U. S. Premium Beef (USPB) 10-Q 7 Nov 19 2019 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 28, 2019	Oct. 26, 2019
Entity Registrant Name	U. S. Premium Beef, LLC
Entity Central Index Key	0001289237
Document Type	10-Q
Document Period End Date	Sep. 28, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-28
Entity's Reporting Status Current	Yes
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2019
Entity Emerging Growth	false
Entity Small Business	false
Entity Interactive data current	Yes
Entity File Number	333-115164
Entity State of Incorporation	DE
Class A Units [Member]
Entity Common Stock, Shares Outstanding		735,385
Class B Units [Member]
Entity Common Stock, Shares Outstanding		755,385

Balance Sheets (Unaudited)

Balance Sheets (Unaudited) - USD ($) $ in Thousands	Sep. 28, 2019	Dec. 29, 2018
Current assets:
Cash and cash equivalents	$ 75,378	$ 88,411
Due from affiliates	32	21
Other current assets	12	27
Total current assets	75,422	88,459
Property, plant, and equipment, at cost	243	200
Less accumulated depreciation	196	183
Net property, plant, and equipment	47	17
Right of use assets, net	243	0
Investment in National Beef Packing Company, LLC	175,888	143,361
Other assets	43	69
Total assets	251,643	231,906
Current liabilities:
Accounts payable - trade	9	12
Due to affiliates	19	44
Accrued compensation and benefits	2,106	2,158
Lease obligations	48	0
Other accrued expenses and liabilities	140	515
Distributions payable	0	5,687
Total current liabilities	2,322	8,416
Long-term liabilities:
Lease obligations	195	0
Other liabilities	3,505	3,734
Total long-term liabilities	3,700	3,734
Total liabilities	6,022	12,150
Commitments and contingencies
Capital shares and equities:
Members' capital, 735,385 Class A units and 755,385 Class B units authorized, issued and outstanding	245,621	219,756
Total capital shares and equities	245,621	219,756
Total liabilities and capital shares and equities	$ 251,643	$ 231,906

Balance Sheets (Unaudited) (Par

Balance Sheets (Unaudited) (Parenthetical) - shares	Sep. 28, 2019	Dec. 29, 2018
Class A Units [Member]
Members' capital, units authorized	735,385	735,385
Members' capital, units issued	735,385	735,385
Members' capital, units outstanding	735,385	735,385
Class B Units [Member]
Members' capital, units authorized	755,385	755,385
Members' capital, units issued	755,385	755,385
Members' capital, units outstanding	755,385	755,385

Statements of Operations (Unaud

Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Net sales	$ 0	$ 0	$ 0	$ 0
Costs and expenses:
Cost of sales	0	0	0	0
Selling, general, and administrative expenses	818	813	3,509	3,345
Depreciation and amortization	4	3	13	9
Total costs and expenses	822	816	3,522	3,354
Operating loss	(822)	(816)	(3,522)	(3,354)
Other income (expense):
Interest income	258	283	905	741
Interest expense	0	(3)	(15)	(9)
Equity in net income of National Beef Packing Company, LLC	41,866	29,463	78,823	68,147
Other, net	48	1	445	392
Total other income	42,172	29,744	80,158	69,271
Net income	$ 41,350	$ 28,928	$ 76,636	$ 65,917
Class A Units [Member]
Earnings per unit:
Basic and diluted	$ 5.62	$ 3.93	$ 10.42	$ 8.96
Outstanding weighted-average Class A and Class B units:
Basic and diluted	735,385	735,385	735,385	735,385
Class B Units [Member]
Earnings per unit:
Basic and diluted	$ 49.27	$ 34.47	$ 91.31	$ 78.54
Outstanding weighted-average Class A and Class B units:
Basic and diluted	755,385	755,385	755,385	755,385

