TABLE OF CONTENTS

     Unless the context indicates or otherwise requires, the terms “USPB”, “the Company”, “we”, “our”, and “us” refer to U.S. Premium Beef, LLC. As used in this report, the terms “NBP” and “National Beef” refer to National Beef Packing Company, LLC, a Delaware limited liability company.

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PART I.    FINANCIAL INFORMATION

Item 1.      Financial Statements (unaudited).

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

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U.S. PREMIUM BEEF, LLC
Statements of Operations
(thousands of dollars, except unit and per unit data)

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U.S. PREMIUM BEEF, LLC
Statements of Cash Flows
(thousands of dollars)

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U.S. PREMIUM BEEF, LLC

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

(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 28, 2019. The results of operations for the interim periods presented are not necessarily indicative of the results for a full fiscal year.

(2)   Accounting Policies

     Accounting for Investment in NBP.On December 30, 2011, USPB sold the majority of its ownership interest in NBP to Leucadia. On that date, USPB’s investment in NBP was measured at fair value and has since been carried under the equity method of accounting. 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.

     Operating losses, diminished cash flows, economic and industry events, pandemics, such as coronavirus disease (COVID-19), and a variety of other factors may result in a decrease in the value of the investment, which is other than temporary. Such potential decreases in value, if deemed other than temporary, will cause the Company to record an impairment charge, which may have an impact on the trading values of USPB’s Class A and Class B units. However, NBP’s plants are all operational at the present time; it has been designated as an essential business during the COVID-19 pandemic; and its results of operations are highly profitable, as reflected in Note 6. As a result, we believe the fair value of our investment in NBP exceeds the carrying value.

     Cash and Cash Equivalents.The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. As of March 28,June 27, 2020, the Company’s balance sheet reflected Cash and cash equivalents of $74.8$31.8 million.

(3)   Noncompetition Agreements

     The former CEO’s employment agreement provided for him to receive noncompetition payments in connection with the Leucadia Transaction. He will continue to receive noncompetition payments of approximately $845,000 per year during calendar years 2020 and 2021.

     The current CEO’s employment agreement provides for him to receive noncompetition payments for a twelve-month period following his termination of employment with USPB.

     As of March 28,June 27, 2020 and December 28, 2019, the Company had accrued $1.7$1.6 million and $1.9 million, respectively, for the noncompetition agreements. The current and long-term portion of the accrued amount isamounts are included in Accrued compensation and benefits and Other liabilities, respectively, on the balance sheet. The table below summarizes the current and long-term portions of the accrued non-compete amounts:amounts (thousands of dollars):

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(4)   Employee Compensation Plans

     In September 2010, USPB’s Board of Directors approved a management phantom unit plan and subsequently awarded phantom units in fiscal years 2010 and 2013. As of March 28,June 27, 2020 and December 28, 2019, the Company had accrued $2.3$2.6 million and $2.3 million, respectively, for the management phantom awards. The current and long-term portion of the accrued amounts are included in Accrued compensation and benefits and Other liabilities on the balance sheet.

     USPB provides its employees the opportunity to earn cash incentives and bonuses. As of March 28,June 27, 2020 and December 28, 2019, the Company had accrued $0.3$0.7 million and $1.4 million, respectively, for the cash incentive and bonus plans. The accrued amounts are included in Accrued compensation and benefits on the balance sheet.

(5)   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 thirteen-weekthirteen and twenty-six week periods ended March 28,June 27, 2020 and March 30,June 29, 2019, 10% of USPB’s net income was 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.

(6)   Investment in National Beef Packing Company, LLC

     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. The table below summarizes the changes to USPB’s investment in NBP (thousands of dollars):

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     Below is a summary of the results of operations for NBP for the thirteen-weekthirteen and twenty-six week periods ended March 28,June 27, 2020 and March 30,June 29, 2019 (thousands of dollars):

(7)   Income Taxes

     Effective August 29, 2004, the Company converted to an LLC, and under this structure, taxes are not assessed at the Company level as the results of operations are included in the taxable income of the individual members.

Although income taxes are assessed to the individual members, USPB is required to withhold state income taxes from the cash distributions it makes to it members. As of March 28,June 27, 2020, Other accrued expenses and liabilities on the Company’s balance sheet reflected state taxes payable of $0.1$0.4 million.

