UNITED STATES ~~SECURITIES AND EXCHANGE COMMISSION~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

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

For the quarterly period ended ~~November~~February 2726, ~~2010~~2011

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

For the transition period from ~~__________~~ to ~~__________~~ .

Commission file number 333-111407

NATIONAL BEEF PACKING COMPANY, LLC

(Exact name of registrant as specified in its charter)

DELAWARE		48-1129505
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

12200 North Ambassador Drive

Kansas City, MO 64163

(Address of principal executive offices)

Telephone: (800) 449-2333

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Tþ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large ~~Accelerated~~accelerated ~~Filer~~filer o£ Accelerated ~~Filer~~filer o£ Non-~~Accelerated~~accelerated ~~Filer~~filer Tþ ~~Small~~Smaller Reporting Company o

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

There is no market for the Registrant’s equity. As of ~~January~~April 78, 2011, there were 203,990,136 Class A units and 15,~~381~~545,~~317~~948 Class B units outstanding.

TABLE OF CONTENTS

	TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	Page No.

Item 1.	Financial Statements.	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	18

Item 4.	Controls and Procedures.	20


PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings.	21

Item 1A.	Risk Factors.	21

Item 6.	Exhibits.	21

	Signatures.	22

PART I.	FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements.	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	17
Item 4.	Controls and Procedures.	18
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings.	19
Item 1A.	Risk Factors.	19
Item 6.	Exhibits.	19
	Signatures.	20

Unless the context indicates or otherwise requires, the terms “National Beef,” “NBP,” “Company,” “we,” “our,” and “us” refer to National Beef Packing Company, LLC and its consolidated subsidiaries. As used in this report, the term “U.S. Premium Beef” or “USPB” refers to U.S. Premium Beef, LLC, a Delaware limited liability company, formerly U.S. Premium Beef, Ltd., a Kansas cooperative, which owns a majority interest in National Beef.

Unless the context indicates or otherwise requires, the terms “National Beef,” “NBP,” “Company,” “we,” “our,” and “us” refer to National Beef Packing Company, LLC and its consolidated subsidiaries. As used in this report, the term “U.S. Premium Beef” refers to U.S. Premium Beef, LLC, a Delaware limited liability company, formerly U.S. Premium Beef, Ltd., a Kansas cooperative, which owns a majority interest in National Beef.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited).

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

	November 27, 2010			August 28, 2010
	February 26, 2011			August 28, 2010
Assets
Current assets:
Cash and cash equivalents	$	2632,~~209~~235		$	20,405
Accounts receivable, less allowance for returns and doubtful accounts of $2,971 and $2,891, respectively		177,462			182,234
Accounts receivable, less allowance for returns and doubtful accounts of $2,961 and $2,891, respectively		191,853			182,234
Due from affiliates		46,~~896~~031			4,961
Other receivables		7,~~860~~965			7,399
Inventories		~~240~~245,~~811~~905			232,943
Other current assets		6895,~~431~~246			45,999
Total current assets		~~525~~579,~~669~~235			493,941
Property, plant and equipment, at cost		~~538~~556,~~923~~171			526,712
Less accumulated depreciation		~~231~~243,~~630~~707			220,274
Net property, plant and equipment		~~307~~312,~~293~~464			306,438
Goodwill		81,242			81,242
Other intangibles, net of accumulated amortization of $13,735 and $13,661, respectively		22,795			22,858
Other intangibles, net of accumulated amortization of $13,812 and $13,661, respectively		22,717			22,858
Other assets		78,~~612~~053			8,213
	$	~~944~~1,~~611~~003,711		$	912,692
Liabilities and Members’ Capital
Current liabilities:
Current installments of long-term debt	$	2138,~~413~~451		$	21,382
Cattle purchases payable		8877,~~713~~429			70,208
Accounts payable – trade		6972,~~374~~253			73,522
Due to affiliates		~~942~~1,189			718
Accrued compensation and benefits		3144,~~362~~984			78,401
Accrued insurance		1716,~~841~~624			15,048
Other accrued expenses and liabilities		3451,~~910~~112			27,091
Distributions payable		~~171~~30,~~144~~931			27,364
Total current liabilities		~~435~~332,~~699~~973			313,734
Long-term debt, excluding current installments		~~257~~398,~~771~~189			225,090
Other liabilities		2,~~482~~483			2,443
Total liabilities		~~695~~733,~~952~~645			541,267
Capital subject to redemption		~~268~~310,~~291~~501			291,746
Members’ capital:
Members’ (deficit) / capital:
Members’ capital attributable to NBP		(22,489	)		76,894
Members’ (deficit) / capital attributable to NBP		(43,459	)		76,894
Accumulated other comprehensive income attributable to NBP		33			23
Accumulated other comprehensive attributable to NBP		44			23
Noncontrolling interest in Kansas City Steak Company, LLC		2,~~824~~980			2,762
Total members’ capital		(19,632	)		79,679
Total members’ (deficit) / capital		(40,435	)		79,679
Commitments and contingencies		-			-
	$	1,003,711		$	912,692
	$	944,611		$	912,692

See accompanying notes to consolidated financial statements.

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

Consolidated Statements of Operations

(in thousands)

	13 weeks ended			13 weeks ended			26 weeks ended			26 weeks ended
	November 27, 2010			November 28, 2009
	February 26, 2011			February 27, 2010			February 26, 2011			February 27, 2010
Net sales	$	1,~~587~~652,~~320~~606		$	1,~~342~~340,~~610~~926		$	3,239,926		$	2,683,536
Costs and expenses:
Cost of sales		1,~~505~~562,~~439~~350			1,~~273~~259,~~312~~860			3,067,789			2,533,171
Selling, general and administrative		12,~~887~~733			1112,~~229~~063			25,620			23,293
Depreciation and amortization		12,~~213~~570			1112,~~908~~376			24,783			24,284
Total costs and expenses		1,~~530~~587,~~539~~653			1,~~296~~284,~~449~~299			3,118,192			2,580,748
Operating income		5664,~~781~~953			4656,~~161~~627			121,734			102,788
Other income (expense):
Interest income		74			296			11			34
Interest expense		(23,~~598~~475	)		(43,~~532~~519	)		(6,073	)		(8,051	)
Other, net		~~596~~236			7(3,784	)		833			(3,776	)
Income before taxes		5461,~~786~~718			4149,~~665~~330			116,505			90,995
Income tax expense		334			400
Income tax expense (benefit)		383			(48	)		718			352
Net income		5461,~~452~~335			4149,~~265~~378			115,787			90,643
Net income attributable to noncontrolling interest		(62	)		(223	)
Net income attributable to the noncontrolling interest		(372	)		(568	)		(433	)		(791	)
Net income attributable to NBP	$	5460,~~390~~963		$	4148,~~042~~810		$	115,354		$	89,852

See accompanying notes to consolidated financial statements.

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC

AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(in thousands)

	13 weeks ended			13 weeks ended
	26 weeks ended			26 weeks ended
	November 27, 2010			November 28, 2009
	February 26, 2011			February 27, 2010
Cash flows from operating activities:
Net income	$	54115,~~452~~787		$	4190,~~265~~643
Adjustments to reconcile net loss to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1224,~~213~~783			1124,~~908~~284
Gain on disposal of property, plant and equipment		(~~365~~645	)		(~~128~~120	)
Amortization of debt issuance costs		~~345~~757			~~195~~484
Write-off of debt issuance costs		-			418
Change in assets and liabilities:
Accounts receivable		4(9,~~772~~619	)		~~7,573~~742
Due from affiliates		65(1,070	)		~~982~~557
Other receivables		(~~461~~566	)		(~~2,491~~199	)
Inventories		(712,~~868~~962	)		(1213,~~020~~252	)
Other assets		(2249,~~187~~345	)		(~~646~~2,290	)
Cattle purchases payable		151,~~986~~924			~~8,713~~223
Accounts payable		(~~747~~2,539	)		(14,~~887~~705	)
Due to affiliates		~~224~~471			~~(196~~6	)
Accrued compensation and benefits		(4733,~~039~~417	)		(239,~~738~~974	)
Accrued insurance		21,~~793~~576			(~~569~~221	)
Other accrued expenses and liabilities		724,~~858~~061			(~~671~~5,266	)
Net cash provided by operating activities		2059,~~041~~196			2881,~~290~~330
Cash flows from investing activities:
Capital expenditures, including interest capitalized		(1331,~~405~~658	)		(917,~~532~~986	)
Proceeds from sale of property, plant and equipment		~~776~~1,645			~~484~~683
Net cash used in investing activities		(1230,~~629~~013	)		(917,~~048~~303	)
Cash flows from financing activities:
Net receipts under revolving credit lines		3730,~~991~~000			~~(29~~21,~~168~~100	)
Repayments under term note payable		(5,000	)		-
Repayments of term note payable		(14,250	)		(23,102	)
Borrowings under term note payable		-			75,000
Borrowings of term note payable		175,000			75,000
Change in overdraft balances		(882	)		12,705
Purchase and cancellation of senior notes		-			(66,855	)
Purchase and cancellation of Senior Notes		-			(39,798	)
Change in overdraft balances		6,567			(936	)
Repayments of other indebtedness/capital leases		(279	)		(4,576	)
Repayments of other indebtedness		(582	)		(5,245	)
Cash paid for financing costs		-(509	)		(1,~~018~~103	)
Member distributions		(33213,~~448~~385	)		(3668,~~083~~728	)
Net cash used in financing activities		(1,618	)		(22,938	)
Distributions paid to noncontrolling interest		(215	)		(490	)
Effect of exchange rate changes on cash		10			22
Net cash used in financing activities		(17,374	)		(70,359	)
Net increase (decrease) in cash		5,804			(3,674	)
Effect of exchange rate changes on cash		21			18
Net increase (decrease) in cash		11,830			(6,314	)
Cash and cash equivalents at beginning of period		20,405			17,373
Cash and cash equivalents at end of period	$	2632,~~209~~235		$	1311,~~699~~059
Supplemental disclosures:
Cash paid during the period for interest	$	25,~~437~~327		$	38,~~516~~154
Cash paid during the period for taxes	$	14722		$	799
Supplemental non-cash disclosures of investing and financing activities;
Assets acquired through capital lease	$	52129		$	55111

See accompanying notes to consolidated financial statements.

