UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
{ X } QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 2010
OR
{ } 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 1-3390
Seaboard Corporation
(Exact name of registrant as specified in its charter)
Delaware 04-2260388
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9000 W. 67th Street, Shawnee Mission, Kansas 66202
(Address of principal executive offices) (Zip Code)
(913) 676-8800
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
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 X No ___
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 __ No __
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer or
a smaller reporting company. See the definitions of "large
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ X ]
Non-accelerated filer [ ](Do not check if a smaller reporting company)
Smaller reporting company [ ]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes . No X .
There were 1,228,756 shares of common stock, $1.00 par value per
share, outstanding on April 23, 2010.
Total pages in filing - 21 pages
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Thousands of dollars except share and per share amounts)
(Unaudited)
Three Months Ended
April 3, April 4,
2010 2009
Net sales:
Products (includes sales to affiliates of
$125,830 and $140,916) $ 772,587 $ 681,513
Services 214,720 214,883
Other 32,969 21,172
Total net sales 1,020,276 917,568
Cost of sales and operating expenses:
Products 691,156 661,369
Services 185,728 174,348
Other 27,376 18,377
Total cost of sales and operating expenses 904,260 854,094
Gross income 116,016 63,474
Selling, general and administrative expenses 48,550 47,432
Operating income 67,466 16,042
Other income (expense):
Interest expense (2,316) (3,856)
Interest income 3,456 3,326
Income from affiliates 4,888 3,894
Foreign currency gain (loss), net 38 (3,933)
Other investment income, net 3,044 1,494
Miscellaneous, net 194 3,114
Total other income, net 9,304 4,039
Earnings before income taxes 76,770 20,081
Income tax expense (14,107) (3,935)
Net earnings $ 62,663 $ 16,146
Less: Net (earnings) loss attributable to
noncontrolling interests 115 (173)
Net earnings attributable to Seaboard $ 62,778 $ 15,973
Earnings per common share $ 50.84 $ 12.89
Dividends declared per common share $ 0.75 $ 0.75
Average number of shares outstanding 1,234,710 1,239,207
See accompanying notes to condensed consolidated financial statements.
2
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Thousands of dollars)
(Unaudited)
April 3, December 31,
2010 2009
Assets
Current assets:
Cash and cash equivalents $ 59,615 $ 61,857
Short-term investments 440,882 407,351
Receivables, net of allowance 319,936 270,647
Inventories 428,892 498,587
Deferred income taxes 10,911 10,490
Deferred costs 113,327 95,788
Other current assets 107,144 80,582
Total current assets 1,480,707 1,425,302
Investments in and advances to affiliates 95,931 82,232
Net property, plant and equipment 682,481 691,343
Goodwill 40,628 40,628
Intangible assets, net 20,273 20,676
Other assets 59,345 76,952
Total assets $2,379,365 $2,337,133
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 66,963 $ 81,262
Current maturities of long-term debt 1,660 2,337
Accounts payable 90,392 141,193
Deferred revenue 182,030 112,889
Other current liabilities 178,544 180,359
Total current liabilities 519,589 518,040
Long-term debt, less current maturities 76,436 76,532
Deferred income taxes 59,171 59,546
Other liabilities 126,278 137,596
Total non-current and deferred liabilities 261,885 273,674
Stockholders' equity:
Common stock of $1 par value,
Authorized 1,250,000 shares;
issued and outstanding 1,231,306 and 1,236,758 shares 1,231 1,237
Accumulated other comprehensive loss (116,565) (114,786)
Retained earnings 1,709,933 1,655,222
Total Seaboard stockholders' equity 1,594,599 1,541,673
Noncontrolling interests 3,292 3,746
Total equity 1,597,891 1,545,419
Total liabilities and stockholders' equity $2,379,365 $2,337,133
See accompanying notes to condensed consolidated financial statements.
3
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Thousands of dollars)
(Unaudited)
Three Months Ended
April 3, April 4,
2010 2009
Cash flows from operating activities:
Net earnings $ 62,663 $ 16,146
Adjustments to reconcile net earnings to cash
from operating activities:
Depreciation and amortization 21,853 23,126
Income from affiliates (4,888) (3,894)
Dividends received from affiliates - 1,937
Other investment income, net (3,044) (1,494)
Foreign currency exchange gains (22) (1,788)
Deferred income taxes 478 (10,885)
Gain from sale of fixed assets (497) (234)
Changes in current assets and liabilities:
Receivables, net of allowance (47,592) 18,937
Inventories 66,404 59,065
Other current assets (23,145) (8,161)
Current liabilities, exclusive of debt 1,873 (38,212)
Other, net 3,458 5,516
Net cash from operating activities 77,541 60,059
Cash flows from investing activities:
Purchase of short-term investments (187,625) (77,507)
Proceeds from the sale of short-term investments 142,788 86,542
Proceeds from the maturity of short-term investments 11,150 17,805
Investments in and advances to affiliates, net (7,652) 59
Capital expenditures (16,342) (15,659)
Proceeds from the sale of fixed assets 944 955
Payment received for the potential sale of power barges - 15,000
Other, net 201 (550)
Net cash from investing activities (56,536) 26,645
Cash flows from financing activities:
Notes payable to banks, net (14,301) (98,709)
Principal payments of long-term debt (843) (898)
Repurchase of common stock (7,149) (2,938)
Dividends paid (925) (928)
Other, net 80 79
Net cash from financing activities (23,138) (103,394)
Effect of exchange rate change on cash (109) (1,945)
Net change in cash and cash equivalents (2,242) (18,635)
Cash and cash equivalents at beginning of year 61,857 60,594
Cash and cash equivalents at end of period $ 59,615 $ 41,959
See accompanying notes to condensed consolidated financial statements.
