculate the LTIP. Of this amount, approximately 3.6% 5.4%, 8.9%, 8.9% and 8.9% was allocated to Messrs. McGee, Nielsen, Wilkerson, Grosenheider and Lowe, respectively.

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Mr. Klein did not participate in our annual or long term incentive plans. Instead, he is eligible for annual and long term incentives set forth with the employment agreement described below. The annual incentive under the employment agreement has been based on the Company’s earnings before taxes and the long-term incentive is based on the Company’s earnings before interest and taxes.

Employee Benefits

Each of our named executive officers is entitled to participate in the Company’s employee benefit plans (including 401(k) retirement savings, medical, dental, and life insurance benefits) on the same basis as other employees.

Employment-Related Agreements

Mr. Klein is the only named executive officer of the Company covered by an employment agreement. Each of our other named executive officers, other than Mr. McGee, are parties to supplemental bonus agreements.

Agreement with Timothy M. Klein

On July 27, 2009, in connection with and effective upon his promotion to Chief Executive Officer, the Company entered into an amendment to Mr. Klein’s employment agreement. Mr. Klein’s employment agreement provided that he would receive an annual salary of $900,000. The agreement also provided that Mr. Klein would have an annual bonus opportunity based on our earnings before taxes for each year and long-term bonus opportunities based on our earnings before interest and taxes. Pursuant to his employment agreement, Mr. Klein’s annual earnings-based bonus was computed applying the formula described in footnote 1 to the Grants of Plan-Based Awards table set forth below. Mr. Klein’s long-term bonus opportunities include the following:

•

If Mr. Klein is continuously employed through the last day of fiscal year 2012, he will be entitled to an additional long-term bonus equal to: (a) if the Company’s cumulative EBIT during the period from the first day of fiscal year 2010 through the last day of fiscal year 2012 exceeds $115,000,000, 4.0% of such excess, up to cumulative EBIT of $150,000,000; plus (b) if such cumulative EBIT exceeds $150,000,000, .75% of such excess.

•

If Mr. Klein is continuously employed through the last day of fiscal year 2014, he will be entitled to an additional long-term bonus equal to: (a) if the Company’s cumulative EBIT during the period from the first day of fiscal year 2013 through the last day of fiscal year 2014 exceeds $76,667,000, 4.0% of such excess, up to cumulative EBIT of $100,000,000; plus (b) if such cumulative EBIT exceeds $100,000,000, .75% of such excess.

Supplemental Bonus Agreements

On October 27, 2010, the Company entered into supplemental bonus agreements with each of Messrs. Nielsen, Wilkerson, Grosenheider and Lowe. The Company awarded the bonuses provided for by these agreements to (i) reward the executives for the Company’s superior financial performance over the four fiscal years ending with fiscal year 2010 and (ii) serve as additional retention incentives for the executives. Pursuant to the supplemental bonus payments, the Company will pay the executives supplemental bonuses in the amounts set forth below within 60 days following the end of fiscal years 2011, 2012, 2013 and 2014 if the executive remains continuously employed through the last day of the applicable fiscal year for which the supplemental bonus relates.



Executive	Annual Supplemental Bonus
Jay D. Nielsen	$	250,000
Terry L. Wilkerson	$	500,000
David L. Grosenheider	$	500,000
Monte E. Lowe	$	500,000

The supplemental bonus agreements provide for the acceleration of any unpaid annual supplemental bonus payments if the executive’s employment with the Company ends as a result of death, disability or involuntary termination without cause.

Impact of Tax and Accounting Treatments

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We believe the compensation paid to our named executive officers is fully deductible under the Internal Revenue Code at the time it is paid. We further believe ASC 718, Compensation — Stock Compensation, did not have a material effect on our compensation program because we historically have not awarded stock options, restricted shares or other equity-based compensation.

Timing of Compensation Decisions

Prior to or shortly after the beginning of each fiscal year, the Board and our Chief Executive Officer review prior year performance and authorize the distribution of annual and long-term incentives, if any, for the prior year. Any changes in base salaries may also be considered at this time. The Board and Chief Executive Officer may deviate from this general practice when appropriate under the circumstances.

Stock Ownership Guidelines

The Company does not impose any minimum equity guidelines for our named executive officers.

Compensation Board Report

The Board has reviewed and discussed the foregoing Compensation Discussion and Analysis with the Company’s senior management. Based on the Board’s review of and discussions with management, the Board has included this Compensation Discussion and Analysis in this Annual Report on Form 10-K.

The foregoing report is provided by the following managers, who constitute the Board:

Steven D. Hunt

Richard A. Jochum

Timothy M. Klein

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Summary Compensation Table

The table below sets forth information regarding the fiscal year compensation for our named executive officers.



Name and Principal Position	Fiscal Year	Salary (1)		Bonus	Non-Equity Incentive Plan Compensation			All Other Compensation			Total
Timothy M. Klein,	2011	$	900,000	—	$	3,018,418		$	10,742		$	3,929,160
President and Chief Executive Officer	2010	$	900,000	—	$	2,879,748		$	5,892		$	3,785,640
	2009	$	565,385	—	$	4,137,310		$	6,309		$	4,709,004
					(2		)	(3		)

Simon P. McGee, Chief	2011	$	365,385	—	$	596,062		$	8,690		$	970,137
Financial Officer					(4		)	(5		)


Jay D. Nielsen, Chief	2011	$	325,000	—	$	925,099		$	7,882		$	1,257,981
Accounting Officer	2010	$	307,981	—	$	668,322		$	7,542		$	983,845
	2009	$	190,000	—	$	257,667		$	5,509		$	453,176
					(6		)	(7		)

Terry L. Wilkerson,	2011	$	419,231	—	$	1,504,750		$	9,767		$	1,933,748
Chief Operating Officer	2010	$	324,038	—	$	918,849		$	11,332		$	1,254,219
	2009	$	275,000	—	$	402,601		$	11,110		$	688,711
					(8		)	(9		)

David L. Grosenheider,	2011	$	338,462	—	$	1,425,329		$	8,151		$	1,771,942
Executive Vice President, Business Planning and	2010	$	324,038	—	$	918,849		$	6,540		$	1,249,427
Analysis	2009	$	266,347	—	$	397,063		$	6,635		$	670,045
					(10		)	(11		)

Monte E. Lowe,	2011	$	365,385	—	$	1,451,803		$	16,583		$	1,833,771
Executive Vice President, Sales and Marketing	2010	$	324,038	—	$	918,849		$	5,882		$	1,248,769
	2009	$	266,347	—	$	397,063		$	6,443		$	669,853
					(12		)	(13		)

________________________________________


(1)	Salaries are paid on a weekly basis. Fiscal years 2011, 2010 and 2009 consisted of 52 weeks.


(2)	Represents annual earning-based bonuses of $4,137,310, $2,879,748, and $3,018,418 in fiscal years 2009, 2010 and 2011, respectively.


(3)	Comprised of a Company matching payment toward a 401(k) retirement plan of $4,600, $4,510 and $9,360 in fiscal years 2009, 2010 and 2011, respectively, as well as a premium payment of life insurance benefit of $1,709, $1,382 and $1,382 in fiscal years 2009, 2010 and 2011, respectively.

(4)

Comprised of $225,916 earned under the Management Long-term Incentive Plan for fiscal year 2011, plus $10,861 of accrued interest with respect to fiscal year 2011, attributable to amounts credited on the executive's behalf under the Management Long-Term Incentive Plan for prior fiscal years. In additions the amount includes $359,285 earned in fiscal year 2011 under our Management Incentive Program.

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(5)	Comprised of a Company matching payment toward a 401(k) retirement plan of $7,308 for fiscal year 2011, as well as a premium payment of life insurance benefit of $1,382 in fiscal year 2011.

(6)

Comprised of $124,668, $338,857 and $338,874 earned under the Management Long-Term Incentive Plan for fiscal years 2009, 2010 and 2011, respectively, plus $11,397, $12,228 and $16,651 of accrued interest with respect to fiscal years 2009, 2010 and 2011, respectively, attributable to amounts credited on the executive’s behalf under the Management Long-Term Incentive Plan for prior fiscal years. In addition the amounts include $121,602, $317,237 and $319,574 earned in fiscal years 2009, 2010 and 2011, respectively, under our Management Incentive Program, and $0, $0 and $250,000 earned in fiscal years 2009, 2010 and 2011, respectively, under our Supplemental Bonus Agreement.


(7)	Comprised of a Company matching payment toward a 401(k) retirement plan of $3,800, $6,160 and $6,500 for fiscal years 2009, 2010 and 2011, respectively, as well as a premium payment of life insurance benefit of $1,709, $1,382 and $1,382 in fiscal years 2009, 2010 and 2011, respectively.

(8)

Comprised of $207,779, $564,762 and $564,790 earned under the Management Long-Term Incentive Plan in fiscal years 2009, 2010 and 2011, respectively, plus $18,819, $20,310 and $27,728 of accrued interest with respect to fiscal years 2009, 2010 and 2011, respectively, attributable to amounts credited on the executive’s behalf under the Management Long-Term Incentive Plan for prior fiscal years. In addition the amounts include $176,003, $333,777 and $412,232 earned in fiscal years 2009, 2010 and 2011, respectively, under our Management Incentive Program, and $0, $0 and $500,000 earned in fiscal years 2009, 2010 and 2011, respectively, under our Supplemental Bonus Agreement.


(9)	Comprised of a Company matching payment toward a 401(k) retirement plan of $4,600, $5,148 and $8,385 in fiscal years 2009, 2010 and 2011, respectively, as well as a premium payment of life insurance benefit of $6,510, $6,184 and $1,382 in fiscal years 2009, 2010 and 2011, respectively.

(10)

Comprised of $207,779, $564,762 and $564,790 earned under the Management Long-Term Incentive Plan in fiscal years 2009, 2010 and 2011, respectively, plus $18,819, $20,310 and $27,728 of accrued interest with respect to fiscal years 2009, 2010 and 2011, respectively, attributable to amounts credited on the executive’s behalf under the Management Long-Term Incentive Plan for prior fiscal years. In addition the amounts include $170,465, $333,777 and $332,811 earned in fiscal years 2009, 2010 and 2011, respectively, under our Management Incentive Program, and $0, $0 and $500,000 earned in fiscal years 2009, 2010 and 2011, respectively, under our Supplemental Bonus Agreement.


(11)	Comprised of a Company matching payment toward a 401(k) retirement plan of $4,927, $5,158 and $6,769 in fiscal years 2009, 2010 and 2011, respectively, as well as a premium payment of life insurance benefit of $1,708, $1,382 and $1,382 in fiscal years 2009, 2010 and 2011, respectively.

(12)

Comprised of $207,779, $564,762 and $564,790 earned under the Management Long-Term Incentive Plan in fiscal years 2009, 2010 and 2011, respectively, plus $18,819, $20,310 and $27,728 of accrued interest with respect to fiscal years 2009, 2010 and 2011, respectively, attributable to amounts credited on the executive’s behalf under the Management Long-Term Incentive Plan for prior fiscal years. In addition the amounts include $170,465, $333,777 and $359,285 earned in fiscal years 2009, 2010 and 2011, respectively, under our Management Incentive Program, and $0, $0 and $500,000 earned in fiscal years 2009, 2010 and 2011, respectively, under our Supplemental Bonus Agreement.


(13)	Comprised of a company matching payment toward a 401(k) retirement plan of $4,735, $4,500 and $10,400 in fiscal years 2009, 2010 and 2011, respectively, as well as a premium payment of life insurance benefit of $1,708, $1,382 and $6,183 in fiscal years 2009, 2010 and 2011, respectively.