Table of Contents

NATIONAL BEEF PACKING COMPANY, LLC AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) Interim Financial Statements

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information; therefore, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included using management’s best estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and judgments will also affect the reported amounts for certain revenues and expenses during the reporting period. Actual results could differ materially from these estimates and judgments. For further information, refer to the audited Consolidated Financial Statements and Notes to Consolidated Financial Statements, which are included in NBP’s Annual Report on Form 10-K on file with the Securities and Exchange Commission, or SEC, for the fiscal year ended August 28, 2010. The results of operations for the interim periods presented are not necessarily indicative of the results for a full fiscal year.

(2) New Accounting Pronouncements

In January 2010, the Financial Accounting Standards Board, (“or FASB”) issued Accounting Standards Update, (“or ASU”) No. 2010-06, Fair Value Measurements and Disclosures. The Update issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires additional disclosures about the different classes of assets and liabilities measured at fair value, the valuation techniques and inputs used, the activity in Level 3 fair value measurements, and the transfers between Levels 1, 2, and 3 of the fair value measurement hierarchy. This guidance will become effective for the Company’s year ending in fiscal 2012. The adoption of ASU No. 2010-06 should not significantly impact the Company’s consolidated financial position or results of operations.

(3) Inventories

Inventories ~~consist~~at ~~primarily~~February of26, ~~meat~~2011 ~~products~~ and ~~supplies. Product~~August ~~inventories are considered commodities and are recorded based on quoted commodity prices~~28, ~~which~~2010 ~~approximate~~consisted ~~net~~of ~~realizable value. Supply and other inventories are valued on~~ the ~~basis~~following ~~of first-~~(in, ~~first-out, specific or average cost methods. Product inventories are relieved from inventory utilizing the first-in, first-out method.~~thousands):

Inventories at November 27, 2010 and August 28, 2010 consisted of the following (in thousands):

	February 26, 2011		August 28, 2010
Dressed and boxed meat products	$	160,970	$	154,927
Beef by-products		42,290		46,891
Supplies and other		42,645		31,125
Total inventory	$	245,905	$	232,943

	November 27, 2010		August 28, 2010
Dressed and boxed meat products	$	157,490	$	154,927
Beef by-products		45,863		46,891
Supplies and other		37,458		31,125
Total inventory	$	240,811	$	232,943

Table of Contents

(4) Comprehensive Income

Comprehensive income, which consists of net income and foreign currency translation adjustments, was as follows for the periods indicated (in thousands):

	13 weeks ended			13 weeks ended			26 weeks ended			26 weeks ended
	November 27, 2010			November 28, 2009
	February 26, 2011			February 27, 2010			February 26, 2011			February 27, 2010
Net income	$	5461,~~452~~335		$	4149,~~265~~378		$	115,787		$	90,643
Other comprehensive income (loss):
Other comprehensive income / (loss):
Foreign currency translation adjustments		1011			22(4	)		21			18
Comprehensive income		5461,~~462~~346			4149,~~287~~374			115,808			90,661
Comprehensive income attributable to the noncontrolling interest		(62372	)		(~~223~~568	)		(433	)		(791	)
Comprehensive income attributable to NBP	$	5460,~~400~~974		$	4148,~~064~~806		$	115,375		$	89,870

(5) Contingencies

~~National~~The ~~Beef~~Company ~~Leathers,~~is ~~LLC,~~a orparty ~~NBL,~~to a ~~wholly-owned~~number ~~subsidiary~~ of ~~NBP, has been a named defendant in two purported class actions involving NBL's tannery located in St. Joseph, Missouri, which NBL purchased in March 2009. These~~ lawsuits ~~were~~and ~~filed~~claims onarising ~~July~~out ~~22,~~of ~~2009 in~~ the ~~U.S.~~operation ~~District Court for the Western District~~ of ~~Missouri.~~its ~~The lawsuits alleged that NBL spread wastewater sludge containing hexavalent chromium in four counties in northwest Missouri~~business. Management ~~The~~believes ~~plaintiffs~~the ~~were~~ultimate ~~seeking~~resolution ~~an unspecified amount~~ of ~~damages~~such ~~for~~matters ~~economic~~should ~~damages,~~not ~~punitive~~have ~~damages,~~a ~~diminished~~material ~~property~~adverse ~~values~~effect ~~and medical monitoring. The claims against NBL in these lawsuits were dismissed~~ on ~~December~~the 2,Company’s ~~2010~~financial ~~and December 10~~condition, ~~2010. As~~results ~~a result~~ of ~~these~~operations ~~dismissals,~~or ~~NBL is no longer a party to these lawsuits~~liquidity.

The Company is a party to a number of other lawsuits and claims arising out of the operation of its business. Management believes the ultimate resolution of such matters should not have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

(6) Capital Subject to Redemption

At any time after certain dates, the earliest being July 31, 2010 in the case of NBPCo Holdings, the latest being July 31, 2011 in the case of certain affiliates of our Chief Executive ~~officer~~Officer, Timothy M. Klein, or the Klein Affiliates, NBPCo Holdings and the Klein Affiliates have the right to request that the Company repurchase their interests, the value of which is to be determined by a mutually agreed appraisal process or a specified formula. If the Company is unable to effect the repurchase within a specified time, the requesting member(s) have the right to cause a sale process to commence.

Generally accepted accounting principles require the Company to determine the fair value of the capital subject to redemption at the end of each reporting period. To the extent this value increases, this change in fair value is accreted over the redemption period. In determining the fair value of the capital subject to redemption held by NBPCo Holdings as of ~~November~~February 2726, ~~2010~~2011, management has considered previous redemption prices, valuations of peer companies and other factors. The capital subject to redemption held by the Klein Affiliates as of ~~November~~February 2726, ~~2010~~2011 was valued based upon a contractually stipulated ~~valuation~~ formula.

The Company accounts for changes in the redemption value of these interests by accreting the change in value from the date of change through the earliest redemption date of the respective interests. At ~~November~~February 2726, ~~2010~~2011, the value of the capital subject to redemption was determined to be $~~273~~315.9 million, which was in excess of its carrying value. The total value of the capital subject to redemption at ~~November~~February 2726, ~~2010~~2011, ~~decreased~~increased by approximately $2342.30 and $18.7 million compared to the value at November 27, 2011 and August 28, 2010, ~~primarily related to distributions offset by net income~~respectively. The carrying value of the capital subject to redemption increased ~~by approximately $14.2 million~~ through accretion during the ~~three~~thirteen ~~months~~and ~~ended~~twenty-six ~~November~~week 27periods ending February 26, ~~2010~~2011 by approximately $35.7 million and $49.9 million respectively, resulting in the $~~268~~310.35 million carrying value, as reflected in the accompanying consolidated balance sheet as of ~~November~~February 2726, ~~2010~~2011. Offsetting the change in value of capital subject to redemption is a corresponding change in members’ capital.

Table of Contents

(7) Fair Value Measurements

The Company determines fair value utilizing a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows:

•

Level 1 – quoted prices in active markets for identical assets or liabilities accessible by the reporting entity.

•

Level 2 – observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•

Level 3 – unobservable inputs for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available.

The following table details the assets and liabilities measured at fair value on a recurring basis as of ~~November~~February 2726, ~~2010~~2011 and August 28, 2010 and also the level within the fair value hierarchy used to measure each category of assets (in thousands).

Description

~~November~~February 2726, ~~2010~~2011

Quoted Prices in Active Markets for Identical Assets (Level 1)

Significant Other Observable Inputs (Level 2)

Significant Unobservable Inputs (Level 3)

Other current assets – derivatives

2740,~~639~~013

42,~~966~~226

2237,~~673~~787

Other accrued expenses and liabilities – derivatives

2238,~~925~~090

Capital subject to redemption

~~268~~310,~~291~~501

5661,~~720~~220

~~211~~249,~~571~~281

Description	August 28, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)

Other current assets – derivatives	$	15,563	$	61	$	15,502	$	-
Other accrued expenses and liabilities – derivatives	$	14,672	$	14,672	$	-	$	-
Capital subject to redemption	$	291,746	$	-	$	61,854	$	229,892

Management has used certain contractual redemption prices in measuring the fair value of the Klein Affiliates capital subject to redemption, which is included in level 2 as of ~~November~~February 2726, ~~2010~~2011 and August 28, 2010. NBPCo Holdings capital subject to redemption is based upon unobservable inputs, thus included in level 3 as of ~~November~~February, 2726, ~~2010~~2011 and August 28, 2010.