Statements of Cash Flows (Unaud

Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018
Cash flows from operating activities:
Net income	$ 76,636	$ 65,917
Adjustments to reconcile net income to net cash provided operating activities:
Depreciation and amortization	13	9
Equity in net income of National Beef Packing Company, LLC	(78,823)	(68,147)
Distributions from National Beef Packing Company, LLC	46,296	55,877
Changes in assets and liabilities:
Due from affiliates	(11)	118
Other assets	41	58
Accounts payable	(3)	(55)
Due to affiliates	(25)	(360)
Accrued compensation and benefits	(281)	(355)
Other accrued expenses and liabilities	(375)	50
Net cash provided by operating activities	43,468	53,112
Cash flows from investing activities:
Capital expenditures, including interest capitalized	(43)	(7)
Distributions from National Beef Packing Company, LLC	0	18,256
Net cash (used in)/provided by investing activities	(43)	18,249
Cash flows from financing activities:
Member distributions	(56,458)	(111,987)
Net cash used in financing activities	(56,458)	(111,987)
Net decrease in cash	(13,033)	(40,626)
Cash and cash equivalents at beginning of the period	88,411	119,074
Cash and cash equivalents at end of the period	75,378	78,448
Supplemental noncash disclosures of operating activities:
Right of use assets and lease obligations	243	0
Supplemental Noncash Disclosures Of Investing Activities:
Investment in National Beef Packing Company, LLC	$ 23,691	$ 0

1. Interim Financial Statements

1. Interim Financial Statements	9 Months Ended
	Sep. 28, 2019
Quarterly Financial Information Disclosure [Abstract]
Interim Financial Statements	(1) Interim Financial Statements Basis of Presentation The accompanying unaudited 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 Financial Statements and Notes to Financial Statements, which are included in the Company’s Annual Report on Form 10-K on file with the Securities and Exchange Commission (SEC), for the fiscal year ended December 29, 2018. 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. Accounting Policies

2. Accounting Policies	9 Months Ended
	Sep. 28, 2019
Accounting Policies [Abstract]
Accounting Policies	(2) Accounting Policies Accounting for Investment in NBP. Accounting for Leases. Leases Upon review of its lease arrangements, USPB determined that its two office leases were subject to the new leasing standard. The Kansas City, MO office lease has a remaining term of approximately 5.4 years (assuming the final 3-year renewal is exercised) and the Dodge City, KS office has a remaining term of approximately 1.3 years. Neither lease agreement provides for renewals beyond the remaining terms. The monthly lease payment for the Kansas City office is $3,790, subject to annual Consumer Price Index adjustments, which are capped at 3% per year. The monthly lease payment for the Dodge City office is $1,018, which is not subject to adjustment. Both offices are used for general office use only. As of September 28, 2019, the present value of the remaining operating lease payments for the offices equaled $0.2 million and USPB’s balance sheet reflected Right of Use Assets and Lease Obligations equal to that amount. The discount rate used to compute the present value was USPB’s incremental borrowing rate. USPB elected the package of practical expedients permitted under the transition guidance, which allows us to accept: 1) the original determination of whether a contract contained a lease, 2) a subsequent review of existing contracts is not necessary, and 3) USPB does not have to reassess the initial direct costs assigned to leases under previous leasing guidance. The new guidance did not have a material impact on our financial statements.

3. Members' Capital

3. Members' Capital	9 Months Ended
	Sep. 28, 2019
Members' Equity [Abstract]
Members' Capital	(3) Members’ Capital The following table represents a reconciliation of Members’ Capital for the thirty-nine week period ended September 28, 2019 (unaudited) (thousands of dollars). Balance at December 29, 2018 $ 219,756 Allocation of net income for the thirty-nine week period ended September 28, 2019 76,636 Member distributions (50,771 ) Balance at September 28, 2019 $ 245,621

4. Earnings Per Unit

4. Earnings Per Unit	9 Months Ended
	Sep. 28, 2019
Earnings per unit:
Earnings Per Unit	(4) Earnings Per Unit Under the LLC structure, earnings of the Company are to be allocated to unitholders based on their proportionate share of underlying equity. Earnings 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 USPB’s net income or net loss to Class A units and the remainder is allocated to Class B units. For the thirty-nine week periods ended September 28, 2019 and September 29, 2018, 10% of USPB’s net income allocated to the Class A’s and 90% to the Class B’s. The net income allocated to the Class A and Class B units were 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. Net Income Per Unit Calculation 13 weeks ended 39 weeks ended (thousands of dollars, except unit and per unit data) September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018 (unaudited) (unaudited) (unaudited) (unaudited) Basic and diluted earnings per unit: Net income attributable to USPB available to unitholders (numerator) Class A $ 4,135 $ 2,893 $ 7,664 $ 6,592 Class B $ 37,215 $ 26,035 $ 68,972 $ 59,325 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 $ 5.62 $ 3.93 $ 10.42 $ 8.96 Class B $ 49.27 $ 34.47 $ 91.31 $ 78.54