Grants of Plan-Based Awards

The table below sets forth information regarding grants of non-equity plan-based awards made to our named executive officers during fiscal 2011. The Summary Compensation Table above reflects the actual dollar amounts earned under our annual and long-term incentive plans.

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Name and		Estimated Future Payouts Under Non- Equity Incentive Plan Awards
Principal Position	Grant Type/Date	Threshold ($)	Target ($)		Maximum ($)
Timothy M. Klein	—	—	3,018,418	(1)	—


Simon P. McGee	MIP / -	—	359,285	(2)	—
	LTIP / -		225,916	(3)

Jay D. Nielsen	MIP / -	—	319,574	(2)	—
	LTIP / -		338,874	(3)
	Supplemental / -		250,000	(4)

Terry L. Wilkerson	MIP / -	—	412,232	(2)	—
	LTIP / -		564,790	(3)
	Supplemental / -		500,000	(4)

David L. Grosenheider	MIP / -	—	332,811	(2)	—
	LTIP / -		564,790	(3)
	Supplemental / -		500,000	(4)

Monte E. Lowe	MIP / -	—	359,285	(2)	—
	LTIP / -		564,790	(3)
	Supplemental / -		500,000	(4)

__________________________________

(1)

Pursuant to Mr. Klein’s employment agreement, he is entitled to an annual bonus for fiscal year 2011 based on the following formula: (a) if the Company’s cumulative earnings before taxes, or EBT, during any such fiscal year exceeds $20,000,000, 2% of such excess, up to EBT of $80,000,000; plus (b) if such cumulative EBT exceeds $80,000,000, 1% of such excess. There are no threshold, target or maximum amounts. The amount shown was earned in fiscal year 2011 from the annual incentive calculation.

(2)

Executive is a participant in our Management Incentive Program, which is described under the heading “Annual and Long-Term Incentives” in our Compensation Discussion and Analysis. Amounts earned under the Management Incentive Plan are determined as a percentage of a bonus pool that is established on the basis of our pre-bonus net income for the year assuming a minimum level of pre-bonus net income is attained. There are no threshold, target or maximum amounts. The amount shown was calculated for fiscal year 2011 based on the formula.

(3)

Executive is a participant in our Management Long-Term Incentive Program, which is described under the heading “Annual and Long-Term Incentives” in our Compensation Discussion and Analysis. Amounts earned under the Management Long-Term Incentive Program are determined as a percentage of the Company’s return on invested capital, assuming a minimum EBIT level is attained. There are no threshold, target or maximum amounts. The amount shown was calculated for fiscal year 2011 based on the formula.

(4)

Executive is a participant in our Supplemental Bonus Agreement, which is described under the heading "Supplemental Bonus Agreements" in our Compensation Discussion and Analysis. Amounts earned under the Supplemental Bonus Agreement are determined based upon agreements entered into with each of the participants. There are no threshold, target or maximum amounts. The amount shown was earned for fiscal year 2011 based on the agreement.

Option Exercises and Stock Vested

The Company has not utilized stock options, restricted shares or similar equity-based awards for our named executive officers and there were no such awards exercised or vested during fiscal 2011.

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Retirement Plans

We do not maintain a qualified or non-qualified defined benefit pension plan covering any of our employees. Our named executive officers are eligible to participate in our tax-qualified Profit Sharing and Savings Plan on the same basis as other employees under the plan. The Company makes a matching contribution to this plan equal to 50% of each participant’s own elective contributions up to 4% of salary. The Company also has the discretion to make annual profit sharing contributions that are allocated among all eligible participants in proportion to their respective compensation. The Summary Compensation Table above reflects the actual dollar amounts contributed to our Profit Sharing and Savings Plan on each named executive officer’s behalf.

Nonqualified Deferred Compensation

The following table reflects the amounts credited under our Management Long Term Incentive Plan on behalf of our named executive officers. We do not maintain any other non-qualified deferred compensation plans.



Name and Principal Position	Executive contributions in last fiscal year ($)	Registrant contributions in last fiscal year ($)		Aggregate earnings in last fiscal year ($)		Aggregate withdrawals/ Distributions ($)		Aggregate balance at fiscal year end ($)
Simon P. McGee		225,916	(1)	10,861	(2)	10,160	(3)	651,032	(4)
Jay D. Nielsen	—	338,874	(1)	16,651	(2)	27,078	(3)	988,642	(4)
Terry L. Wilkerson	—	564,790	(1)	27,728	(2)	44,341	(3)	1,646,930	(4)
David L. Grosenheider	—	564,790	(1)	27,728	(2)	44,341	(3)	1,646,930	(4)
Monte E. Lowe	—	564,790	(1)	27,728	(2)	44,341	(3)	1,646,930	(4)

_____________________________


(1)	This amount represents the amount awarded to the executive under our Management Long-Term Incentive Plan for fiscal 2011. This amount is also included in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.


(2)	This amount represents accrued interest on the incentive bonuses credited on the executive’s behalf under our Management Long-Term Incentive Plan for fiscal 2011 and earlier years. This amount is also included in the Summary Compensation Table under the “Non-Equity Incentive Plan Compensation” column.


(3)	This amount represents the vested incentive payments paid to executive during fiscal 2011 under our Management Long-Term Incentive Plan.


(4)	This amount represents the aggregate unpaid incentive bonuses (both vested and non-vested) credited on executive’s behalf under our Management Long-Term Incentive Plan for all fiscal years through 2011.

Amounts Deferred under the Long-Term Incentive Plan

The Nonqualified Deferred Compensation table reflects amounts awarded and deferred under the LTIP. Pursuant to the LTIP, three years after the close of the fiscal year in which the award is granted, a participant becomes 33.33% vested. At the close of each subsequent year, an additional 33.33% of the award vests until the award is fully vested. Unless a participant elects to receive payment of the vested portions of his or her award for a particular year in cash, all amounts awarded under the plan remain in the plan as an investment in the working capital of the Company, even after such awards have vested. The amounts that remain in the plan accrue interest at the weighted cost of debt capital, which for fiscal 2011 was 2.61%. Vested awards remaining in the plan are paid to the participants or their respective beneficiaries upon disability, retirement or death.

Risk Assessment in Compensation Programs

The Company has assessed its compensation policies and practices to determine if its compensation programs are reasonably likely to have a material adverse effect on the Company. The Company’s compensation programs (i) generally

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apply on a uniform basis to management employees at all of the Company’s material business operations, (ii) focus on earnings and return-on-invested-capital targets (as opposed to revenue targets) and (iii) are designed to award executives for meeting a blend of annual and cumulative long-term performance objectives. In light of these characteristics and as a result of our analysis, we have concluded that our compensation policies and practices do not create risks reasonably likely to have a material adverse effect on the Company.

Potential Payments upon Termination

The following table provides an estimate of the payments and benefits that would be paid to Mr. Klein, assuming an August 27, 2011 termination date, upon voluntary or involuntary termination of employment. The table does not reflect any payments or benefits that would be paid to our employees generally, including for example accrued salary and vacation pay or normal distribution of account balances under our qualified defined contribution plan.



Name and Principal Position	Termination by executive for good reason ($)	Termination by us without cause ($)	Death or disability ($)
Timothy M. Klein, President and Chief Executive Officer (1)
• Base Salary	2,700,000	2,700,000	900,000
• Incentive Pay	18,425,332	18,425,332	4,945,574
• Fringe Benefits	32,227	32,227	9,767	(2)
• Total	21,157,559	21,157,559	5,855,341

________________________________________


(1)	The items shown in this table reflect the Company’s estimated obligations through the term of Mr. Klein’s employment agreement. The term of his agreement expires August 27, 2014.


(2)	Not payable in the event of death.

Mr. Klein’s employment agreement provides that if we terminate his employment without cause or if he terminates his employment with good reason, he will continue to receive his then-current salary and specified bonuses and we will maintain certain fringe benefits on his behalf for the remainder of the five-year term specified in the agreement. Mr. Klein’s employment agreement also contains a covenant not to compete for eighteen months following the termination of his employment, subject to certain conditions.

On October 27, 2010, the Company entered into supplemental bonus agreements with each of Messrs. Nielsen, Wilkerson, Grosenheider and Lowe. These agreements provide for the Company to pay the executives supplemental bonuses within 60 days following the end of fiscal years 2011, 2012, 2013 and 2014 if the executive remains continuously employed through the last day of the applicable fiscal year for which the supplemental bonus relates. The supplemental bonus agreements also provide that any unpaid annual supplemental bonus payments will be accelerated if the executive’s employment with the Company ends as a result of death, disability or involuntary termination without cause.

Manager Compensation

The members of our Board of Managers do not receive any separate compensation for serving in such capacity other than reimbursement of their out-of-pocket business expenses.

Compensation Committee Interlocks and Insider Participation

The Board makes all compensation-related decisions that affect Mr. Klein, our President and Chief Executive Officer. Mr. Klein, with input from the Board, makes compensation-related decisions for all other senior management. Other than as disclosed under Item 13. Transactions with Related Persons, and Director Independence below, none of our executive officers served as:


•	a member of the compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served on our Board; or


•	a director of another entity, one of whose executive officers served on our Board.

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ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table provides certain information as of August 27, 2011 with respect to the beneficial ownership of the membership interests of the Company by (i) each holder known by us who beneficially owns 5% or more of the outstanding voting interests of the Company, (ii) each of the members of our Board of Managers, (iii) each of our named executive officers, (iv) other executive officers who beneficially own membership interests in the Company, and (v) all of the members of our Board of Managers and our executive officers as a group. Unless otherwise indicated in a footnote, the business address of each person is our corporate address.



Beneficial Owner	Class B Interest	Percentage of Class
U.S. Premium Beef, LLC	10,664,475	69	%
NBPCo Holdings, LLC (1)	3,810,044	25	%
David L. Grosenheider	—	—
Steven D. Hunt	—	—
Richard A. Jochum	—	—
Timothy M. Klein (2)	906,798	6	%
John R. Miller	—	—
Simon P. McGee	—	—
Jay D. Nielsen	—	—
Terry L. Wilkerson	—	—
Monte E. Lowe	—	—
All managers and executive officers as a group (8 persons)	15,381,317	100	%

______________________________________


(1)	Eldon N. Roth is the controlling stockholder of NBPCo Holdings, LLC and is deemed to beneficially own the interests held by NBPCo Holdings, LLC.


(2)	Mr. Klein holds his interests through TKK Investments, LLC, and TMKCo., LLC, both of which are Missouri limited liability companies that are beneficially owned by Mr. Klein.

Equity Interests

USPB, NBPCo Holdings and affiliates of Timothy M. Klein each hold Class A and Class B interests in the Company.

Class A Interests. Class A interests are non-voting and are entitled to a priority distribution of 5% per year on the face amount of the Class A interests, payable not later than 30 days after the close of the Company’s tax year quarters in cash to the extent permitted by the Company’s senior lenders and the indenture governing the senior notes. The face amount of the Class A interests, together with all unpaid priority distributions, will be distributed on a priority basis upon liquidation.

Class A1 Interests. Class A1 interests are non-voting and are entitled to a priority distribution of 7% per year on the face amount of the Class A1 interests, payable with payment in kind Class A1 interests in lieu of cash if the Company’s EBITDA does not meet certain tests. For purposes of determining Class B ownership for liquidation or redemption, the Class A1 interests will be deemed to be converted to Class B units at a ratio in the LLC Agreement, but will remain Class A1 interests after such determination.