Table of Contents

The following table presents a reconciliation of capital subject to redemption measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the ~~three~~thirteen ~~months~~and twenty-six weeks ended ~~November~~February 2726, ~~2010~~2011 (in thousands).

	Level 3 Fair Value Measurements at November 27, 2010
	Thirteen weeks ended February 26, 2011			Twenty-six weeks ended February 26, 2011
	Capital Subject to Redemption
Beginning Balance	$	211,571		$	229,892
Balance, August 28, 2010	$	229,892
Allocation of net income		15,103			28,590
Allocation of net income		13,486
Class A 5% priority distributions		(736	)		(1,472	)
Class A 5% priority distributions		(736	)
Class B distributions		(9,117	)		(15,138	)
Class B distributions		(6,021	)
Equity distribution		-			(37,156	)
Equity distribution		(37,156	)
Appraisal valuation adjustment		32,460			44,565
Appraisal valuation adjustment		12,106
Balance, February 26, 2011	$	249,281		$	249,281
Balance, November 27, 2010	$	211,571

(8) Disclosure about Derivative Instruments and Hedging Activities

As part of the Company’s ongoing operations, the Company is exposed to market risks such as changes in commodity prices. To manage these risks, the Company may enter into the following derivative instruments pursuant to our established policies:

Forward purchase contracts for cattle for use in our beef plants

Exchange traded futures contracts for cattle

Exchange traded futures contracts for grain

While management believes each of these instruments ~~helps~~help mitigate various market risks, they are not designated and accounted for as hedges as a result of the extensive recordkeeping requirements associated with hedge accounting. Accordingly, the gains and losses associated with the change in fair value of the instruments are recorded to net sales and cost of goods sold in the period of change. Certain firm commitments for live cattle purchases and all firm commitments for boxed beef sales are treated as normal purchases and sales and not recorded at fair value.

The Company enters into certain commodity derivatives, primarily with a diversified group of highly rated counterparties. The maximum amount of loss due to the credit risk of the counterparties, should the counterparties fail to perform according to the terms of the contracts, is deemed to be immaterial as of ~~November~~February 2726, ~~2010 as all derivatives in an asset position are exchange-traded contracts~~2011. The exchange-traded contracts have been entered into under a master netting agreement. None of the derivatives entered into have credit-related contingent features. The Company has $2743.96 million in cash collateral posted on its derivative liabilities.

The following table presents the fair values as discussed in Note 67 and other information regarding derivative instruments not designated as hedging instruments as of ~~November~~February 2726, ~~2010,~~2011 and August 28, 2010 (in thousands):

	Derivative Asset			Derivative Liability
	As of November 27, 2010			As of November 27, 2010
	As of February 26, 2011			As of February 26, 2011
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	2740,~~639~~013	Other accrued expenses and liabilities	$	2238,~~925~~090
Totals		$	2740,~~639~~013		$	2238,~~925~~090

Table of Contents

	Derivative Asset			Derivative Liability
	As of August 28, 2010			As of August 28, 2010
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	15,563	Other accrued expenses and liabilities	$	14,672
Totals		$	15,563		$	14,672

The following table presents the impact of derivative instruments on the Consolidated Statement of Operations for the thirteen and twenty-six week ~~period~~periods ended ~~November~~February 2726, ~~2010~~2011 and ~~November~~February 2827, ~~2009~~2010, respectively (in thousands):

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives			~~Amount of Gain or (Loss) Recognized in Income on Derivatives~~
		13 Weeks Ended November 27, 2010			13 Weeks Ended November 28, 2009
		13 Weeks ended February 26, 2011			26 Weeks ended February 26, 2011
Commodity contracts	Net sales	$	62,~~970~~959		$	(69,~~757~~929	)
Commodity contracts	Cost of sales		(611,~~489~~482	)		3(17,~~543~~971	)
Totals		$	~~481~~(8,523	)	$	(38,~~214~~042	)

(9) Segments

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Income on Derivatives	Amount of Gain or (Loss) Recognized in Income on Derivatives
		13 Weeks ended February 27, 2010		26 Weeks ended February 27, 2010
Commodity contracts	Net sales	$	3,588	$	(3,169	)
Commodity contracts	Cost of sales		4,393		7,937
Totals		$	7,981	$	4,768

~~The Company’s operating segments are based on segment profit and evaluated by the Chief Executive Officer, who also serves as the Chief Operating Decision Maker.~~(9) ~~Segment profit is measured as operating income for NBP’s two reporting segments, Core Beef and Other, based on the definitions provided in ASC 280, Segment Reporting.~~Debt

~~Core~~On ~~Beef—the~~November ~~majority~~29, of2010, ~~NBP’s~~the ~~revenues~~Company ~~are~~drew ~~generated~~$175 ~~from~~million under the ~~sale~~Amended ofand ~~fresh~~Restated ~~meat,~~Credit ~~which~~Agreement. The ~~include~~draw ~~chuck~~was ~~cuts,~~made ~~rib~~to ~~cuts,~~fund ~~loin~~distributions ~~cuts,~~to ~~round~~the ~~cuts,~~Company’s ~~thin~~members ~~meats,~~and ~~ground~~for ~~beef,~~general ~~and~~corporate ~~other products~~purposes. InThe ~~addition,~~draw weconstituted ~~sell beef by-products including hides to~~ the ~~variety~~last ~~meat,~~of ~~feed~~a ~~processing,~~series ~~fertilizer,~~of ~~pet~~term ~~food~~loans ~~and~~under ~~leather~~the ~~tanning~~Credit ~~industries. Aggregation~~Facility ~~criteria~~not ~~were applied~~ to ~~determine~~exceed ~~the~~$375 ~~constituents~~million ofin the ~~Core Beef segment~~aggregate.

Other—the Other segment of NBP consists of the operations of National Carriers, National Elite Transportation, LLC, or National Elite, a provider of transportation logistics services, and Kansas City Steak.(10) Segments

~~Eliminations—this~~The ~~line~~Company’s ~~item~~operating ~~includes~~segments ~~eliminations~~are ofbased ~~inter-~~on segment profit and ~~intra-segment~~evaluated ~~activity~~by ~~resulting~~the ~~from~~Chief Executive Officer, who also serves as the ~~consolidation~~Chief ~~process~~Operating Decision Maker, or CODM. Segment profit is measured as operating income for NBP’s two reporting segments, Core Beef and Other, based on the definitions provided in ASC 280, Disclosures about Segments of an Enterprise and Related Information.

Table of Contents

~~The~~Core ~~following~~Beef—the ~~table~~majority ~~represents~~of ~~segment~~NBP’s ~~results~~revenues ~~for~~are generated from the ~~periods~~sale ~~indicated~~of ~~(amounts~~fresh inmeat, ~~thousands):~~which include chuck cuts, rib cuts, loin cuts, round cuts, thin meats, ground beef, and other products. In addition, we also sell beef by-products including hides to the variety meat, feed processing, fertilizer and pet food industries. Aggregation criteria were applied to determine the constituents of the Core Beef segment.

	13 weeks ended			13 weeks ended
	November 27, 2010			November 28, 2009
Net sales:
Core beef	$	1,620,788		$	1,363,131
Other		53,646			54,920
Eliminations		(87,114	)		(75,441	)
Total net sales	$	1,587,320		$	1,342,610
Operating income:
Core beef	$	56,432		$	44,729
Other		349			1,432
Total operating income		56,781			46,161
Interest income		7			29
Interest expense		(2,598	)		(4,532	)
Other income, net		596			7
Total income before taxes	$	54,786		$	41,665
	November 27, 2010			November 28, 2009
Assets:
Core beef	$	899,616		$	766,041
Other		46,885			45,027
Eliminations		(1,890	)		(904	)
Total assets	$	944,611		$	810,164

Other—the Other segment of NBP consists of the operations of National Carriers, Inc., a refrigerated and livestock contract carrier company, National Elite Transportation, LLC, a provider of transportation logistics services, and Kansas City Steak Company, LLC, a portion control steak cutting operation.

~~(10)~~Eliminations—this ~~Subsequent~~line ~~Events~~item includes eliminations of inter-segment and intra-segment activity resulting from the consolidation process.

~~On November 29, 2010, the Company drew $175 million under the Amended and Restated Credit Agreement.~~ The ~~draw~~following ~~was~~table ~~made~~represents tosegment ~~fund~~results ~~distributions to the Company’s members and~~ for ~~general corporate purposes. The draw constitutes~~ the ~~last~~periods ofindicated ~~a series of term loans under the Credit Facility not to exceed $375 million~~ (in ~~the aggregate. The total amount of term loans outstanding under the Credit Facility immediately following the draw was approximately $370 million.~~thousands):

On November 29, 2010, the Company paid an approximately $141.2 million cash distribution to certain members based on approval by the Board of Managers on October 27, 2010 of a $150 million cash distribution. The remaining $8.8 million was paid to certain members on January 3, 2011.

