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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

Commission file number 333-115164

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

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 x No ¨

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 x No ¨

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 ¨

Accelerated Filer ¨

Non-Accelerated Filer x

Small Reporting Company ¨

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

The registrant’s units are not traded on an exchange or in any public market.  As of October 25, 2014, there were 735,385 Class A units and 755,385 Class B units outstanding.    

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	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	11
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.	Mine Safety Disclosures	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.

                                                                                               

 

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

Item 1.  Financial Statements (unaudited).

 

 

 

 

 

 

 

 

 

 

 

                                                                                               

 

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U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES

Consolidated Balance Sheets

(thousands of dollars, except unit information)

 

Assets	September 27, 2014				December 28, 2013
Current assets:
Cash and cash equivalents	$	92,991		$	59,812
Due from affiliates		108			1,488
Other receivables		-			3
Restricted cash		-			36,943
Other current assets		17			385
Total current assets		93,116			98,631
Property, plant, and equipment, at cost		219			250
Less accumulated depreciation		214			244
Net property, plant, and equipment		5			6
Investment in National Beef Packing Company, LLC		154,640			155,928
Other assets		255			323
Total assets	$	248,016		$	254,888
Liabilities and Capital Shares and Equities
Current liabilities:
Accounts payable - trade	$	8		$	25
Due to affiliates		26			8
Accrued compensation and benefits		1,113			3,898
Other accrued expenses and liabilities		45			105
Patronage notices payable		90			90
Distributions payable		2			223
Total current liabilities		1,284			4,349
Long-term liabilities:
Other liabilities		6,060			6,327
Total long-term liabilities		6,060			6,327
Total liabilities		7,344			10,676
Commitments and contingencies		-			-
Capital shares and equities:
Members' capital, 735,385 Class A units and 755,385 Class B units
authorized, issued and outstanding		240,672			244,212
Total capital shares and equities		240,672			244,212
Total liabilities and capital shares and equities	$	248,016		$	254,888

 

 

 

 

See accompanying notes to consolidated financial statements.

 

 

 

                                                                                               

 

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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			39 weeks ended			39 weeks ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net sales	$	-		$	-		$	-		$	-
Costs and expenses:
Cost of sales		-			-			-			-
Selling, general, and administrative expenses		540			719			2,354			3,077
Depreciation and amortization		-			1			1			5
Total costs and expenses		540			720			2,355			3,082
Operating loss		(540)			(720)			(2,355)			(3,082)
Other income (expense):
Interest income		12			10			35			30
Interest expense		(3)			(19)			(27)			(57)
Equity interest in net income of National Beef
Packing Company, LLC		4,020			7,255			692			8,230
Other, net		28			6			201			282
Income (loss) before taxes		3,517			6,532			(1,454)			5,403
Income tax expense		-			-			-			-
Net income (loss)	$	3,517		$	6,532		$	(1,454)		$	5,403
Income (loss) per unit:
Basic
Class A units	$	0.48		$	0.89		$	(0.20)		$	0.73
Class B units	$	4.19		$	7.78		$	(1.73)		$	6.44
Diluted
Class A units	$	0.48		$	0.88		$	(0.20)		$	0.73
Class B units	$	4.19		$	7.78		$	(1.73)		$	6.44
Outstanding weighted-average Class A and Class B units:
Basic
Class A units		735,385			735,385			735,385			735,385
Class B units		755,385			755,385			755,385			755,385
Diluted
Class A units		735,385			744,452			735,385			744,192
Class B units		755,385			755,385			755,385			755,385

 

See accompanying notes to consolidated financial statements.

 

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U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES

Statements of Cash Flows

(thousands of dollars)

 

 

		39 weeks ended			39 weeks ended
	September 27, 2014			September 28, 2013
		(unaudited)			(unaudited)
Cash flows from operating activities:
Net (loss) income	$	(1,454)		$	5,403
Adjustments to reconcile net loss (income) to net cash provided by
operating activities:
Depreciation and amortization		1			5
Equity in net income of National Beef Packing Company, LLC		(692)			(8,230)
Distribution from National Beef Packing Company, LLC		-			4,517
Changes in assets and liabilities:
Due from affiliates		562			58
Other receivables		3			75
Other assets		437			1,324
Accounts payable		(17)			(11)
Due to affiliates		18			(435)
Accrued compensation and benefits		(3,052)			(3,114)
Other accrued expenses and liabilities		(59)			(137)
Net cash used in operating activities		(4,253)			(545)
Cash flows from investing activities:
Additional minority interest acquired in National Beef Packing Company, LLC		-			(1,507)
Distribution from National Beef Packing Company, LLC		1,979			-
Release of escrowed funds related to the 2011 transaction with Leucadia		36,943			-
Net cash provided by (used in) investing activities		38,922			(1,507)
Cash flows from financing activities:
Change in overdraft balances		(221)			26
Prior year excess distribution		818			23
Member distributions		(2,087)			-
Net cash (used in) provided by financing activities		(1,490)			49
Net increase (decrease) in cash		33,179			(2,003)
Cash and cash equivalents at beginning of the period		59,812			62,683
Cash and cash equivalents at end of the period	$	92,991		$	60,680

 

 

See accompanying notes to consolidated financial statements.

