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EX-32 - U. S. Premium Beef, LLCexhibit_321.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒  

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

 

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 24, 2016
or

 

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 ☑ 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 ☑ 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 ☑ 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  ☑     

     The registrant’s units are not traded on an exchange or in any public market. As of October 29, 2016, there were 735,385 Class A units and 755,385 Class B units outstanding.

 

 

 


 

TABLE OF CONTENTS
  FINANCIAL INFORMATION   
PART I.    Page No. 
     
 

Item 1. 

Financial Statements (unaudited). 
 

 

   
 

Item 2. 

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

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. 

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.

ii


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited).

 

 

 

 

 

 

 

 

 

 

1


 

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES
Consolidated Balance Sheets
(thousands of dollars, except unit information)
 
Assets 

September 24, 2016 

 

December 26, 2015 

  (unaudited)       

Current assets: 

         

Cash and cash equivalents 

96,295    85,220 

Due from affiliates 

  146      137 

Other current assets 

  11     

Total current assets 

  96,452      85,365 

Property, plant, and equipment, at cost 

  223      223 

Less accumulated depreciation 

  185      175 

Net property, plant, and equipment 

  38      48 

Investment in National Beef Packing Company, LLC 

  148,211      132,628 

Other assets 

  145      196 

Total assets 

244,846    218,237 
Liabilities and Capital Shares and Equities           

Current liabilities: 

         

Accounts payable - trade 

  14 

Due to affiliates 

  47     

Accrued compensation and benefits 

  1,220      1,066 

Other accrued expenses and liabilities 

  89      179 

Patronage notices payable 

  19      90 

Total current liabilities 

  1,381      1,349 
Long-term liabilities:           

Other liabilities 

  4,792      5,118 

Total long-term liabilities 

  4,792      5,118 

Total liabilities 

  6,173      6,467 
 

Commitments and contingencies 

     
 

Capital shares and equities: 

         

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

         

issued and outstanding 

  238,673      211,770 

Total capital shares and equities 

  238,673      211,770 

Total liabilities and capital shares and equities 

244,846    218,237 
 

See accompanying notes to consolidated financial statements. 

         

 

2


 

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES
Consolidated 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 24, 2016    September 26, 2015    September 24, 2016    September 26, 2015 
  (unaudited)   

(unaudited) 

  (unaudited)    (unaudited) 
 

Net sales 

$

 

$

 

$

 

$

 

Costs and expenses: 

                     

Cost of sales 

     

       

Selling, general, and administrative expenses 

  726      430      2,281      1,616 

Depreciation and amortization 

          10     

Total costs and expenses 

  729      432      2,291      1,620 
 

Operating loss 

  (729)      (432)      (2,291)     (1,620)
 

Other income (expense): 

                     

Interest income 

  11      11      35      34 

Interest expense 

  (3)     (3)     (9)      (9)

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

  16,270      (4,856)     28,800      (11,361)

Other, net 

  21          367     

Income (loss) before taxes 

  15,570      (5,278)     26,902      (12,954)
 

Income tax expense 

     

       

Net income (loss) 

$

15,570   

$

(5,278)  

$

26,902   

$

(12,954)
 

Income (loss) per unit: 

                     

Basic 

                     

Class A units 

$

2.12   

$

(0.72)  

$

3.66   

$

(1.76)

Class B units 

$

18.55   

$

(6.29)  

$

32.05   

$

(15.43)

Diluted 

                     

Class A units 

$

2.12   

$

(0.72)  

$

3.66   

$

(1.76)

Class B units 

$

18.55   

$

(6.29)  

$

32.05   

$

(15.43)
 
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      735,385      735,385      735,385 

Class B units 

  755,385      755,385      755,385      755,385 

See accompanying notes to consolidated financial statements. 

                     

 

3


 

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(thousands of dollars)
 
 
  39 weeks ended    39 weeks ended 
  September 24, 2016    September 26, 2015 
  (unaudited)    (unaudited) 
Cash flows from operating activities:           

Net income (loss) 

26,902    (12,954)

Adjustments to reconcile net income (loss) to net cash used in 

         

operating activities: 

         

Depreciation and amortization 

  10     

Equity in net (income) loss of National Beef Packing Company, LLC 

  (28,800)     11,361 

Changes in assets and liabilities: 

         

Due from affiliates 

  (9)      (14) 

Other assets 

  49      50 

Accounts payable 

  (8)      (7)