(8)   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 matures oncommitments original maturity date was June 30, 2020. On June 24, 2020, CoBank unilaterally extended the Term Expiration Date under USPB’s Amended and Restated Revolving Term Supplement from June 30, 2020 up to and including August 31, 2020. USPB and CoBank entered into a new Credit Agreement on July 13, 2020 (see Note 11 – Subsequent Events).

(9)   Members’ Capital

     The following table represents a reconciliation of Members’ Capital for the thirteen-weekthirteen and twenty-six-week periods ended March 28,June 27, 2020 and March 30,June 29, 2019 (unaudited) (thousands of dollars).

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(10)   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 is a defendant in twofour class action lawsuits in the United States District Court, Minnesota District alleging that it violated the Sherman Antitrust Act, the Packers and Stockyards Act, the Commodity Exchange Act, and various state laws (the “Antitrust Cases”). The Antitrust Cases are entitled In re Cattle Antitrust Litigation, which was filed originally on April 23, 2019, and2019; Peterson et al. v. JBS USA Food Company Holdings, et al., which was filed originally on April 26, 2019.2019; Samuels v. Cargill, Inc., et al, which was filed originally o April 26, 2019; and Erbert & Gerbert’s, Inc. v. JBS USA Food Company Holdings, et al., which was filed originally on June 18, 2020. The plaintiffs in the Antitrust Cases seek treble damages and other relief under the Sherman Antitrust Act, the Packers & Stockyards Act, the Commodities Exchange Act and attorneys’ fees. NBP is also a defendant in two class action lawsuits filed on January 7, 2020, alleging that it misrepresented the origin of its products in violation of the New Mexico Unfair Practices Act (the “Labelling Cases”). The Labelling Cases are entitledThornton v. Tyson Foods, Inc., et al., filed in the New Mexico Second Judicial District Court, Bernalillo County, andLucero v. Tyson Foods, et al., filed in the New Mexico Thirteenth Judicial District Court, Sandoval County. The Labelling Cases were subsequently removed to the United States District Court, New Mexico District. The plaintiffs in the Labelling Cases seek treble damages and other relief and attorneys’ fees. NBP believes it has meritorious defenses to the claims in the Antitrust Cases and the Labelling Cases and intends to defend these cases vigorously. There can be no assurances, however, as to the outcome of these matters or the impact on NBP’s consolidated financial position, results of operations and cash flows.

     NBP is a party to various 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 NPB’s financial condition, results of operations or liquidity.

     USPB is not able to assess what impact, if any, the actions described above will have on NBP or USPB.

(11)   Subsequent Events

     USPB has evaluated subsequent events through the date the financial statements were issued and determined there were no such events to report.

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On July 13, 2020, USPB, and CoBank, ACB (“CoBank”), entered into a Credit Agreement, Amended and Restated Revolving Term Promissory Note (“Promissory Note”), and an Affirmation of Pledge Agreement. The Credit Agreement, Amended and Restated Revolving Term Promissory Note, and Affirmation of Pledge Agreement replace, amend and restate the arrangements between CoBank and USPB contained in that certain Master Loan Agreement, Revolving Term Loan Supplement to the Master Loan Agreement, Pledge Agreement, and Security Agreement dated July 26, 2011, as amended (the “Prior Agreements.”). The Prior Agreements carried a “Term Expiration Date” of June 30, 2020, but on June 24, 2020, CoBank unilaterally extended the Term Expiration Date under USPB’s Amended and Restated Revolving Term Supplement from June 30, 2020 up to and including August 31, 2020.

The Credit Agreement and the Amended and Restated Revolving Term Promissory Note provide for a $1 million Revolving Term Commitment. That commitment carries a term of five years, maturing on June 30, 2025. The Promissory Note defines Interest as equal to the One-Month LIBOR Index Rate or if LIBOR quotes are no longer available, CoBank will replace the LIBOR Index Rate with a replacement benchmark rate. The other terms and conditions of the Master Loan Agreement and the Revolving Term Loan Supplement continue the terms and conditions of the Prior Agreements without material modifications. The Affirmation of Pledge Agreement provides CoBank with a first-priority security interest in USPB’s Membership Interests in, and Distributions from, National Beef Packing Company, LLC.