 

 

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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 28, 2013.  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.

 (2) Members’ Capital

The following table represents a reconciliation of Members’ Capital for the thirty-nine week period ended September 27, 2014 (thousands of dollars).

Balance at December 28, 2013	$	244,212
Allocation of net loss for the thirty-nine week period ended September 27, 2014		(1,454)
Member distributions		(2,087)
Balance at September 27, 2014	$	240,672

(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.

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 September 27, 2014 and September 28, 2013, net income was allocated 10% to the Class A’s and 90% to the Class B’s.  For the thirty-nine week periods ended September 27, 2014 and September 28, 2013, net loss and net income, respectively, was allocated 10% to the Class A’s and 90% to the Class B’s.  The net 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. 

 

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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 employment agreement and until eighteen months after the termination of the employment agreement, at the election of Mr. Steven Hunt, or upon mutual agreement of the Board of the Company and Mr. Hunt, Mr. Hunt was eligible to purchase up to 20,000 Class A units, or upon agreement of Mr. Hunt and the Board of the Company, Mr. Hunt could have converted 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.

On April 2, 2014, Mr. Hunt gave notice of his election to receive the appreciation right payment for the 20,000 Class A phantoms provided for in his employment agreement.  On April 10, 2014, Mr. Hunt was paid approximately $2.2 million for the Class A phantom appreciation right payment.  In the table below, as a result of that payment, the diluted income per Class A unit calculation for the thirteen week period ended September 27, 2014 does not reflect any dilution.  The diluted income per Class A unit calculation for the thirteen and thirty-nine week periods ended September 28, 2013 includes the effect of the 20,000 Class A unit purchase rights noted above.  The diluted loss per Class A unit calculations for the thirty-nine week period ended September 27, 2014 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 calculation.

Income (Loss) Per Unit Calculation

	13 weeks ended			13 weeks ended			39 weeks ended			39 weeks ended
(thousands of dollars, except unit and per unit data)	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Basic income (loss) per unit
Income (loss) attributable to USPB available to
unitholders (numerator)
Class A	$	352		$	653		$	(145)		$	540
Class B	$	3,165		$	5,879		$	(1,309)		$	4,863
Weighted average outstanding units (denominator)
Class A		735,385			735,385			735,385			735,385
Class B		755,385			755,385			755,385			755,385
Per unit amount
Class A	$	0.48		$	0.89		$	(0.20)		$	0.73
Class B	$	4.19		$	7.78		$	(1.73)		$	6.44
Diluted income (loss) per unit:
Income (loss) attributable to USPB available to
unitholders (numerator)
Class A	$	352		$	653		$	(145)		$	540
Class B	$	3,165		$	5,879		$	(1,309)		$	4,863
Weighted average outstanding Class A units		735,385			735,385			735,385			735,385
Effect of dilutive securities - Class A unit options		-			9,067			-			8,807
Units (denominator)		735,385			744,452			735,385			744,192
Weighted average outstanding Class B units		755,385			755,385			755,385			755,385
Effect of dilutive securities - Class B unit options		-			-			-			-
Units (denominator)		755,385			755,385			755,385			755,385
Per unit amount
Class A	$	0.48		$	0.88		$	(0.20)		$	0.73
Class B	$	4.19		$	7.78		$	(1.73)		$	6.44

                                                                                               

6

 

 

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(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 and thirty-nine week periods ended September 27, 2014 and September 28, 2013 (thousands of dollars):