Class B Interests. Class B interests are entitled to receive all assets available for distribution upon liquidation after payment of the Class A face amount together with all unpaid Class A priority distributions. Class B interests will also be allocated all items of income and loss earned or incurred by the Company after allocation of income attributable to the Class A priority distribution. In addition, the holders of Class B interests are entitled to receive quarterly distributions to make tax payments which consist of 48% of the Company’s remaining estimated taxable net income after the Class A priority distributions are made. The voting power of the members (voting either directly or by action of the Board of Managers designated by the members) is determined based upon the number of Class B interests held.

USPB holds approximately 69.3% of the Class B interests, as well as Class A and Class A-1 interests with an aggregate face amount of approximately $150.5 million, NBPCo Holdings owns approximately 24.8% of the Class B interests, as well as Class A and Class A-1 interests with an aggregate face amount of approximately $51.2 million, and affiliates of Timothy M.

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Klein own approximately 5.9% of the Class B interests, as well as Class A interests with an aggregate face amount of approximately $2.3 million.

We do not have any equity compensation plans under which equity securities of National Beef are authorized for issuance.

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ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Unit Redemption Agreement

At any time after certain dates, the earliest being July 31, 2010, the latest being July 31, 2011, affiliates of Mr. Klein and/or NBPCo Holdings have the right to require that the company repurchase their interests, the value of which is to be determined by a specified formula or a mutually agreed process. If the Company is unable to effect the repurchase within a specified time, the requesting member(s) have the right to cause a sale process to commence.

Transactions with U.S. Premium Beef

In December 1997, FNBPC entered into a contract with USPB to purchase a portion of our annual cattle requirements. In connection with USPB’s purchase of its interest in FNBPC, USPB obtained the right, and became subject to the obligation, if requested, to deliver cattle annually to NBP pursuant to the supply agreement. USPB now facilitates the delivery of cattle annually to us from its individual producer-owners. The purchase price for the cattle is determined by our pricing grid, which, under the terms of our supply agreement with USPB, must be competitive with the formula pricing of our competitors and may not be less favorable than formula pricing we offer to other suppliers. The standard market prices on the USPB pricing grid are reported by the USDA and certain adjustments to the market prices are made based on quality and yield of the cattle delivered by USPB members. The supply agreement provides that any disputes between us and USPB relating to the pricing grid shall be resolved by binding arbitration. During fiscal 2011, we obtained approximately 20% of the cattle we processed from USPB members under our contractual arrangement with USPB. Any new purchase agreements and payment formulas with USPB must be consistent with our supply agreement existing at the time USPB acquired a majority interest in us on August 6, 2003.

Transactions with Beef Products, Inc.

Since 1994, we have had a business relationship with Beef Products, Inc., or BPI, which is an affiliate of NBPCo Holdings, whereby we sell beef trimmings, referred to as trim, to BPI, primarily at a formula-based price, and we purchase processed lean beef from BPI at negotiated prices for use in our ground beef operations. Our aggregate sales of trim to BPI totaled approximately $170.2 million, $120.4 million and $96.9 million, respectively, in fiscal 2011, 2010 and 2009. Our aggregate purchases of processed lean beef from BPI totaled approximately $47.5 million, $40.6 million, and $28.9 million, respectively, in fiscal 2011, 2010 and 2009.

In January 2007, we entered into an agreement with BPI for BPI to manufacture and install a grinding system in one of our plants. In accordance with the agreement with BPI, we are to pay BPI a technology and support fee based on the number of pounds of product produced using the grinding system. The installation of the grinding system was completed in fiscal year 2008. During fiscal 2011, 2010 and 2009, we paid approximately $2.0 million, $1.9 million and $1.7 million, respectively, to BPI in technology and support fees.

Employment of Related Persons

Tom Klein, the brother of Timothy M. Klein, our Chief Executive Officer, serves as Vice President, Value-Added of the Company. During fiscal years 2011, 2010 and 2009, Tom Klein received compensation in this position of $466,592, $413,243 and $272,810, respectively. Andrew Wilkerson, the son of Terry L. Wilkerson, our Chief Operating Officer, serves as Application Manager of the Company. During fiscal years 2011, 2010, and 2009, Andrew Wilkerson received compensation in this position of $169,154, $169,041, and $123,001, respectively.

See Item 10. “Directors And Executive Officers of the Registrant” for additional information regarding the independence of our audit committee financial expert. None of our managers is an “independent director” as defined by NASDAQ.

The Company’s Limited Liability Company Agreement requires consent of certain members for any contract with a member or its affiliates other than arms-length, ordinary course contracts whose terms and conditions are disclosed to the Board of Managers prior to commencement. In addition, no contract or transaction between the Company and a Manager or its affiliate (or in which they have a material financial interest) is void if the material facts are disclosed to the Board of Managers when the contract is authorized and the contract is approved in accordance with the Limited Liability Company Agreement.


ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES

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KPMG LLP, an independent registered public accounting firm, served as our auditors for the fiscal years ended August 27, 2011 and August 28, 2010.



Type of Service	52 weeks ended August 27, 2011		52 weeks ended August 28, 2010
	(amounts in thousands)
Audit Fees	$	367	$	455
Audit-Related Fees	—		17
Tax Fees	—		—
All Other Fees	9		905
Total	$	376	$	1,377

Audit Fees

Audit fees relate to the audit of our consolidated financial statements, the reviews of quarterly reports on Form 10-Q and the review of the annual report on Form 10-K.

Audit-Related Fees

Audit-related fees in fiscal year 2010 primarily relate to consultations on accounting related matters.

Tax Fees

Tax fees relate to tax compliance, tax advice and tax planning services.

All Other Fees

All other fees for fiscal year 2011 relate to workpaper reviews. All other fees for fiscal year 2010 relate to IPO preparation.

Our audit committee appoints our independent auditors. The audit committee is solely and directly responsible for the approval of the appointment, re-appointment, compensation and oversight of our independent auditors. The audit committee approves in advance all work to be performed by the independent auditors.

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PART IV


ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Financial Statements and Financial Statement Schedules

(1) The consolidated financial statements filed as part of this report at Item 8 are listed in the Index to the Consolidated Financial Statements on page F-1 contained herein.

(2) The financial statement schedule required to be filed by Item 8 of this report is set forth in Item 15(c), Financial Statement Schedules contained herein.

(b) The following documents are filed or incorporated by reference as exhibits to this report:



3.1(a)		Limited Liability Company Agreement of National Beef Packing Company, LLC, dated as of August 6, 2003 (incorporated herein by reference to Exhibit 3.1(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 27, 2006, filed with the SEC on July 10, 2006).

3.1(b)		Amendment to the Limited Liability Company Agreement of National Beef Packing Company, LLC, dated as of July 7, 2005 (incorporated by reference to Exhibit 3.1(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended May 27, 2006, filed with the SEC on July 10, 2006).

3.1(c)		Amendment of a portion of Section 6.6 to the Limited Liability Company Agreement of National Beef Packing Company, LLC (incorporated by reference to Exhibit 3.1(a) to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2009, filed with the SEC on April 15, 2009).

3.1(d)		Amendment of a portion of Section 12.5 to the Limited Liability Company Agreement of National Beef Packing Company, LLC (incorporated by reference to Exhibit 3.1(b) to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2009, filed with the SEC on April 15, 2009).

3.1(e)		Summary of Class A-1 Units (incorporated by reference to Exhibit 3.1(c) to the Company’s Quarterly Report on Form 10-Q for the quarter ended February 28, 2009, filed with the SEC on April 15, 2009).

3.1(f)		Fifth Amended Exhibit 3.1 to the Limited Liability Company Agreement of National Beef Packing Company, LLC, effective as of June 2, 2010 (incorporated herein by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on June 6, 2010).

10.1(a)*		Employment Agreement dated as of August 6, 2003 by and between National Beef Packing Company, LLC and Timothy M. Klein (incorporated herein by reference to Exhibit 10.4 to Registration Statement on Form S-4 (File No. 333-111407) filed with the SEC on December 19, 2003).

10.1(b)*		Amendment to Employment Agreement for Timothy M. Klein dated as of December 31, 2008 by and between National Beef Packing Company, LLC and Timothy M. Klein (incorporated herein by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended November 29, 2008, filed with the SEC on January 13, 2009).

10.1(c)*		Second Amendment to Employment Agreement dated as of July 27, 2009, between the Company and Timothy M. Klein (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended July 27, 2009, filed with the SEC on July 28, 2009).

10.1(d)*		Deferred Equity Incentive Compensation Agreement dated August 6, 2003 by and between National Beef Packing Company, LLC and Timothy M. Klein (incorporated herein by reference to Exhibit 10.5 to Registration Statement on Form S-4 (File No. 333-111407) filed with the SEC on December 19, 2003).

10.2*		Supplemental Bonus Agreement dated October 27, 2010 by and between National Beef Packing Company, LLC and Jay D. Nielsen (incorporated by reference to Exhibit 10.2 to the Company's Annual Report on Form 10-K for the year ended August 28, 2010, filed with the SEC on October 29, 2010). .

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10.3*		Supplemental Bonus Agreement dated October 27, 2010 by and between National Beef Packing Company, LLC and Terry L. Wilkerson (incorporated by reference to Exhibit 10.3 to the Company's Annual Report on Form 10-K for the year ended August 28, 2010, filed with the SEC on October 29, 2010). .

10.4*		Supplemental Bonus Agreement dated October 27, 2010 by and between National Beef Packing Company, LLC and David L. Grosenheider (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for the year ended August 28, 2010, filed with the SEC on October 29, 2010). .

10.5*		Supplemental Bonus Agreement dated October 27, 2010 by and between National Beef Packing Company, LLC and Monte E. Lowe (incorporated by reference to Exhibit 10.5 to the Company's Annual Report on Form 10-K for the year ended August 28, 2010, filed with the SEC on October 29, 2010). .

10.6		Unit Redemption Agreement dated as of June 2, 2010, among National Beef Packing Company, LLC, TKK Investments, LLC and TMKCo., LLC (incorporated by reference to Exhibit 2 to the Company’s Current Report on Form 8-K filed with the SEC on June 8, 2010).

10.7		Amended and Restated Credit Agreement dated as of June 4, 2010 by and among the Company and certain agents, lenders and issuers (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 6, 2010).

10.8		First Amendment, dated June 10, 2011, to Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on June 16, 2011).

10.9		Limited Waiver and Second Amendment, dated July 7, 2011, to Amended and Restated Credit Agreement (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended May 28, 2011, filed with the SEC on July 8, 2011)

10.10		Cattle Purchase and Sale Agreement dated as of December 1, 1997 by and among Farmland National Beef Packing Company, L.P. and U.S. Premium Beef, Ltd. (incorporated herein by reference to Exhibit 10.7 to Registration Statement on Form S-4 (File No. 333-111407) filed with the SEC on December 19, 2003).

10.11(a)		Lease dated as of December 1, 2004 between City of Dodge City, Kansas and National Beef Packing Company, LLC securing $102,300,000 City of Dodge City, Kansas Industrial Development Revenue Bonds, Series 2004 (National Beef Packing Company, LLC Project) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on January 6, 2005).

10.11(b)		Trust Indenture dated as of December 1, 2004 between City of Dodge City, Kansas and Commerce Bank, N.A., as trustee, securing $102,300,000 City of Dodge City, Kansas Industrial Development Revenue Bonds, Series 2004 (National Beef Packing Company, LLC Project) (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the Commission on January 6, 2005).