	13 weeks ended			13 weeks ended			26 weeks ended			26 weeks ended
	February 26, 2011			February 27, 2010			February 26, 2011			February 27, 2010
Net sales:
Core beef	$	1,681,632		$	1,367,189		$	3,302,420		$	2,730,320
Other		69,240			65,088			122,886			120,008
Eliminations		(98,266	)		(91,351	)		(185,380	)		(166,792	)
Total net sales	$	1,652,606		$	1,340,926		$	3,239,926		$	2,683,536

Operating income:
Core beef	$	63,176		$	54,931		$	119,608		$	99,659
Other		1,777			1,696			2,126			3,129
Total operating income		64,953			56,627			121,734			102,788

Interest income		4			6			11			34
Interest expense		(3,475	)		(3,519	)		(6,073	)		(8,051	)
Other expense, net		236			(3,784	)		833			(3,776	)
Total income before taxes	$	61,718		$	49,330		$	116,505		$	90,995

	February 26, 2011			February 27, 2010
Assets:
Core beef	$	958,051		$	769,251
Other		47,114			43,534
Eliminations		(1,454	)		(2,172	)
Total assets	$	1,003,711		$	810,613

On December 17, 2010, the Company entered into a series of agreements with the City of St. Joseph, Missouri to provide Missouri Chapter 100 bonds in the amount of $14.5 million. The Company agreed to purchase the bonds which would effectively provide property tax abatement on certain equipment, which will be leased to the Company by the City of St. Joseph under a capital lease, located at the Company’s hide processing facilities in St. Joseph, Missouri. Additionally, the Company entered into a Payment in Lieu of Taxes Agreement related to the abatement. As a result of the legal right of offset, the capital lease obligation and corresponding bond investment will be eliminated in consolidation.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our consolidated financial statements and related notes and other financial information appearing elsewhere in this report.

Disclosure Regarding Forward-Looking Statements

This report contains “forward-looking statements,” which are subject to a number of risks and uncertainties, many of which are beyond our control. Forward-looking statements are typically identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and similar expressions. Actual results could differ materially from those contemplated by these forward-looking statements as a result of many factors, including economic conditions generally and in our principal markets, the availability and prices of live cattle and commodities, food safety ~~issues~~, livestock disease, including the identification of cattle with Bovine Spongiform Encephalopathy, or (BSE), ~~product contamination and recall concerns,~~ competitive practices and consolidation in the cattle production and processing industries ~~and among our customers~~, actions of domestic or foreign governments, hedging risk, changes in interest rates and foreign currency exchange rates, ~~trade barriers and exchange controls,~~ consumer demand and preferences, the cost of compliance with environmental and health laws, loss of key customers, loss of key employees, labor relations, and consolidation among our customers.

In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking information contained in this report will in fact transpire. Readers are cautioned not to place undue reliance on these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. ~~Please~~See ~~review~~also Part II. Item 1A, Risk Factors, included in this report, and Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended August 28, 2010 on Form 10-K filed with the Securities and Exchange Commission for other important factors that could cause actual results to differ materially from those in any such forward-looking statements, and which should be read in conjunction with this report.

Industry Outlook

We anticipate ~~fed~~strong ~~cattle~~beef ~~supplies~~demand to ~~remain~~offset ~~above~~possible ~~prior~~negative implications of year ~~levels~~over ~~through~~year ~~the~~increases ~~winter~~in ~~quarter~~fed ~~following~~cattle ~~active~~supplies ~~late~~into mid-summer. Cattle ~~placements~~placement ~~and~~has ~~very~~been ~~favorable~~active ~~cattle~~during ~~feeding conditions through~~ the ~~fall. The~~first ~~anticipated~~calendar ~~greater~~quarter ~~supplies~~as ~~and~~dry ~~heavier~~conditions ~~weights~~in ~~should~~the ~~contribute~~Central toand ~~gains~~South inPlains ~~beef~~moved ~~production~~larger ~~compared~~numbers toof ~~the~~lightweight ~~prior~~cattle ~~year~~onto feed. ~~Beyond~~ We ~~the~~anticipate ~~first~~this ~~calendar~~early ~~quarter~~placement of ~~2011,~~calves wecombined ~~expect~~with ~~fed~~smaller ~~cattle~~calf ~~supplies~~crops to ~~tighten~~contribute ~~following~~to ~~placement~~a ofdecline in cattle ~~with~~supplies ~~more~~during ~~diverse placement weights and~~ the ~~continuing~~second ~~calf~~half ~~crop~~of ~~decline~~calendar 2011. ~~Larger~~The ~~cow~~long ~~and~~term ~~bull~~cattle ~~slaughter~~industry ~~during~~outlook ~~2010~~remains ~~continues~~essentially tounchanged ~~imply~~though herd liquidation ~~and~~appears ~~the~~to ~~trend~~be ~~of smaller cattle supplies into the coming years~~easing. ~~While~~ Export ~~the~~of ~~cattle~~beef ~~supply~~products ~~may~~is ~~appear~~expected ~~negative~~ to ~~our~~remain ~~operation,~~strong ~~recent beef demand,~~ supported by ~~beef~~an ~~export~~improving ~~tonnage~~global ~~near~~economy ~~that of pre-BSE (2003) levels~~ and ~~encouraging~~the ~~domestic~~value ~~economic~~of ~~conditions,~~the ~~appears~~dollar ~~positive. Absent~~relative ~~significant deterioration in domestic and global economic conditions, we expect cattle and beef prices~~ to ~~remain~~other ~~strong~~major ~~throughout 2011~~currencies.

Beef Export Markets

Export markets for U.S. beef products remain constrained since the discovery of a single case of BSE in the State of Washington in December 2003, as well as other isolated cases. In July 2006, Japan agreed to reopen its market to U.S. beef from cattle aged 20 months and younger. South Korea announced a provisional opening of its border to U.S. beef from animals 30 months and younger in September 2006 but subsequently closed its border again in October 2007. South Korea reopened its border and started inspecting U.S. beef near the end of June 2008. These constraints and uncertainties have historically had a negative impact on beef demand during the periods in which they occurred.

We cannot presently assess the full economic impact of the consequences of BSE on the U.S. beef packing industry or on our operations. Existing or new import restrictions or additional regulatory restrictions or disruptions in domestic and foreign consumer demand for beef may have a material adverse effect on our revenues and net income.

Table of Contents

In December 2010, the United States Department of Agriculture, or USDA, announced that China has agreed to resume talks with the United States regarding beef market access and that technical talks will resume with the goal of re-opening China’s market for U.S. beef under the age of 30 months in early 2011. We cannot presently assess the full economic impact of the ~~consequences~~re-opening of ~~BSE~~China’s market to age verified beef on the U.S. beef packing industry or on our operations~~. Existing~~, orand ~~new~~there ~~import~~can ~~restrictions~~be orno ~~additional~~assurance ~~regulatory~~that ~~restrictions~~such talks will occur or ~~disruptions~~result in ~~domestic~~re-opening ~~and~~of ~~foreign~~China’s ~~consumer~~market ~~demand~~to ~~for~~U.S. beef ~~may have a material adverse effect on our revenues and net income~~products.

In ~~December~~March ~~2010~~2011, ~~the~~a ~~United~~major ~~States~~earthquake ~~Department~~followed ofby ~~Agriculture,~~a ortsunami ~~USDA,~~hit ~~announced that China has agreed to resume talks with~~ the ~~United~~east ~~States~~coast ~~regarding~~of ~~beef~~Japan ~~market access~~ and ~~that~~caused ~~technical~~significant ~~talks~~damage ~~will~~to ~~resume~~parts ~~with~~of the ~~goal~~country. A portion of ~~re-opening~~our ~~China’s~~export ~~market~~sales ~~for~~are ~~U.S.~~delivered ~~beef~~to ~~under~~Japan, ~~the~~and ~~age~~while ofwe ~~30 months in early 2011. We~~ cannot presently assess the full long-term economic impact of the ~~re-opening~~earthquake ofand ~~China’s~~tsunami ~~market to age verified beef~~ on ~~the U.S. beef packing industry or~~ our operations, ~~and~~so far there ~~can~~have bebeen nofew ~~assurance that such talks will occur or result in re-opening of China’s market to U~~interruptions.~~S. beef products.~~

~~Recent~~Regulatory ~~Events~~Developments

On June 22, 2010, the Grain Inspection and Packers and Stockyards Administration published a proposed rule adding new regulations under the Packers and Stockyards Act. If adopted as currently proposed, the new regulations could have a significant impact on marketing and procurement practices in the beef processing industry and could affect how we procure cattle for our value-added programs and how we process and market value-added beef products. We cannot presently assess the full economic impact of the proposed rule on the beef processing industry or on our operations.

Results of Operations

Thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to thirteen weeks ended ~~November~~February 2827, ~~2009~~2010

General. Net income for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 was approximately $5461.53 million compared to net income of approximately $4149.34 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, an ~~increase~~improvement of approximately $1311.29 million, or 24.1%. ~~Sales~~Net sales were higher in the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010 primarily due ~~in part~~ to ana ~~approximate 4~~20.01% increase in the ~~volume~~net ~~of cattle processed and increase in the average~~ sales ~~price~~ per head, ofas ~~approximately14~~well as a 2.34% ~~during~~increase in the ~~current~~volume ~~reporting~~of ~~period~~cattle processed.