	13 weeks ended			13 weeks ended			39 weeks ended			39 weeks ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
Net sales	$	1,983,058		$	1,920,747		$	5,872,424		$	5,629,564
Costs and expenses:
Cost of sales		1,917,114			1,832,908			5,750,762			5,455,755
Selling, general, and administrative expenses		14,482			14,489			43,392			42,386
Depreciation and amortization		21,479			22,250			63,434			65,838
Total costs and expenses		1,953,075			1,869,647			5,857,588			5,563,979
Operating income		29,983			51,100			14,836			65,585
Other income (expense):
Interest income		2			2			6			9
Interest expense		(3,910)			(2,944)			(11,130)			(9,428)
Other, net		232			153			1,101			(1,082)
Income before taxes		26,307			48,311			4,813			55,084
Income tax expense		362			(177)			(225)			(737)
Net income		26,669			48,134			4,588			54,347
Less: net loss attributable to Kansas City Steak
Company, LLC		-			-			-			255
Net income attributable to NBP	$	26,669		$	48,134		$	4,588		$	54,602
NBP's net income attributable to USPB	$	4,020		$	7,255		$	692		$	8,230

 

(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.  No indemnification claims were received and, as a result, USPB received 40%, or approximately $14.8 million, in January 2013, and the remaining 60% in January 2014.  As of January 2014, the $36.9 million is included in Cash and cash equivalents on the balance sheet. 

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.

                                                                                               

 

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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 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 three and nine months of 2014 were largely unchanged from the comparable 2013 periods.

Higher revenues during the three and nine months ended September 30, 2014, as compared to the same periods in 2013, are due primarily to higher selling prices but lower sales volume as fewer cattle were processed.  Cost of sales increased during the 2014 periods as compared to the comparable 2013 periods, as fed cattle prices continued to rise and reached record high levels, due in part to the declining supply of fed cattle available for slaughter.  As a result, gross margins were compressed during these periods.

As more fully discussed in the 2013 10-K, during the fourth quarter of 2013 NBP decided to close its beef processing facility located in Brawley, California; the facility was closed during the second quarter of 2014.  In addition to the long-lived asset impairment charge that it recorded in the fourth quarter of 2013, during the nine months ended September 30, 2014, NBP recognized $6.8 million of costs in connection with closing the Brawley facility.  These costs include employee separation and retention, systems decommissioning and various other expenses.  Of these amounts, during the nine month 2014 period, $4.5 million related to employee separation.  NBP does not expect to incur significant additional costs related to the closure of the Brawley facility in future periods. 

During 2013, Walmart discontinued using NBP as a provider of its consumer-ready products.  In addition to its Kansas City Steak Company facility, NBP has two other consumer-ready processing facilities, one of which was completely dedicated to Walmart’s business and the other substantially so dedicated.  The underutilization of these plants has impacted the results of NBP, and it has taken steps to establish replacement business for those facilities.  Through the third quarter of 2014, it has made substantial progress in increasing the utilization of these plants; however, it is uncertain as to whether it will be able to fully replace the lost business or attain the same level of profitability as in the past.

USPB Results of Operations

Thirteen weeks ended September 27, 2014 compared to thirteen weeks ended September 28, 2013

Net Sales.  There were no Net sales in the thirteen week periods ended September 27, 2014 and September 28, 2013.   

 

 

 

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Cost of Sales.  There were no Cost of sales in the thirteen week periods ended September 27, 2014 and September 28, 2013.   

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were approximately $0.5 million for the thirteen weeks ended September 27, 2014 compared to approximately $0.7 million for the thirteen weeks ended September 28, 2013, a decrease of approximately $0.2 million.  The decrease is primarily due to lower bonus and phantom unit plan expenses, which were partially offset by higher expenses associated with the non-compete payments to the former CEO.

Operating Loss.  Operating loss was approximately $0.5 million for the thirteen weeks ended September 27, 2014 compared to an operating loss of approximately $0.7 million for the thirteen weeks ended September 28, 2013, a decrease of approximately $0.2 million.   

Equity Interest in Net Income of National Beef Packing Company, LLC.  Equity in NBP net income was $4.0 million for the thirteen weeks ended September 27, 2014 compared to $7.3 million for the thirteen weeks ended September 28, 2013, a decrease of $3.3 million.  The decrease was primarily due to lower gross margins at NBP.  USPB carries its 15.0729% investment in NBP under the equity method of accounting.

Other, net.  Other income was immaterial in the thirteen week periods ended September 27, 2014 and September 28, 2013.

Net Income.  Net income for the thirteen week period ended September 27, 2014 was approximately $3.5 million compared to net income of approximately $6.5 million for the thirteen week period ended September 28, 2013, a decrease of approximately $3.0 million.

Thirty-nine weeks ended September 27, 2014 compared to thirty-nine weeks ended September 28, 2013

Net Sales.  There were no Net sales in the thirty-nine week periods ended September 27, 2014 and September 28, 2013.   

Cost of Sales.  There were no Cost of sales in the thirty-nine week periods ended September 27, 2014 and September 28, 2013.   