10.12*		National Beef Packing Company, LLC Management Incentive Program (incorporated herein by reference to Exhibit 10.18 to Registration Statement on Form S-1 (File No. 333-162443) filed by National Beef, Inc. with the SEC on October 13, 2009).

10.13*		National Beef Packing Company, LLC Management Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.24 to Registration Statement on Form S-4 (File No. 333-111407) filed with the SEC on December 19, 2003).

10.14		FMI Grinding System Lease Agreement by and between Beef Products, Inc. and National Beef Packing Company, LLC (incorporated herein by reference to Exhibit 10.16 to the Company’s Quarterly Report on Form 10-K for the fiscal year ended August 30, 2008, filed with the SEC on November 24, 2008). (1)

21.1		Subsidiaries of National Beef Packing Company, LLC (filed herewith).

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

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

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

_______________________________________

* Management contract or compensatory plan or arrangement.


(1)	Portions of this exhibit are omitted and were filed separately with the Secretary of the SEC pursuant to the Company’s application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	National Beef Packing Company, LLC


	By:	/s/ Timothy M. Klein
		Name: Timothy M. Klein
		Chief Executive Officer and Manager
		(Principal Executive Officer)

Date: November 16, 2011

* * * *

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacity and on the dates indicated.



Signature	Title	Date

/s/ Timothy M. Klein	Chief Executive Officer and Manager (Principal Executive Officer)	November 16, 2011
Timothy M. Klein


/s/ Simon P. McGee	Chief Financial Officer (Principal Financial Officer)	November 16, 2011
Simon P. McGee


/s/ Jay D. Nielsen	Chief Accounting Officer (Principal Accounting Officer)	November 16, 2011
Jay D. Nielsen


/s/ Steven D. Hunt	Chairman of the Board of Managers	November 16, 2011
Steven D. Hunt


/s/ Richard A. Jochum	Manager	November 16, 2011
Richard A. Jochum

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



		Page

Audited Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets at August 27, 2011 and August 28, 2010		F-3

Consolidated Statements of Operations for the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009		F-4

Consolidated Statements of Cash Flows for the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009		F-5

Consolidated Statements of Members’ (Deficit)/Capital for the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009		F-6

Consolidated Statements of Comprehensive Income for the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009		F-8

Notes to Consolidated Financial Statements		F-9

F-1

Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Managers and Members

National Beef Packing Company, LLC:

We have audited the accompanying consolidated balance sheets of National Beef Packing Company, LLC and subsidiaries, (the Company) as of August 27, 2011 and August 28, 2010, and the related consolidated statements of operations, comprehensive income, members’ (deficit)/capital, and cash flows for the each of the years in the three-year period ended August 27, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of National Beef Packing Company, LLC and subsidiaries as of August 27, 2011 and August 28, 2010, and the results of their operations and their cash flows for each of the years in the three-year period ended August 27, 2011, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the accompanying consolidated financial statements, effective August 30, 2009, the Company adopted Accounting Standards Codification 810-10-65, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.

/s/ KPMG LLP

Kansas City, Missouri

November 16, 2011

F-2

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)



	August 27, 2011			August 28, 2010
Assets
Current assets:
Cash and cash equivalents	$	50,662		$	20,405
Accounts receivable, less allowance for returns and doubtful accounts of $3,368 and $2,891, respectively	200,254			182,234
Due from affiliates	5,803			4,961
Other receivables	7,448			7,399
Inventories	276,783			232,943
Other current assets	25,975			45,999
Total current assets	566,925			493,941
Property, plant and equipment, at cost:
Land and improvements	35,268			27,310
Buildings and improvements	130,368			118,658
Machinery and equipment	368,082			324,098
Trailers and automotive equipment	3,601			4,921
Furniture and fixtures	11,684			9,998
Construction in progress	39,214			41,727
	588,217			526,712
Less accumulated depreciation	267,875			220,274
Net property, plant and equipment	320,342			306,438
Goodwill	81,242			81,242
Other intangibles, net of accumulated amortization of $13,969 and $13,661, respectively	22,566			22,858
Other assets	7,690			8,213
Total Assets	$	998,765		$	912,692
Liabilities and Members’ (Deficit)/Capital
Current liabilities:
Current installments of long-term debt	$	38,486		$	21,382
Cattle purchases payable	73,407			70,208
Accounts payable — trade	81,226			73,522
Due to affiliates	460			718
Accrued compensation and benefits	77,288			78,401
Accrued insurance	17,271			15,048
Other accrued expenses and liabilities	19,242			27,091
Distributions payable	26,341			27,364
Total current liabilities	333,721			313,734
Long-term debt, excluding current installments	321,926			225,090
Other liabilities	1,954			2,443
Total liabilities	657,601			541,267
Capital subject to redemption	351,071			291,746
Members’ (deficit)/ capital:
Members’ (deficit)/capital attributable to NBP	(13,063		)	76,894
Accumulated other comprehensive income attributable to NBP	68			23
Noncontrolling interest in Kansas City Steak Company, LLC	3,088			2,762
Total members’ (deficit)/capital	(9,907		)	79,679
Total Liabilities and Members' capital	$	998,765		$	912,692

See accompanying notes to consolidated financial statements.

F-3

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NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands)



	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009
Net sales	$	6,849,467		$	5,807,929		$	5,449,278
Costs and expenses:
Cost of sales	6,473,292			5,438,033			5,187,119
Selling, general and administrative	52,023			49,266			43,074
Depreciation and amortization	51,195			49,616			44,368
Total costs and expenses	6,576,510			5,536,915			5,274,561
Operating income	272,957			271,014			174,717
Other income (expense):
Interest income	15			37			173
Interest expense	(11,708		)	(14,769		)	(23,344		)
Equity in loss of aLF Ventures, LLC	—			—			(61		)
Other, net	305			(7,344		)	(6,407		)
Income before taxes	261,569			248,938			145,078
Income tax expense	2,525			889			923
Net income	259,044			248,049			144,155
Net income attributable to noncontrolling interest	(551		)	(963		)	(1,292		)
Net income attributable to NBP	$	258,493		$	247,086		$	142,863

See accompanying notes to consolidated financial statements.

F-4

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NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)



	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009
Cash flows from operating activities:
Net income	$	259,044		$	248,049		$	144,155
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	51,195			49,616			44,368
Gain on disposal of property, plant and equipment	(1,557		)	(75		)	(13		)
Amortization of debt issuance costs	1,440			1,516			—
Write-off of debt issuance costs	436			496			1,462
Change in assets and liabilities (net of acquisitions):
Accounts receivable	(18,020		)	(9,814		)	45,602
Due from affiliates	(842		)	(429		)	2,539
Other receivables	(49		)	(234		)	(1,773		)
Inventories	(43,840		)	(57,643		)	17,180
Other assets	19,907			(30,617		)	1,007
Cattle purchases payable	3,639			4,425			(3,963		)
Accounts payable	9,483			653			(804		)
Due to affiliates	(258		)	(324		)	164
Accrued compensation and benefits	(1,113		)	27,544			6,402
Accrued insurance	2,223			(1,296		)	3,426
Other accrued expenses and liabilities	(8,338		)	12,585			4,586
Net cash provided by operating activities	273,350			244,452			264,338
Cash flows from investing activities:
Capital expenditures, including interest capitalized	(68,343		)	(49,536		)	(40,764		)
Acquisition of businesses, net of cash acquired	—			—			(11,007		)
Proceeds from sale of property, plant and equipment	5,118			1,399			1,406
Net cash used in investing activities	(63,225		)	(48,137		)	(50,365		)
Cash flows from financing activities:
Net (payments) receipts under revolving credit lines	(27,000		)	(2,168		)	17,801
Repayments of term note payable	(32,750		)	(251,903		)	(25,713		)
Borrowings under term note payable	175,000			275,000			—
Cash paid for financing costs	(1,261		)	(5,194		)	(1,343		)
Change in overdraft balances	(2,219		)	19,773			(13,012		)
Purchase and cancellation of Senior Notes	—			(66,855		)	(62,542		)
Repayments of other indebtedness/capital leases	(1,310		)	(6,430		)	(8,547		)
Member capital redemption	—			(8,000		)	(125,484		)
Member capital contribution	—			—			75,484
Member distributions	(290,148		)	(146,962		)	(78,297		)
Distributions paid to noncontrolling interest	(225		)	(568		)	(389		)
Net cash used in financing activities	(179,913		)	(193,307		)	(222,042		)
Effect of exchange rate changes on cash	45			24			(24		)
Net increase (decrease) in cash	30,257			3,032			(8,093		)
Cash and cash equivalents at beginning of period	20,405			17,373			25,466
Cash and cash equivalents at end of period	$	50,662		$	20,405		$	17,373
Supplemental disclosures:
Cash paid during the period for interest	$	11,079		$	13,839		$	23,062
Cash paid (received) during the period for taxes, net of $0, $0, and $925 refunds, respectively	$	735		$	764		$	(118	)
Supplemental non-cash disclosures of investing and financing activities:
Assets acquired through capital lease	$	187		$	139		$	70

See accompanying notes to consolidated financial statements.

F-5

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

Consolidated Statements of Members’ (Deficit)/Capital

(in thousands)



	Capital Subject to Redemption
	Class A			Class A-1			Class B-1			Class B-2 and C (a)			TOTAL
Balance at August 30, 2008	$	42,154		$	—		$	129,376		$	15,003		$	186,533
Allocation of net income	1,946			516			45,724			1,838			50,024
Class A 5% priority distributions	(1,946		)	(516		)	—			—			(2,462		)
Class B distributions	—			—			(20,270		)	(522		)	(20,792		)
Equity redemption	(8,329		)	—			(117,155		)	—			(125,484		)
Equity contribution	—			19,643			—			—			19,643
Reclass B-2 units to B-1 units (b)	—			—			22,559			(22,559		)	—
Appraisal valuation adjustment	(5,029		)	(2,588		)	77,322			6,240			75,945
Balance at August 29, 2009	$	28,796		$	17,055		$	137,556		$	—		$	183,407
Allocation of net income	1,687			1,371			73,393			—			76,451
Class A 5% priority distributions	(1,687		)	(1,371		)	—			—			(3,058		)
Class B distributions	—			—			(39,764		)	—			(39,764		)
Equity redemption	—			—			(8,000		)	—			(8,000		)
Appraisal valuation adjustment	1,154			363			81,193			—			82,710
Balance at August 28, 2010	$	29,950		$	17,418		$	244,378		$	—		$	291,746
Allocation of net income	1,687			1,371			75,688			—			78,746
Class A 5% priority distributions	(1,687		)	(1,371		)	—			—			(3,058		)
Class B distributions	—			—			(39,083		)	—			(39,083		)
Cash Distribution	—			—			(45,999		)	—			(45,999		)
Appraisal valuation adjustment	242			115			68,362			—			68,719
Balance at August 27, 2011	$	30,192		$	17,533		$	303,346		$	—		$	351,071