Total costs and expenses of approximately $1,~~530~~587.57 million for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011, were 96.41% of net sales compared to approximately $1,~~296~~284.43 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, or 9695.68% of net sales. AnContinued ~~increase~~stable indemand ~~the~~for ~~volume~~beef ofproducts ~~cattle processed,~~ and aincreases ~~decrease~~ in ~~total~~cattle ~~costs~~prices asduring athe ~~percentage~~second quarter of ~~sales~~fiscal ~~resulted~~2011 inas ~~increased~~compared ~~operating~~to ~~income~~the same period of ~~approximately~~fiscal ~~$10.6~~2010 ~~million~~resulted ~~for~~in ~~the~~an ~~thirteen~~increase ~~weeks~~in ~~ended~~the ~~November~~percentage ~~27,~~of ~~2010~~total ~~compared~~costs to ~~the~~net ~~thirteen~~sales ~~weeks~~during ~~ended~~the ~~November 28, 2009~~period.

Net Sales. Net sales were approximately $1,~~587~~652.36 million for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to approximately $1,~~342~~340.69 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, an increase of approximately $~~244~~311.7 million, or 1823.2%. The increase in net sales ~~primarily~~ resulted primarily from ana ~~approximately 14~~20.31% increase in the ~~average~~net sales ~~price~~ per head during the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to the same period in the prior year, as the demand for beef products ~~was~~remained ~~stronger~~strong, asand ~~compared~~price toof ~~the~~beef ~~thirteen~~products ~~weeks~~increased ~~ended~~during ~~November~~the ~~28, 2009~~period. Also contributing to the increase in net sales was an approximately 42.04% increase in the ~~volume~~number of cattle processed compared to the same period of the prior year.

Cost of Sales. Cost of sales was approximately $1,~~505~~562.4 million for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to approximately $1,~~273~~259.39 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, an increase of approximately $~~232~~302.15 million, or 1824.20%. The increase was primarily a result of an ~~approximate~~approximately 1523.39% increase in average cattle prices ~~for~~during the ~~comparable~~period ~~periods. Also~~compared ~~contributing~~ to the ~~increase~~prior ~~was~~period. In anaddition, ~~increase in~~ the ~~volume~~cost of ~~cattle~~sales ~~processed~~increase ofwas ~~approximately~~partially ~~4.0%~~due ~~during~~to the 132.4% ~~weeks~~increase ~~ended~~in ~~November 27, 2010 compared to~~ the ~~thirteen~~volume ~~weeks~~of ~~ended~~cattle ~~November 28, 2009~~processed.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $12.97 million for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to approximately $1112.21 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, an increase of approximately $10.76 million, or 155.20%. ~~The increase primarily reflects an increase of approximately $0.5 million in both consulting and salaries expense for the period.~~

Table of Contents

Depreciation and Amortization Expense. Depreciation and amortization expenses were approximately $12.26 million for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to approximately $1112.94 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, an increase of approximately $0.32 million, or 21.56%. ~~The~~Depreciation ~~slight increase in depreciation~~ expense ~~was~~increased ~~primarily~~due ~~related~~ to ~~fixed~~ assets being placed into service, primarily at our three beef plants and two case ready plants, during fiscal year 2011.

Operating Income. Operating income was approximately $5665.80 million for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to operating income of approximately $4656.26 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, an ~~increase~~improvement of approximately $108.64 million, or 2214.98%. The ~~improvement~~increased in operating income ~~during the first quarter of fiscal 2010~~ resulted ~~primarily~~ from an approximately 20.1% increase in ~~the~~net sales per head offor ~~approximately~~and 14a 2.34% ~~and~~ increase in the volume of cattle processed ~~of approximately 4~~.~~0% during the thirteen weeks ended November 27, 2010.~~ These increases ~~were~~are partially offset by an approximately 23.9% increase in average ~~live~~ cattle prices ~~of approximately 15.3%~~ during the period.

~~Interest~~Other, ~~Expense~~net. ~~Interest~~Other, ~~expense~~net non-operating income was approximately $20.62 million for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to other, net non-operating expense of approximately $43.58 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, aan ~~decrease~~improvement of approximately $14.90 million ~~or 42~~.~~2%.~~ ~~The~~During ~~decrease in interest expense during~~ the thirteen weeks ended ~~November~~February 27, 2010 ~~as compared to the thirteen weeks ended November 28~~, ~~2009~~we ~~was~~expensed ~~due~~$2.2 ~~primarily~~million toincurred ~~a decrease~~ in ~~the~~connection ~~average~~with ~~borrowings during~~ the ~~period~~attempted ofIPO ~~approximately12.3%,~~by ~~and~~National aBeef ~~decrease of approximately 226 basis points on the average daily interest rate during each of the respective reporting periods~~Inc. ~~These~~ ~~decreases~~in ~~are~~December ~~primarily due to the purchase and cancellation of the remaining approximately $66~~2009.~~9 million of our Senior Notes.~~ ~~Portions~~In ofaddition ~~these notes were outstanding~~ during the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, ~~but~~we ~~were~~expensed ~~retired~~approximately ~~and~~$1.8 ~~cancelled~~million inof ~~their~~legal ~~entirety~~fees, ~~prior~~and to the ~~beginning~~remaining ofsenior ~~the~~notes ~~thirteen~~issuance ~~weeks~~fees ~~ending~~of ~~November~~$0.2 ~~27, 2010~~million.

Income Tax Expense/Benefit. Income tax expense was $0.34 million ~~and~~for the thirteen weeks ended February 26, 2011 compared to an income tax benefit of $0.41 million for the ~~thirteen~~same ~~weeks~~period ~~ended~~of ~~November~~fiscal ~~27,~~year 2010, ~~and~~a ~~November~~tax ~~28,~~expense ~~2009,~~increase ~~respectively~~of $0.5 million. Income tax expense is recorded on taxable income from National Carriers, which is organized as a C Corporation, and the apportioned taxable income of NBP by certain states which impose privilege taxes.

~~Net Income. As a result of the factors described above, net income for the thirteen~~Twenty-~~week~~six ~~period~~weeks ended ~~November~~February 2726, ~~2010~~2011 ~~was approximately $54.5 million~~ compared to ~~net income of approximately $41.3 million for the thirteen~~twenty-~~week~~six ~~period~~weeks ended ~~November~~February 2827, ~~2009, an increase of approximately $13.2 million or 32.0%.~~2010

General. Net income for the twenty-six weeks ended February 26, 2011 was approximately $115.8 million compared to net income of approximately $90.6 million for the twenty-six weeks ended February 27, 2010, an improvement of approximately $25.2 million, or 27.8%. Net sales were higher in the twenty-six weeks ended February 26, 2011 compared to those of the prior period primarily due to an increase in net sales per head of approximately 17.2%, and an approximately 3.2% increase in the volume of cattle processed.

Total costs and expenses of $3,118.2 million for the twenty-six weeks ended February 26, 2011 were 96.2% of net sales compared to $2,580.7 million for the twenty-six weeks ended February 27, 2010, or 96.2% of net sales. Total costs as a percentage of net sales are similar primarily due to the increase in net sales per head of approximately 17.2%, offset by an increase in average cattle prices of approximately 19.6% for the comparable periods.

Net Sales. Net sales were approximately $3,239.9 million for the twenty-six weeks ended February 26, 2011 compared to approximately $2,683.5 million for the twenty-six weeks ended February 27, 2010, an increase of approximately $556.4 million, or 20.7%. The increase in net sales resulted primarily from an average increase in net sales per head of 17.2%, and an increase in the volume of cattle processed by approximately 3.2% in the twenty-six weeks ended February 26, 2011, as compared to the same period in the prior year.

Cost of Sales. Cost of sales was approximately $3,067.8 million for the twenty-six weeks ended February 26, 2011 compared to approximately $2,533.2 million for the twenty-six weeks ended February 27, 2010, an increase of approximately $534.6 million, or 21.1%. The increase was primarily a result of an approximately 19.6% increase in average cattle prices during the period, and an approximately 3.2% increase in the number of cattle processed during the period.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $25.6 million for the twenty-six weeks ended February 26, 2011 compared to approximately $23.3 million for the twenty-six weeks ended February 27, 2010, an increase of approximately $2.3 million, or 9.9%. The increase for the period is primarily due to an approximately $0.8 million increase in consulting expenses, approximately $0.7 million increase in salaries expense and an increase in travel expenses of approximately $0.5 million during the current period as compared to the same period of the prior year. These increases are offset by a decrease in bad debt expense of approximately $0.3 million during the period.

Table of Contents

Depreciation and Amortization Expense. Depreciation and amortization expenses were approximately $24.8 million for the twenty-six weeks ended February 26, 2011 compared to approximately $24.3 million for the twenty-six weeks ended February 27, 2010, an increase of approximately $0.5 million, or 2.1%. Depreciation expense increased due to assets being placed into service, primarily at our three beef plants and two case ready plants, during fiscal year 2011.

Operating Income. Operating income was approximately $121.7 million for the twenty-six weeks ended February 26, 2011 compared to operating income of approximately $102.8 million for the twenty-six weeks ended February 27, 2010, an improvement of approximately $18.9 million, or 18.4%. The increased operating income primarily resulted from an approximately 17.2% increase in net sales per head and a 3.2% increase in the volume of cattle processed. These increases are partially offset by an approximately 19.6% increase in average cattle prices during the period.

