Operational activities are conducted through NBP and significant efforts with respect to governmental and environmental regulation are conducted by NBP. SeeBusiness of National Beef Packing Company, LLC -Regulation and Environmental.

Sales, Marketing, and Customers

NBP is the only beef processor that USPB has a cattle delivery agreement with. The ultimate customers of and the market for the products resulting from the processing of cattle supplied by USPB’s unitholders and associates are described inBusiness of National Beef Packing Company, LLC.

Beef Industry, Markets, and Competition

As indicated above, USPB’s business activities are focused on facilitating the delivery of cattle produced by its Class A unitholders and associates to NBP. Information regarding the beef industry, the market for beef and beef products and competition within the beef industry are described inBusiness of National Beef Packing Company, LLC.

Intellectual Property

USPB maintains a federally registered trademark on a U.S. Premium Beef logo that it uses periodically.

Research and Development

USPB does not conduct any research and development activities.

CATTLE DELIVERY ARRANGEMENTS

Cattle Producers’ Uniform Cattle Delivery and Marketing Agreements and Payments to Unitholders and Associates for Cattle

USPB facilitates the delivery of cattle from its Class A unitholders and associates to NBP. Each Class A unitholder is required to enter into a Uniform Cattle Delivery and Marketing Agreement (Delivery Agreement) with the Company whereby the unitholder is committed to deliver a designated number of cattle on an annual basis. Each Class A unit held by a unitholder entitles and obligates that unitholder to deliver one head of cattle per delivery year to USPB. The Delivery Agreements are for a term of 5 years with an “evergreen” renewal provision that automatically renews annually in the beginning of USPB’s delivery year for a subsequent five year period.

Cattle delivered by USPB’s unitholders and associates are delivered to NBP for processing (NBP is the only beef processor that USPB has a cattle delivery agreement with). The resulting beef and beef products are marketed by NBP. Each unitholder or associate is paid for the cattle delivered to USPB based on a market-based purchase price that is subject to the agreements between USPB and NBP.

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The largest share of NBP’s revenue, about 91%, is generated from the sale of fresh and chilled boxed beef products. NBP also generates revenues through value-added production with its consumer-ready products. In addition, NBP operates one of the largest wet blue tanning facilities in the world (wet blue tanning refers to the first step in processing raw and brine-cured hides into tanned leather), selling processed hides to tanners that produce finished leather for the automotive, luxury goods, apparel and furniture industries. Other streams of revenue include sales through its subsidiary, Kansas City Steak Company, LLC, which sells portioned beef and other products to customers in the food service and retail channels, as well as direct to consumers through internet, direct mail and direct response television, and service revenues generated by National Carriers, Inc., a wholly owned transportation and logistics company that is one of the largest refrigerated and livestock carrier operations in the U.S. and transports products for NBP and a variety of other customers. 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.

Beef Processing Services

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.volume. 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.

          The USDA reports market valuesRevenues in 2016 decreased about 5% in comparison to 2015, due to lower average selling prices for cattle, beef offal and other products produced by ranchers, farmers and beef processors. Generally, NBP expects its profitability to improve asby-products, partially offset by an increase in the ratio of the USDA comprehensive boxed beef cutout (a weekly reported measure of the total value of all USDA inspected 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. While the ratio during 2015 was the highest since 2010, the drop credit value (amount received for all products other than beef that are produced when cattle are processed) as a percentagenumber of cattle price were at an historically low level and had a negative impact on profitability.

processed. Revenues in 2015 decreased about 5% in comparison to 2014, due to lower sales volume, as fewer cattle were processed, and lower average selling prices for beef and beef by-products. Additionally, during 2015, decreases to revenues of $52.9 million were recorded as a result of NBP's use of derivatives in its hedging activity associated with its forwardactivity. For 2016, cost of sales of boxed beef and driven bydeclined 11% as compared to 2015, due to a significant drop in live cattle futures prices amidst unusually high price volatilitydecrease in the second halfprice of the year. Revenuesfed cattle, partially offset by an increase in 2014 increased about 5% in comparison to 2013, due primarily to higher selling prices despite lower sales volume, as fewer cattle were processed.volume. For 2015, cost of sales declined 5% as compared to 2014, due to fewer cattle processed, and a small decrease in the price of cattle. Cost

For 2016, the combined effects of sales increased markedly during 2014 as comparedmargin per head and an increase in volume led to 2013 as industry slaughter declined approximately 5% from 2013 and cattle prices increased approximately 22% on average.

          Therecord high profitability. For 2015, the combined effects of both lower volumes and tighter margins due to the relative price of cattle compared to the selling price of beef and beef by-products impacted margins leading to reduced profitability in 2015 compared to 2014. Selling, generalDuring 2015, NBP recorded an impairment loss on property, plant and other expenses in 2013 included a $63.3 million impairment charge in connection with NBP’s decision to closeequipment located at its Brawley, California beef processing plant. An additional impairment charge related to the Brawley plantfacility of approximately $4.7 million was included in Selling, general and other expenses in 2015.to adjust the carrying value of the long-lived assets to its fair value. Also in connection with closing the Brawley facility, NBP recognized $6.9 million of costs including employee separation and retention, systems decommissioning and various other expenses in 2014. Of these amounts, $4.6 million related to employee separation, which is included in compensationCompensation and benefits, and the various other costs are included in selling,Selling, general and other expenses.

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Raw Materials and Procurement

The primary raw material for the beef processing plants is live cattle. The domestic beef industry is characterized byLive cattle prices that change daily based on seasonal consumption patterns, supply and demand for beef and other proteins, cattle inventory levels, weather and other factors. NBP’s two largest beef processing facilities are located in southwest Kansas. The primary market area for the purchase of cattle for those facilities includes Kansas, Texas and Oklahoma. A significant portion of USPB’s unitholders and associates are located in this area. The close proximity of NBP’s facilities to large supplies of cattle gives its buyers the ability to visit feedlots on a regular basis, which enables NBP to develop strong working relationships with its suppliers, reduces its reliance on any one cattle supplier and lowers in-bound transportation costs.