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

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

Disclosure Regarding Forward-Looking Statements

     This report contains “forward-looking statements,” which are subject to a number of risks and uncertainties, many of which are beyond our control. Forward-looking statements are typically identified by the words “believe,” “expect,” “anticipate,” “intend,” “estimate” and similar expressions. Actual results could differ materially from those contemplated by these forward-looking statements as a result of many factors, including economic conditions generally and in our principal markets, the availability and prices of live cattle and commodities, food safety issues, livestock disease, including the identification of cattle with Bovine Spongiform Encephalopathy, product contamination and recall concerns, competitive practices and consolidation in the cattle production and processing industries and among our customers, actions of domestic or foreign governments, hedging risk, changes in interest rates and foreign currency exchange rates, trade barriers and exchange controls, consumer demand and preferences, the costs and risks associated with operations during public health crises, such as the COVID-19 pandemic, the cost of compliance with environmental and health laws, loss of key customers, loss of key employees, labor relations, and consolidation among our customers.

     In light of these risks and uncertainties, there can be no assurance that the results and events contemplated by the forward-looking information contained in this report will in fact transpire. Readers are cautioned not to place undue reliance on these forward-looking statements. We do not undertake any obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. Please review Part II. Item 1A,Risk Factors, included in this report, for other important factors that could cause actual results to differ materially from those in any such forward-looking statements.

Investment in National Beef Packing Company, LLC

     NBP processes and markets fresh and chilled boxed beef, ground beef, beef by-products, consumer-ready beef and pork, and wet blue leather for domestic and international markets. The largest share of NBP’s revenue is generated from the sale of boxed beef and beef by-products. NBP also generates revenues through value-added production withof its consumer-ready products.

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NBP has two beef processing facilities located in southwest Kansas and a third plantfacility in central Iowa. In addition, NBP operates one of the largest hide tanning facilities in the world, selling wet blue leather to tanners that produce finished leather for the automotive, luxury goods, apparel and furniture industries. Other streams of revenue include sales through its subsidiary, Kansas City Steak Company, LLC, which sells portioned beef and other products directly to consumers through internet, direct mail and direct response television, a fresh and frozen hamburger manufacturing facility, and service revenues generated by National Carriers, Inc., a wholly owned transportation and logistics company that is one of the largest refrigerated and livestock carrier operations in the U.S. and transports products for NBP and a variety of other customers.

     NBP’s profitability typically fluctuates seasonally as well as cyclically, based on the availability of fed cattle. Its profitability is dependent, in large part, on the spread between its cost for live cattle, the primary raw material for its business, and the value received from selling boxed beef and other products coupled with its overall volume. NBP operates in a large and liquid commodity market and it does not have much influence over the price it pays for cattle or the selling price it receives for the products it produces.

     RevenuesSales in the thirteen-weektwenty-six-week period ended March 28,June 27, 2020 increased approximately 19.6%23.4% in comparison to the same period in 2019, primarily due to increasedmuch higher average selling prices for beef products and the additional volume in NBP’sresulting from the June 2019 acquisition of the Iowa Premium beef processing and consumer-ready facilities.plant. Cost of sales increased by approximately 20.4%11.3% for the thirteen-weektwenty-six-week period ended March 28,June 27, 2020, as compared to the same period in 2019, primarily due to increased volume in NBP’sresulting from the June 2019 acquisition of Iowa Premium beef processing plant and consumer-ready facilities.higher labor costs. Higher volumes and higher per unit beef processing margins along with higher volumes, led to an increase in overall profitability in the 2020 period, as compared to the 2019 period.

     Operating losses, material decreases in cash flows, economic and industry events, pandemics, such as coronavirus disease (COVID-19), and a variety of other factors may result in a decrease in the value of theUSPB’s investment in NBP, which is other than temporary. Such potential decreases in value, if deemed other than temporary, will cause the Company to record an impairment charge, which may have an impact on the trading values of USPB’s Class A and Class B units. However, NBP’s plants are all operational at the present time; it has been designated as an essential business during the COVID-19 pandemic; and its results of operations are highly profitable, as reflected in Note 6. As a result, we believe the fair value of our investment in NBP exceeds the carrying value.

     On June 10, 2019, USPB and NBP entered into the First Amended and Restated Cattle Purchase and Sale Agreement (A&R Agreement) with USPB. The terms and conditions of the A&R Agreement are substantially the same as those of the Cattle Purchase and Sale Agreement dated December 30, 2011. Per the terms and conditions of the A&R Agreement, NBP is required to purchase through USPB from its owners and associates, and USPB is required to sell and deliver from its owners and associates to NBP, a base amount of 735,385 (subject to adjustment) head of cattle per year with prices based on those published by the U.S. Department of Agriculture, subject to adjustments for cattle performance. NBP obtained approximately 24% and 25% of its cattle requirements under this agreement during the thirteen-weekstwenty-six weeks ended March 28,June 27, 2020 and March 30,June 29, 2019, respectively.

