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EX-32 - U. S. Premium Beef, LLCexhibit-321.htm
EX-31 - U. S. Premium Beef, LLCexhibit-311.htm

 

 


 

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

þ

 

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

 

 

For the quarterly period ended March 30, 2013

or

 

 

 

 

o

 

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

 

 

For the transition period from            to           .

 

Commission file number 333-115164

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

DELAWARE

 

20-1576986

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

12200 North Ambassador Drive
Kansas City
, MO 64163
(Address of principal executive offices)

Telephone: (866) 877-2525
(Registrant’s telephone number, including area code)

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 þ 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 þ No o

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

Large Accelerated Filer o  

Accelerated Filer o  Non-Accelerated Filer þ Small Reporting Company o

 

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

The registrant’s units are not traded on an exchange or in any public market.  As of April 27, 2013, there were 735,385 Class A units and 755,385 Class B units outstanding.    


 


 


 

 

 

 

 

 

TABLE OF CONTENTS

 

 

PART I.

FINANCIAL INFORMATION

Page No.

 

 

 

Item 1.

Financial Statements (unaudited).

1

 

 

 

Item 2.

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

7

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

10

 

 

 

Item 4.

Controls and Procedures.

11

 

 

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings.

12

 

 

 

   Item 1A.

Risk Factors.

12

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

12

 

 

 

Item 3.

Defaults Upon Senior Securities.

12

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders.

12

 

 

 

Item 5.

Other Information.

12

 

 

 

Item 6.

Exhibits.

12

 

 

 

 

Signatures.

14

 

 

Unless the context indicates or otherwise requires, the terms “USPB”, “the Company”, “we”, “our”, and “us” refer to U.S. Premium Beef, LLC. As used in this report, the terms “NBP” and “National Beef” refer to National Beef Packing Company, LLC, a Delaware limited liability company.

                                                                                               

ii


 


 


 

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements (unaudited).

1


 

 

 

 

 

 

 

                                                                                               


 


 

 

 

 

 

U.S. PREMIUM BEEF, LLC

Balance Sheets

(thousands of dollars, except unit data)

 

 

 

 

March 30,

 

December 29,

Assets

2013

 

2012

 

 

 

 

(unaudited)

 

(unaudited)

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

59,543 

 

$

62,683 

 

Due from affiliates

 

1,393 

 

657 

 

Other receivables

 

31 

 

78 

 

Restricted cash

 

36,943 

 

 

 

Total current assets

 

97,910 

 

63,418 

Property, plant, and equipment, at cost

 

250 

 

250 

 

Less accumulated depreciation

 

240 

 

238 

 

 

Net property, plant, and equipment

10 

 

12 

Investment in National Beef Packing Company, LLC

162,339 

 

165,401 

Restricted cash

 

 

36,943 

Other assets

 

345 

 

1,664 

 

 

Total assets

 

$

260,604 

 

$

267,438 

 

 

 

 

 

 

 

Liabilities and Capital Shares and Equities

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable - trade

 

$

142 

 

$

42 

 

Due to affiliates

 

16 

 

446 

 

Accrued compensation and benefits

 

1,528 

 

4,654 

 

Other accrued expenses and liabilities

114 

 

197 

 

Patronage notices payable in cash

 

115 

 

115 

 

Distributions payable

 

172 

 

172 

 

 

Total current liabilities

 

2,087 

 

5,626 

Long-term liabilities:

 

 

 

 

 

Accrued compensation and benefits

 

7,319 

 

7,266 

 

 

Total liabilities

 

9,406 

 

12,892 

Capital shares and equities:

 

 

 

 

 

Members' capital, 735,385 Class A units and 755,385 Class B units

 

 

 

 

 

authorized, issued and outstanding

251,198 

 

254,546 

 

 

Total liabilities and capital shares and equities

$

260,604 

 

$

267,438 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

 

 

 

 

 

 

 

 

 

2


                                                                                               


 


 

 

 

 

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES

Statements of Operations

(thousands of dollars, except per unit and per unit data)

 

 

 

 

13 weeks ended

 

13 weeks ended

 

 

 

 

March 30, 2013

 

March 31, 2012

 

 

 

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

 

Net sales

 

$

 