On December 30, 2011, NBP entered into a new Cattle Purchase and Sale Agreement with USPB. Per the terms and conditions of the 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. In fiscal years 2013 and 2012, USPB and NBP agreed to increase the number of cattle that USPB’s owners and associates could deliver during USPB’s delivery year by up to 10%. During fiscal years 2015, 2014 and 2013, USPB’s owners and associates provided approximately 28%, 23% and 21%, respectively, of NBP’s total cattle requirements. The purchase price for the cattle is determined by pricing grids, which, at all times, are required to be no less favorable than any other pricing grid being utilized by NBP and the pricing grid shall be competitive with NBP’s major competitors for the purchase of cattle. NBP believes the pricing grids are based on terms that could be obtained from an unaffiliated party. The cattle supply agreement extends through December 31, 2017, with automatic, but optional one year extensions on each December 30, unless either party provides a notice not to extend sixty days prior to the annual anniversary date. NBP also purchased additional cattle from certain USPB unitholders and associates outside of the cattle supply agreement.

During fiscal years 2016, 2015 and 2014, USPB’s owners and associates provided approximately 27%, 28% and 23%, respectively, of NBP’s total cattle requirements.

Processing Facilities

NBP owns two beef processing facilities located in Liberal and Dodge City, Kansas, which can each process approximately 6,000 cattle per day. NBP’s three consumer-ready facilities are in Hummels Wharf, Pennsylvania, Moultrie, Georgia and Kansas City, Kansas. NBP’s wet blue tanning facility is in St. Joseph, Missouri.

Competition

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The Dodge City and Liberal facilities are subject to Title V permitting pursuant to the Federal Clean Air Act and the Kansas Air Quality Act. The St. Joseph facility is subject to a secondary air permit which is in place. The Dodge City, Liberal, Hummels Wharf and Moultrie facilities are subject to Clean Air Act Risk Management Plan requirements relating to the use of ammonia as a refrigerant.

All of NBP’s plants are indirect dischargers of wastewater to publicly owned treatment works and are subject to requirements under the federal Clean Water Act, state and municipal laws, as well as agreements or permits with municipal or county authorities. Upon renewal of these agreements and permits, NBP is from time to time required to make capital expenditures to upgrade or expand wastewater treatment facilities to address new and more stringent discharge requirements imposed at the time of renewal. Storm water discharges from NBP’s plants are also regulated by state and local authorities.

All of NBP’s facilities generate solid waste streams including small quantities of hazardous wastes. NBP is subject to laws that provide for strict, and in certain circumstances, joint and several liability for remediation of hazardous substances at contaminated sites; however, NBP has not received any demands that it has any liability at sites under the Comprehensive Environmental Response, Compensation and Liability Act (Superfund) or state counterparts. All plants are subject to community right to know reporting requirements under the Superfund Amendments and Reauthorization Act of 1986, which requires yearly filings as to the substances used on facility premises.

Employees

Of NBP’s 8,4008,140 employees, about 5,5005,325 are represented by collective bargaining agreements. About 2,7002,265 employees at the Liberal plant are represented by the United Food and Commercial Workers International Union under a collective bargaining agreement scheduled to expire in December 2017, 2,5002,475 employees at the Dodge City plant are represented by the United Food and Commercial Workers International Union under a collective bargaining agreement scheduled to expire in December 2016,2021, and another 220225 employees at the St. Joseph plant are represented by the United Cereal Workers (R.W.D.S.U./U.F.C.W) under a collective bargaining agreement scheduled to expire in June 2019.

ITEM 1A.RISK FACTORS

As described throughout this document, USPB’s business involves the operation of an integrated cattle processing and beef marketing enterprise in which USPB’s unitholders and associates supply cattle that are processed at the facilities owned and operated by NBP. NBP markets and distributes the beef and beef products produced from both cattle supplied by USPB’s unitholders and associates and other cattle purchased by NBP from other sources. The financial results of NBP’s operations therefore are the single largest influence on USPB’s financial performance. Consequently, those factors and risks that impact the performance of NBP’s business have a direct and immediate influence on USPB’s performance. However, there are also some risks that are unique to USPB. ThisRisk Factorssection is divided into two parts, with one subsection focusing on the risk factors that influence the performance of NBP and another subsection discussing certain risk factors that are directly applicable to USPB.

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The supply and market price of cattle purchased by NBP are dependent upon a variety of factors over which NBP has no control, including fluctuations in the size of herds maintained by producers, the relative cost of feed and energy, weather and livestock diseases. A decline in the supply of fed cattle available for NBP’s Brawley facility was a key factor in the 2013 decision to close the Brawley plant. The cost of raw materials used by NBP’sits manufacturing businesses has increasedhave fluctuated over time as a result of a variety of factors. Although NBP’sits manufacturing subsidiariesbusinesses are not currently experiencing any shortage of raw materials, if the subsidiaries experiencesuch shortages occur, revenues and profitability could decline.

Outbreaks of disease affecting livestock can adversely affect the supply of cattle and the demand for NBP’s products.

NBP is subject to risks relating to animal health and disease control. An outbreak of disease affecting livestock (such as foot-and-mouth disease or bovine spongiform encephalopathy (BSE), commonly referred to as mad cow disease) could result in restrictions on sales of products, restrictions on purchases of livestock from suppliers or widespread destruction of cattle. The discovery of BSE in the past caused certain countries to restrict or prohibit the importation of beef products. Outbreaks of diseases, or the perception by the public that an outbreak has occurred, or other concerns regarding diseases, can lead to inadequate supply, cancellation of orders by customers and create adverse publicity, any of which can have a significant negative impact on consumer demand and, as a result, on NBP’sits consolidated financial position, cash flows and results of operations.

If NBP’s products or products made by others using its products become contaminated or are alleged to be contaminated, NBP may be subject to product liability claims that could adversely affect its business.