4
SEABOARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 - Accounting Policies and Basis of Presentation
The condensed consolidated financial statements include the accounts
of Seaboard Corporation and its domestic and foreign subsidiaries
("Seaboard"). All significant intercompany balances and
transactions have been eliminated in consolidation. Seaboard's
investments in non-consolidated affiliates are accounted for by the
equity method. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated
financial statements of Seaboard for the year ended
December 31, 2009 as filed in its Annual Report on Form 10-K.
Seaboard's first three quarterly periods include approximately 13
weekly periods ending on the Saturday closest to the end of March,
June and September. Seaboard's year-end is December 31.
The accompanying unaudited condensed consolidated financial
statements include all adjustments (consisting only of normal
recurring accruals) which, in the opinion of management, are
necessary for a fair presentation of financial position, results of
operations and cash flows. Results of operations for interim
periods are not necessarily indicative of results to be expected for
a full year. As Seaboard conducts its commodity trading business
with third parties, consolidated subsidiaries and non-consolidated
affiliates on an interrelated basis, gross margin on non-
consolidated affiliates cannot be clearly distinguished without
making numerous assumptions primarily with respect to mark-to-market
accounting for commodity derivatives.
Use of Estimates
The preparation of the consolidated financial statements in
conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
Net cash from operating activities was increased and net cash from
investing activities was decreased from prior year presentation by
$1,937,000 for 2009 to conform to the 2010 presentation of dividends
received from affiliates.
Recently Adopted Accounting Standards
In June 2009, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Codification (ASC) Topic 810-10 (formerly
Financial Accounting Standard No. 167 "Amendments to FASB
Interpretation No. 46(R)"). This Topic amends Interpretation 46(R)
and requires an enterprise to perform an analysis to determine
whether the enterprise's variable interest or interests give it a
controlling financial interest in a variable interest entity (VIE).
This analysis identifies the primary beneficiary of a VIE as the
enterprise that has both the power to direct the most significant
activities of a VIE and the obligation to absorb losses or the right
to receive benefits from the VIE.
This Topic eliminates the quantitative approach previously required
for determining the primary beneficiary of the VIE, which was based
on determining which enterprise absorbs the majority of the entity's
expected losses, receives a majority of the entity's expected
residual returns, or both. This Topic also amends Interpretation
46(R) to require ongoing reassessments of whether an enterprise is
the primary beneficiary of a VIE and requires certain additional
disclosures about the VIE. Seaboard adopted this Topic as of
January 1, 2010. The adoption of this Topic did not have a material
impact on Seaboard's financial position or net earnings.
Note 2- Investments
Seaboard's short-term investments are treated as either available-
for-sale securities or trading securities. All of Seaboard's
available-for-sale and trading securities are classified as current
assets as they are readily available to support Seaboard's current
operating needs. Available-for-sale securities are recorded at
their estimated fair market values with unrealized gains and losses
reflected, net of tax, as a separate component of accumulated other
comprehensive income. Trading securities are recorded at their
estimated fair market values with unrealized gains and losses
reflected in the statement of earnings.
As of April 3, 2010 and December 31, 2009, the available-for-sale
investments primarily consisted of money market funds, fixed rate
municipal notes and bonds, corporate bonds and U.S. Government
agency securities. At April 3, 2010 and December 31, 2009,
available-for-sale short-term investments included $21,757,000 and
$14,710,000, respectively, held by a wholly-owned consolidated
insurance captive to pay Seaboard's retention of
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accrued outstanding workers' compensation claims. At April 3, 2010
and December 31, 2009, amortized cost and estimated fair market
value were not materially different for these investments.
As of April 3, 2010, the trading securities primarily consisted of
high yield debt securities. Unrealized gains (losses) related to
trading securities were $87,000 and ($196,000), for the three months
ended April 3, 2010, and April 4, 2009, respectively.
The following is a summary of the amortized cost and estimated fair
value of short-term investments for both available-for-sale and
trading securities at April 3, 2010 and December 31, 2009.
2010 2009
Amortized Fair Amortized Fair
(Thousands of dollars) Cost Value Cost Value
Money market funds $128,024 $128,024 $153,699 $153,699
Fixed rate municipal notes and bonds 116,034 118,431 144,794 148,609
Corporate bonds 94,969 95,797 34,663 35,449
Fixed income mutual funds 15,012 15,024 - -
U.S. Government agency securities 13,974 13,930 15,907 16,272
U.S. Treasury securities 11,966 11,948 - -
Variable rate demand notes 11,900 11,900 1,900 1,900
Asset backed debt securities 11,639 11,666 8,447 8,484
Other 3,860 3,865 3,060 3,069
Foreign government debt securities - - 10,300 10,210
Total available-for-sale short-term
investments 407,378 410,585 372,770 377,692
High yield trading debt securities 25,036 26,447 24,784 26,771
Other trading debt securities 3,643 3,850 2,669 2,888
Total available-for-sale and trading
short-term Investments $436,057 $440,882 $400,223 $407,351
The following table summarizes the estimated fair value of fixed
rate securities designated as available-for-sale classified by the
contractual maturity date of the security as of April 3, 2010.