F-6

Table of Contents



	Members’ (Deficit)/Capital
	Class A			Class A-1			Class B-1			Accumulated Other Comprehensive (Loss) Income			Noncontrolling Interest KCS			TOTAL
Balance at August 30, 2008	$	92,346		$	—		$	(32,576	)	$	23		$	1,464		$	61,257
Allocation of net income	4,721			1,467			86,651			—			1,292			94,131
Class A 5% priority distributions	(4,721		)	(1,467		)	—			—			—			(6,188		)
Class B distributions	—			—			(41,027		)	—			—			(41,027		)
Equity contribution	—			55,841			—			—			—			55,841
Appraisal valuation adjustment	—			—			(75,945		)	—			—			(75,945		)
Foreign currency translation adjustments	—			—			—			(24		)	—			(24		)
Distributions paid to noncontrolling interest	—			—			—			—			(389		)	(389		)
Balance at August 29, 2009	$	92,346		$	55,841		$	(62,897	)	$	(1	)	$	2,367		$	87,656
Allocation of net income	4,721			3,898			162,016			—			963			171,598
Class A 5% priority distributions	(4,721		)	(3,898		)	—			—			—			(8,619		)
Class B distributions	—			—			(87,702		)	—			—			(87,702		)
Appraisal valuation adjustment	—			—			(82,710		)	—			—			(82,710		)
Foreign currency translation adjustments	—			—			—			24			—			24
Distributions paid to noncontrolling interest	—			—			—			—			(568		)	(568		)
Balance at August 28, 2010	$	92,346		$	55,841		$	(71,293	)	$	23		$	2,762		$	79,679
Allocation of net income	4,721			3,898			171,128			—			551			180,298
Class A 5% priority distributions	(4,721		)	(3,898		)	—			—			—			(8,619		)
Class B distributions	—			—			(88,365		)	—			—			(88,365		)
Cash Distribution	—			—			(104,001		)	—			—			(104,001		)
Appraisal valuation adjustment	—			—			(68,719		)	—			—			(68,719		)
Foreign currency translation adjustments	—			—			—			45			—			45
Distributions paid to noncontrolling interest	—			—			—			—			(225		)	(225		)
Balance at August 27, 2011	$	92,346		$	55,841		$	(161,250	)	$	68		$	3,088		$	(9,907	)

______________________________________________


(a)	Class B-2 and Class C collectively had equal value and rights as Class B-1.


(b)	Per Fourth Amendment to LLC Agreement

See accompanying notes to consolidated financial statements.

F-7

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NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(in thousands)



	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009
Net income	$	259,044		$	248,049		$	144,155
Other comprehensive income (loss):
Foreign currency translation adjustments	45			24			(24		)
Comprehensive income	259,089			248,073			144,131
Comprehensive income attributable to the noncontrolling interest	(551		)	(963		)	(1,292		)
Comprehensive income attributable to NBP	$	258,538		$	247,110		$	142,839

See accompanying notes to consolidated financial statements.

F-8

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS

National Beef Packing Company, LLC (the Company) is a Delaware limited liability company. The Company and its subsidiaries sell meat products to customers in the food service, international, further processor and retail distribution channels. The Company also produces and sells by-products that are derived from its meat processing operations and variety meats to customers in various industries.

The Company operates beef slaughter and fabrication facilities in Liberal and Dodge City, Kansas, and Brawley, California, case-ready beef processing facilities in Hummels Wharf, Pennsylvania and Moultrie, Georgia and holds a 75% interest in Kansas City Steak Company, LLC, or Kansas City Steak, a portion control processing facility in Kansas City, Kansas. National Carriers, Inc., or National Carriers, a wholly-owned subsidiary located in Liberal, Kansas, provides trucking services to the Company and third parties and National Elite Transportation, LLC, or National Elite, a wholly-owned subsidiary located in Springdale, Arkansas, provides third-party logistics services to the transportation industry. National Beef Leathers, LLC, or NBL, a wholly-owned subsidiary located in St. Joseph, Missouri, provides wet blue hide tanning services to the Company. As of August 27, 2011, approximately 44% or our employees were represented by collective bargaining agreements. The Company makes certain contributions for the benefit of employees (see Note 7).

U.S. Premium Beef, LLC, or USPB, NBPCo Holdings, LLC, or NBPCo Holdings, and affiliates of Timothy M. Klein each hold Class A and Class B interests in the Company.

Class A1 Interests. Class A1 interests are non-voting and are entitled to a priority distribution of 7% per year on the face amount of the Class A1 interests, payable with payment in kind Class A1 interests in lieu of cash if the Company’s EBITDA does not meet certain tests. For purposes of determining Class B ownership for liquidation or redemption, the Class A1 interests will be deemed to be converted to Class B interests at a ratio stated in the LLC Agreement, but will remain Class A1 interests after such determination.

USPB holds approximately 69.3% of the Class B interests, as well as Class A and Class A-1 interests, with an aggregate face amount of approximately $150.5 million, NBPCo Holdings owns approximately 24.8% of the Class B interests, as well as Class A and Class A-1 interests, with an aggregate face amount of approximately $51.2 million, and affiliates of Timothy M. Klein own approximately 5.9% of the Class B interests, as well as Class A interests, with an aggregate face amount of approximately $2.3 million.

Capital subject to redemption represents Class A, A1 and B interests held by affiliates of Timothy M. Klein and NBPCo Holdings, which include repurchase rights of the holders (see Note 6).

NOTE 2. BASIS OF PRESENTATION AND ACCOUNTING POLICIES

Basis of Presentation and Consolidation

The consolidated financial statements include the accounts of the Company and its direct and indirect subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

F-9

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective August 30, 2009, the Company adopted ASC 810 — Consolidations, which includes ASC 810-10-65 Noncontrolling Interests in Consolidated Financial Statements - an Amendment of ARB No. 51. ASC 810-10-65 establishes accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary. ASC 810-10-65 requires noncontrolling interests held by parties other than the parent in subsidiaries be clearly identified, labeled and presented in the consolidated balance sheet within equity, but separate from the parent’s equity. The Company’s adoption of ASC 810-10-65 as of August 30, 2009 changed the presentation of the noncontrolling interest. Minority owners’ interest in net income of Kansas City Steak Company, LLC was previously presented as a reduction in the calculation of net income in the Consolidated Statements of Operations and is now presented as net income attributable to noncontrolling interest, which is presented as a reduction of net income to calculate net income attributable to NBP. Corresponding changes have been made to the Consolidated Statements of Cash Flows and Members’ (Deficit)/Capital. The Company has applied the provisions of ASC 810-10-65 prospectively, except for the presentation and disclosure requirements, which have been applied retrospectively for all periods presented.

Fiscal Year

The Company’s fiscal year consists of 52 or 53 weeks, ending on the last Saturday in August. Fiscal 2011, 2010 and 2009 were 52 week fiscal years. All references to years in these notes to consolidated financial statements represent fiscal years unless otherwise noted.

Use of Estimates

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, using management’s best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of the contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of August 27, 2011 and August 28, 2010, the Company had cash and cash equivalents of $50.7 million and $20.4 million, respectively, as presented in the consolidated balance sheets and consolidated statements of cash flows.

Allowance for Returns and Doubtful Accounts

The allowance for returns and doubtful accounts is the Company’s best estimate of the amount of probable returns and credit losses in the Company’s existing accounts receivable. The Company determines these allowances based on historical experience, customer conditions and management’s judgments. Management considers factors such as changes in the economy and industry. Specific accounts are reviewed individually for collectability.

The following table represents the rollforward of the allowance for returns and doubtful accounts for the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009 (in thousands).



Period Ending	Beginning Balance			Provision			Charge Off		Ending Balance
August 27, 2011	$	(2,891	)	$	(7,584	)	$	7,107	$	(3,368	)
August 28, 2010	$	(1,511	)	$	(9,211	)	$	7,831	$	(2,891	)
August 29, 2009	$	(1,665	)	$	(6,201	)	$	6,355	$	(1,511	)

Inventories

Inventories consist primarily of meat products and supplies. Product inventories are considered commodities and are recorded based on quoted commodity prices, which approximate net realizable value. Supply and other inventories are valued

F-10

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

on the basis of first-in, first-out, specific or average cost methods. Product inventories are relieved from inventory utilizing the first-in, first-out method.

Inventories at August 27, 2011 and August 28, 2010 consisted of the following (in thousands):



	August 27, 2011		August 28, 2010
Dressed and boxed meat products	$	173,853	$	154,927
Beef by-products	57,009		46,891
Supplies and other	45,921		31,125
Total inventory	$	276,783	$	232,943

Property, plant and equipment

Property, plant and equipment are recorded at cost. Property, plant and equipment are depreciated principally on a straight-line basis over the estimated useful life (based upon original acquisition date) of the individual asset by major asset class as follows:



Buildings and improvements		15 to 25 years
Machinery and equipment		2 to 15 years
Trailers and automotive equipment		2 to 4 years
Furniture and fixtures		3 to 5 years

Upon disposition of these assets, any resulting gain or loss is included in other, net (see Note 4). Major repairs and maintenance costs that extend the useful life of the related assets are capitalized. Normal repairs and maintenance costs are charged to operations.

The Company capitalizes the cost of interest on borrowed funds which are used to finance the construction of certain property, plant and equipment. Such capitalized interest costs are charged to the property, plant and equipment accounts and are amortized through depreciation charges over the estimated useful lives of the assets. Interest capitalized was $0.8 million, $0.3 million and $0.3 million for the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009, respectively.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is assessed based on estimated undiscounted future cash flows. Impairment, if any, is recognized based on fair value of the assets. Assets to be disposed of are reported at the lower of cost or fair value less costs to sell, and are no longer depreciated.

Debt Issuance Costs

On April 13, 2009, the Company’s Credit Facility was amended to permit the redemption of the Company’s membership interests in the amount of $125.5 million, including the authorization and issuance of Class A1 interests to help fund the redemption (see Note 6 for further detail of the redemption). In addition, the terms of the Company’s Credit Facility were amended to: (1) increase the borrowings under the Company’s Credit Facility by up to $100.0 million, of which up to $75.0 million is under the Company’s term loan and $25.0 million is under the Company’s revolving line of credit; (2) increase the applicable margin on the rates of interest of the term loan and revolving line of credit; (3) revise the payment schedule of the term loan; (4) shorten the maturity date of the term loan; (5) remove the restrictions on purchasing the Company’s senior notes and require the repurchase or redemption of $100 million aggregate principal amount of the Company’s senior notes; (6) increase the amount of capital expenditures the Company can make in any fiscal year from $50 million to $60 million, or $65 million if the Company expends less than $55 million in the immediately preceding fiscal year; and (7) add a financial covenant requiring the Company to maintain a Funded Debt to EBITDA ratio. The related financing charges, an upfront fee of approximately $0.8 million and an arrangement fee of approximately $0.5 million, was capitalized and is being amortized over the life of the related debt instruments.

F-11

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During fiscal 2009, the Company repurchased and cancelled approximately $62.5 million of its senior notes. Associated with the repurchase and cancellation of these senior notes, a portion of the unamortized loans costs of approximately $0.5 million were expensed in other, net in the consolidated statement of operations during the fiscal year ended August 29, 2009.

On June 4, 2010, the Company’s Credit Facility was amended and restated to: (1) increase the borrowings under the Credit Facility by providing for a term loan facility of up to $375 million and a revolving line of credit of up to $250 million; (2) reduce the applicable margin on the rates of interest of the term loan and revolving line of credit; (3) revise the payment schedule of the term loan; (4) extend the maturity date of the Credit Facility to June 4, 2015; and (5) remove the limitations on capital expenditures; (6) add new financial covenants regarding adjusted net worth and a fixed charge coverage ratio; and (7) add two wholly owned subsidiaries, National Beef California, LLP and National Carriers, Inc., as loan parties and guarantors. The related financing charges of approximately $4.2 million will be amortized over the life of the loan.