$

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

Cost of sales

 

 

Selling, general, and administrative expenses

1,320 

 

1,963 

 

Depreciation and amortization

 

 

 

Total costs and expenses

1,322 

 

1,965 

 

 

 

 

 

 

 

 

 

 

Operating loss

(1,322)

 

(1,965)

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

Interest income

10 

 

27 

 

Interest expense

(73)

 

(74)

 

Equity interest in net loss of National Beef Packing Company, LLC

(3,062)

 

(2,706)

 

Other, net

262 

 

 

 

 

Loss before taxes

(4,185)

 

(4,718)

 

 

 

 

 

 

 

Income tax expense

 

 

 

 

Net loss

(4,185)

 

(4,718)

 

 

 

 

 

 

 

Loss per unit:

 

 

 

 

Basic

 

 

 

 

 

 

Class A units

$

(0.57)

 

$

(0.64)

 

 

Class B units

$

(4.98)

 

$

(5.62)

 

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

Class A units

$

(0.57)

 

$

(0.64)

 

 

Class B units

$

(4.98)

 

$

(5.62)

 

 

 

 

 

 

 

Outstanding weighted-average Class A and Class B units:

 

 

 

 

Basic

 

 

 

 

 

 

Class A units

735,385 

 

735,385 

 

 

Class B units

755,385 

 

755,385 

 

Diluted

 

 

 

 

 

 

Class A units

735,385 

 

735,385 

 

 

Class B units

755,385 

 

755,385 

See accompanying notes to financial statements.

 

 

 

 

3


                                                                                               


 


 

 

 

 

 

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES

Statements of Cash Flows

(thousands of dollars)

 

 

 

 

 

13 weeks ended

 

13 weeks ended

 

 

 

 

 

March 30, 2013

 

March 31, 2012

 

 

 

 

 

(unaudited)

 

(unaudited)

Cash flows from operating activities:

 

 

 

 

Net loss

 

$

(4,185)

 

$

(4,718)

 

Adjustments to reconcile net (loss) income to net cash provided by

 

 

 

 

 

operating activities:

 

 

 

 

 

Depreciation and amortization

 

 

 

Equity in losses of National Beef Packing Company, LLC

3,062 

 

2,706 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

(386)

 

 

 

Due from affiliates

(736)

 

2,296 

 

 

 

Other receivables

47 

 

 

 

 

Other assets

1,319 

 

38 

 

 

 

Accounts payable

100 

 

(10)

 

 

 

Due to affiliates

(430)

 

(10)

 

 

 

Accrued compensation and benefits

(3,073)

 

(545)

 

 

 

Other accrued expenses and liabilities

(83)

 

3,650 

 

 

 

 

Net cash (used in) provided by operating activities

(3,977)

 

3,023 

Cash flows from investing activities:

 

 

 

 

Capital expenditures, including interest capitalized

 

(3)

 

 

Net cash used in investing activities

 

(3)

Cash flows from financing activities:

 

 

 

 

Payments of patronage notices

 

(21,868)

 

Change in overdraft balances

 

(19,563)

 

Prior year excess distribution

837 

 

 

Member distributions

 

(538,840)

 

 

 

 

Net cash provided by (used in) financing activities

837 

 

(580,271)

 

Effect of exchange rate changes on cash

 

 

 

 

 

Net decrease in cash

(3,140)

 

(577,251)

Cash and cash equivalents at beginning of the period

62,683 

 

642,670 

Cash and cash equivalents at end of the period

$

59,543 

 

$

65,419 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

 

 

 

4


                                                                                               


 


 

 

 

 

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

(1) Interim Financial Statements

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP), for interim financial information; therefore, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included using management’s best estimates and judgments where appropriate.  These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of 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.  For further information, refer to the audited Consolidated Financial Statements and Notes to Consolidated Financial Statements, which are included in the Company’s Annual Report on Form 10-K on file with the Securities and Exchange Commission (SEC), for the fiscal year ended December 29, 2012.  The results of operations for the interim periods presented are not necessarily indicative of the results for a full fiscal year.