(Thousands of dollars) 2010
Due within one year $ 62,948
Due after one year through three years 127,996
Due after three years 48,966
Total fixed rate securities $239,910
In addition to its short-term investments, Seaboard also has trading
securities related to Seaboard's deferred compensation plans
classified in other current assets on the Condensed Consolidated
Balance Sheets. See Note 5 to the Condensed Consolidated Financial
Statements for information on the types of trading securities held
related to the deferred compensation plans.
6
Note 3 - Inventories
The following is a summary of inventories at April 3, 2010 and
December 31, 2009:
April 3, December 31,
(Thousands of dollars) 2010 2009
At lower of LIFO cost or market:
Live hogs and materials $181,543 $192,999
Fresh pork and materials 23,937 22,398
205,480 215,397
LIFO adjustment (20,304) (22,807)
Total inventories at lower of LIFO cost or market 185,176 192,590
At lower of FIFO cost or market:
Grains and oilseeds 136,283 174,508
Sugar produced and in process 30,426 47,429
Other 45,503 46,804
Total inventories at lower of FIFO cost or market 212,212 268,741
Grain, flour and feed at lower of weighted average cost
or market 31,504 37,256
Total inventories $428,892 $498,587
As of April 3, 2010, Seaboard had $5,110,000 recorded in grain
inventories related to its commodity trading business that are
committed to various customers in foreign countries for which customer
contract performance is a heightened concern. If Seaboard is unable
to collect amounts from these customers as currently estimated or
Seaboard is forced to find other customers for a portion of this
inventory, it is possible that Seaboard could incur a material write-
down in the value of this inventory if Seaboard is not successful in
selling at the current carrying value. For similar inventories that
existed prior to December 31, 2009, Seaboard incurred a write-down in
the first quarter of 2009 in the amount of $8,801,000 (with no tax
benefit recognized), or $7.10 per share.
Note 4 - Income Taxes
Seaboard's tax returns are regularly audited by federal, state and
foreign tax authorities, which may result in adjustments.
Seaboard's U.S. federal income tax returns have been reviewed
through the 2004 tax year. There have not been any material changes
in unrecognized income tax benefits since December 31, 2009.
Interest related to unrecognized tax benefits and penalties was not
material for the three months ended April 3, 2010.
Note 5 -Derivatives and Fair Value of Financial Instruments
U.S. GAAP discusses valuation techniques, such as the market
approach (prices and other relevant information generated by market
conditions involving identical or comparable assets or liabilities),
the income approach (techniques to convert future amounts to single
present amounts based on market expectations including present value
techniques and option-pricing), and the cost approach (amount that
would be required to replace the service capacity of an asset which
is often referred to as replacement cost). U.S. GAAP utilizes a
fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The
following is a brief description of those three levels:
Level 1: Observable inputs such as unadjusted quoted prices in
active markets for identical assets or liabilities that the Company
has the ability to access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly or
indirectly. These include quoted prices for similar assets or
liabilities in active markets and quoted prices for identical or
similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity's own
assumptions.
The following table shows assets and liabilities measured at fair
value on a recurring basis as of April 3, 2010 and also the level
within the fair value hierarchy used to measure each category of
assets. Seaboard uses the end of the reporting period to determine
if there were any transfers between levels. There were no transfers
7
between levels that occurred in the first quarter of 2010. The
trading securities classified as other current assets below are
assets held for Seaboard's deferred compensation plans.
Balance
April 3,
(Thousands of dollars) 2010 Level 1 Level 2 Level 3
Assets:
Available-for-sale securities - short-term
investments:
Money market funds $128,024 $128,024 $ - $ -
Fixed rate municipal notes and bonds 118,431 - 118,431 -
Corporate bonds 95,797 - 95,797 -
Fixed income mutual funds 15,024 15,024 - -
U.S. Government agency securities 13,930 - 13,930 -
U.S. Treasury securities 11,948 - 11,948 -
Variable rate demand notes 11,900 - 11,900 -
Asset backed debt securities 11,666 - 11,666 -
Other 3,865 - 3,865 -
Trading securities - short-term investments:
High yield debt securities 26,447 - 26,447 -
Other debt securities 3,850 - 3,850 -
Trading securities - other current assets:
Domestic equity securities 12,110 12,110 - -
Foreign equity securities 7,457 3,618 3,839 -
Money market funds 3,132 3,132 - -
U.S. Government agency securities 2,628 - 2,628 -
Fixed income mutual funds 2,604 2,604 - -
U.S. Treasury securities 2,045 - 2,045 -
Other 154 142 12 -
Derivatives:
Commodities 4,844 4,844 - -
Foreign currencies 287 - 287 -
Total Assets $476,143 $169,498 $306,645 $ -
Liabilities:
Derivatives:
Commodities 4,735 4,735 - -
Foreign currencies 3,935 - 3,935 -
Total Liabilities $ 8,670 $ 4,735 $ 3,935 $ -
Financial instruments consisting of cash and cash equivalents, net
receivables, notes payable, and accounts payable are carried at
cost, which approximates fair value, as a result of the short-term
nature of the instruments.