NBP may be subject to significant liability in excess of insurance policy limits if its products or products made by others using its products cause injury, illness or death. In addition, NBP could recall or be required to recall products that are, or are alleged to be, contaminated, spoiled or inappropriately labeled. Organisms producing food borne illnesses (such asE. coli)coli) could be present in NBP’s products and result in illness or death if they are not eliminated through further processing or cooking. Contamination of NBP’s or its competitors’ products may create adverse publicity or cause consumers to lose confidence in the safety and quality of beef products. Allegations of product contamination may also be harmful even if they are untrue or result from third-party tampering. Any of these events may increase costs or decrease demand for beef products, any of which could have a significant adverse effect on NBP’sits consolidated financial condition, cash flows and results of operations.

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NBP incurs substantial costs to comply with environmental regulations and could incur additional costs as a result of new regulations or compliance failures that result in civil or criminal penalties, liability for damages and negative publicity.

NBP’s operations are subject to extensive and increasingly stringent environmental regulations administered by the EPA and state, local and other authorities with regards to water usage, wastewater and storm water discharge, air emissions and odor, and waste management and disposal. Failure to comply with these laws and regulations could have serious consequences, including criminal, civil and administrative penalties and negative publicity. In addition, NBP incurs and will continue to incur significant capital and operating expenditures to comply with existing and new or more stringent regulations and requirements. All of NBP’s processing facilities procure wastewater treatment services from municipal or other regional governmental agencies that are in turn subject to environmental laws and permit limits regarding their water discharges. As permit limits are becoming more stringent, upgrades and capital improvements to these municipal treatment facilities are likely. In locations where NBP is a significant volume discharger, it could be asked to contribute toward the costs of such upgrades or to pay significantly increased water or sewer charges to recoup such upgrade costs. NBP may also be required to undertake upgrades and make capital improvements to its own wastewater pretreatment facilities, the cost of which could be significant. Compliance with environmental regulations has had and will continue to have a significant impact on NBP’s cash flows and profitability. In addition, under most environmental laws, most notably the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and analogous state laws, NBP could be held liable for the cost to investigate or remediate any contamination at properties it owns or operates, or as to which it arranges for the disposal or treatment of hazardous substances, as such liability is imposed without regard to fault.

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

NBP’s operations are subject to extensive regulation and oversight by the USDA, including its FSIS and GIPSA agencies, the FDA, and other federal, state, local and foreign authorities regarding the procurement of cattle and the processing, packaging, storage, safety, distribution, advertising and labeling of its products. Recently, food safety practices and procedures in the meat processing industry have been subject to more intense scrutiny and oversight by the USDA. NBP is also subject to a variety of immigration, labor and worker safety laws and regulations, including those relating to the hiring and retention of employees. Failure to comply with existing or new laws and regulations could result in administrative penalties and injunctive relief, civil remedies, fines, interruption of operations, recalls of products or seizures of properties, potential criminal sanctions and personal injury or other damage claims. These remedies, changes in the applicable laws and regulations or discovery of currently unknown conditions could increase costs, limit business operations and reduce profitability.

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USPB’s investment in NBP could become impaired.

USPB’s investment in NBP is carried under the equity method of accounting. Operating losses, economic and industry events, and a variety of other factors may result in a decrease in the value of the investment, which is other than temporary. Such potential decreases in value will cause the Company to record an impairment charge, which may have an impact on the trading values of USPB’s Class A and Class B units.

The other members of NBP do not deliver cattle to NBP for processing, creating the possibility that the interests of those other members of NBP could conflict with the interests of USPB and its unitholders.

The other members of NBP do not deliver cattle to NBP for processing and marketing. As a result, conflicts of interest may arise between USPB and NBP relating to cattle purchases. If a dispute were to arise, the settlement of any such dispute may not be on terms as favorable to USPB as would be expected if all of the members of NBP were involved in the delivery of cattle to NBP for processing.

The Internal Revenue Service could assert that USPB should be treated as a corporation for federal income tax purposes.

Under applicable regulations, an unincorporated entity such as a limited liability company is treated as a partnership for federal income tax purposes unless the entity is considered a “publicly traded partnership” or the entity affirmatively elects to be taxed as a corporation. USPB has not elected to be taxed as a corporation, and USPB believes that it should be treated as a partnership not taxable as a corporation for federal income tax purposes. USPB has not requested and will not request any ruling from the IRS, however, with respect to its classification as a partnership for federal income tax purposes. If the IRS were to assert successfully that USPB were taxable as a corporation for federal income tax purposes in any taxable year, holders of Class A units and Class B units would not be required to report on their federal income tax returns their allocable share of USPB’s items of income, gain, deduction, and loss for that year and USPB would be subject to tax on its net income for that year at corporate tax rates. In addition, any distributions would be taxable to holders of Class A units and Class B units as dividend income. Taxation of USPB as a corporation could materially reduce the after-tax return on an investment in units and could substantially reduce the value of the units.

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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.

ITEM 1B.       UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.          PROPERTIES

USPB’s corporate office is located at 12200 Ambassador Drive, Suite 501, Kansas City, Missouri 64163, in proximity to the corporate offices of NBP. The Company leases its office space from the Kansas City Aviation Department, with offices at 601 Brasilia Avenue, Kansas City, Missouri 64153.

ITEM 3.          LEGAL PROCEEDINGS

For information regarding legal proceedings, see Note 10.Legal Proceedings.

ITEM 4.          NOT USED.

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The affiliated sales represent sales for each of the periods shown above were not at arms-length and, therefore, the sales prices disclosed above are not necessarily indicative of the market value of the Class A and Class B units during the periods in question.

During fiscal years 20152016 and 2014,2015, USPB’s Board of Directors approved the following per unit cash distributions to be made to its Class A and Class B unitholders:

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Overview

          USPBU.S. Premium Beef (USPB or the Company) was formed as a closed marketing cooperative on July 1, 1996. Its mission is to increase the quality of beef and long-term profitability of cattle producers by creating a fully integrated producer-owned beef processing system that is a global supplier of high quality, value-added beef products responsive to consumer desires.