USPB Results of Operations

Thirteen-weeks ended March 28,June 27, 2020 compared to thirteen-weeks ended March 30,June 29, 2019

Net Sales. There were no Net Salesnet sales in the thirteen-week periods ended March 28,June 27, 2020 and March 30,June 29, 2019.

     Cost of Sales. There were no Costcost of Salessales in the thirteen-week periods ended March 28,June 27, 2020 and March 30,June 29, 2019.

     Selling, General and Administrative Expenses. Selling, general and administrative expenses were approximately $1.1$1.2 million and $0.9 million for the thirteen-weeksthirteen-week periods ended March 28,June 27, 2020 compared to approximately $1.8 million for the thirteen-weeks ended March 30,and June 29, 2019, a decreaserespectively, an increase of approximately $0.7$0.3 million. The decreaseincrease was the result of lowerhigher phantom plan compensation, legalexpenses, due to higher unit transfer prices, and accounting expenses.

     Operating Loss.Operating loss was approximately $1.1$1.2 million and $0.9 million for the thirteen-weeksthirteen-week periods ended March 28,June 27, 2020 compared to approximately $1.8 million for the thirteen-weeks ended March 30, 2019.and June 29, 2019, respectively.

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     Equity in Net Income of National Beef Packing Company, LLC. Equity in NBP net income was $13.1$102.4 million and $25.2 million for the thirteen-weeksthirteen-week periods ended March 28,June 27, 2020 compared to $11.8 million for the thirteen-weeks ended March 30, 2019.and June 29, 2019, respectively. The increase in fiscal year 2020 is primarily due to significantly higher gross margins at NBP and the acquisitions of Ohio Beef patty manufacturing facility in the first quarter of 2019 and Iowa Premium in the second quarter of 2019.NBP. USPB carries its 15.0729% investment in NBP under the equity method of accounting.

     Interest Income. Interest income was $0.2less than $0.1 million and $0.3 million for the thirteen-weeksthirteen-week periods ended March 28,June 27, 2020 comparedand June 29, 2019, respectively. The decrease is due to $0.4 million for the thirteen-weeks ended March 30, 2019.lower cash balances and lower interest rates.

     Other, net.Other income was less than $0.1 million and $0.2 million for the thirteen-week periods ended March 28,June 27, 2020 and March 30,June 29, 2019, respectively. The decrease is primarily due to lower delivery right lease income.

     Net income.Net income was $12.2$101.2 million and $10.5$24.7 million for the thirteen-week periods ended March 28,June 27, 2020 and March 30,June 29, 2019, respectively.

Twenty-six-weeks ended June 27, 2020 compared to twenty-six-weeks ended June 29, 2019

Net Sales. There were no net sales in the twenty-six-week periods ended June 27, 2020 and June 29, 2019.

Cost of Sales. There were no cost of sales in the twenty-six-week periods ended June 27, 2020 and June 29, 2019.

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $2.3 million and $2.7 million for the twenty-six-week periods ended June 27, 2020 and June 29, 2019, respectively, a decrease of approximately $0.4 million. The decrease was the result of lower phantom plan and legal expenses, which were partially offset by higher accounting expenses.

Operating Loss. Operating loss was $2.4 million and $2.7 million for the twenty-six-week periods ended June 27, 2020 and June 29, 2019, respectively.

Equity in Net Income of National Beef Packing Company, LLC. Equity in NBP net income was $115.5 million and $37.0 million for the twenty-six-week periods ended June 27, 2020 and June 29, 2019, respectively. The increase in fiscal year 2020 is primarily due to significantly higher gross margins at NBP. USPB carries its 15.0729% investment in NBP under the equity method of accounting.

Interest Income. Interest income was less than $0.2 million and $0.6 million for the twenty-six-week periods ended June 27, 2020 and June 29, 2019, respectively. The decrease is due to lower cash balances and lower interest rates.

Other, net. Other income was less than $0.1 million and $0.4 million for the twenty-six-week periods ended June 27, 2020 and June 29, 2019, respectively. The decrease is primarily due to lower delivery right lease income.

Net income. Net income was $113.4 million and $35.3 million for the twenty-six-week periods ended June 27, 2020 and June 29, 2019, respectively.