During fiscal 2010, the Company repurchased and cancelled the remaining approximately $66.9 million of its senior notes. Associated with the repurchase and cancellation of these senior notes, the remaining unamortized loans costs of approximately $0.4 million were expensed in other, net in the consolidated statement of operations during the fiscal year ended August 28, 2010.

Amortization of $1.4 million, $1.5 million and $0.9 million was charged to interest expense during the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009, respectively, related to these costs. The Company had unamortized costs of $5.2 million and $5.3 million included in other assets on the consolidated balance sheets for the fiscal years ended August 27, 2011 and August 28, 2010, respectively.

Goodwill and Other Intangible Assets

ASC 350, Intangibles - Goodwill and Other, provides that goodwill and other intangible assets with indefinite lives shall not be amortized but shall be tested for impairment on an annual basis. Identifiable intangible assets with definite lives are amortized over their estimated useful lives. The Company evaluates goodwill and other indefinite life intangible assets annually for impairment and, if there is impairment, the carrying amount of goodwill and other intangible assets is written down to the implied fair value. For goodwill, this test involves comparing the fair value of each reporting unit to the unit’s book value to determine if any impairment exists. The Company calculates the fair value of each reporting unit using estimates of future cash flows. All of the Company’s goodwill has been allocated to the Core Beef segment. In accordance with ASC 350, goodwill was tested for impairment and, as of August 27, 2011, management determined there was no impairment.

The amounts of goodwill, all allocated to the Core Beef segment, are as follows (amounts in thousands):



	August 27, 2011		August 28, 2010
Beginning balance	$	81,242	$	81,242
Adjustments	—		—
Ending balance	$	81,242	$	81,242

The amounts of other intangible assets are as follows (amounts in thousands):

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	Weighted	August 27, 2011				August 28, 2010
	Average Amortization Period	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Intangible assets subject to amortization:
Customer relationships	12.9 years	$	16,097	$	13,969	$	16,081	$	13,661

Intangible assets not subject to amortization:
Trademarks	Indefinite	20,438		—		20,438		—

Total intangible assets		$	36,535	$	13,969	$	36,519	$	13,661

Customer relationships, including contractual and non-contractual relationships, are being amortized using the straight-line method over their useful lives, which range from five to 15 years. Trademarks are not scheduled for amortization due to their expected indefinite useful life. In accordance with ASC 350, these trademarks were tested for impairment and, as of August 27, 2011, management determined there was no impairment.

For the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009, the Company recognized $0.3 million, $2.2 million and $2.1 million, respectively, of amortization expense on intangible assets. The following table reflects the anticipated amortization expense relative to intangible assets recognized in the Company’s consolidated balance sheet as of August 27, 2011, for each of the next five years and thereafter:



	(Amounts in thousands)
Estimated amortization expense for fiscal years ended:
2012	$	309
2013(1)	315
2014	262
2015	218
2016	215
Thereafter	809
Total	$	2,128

__________________________________


(1)	Fiscal year 2013 consists of 53 weeks

Overdraft Balances

The majority of the Company’s bank accounts are zero balance accounts where cash needs are funded as checks are presented for payment by the holder. Checks issued pending clearance that result in overdraft balances for accounting purposes are included in the trade accounts payable and cattle purchases payable balances, and the change in the related balances are reflected in financing activities on the Company’s consolidated statement of cash flows. Overdraft balances of $76.8 million and $79.1 million were included in trade accounts and cattle purchases payables at August 27, 2011 and August 28, 2010, respectively.

Self-insurance

The Company is self-insured for certain losses relating to workers’ compensation, automobile liability, general liability and employee medical and dental benefits. The Company has purchased stop-loss coverage in order to limit its exposure to any significant levels of claims. Self-insured losses are accrued based upon the Company’s estimates of the aggregate uninsured claims incurred using actuarial assumptions accepted in the insurance industry and the Company’s historical experience rates.

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Environmental Expenditures and Remediation Liabilities

Environmental expenditures that relate to current or future operations and which improve operational capabilities are capitalized at the time of expenditure. Expenditures that relate to an existing or prior condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated.

Foreign Currency Translation

The Company has representative offices located in Tokyo, Japan, Seoul, South Korea and Guangzhou, China. The primary activity of these offices is to assist customers with product and order related issues. For foreign operations, the local currency is the functional currency. Translation into U.S. dollars is performed for assets and liabilities at the exchange rates as of the balance sheet date. Income and expense accounts are recorded at average exchange rates for the period. Adjustments resulting from the translation are reflected as a separate component of other comprehensive income.

Income Taxes

The provision for income taxes is computed on a separate legal entity basis. Accordingly, the separate legal entity of the Company does not provide for income taxes, except for certain states which impose privilege taxes on the apportioned taxable income of NBP, as the results of operations are included in the taxable income of the individual members. However, to the extent that entities provide for income taxes, deferred tax assets and liabilities are recognized based on the differences between the financial statement and tax bases of assets and liabilities at each balance sheet date using enacted tax rates expected to be in effect in the year the differences are expected to reverse, and are thus included in the consolidated financial statements of the Company. Based on federal income tax statute of limitations, National Carriers remains subject to examination of its income taxes for calendar years 2010, 2009 and 2008.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, short-term trade receivables and payables, approximate their fair values due to the short-term nature of the instruments. The carrying value of other debt approximates its fair value at August 27, 2011 and August 28, 2010, as substantially all such debt has a variable interest rate.

Revenue Recognition

The Company recognizes revenue from the sale of products based on the terms of the sale, typically upon delivery to customers. National Carriers, Inc. and National Elite recognize revenue when shipments are complete.

Selling, General and Administrative Costs

Selling expenses consist primarily of salaries, trade promotions, advertising, commissions and other marketing costs. General and administrative costs consist primarily of general management, insurance and professional expenses. Selling, general and administrative costs consist of aggregated expenses that generally apply to multiple locations.

Shipping Costs

Pass-through finished goods delivery costs reimbursed by customers are reported in sales, while an offsetting expense is included in cost of sales.

Advertising and Promotion Expenses

Advertising and promotion expenses are charged to operations in the period incurred and were $6.4 million in fiscal 2011, $5.3 million in fiscal 2010, and $4.6 million in fiscal 2009.

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Comprehensive Income

Comprehensive income consists of net income and foreign currency translation adjustments. The Company deems its foreign investments to be permanent in nature and does not provide for taxes on currency translation adjustments arising from converting the investment in a foreign currency to U.S. dollars.

Derivatives and Hedging Activities

The Company uses futures contracts in order to reduce exposure associated with entering into firm commitments to purchase live cattle at prices determined prior to the delivery of the cattle as well as firm commitments to sell certain beef products at sales prices determined prior to shipment. In accordance with ASC 815, Derivatives and Hedging, the Company accounts for futures contracts and their related firm purchase commitments at fair value. Certain firm commitments for live cattle purchases and all firm commitments for boxed beef sales are treated as “normal purchases and sales” and not marked to market. ASC 815 imposes extensive recordkeeping requirements in order to treat a derivative financial instrument as a hedge for accounting purposes. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the instrument and the related change in fair value of the underlying commitment. For derivatives that qualify as effective hedges, the change in fair value has no net effect on earnings until the hedged transaction affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value does affect current period net earnings.

The fair value of derivative assets is recognized within other current assets, while the fair value of derivative liabilities is recognized within accrued liabilities.

NOTE 3. NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS under ASU 2011-04, or ASU 2011-04. ASU 2011-04 amends ASC 820, Fair Value Measurements (“ASC 820”), providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. ASU 2011-04 will be effective for the Company's third quarter of fiscal 2012. The amendments in ASU 2011-04 are to be applied prospectively. The adoption of ASU 2011-04 is not expected to have a material effect on the Company's consolidated financial statements, but may require certain additional disclosures.

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NOTE 4. OTHER INCOME

Other non-operating income, net was $0.3 million, for the fiscal year ended 2011 while other non-operating expense, net was $7.3 million, and $6.4 million in the fiscal years ended 2010 and 2009 respectively. Other, net includes miscellaneous non-operating items of income and expense such as adjustments to unamortized loan costs as discussed in Note 2. Basis of Presentation and Accounting Policies, Debt Issuance Costs, adjustments to postretirement benefits costs as discussed in Note 7. Retirement Plans, and gains or losses on the disposal of fixed assets as discussed in Note 2. Basis of Presentation and Accounting Policies, Property, Plant and Equipment, and disclosed on the consolidated statements of cash flows. Other non-operating income, net for fiscal year 2011 primarily includes approximately $1.5 million of income related to gains on the sale of fixed assets, offset by an expense of approximately $0.8 million related to an abandoned IPO effort. Other non-operating expense, net for fiscal year 2010 primarily includes approximately $2.4 million related to tannery litigation and approximately $2.2 million related to an abandoned IPO effort. In addition, other non-operating expense, net includes approximately $3.3 million accrued for a potential settlement of a dispute with the city of Dodge City, Kansas pertaining to the transfer of certain water rights. Other non-operating expense, net for fiscal year 2009 includes approximately $5.6 million in legal fees which was primarily related to the termination of a purchase agreement in February 2009 and approximately $1.5 million related to the write-off of debt issuance costs. In addition, approximately $0.7 million of obsolete parts were written off at our case ready facilities during fiscal year 2009.

NOTE 5. LONG-TERM DEBT AND LOAN AGREEMENTS

The Company entered into various debt agreements in order to finance acquisitions and provide liquidity to operate the business on a going forward basis. As of August 27, 2011 and August 28, 2010, debt consisted of the following:



	August 27, 2011		August 28, 2010
	(in thousands)
Short-term debt:
Current portion of term loan facility (a)	$	37,000	$	20,000
Current portion of capital lease obligations & other (d)	1,486		1,382
	38,486		21,382
Long-term debt:
Term loan facility (a)	305,250		180,000
Senior notes (b)	—		—
Industrial Development Revenue Bonds (c)	12,245		12,245
Revolving credit facility (a)	—		27,000
Long-term capital lease obligations & other (d)	4,431		5,845
	321,926		225,090
Total debt	$	360,412	$	246,472

___________________________________

(a)Senior Credit Facilities— Effective as of June 4, 2010, our Credit Facility was amended and restated to: (1) increase the borrowings under the Credit Facility by providing for a term loan facility of up to $375 million and a revolving line of credit of up to $250 million; (2) reduce the applicable margin on the rates of interest of the term loan and revolving line of credit; (3) revise the payment schedule of the term loan; (4) extend the maturity date of the Credit Facility to June 4, 2015; (5) remove limitations on capital expenditures; (6) add new financial covenants regarding adjusted net worth and a fixed charge coverage ratio; and (7) add two wholly owned subsidiaries, National Beef California, LP and National Carriers, Inc., as loan parties and guarantors. The lender financing charges for the amended and restated Credit Facility of approximately $4.2 million are being amortized over the life of the loan.

On June 10, 2011, the Company's Credit Facility was amended and restated to: (1) reduce the applicable margin by up to 0.75% for “LIBOR Rate” advances and “Base Rate” advances, (2) revise the “fixed charge coverage ratio” covenant provisions to provide the Company credit of up to $30 million for maintaining net asset borrowing base levels that exceed the lenders' aggregate credit commitments under the Credit Facility in the calculation of the fixed charge coverage ratio and (3) extend the maturity date of the Credit Facility to June 4, 2016. The related financing charges of approximately $0.8 million will be

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amortized over the life of the loan.