5. Investment in National Beef

5. Investment in National Beef Packing Company, LLC	9 Months Ended
	Sep. 28, 2019
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]
Investment in National Beef Packing Company, LLC	(5) 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 thirty-nine week periods ended September 28, 2019 and September 29, 2018 (thousands of dollars): 13 weeks ended 39 weeks ended September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018 (unaudited) (unaudited) (unaudited) (unaudited) Net sales $ 2,249,133 $ 1,880,561 $ 6,189,854 $ 5,605,170 Costs and expenses: - Cost of sales 1,915,866 1,637,216 5,507,504 5,014,815 Selling, general, and administrative expenses 20,545 18,540 59,941 51,364 Depreciation and amortization 31,432 26,121 89,049 77,445 Total costs and expenses 1,967,843 1,681,877 5,656,494 5,143,624 Operating income 281,290 198,684 533,360 461,546 Other income (expense): Interest income 109 88 347 233 Interest expense (2,985 ) (2,718 ) (9,127 ) (8,196 ) Income before taxes 278,414 196,054 524,580 453,583 Income tax expense (657 ) (585 ) (1,637 ) (1,468 ) Net income $ 277,757 $ 195,469 $ 522,943 $ 452,115 NBP's net income attributable to USPB $ 41,866 $ 29,463 $ 78,823 $ 68,147 On June 10, 2019, NBP announced that the transactions to acquire 100% of the ownership interests in Iowa Premium, LLC (Iowa Premium) had closed and it was the owner of Iowa Premium. As a part of the transactions, USPB entered into a Membership Interest Purchase Agreement (MIPA) between and among USPB, Iowa Premium, additional buyers identified therein, and Sysco Holdings, LLC (Sysco). The MIPA provided for USPB and each of the other members of NBP to purchase, in the aggregate, 100% of the ownership interests in Iowa Premium. NBP served as representative for the buyers in connection with the transaction contemplated by the MIPA and delivered the purchase price funds to Sysco and its designees on behalf of the buyers. The funds used to consummate the transaction were provided by way of a permitted distribution from NBP to its Members. USPB’s proportionate share of the distribution from NBP was approximately $23.7 million. Immediately following the purchase, the transactions provided for by the Contribution Agreement were completed. The Contribution Agreement provided for (i) USPB to contribute to NBP all of USPB’s ownership interest in Iowa Premium; and (ii) NBP to assume USPB’s obligations under the MIPA and to indemnify USPB for any claims against USPB that may arise out of the MIPA. The contribution took place immediately following the closing of the purchase of Iowa Premium ownership by NBP’s members pursuant to the MIPA. Following the contribution, NBP’s members are no longer members of Iowa Premium, and NBP is the sole member and 100% owner of Iowa Premium and is responsible for all obligations under the MIPA. NBP indemnified its members, including USPB, for any and all liabilities arising from the purchase of the Iowa Premium ownership interests and the transfer of those interests to NBP.

6. Long-term Debt and Loan Agre

6. Long-term Debt and Loan Agreements	9 Months Ended
	Sep. 28, 2019
Debt Disclosure [Abstract]
Long-term Debt and Loan Agreements	(6) Long-term Debt and Loan Agreements On August 16, 2019, USPB and CoBank entered into an Amended and Restated Revolving Term Supplement to the Master Loan Agreement dated July 26, 2011. The Amended and Restated Revolving Term Supplement provides for a $1 million revolving credit commitment and reduces the commitment fee to 0.0%. The commitment has a remaining term of one year, maturing on September 29, 2020.

7. Legal Proceedings

7. Legal Proceedings	9 Months Ended
	Sep. 28, 2019
Commitments and Contingencies Disclosure [Abstract]
Legal Proceedings	(7) Legal Proceedings USPB is not currently involved in any litigation. However, because its ownership interest in NBP is USPB’s largest asset and because of the cattle procurement and distribution relationship between USPB and NBP, litigation involving NBP may impact USPB. NBP has recently been named as a defendant in a couple of class action lawsuits. The Class action lawsuits entitled In re Cattle Antitrust Litigation and Peterson et al. v. JBS USA Food Company Holdings, et al., and Pacific Agri-Products, Inc. v. JBS USA Food Company Holdings, et al., which allege, among other things, violations of the Sherman Antitrust Act, the Packers and Stockyards Act, the Commodity Exchange Act, and various state laws. NBP intends to vigorously defend itself. USPB is not able to assess what impact, if any, the actions described above will have on NBP or USPB.