Interest Expense. Interest expense was approximately $6.1 million for the twenty-six weeks ended February 26, 2011 compared to $8.1 million for the twenty-six weeks ended February 27, 2010, a decrease of approximately $2.0 million or 24.7%. The decrease in interest expense during the twenty-six weeks ended February 26, 2011 as compared to the same period in the prior fiscal year was due primarily to an average daily interest rate reduction from 4.5% to 2.8%. This decrease was primarily the result of purchasing and cancelling the remaining $66.9 million of our Senior Notes during the twenty-six weeks ended February 27, 2010.

Other, net. Other, net non-operating income was approximately $0.8 million for the twenty-six weeks ended February 26, 2011 compared to other, net non-operating expense of approximately $3.8 million for the twenty-six weeks ended February 27, 2010, an improvement of approximately $4.6 million. During the twenty-six weeks ended February 27, 2010, we expensed $2.2 million incurred in connection with the attempted IPO by National Beef Inc. in December 2009. In addition, during the twenty-six weeks ended February 27, 2010, we expensed approximately $1.8 million of legal fees, and the remaining senior notes issuance fees of $0.4 million.

Income Tax Expense. Income tax expense was $0.7 million for the twenty-six weeks ended February 26, 2011 compared to $0.4 million for the same period of fiscal year 2010, an increase of $0.3 million. Income tax expense is recorded on taxable income from National Carriers, which is organized as a C Corporation, and the apportioned taxable income of NBP by certain states which impose privilege taxes.

Segment Results

The Company’s operating segments are based on segment profit and evaluated by the Chief Executive Officer, who also serves as the Chief Operating Decision Maker (CODM). Segment profit is measured as operating income for NBP’s two reporting segments, Core Beef and Other, based on the definitions provided in ASC 280, ~~Segment~~Disclosures ~~Reporting~~about Segments of an Enterprise and Related Information.

Core Beef—the majority of NBP’s revenues are generated from the sale of fresh meat, which include chuck cuts, rib cuts, loin cuts, round cuts, thin meats, ground beef, and other products. In addition, we also sell beef by-products including hides to the variety meat, feed processing, fertilizer, and pet food ~~and leather tanning~~ industries. Aggregation criteria were applied to determine the constituents of the Core Beef segment.

Eliminations—this line item includes eliminations of inter-segment and intra-segment activity resulting from the consolidation process.

1314

Table of Contents

The following table represents segment results for the periods indicated (~~amounts~~ in thousands):

	13 weeks ended			13 weeks ended			26 weeks ended			26 weeks ended
	November 27, 2010			November 28, 2009
	February 26, 2011			February 27, 2010			February 26, 2011			February 27, 2010
Net sales:
Core beef	$	1,~~620~~681,~~788~~632		$	1,~~363~~367,~~131~~189		$	3,302,420		$	2,730,320
Other		5369,~~646~~240			5465,~~920~~088			122,886			120,008
Eliminations		(8798,~~114~~266	)		(7591,~~441~~351	)		(185,380	)		(166,792	)
Total net sales	$	1,~~587~~652,~~320~~606		$	1,~~342~~340,~~610~~926		$	3,239,926		$	2,683,536
Operating income:
Core beef	$	5663,~~432~~176		$	4454,~~729~~931		$	119,608		$	99,659
Other		~~349~~1,777			1,~~432~~696			2,126			3,129
Total operating income		5664,~~781~~953			4656,~~161~~627			121,734			102,788
Interest income		74			296			11			34
Interest expense		(23,~~598~~475	)		(43,~~532~~519	)		(6,073	)		(8,051	)
Other income, net		596			7
Other expense, net		236			(3,784	)		833			(3,776	)
Total income before taxes	$	5461,~~786~~718		$	4149,~~665~~330		$	116,505		$	90,995
	November 27, 2010			November 28, 2009
	February 26, 2011			February 27, 2010
Assets:
Core beef	$	~~899~~958,~~616~~051		$	~~766~~769,~~041~~251
Other		4647,~~885~~114			4543,~~027~~534
Eliminations		(1,~~890~~454	)		(~~904~~2,172	)
Total assets	$	~~944~~1,~~611~~003,711		$	810,~~164~~613

Thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to thirteen weeks ended ~~November~~February 2827, ~~2009~~2010

Core Beef

Net Sales. Net sales for Core Beef were approximately $1,~~620~~681.86 million for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to approximately $1,~~363~~367.12 million for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, an increase of approximately $~~257~~314.74 million, or 1823.90%. The increase in net sales ~~primarily~~ resulted primarily from an ~~approximately14.3%~~ increase in ~~the~~net ~~average~~ sales ~~price~~ per head ~~during~~of ~~the~~20.1% ~~thirteen~~as ~~weeks~~well ~~ended~~as ~~November~~a ~~27,~~2.4% ~~2010~~increase asin the ~~demand~~number ~~for~~of ~~beef~~cattle ~~products~~processed ~~was~~for ~~stronger as compared to~~ the current thirteen ~~weeks~~week ~~ended~~period ~~November~~as ~~28,~~compared ~~2009. Also contributing~~ to the ~~increase~~same inperiod ~~net~~of ~~sales was an approximately 4.0% increase in~~ the ~~volume~~prior ~~of cattle processed~~year.

Operating Income. ~~Operating~~The operating income for Core Beef was approximately $5663.42 million ~~during~~for the thirteen weeks ended ~~November~~February 2726, ~~2010~~2011 compared to operating income of approximately $4454.79 million ~~during~~for the thirteen weeks ended ~~November~~February 2827, ~~2009~~2010, an improvement of approximately $118.73 million. The ~~improvement~~improved in operating income ~~during the first quarter of fiscal 2010~~ resulted ~~primarily~~ from an increase in ~~the~~net sales per head of approximately 1420.31% and 2.4% increase in the ~~volume~~number of cattle processed ~~of approximately 4.0% during the thirteen weeks ended November 27~~, ~~2010. These increases were~~ offset by an approximately 23.9% increase in average ~~live~~ cattle prices ~~of approximately 15.3%~~ during the period.

~~Other~~15

Net Sales. Net sales for Other were approximately $53.6 million for the thirteen weeks ended November 27, 2010 compared to approximately $54.9 million for the thirteen weeks ended November 28, 2009, a decrease of approximately $1.3 million or 2.4%. The decrease in net sales for other was primarily due to reduced revenues at both our transportation company and portion control facility during the thirteen weeks ended November 27, 2010 as compared to the thirteen weeks ended November 28, 2009.

Table of Contents

~~Operating Income. Operating income for~~ Other was approximately $0.3 million for the thirteen weeks ended November 27, 2010 compared to approximately $1.4 million for the thirteen weeks ended November 28, 2009, a decrease of approximately $1.1 million. This decrease was due primarily to a reduction of operating income at both our transportation company and portion control facility due to lower sales at both locations and higher depreciation expense at our transportation company.

Net Sales. Net sales for Other were approximately $69.2 million for the thirteen weeks ended February 26, 2011 compared to approximately $65.1 million for the thirteen weeks ended February 27, 2010, an increase of approximately $4.1 million, or 6.3%. The increase was primarily due to increased net sales at our portion control beef facility and transportation operations during the thirteen week period of fiscal 2011 as compared to the same period of the prior year.

Operating Income. Operating income for Other was approximately $1.8 million for the thirteen weeks ended February 26, 2011 compared to approximately $1.7 million for the thirteen weeks ended February 27, 2010, an increase of approximately $0.1 million.

Twenty-six weeks ended February 26, 2011 compared to twenty-six weeks ended February 27, 2010

Core Beef

Net Sales. Net sales for Core Beef were approximately $3,302.4 million for the twenty-six weeks ended February 26, 2011 compared to approximately $2,730.3 million for the twenty-six weeks ended February 27, 2010, an increase of approximately $572.1 million, or 21.0%. The increase in net sales resulted primarily from an approximately 17.2% increase in net sales per head for the twenty-six weeks ended February 26, 2011 as compared to the same period of the prior year, and a 3.2% increase in the number of cattle processed.

Operating Income. Operating income for Core Beef was approximately $119.6 million for the twenty-six weeks ended February 26, 2011 compared to operating income of approximately $99.7 million for the twenty-six weeks ended February 27, 2010, an improvement of approximately $19.9 million, or 20.0%. The improved operating income resulted from a 17.2% increase in net sales per head and a 3.2% increase in the volume of cattle processed, offset by an approximately 19.6% increase in average cattle prices compared to the prior year.

Other

Net Sales. Net sales for Other were approximately $122.9 million for the twenty-six weeks ended February 26, 2011 compared to approximately $120.0 million for the twenty-six weeks ended February 27, 2010, an increase of approximately $2.9 million, or 2.4%. The increase in net sales was primarily due to higher net sales in our transportation operations during the twenty-six week period of fiscal 2010 as compared to the same period of the prior year.

Operating Income. Operating income for Other was approximately $2.1 million for the twenty-six weeks ended February 26, 2011 compared to approximately $3.1 million for the twenty-six weeks ended February 27, 2010, a reduction of approximately $1.0 million. The decrease was due primarily to a reduction of operating income at our portion control beef facility partially offset by improved operating income at our transportation operations facility during the current twenty-six week period of fiscal 2011 as compared to the same period of the prior year.