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were approximately $2.4 million for the thirty-nine weeks ended September 27, 2014 compared to approximately $3.1 million for the thirty-nine weeks ended September 28, 2013, a decrease of approximately $0.7 million.  The decrease is primarily due to lower bonus and phantom unit plan expenses, which were partially offset by higher expenses associated with the non-compete payments to the former CEO.

Operating Loss.  Operating loss was approximately $2.4 million for the thirty-nine weeks ended September 27, 2014 compared to an operating loss of approximately $3.1 million for the thirty-nine weeks ended September 28, 2013, a decrease of approximately $0.7 million.   

Equity Interest in Net Income of National Beef Packing Company, LLC.  Equity in NBP net income was $0.7 million for the thirty-nine weeks ended September 27, 2014 compared to equity in net income of $8.2 million for the thirty-nine weeks ended September 28, 2013, a decrease of approximately $7.5 million.  The change is primarily due to lower gross margins at NBP. 

Other, net.  Other income was $0.2 million and $0.3 million for the thirty-nine weeks ended September 27, 2014 and September 28, 2013, respectively, a decrease of approximately $0.1 million.  The decrease was primarily due to lower lease income on Company owned cattle delivery rights.

Net Loss (Income).  Net loss for the thirty-nine-week period ended September 27, 2014 was approximately $1.5 million compared to net income of approximately $5.4 million for the thirty-nine-week period ended September 28, 2013, a decrease of approximately $6.9 million.

 

                                                                                               

 

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Liquidity and Capital Resources

As of September 27, 2014, USPB had net working capital (the excess of current assets over current liabilities) of approximately $91.8 million, which included cash and cash equivalents of $93.0 million and $0.1 million in patronage notices payable.  As of December 28, 2013, we had net working capital of approximately $94.3 million, which included cash and cash equivalents of $59.8 million and restricted cash of $36.9 million, with $0.2 million in distributions payable and $0.1 million in patronage notices payable. 

As of September 27, 2014, we had a $5.0 million revolving term loan with CoBank, all of which was available.  USPB was in compliance with all of the financial covenants under the Master Loan Agreement as of September 27, 2014.

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 2013.

Operating Activities

Net cash used in operating activities in the thirty-nine weeks ended September 27, 2014 was approximately $4.3 million compared to approximately $0.5 million in the thirty-nine weeks ended September 28, 2013.  The cash used in the current period was primarily driven by the Class A phantom appreciation right payment and non-compete payments made to the former CEO; the cash used in the prior year was primary due to the payment of accrued bonuses and non-compete payments made to the former CEO, which were offset by a distribution received from NBP.

Investing Activities

Net cash provided by investing activities in the thirty-nine weeks ended September 27, 2014 was approximately $38.9 million compared to net cash used in investing activities of approximately $1.5 million in the thirty-nine weeks ended September 28, 2013, a change of $40.4 million.  The change was due to the receipt in fiscal year 2014 of $36.9 million placed in escrow as a result of the 2011 transaction with Leucadia, and a $2.0 million distribution from NBP, as opposed to the acquisition of additional minority owner’s interest in NBP in the 2013 period.

Financing Activities

Net cash used in financing activities was approximately $1.5 million in the thirty-nine weeks ended September 27, 2014 compared to immaterial cash provided by financing activities in the thirty-nine weeks ended September 28, 2013.  The cash used in the current fiscal year was primarily related to distributions to USPB’s unitholders, which was partially offset by the collection of tax year 2012 over-distributions in the current year. 

Master Loan Agreement

On May 29, 2014, USPB and CoBank entered into a Revolving Term Loan Supplement to the Master Loan Agreement dated July 26, 2011.  The new Revolving Term Loan Supplement provides for a $5 million revolving credit commitment, a reduction of $10 million from the prior commitment.  The new commitment carries a term of three years, maturing on June 30, 2017.  The Pledge Agreement provides CoBank with a first-priority security interest in USPB’s membership interests in, and distributions from, NBP.

All of the $5 million revolving credit commitment was available as of September 27, 2014.  Borrowings under the revolving credit commitment bear interest at the base rate or LIBOR rate plus applicable margin.

 

 

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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.

 

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 September 27, 2014, the Company did not have any outstanding debt.

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 September 27, 2014 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. 11

                                                                                               

11

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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 28, 2013 have not materially changed.  Please refer to the Company’s report on Form 10-K for the fiscal year ended December 28, 2013 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. Mine Safety Disclosures.

Not applicable.

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

 

 

 

 

 

Date: November 10, 2014