8. Subsequent Events

8. Subsequent Events	9 Months Ended
	Sep. 28, 2019
Subsequent Events [Abstract]
Subsequent Events	(8) Subsequent Events USPB evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through November 8, 2019, the date the financial statements were available for issuance.

2. Accounting Policies (Policie

2. Accounting Policies (Policies)	9 Months Ended
	Sep. 28, 2019
Accounting Policies [Abstract]
Accounting for Investment in NBP	Accounting for Investment in NBP.
Accounting for Leases	Accounting for Leases. Leases Upon review of its lease arrangements, USPB determined that its two office leases were subject to the new leasing standard. The Kansas City, MO office lease has a remaining term of approximately 5.4 years (assuming the final 3-year renewal is exercised) and the Dodge City, KS office has a remaining term of approximately 1.3 years. Neither lease agreement provides for renewals beyond the remaining terms. The monthly lease payment for the Kansas City office is $3,790, subject to annual Consumer Price Index adjustments, which are capped at 3% per year. The monthly lease payment for the Dodge City office is $1,018, which is not subject to adjustment. Both offices are used for general office use only. As of September 28, 2019, the present value of the remaining operating lease payments for the offices equaled $0.2 million and USPB’s balance sheet reflected Right of Use Assets and Lease Obligations equal to that amount. The discount rate used to compute the present value was USPB’s incremental borrowing rate. USPB elected the package of practical expedients permitted under the transition guidance, which allows us to accept: 1) the original determination of whether a contract contained a lease, 2) a subsequent review of existing contracts is not necessary, and 3) USPB does not have to reassess the initial direct costs assigned to leases under previous leasing guidance. The new guidance did not have a material impact on our financial statements.

3. Members' Capital (Tables)

3. Members' Capital (Tables)	9 Months Ended
	Sep. 28, 2019
Members' Equity [Abstract]
Schedule of Reconciliation of Members' Capital	Balance at December 29, 2018 $ 219,756 Allocation of net income for the thirty-nine week period ended September 28, 2019 76,636 Member distributions (50,771 ) Balance at September 28, 2019 $ 245,621

4. Earnings Per Unit (Tables)

4. Earnings Per Unit (Tables)	9 Months Ended
	Sep. 28, 2019
Limited Liability Company (LLC) Members' Equity [Abstract]
Schedule of Net Income Per Unit Calculation	Net Income Per Unit Calculation 13 weeks ended 39 weeks ended (thousands of dollars, except unit and per unit data) September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018 (unaudited) (unaudited) (unaudited) (unaudited) Basic and diluted earnings per unit: Net income attributable to USPB available to unitholders (numerator) Class A $ 4,135 $ 2,893 $ 7,664 $ 6,592 Class B $ 37,215 $ 26,035 $ 68,972 $ 59,325 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 $ 5.62 $ 3.93 $ 10.42 $ 8.96 Class B $ 49.27 $ 34.47 $ 91.31 $ 78.54

5. Investment in National Bee_2

5. Investment in National Beef Packing Company, LLC (Tables)	9 Months Ended
	Sep. 28, 2019
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]
Schedule of Operations for NBP	13 weeks ended 39 weeks ended September 28, 2019 September 29, 2018 September 28, 2019 September 29, 2018 (unaudited) (unaudited) (unaudited) (unaudited) Net sales $ 2,249,133 $ 1,880,561 $ 6,189,854 $ 5,605,170 Costs and expenses: - Cost of sales 1,915,866 1,637,216 5,507,504 5,014,815 Selling, general, and administrative expenses 20,545 18,540 59,941 51,364 Depreciation and amortization 31,432 26,121 89,049 77,445 Total costs and expenses 1,967,843 1,681,877 5,656,494 5,143,624 Operating income 281,290 198,684 533,360 461,546 Other income (expense): Interest income 109 88 347 233 Interest expense (2,985 ) (2,718 ) (9,127 ) (8,196 ) Income before taxes 278,414 196,054 524,580 453,583 Income tax expense (657 ) (585 ) (1,637 ) (1,468 ) Net income $ 277,757 $ 195,469 $ 522,943 $ 452,115 NBP's net income attributable to USPB $ 41,866 $ 29,463 $ 78,823 $ 68,147