Liquidity and Capital Resources

As of ~~November~~February 2726, ~~2010~~2011, we had net working capital of approximately $90246.03 million, which included $~~171~~30.19 million in distributions payable, and cash and cash equivalents of $2632.2 million. As of August 28, 2010, we had net working capital of approximately $180.2 million, which included cash and cash equivalents of $20.4 million, with $27.4 million in distributions payable. Our primary sources of liquidity are cash ~~flow~~flows from operations and available borrowings under our amended and restated credit facility, or Credit Facility.

As of ~~November~~February 2726, ~~2010~~2011, we had $~~279~~436.26 million of long-term debt, of which $2138.45 million ~~of which~~ was classified as a current liability. As of ~~November~~February 2726, ~~2010~~2011, our Credit Facility ~~originally~~ consisted of a ~~$375.0 million~~ term loan, of which $~~195~~360.08 million was outstanding, and a $250.0 million revolving line of credit loan, which had outstanding borrowings of $6557.0 million, outstanding letters of credit of $24.1 million and available borrowings of $~~159~~168.69 million, based on the most restrictive financial covenant calculations. Cash flows from operations and borrowings under our Credit Facility have funded our working capital requirements, acquisitions, capital expenditures and other general corporate purposes. We were in compliance with all of our financial covenants under our Credit Facility as of ~~November~~February 2726, ~~2010~~2011.

In addition to outstanding borrowings under our Credit Facility, we had outstanding borrowings under industrial revenue bonds of $12.2 million and capital lease and other obligations of $7.0 million as of November 27, 2010.16

WeTable believe that available borrowings under our Credit Facility and cash provided by operating activities will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future. Our ability to generate sufficient cash, however, is subject to certain general economic, financial, industry, legislative, regulatory and other factors beyond our control. For a review of our obligations that affect liquidity, please see the “Cash Payment Obligations” table in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended August 28, 2010.Contents

In addition to outstanding borrowings under our Credit Facility, we had outstanding borrowings under industrial revenue bonds of $12.2 million and capital leases and other obligations of $6.6 million as of February 26, 2011.

We believe that available borrowings under our Credit Facility and cash provided by operating activities will be sufficient to support our working capital, capital expenditures and debt service requirements for the foreseeable future. Our ability to generate sufficient cash, however, is subject to certain general economic, financial, industry, legislative, regulatory and other factors beyond our control. For a review of our obligations that affect liquidity, please see the “Cash Payment Obligations” table in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended August 28, 2010.

Operating Activities

Net cash provided ~~through~~by operating activities in the ~~thirteen~~twenty-six weeks ended ~~November~~February 2726, ~~2010~~2011 was approximately $2059.02 million compared to net cash provided ~~through~~by operating activities of approximately $2881.3 million in the ~~thirteen~~twenty-six weeks ended ~~November~~February 2827, ~~2009~~2010. The $822.31 million ~~decrease~~change ~~in operating activities~~ was primarily ~~related~~due to a decrease in working capital changes during the period,. The working capital changes were primarily related to an increase in cash paid in fiscal year 2011 for bonuses earned in fiscal year 2010 and an increase in cash collateral posted on derivatives liabilities. These decreases are partially offset by an increase in net income of approximately $1325.21 million during the ~~thirteen~~twenty-six weeks ended ~~November~~February 2726, ~~2010~~2011 as compared to the ~~thirteen~~twenty-six weeks ended ~~November~~February 2827, ~~2009~~2010.

Investing Activities

Net cash used in investing activities was approximately $1230.60 million in the ~~thirteen~~twenty-six weeks ended ~~November~~February 2726, ~~2010~~2011 compared to approximately $917.03 million in the ~~thirteen~~twenty-six weeks ended ~~November~~February 2827, ~~2009~~2010. This increase in cash used was primarily attributable to an approximate $313.97 million increase in expenditures for property, plant and equipment during the ~~thirteen~~twenty-six weeks ended ~~November~~February 2726, ~~2010~~2011 as compared to the ~~thirteen~~twenty-six weeks ended ~~November~~February 2827, ~~2009~~2010.

Table of Contents

Financing Activities

Net cash used in financing activities was approximately $117.64 million ~~during~~in the ~~thirteen~~twenty-six weeks ended ~~November~~February 2726, ~~2010~~2011 compared to net cash used in financing activities of approximately $2270.94 million ~~during~~in the ~~thirteen~~twenty-six weeks ended ~~November~~February 2827, ~~2009~~2010. The change was primarily attributed to anadditional ~~approximately~~ $67100.20 ~~increase~~million inof ~~net~~borrowings ~~receipts~~on ~~under~~the ~~our~~term ~~revolving~~loan ~~credit lines~~ during the ~~thirteen~~twenty-six weeks ended ~~November~~February 2726, ~~2010~~2011 compared to the ~~thirteen~~prior ~~weeks~~year ~~ended~~period. In ~~November 28~~addition, ~~2009, and~~ the ~~purchase~~remaining ~~and~~$66.9 ~~cancellation~~million ofwas ~~approximately~~purchased ~~$39.8~~and ~~million~~cancelled ofon our ~~Senior~~senior ~~Notes~~notes during the ~~thirteen~~twenty-six weeks ended ~~November~~February 2827, ~~2009~~2010. These increases in cash provided by financing activities ~~was~~were partially offset by an ~~approximate~~additional $75144.07 million in ~~borrowings~~member ~~under~~distributions ~~our~~made ~~term note payable~~ during the ~~thirteen~~twenty-six weeks ended ~~November~~February 2826, ~~2009~~2011 ~~and~~compared anto ~~approximate $13.6 million change in~~ the ~~overdraft~~twenty-six ~~balances~~weeks ~~during~~ended ~~the~~February ~~period~~27, 2010.

Amended and Restated Senior Credit Facility

Effective as of June 4, 2010, the Credit Facility was amended and restated to: (1) increase the borrowings under the Credit Facility by providing for a term loan facility of up to $375 million and a revolving line of credit of up to $250 million; (2) reduce the applicable margin on the rates of interest of the term loan and revolving line of credit; (3) revise the payment schedule of the term loan; (4) extend the maturity date of the Credit Facility to June 4, 2015; (5) remove limitations on capital expenditures; (6) add new financial covenants regarding adjusted net worth and a fixed charge coverage ratio; and (7) add two wholly owned subsidiaries, National Beef California, LP and National Carriers, Inc., as loan parties and guarantors. The lender financing charges for the amended and restated Credit Facility of approximately $4.27 million are being amortized over the life of the loan.

The borrowings under the Credit Facility bear interest at LIBOR or the Base Rate, plus the applicable margin. The applicable margin for the revolving line of credit and the term loan will be as set forth on a grid based on different ratios of funded debt to EBITDA. As of November 27, 2010, the interest rates for the term loan and revolving loan were approximately 2.76% and 3.53%, respectively.17

Table of Contents

On November 29, 2010, the Company drew $175 million under the Credit Facility. The draw was made to fund distributions to the Company’s members and for general corporate purposes. The draw constitutes the last of a series of term loans under the Credit Facility not to exceed $375 million in the aggregate.

The borrowings under the Credit Facility bear interest at LIBOR or the Base Rate, plus the applicable margin. The applicable margin for the revolving line of credit and the term loan will be as set forth on a grid based on different ratios of funded debt to EBITDA. As of February 26, 2011, the interest rates for the term loan and revolving loan were both approximately 2.52%.

The borrowings under the revolving loan are available for our working capital requirements, capital expenditures and other general corporate purposes. The advance rates under the borrowing base are 90% on eligible accounts and 70% on eligible inventory. The Credit Facility is secured by a first priority lien on substantially all of our assets and the assets of our subsidiaries.

The principal amount outstanding under the term loan is due and payable in equal quarterly installments beginning in October 2010, based on a 10-year level amortization of the remaining amount of the term loan. All outstanding loan amounts are due and payable on June 4, 2015. Prepayment of the loans is allowed at any time.

The Credit Facility contains customary affirmative covenants relating to NBP LLC and its subsidiaries, including, without limitation, conduct of business, maintenance of insurance, compliance with laws, maintenance of properties, keeping of books and records, and the furnishing of financial statements. The facility also contains customary negative covenants relating to NBP LLC and its subsidiaries, including, without limitation, restrictions on: distributions, mergers, asset sales, investments and acquisitions, encumbrances, affiliate transactions, and ERISA matters. The ability of NBP LLC and its subsidiaries to engage in other business, incur debt or grant liens is also restricted.

The Credit Facility contains customary events of default, including, without limitation, failure to make payment when due, materially incorrect representations and warranties, breach of covenants, events of bankruptcy, default of other indebtedness that would permit acceleration of such indebtedness, the occurrence of one or more unstayed or undischarged judgments in excess of $3.0 million, changes in custody or control of NBP LLC’s property, changes in control of National Beef or the Company, failure of any of the loan documents to remain in full force, and the Company’s failure to properly fund its employee benefit plans. The Credit Facility also includes customary provisions protecting the lenders against increased costs or loss of yield resulting from changes in tax, reserve, capital adequacy and other requirements of law.

16Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

The principal market risks affecting our business are exposure to changes in prices for commodities, such as livestock and boxed beef, and interest rate risk.