          On December 1, 1997, the cooperative became operational by acquiring 25.4966% of FNB, a partnership owned by the cooperative USPB operates an integrated cattle processing and Farmland Industries, Inc. (Farmland). The cooperative acquired an additional 3.29% partnership interestbeef marketing enterprise where consumer and processor demands and requirements are implemented through changes in February 1998, bringinggenetics, feeding, and management. USPB’s unitholders benefit from its ownership to 28.7866% of FNB. Farmland then owned the remaining 71.2134%.

          On May 31, 2002, Farmland and four of its subsidiaries filed voluntary petitions to reorganize under Chapter 11 of the United States Bankruptcy Code. FNB was not a party of these filings. In the fourth quarter of fiscal year 2003, the cooperative acquired a controlling interest in the former FNB, now NBP, and the assets, liabilities and operating results of NBP were consolidatedsupplier alliance with those of USPB effective August 7, 2003.

          In connection with the cooperative’s purchase of its interest in FNB, the cooperative owned the right and was subject to the obligation to deliver cattle annually to NBP. The price received for cattle is based upon a price grid determined by USPB and NBP, which reflects current market conditions. The cattle purchase agreement is effective as long as USPB is an owner in NBP. Cattle delivered by USPB unitholders and associates are processed in NBP’s processing plants.

          USPB fulfills its annual obligation to deliver cattle to NBP through its unitholders and associates. Under Uniform Cattle Delivery and Marketing Agreements, unitholders are obligated to deliver a designated number of cattle to USPB. The agreements carry a term of five years and have an evergreen renewal provision. The agreement provides for minimum quality standards, delivery variances, and termination provisions, as defined. Cattle acquired pursuant to the agreements are delivered to NBP pursuant to the cattle purchase agreement. Sales transactions are based upon prevailing cash market prices, and purchases are on terms no less favorable to NBP than would be obtained from an unaffiliated party.

          On June 12, 2003, the cooperative entered into an agreement with Farmland to acquire all of the partnership interests in FNB held by Farmland, which approximated 71.2%. As a result of this acquisition, the cooperative gained voting control of FNB and converted it to a limited liability company, National Beef Packing Company, LLC under Delaware law. These transactions closed on(NBP) through (i) premiums received in excess of cash market prices for higher quality cattle, (ii) allocations of profits and potential distributions, (iii) potential unit price appreciation, and (iv) information that permits unitholders to make informed production decisions.

Effective August 6, 2003. NBP assumed both the Uniform Delivery and Marketing Agreements and the cattle purchase agreement.

          On August 18,29, 2004, the shareholders of U.S. Premium Beef, Ltd. approved the merger of the cooperative restructured into a wholly-owned subsidiary, U.S. Premium Beef, Inc., a Delaware corporation. The merger was effective on August 29, 2004. The Delaware corporation then, in a statutory conversion authorizedlimited liability company (LLC) under Delaware law converted into a Delaware limited liability company. Following the effective date of the merger and the statutory conversion, the(Conversion). The business of USPB, the cooperative, wasis being continued in the limited liability companyLLC form of business organization. The Company was subsequently renamed U.S. Premium Beef, LLC.

As USPB filed a registration statement with the Securities and Exchange Commission in connection with its 2004 Conversion from the cooperative form of business organization to an LLC structure, USPB is subject to the informational requirements of the Securities Exchange Act of 1934 (Exchange Act), although USPB is not required to be registered under the Exchange Act. Accordingly, USPB files periodic reports and other information with the Securities and Exchange Commission (SEC). Such reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, N.E., Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports and information statements and other information regarding USPB and other issuers that file electronically.

On December 5, 2011, USPB entered into thea Membership Interest Purchase Agreement.Agreement with Leucadia National Corporation (Leucadia). The Purchase Agreement provided for (i) Leucadia to purchase 56.2415% of the National Interestsmembership interests in NBP (National Interests) from the Company for approximately $646.8 million and 19.8775% of the National Interests from NBPCo for $228.6 million; (ii) pursuant to pre-existing put rights, NBP to purchase from TKK and TMKCo all the National Interests owned by TKK and TMKCo for $75.9 million; and (iii) Leucadia to sell to TMK Holdings 0.6522% of the National Interests for $7.5 million. Upon consummation of the Leucadia Transaction, the parties own the following percentage membership interests in NBP: Leucadia 78.9477%; USPB 15.0729%; NBPCo 5.3272%; and TMK Holdings 0.6522%.

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Financial Statement Accounts

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

Critical Accounting Policies and Estimates

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

Accounting for Investment in NBP.On December 30, 2011, USPB sold the majority of its ownership interest in NBP to Leucadia. On that date, USPB’s investment in NBP was measured at fair value and has since been carried under the equity method of accounting. Operating losses, economic and industry events, and a variety of other factors may result in a decrease in the value of the investment, which is other than temporary. Such potential decreases in value will cause the Company to record an impairment charge, which may have an impact on the trading values of USPB’s Class A and Class B units.

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Fiscal Year Ended December 31, 2016 compared to December 26, 2015

Net Sales.There were no sales during the fifty-three weeks ended December 31, 2016 and the fifty-two weeks ended December 26, 2015.

Cost of Sales. There were no cost of sales during the fifty-three weeks ended December 31, 2016 and the fifty-two weeks ended December 26, 2015.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $3.6 million for the fifty-three weeks ended December 31, 2016, compared to approximately $2.4 million for the fifty-two weeks ended December 26, 2015, an increase of approximately $1.2 million. The increase is primarily due to higher expenses associated with the bonus plans, non-compete agreements and phantom plans.

Depreciation and Amortization Expense. There were immaterial depreciation and amortization expenses during the fifty-three weeks ended December 31, 2016 compared to the fifty-two weeks ended December 26, 2015.

Operating Loss.Operating loss was approximately $3.6 million for the fifty-three weeks ended December 31, 2016 compared to an operating loss of approximately $2.4 million for the fifty-two weeks ended December 26, 2015, an increase of approximately $1.2 million.

Interest Expense and Interest Income. Interest expense and interest income were immaterial during the fifty-three weeks ended December 31, 2016 and fifty-two weeks ended December 26, 2015.