The fair value of long-term debt is estimated by comparing interest
rates for debt with similar terms and maturities. The amortized cost
and estimated fair values of investments and long-term debt at April
3, 2010 and December 31, 2009 are presented below.
2010 2009
Amortized Fair Amortized Fair
(Thousands of dollars) Cost Value Cost Value
Short-term investments, available-for-sale $407,378 $410,585 $372,770 $377,692
Short-term investments, trading debt
securities 28,679 30,297 27,453 29,659
Long-term debt 78,096 80,868 78,869 82,415
While management believes its derivatives are primarily economic
hedges of its firm purchase and sales contracts or anticipated sales
contracts, Seaboard does not perform the extensive record-keeping
required to
8
account for these types of transactions as hedges for accounting
purposes. The nature of Seaboard's market risk exposure has not
changed materially since December 31, 2009.
Commodity Instruments
Seaboard uses various grain, meal, hog, pork bellies and energy
resource related futures and options to manage its risk to price
fluctuations for raw materials and other inventories, finished
product sales and firm sales commitments. At April 3, 2010,
Seaboard had open net derivative contracts to purchase 1,441,000
bushels of grain and 103,500 tons of soybean meal and to sell
1,848,000 gallons of heating oil, and 59,600,000 pounds of hogs. At
December 31, 2009, Seaboard had open net derivative contracts to
sell 13,955,000 bushels of grain, 1,344,000 gallons of heating oil,
87,900 tons of soybean meal and to purchase 2,720,000 pounds of
hogs. From time to time, Seaboard may enter into speculative
derivative transactions not directly related to its raw material
requirements. Commodity derivatives are recorded at fair value with
any changes in fair value being marked to market as a component of
cost of sales on the Condensed Consolidated Statements of Earnings.
Since these derivatives are not accounted for as hedges,
fluctuations in the related commodity prices could have a material
impact on earnings in any given period.
Foreign Currency Exchange Agreements
Seaboard enters into foreign currency exchange agreements to manage
the foreign currency exchange rate risk with respect to certain
transactions denominated in foreign currencies. These foreign
exchange agreements are recorded at fair value with changes in value
marked to market as a component of cost of sales on the Condensed
Consolidated Statements of Earnings as management believes they are
primarily related to the underlying commodity transaction, with the
exception of the Japanese Yen foreign exchange agreement that was
terminated in the fourth quarter of 2009. The change in value of
the Japanese Yen foreign exchange agreement was marked to market as
a component of foreign currency gain (loss) on the Condensed
Consolidated Statements of Earnings. Since these agreements are not
accounted for as hedges, fluctuations in the related currency
exchange rates could have a material impact on earnings in any given
period.
At April 3, 2010, Seaboard had trading foreign exchange contracts to
cover its firm sales and purchase commitments and related trade
receivables and payables with net notional amounts of $197,955,000
primarily related to the South African Rand and the Euro.
At December 31, 2009, Seaboard had trading foreign exchange
contracts to cover its firm sales and purchase commitments and
related trade receivables and payables with net notional amounts of
$193,379,000 primarily related to the South African Rand and the
Euro.
Interest Rate Exchange Agreements
In December 2008 and again in March 2009, Seaboard entered into ten-
year interest rate exchange agreements which involve the exchange of
fixed-rate and variable-rate interest payments over the life of the
agreements without the exchange of the underlying notional amounts
to mitigate the effects of fluctuations in interest rates on
variable rate debt. Seaboard agreed to pay a fixed rate and receive
a variable rate of interest on two notional amounts of $25,000,000
each. In June 2009, Seaboard terminated both interest rate exchange
agreements with a total notional value of $50,000,000. Seaboard
received payments in the amount of $3,981,000 to unwind these
agreements. Since these interest rate exchange agreements were not
accounted for as hedges, the change in value related to these
agreements were recorded in Miscellaneous, net in the Condensed
Consolidated Statements of Earnings. As of April 3, 2010, there were
no such agreements outstanding. However, in May 2010, Seaboard
entered into two ten-year interest rate exchange agreements with
notional amounts of $25,000,000 each to mitigate the effects of
fluctuations in interest rates, each with similar terms to
agreements discussed above.
Counterparty Credit Risk
Seaboard is subject to counterparty credit risk related to its
foreign currency exchange agreements. The maximum amount of loss
due to the credit risk of the counterparties for these agreements,
should the counterparties fail to perform according to the terms of
the contracts, was $287,000 as of April 3, 2010. Seaboard does not
hold any collateral related to these agreements.
9
The following table provides the amount of gain or (loss) recognized
for each type of derivative and where it was recognized in the
Condensed Consolidated Statement of Earnings for the three months
ended April 3, 2010 and April 4, 2009.
(Thousands of dollars)
April 3, 2010 April 4, 2009
Location of Gain or (Loss) Amount of Gain or (Loss) Amount of Gain or (Loss)
Recognized in Income Recognized in Income Recognized in Income
Commodities Cost of sales $16,068 $ 3,641
Foreign currencies Cost of sales (4,294) 1,828
Foreign currencies Foreign currency (25) (5,732)
Interest rate Miscellaneous, net - 2,479
The following table provides the fair value of each type of
derivative held as of April 3, 2010 and December 31, 2009 and where
each derivative is included on the Condensed Consolidated Balance
Sheets.