Due to affiliates 

  47     

Accrued compensation and benefits 

  (172)     (946)

Other accrued expenses and liabilities 

  (89)     (69)

Net cash used in operating activities 

  (2,070)     (2,573)

Cash flows from investing activities: 

         

Capital expenditures 

      (22)

Distribution from National Beef Packing Company, LLC 

  13,216     

Net cash provided by (used in) investing activities 

  13,216      (22)

Cash flows from financing activities: 

         

Change in overdraft balances 

  (71)    

Net cash used in financing activities 

  (71)    

Net increase (decrease) in cash 

  11,075      (2,595)

Cash and cash equivalents at beginning of the period 

  85,220      92,344 

Cash and cash equivalents at end of the period 

96,295    89,749 
 
See accompanying notes to financial statements.           

 

4


 

U.S. PREMIUM BEEF, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED 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 26, 2015. The results of operations for the interim periods presented are not necessarily indicative of the results for a full fiscal year.

     USPB’s 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 24, 2016 (thousands of dollars).

Balance at December 26, 2015 

211,770 

Net income for the thirty-nine week period ended September 24, 2016 

 

26,902 

Balance at September 24, 2016 

238,673 

 

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

     Under the LLC structure, earnings of the Company are to be allocated 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 and thirty-nine week periods ended September 24, 2016 and September 26, 2015, net income (loss) 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.

     Diluted EPU reflects the potential dilution that could occur to the extent that any outstanding dilutive Class A or Class B units were exercised. There are no potentially dilutive Class A or Class B units outstanding.

5


 

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 24, 2016   

September 26, 2015 

  September 24, 2016    September 26, 2015 
Basic earnings per unit                       
Net income (loss) attributable to USPB available to                       

unitholders (numerator) 

                     

Class A 

$  1,557    $  (527)   $  2,690    $  (1,295)

Class B 

$  14,013    $  (4,751)   $  24,212    $  (11,659)
 

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 

$  2.12    $  (0.72)   $  3.66    $  (1.76)

Class B 

$  18.55    $  (6.29)   $  32.05    $  (15.43)
 

Diluted earnings per unit: 

                     

Net income (loss) attributable to USPB available to 

                     

unitholders (numerator) 

                     

Class A 

$  1,557    $  (527)   $  2,690    $  (1,295)

Class B 

$  14,013    $  (4,751)   $  24,212    $  (11,659)
 

Weighted average outstanding Class A units 

  735,385      735,385      735,385      735,385 

Effect of dilutive securities - Class A unit options 

  -      -      -      - 

Units (denominator) 

  735,385      735,385      735,385      735,385 
 

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 

$  2.12    $  (0.72)   $  3.66    $  (1.76)

Class B 

$  18.55    $  (6.29)   $  32.05    $  (15.43)

 

6


 

(4) Investment in National Beef Packing Company, LLC

     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 24, 2016 and September 26, 2015 (thousands of dollars):

  13 weeks ended    13 weeks ended    39 weeks ended    39 weeks ended 
  September 24, 2016    September 26, 2015    September 24, 2016    September 26, 2015 
Net sales 

$ 

1,746,839   

$ 

1,863,040   

$ 

5,175,592   

$ 

5,709,835 
 
Costs and expenses:                       

Cost of sales 

  1,595,672      1,849,023      4,856,046      5,658,679 

Selling, general, and administrative expenses 

  17,035      15,485      51,929      46,882 

Depreciation and amortization 

  23,100      22,528      68,511      66,397 

Total costs and expenses 

  1,635,807      1,887,036      4,976,486      5,771,958 
 

Operating income (loss) 

  111,032      (23,996)     199,106      (62,123)
 
Other income (expense):                       

Interest income 

  51      3      114      20 

Interest expense 

  (2,965)      (3,902)     (10,728)     (12,619)

Other, net 

  149      (3,786)     4,040      56 

Income (loss) before taxes 

  108,267      (31,681)     192,532      (74,666)
 
Income tax expense    (327)     (538)     (1,462)     (710)

Net income (loss) 

  107,940      (32,219)     191,070      (75,376)
 

NBP's net income (loss) attributable to USPB 

$ 

16,270   

$ 

(4,856)  

$ 

28,800   

$ 

(11,361)

 

(5) Subsequent Events

       On October 24, 2016, USPB received an $11.3 million discretionary distribution from NBP.

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.

     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.