Equity in Income (Loss) of National Beef Packing Company, LLC. Equity in NBP income was $49.3 million for the fifty-three weeks ended December 31, 2016 compared to a loss of $18.9 million for the fifty-two weeks ended December 26, 2015. As of December 31, 2011, USPB started carrying its 15.0729% investment in NBP under the equity method of accounting.

Other, net. Other income was $0.7 million for the fifty-three weeks ended December 31, 2016 compared to $0.0 million for the fifty-two weeks ended December 26, 2015, an increase of approximately $0.7 million. The increase was primarily due to higher lease income on the Company owned delivery rights.

Income Tax Expense. There was no income tax expense during the fifty-three weeks ended December 31, 2016 and fifty-two weeks ended December 26, 2015.

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Net Income (Loss).Net income for the fifty-three weeks ended December 31, 2016 was approximately $46.4 million compared to a net loss of approximately $21.3 million for the fifty-two weeks ended December 26, 2015, an improvement of approximately $67.7 million. The improvement was due to net income at NBP.

Fiscal Year Ended December 26, 2015 compared to December 27, 2014

Net Sales.There were no sales during the fifty-two weeks ended December 26, 2015 and December 27, 2014.

Cost of Sales. There was no cost of sales during the fifty-two weeks ended December 26, 2015 and December 27, 2014.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $2.4 million for the fifty-two weeks ended December 26, 2015, compared to approximately $3.1 million for the fifty-two weeks ended December 27, 2014, a decrease of approximately $0.7 million. The decrease is primarily due to lower expenses associated with the non-compete agreements and bonus plans. Those decreases were partially offset by higher legal and accounting expenses.

Depreciation and Amortization Expense. There were immaterial depreciation and amortization expenses during the fifty-two weeks end December 26, 2015 and December 27, 2014.

Operating Loss.Operating loss was approximately $2.4 million for the fifty-two weeks ended December 26, 2015 compared to approximately $3.1 million for the fifty-two weeks ended December 27, 2014, an improvement of approximately $0.7 million.

Interest Expense. Interest expense was immaterial during the fifty-two weeks ended December 26, 2015 and December 27, 2014.

Equity in Loss of National Beef Packing Company, LLC. Equity in NBP loss was $18.9 million for the fifty-two weeks ended December 26, 2015 compared to $6.1 million for the fifty-two weeks ended December 27, 2014. As of December 31, 2011, USPB started carrying its 15.0729% investment in NBP under the equity method of accounting.

Other, net. Other income was $0.0 million and $0.2 million for the fifty-two weeks ended December 26, 2015 and December 27, 2014, respectively, a decrease of approximately $0.2 million. The decrease was primarily due to lower lease income on the Company owned delivery rights.

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USPB believes available borrowings under the Master Loan Agreement and cash will be sufficient to support its working capital and cash flow requirements. For a review of the obligations that affect USPB’s liquidity, please see the ‘‘Cash Payment Obligations’’ table below.

Operating Activities

Net cash provided by operating activities was $8.3 million in fiscal year 2016 as compared to net cash used by operating activities of $3.3 million in fiscal year 2015. The $11.6 million increase was primarily due to the distributions received from NBP, which was partially offset by increases in compensation related expenses in the current fiscal year.

Net cash used in operating activities was $3.3 million in fiscal year 2015 as compared to $4.9 million in fiscal year 2014. The $1.6 million decrease was primarily due to the appreciation right payment on the former CEO’s Class A phantom units in April 2014 ($2.2 million), which was partially offset by lower compensation related expenses in the current fiscal year.

Investing Activities

Net cash used in operatingprovided by investing activities was $4.9$27.5 million in fiscal year 20142016 as compared to $6.0net cash used in investing activities of $3.8 million in fiscal year 2013.2015. The $1.1$31.3 million decreasechange was primarily due to lower expenses, which was partially offset by higher compensation related payments, which were up primarily duedistributions received from NBP in fiscal year 2016 as compared to the appreciation right payment on the former CEO’s Class A phantom units.USPB’s $3.8 million contribution of additional capital to NBP in fiscal year 2015 to purchase 33.97 NBP units and maintain its 15.0729% ownership percentage.

Investing Activities

Net cash used by investing activities was $3.8 million in fiscal year 2015 as compared to net cash provided by investing activities of $38.9 million in fiscal year 2014. The $42.7 million change was due to the receipt of escrow monies in fiscal year 2014 related to the 2011 transaction with Leucadia in fiscal year 2014Transaction and USPB’s $3.8 million contribution of additional capital to NBP in fiscal year 2015 to purchase 33.97 NBP units and maintain its 15.0729% ownership percentage.

Financing Activities

Net cash provided by investingused in financing activities was $38.9$35.8 million in fiscal year 20142016 as compared to $3.0$0.0 million in fiscal year 2013.2015. The $35.9$35.8 million change was due to the receipt of escrow moniesprimarily related to the 2011 transaction with Leucadia.a distribution to USPB’s unitholders in fiscal year 2016.

Financing Activities

Net cash used in financing activities was $0.0 million in fiscal year 2015 as compared to $1.5 million in fiscal year 2014. The $1.5 million change was primarily related to a distribution to USPB’s unitholders in fiscal year 2014.

          Net cash used in financing activities was $1.5 million in fiscal year 2014 as compared to net cash provided by financing activities in fiscal year 2013 of $0.1 million. The $1.6 million change was primarily related to a distribution to USPB’s unitholders, which was partially offset by the collection of an over-distribution in a prior fiscal year.

CoBank Debt

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 December 26, 2015.31, 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 Transaction, 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.

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Cash Payment Obligations

The following table describes the cash payment obligations as of December 26, 201531, 2016 (thousands of dollars):

ITEM 9A.     CONTROLS AND PROCEDURES

We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the consolidated financial statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) under supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in alerting them, in a timely manner, to material information required to be included in our periodic Securities and Exchange Commission filings. There have been no changes in our internal control over financial reporting during the thirteenfourteen weeks ended December 26, 201531, 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.