(Thousands of dollars) Asset Derivatives Liability Derivatives
Balance Fair Value Balance Fair Value
Sheet April 3, December 31, Sheet April 3, December 31,
Location 2010 2009 Location 2010 2009
Commodities Other current assets $4,844 $4,610 Other current liabilities $4,735 $2,288
Foreign currencies Other current assets 287 430 Other current liabilities 3,935 5,943
Note 6 - Employee Benefits
Seaboard maintains a defined benefit pension plan ("the Plan") for
its domestic salaried and clerical employees. Effective January 1,
2010, Seaboard split a portion of employees from the Plan into a new
defined benefit pension. However, the split did not change the
employees' benefit and thus pension expense should not be materially
impacted. Management anticipates making a deductible contribution
to the Plan currently estimated to be between $8,000,000 and
$15,000,000 for the 2009 and 2010 plan years during the second or
third quarter of 2010. Seaboard also sponsors non-qualified,
unfunded supplemental executive plans, and unfunded supplemental
retirement agreements with certain executive employees. Management
has no plans to provide funding for these supplemental plans in
advance of when the benefits are paid.
The net periodic benefit cost of these plans was as follows:
Three Months Ended
April 3, April 4,
(Thousands of dollars) 2010 2009
Components of net periodic benefit cost:
Service cost $ 1,611 $ 1,486
Interest cost 2,162 2,024
Expected return on plan assets (1,534) (1,060)
Amortization and other 1,003 1,206
Net periodic benefit cost $ 3,242 $ 3,656
Note 7 - Commitments and Contingencies
Seaboard is subject to various legal proceedings related to the
normal conduct of its business, including various environmental
related actions. In the opinion of management, none of these
actions is expected to result in a judgment having a materially
adverse effect on the consolidated financial statements of Seaboard.
Contingent Obligations
Certain of the non-consolidated affiliates and third party
contractors who perform services for Seaboard have bank debt
supporting their underlying operations. From time to time, Seaboard
will provide guarantees of that debt allowing a lower borrowing rate
or facilitating third party financing in order to further Seaboard's
business objectives. Seaboard does not issue guarantees of third
parties for compensation. As of April 3, 2010, Seaboard had
guarantees outstanding to two third parties with a total maximum
exposure of $1,354,000.
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Seaboard has not accrued a liability for any of the third party
or affiliate guarantees as management considers the likelihood of
loss to be remote.
As of April 3, 2010, Seaboard had outstanding letters of credit
("LCs") with various banks which reduced its borrowing capacity
under its committed and uncommitted credit facilities by $42,720,000
and $4,609,000, respectively. Included in these amounts are LCs
totaling $26,385,000, which support the Industrial Development
Revenue Bonds included as long-term debt and $17,802,000 of LCs
related to insurance coverages.
Note 8 - Stockholders' Equity and Accumulated Other Comprehensive
Loss
Components of total comprehensive income, net of related taxes, are
summarized as follows:
Three Months Ended
April 3, April 4,
(Thousands of dollars) 2010 2009
Net earnings $62,663 $ 16,146
Other comprehensive income
net of applicable taxes:
Foreign currency translation adjustment (1,392) (5,866)
Unrealized gain on investments (1,100) 921
Unrecognized pension cost 713 836
Total comprehensive income $60,884 $ 12,037
The components of and changes in accumulated other comprehensive
loss for the three months ended April 3, 2010 are as follows:
Balance Balance
December 31, Period April 3,
(Thousands of dollars) 2009 Change 2010
Foreign currency translation adjustment $(77,576) $(1,392) $ (78,968)
Unrealized gain on investments 2,579 (1,100) 1,479
Unrecognized pension cost (39,789) 713 (39,076)
Accumulated other comprehensive loss $(114,786) $(1,779) $(116,565)
The foreign currency translation adjustment primarily represents the
effect of the Argentine peso currency exchange fluctuation on the net
assets of the Sugar segment. At April 3, 2010, the Sugar segment had
$163,108,000 in net assets denominated in Argentine pesos and
$31,514,000 in net liabilities denominated in U.S. dollars.
With the exception of the foreign currency translation adjustment to
which a 35% federal tax rate is applied, income taxes for components
of accumulated other comprehensive loss were recorded using a 39%
effective tax rate. In addition, the unrecognized pension cost
includes $12,495,000 related to employees at certain subsidiaries
for which no tax benefit has been recorded.
On November 6, 2009, the Board of Directors authorized Seaboard to
repurchase from time to time prior to October 31, 2011 up to
$100,000,000 market value of its Common Stock in open market or
privately negotiated purchases which may be above or below the
traded market price. Such purchases may be made by Seaboard or
Seaboard may from time to time enter into a 10b5-1 plan authorizing
a third party to make such purchases on behalf of Seaboard. The
stock repurchase will be funded by cash on hand. Shares repurchased
will be retired and shall resume the status of authorized and
unissued shares. Any stock repurchases will be made in compliance
with applicable legal requirements and the timing of the repurchases
and the number of shares to be repurchased at any given time may
depend on market conditions, Securities and Exchange Commission
regulations and other factors. The Board's stock repurchase
authorization does not obligate Seaboard to acquire a specific
amount of common stock and the stock repurchase program may be
suspended at any time at Seaboard's discretion. For the three
months ended April 3, 2010, Seaboard repurchased 5,452 shares of
common stock at a cost of $7,149,000.