1. Interim Financial Statemen_2

1. Interim Financial Statements (Details Narrative)	Sep. 28, 2019
Quarterly Financial Information Disclosure [Abstract]
Remaining membership interests in National Beef Packing Company, LLC (NBP)	15.0729%

2. Accounting Policies (Details

2. Accounting Policies (Details Narrative) $ in Thousands	9 Months Ended
	Sep. 28, 2019USD ($)
Present value of remaining operating lease payments	$ 200
Kansas City, MO Office Lease [Member]
Remaining term of lease	5 years 4 months 24 days
Lease periodic term	monthly
Lease periodic payment	$ 3,790
Dodge City, KS Office Lease [Member]
Remaining term of lease	1 year 3 months 18 days
Lease periodic term	monthly
Lease periodic payment	$ 1,018

3. Members' Capital (Details)

3. Members' Capital (Details) - USD ($) $ in Thousands	Jun. 10, 2019	Sep. 28, 2019
Members' Equity [Abstract]
Beginning balance		$ 219,756
Allocation of comprehensive income		76,636
Member distributions	$ (23,700)	(50,771)
Ending balance		$ 245,621

4. Earnings Per Unit (Details)

4. Earnings Per Unit (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Class A Units [Member]
Basic and diluted earnings per unit
Comprehensive income attributable to USPB unitholders (numerator)	$ 4,135	$ 2,893	$ 7,664	$ 6,592
Weighted average outstanding units (denominator)	735,385	735,385	735,385	735,385
Per unit amount	$ 5.62	$ 3.93	$ 10.42	$ 8.96
Class B Units [Member]
Basic and diluted earnings per unit
Comprehensive income attributable to USPB unitholders (numerator)	$ 37,215	$ 26,035	$ 68,972	$ 59,325
Weighted average outstanding units (denominator)	755,385	755,385	755,385	755,385
Per unit amount	$ 49.27	$ 34.47	$ 91.31	$ 78.54

4. Earnings Per Unit (Details N

4. Earnings Per Unit (Details Narrative)	9 Months Ended
	Sep. 28, 2019
Class A Units [Member]
Class of Stock [Line Items]
Ownership percentage	10.00%
Class B Units [Member]
Class of Stock [Line Items]
Ownership percentage	90.00%

5. Investment in National Bee_3

5. Investment in National Beef Packing Company, LLC (Details) - National Beef Packing Company, LLC [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 28, 2019	Sep. 29, 2018	Sep. 28, 2019	Sep. 29, 2018
Investment in National Beef Packing
Net sales	$ 2,249,133	$ 1,880,561	$ 6,189,854	$ 5,605,170
Costs and expenses:
Cost of sales	1,915,866	1,637,216	5,507,504	5,014,815
Selling, general, and administrative expenses	20,545	18,540	59,941	51,364
Depreciation and amortization	31,432	26,121	89,049	77,445
Total costs and expenses	1,967,843	1,681,877	5,656,494	5,143,624
Operating income	281,290	198,684	533,360	461,546
Other income (expense):
Interest income	109	88	347	233
Interest expense	(2,985)	(2,718)	(9,127)	(8,196)
Income before taxes	278,414	196,054	524,580	453,583
Income tax expense	(657)	(585)	(1,637)	(1,468)
Net income	277,757	195,469	522,943	452,115
NBP's net income attributable to USPB	$ 41,866	$ 29,463	$ 78,823	$ 68,147

5. Investment in National Bee_4

5. Investment in National Beef Packing Company, LLC (Details Narrative) - USD ($) $ in Thousands	Jun. 10, 2019	Sep. 28, 2019
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]
Proportionate share of distribution	$ 23,700	$ 50,771

6. Long-term Debt and Loan Ag_2

6. Long-term Debt and Loan Agreements (Details Narrative) $ in Thousands	1 Months Ended
	Aug. 16, 2019USD ($)
Debt Disclosure [Abstract]
Revolving credit limit	$ 1,000
Commitment fee	0.00
Maturity date	Sep. 29, 2020