Management’s Report on Internal Control over Financial Reporting

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

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

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

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

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

Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 26, 2015.31, 2016. In making this assessment, management used the criteria established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control – Integrated Framework(2013 Framework).

Based on the Company’s processes and assessment, as described above, management has concluded that, as of December 26, 2015,31, 2016, the Company’s internal control over financial reporting was operating effectively.

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ITEM 9B.        OTHER INFORMATION

The Company may purchase a portion of its outstanding Class A and Class B units from time to time in accordance with the limits imposed under the CoBank Master Loan Agreement.

PART III

ITEM 10.         DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors

USPB’s business and affairs are governed by its board of directors. The board of directors is to consist of seven directors. The board of directors has full authority to act on behalf of USPB. The board of directors act collectively through meetings, committees and executive officers it appoints. In addition, USPB employs a staff of professionals to manage the day-to-day business of USPB. The members of the board of directors, nominees to the board of directors and the executive officers are identified below. There are no arrangements or understandings pursuant to which any director, nominee to become a director or executive officer was elected or appointed.

Jerry L. Bohn. Mr. Bohn has served as the General Manager of Pratt Feeders since 1982. Pratt Feeders has a one-time capacity of 85,000 head in three feedlots in Kansas and Oklahoma. In this capacity he oversees more than 85 employees. Mr. Bohn also owns and manages a 2,000 to 3,000 head cattle operation which includes grazing and finishing cattle. Throughout Mr. Bohn has over 40 years of agricultural business management experience, he has worked with complex banking and financial data and is required to make decisions involving several hundred thousand dollars, on a daily basis. Mr. Bohn previously was employed as Director of Market Analysis for Cattle-Fax, an industry market analysis firm. Mr. Bohn has served as president of the Kansas Livestock Association. He has been a Board member of the Kansas Beef Council, the National Cattlemen’s Beef Association (NCBA) and Feeders Advantage, a private animal health product distribution company. Mr. Bohn has also served on the NCBA’s Executive Committee and as chairman of NCBA’s Live Cattle Marketing. Mr. Bohn served on USPB’s Board from 2004 through 2007 and was reelected in 2009. He was elected Secretary of USPB’s Board in 2006. He holds a Bachelor’s degree in Animal Sciences and Industry from Kansas State University. As a member of USPB’s board of directors, Mr. Bohn and the entities he is associated with that deliver cattle to USPB are considered affiliates of USPB.

Wayne L. Carpenter.Mr. Carpenter is the President and owner of Carpenter Cattle Company Inc. which was established in 1980. His operation today consists of a 7,500 head feed yard which markets 10,000-11,000 head through USPB annually. Mr. Carpenter runs 1,100 mother cows and also yearlings on ranches in Kansas and Montana. His farming operation consists of dryland and irrigated acres, which markets most of its crop production through the feed yard. Mr. Carpenter is a member of Kansas Livestock Association and National Cattlemen’s Beef Association. Carpenter Cattle Company Inc. has been a member of USPB since the beginning. Mr. Carpenter has served as a member of the Company’s board since 2016. As a member of USPB’s board of directors, Mr. Carpenter and the entities he is associated with that deliver cattle to USPB are considered affiliates of USPB.

John M. Freund.Mr. Freund has been actively involved in his family’s cattle feeding operation in Southwest Iowa since 1985 and has been president since 2005. In addition to the feeding operation, the business also includes feed grain production and has ownership in stockers, feedlot production and a ranch in other Midwest states. He has been a member of USPB since its inception and was a member of the company’s Nominating Committee since from 2011 to 2015. As a member of USPB’s board of directors, Mr. Freund and the entities he is associated with that deliver cattle to USPB are considered affiliates of USPB.

Rex W. McCloy. Mr. McCloy has over 34 years of experience in the cattle business and is manager and part-owner of McLeod Farms Inc., a family-owned business involved in farming and ranching in the Texas Panhandle. Mr. McCloy is a member of the National Cattlemen’s Beef Association, the Texas Cattle Feeder's Association (TCFA) and the Texas Southwestern Cattle Raisers Association. He is a past Board member and marketing committee chairman of TCFA. In addition, he is a former member of U.S. Premium Beef’s Nominating Committee. Mr. McCloy holds a Bachelor’s degree in Agricultural Economics from Texas Tech University. Mr. McCloy has served as a member of the Company’s board since 2005. Mr. McCloy is a former board member of the Hutchinson County Hospital District and is presently on the Board of Managers at Adobe Walls Cotton Gin. As a member of USPB’s board of directors, Mr. McCloy and the entities he is associated with that deliver cattle to USPB are considered affiliates of USPB.

Jeff H. Sternberger. Mr. Sternberger is the manager and part owner of Midwest Feeders, Inc. Mr. Sternberger has been the manager of Midwest Feeders, Inc. since 1992 and has overseen large growth in his company and directed the acquisition of other business to add to their holdings. Mr. Sternberger has been the direct contact during that time frame for all banking and accounting relationships. He also owns and operates a farming and cattle operation in Oklahoma as well as a personal cattle feeding operation. He serves as a director of Midwest Feeders, Inc., CRI Feeders of Guymon LLC, and Brookover Cattle Co. of Scott City LLC. Mr. Sternberger holds a Bachelor of Science Degree in Agricultural Economics from Oklahoma State University. As a member of USPB’s board of directors, Mr. Sternberger and the entities he is associated with that deliver cattle to USPB are considered affiliates of USPB.

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Scott J. Miller. Mr. Miller has served as the Company’s Chief Financial Officer since January 2010. Prior to this appointment, he served as the Company’s Chief Reporting and Compliance Officer, a position he held since joining the Company in 2005. He oversees the finance and treasury functions and is directly responsible for financial reporting, tax reporting, and ensuring compliance with internal policies and regulatory requirements. Before joining U.S. Premium Beef, he worked as the Manager, Capital Markets for Sprint Corporation from 2001 to 2005 and, prior to that, in various finance and accounting positions with Farmland Industries, Inc. Mr. Miller earned a Bachelor’s degree in Accounting from Benedictine College and an MBA with an emphasis in Finance from the University of Missouri-Kansas City. He has passed the Certified Public Accounting exam and the Certified Cash Managers exam.