11
Note 9 - Segment Information
During the first half of 2008, Seaboard started operations at its
newly constructed biodiesel plant. The ongoing profitability of
this plant is primarily based on future sales prices, the price of
alternative inputs, enforcement of government usage mandates and
reinstituting federal tax credits, which expired at the end of 2009.
Management believes the federal tax credits will be renewed
retroactive to January 1, 2010, during 2010. Several tax credits
were allowed to expire at the end of 2009 and certain members of the
U.S. Congress have indicated these will be specifically reviewed
during 2010. As of December 31, 2009, Seaboard performed an
impairment evaluation of this plant and determined there was no
impairment based on management's current assumptions of future
production volumes, sales prices, cost inputs and the probabilities
of the combination of federal usage mandates and tax credits being
renewed. However, if the federal tax credits are not renewed as
discussed above, and future market conditions do not produce
projected sales prices or expected cost inputs or there is a
material change in the enforcement of government usage mandates or
other available tax credits, there is a possibility that some amount
of the recorded value of this processing plant could be deemed
impaired during some future period including 2010, which may result
in a charge to earnings. The recorded value of these assets as of
April 3, 2010 was $42,494,000.
Prior to the first quarter of 2009, the Sugar segment was named
Sugar and Citrus reflecting the citrus and related juice operations
of this business. During the first quarter of 2009, management
reviewed its strategic options for the citrus business in light of a
continually difficult operating environment. In March 2009,
management decided not to process, package or market the 2009
harvest for the citrus and related juice operations. As a result,
during the first quarter of 2009, a charge to earnings of $2,803,000
was recorded primarily to write-down the value of related citrus and
juice inventories to net realizable value, considering such
remaining inventory will not be marketed similar to prior years but
instead liquidated. In the second quarter of 2009, management
decided to integrate and transform the land previously used for
citrus production into sugar cane production and thus incurred an
additional charge to earnings of approximately $2,497,000 during the
second quarter of 2009 in connection with this change in business.
The remaining fixed assets from the citrus operations, primarily
buildings and equipment, have either been sold under long-term
agreements or integrated into the sugar business. However, since
such sale agreements are long-term and collection of the sales price
is not reasonably assured, the sale is being recognized under the
cost recovery method and thus the gain on sale, which is not
material, will not be recognized until proceeds collected exceed the
net book value of the assets sold.
The Power segment sells approximately 34% of its power generation to
a government-owned distribution company under a short-term contract
for which Seaboard bears a concentrated credit risk as this customer,
from time to time, has significant past due balances. This contract
expired at the end of March 2010 but was renewed in May 2010 for one
year, subject to early cancellation by either party.
On March 2, 2009, an agreement became effective under which Seaboard
will sell its two power barges in the Dominican Republic for
$70,000,000. The agreement calls for the sale to occur on or around
January 1, 2011. During March 2009, $15,000,000 was paid to
Seaboard (recorded as deferred revenue in current liabilities as of
April 3, 2010) and the $55,000,000 balance of the purchase price was
paid into escrow and will be paid to Seaboard at the closing of the
sale. The net book value of the two barges was $20,090,000 as of
April 3, 2010 and is classified as held for sale in other current
assets. Accordingly, Seaboard ceased depreciation on the two barges
as of January 1, 2010 but will continue to operate these two barges
until a few weeks prior to the closing date of the sale. Seaboard
will be responsible for the wind down and decommissioning costs of
the barges. Completion of the sale is dependent upon several
issues, including meeting certain baseline performance and emission
tests. Failure to satisfy or cure any deficiencies could result in
the agreement being terminated and the sale abandoned. Seaboard
could be responsible to pay liquidated damages of up to
approximately $15,000,000 should it fail to perform its obligations
under the agreement, after expiration of applicable cure and grace
periods. Seaboard will retain all other physical properties of this
business and is considering options to continue its power business
in the Dominican Republic after the sale of these assets is
completed.
The following tables set forth specific financial information about
each segment as reviewed by Seaboard's management. Operating income
for segment reporting is prepared on the same basis as that used for
consolidated operating income. Operating income, along with income
or losses from affiliates for the Commodity Trading and Milling
segment, is used as the measure of evaluating segment performance
because management
12
does not consider interest, other investment income and income tax
expense on a segment basis.