As a result of the transaction with Leucadia National Corporation (Leucadia) on December 30, 2011 in which Leucadia purchased 56.2415% of the membership interests in National Beef Packing Company, LLC (NBP) from the Company, the Company’s financial statements are no longer consolidated with NBP.  USPB’s remaining 15.0729% investment in NBP is accounted for using the equity method of accounting as the Company has the ability to exercise significant influence, but does not have financial or operational control.

Historically, the Company’s fiscal year consisted of a 52 or 53 week period, which ended on the last Saturday in August.  With the closing of the transaction with Leucadia, the Company’s fiscal year-end changed from the last Saturday in August to the last Saturday in December. 

(2) Members’ Capital

The following table represents a reconciliation of Members’ Capital for the thirteen week period ended March 30, 2013 (thousands of dollars).

 

 

Balance at December 29, 2012

$

254,546 

Allocation of net loss for the thirteen week period ended March 30, 2013

(4,185)

Prior year excess distribution

837 

Balance at March 30, 2013

$

251,198 

 

 

For tax year 2012, USPB’s Board of Directors authorized the Company to make quarterly tax distributions to its unitholders to assist those that make quarterly estimated tax payments.  USPB made one such distribution in April 2012, which was based on a conservative estimate of taxable income for the first quarter.  The estimate for the quarter was ultimately higher than actual taxable income for the full year, which caused the Company to be over-distributed.  USPB’s Board of Director’s directed management to offset future tax distributions by the amount of the over-distribution.  The over-distribution also resulted in a violation of the terms of the Company’s Master Loan Agreement with CoBank.  The Company informed CoBank of the over-distribution and CoBank waived the violation. 

(3) Income (Loss) Attributable to USPB Per Unit

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

 

 

5


                                                                                               


 


 

 

 

 

 

Basic EPU excludes dilution and is computed by first allocating a portion of net income (loss) attributable to USPB to Class A units and the remainder is allocated to Class B units.  For the thirteen week periods ended March 30, 2013 and March 31, 2012, income (loss) was allocated 10% to the Class A’s and 90% to the Class B’s.  Income (loss) allocated to the Class A and Class B units is then divided by the weighted-average number of Class A and Class B units outstanding for the period to determine the basic EPU for each respective class of unit. 

Diluted EPU reflects the potential dilution that could occur if potential Class A unit purchase rights were exercised or contractual appreciation rights were converted into units.   Upon termination of the former CEO’s, Steven Hunt, employment agreement and until eighteen months after the termination of the employment agreement, at the election of Mr. Hunt, or upon mutual agreement of the Board of the Company and the Mr. Hunt, Mr. Hunt may purchase up to 20,000 Class A units, or upon agreement of Mr. Hunt and the Board of the Company, Mr. Hunt may convert the contractual unit appreciation rights to up to 20,000 Class A units.  The diluted EPU reflects the circumstances of termination of Mr. Hunt’s employment agreement, and the election of Mr. Hunt or agreement by the Board of the Company and Mr. Hunt for him to purchase or convert contractual rights to the maximum 20,000 Class A units at $55 per unit for the periods as provided in his employment agreement. The diluted loss per Class A unit calculations for the 13 week period ended March 30, 2013 and March 31, 2012 in the following table excludes the effect of the 20,000 Class A unit purchase rights noted above as the effect of including them would have been anti-dilutive to the loss per Class A unit calculations.

 

Loss Per Unit Calculation

 

 

 

 

 

 

13 weeks ended

 

13 weeks ended

(thousands of dollars, except unit and per unit data)

March 30, 2013

 

March 31, 2012

 

 

 

 

 

 

Basic loss per unit

 

 

 

Loss attributable to USPB available to

 

 

 

 

unitholders (numerator)

 

 

 

 

 

Class A

$

(419)

 

$

(472)

 

 

Class B

$

(3,766)

 

$

(4,246)

 

 

 

 

 

 

Weighted average outstanding units (denominator)

 

 

 

 

Class A

735,385 

 

735,385 

 

Class B

755,385 

 

755,385 

 

 

 

 

 

 

Per unit amount

 

 

 

 

Class A

$

(0.57)

 

$

(0.64)

 

Class B

$

(4.98)

 

$

(5.62)

 

 

 

 

 

 

Diluted loss per unit:

 

 

 

Loss attributable to USPB available to

 

 

 

 

unitholders (numerator)