Danielle D. Imel.Ms. Imel is the Company’s Treasurer and joined the Company in 1998. She oversees the Company’s finance functions and is directly responsible for Company treasury activities. She was employed by the CPA firm of Kennedy, McKee and Co., LLC of Dodge City, Kansas, prior to joining USPB. Ms. Imel earned a Bachelor’s degree in Accounting and a second Bachelor’s degree in Agricultural Economics from Kansas State University.

Board of Directors

Under USPB’s limited liability company agreement, the number of directors is set by the board of directors but may not be less than seven directors. Directors must be unitholders of USPB. Seven directors will always be elected by unitholders holding Class A units.

The directors are elected at the annual meeting of the unitholders and hold office for a term of three years. The terms of the directors are staggered in such a manner that approximately one-third of the directors will be elected each year. All directors will hold office until their successors are elected and qualified. Any vacancy in the board, other than a vacancy resulting from expiration of a term of office, will be filled by a majority vote of the remaining directors. In case a vacancy in the board of directors extends beyond the next annual meeting, the vacancy will be filled by the remaining directors until such meeting, at which meeting a director will be chosen by the unitholders for the unexpired term of such vacancy.

In the discretion of the board of directors, the number of directors may be increased by up to an additional five directors. Those additional directors will represent the Class B unitholders and may be elected or appointed by either the board of directors or by the holders of Class B units.

Compensation of Directors

The board of directors meets from time to time at such time and place as may be fixed by resolution adopted by a majority of the whole board of directors. Members of the board of directors receive a per diem payment of $250 for each activity on behalf of USPB, as well as direct reimbursement of travel expenses related to service on the board of directors.

Audit Committee

The board of directors has an Audit Committee consisting of Messrs. Gardiner, Ramsey,Bohn, and McCloy. Subject to the qualifications in the section headed “Directors who are unitholders” in Item 13 below, all members of the Audit Committee are considered independent within the meaning of the listing standards of the NASDAQ. Mr. Gardiner is Chairman of the Audit Committee. The Board has identified Mr. RamseyBohn as an “audit committee financial expert”. The Audit Committee selects and retains independent auditors and assists the board of directors in its oversight of the integrity of U.S. Premium Beef’s financial statements, including the performance of our independent auditors in their audit of our annual financial statements. The Audit Committee meets with management and the independent auditors, as may be required. The independent auditors have full and free access to the Audit Committee without the presence of management. The Audit Committee has a charter.

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Code of Ethics

USPB has adopted a corporate Code of Conduct that is enforced throughout all levels of management and a Code of Ethics For Financial Officers for its chief executive officer, chief financial officer, and treasurer within the meaning of the rules and regulations of the Securities and Exchange Commission. The Code of Ethics are intended to deter wrongdoing and promote honest and ethical conduct; provide full, fair, accurate, timely and understandable disclosure in public reports; comply with applicable laws; ensure prompt internal reporting of code violations; and provide accountability for adherence to the code. A copy of the Code of Conduct may be obtained, without charge, upon written request to Scott J. Miller, Chief Financial Officer, U.S. Premium Beef, LLC, P. O. Box 20103, Kansas City, Missouri 64195.

ITEM 11.      EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Overview of Compensation Program

This Compensation Discussion and Analysis describes the material elements of compensation paid to our named executive officers as well as the objectives and material factors underlying our compensation program. The compensation program places emphasis on USPB’s financial performance and the benefits received by USPB’s unitholders.

The Compensation Committee (Committee) is responsible for developing and administering the compensation program for USPB’s named executive officers and professional staff.

Compensation Philosophy and Objectives

     USPB’s compensation program is a key element in attracting, retaining, and motivating named executive officers with the skills necessary to create value for the unitholders. To achieve this goal, we have designed the compensation program with the following objectives:

• Attracting and retaining top talent—The compensation of USPB’s executive officers must be commensurate with the competitive regional marketplace taking into consideration job responsibilities and supply of competent employees with the education and background to perform at the highest levels in their field.
• Paying for financial and operational performance—The compensation of USPB’s executive officers should motivate them to achieve strong financial and operational results. USPB must achieve specific levels of financial and operational performance to allow executives to earn this portion of their compensation.
• Alignment with the equity interests of our unitholders—Management phantom unit plans approved in September 2010 and January 2013 aligns management’s interest with the equity interests of USPB’s unitholders.

Each element of our compensation program is designed to achieve one or more of these objectives. The structure of a particular executive’s compensation may vary depending on the scope and level of that executive’s responsibilities.

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The elements of our named executive officers total compensation package are as follows:

• base salary;

• annual cash bonuses;

• long-term cash bonus;

• discretionary cash bonuses;

• retirement plans; and

• limited personal benefits.

Elements of Our Compensation Program

Base Salary

Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation program. The relative levels of base salary for named executive officers are designed to reflect each executive officer’s scope of responsibility and accountability with USPB. Except for the CEO’s salary, base salaries are reviewed annually to determine if they are consistent with the performance of the individual executive and equitable relative to USPB’s other executive officers and professional staff. Salary surveys summarizing the compensation packages for positions of equivalent responsibility in related industries were used to establish the CEO’s base salary.

          On November 23, 2012, USPB entered into an employment agreement with Mr. Stanley Linville, which became effective on January 28, 2013 (First Employment Agreement). Pursuant to the First Employment Agreement, Mr. Linville served as USPB’s CEO for a term that started on January 28, 2013 and expired on December 31, 2015. The First Employment Agreement provided for Mr. Linville to receive an annual base salary of $300,000.

On December 21, 2015, USPB entered into a new employment agreement with Mr. Linville (Second(Linville Employment Agreement), which became effective on January 1, 2016. The SecondLinville Employment Agreement provides for Mr. Linville to serve as USPB’s CEO for a term that started on January 1, 2016 and expires on December 29, 2018. The SecondLinville Employment Agreement provides for Mr. Linville to receive an annual base salary of $300,000.