The borrowings under the Credit Facility bear interest at LIBOR or the Base Rate, plus the applicable margin. The applicable margin for the revolving line of credit and the term loan will be as set forth on a grid based on different rations of funded debt to EBITDA as depicted in the table below:



Borrowing Base Availability Level	Funded Debt to EBITDA Ratio	Base Rate Advance Line of Credit Swing Line Loans, and Term Loans		LIBOR Rate Line of Credit Loan		LC Fees		Non-Use Fee
Level 1	Less than or equal to 1.50:1.00	0.75	%	1.75	%	1.75	%	0.25	%
Level 2	Greater than 1.50:1.00 and less than 2.50:1.00	1.00	%	2.00	%	2.00	%	0.375	%
Level 3	Greater than or equal to 2.50:1.00	1.50	%	2.50	%	2.50	%	0.50	%

As of August 27, 2011 the interest rate for the term loan was equal to 1.96%. As of August 28, 2010 the interest rate for the term and revolving loan was equal to 2.79% and 3.66%, respectively.

The Credit Facility contains customary events of default, including without limitation, failure to make payment when due, materially incorrect representations and warranties, breach of covenants, events of bankruptcy, default of other indebtedness that would permit acceleration of such indebtedness, the occurrence of one or more unstayed or undischarged judgments in excess of $3.0 million, changes in custody or control of the Company’s property, changes in control of the Company, or failure of any of the loan documents to remain in full force, and the Company’s failure to properly fund its employee benefit plans. The Credit Facility also includes customary provisions protecting the lenders against increased cost or loss of yield resulting from changes in tax, reserve, capital adequacy and other requirements of law.

(b) 10 1/2% Senior Notes—During the year ended August 28, 2010 the Company purchased and cancelled the remaining approximately $66.9 million of our senior notes. No material gains or losses were incurred as a result of the purchase and cancellation of these senior notes.

(c) Industrial Development Revenue Bonds—Effective December 30, 2004, the Company entered into a transaction with the City of Dodge City, Kansas, designed to provide property tax savings. Under the transaction, the City purchased the Company’s Dodge City facility, or the facility, by issuing $102.3 million in bonds due in December 2019, used the proceeds to purchase our Dodge City facility and leased the facility to the Company for an identical term under a capital lease. The Company purchased the City's bonds with proceeds of its term loan under the Credit Facility. Because the City has assigned

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the lease to the bond trustee for the benefit of the Company as the sole bondholder, the Company, effectively controls enforcement of the lease against itself. As a result of the capital lease treatment, the facility will remain a component of property, plant and equipment in the Company’s consolidated balance sheet. As a result of the legal right of offset, the capital lease obligation and the corresponding bond investments have been eliminated in consolidation. The transaction provides the Company with property tax exemptions for the leased facility, that, after netting payments to the City and local school district under payment in lieu of tax agreements, result in an annual property tax savings of approximately 25%. The facility remains subject to a prior mortgage and security interest in favor of the lenders under the Credit Facility. Additional revenue bonds may be issued to cover the costs of certain improvements to this facility. The total amount of revenue bonds authorized for issuance is $120.0 million.

The cities of Liberal and Dodge City, Kansas issued an aggregate of $13.8 million of industrial development revenue bonds on the Company’s behalf to fund the purchase of equipment and construction improvements at the Company’s facilities in those cities. These bonds were issued in four series of $1.0 million, $1.0 million, $6.0 million and $5.9 million and are due on demand or on February 1, 2029, March 1, 2027, March 1, 2015 and October 1, 2009, respectively. Because each series of bonds is backed by a letter of credit under our Credit Facility, these due-on-demand bonds have been presented as non-current obligations until twelve months prior to their maturity. As of August 27, 2011, the amount outstanding on the $6.0 million series of bonds had been reduced to $3.4 million and the $5.9 million series were paid at maturity on October 1, 2009. Pursuant to a lease agreement, we lease the facilities, equipment and improvements from the respective cities and make lease payments in the amount of principal and interest due on the bonds.

The bonds issued in 1999 and 2000 are variable rate demand obligations that bear interest at a rate that is adjusted weekly, which rate will not exceed 10% per annum. The average per annum interest rate for each series of bonds was 0.3% in fiscal year 2011 and 0.5% in fiscal year 2010. The Company has the option to redeem a series of bonds at any time for an amount equal to the principal plus accrued interest to the date of such redemption. The holders of the bonds have the option to tender the bonds upon seven days’ notice for an amount equal to par plus accrued interest. To the extent that the remarketing agent for the bonds is unable to resell any of the bonds that are tendered, the remarketing agent will use the letter of credit to fund such tender.

In connection with the Brawley Beef acquisition, the Company assumed the obligation under a Trust Indenture securing $6.8 million in California Pollution Control Financing Authority Tax-Exempt variable rate demand solid waste disposal revenue bonds dated as of October 1, 2001. The bonds bear a rate that is adjusted weekly, which rate will not exceed 12% per annum. The average per annum interest rate for this series of bonds for fiscal years 2011 and 2010 was 0.3% and 0.4%, respectively. These bonds have a maturity date of October 1, 2016. The Company has the option to redeem all or a portion of the bonds at any time for an amount equal to the principal plus accrued interest to the date of such redemption. The holders of the bonds have the option to tender the bonds upon seven days’ notice for an amount equal to par plus accrued interest. To the extent that the remarketing agent for the bonds is unable to resell any of the bonds that are tendered, the remarketing agent will use the letter of credit to fund such tender.

On December 17. 2010, National Beef Leathers, LLC, or Leathers, a subsidiary of NBP, entered into various agreements with the city of St. Joseph, Missouri, designed to provide NBP property tax savings. Under the transaction, the city of St. Joseph issued $14.5 million in bonds due in December 2022, used the proceeds to purchase our equipment within our Leathers facility and subsequently leased the equipment back to us for an identical term under a capital lease. The Company purchased the City's bonds with proceeds of our term loan under the Credit Facility. Because the city of St. Joseph has assigned the lease to the bond trustee for our benefit as the sole bondholder, the Company, effectively controls enforcement of the lease against ourselves. As a result of the capital lease treatment, the equipment will remain a component of property, plant and equipment in NBP’s consolidated balance sheet. As a result of the legal right of offset, the capital lease obligation and the corresponding bond investments will be eliminated in consolidation.

(d) Capital and Operating Leases—the Company leases a variety of buildings and equipment, some of which were acquired through the Brawley Beef acquisition, as well as tractors and trailers through its subsidiary National Carriers, under capital and operating lease agreements that expire in various years. Future minimum lease payments required at August 27, 2011, under capital leases and non-cancelable operating leases with terms exceeding one year, are as follows:

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	Capital Lease Obligations			Non-cancelable Operating Lease Obligations
	(in thousands)
For the fiscal years ended August:
2012	$	1,775		$	12,811
2013	1,745			9,592
2014	3,024			8,578
2015	—			5,228
2016	—			1,953
Thereafter	—			2,662

Net minimum lease payments	6,544			$	40,824
Less: Amount representing interest	(707		)
Present value of net minimum lease payments	$	5,837

Rent expense associated with operating leases was $14.1 million, $14.1 million and $14.5 million, for fiscal years 2011, 2010 and 2009, respectively. The Company expects that it will renew lease agreements or enter into new leases as the existing leases expire.

The aggregate minimum principal maturities of the long-term debt for each of the five fiscal years and thereafter following August 27, 2011, are as follows:



	Minimum Principal Maturities
	(in thousands)
Fiscal Year ending August:
2012	$	38,486
2013 (1)	38,543
2014	39,888
2015	40,430
2016	194,250
Thereafter	8,815
Total minimum principal maturities	$	360,412

_______________________________________


(1)	Fiscal year 2013 consists of 53 weeks

Other Commitments

Utilities Commitment - Effective December 30, 2004, the Company finalized an agreement with the City of Dodge City, Kansas, whereby in consideration of certain improvements made to the city water and wastewater systems, the Company committed to make a series of service charge payments totaling $19.3 million over a 20 year period, of which $0.8 million, $1.7 million and $1.4 million was paid in each of the fiscal years ending 2011, 2010 and 2009, respectively. Payments under the commitment will be $0.8 million in each of the fiscal years 2012 through 2016, with the remaining balance of $6.5 million to be paid in subsequent years.

Cattle Commitment - The Company makes verbal commitments to cattle producers to purchase cattle about one week in advance of delivery of the live animals to its plants, with the actual price paid for the cattle determined after the cattle are delivered and inspected at the Company’s facilities. The Company’s cattle commitments as of August 27, 2011 were $73.4 million.

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NOTE 6. CAPITAL SUBJECT TO REDEMPTION

At any time after certain dates, the earliest being July 31, 2010, the latest being July 31, 2011, certain affiliates of our Chief Executive officer, Timothy M. Klein, or the Klein Affiliates, and/or NBPCo Holdings have the right to request that the Company repurchase their interests, the value of which is to be determined by a specified formula or a mutually agreed appraisal process. If the Company is unable to effect the repurchase within a specified time, the requesting member(s) have the right to cause a sale process to commence.

Generally accepted accounting principles require the Company to determine the fair value of the capital subject to redemption at the end of each reporting period. The carrying value of capital subject to redemption reflects fair value. In determining the fair value of the capital subject to redemption held by NBPCo Holdings as of August 27, 2011 and August 28, 2010, management has considered previous redemption prices, valuations of peer companies and other factors. The capital subject to redemption held by the Klein Affiliates as of August 27, 2011 and August 28, 2010 was valued based upon a contractually stipulated valuation formula.

At August 27, 2011, the value of the capital subject to redemption was determined to be $351.1 million, which was equal to its carrying value. The total value of the capital subject to redemption at August 27, 2011, increased by approximately $53.8 million compared to the value at August 28, 2010. The carrying value of the capital subject to redemption increased approximately $68.7 million through valuation changes during the fiscal year ending August 27, 2011, resulting in the $351.1 million carrying value, as reflected in the accompanying consolidated balance sheet as of August 27, 2011. Offsetting the change in the value of the capital subject to redemption is a corresponding change in the members’ capital.

NOTE 7. RETIREMENT PLANS

The Company maintains a tax-qualified employee savings and retirement plan, or the 401(k) Plan, covering the Company’s non-union employees. Pursuant to the 401(k) Plan, eligible employees may elect to reduce their current compensation by up to the lesser of 75% of their annual compensation or the statutorily prescribed annual limit and have the amount of such reduction contributed to the 401(k) Plan. The 401(k) Plan provides for additional matching contributions by the Company, based on specific terms contained in the 401(k) Plan. The trustee of the 401(k) Plan, at the direction of each participant, invests the assets of the 401(k) Plan in designated investment options. The 401(k) Plan is intended to qualify under Section 401 of the Internal Revenue Code. Expenses related to the 401(k) Plan totaled approximately $1.0 million, $0.8 million and $0.6 million for fiscal years 2011, 2010 and 2009, respectively.

The Company has agreed to make contributions to the United Food and Commercial Workers International Union-Industry Pension Fund, or the UFCW Plan, for employees covered by a collective bargaining agreement as provided for in that agreement. Expenses related to the UFCW Plan totaled approximately $0.9 million, $0.8 million and $0.7 million for fiscal years 2011, 2010 and 2009, respectively.

Postretirement Benefits—Certain former employees are covered by an unfunded postretirement benefit plan that provides medical and dental benefits. Costs associated with this plan, which relate primarily to insurance premiums, benefit payments and changes in the accumulated benefit obligation were approximately $0.1 million, $0.0 million and $0.2 million, for fiscal years 2011, 2010 and 2009, respectively, and are included in other, net.