Sales to External Customers:
Three Months Ended
April 3, April 4,
(Thousands of dollars) 2010 2009
Pork $ 317,906 $262,757
Commodity Trading and Milling 408,103 380,877
Marine 203,423 206,947
Sugar 53,822 42,007
Power 32,969 21,172
All Other 4,053 3,808
Segment/Consolidated Totals $1,020,276 $917,568
Operating Income (Loss):
Three Months Ended
April 3, April 4,
(Thousands of dollars) 2010 2009
Pork $ 26,408 $(17,077)
Commodity Trading and Milling 22,634 13,101
Marine 8,266 19,739
Sugar 11,277 2,298
Power 4,028 1,352
All Other 412 273
Segment Totals 73,025 19,686
Corporate Items (5,559) (3,644)
Consolidated Totals $ 67,466 $ 16,042
Income from Affiliates:
Three Months Ended
April 3, April 4,
(Thousands of dollars) 2010 2009
Commodity Trading and Milling $ 4,817 $ 3,703
Sugar 71 191
Segment/Consolidated Totals $ 4,888 $ 3,894
Total Assets:
April 3, December 31,
(Thousands of dollars) 2010 2009
Pork $ 767,397 $ 774,718
Commodity Trading and Milling 552,576 521,618
Marine 252,422 236,382
Sugar 196,573 205,155
Power 61,193 75,348
All Other 9,600 8,988
Segment Totals 1,839,761 1,822,209
Corporate Items 539,604 514,924
Consolidated Totals $2,379,365 $2,337,133
13
Investments in and Advances to Affiliates:
April 3, December 31,
(Thousands of dollars) 2010 2009
Commodity Trading and Milling $ 93,541 $ 79,883
Sugar 2,390 2,349
Segment/Consolidated Totals $ 95,931 $ 82,232
Administrative services provided by the corporate office allocated
to the individual segments represent corporate services rendered to
and costs incurred for each specific segment with no allocation to
individual segments of general corporate management oversight costs.
Corporate assets include short-term investments, other current
assets related to deferred compensation plans, fixed assets,
deferred tax amounts and other miscellaneous items. Corporate
operating losses represent certain operating costs not specifically
allocated to individual segments.
_______________________________________________________
14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Summary of Sources and Uses of Cash
Cash and short-term investments as of April 3, 2010 increased $31.3
million to $500.5 million from December 31, 2009. The increase was
the result of cash generated by operating activities of $77.5
million. During this same time, cash was primarily used for capital
expenditures of $16.3 million and to reduce notes payable by $14.3
million. Cash from operating activities increased $17.5 million for
the three months ended April 3, 2010 compared to the same period in
2009, primarily as a result of higher net earnings for the three
months ended April 3, 2010 compared to the same period in 2009.
Acquisitions, Capital Expenditures and Other Investing Activities
During the three months ended April 3, 2010, Seaboard invested $16.3
million in property, plant and equipment, of which $1.0 million was
expended in the Pork segment, $10.0 million in the Marine segment
and $4.7 million in the Sugar segment. The Pork segment
expenditures were primarily for improvements to existing facilities
and related equipment. The Marine segment expenditures were
primarily for purchases of cargo carrying and handling equipment.
In the Sugar segment, the capital expenditures were primarily for
the continued development of the cogeneration plant with the
remaining amount for normal upgrades to existing operations. All
other capital expenditures are of a normal recurring nature and
primarily include replacements of machinery and equipment, and
general facility modernizations and upgrades.
For the remainder of 2010 management has budgeted capital
expenditures totaling $67.9 million. The Pork segment plans to
spend $14.1 million for improvements to existing facilities and
related equipment. The Marine segment has budgeted $24.8 million
primarily for the purchase of additional cargo carrying and handling
equipment and port development projects. In addition, management
will be evaluating whether to purchase additional containerized
cargo vessels for the Marine segment and dry bulk vessels for the
Commodity Trading and Milling segment during 2010. The Sugar
segment plans to spend a total of $19.2 million consisting of $8.1
million for the continued development of a 40 megawatt cogeneration
plant, with the remaining amount for normal upgrades to existing
operations. The cogeneration plant is expected to be operational by
the second half of 2010. The balance of $9.8 million is planned to
be spent in all other businesses. Management anticipates paying for
these capital expenditures from available cash, the use of available
short-term investments or Seaboard's available borrowing capacity.
On March 2, 2009, an agreement became effective under which Seaboard
agreed to sell its two power barges in the Dominican Republic on or
around January 1, 2011 for $70.0 million. During March 2009, $15.0
million was paid to Seaboard and the $55.0 million balance of the
purchase price was paid into escrow and will be paid to Seaboard at
the closing of the sale. See Note 9 to the Condensed Consolidated
Financial Statements for further discussion.
In late March 2010, Seaboard acquired a 50% non-controlling interest
in an international commodity trading business located in North
Carolina for approximately $7.7 million. There was an initial
payment of $6.0 million made in March 2010 with the remaining $1.7
million recorded as a holdback payable over the next year upon
verification of the balance sheet as of the date of closing and
collection of certain receivables outstanding. This investment is
accounted for using the equity method.
Financing Activities and Debt
As of April 3, 2010, Seaboard had committed lines of credit totaling
$300.0 million and uncommitted lines totaling $163.4 million. As of
April 3, 2010, there were no borrowings outstanding under the
committed lines of credit and borrowings under the uncommitted lines
of credit totaled $19.5 million. Outstanding standby letters of
credit reduced Seaboard's borrowing capacity under its committed and
uncommitted credit lines by $42.7 million and $4.6 million,
respectively, primarily representing $26.4 million for Seaboard's
outstanding Industrial Development Revenue Bonds and $17.8 million
related to insurance coverage. Also included in notes payable as of
April 3, 2010 was a term note of $47.5 million denominated in U.S.
dollars.