Annual Cash Incentive/Bonuses

Cash incentive and bonus plans were designed to provide the financial incentive to the CEO and other named executive officers to influence USPB unitholder benefits and are only paid after certain levels of benefits have been achieved.

Under the terms of the CEO’s FirstLinville Employment Agreement, if Mr. Linville is employed by USPB on the last day of any employmentfiscal year, (except as otherwise provided in the agreement) during the term of the Linville Employment Agreement, he shall be paid annual incentive compensation equal to seventy-five one-hundredths of a percent (0.75%) of the sum of the total financial benefits to USPB (USPB Total Benefits) that exceed $25,000,000 (Annual Incentive). The USPB Total Benefits are: (1) audited fiscal year-end USPB earnings before tax; and (2) the fiscal year USPB grid premiums, which is the net sum of all USPB unitholder and associate grid premiums and discounts calculated through all USPB grids at all plants as outlined in the FirstLinville Employment Agreement.

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The FirstLinville Employment Agreement and Second Employment Agreement provideprovides for a cumulative annual cap of $450,000 for payments to Mr. Linville for Annual Incentive and Long-Term Incentive cash bonuses.

Discretionary Cash Bonuses

Discretionary bonuses are sometimes paid to named executive officers, other than the CEO, and professional staff to compensate for extraordinary cases of individual or Company performance.

Retirement Plans

Qualifying employees are encouraged to participate in the Company’s sponsored 401(k) savings plan. Under USPB’s plan, employees may contribute up to the maximum amount permissible by IRS limits. USPB matches 100% of each dollar contributed by a participant up to a maximum of 4% of his or her qualifying compensation.

Limited Personal Benefits

USPB also provides certain benefits to all salaried employees that are not included as perquisites in the Summary Compensation Table for the named executives because they are broadly available. These include health and welfare benefits, and disability and life insurance.

Equity Compensation

In September 2010, USPB’s Board of Directors approved a management phantom unit plan. The phantom unit plan provides for the award of unit appreciation rights to certain management employees of USPB. USPB’s CEO administers the phantom unit plan and awards “Phantom Units” (Class A and Class B Units) to employees in amounts determined by the CEO, subject to the total Phantom Unit amount approved by the Board of Directors of USPB. During fiscal year 2011, a total of 5,000 Class A phantom units and 5,000 Class B phantom units were awarded to management employees. As a result of the retirement of one of USPB’s employees on December 31, 2014, 4,8834,817 Class A phantom units and 4,8834,817 Class B phantom units remained outstanding at December 26, 2015,31, 2016, all of which were fully vested.

In November 2012, USPB’s Board of Directors approved the issuance of an additional 1,500 Class A phantom units and 1,500 Class B phantom units to certain members of management, to be effective on January 28, 2013. These phantom units will vest over a five year period and were approximately 60%80% vested on January 28, 2016.2017.

Employment Agreements

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The FirstLinville Employment Agreement also provides for post termination compensation. In addition to the amounts described below that will be payable upon termination of the agreement, Mr. Linville has agreed to a noncompetition provision that, for twelve (12) months following the termination of Mr. Linville’s employment with USPB, prohibits him from participating in the management or control of any beef industry business or enterprise that competes with the business of USPB and its various affiliates. During such period, Mr. Linville will receive a monthly payment equal to one twelfth of Mr. Linville’s annual salary at the time of termination. If Mr. Linville terminates the agreement for any or no reason, USPB need only pay salary earned to the date of the termination, and the noncompetition compensation, unless termination is the result of death or permanent disability. If USPB terminates the agreement for any reason other than cause, death or disability, or if Mr. Linville terminates the FirstLinville Employment Agreement for good reason, Mr. Linville shall be entitled to salary and benefits through employment year 2015; payment of certain fringe benefits through employment year 2015; the annual incentive bonus for the year in which the termination occurs and each subsequent year through employment year 2015; the long-term incentive bonus that would have accrued had Mr. Linville been employed through employment year 2015; and the payment of the noncompetition compensation.

          On December 21, 2015, USPB entered into the Second Employment Agreement with Mr. Linville, which became effective on January 1, 2016 and expires on December 29, 2018, subject to earlier termination as provided in the agreement. The Second Employment Agreement provides for the same salary, annual cash bonus, and long-term cash bonus as in his First Employment Agreement, all of which are discussed above. The Second Employment Agreement provides for a cumulative annual cap of $450,000 for payments to Mr. Linville for annual and long-term incentive amounts.

          The Second Employment Agreement also provides for post termination compensation. In addition to the amounts described below that will be payable upon termination of the agreement, Mr. Linville has agreed to a noncompetition provision that, for twelve (12) months following the termination of Mr. Linville’s employment with USPB, prohibits him from participating in the management or control of any beef industry business or enterprise that competes with the business of USPB and its various affiliates. During such period, Mr. Linville will receive a monthly payment equal to one twelfth of Mr. Linville’s annual salary at the time of termination. If Mr. Linville terminates the agreement for any or no reason, USPB need only pay salary earned to the date of the termination, and the noncompetition compensation, unless termination is the result of death or permanent disability. If USPB terminates the agreement for any reason other than cause, death or disability, or if Mr. Linville terminates the Second Employment Agreement for good reason, Mr. Linville shall be entitled to salary and benefits through employmentfiscal year 2018; payment of certain fringe benefits through employmentfiscal year 2018; the annual incentive bonus for the year in which the termination occurs and each subsequent year through employmentfiscal year 2018; the long-term incentive bonus that would have accrued had Mr. Linville been employed through employmentfiscal year 2018; and the payment of the noncompetition compensation.

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Summary Compensation Table

     The table below sets forth information regarding compensation for our named executive officers for fiscal year 2016, 2015, 2014, and 2013.2014. Non-Equity Incentive Plan Compensation amounts reflected in this table are performance based awards and include amounts earned under our annual and long term cash bonus plans.

Grants of Plan-Based Awards in the Fiscal Year 20152016

     The table below sets forth information regarding grants of a non-equity incentive plan-based award made to our named executive officers during fiscal year 2015.2016.