Liquidity and Capital Resources

     As of March 28,June 27, 2020, we had net working capital (the excess of current assets over current liabilities) of approximately $73.2$29.8 million, which included cash and cash equivalents of $74.8$31.8 million. As of December 28, 2019, we had net working capital of approximately $74.3 million, which included cash and cash equivalents of $77.9 million. The decrease in working capital is primarily due to timing of the receipt of tax distributions from NBP. During the second quarter, USPB continued to make distributions to its members, but NBP delayed the majority of the tax distributions to its members, including USPB, until July 2020. Our primary sources of liquidity for the first two quarters of fiscal year 2020 and fiscal year 2019 were cash and available borrowings under the Master Loan Agreement with CoBank.

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As of March 28,June 27, 2020, USPB had no long-term debt outstanding. We had a $1.0 million revolving term loan with CoBank all of which was available. USPB was in compliance with the financial covenant under its Master Loan Agreement as of March 28,June 27, 2020.

On July 13, 2020, USPB, and CoBank, ACB (“CoBank”), entered into a Credit Agreement, Amended and Restated Revolving Term Promissory Note (“Promissory Note”), and an Affirmation of Pledge Agreement. The Credit Agreement, Amended and Restated Revolving Term Promissory Note, and Affirmation of Pledge Agreement replace, amend and restate the arrangements between CoBank and USPB contained in that certain Master Loan Agreement, Revolving Term Loan Supplement to the Master Loan Agreement, Pledge Agreement, and Security Agreement dated July 26, 2011, as amended (the “Prior Agreements.”). The Prior Agreements carried a “Term Expiration Date” of June 30, 2020, but on June 24, 2020, CoBank unilaterally extended the Term Expiration Date under USPB’s Amended and Restated Revolving Term Supplement from June 30, 2020 up to and including August 31, 2020.

The Credit Agreement and the Amended and Restated Revolving Term Promissory Note provide for a $1 million Revolving Term Commitment. That commitment carries a term of five years, maturing on June 30, 2025. The Promissory Note defines Interest as equal to the One-Month LIBOR Index Rate or if LIBOR quotes are no longer available, CoBank will replace the LIBOR Index Rate with a replacement benchmark rate. The other terms and conditions of the Master Loan Agreement and the Revolving Term Loan Supplement continue the terms and conditions of the Prior Agreements without material modifications. The Affirmation of Pledge Agreement provides CoBank with a first-priority security interest in USPB’s Membership Interests in, and Distributions from, National Beef Packing Company, LLC.

We believe our cash will be sufficient to support our cash needs for the foreseeable future. For a review of our obligations that affect liquidity, please see the “Cash Payment Obligations” table in “Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for fiscal year 2019.

Operating Activities

     Net cash used inprovided by operating activities in the thirteen-weekstwenty-six-weeks ended March 28,June 27, 2020 was approximately $3.1$4.1 million compared to approximately $1.6$20.3 million in the thirteen-weekstwenty-six-weeks ended March 30,June 29, 2019. The $1.5$16.2 million change was primarily due to the payment of state taxes withheldsmaller distributions from the distributions and payment of accrued bonuses.National Beef.

Investing Activities

     Net cash used in investing activities in the thirteen-weektwenty-six-week periods ended March 28,June 27, 2020 and March 30,June 29, 2019 were less than $0.1 million.

Financing Activities

     Net cash used in financing activities was less than $0.1$50.1 million in the thirteen-weekstwenty-six-weeks ended March 28,June 27, 2020 compared to $39.4$49.0 million in the thirteen-weekstwenty-six-weeks ended March 30, 2019June 29, 2019. The change was due to discretionary distribution that was madeslightly higher distributions in the first quarter of 2019.fiscal year 2020.

Master Loan Agreement

     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 matures oncommitments original maturity date was June 30, 2020. On June 24, 2020, CoBank unilaterally extended the Term Expiration Date under USPB’s Amended and Restated Revolving Term Supplement from June 30, 2020 up to and including August 31, 2020.

     All of the $1 million revolving credit commitment was available as of March 28,June 27, 2020. Borrowings under the revolving credit commitment bear interest at the base rate or LIBOR rate plus applicable margin. The applicable margin over LIBOR was 200 bps at March 28,June 27, 2020.