The health care trend rate used to value the accumulated benefit obligation at August 27, 2011 is a rate of 8.0% per year, declining by 0.5% per year to an ultimate rate of 5% in 2017 and thereafter. The discount rate used to value the accumulated benefit obligation is 5%. The unfunded accumulated benefit obligation was $1.4 million and $1.4 million at August 27, 2011 and August 28, 2010, respectively, and has been recorded in the consolidated financial statements as non-current other liabilities.

NOTE 8. INCOME TAXES

Income tax expense includes the following current and deferred provisions:

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	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009
	(in thousands)
Current provision:
Federal	$	1,689		$	61		$	144
State	1,357			958			691
Foreign	54			80			77
Total current tax expense	3,100			1,099			912
Deferred provision:
Federal	(500		)	(144		)	32
State	(75		)	(66		)	(21		)
Foreign	—			—			—
Total deferred tax expense	(575		)	(210		)	11
Total income tax expense	$	2,525		$	889		$	923

Income tax expense differed from the “expected” income tax (computed by applying the federal income tax rate of 35% to earnings before income taxes) as follows:



	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009
	(in thousands)
Computed “expected” income tax expense	$	91,645		$	86,791		$	50,325
Passthrough “expected” income tax expense	(90,419		)	(86,785		)	(50,060		)
State taxes, net of federal	1,221			895			658
Other	78			(12		)	—
Total income tax expense	$	2,525		$	889		$	923

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at August 27, 2011 and August 28, 2010 are presented below:



	August 27, 2011		August 28, 2010
	(in thousands)
Deferred tax assets:
Accounts receivable, due to allowance for doubtful accounts	$	247	$	189
Intangible assets	336		370
Self-insurance and workers’ compensation accruals	1,171		1,044
Employee benefit accruals	44		27
Plant and equipment, principally due to differences in depreciation	40		—
Total gross deferred tax assets	1,838		1,630
Deferred tax liabilities:
Prepaid assets	5		43
Plant and equipment, principally due to differences in depreciation	444		718
Total gross deferred tax liabilities	449		761
Net deferred tax assets	$	1,389	$	869

Net deferred tax assets and liabilities at August 27, 2011 and August 28, 2010 are included in the consolidated balance sheet as follows:

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	August 27, 2011		August 28, 2010
	(in thousands)
Other current assets	$	1,838	$	1,630
Other liabilities	449		761
	$	1,389	$	869

Deferred tax assets and liabilities relate primarily to the operations of National Carriers.

There was no valuation allowance provided for at August 27, 2011 and August 28, 2010. Management believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets.

NOTE 9. RELATED PARTY TRANSACTIONS

The Company entered into various transactions with a company affiliated with NBPCo Holdings in the ordinary course of business. Sales transactions were based upon prevailing market prices, and purchases were on terms no less favorable to the Company than would be obtained from an unaffiliated party.

During fiscal years 2011, 2010 and 2009, the Company had sales and purchases with the following related parties (amounts in thousands):



	52 weeks ended August 27, 2011		52 weeks ended August 28, 2010		52 weeks ended August 29, 2009
Sales to:
Beef Products, Inc. (1)	$	170,227	$	120,362	$	96,896
Total sales to affiliate	$	170,227	$	120,362	$	96,896
Purchases from:
Beef Products, Inc. (1)	$	47,508	$	40,649	$	28,930
Total purchases from affiliate	$	47,508	$	40,649	$	28,930

___________________________________


(1)	Beef Products, Inc. (BPI) is an affiliate of NBPCo Holdings

At August 27, 2011 and August 28, 2010, the amounts due from BPI for sale of beef trimmings were approximately $5.8 million and $5.0 million, respectively. At August 27, 2011 and August 28, 2010, the amounts due to BPI for the purchase of processed lean beef were approximately $0.5 million and $0.7 million, respectively.

In January 2007, we entered into an agreement with BPI for BPI to manufacture and install a grinding system in one of our plants. In accordance with the agreement with BPI, we are to pay BPI a technology and support fee based on the number of pounds of product produced using the grinding system. The installation of the grinding system was completed in fiscal year 2008. During fiscal years 2011, 2010 and 2009, we paid approximately $2.0 million, $1.9 million and $1.7 million, respectively, to BPI in technology and support fees.

In December 1997, the former Farmland National Beef Packing Company, L.P., or FNBPC, the predecessor entity to the Company, entered into a contract with USPB to purchase a portion of its annual cattle requirements. In connection with USPB’s purchase of its interest in Farmland National Beef, USPB obtained the right, and became subject to the obligation, if requested, to deliver cattle annually to the Company relative to: (i) USPB’s ownership in the Company and (ii) the number of cattle processed annually by the Company. At the beginning of fiscal year 2005, USPB converted to a limited liability company. USPB now facilitates the delivery of cattle annually to the Company through its individual producer-owners. The purchase price for the cattle is determined by the Company’s pricing grid, which, under the terms of the agreement with USPB, must be competitive with the pricing grids of the Company’s competitors and may not be less favorable than pricing grids offered to other suppliers. During the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009, the Company obtained approximately 20%, 20% and 20%, respectively, of its cattle requirements through this pricing grid process from USPB and its producer-owners.

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Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10. FAIR VALUE MEASUREMENTS

The Company determines fair value utilizing a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows:


•	Level 1 — quoted prices in active markets for identical assets or liabilities accessible by the reporting entity.


•	Level 2 — observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


•	Level 3 — unobservable inputs for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available.

The following table details the assets and liabilities measured at fair value on a recurring basis as of August 27, 2011, and August 28, 2010 and also the level within the fair value hierarchy used to measure each category of assets (in thousands).



Description	August 27, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets — derivatives	$	4,022	$	—	$	4,022	$	—
Other accrued expenses and liabilities — derivatives	$	5,860	$	5,860	$	—	$	—
Capital subject to redemption	$	351,071	$	—	$	75,922	$	275,149



Description	August 28, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Other current assets — derivatives	$	15,563	$	61	$	15,502	$	—
Other accrued expenses and liabilities — derivatives	$	14,672	$	14,672	$	—	$	—
Capital subject to redemption	$	291,746	$	—	$	61,854	$	229,892

Management has used certain contractual redemption prices in measuring the fair value of the Klein Affiliates capital subject to redemption, which is included in level 2 as of August 27, 2011 and August 28, 2010. NBPCo Holdings capital subject to redemption is based upon unobservable inputs, thus included in level 3 as of August 27, 2011 and August 28, 2010.

The following table presents a reconciliation of capital subject to redemption measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the fiscal year ended August 27, 2011 (in thousands).



	Fiscal Year Ending
	August 27, 2011
Beginning Balance	$	229,892
Allocation of net income	64,287
Class A 5% priority distributions	(2,945		)
Class B distributions	(31,682		)
Equity distribution	(37,156		)
Appraisal valuation adjustment	52,753
Balance, May 28, 2011	$	275,149

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Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11. DISCLOSURE ABOUT DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

As part of the Company’s ongoing operations, the Company is exposed to market risks such as changes in commodity prices. To manage these risks, the Company may enter into the following derivative instruments pursuant to our established policies:


•	Forward purchase contracts for cattle for use in our beef plants


•	Exchange traded futures contracts for cattle


•	Exchange traded futures contracts for grain

While management believes each of these instruments help mitigate various market risks, they are not designated and accounted for as hedges as a result of the extensive recordkeeping requirements associated with hedge accounting. Accordingly, the gains and losses associated with the change in fair value of the instruments are recorded to net sales and cost of goods sold in the period of change. Certain firm commitments for live cattle purchases and all firm commitments for boxed beef sales are treated as normal purchases and sales and not recorded at fair value.

The Company enters into certain commodity derivatives, primarily with a diversified group of highly rated counterparties. The maximum amount of loss due to the credit risk of the counterparties, should the counterparties fail to perform according to the terms of the contracts, is deemed to be immaterial as of August 27, 2011 and August 28, 2010. The exchange-traded contracts have been entered into under a master netting agreement. None of the derivatives entered into have credit-related contingent features. The Company has $14.5 million and $19.9 million in cash collateral posted on its derivative liabilities included in other assets on the consolidated balance sheets as of August 27, 2011 and August 28, 2010 respectively.

The following table presents the fair values as discussed in Note 10 and other information regarding derivative instruments not designated as hedging instruments as of August 27, 2011 and August 28, 2010 (in thousands of dollars):



	Derivative Asset As of August 27, 2011			Derivative Liability As of August 27, 2011
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	4,022	Other accrued expenses and liabilities	$	5,860
Totals		$	4,022		$	5,860



	Derivative Asset As of August 28, 2010			Derivative Liability As of August 28, 2010
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	15,563	Other accrued expenses and liabilities	$	14,672
Totals		$	15,563		$	14,672

The following table presents the impact of derivative instruments on the Consolidated Statement of Operations for the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009 (in thousands of dollars):



Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments		Fiscal Year Ended August 27, 2011			Fiscal Year Ended August 28, 2010			Fiscal Year Ended August 29, 2009
Commodity contracts	Net sales	$	6,975		$	14,860		$	(37,386	)
Commodity contracts	Cost of sales	(33,829		)	(2,397		)	22,224
Totals		$	(26,854	)	$	12,463		$	(15,162	)

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Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12. LEGAL PROCEEDINGS

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

NOTE 13. BUSINESS SEGMENTS

Other—the Other segments of NBP consists of the operations of National Carriers, National Elite Transportation, LLC, or National Elite, a provider of transportation logistics services, and Kansas City Steak.

Eliminations—this line item includes eliminations of inter-segment and intra-segment activating resulting from the consolidation process.

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

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Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



	52 weeks ended August 27, 2011			52 weeks ended August 28, 2010			52 weeks ended August 29, 2009
Net sales:
Core beef	$	7,003,430		$	5,927,646		$	5,494,866
Other	246,964			228,119			239,406
Eliminations	(400,927		)	(347,836		)	(284,994		)
Total net sales	$	6,849,467		$	5,807,929		$	5,449,278
Depreciation and amortization:
Core beef	$	47,622		$	46,521		$	42,128
Other	3,573			3,095			2,240
Total depreciation and amortization	$	51,195		$	49,616		$	44,368
Operating income:
Core beef	$	268,192		$	266,848		$	167,394
Other	4,765			4,166			7,323
Total operating income	272,957			271,014			174,717
Interest income	15			37			173
Interest expense	(11,708		)	(14,769		)	(23,344		)
Other, net	305			(7,344		)	(6,468		)
Total income before taxes	$	261,569		$	248,938		$	145,078

	August 27, 2011			August 28, 2010
Assets:
Core beef	$	950,354		$	868,902
Other	50,067			44,776
Eliminations	(1,656		)	(986		)
Total assets	$	998,765		$	912,692

Customer Concentration

In the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009 one customer with its consolidated subsidiaries represented 8.7%, 9.5% and 9.6%, respectively of total sales, with no other customer representing more than 3.3%, 3.0% and 4.0%, respectively of total sales.

Sales to Foreign Countries

The Company had sales outside the United States of America in the fiscal years ended August 27, 2011, August 28, 2010 and August 29, 2009 of approximately $865.2 million, $636.9 million and $608.2 million, respectively. No single country outside the United States of America accounted for more than 3.6% of total sales. The amount of assets maintained outside the United States of America is not material.

F-26

Attached files

NATIONAL BEEF PACKING CO LLC Reports

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