Commodities. We use various raw materials, many of which are commodities. Raw materials are generally available from several different sources, and we presently believe that we can obtain them as needed. Commodities are subject to price fluctuations that may create price risk. ~~From~~When ~~time to time~~appropriate, we may hedge commodities in order to mitigate this price risk. While this may tend to limit our ability to participate in gains from commodity price fluctuations, it also tends to reduce the risk of loss from changes in commodity prices. To the extent the contracts are not designated as normal purchases, we reflect commodity contract gains and losses as adjustments to the basis of underlying commodities purchased; gains or losses are recognized in the statement of operations as a component of costs of goods sold.

We purchase cattle for use in our processing businesses. From time to time, we enter into forward purchase contracts at prices determined prior to the delivery of the cattle. The commodity price risk associated with these activities can be hedged by selling (or buying) the underlying commodity, or by using an appropriate commodity derivative instrument. The particular hedging instrument we use depends on a number of factors, including availability of appropriate derivative instruments.

We sell commodity beef products in our business. Commodity beef products are subject to price fluctuations that may create price risk. From time to time, we enter into forward sales contracts at prices determined prior to shipment. We may hedge the commodity price risk associated with these activities in order to mitigate this price risk. While this may tend to limit our ability to participate in gains from commodity price fluctuations, it also tends to reduce the risk of loss from changes in commodity beef prices. To the extent the contracts are not designated as normal sales, we reflect commodity contract gains and losses as adjustments to the basis of underlying commodities sold; gains or losses are recognized in the statement of operations as a component of net sales.18

From time to time, we purchase cattle futures and options contracts. Our primary use of these contracts is to partially determine our future input costs when we have committed forward sales purchase orders from customers at a specified fixed price. The longest duration futures contract owned is sixteen months. In accordance with ASC 815, Derivatives and Hedging, as amended, we account for futures contracts and their related firm purchase commitments at fair value. Certain firm commitments for live cattle purchases and all firm commitments for boxed beef sales are treated as “normal purchases and sales” and not marked to market. ASC 815 imposes extensive recordkeeping requirements in order to treat a derivative instrument as a hedge for accounting purposes. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the instrument and the related change in fair value of the underlying commitment. For derivatives that qualify as effective hedges, the change in fair value has no net effect on earnings until the hedged transaction affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value does affect current period net earnings.

While management believes each of these instruments helps mitigate various market risks, they are not designated and accounted for as hedges as a result of the extensive recordkeeping requirements of this statement. Accordingly, the gains and losses associated with the change in fair value of the instrument and the offsetting gains and losses associated with changes in the market value of certain of the firm purchase commitments related to the futures contracts are recorded to income and expense in the period of change.

Table of Contents

We ~~use~~sell acommodity ~~sensitivity~~beef ~~analysis~~products toin ~~evaluate~~our ~~the~~business. ~~effect~~Commodity beef products are subject to price fluctuations that ~~changes~~may increate ~~the~~price ~~market~~risk. ~~value~~From oftime ~~commodities~~to ~~will~~time, ~~have~~we onenter ~~these~~into ~~commodity~~forward ~~derivative~~sales ~~instruments. We~~contracts ~~feel~~at ~~that~~prices ~~sensitivity~~determined ~~analysis~~prior ~~more~~to ~~appropriately~~shipment. ~~reflects~~We ~~the~~may ~~potential~~hedge ~~market~~the ~~value~~commodity ~~exposure~~price risk associated with ~~the~~these ~~use~~activities ofin ~~derivative~~order ~~instruments~~to mitigate this price risk. AsWhile ofthis ~~November~~may ~~27,~~tend ~~2010~~to ~~and~~limit ~~August~~our ~~28,~~ability ~~2010~~to participate in gains from commodity price fluctuations, ~~the~~it ~~potential~~also ~~change~~tends into reduce the ~~fair~~risk ~~value~~ of ~~the~~loss ~~derivative~~from ~~instruments~~changes wein ~~hold~~commodity ~~that~~beef prices. To the extent the contracts are not designated as normal ~~purchases or~~ sales, ~~assuming~~we areflect ~~hypothetical~~commodity ~~10%~~contract ~~decrease~~gains inand losses as adjustments to the basis of underlying ~~commodity~~commodities ~~price~~sold; gains or losses are recognized in ~~each~~the ~~year,~~statement ~~was~~of ~~$9.3~~operations ~~million~~as ~~and~~a ~~$0.3~~component ~~million,~~of ~~respectively~~net sales.

From time to time, we purchase cattle futures and options contracts. Our primary use of these contracts is to partially fix our future input costs when we have committed forward sales purchase orders from customers at a specified fixed price. The longest duration futures contract owned is sixteen months. In accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities, as amended, we account for futures contracts and their related firm purchase commitments at fair value. Certain firm commitments for live cattle purchases and all firm commitments for boxed beef sales are treated as “normal purchases and sales” and not marked to market. ASC Topic 815 imposes extensive recordkeeping requirements in order to treat a derivative instrument as a hedge for accounting purposes. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the instrument and the related change in fair value of the underlying commitment. For derivatives that qualify as effective hedges, the change in fair value has no net effect on earnings until the hedged transaction affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value does affect current period net earnings.

While management believes each of these instruments help mitigate various market risks, they are not designated and accounted for as hedges as a result of the extensive recordkeeping requirements of this statement. Accordingly, the gains and losses associated with the change in fair value of the instrument and the offsetting gains and losses associated with changes in the market value of certain of the firm purchase commitments related to the futures contracts are recorded to income and expense in the period of change.

We use a sensitivity analysis to evaluate the effect that changes in the market value of commodities will have on these commodity derivative instruments. We feel the sensitivity analysis appropriately reflects the potential market value exposure associated with the use of derivative instruments. As of February 26, 2011 and August 28, 2010, the potential change in the fair value of the derivative instruments we hold that are not designated as normal purchases or sales, assuming a hypothetical 10% decrease in the underlying commodity price in each year, was $4.0 million and $0.3 million, respectively.

Interest Rates. As a result of our normal borrowing and leasing activities, our operating results are exposed to fluctuations in interest rates, which we manage primarily through our regular financing activities. We generally maintain limited investments in cash and cash equivalents.

We have long-term debt with variable interest rates. Short-term debt is primarily comprised of the current portion of long-term debt maturing twelve months from the balance sheet date. Our variable interest expense is sensitive to changes in the general level of interest rates. As of ~~November~~February 2726, ~~2010~~2011, the weighted average interest rate on our $~~272~~430.20 million of variable ~~interest~~rate debt was approximately 2.8445%. As of August 28, 2010, the weighted average interest rate on our $239.2 million of variable interest debt was approximately 2.77%.

We had total interest expense of approximately $2.6.1 million during the ~~thirteen~~twenty-six ~~weeks~~week ~~ended~~period ~~November~~ending 27February 26, ~~2010~~2011. The estimated increase in interest expense from a hypothetical 200 basis point increase in applicable variable interest rates would have been approximately $1.3.4 million ~~during~~in the ~~thirteen~~twenty-six ~~weeks~~week ~~ended~~period ~~November~~ending 27February 26, ~~2010~~2011.

Foreign Operations. Transactions denominated in a currency other than an entity’s functional currency may expose that entity to currency risk. Although we operate in international markets including Japan, and South Korea ~~and China~~, product sales are predominately made in United States dollars, and therefore, currency risks are limited.

~~Item 4. Controls and Procedures.~~19

We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the Consolidated Financial Statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) under supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in alerting them, in a timely manner, to material information required to be included in our periodic Securities and Exchange Commission filings. There have been no changes in our internal controls over financial reporting during the thirteen weeks ended November 27, 2010 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.

Table of Contents

Item 4. Controls and Procedures

We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the Consolidated Financial Statements and other disclosures included in this report, as well as to safeguard assets from unauthorized use or disposition. We evaluated the effectiveness of the design and operation of our disclosure controls and procedures as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e) under supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in alerting them, in a timely manner, to material information required to be included in our periodic Securities and Exchange Commission filings. There have been no changes in our internal controls over financial reporting during the thirteen weeks ended February 26, 2011 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.

Table of Contents

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For information regarding legal proceedings, see Note 5, “Contingencies” to our Consolidated Financial Statements included in Part I-, Item 1 of this Form 10-Q~~, which is incorporated herein by reference~~.

Item 1A. Risk Factors.

The risk factors set forth in our Annual Report on Form 10-K for the ~~fiscal~~ year ended August 2728, 2010 have not materially changed.

Item 6. Exhibits.

(A)

Exhibits

31.1

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

31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

1921

Table of Contents

SIGNATURES

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

National Beef Packing Company, LLC By: /s/ Timothy M. Klein Timothy M. Klein Chief Executive Officer and Manager (Principal Executive Officer) By: /s/ Jay D. Nielsen Jay D. Nielsen Chief Financial Officer (Principal Financial and Accounting Officer)

	National Beef Packing Company, LLC

	By:	/s/ Timothy M. Klein
		Timothy M. Klein
		Chief Executive Officer and Manager
		(Principal Executive Officer)

	By:	/s/ Simon P. McGee
		Simon P. McGee
		Chief Financial Officer
		(Principal Financial Officer)

	By:	/s/ Jay D. Nielsen
		Jay D. Nielsen
		Chief Accounting Officer
		(Principal Accounting Officer)

Date: April 8, 2011

~~Date: January 7, 2011~~22

Filing Compare · NATIONAL BEEF PACKING CO LLC