 

 

 

 

 

Class A

$

(419)

 

$

(472)

 

 

Class B

$

(3,766)

 

$

(4,246)

 

 

 

 

 

 

Weighted average outstanding Class A units

735,385 

 

735,385 

Effect of dilutive securities - Class A unit options

 

 

Units (denominator)

735,385 

 

735,385 

 

 

 

 

 

 

Weighted average outstanding Class B units

755,385 

 

755,385 

Effect of dilutive securities - Class B unit options

 

 

Units (denominator)

755,385 

 

755,385 

 

 

 

 

 

 

Per unit amount

 

 

 

 

Class A

$

(0.57)

 

$

(0.64)

 

Class B

$

(4.98)

 

$

(5.62)

 

 

 

 

 

 

 

6


                                                                                               


 


 

 

 

 

(4) Investment in National Beef Packing Company, LLC

As of December 31, 2011, USPB’s investment in NBP is accounted for using the equity method of accounting as the Company has the ability to exercise significant influence, but does not have financial or operational control.  Below is a summary of the results of operations for NBP for the thirteen week periods ended March 30, 2013 and March 31, 2012 (thousands of dollars):

 

 

 

 

 

13 weeks ended

 

13 weeks ended

 

 

 

 

 

March 30, 2013

 

March 31, 2012

Net sales

 

$

1,788,813 

 

$

1,790,555 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

Cost of sales

1,770,844 

 

1,772,219 

 

 

Selling, general, and administrative expenses

14,128 

 

14,033 

 

 

Depreciation and amortization

21,733 

 

20,308 

 

 

 

Total costs and expenses

1,806,705 

 

1,806,560 

 

 

 

 

 

 

 

 

 

 

 

 

Operating loss

(17,892)

 

(16,005)

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest income

 

 

 

Interest expense

(3,250)

 

(3,016)

 

 

Other, net

623 

 

1,421 

 

 

 

Loss before taxes

(20,514)

 

(17,597)

 

 

 

 

 

 

 

 

Income tax expense

(54)

 

(420)

 

 

 

Net loss

(20,568)

 

(18,017)

Less: net income (loss) attributable to Kansas City Steak Company, LLC

254 

 

64 

 

Net loss attributable to NBP

$

(20,314)

 

$

(17,953)

 

 

 

 

 

 

 

 

 

NBP's net loss attributable to USPB

$

(3,062)

 

$

(2,706)

 

(5) Restricted Cash

When the transaction with Leucadia closed on December 30, 2011, approximately $36.9 million of the Company’s proceeds were deposited in an escrow account to satisfy potential indemnification claims from Leucadia.  USPB received 40%, or approximately $14.8 million, in January 2013; however, those funds remain subject to potential indemnification claims that may arise during the second year after the closing of the transaction and are therefore included in Restricted cash on the balance sheet.  If no indemnification claims arise during the second year, the remaining 60% of the funds will be distributed to USPB.  As the Company anticipates receipt of those funds from the escrow agent in January 2014, the full amount has been reclassified from non-current assets to current assets.

Item 2.  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.

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 issues, livestock disease, including the identification of cattle with Bovine Spongiform Encephalopathy , product contamination and recall concerns, competitive practices and consolidation in the cattle production and processing industries and among our customers, actions of domestic or foreign governments, hedging risk, changes in interest rates and foreign currency exchange rates, trade barriers and exchange controls, 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.

 

 

 

7


                                                                                               


 


 

 

 

 

 

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 Part II. 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.

Investment in National Beef Packing Company, LLC

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

NBP’s profitability is dependent, in large part, on the spread between its cost for live cattle, the primary raw material for its business, and the value received from selling boxed beef and other products. Because NBP operates in a large and liquid commodity market, it does not have much influence over the price it pays for cattle or the selling price it receives for the products it produces. NBP’s profitability typically fluctuates seasonally as well as cyclically, with relatively higher margins in the spring and summer months and during times of cattle herd expansion.