7


 

Investment in National Beef Packing Company, LLC

     NBP processes and markets fresh and chilled boxed beef, ground beef, beef by-products, consumer-ready beef and pork, and wet blue leather for domestic and international markets. NBP operates two beef processing facilities, three consumer-ready facilities and a wet blue tanning facility, all located in the U.S. NBP operates one of the largest wet blue tanning facilities in the world that sells processed hides to tanners that produce finished leather for the automotive, luxury goods, apparel and furniture industries. NBP owns Kansas City Steak Company, LLC, which sells portioned beef and other products to customers in retail channels such as the internet, direct mail and direct response television. NBP also owns a refrigerated and livestock transportation and logistics company that provides transportation services for NBP and third parties.

     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, coupled with its overall volume and capacity utilization. NBP operates in a large and liquid commodity market and 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 ample cattle availability.

     Revenues in the three and nine month 2016 periods decreased 6% and 9%, respectively, in comparison to the same periods in 2015, due to lower average selling prices, partially offset by an increase in the number of cattle processed. Cost of sales declined 14% for both the three and nine month 2016 periods as compared to the same periods in 2015. The decline is primarily due to a decrease in the price of cattle, partially offset by an increase in volume. The combined effects of increased margin per head and an increase in volume led to high profitability in the 2016 periods.

     At September 30, 2016, NBP’s credit facility consisted of a term loan and a revolving credit facility of $285.0 million, which matures in October 2018. The revolving credit facility was voluntarily reduced by NBP in the third quarter of 2016 from $375.0 million to $285.0 million. The term loan and the revolving credit facility bear interest at the Base Rate or the LIBOR Rate (as defined in the credit facility), plus a margin ranging from 0.75% to 2.75% depending upon certain financial ratios and the rate selected. At September 30, 2016, the interest rate on the outstanding term loan was 3.27% and the interest rate on the outstanding revolving credit facility was 5.25%. The credit facility contains a minimum tangible net worth covenant; at September 30, 2016, NBP met this covenant. The credit facility is secured by a first priority lien on substantially all of the assets of NBP and its subsidiaries.

     Borrowings under the revolving credit facility are available for NBP’s working capital requirements, capital expenditures and other general corporate purposes. Unused capacity under the facility can also be used to issue letters of credit; letters of credit aggregating $12.6 million were outstanding at September 30, 2016. Amounts available under the revolver are subject to a borrowing base calculation primarily comprised of receivable and inventory balances. At September 30, 2016, after deducting outstanding amounts and issued letters of credit, $247.7 million of the unused revolver was available to NBP.

     On December 30, 2011, NBP entered into a new Cattle Purchase and Sale Agreement with USPB. Per the terms and conditions of this agreement, NBP is required to purchase through USPB from its owners and associates, and USPB is required to sell and deliver from its owners and associates to NBP, a base amount of 735,385 (subject to adjustment) head of cattle per year with prices based on those published by the U.S. Department of Agriculture, subject to adjustments for cattle performance. NBP obtained approximately 26% and 28% of its cattle requirements under this agreement during the first three quarters of fiscal years 2016 and 2015, respectively.

USPB Results of Operations

Thirteen weeks ended September 24, 2016 compared to thirteen weeks ended September 26, 2015

     Net Sales. There were no Net Sales in the thirteen week periods ended September 24, 2016 and September 26, 2015.

8


 

     Cost of Sales. There were no Cost of Sales in the thirteen week periods ended September 24, 2016 and September 26, 2015.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $0.7 million for the thirteen weeks ended September 24, 2016 compared to approximately $0.4 million for the thirteen weeks ended September 26, 2015, an increase of approximately $0.3 million. The increase was primarily due to higher compensation expense.

     Operating Loss. Operating loss was approximately $0.7 million for the thirteen weeks ended September 24, 2016 compared to approximately $0.4 million for the thirteen weeks ended September 26, 2015.

     Equity Interest in Net Income (Loss) of National Beef Packing Company, LLC. Equity in NBP net income was $16.3 million for the thirteen weeks ended September 24, 2016 compared to equity in net loss of $4.9 million for the thirteen weeks ended September 26, 2015. The improvement in fiscal year 2016 is primarily due to higher gross margins at NBP. USPB carries its 15.0729% investment in NBP under the equity method of accounting.

     Net Income (Loss). Net income for the thirteen-week period ended September 24, 2016 was approximately $15.6 million compared to net loss of approximately $5.3 million for the thirteen-week period ended September 26, 2015.

