Brawley plant closure, lower gross margins impact net income

Company Files Fiscal
Year 2013 Results

U.S. Premium Beef has closed its fiscal year 2013 and has filed the results with the Securities and Exchange Commission. For the fiscal year, which ended December 28, 2013, USPB recorded a net loss of $11.2 million compared to net income of $ 2.7 million during the prior fiscal year. The $13.9 million decrease was primarily due to a net loss at National Beef, which was the result of the impairment charge related to National Beef’s decision to close the Brawley plant, which is expected to occur in May 2014, and lower gross margins.

Did You Know...

üIf you have delivery rights you do not plan on using in delivery year 2014, which ends August 30, and would like USPB to help you get them leased to other producers, please call our office at 866-877-2525.

USPB Non-Conditional Unit Trade Report

FY 2014
Trades

Most Recent
Trades

# Class A Units

1,450

1,450

Avg. Price Per Unit

$161.41

$161.41

# Class B Units

0

6,270

Avg. Price Per Unit

0

$174.25

Opportunity to showcase our commitment to safety, quality

National Beef, USPB
Ranchers and Feedlots
Host Japanese Customer

Last month, National Beef and U.S. Premium Beef met with representatives of Zensho, a large Japanese based restaurant chain, to help them understand how our production system— from the ranch to the processor—is committed to delivering a safe, consistent, high quality product their customers expect. “Zensho is a major Japanese restaurant chain with about 3,600 restaurants in Japan, China, Hong Kong, Singapore and the U.S., among others,” Peter Michalski, vice president of National Beef’s International Division, explains. “Their menus vary by restaurants including sushi, beef bowl, steak and Italian cuisine.

“Due to the BSE event in 2003, their upper management was weary about purchasing U.S. beef until about 2-3 years ago,” he points out. “They decided to start buying U.S. beef only after auditing plants, feedlots and ranches.

“Their main concern is that no meat and bone meal is used in feed,” Michalski adds. “They actually test for this as well as interview plant, feedlot and ranch managers on the feed ingredients used. The purpose of their visit was to tour our Liberal and Dodge City plants and look at operations. They also wanted to visit feedlots and ranches that supply cattle to National Beef.”

That’s where U.S. Premium Beef got involved. Brian Bertelsen, USPB vice president of Field Operations, asked several ranches and feed-lots who market cattle through USPB to participate. “We’re always ready to assist National Beef with educating customers from around the world and promoting beef from our producer-owners,” Bertelsen says. “We have a great story to tell.”

“We really appreciate the willingness of our producers to host National Beef customers,” he adds. “Over the years there have been quite a few customer groups visit feedlots and ranches. It is common for other U.S. packers to offer plant tours and feedlot visits. However, we can visit ranches and even seedstock producers to show customers how USPB’s producer-owners have the ability to design cattle that will be harvested at National

…continued on page 4

Much of fiscal year 2013 presented a challenging feeding environment for cattle feeders who delivered cattle to U.S. Premium Beef. High corn prices resulted in high costs of gains and red ink during a good portion of the year. However, in spite of those challenges, our producers consistently delivered quality cattle that hit the target set by our grids. That contributed to strong grid premiums paid per head and, in some cases, turned a cattle feeding loss into a profit.

Unitholders and associates who delivered cattle to National Beef’s Kansas and California plants received an average of $60.37 per head above the cash market, or more than $46.5 million in total grid premiums, both of which lagged only fiscal year 2012’s totals. USPB producers have now delivered more than 10.8 million head through USPB since beginning operations in 1997.

USPB unitholders also realized solid prices paid for Class A units in fiscal year 2013. Class A units sold for an average of $70 per unit more than in fiscal year 2012. The average price paid for Class B unit prices decreased $15.17 per unit from fiscal year 2012 prices.

One of USPB’s services to our unitholders is to facilitate the leasing of their delivery rights to other producers in years where unitholders cannot meet their delivery obligations.

This service again worked well for both parties in 2013. Delivery right lease rates increased to $8 per delivery right in September. In total, our cattle deliverers continued to use a high percentage of delivery rights available during 2013.

Plus, our company was also able to attract more high quality cattle that were delivered against leased rights. Producers who delivered cattle to National Beef’s Kansas plants by leasing delivery rights through the USPB facilitated program in 2013 received average grid premiums of $56.96 per head.

I encourage you to attend our annual meeting on March 28 to learn more about our 2013 financial results and our plans going forward. I’m confident you will go home with a better understanding of the benefits of being an owner of USPB.

See you in Kansas City.

Annual Meeting Hotel:

Kansas City Airport Hilton—8801 NW 112th St.—816-891-8900—When making reservations request USPB’s annual meeting rate of $104. Cutoff date for the annual meeting rate was March 13. If you have questions, please call USPB at 866-877-2525.

Other Hotels Close to the Airport Hilton:

Embassy Suites KCI—1/2 mile south of Hilton—7640 Tiffany Springs Pkwy.—800-362-2779

Holiday Inn Express-KCI—next to Hilton—11130 NW Ambassador Drive— 816-891-9111

Driving Directions to Kansas City
Airport Hilton

Take Exit #12 (112th Street) off of I-29 just south of the Kansas City International Airport. The Kansas City Airport Hilton is located on the southeast corner of the intersection of I-29 and 112th Street in Kansas City.

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