The USDA regularly reports market values for cattle, beef, offal and other products produced by ranchers, farmers and beef processors. Generally, NBP expects its profitability to improve as the ratio of the USDA comprehensive boxed beef cutout (a weekly reported measure of the total value of all USDA inspected beef primal cuts, grind and trim produced from fed cattle) to the USDA 5-area weekly average slaughter cattle price increases and for profitability to decline as the ratio decreases. The ratios during the first quarter of fiscal year’s 2013 and 2012 were the lowest for the corresponding periods during the past ten years. Due in part to the declining U.S. cattle herd, which has been exacerbated by drought conditions across key cattle raising areas, during this period average cattle prices remained at record levels and NBP’s per head revenue has not increased to offset the full increase in its per head cost for cattle, resulting in reduced margins. 

During the first quarter of fiscal year 2013, revenues were lower than the first quarter of fiscal year 2012 due primarily to fewer cattle processed versus the prior quarter. Although gross margin per head was modestly higher versus the first quarter of fiscal year 2012, total gross margin was lower due primarily to fewer cattle processed versus the prior quarter. Depreciation and amortization expenses include $11.3 million during each of fiscal year’s 2013 and 2012 of amortization expenses related to identifiable intangible assets recorded at the date of acquisition.

The 2012 drought across much of the country caused prices for corn, hay and certain other cattle feedstuffs to increase and pastures to wither; as such some cattle producers reduced and continue to reduce the size of their cow herds. NBP’s profitability is primarily dependent upon the spread between what it pays for fed cattle and the price it receives for its products, along with the efficiency of its processing facilities. The drought contributed to a decline in the beef cow herd and affected the supply of fed cattle; this caused the price NBP pays for fed cattle to increase more than it can pass along in the form of higher selling prices for its products, resulting in reduced profitability.

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As more fully discussed in the fiscal year 2012 10-K, NBP received notice from Walmart that it intends to discontinue using NBP as a provider of its case-ready products in 2013. During fiscal year 2013, the two case-ready facilities began to operate at reduced levels, resulting in an approximate 50% reduction in the number of personnel employed at the facilities. In connection with the reduction in the labor force, NBP recorded a charge of approximately $1.9 million during the first quarter of fiscal year 2013. NBP is currently pursuing replacement business for its case-ready facilities; however, it may not be able to fully replace the operating cash flow generated by these facilities.

USPB Results of Operations

Thirteen weeks ended March 30, 2013 compared to thirteen weeks ended March 31, 2012

Net Sales.  There were no Net Sales in the thirteen week periods ended March 30, 2013 and March 31, 2012.   

Cost of Sales.  There were no Cost of Sales in the thirteen week periods ended March 30, 2013 and March 31, 2012.   

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were approximately $1.3 million for the thirteen weeks ended March 30, 2013 compared to approximately $2.0 million for the thirteen weeks ended March 31, 2012, a decrease of approximately $0.7 million.  That decrease is primarily due to lower bonus expenses and professional service expenses, which were higher than usual in the prior year due to the transaction with Leucadia.

Operating Loss.  Operating loss was approximately $1.3 million for the thirteen weeks ended March 30, 2013 compared to an operating loss of approximately $2.0 million for the thirteen weeks ended March 31, 2012, a decrease of approximately $0.7 million.   

Interest Expense.  Interest expense was $0.1 million for the thirteen weeks ended March 30, 2013 compared to $0.1 million for the thirteen weeks ended March 31, 2012.  

Equity Interest in Net Loss of National Beef Packing Company, LLC.  Equity in NBP net loss was $3.1 million for the thirteen weeks ended March 30, 2013 compared to $2.7 million for the thirteen weeks ended March 31, 2012.  As of December 31, 2011, USPB is carrying its 15.0729% investment in NBP under the equity method of accounting.

Net Loss.  Net loss for the thirteen-week period ended March 30, 2013 was approximately $4.2 million compared to net loss of approximately $4.7 million for the thirteen-week period ended March 31, 2012, a decrease of approximately $0.5 million. The decrease in net loss is primarily due to lower gross margins at NBP.

Liquidity and Capital Resources

As of March 30, 2013, USPB had net working capital (the excess of current assets over current liabilities) of approximately $95.8 million, which included cash and cash equivalents of $59.5 million, restricted cash of $36.9 million, and $0.2 million in distributions payable and $0.1 million in patronage notices payable.  As of December 29, 2012, we had net working capital of approximately $57.8 million, which included cash and cash equivalents of $62.7 million, with $0.2 million in distributions payable and $0.1 million in patronage notices payable. 