Thirty-nine weeks ended September 24, 2016 compared to thirty-nine weeks ended September 26, 2015

     Net Sales. There were no Net Sales in the thirty-nine week periods ended September 24, 2016 and September 26, 2015.

     Cost of Sales. There were no Cost of Sales in the thirty-nine week periods ended September 24, 2016 and September 26, 2015.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $2.3 million for the thirty-nine weeks ended September 24, 2016 compared to approximately $1.6 million for the thirty-nine weeks ended September 26, 2015. The increase was primarily due to higher compensation expense and higher expense associated with the former CEO’s non-compete agreement.

     Operating Loss. Operating loss was approximately $2.3 million for the thirty-nine weeks ended September 24, 2016 compared to approximately $1.6 million for the thirty-nine weeks ended September 26, 2015.

     Equity Interest in Net Income (Loss) of National Beef Packing Company, LLC. Equity in NBP net income was $28.8 million for the thirty-nine weeks ended September 24, 2016 compared to equity in net loss of $11.4 million for the thirty-nine weeks ended September 26, 2015. The improvement in fiscal year 2016 is primarily due to higher gross margins at NBP. USPB carries its 15.0729% investment in NBP under the equity method of accounting.

     Other, net. Other income was $0.4 million and $0.0 million for the thirty-nine weeks ended September 24, 2016 and September 26, 2015, respectively, an increase of approximately $0.4 million. The increase was primarily due to lease income on Company owned cattle delivery rights.

     Net Income (Loss). Net income for the thirty-nine-week period ended September 24, 2016 was approximately $26.9 million compared to net loss of approximately $13.0 million for the thirty-nine-week period ended September 26, 2015.

Liquidity and Capital Resources

     As of September 24, 2016, we had net working capital (the excess of current assets over current liabilities) of approximately $95.1 million, which included cash and cash equivalents of $96.3 million. As of December 26, 2015, we had net working capital (the excess of current assets over current liabilities) of approximately $84.0 million, which included cash and cash equivalents of $85.2 million. Our primary source of liquidity for the first three quarters of fiscal year 2016 and fiscal year 2015 was cash and available borrowings under the Master Loan Agreement.

9


 

 

     As of September 24, 2016, USPB had no long-term debt outstanding. 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 its Master Loan Agreement as of September 24, 2016.

     USPB believes available borrowings under the Master Loan Agreement and cash will be sufficient to support its working capital and cash flow requirements.

     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 2015.

Operating Activities

     Net cash used in operating activities in the thirty-nine weeks ended September 24, 2016 was approximately $2.1 million compared to approximately $2.6 million in the thirty-nine weeks ended September 26, 2015. The $0.5 million change was primarily due to a decrease in the discount rate used to compute the carrying value of the non-compete payments to be made to the former CEO.

Investing Activities

     Net cash provided by investing activities in the thirty-nine weeks ended September 24, 2016 was approximately $13.2 million compared to an immaterial amount of net cash used in the thirty-nine weeks ended September 26, 2015. The change was primarily due to tax distributions received from NBP in the current fiscal year.

Financing Activities

     Net cash used in financing activities was immaterial in the thirty-nine weeks ended September 24, 2016 and September 26, 2015.

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 Revolving Term Loan Supplement provides for a $5 million revolving credit 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 24, 2016. 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 NBP Pledge and (iv) consent to the amendments and restatements of the NBP Operating Agreement and the PA Newco Operating Agreement. The NBP Pledge grants NBP 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.

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     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 24, 2016, 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 24, 2016 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.

Rules proposed by the U.S. Department of Agriculture’s (USDA) Grain Inspection, Packers and Stockyards Administration (GIPSA) could adversely impact USPB’s business operations.

     The “Farmer Fair Practices Rules” proposed by GIPSA could have an impact on how USPB’s members market the cattle they produce and on USPB’s ability to offer its members value based grids for their cattle. If enacted, the proposed rules may have a negative impact the value of the Class A unit and the associated delivery rights held by USPB’s unitholders.

     Other risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 26, 2015 have not materially changed. Please refer to the Company’s report on Form 10-K for the fiscal year ended December 26, 2015 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 ** 

 

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101.DEF  XBRL Taxonomy Extension Definition Linkbase Document ** 
101.LAB  XBRL Taxonomy Extension Label Linkbase Document ** 
101.PRE  XBRL Taxonomy Extension Presentation Linkbase Document ** 

 

** 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: November 3, 2016

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