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On December 30, 2011, in connection with the closing of the Leucadia Transaction, the Company and CoBank entered into the Consent and First Amendment to Pledge Agreement and Security Agreement, by which CoBank agreed to (i) consent to the Membership Interest Sale and the PA Distribution, (ii) release its security interest in, and liens on, the Membership Interests being sold pursuant to the Membership Interest Sale, (iii) consent to the NBP Pledge and (iv) consent to the amendments and restatements of the NBP Operating Agreement and the PA Newco Operating Agreement. The NBP Pledge grants NBP a perfected security interest in and to USPB’s membership interests in, and distributions from, NBP, subject only to the prior first priority security interest held by CoBank.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk.

     The principal market risks affecting USPB’s business are exposure to interest rate risk, to the extent the Company has debt outstanding. As of March 28,June 27, 2020, the Company did not have any outstanding debt.

Item 4.   Controls and Procedures.

     We maintain a system of controls and procedures designed to provide reasonable assurance as to the reliability of the 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-weekstwenty-six weeks ended March 28,June 27, 2020 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.

PART II.   OTHER INFORMATION

Item 1.   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 is a defendant in twofour class action lawsuits in the United States District Court, Minnesota District alleging that it violated the Sherman Antitrust Act, the Packers and Stockyards Act, the Commodity Exchange Act, and various state laws (the “Antitrust Cases”). The Antitrust Cases are entitled In re Cattle Antitrust Litigation, which was filed originally on April 23, 2019, and2019; Peterson et al. v. JBS USA Food Company Holdings, et al., which was filed originally on April 26, 2019.2019; Samuels v. Cargill, Inc., et al, which was filed originally o April 26, 2019; and Erbert & Gerbert’s, Inc. v. JBS USA Food Company Holdings, et al., which was filed originally on June 18, 2020. The plaintiffs in the Antitrust Cases seek treble damages and other relief under the Sherman Antitrust Act, the Packers & Stockyards Act, the Commodities Exchange Act and attorneys’ fees. NBP is also a defendant in two class action lawsuits filed on January 7, 2020, alleging that it misrepresented the origin of its products in violation of the New Mexico Unfair Practices Act (the “Labelling Cases”). The Labelling Cases are entitledThornton v. Tyson Foods, Inc., et al., filed in the New Mexico Second Judicial District Court, Bernalillo County, andLucero v. Tyson Foods, et al., filed in the New Mexico Thirteenth Judicial District Court, Sandoval County. The Labelling Cases were subsequently removed to the United States District Court, New Mexico District. The plaintiffs in the Labelling Cases seek treble damages and other relief  and attorneys’ fees. NBP believes it has meritorious defenses to the claims in the Antitrust Cases and the Labelling Cases and intends to defend these cases vigorously. There can be no assurances, however, as to the outcome of these matters or the impact on NBP’s consolidated financial position, results of operations and cash flows.

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NBP is a party to various 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 NPB’s financial condition, results of operations or liquidity.liquidity

     USPB is not able to assess what impact, if any, the actions described above will have on NBP or USPB.

Item 1A.   Risk Factors.

     Except for the risk factors discussed below, the risk factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019 have not materially changed. Please refer to the Company’s report on Form 10-K for the fiscal year ended December 28, 2019 to consider those risk factors.

USPB’s investment in NBP could become impaired.

     USPB’s investment in NBP is carried under the equity method of accounting. Although NBP’s results from operations are currently highly profitable, pandemic events such as COVID-19, industry trends, and other economic factors could have a negative impact on NBP’s operations and cash flows. As a result, the fair market value of USPB’s investment in NBP could decrease to a level that is less than the carrying value. If such situation is deemed to not be temporary, USPB would record an impairment charge, which may have an impact on the trading values of USPB’s Class A and Class B units.

If the COVID-19 pandemic adversely affects NBP’s ability to keep the cattle slaughter at normal levels, the ability of USPB members to deliver cattle for processing based on their ownership of Class A units may be impacted.

     COVID-19 hastemporarily caused NBP to reduce fed cattle slaughter at several of its beef processing plants. If NBP is unable to increasemaintain the slaughter toat normal levels for an extended period, USPB members may be delayed in delivering their cattle or may be required to deliver to a different NBP processing plant. As the right and obligation to deliver cattle is associated with ownership of USPB’s Class A units, such a result may impact the value or liquidity of Class A units.

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

     None.

Item 3.   Defaults Upon Senior Securities.

     None.

Item 4.   Mine Safety Disclosures.

     Not applicable.

Item 5.   Other Information.

     None.

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Item 6.   Exhibits.

** Furnished herewith. Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

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SIGNATURES

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

Date: MayAugust 7, 2020

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