As of March 30, 2013, we had a $15.0 million revolving term loan with CoBank, all of which was available.  USPB was in compliance with all of the financial covenants under the Credit Facilities as of March 30, 2013.

 

 

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Accordingly, if NBP continues to sustain losses and does not make distributions to the Company, we believe our cash and available borrowings under our Master Loan Agreement will be sufficient to support our cash needs for the foreseeable future.  For a review of our obligations that affect liquidity, please see the “Cash Payment Obligations” table in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for fiscal year 2012.

Operating Activities

Net cash used in operating activities in the thirteen weeks ended March 30, 2013 was approximately $4.0 million compared to net cash provided by operating activities of approximately $3.0 million in the thirteen weeks ended March 31, 2012.  The $7.0 million change was primarily due to a tax distribution received from NBP in the first quarter of fiscal year 2012 and the payment of accrued bonuses and other accrued liabilities in the first quarter of fiscal year 2013.

Investing Activities

There were no material cash flow investing activities in the thirteen week periods ended March 30, 2013 and March 31, 2012.  

Financing Activities

Net cash provided by financing activities was approximately $0.9 million in the thirteen weeks ended March 30, 2013 compared to net cash used of approximately $580.3 million in the thirteen weeks ended March 31, 2012.  The change was primarily related to distributions to USPB’s unitholders, and the redemption of the patronage notices which occurred as a result of the transaction with Leucadia. 

Master Loan Agreement

On July 28, 2011, USPB and CoBank entered into a Master Loan Agreement, Revolving Term Loan Supplement to the Master Loan Agreement, and Pledge Agreement.  These agreements replace the Amended and Restated Credit Agreement and Security Agreement dated June 22, 2009.

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

All of the $15 million revolving credit commitment was available as of March 30, 2013.  Borrowings under the revolving credit commitment bear interest at the base rate or LIBOR rate plus applicable margin.

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

For tax year 2012, USPB’s Board of Directors authorized the Company to make quarterly tax distributions to its unitholders to assist those that make quarterly estimated tax payments.  USPB made one such distribution in April 2012, which was based on a conservative estimate of taxable income for the first quarter.  The estimate for the quarter was ultimately higher than actual taxable income for the full year, which caused the Company to be over-distributed.  USPB’s Board of Director’s directed management to offset future tax distributions by the amount of the over-distribution.  The over-distribution also resulted in a violation of the terms of the Company’s Master Loan Agreement with CoBank.  The Company informed CoBank of the over-distribution and CoBank waived the violation.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The principal market risks affecting USPB’s business are exposure to interest rate risk, to the extent the company has debt outstanding.  As of March 30, 2013, the company did not have any outstanding debt.

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Item 4.  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 Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in alerting them, in a timely manner, to material information required to be included in our periodic Securities and Exchange Commission filings.  There have been no changes in our internal controls over financial reporting during the thirteen weeks ended March 30, 2013 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.

 

 

 

 

 

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

The risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 29, 2012 have not materially changed.  Please refer to the Company’s report on Form 10-K for the fiscal year ended December 29, 2012 to consider those risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

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

None

Item 5. Other Information.

None.        

Item 6. Exhibits.

31.1

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

 

 

31.2

Certification of the 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).

 

 

101.INS

XBRL Instance Document *

 

 

101.SCH

XBRL Taxonomy Extension Schema Document *

 

 

101.CAL

XBRL Taxonomy Extension Calculation Linkbase *

 

 

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document *

 

 

101.LAB

XBRL Taxonomy Extension Label Linkbase Document *

   
101.PRE 

XBRL Taxonomy Extension Presentation Linkbase Document *

 

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*  Furnished herewith.  Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 

 

 

 

 

 

 

 

 

 

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SIGNATURES

 

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

 

 

 

 

    U.S. Premium Beef, LLC
     
     

 

 

 

 

 By:

/s/ Stanley D. Linville

 

 

 

 

 

Stanley D. Linville
Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

 By:

/s/ Scott J. Miller

 

 

 

 

 

Scott J. Miller
 Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

 

Date: May 9, 2013

 

 

 

 

 

 

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