Seaboard's remaining 2010 scheduled long-term debt maturities total
$1.6 million. As of April 3, 2010, Seaboard has cash and short-term
investments of $500.5 million with total net working capital of
$961.1 million. Accordingly, management believes Seaboard's
combination of internally generated cash, liquidity, capital
resources and borrowing capabilities will be adequate for its
existing operations and any currently known potential plans for
expansion of existing operations or business segments for 2010.
Management does, however, periodically review various alternatives
for future financing to provide additional liquidity for future
15
operating plans. Management intends to continue seeking
opportunities for expansion in the industries in which Seaboard
operates, utilizing existing liquidity, available borrowing
capacity, and other financing alternatives.
On November 6, 2009, the Board of Directors authorized up to $100.0
million for a new share repurchase program. For the three months
ended April 3, 2010, Seaboard used cash to repurchase 5,452 shares
of common stock at a total price of $7.1 million. See Note 8 to the
Condensed Consolidated Financial Statements for further discussion.
See Note 7 to the Condensed Consolidated Financial Statements for a
summary of Seaboard's contingent obligations, including guarantees
issued to support certain activities of non-consolidated affiliates
or third parties who provide services for Seaboard.
RESULTS OF OPERATIONS
Net sales increased to $1,020.3 million for the first quarter of
2010 compared to $917.6 million for the first quarter of 2009. The
increase primarily reflected an increase in sale prices for pork
products and increased commodities trading volumes.
Operating income increased to $67.5 million in the first quarter of
2010, compared to $16.0 million in the first quarter of 2009, which
primarily reflected higher Pork segment margins and, to a lesser
extent, increased margins for the Sugar segment and a $5.1 million
fluctuation of marking to market Commodity Trading and Milling
segment derivative contracts as discussed below.
Pork Segment
Three Months Ended
April 3, April 4,
(Dollars in millions) 2010 2009
Net sales $ 317.9 $ 262.8
Operating income (loss) $ 26.4 $ (17.1)
Net sales for the Pork segment increased $55.1 million in the first
quarter of 2010 compared to the first quarter of 2009. The increase
primarily represented an increase in overall sales prices for pork
products, and, to a lesser extent, higher volumes of biodiesel.
Operating income for the Pork segment increased $43.5 million for
the first quarter of 2010 compared to the first quarter of 2009. The
increase was primarily related to higher sales prices and lower feed
costs. Management is unable to predict future market prices for
pork products or the cost of feed and hogs purchased from third
parties. However, management anticipates positive operating income
for the remainder of 2010.
In addition, as discussed in Note 9 to the Condensed Consolidated
Financial Statements, there is a possibility that some amount of the
biodiesel plant could be deemed impaired during some future period
including fiscal 2010, which may result in a charge to earnings if
current projections are not met.
Commodity Trading and Milling Segment
Three Months Ended
April 3, April 4,
(Dollars in millions) 2010 2009
Net sales $ 408.1 $ 380.9
Operating income as reported $ 22.6 $ 13.1
Less mark-to-market adjustments (8.7) (3.6)
Operating income excluding mark-to-market adjustments $ 13.9 $ 9.5
Income from affiliates $ 4.8 $ 3.7
Net sales for the Commodity Trading and Milling segment increased
$27.2 million for the first quarter of 2010 compared to the first
quarter of 2009. The increase is primarily the result of increased
volumes of commodities sold, principally wheat. Partially
offsetting the increase were price decreases for commodities sold by
the commodity trading business to third parties, especially for
wheat and corn, and to a lesser extent, lower milling sales in
Zambia.
16
Operating income for this segment increased $9.5 million for the
first quarter of 2010 compared to the first quarter of 2009. The
increase reflects the $5.1 million fluctuation of marking to market
the derivative contracts as discussed below and write-downs of $8.8
million in the first quarter of 2009 for certain grain inventories
for customer contract performance issues and related lower of cost
or market adjustments, as discussed further in Note 3 to the
Condensed Consolidated Financial Statements. Partially offsetting
the increase were lower margins on soybean meal sales.
Due to the uncertain political and economic conditions in the
countries in which Seaboard operates and the current volatility in
the commodity markets, management is unable to predict future sales
and operating results. However, management anticipates positive
operating income for the remainder of 2010, excluding the potential
effects of marking to market derivative contracts. In addition, see
Note 3 to the Condensed Consolidated Financial Statements for
discussion regarding certain grain inventories.
Had Seaboard not applied mark-to-market accounting to its derivative
instruments, operating income would have been lower by $8.7 million
and $3.6 million, respectively, for the first quarter of 2010 and
2009. While management believes its commodity futures and options
and foreign exchange contracts are primarily economic hedges of its
firm purchase and sales contracts or anticipated sales contracts,
Seaboard does not perform the extensive record-keeping required to
account for these types of transactions as hedges for accounting
purposes. Accordingly, while the changes in value of the derivative
instruments were marked to market, the changes in value of the firm
purchase or sales contracts were not. As products are delivered to
customers, these mark-to-market adjustments should be primarily
offset by realized margins or losses as revenue is recognized and
thus, these mark-to-market adjustments could reverse in fiscal 2010.
Management believes eliminating these adjustments, as noted in the
table above, provides a more reasonable presentation to compare and
evaluate period-to-period financial results for this segment.
Income from affiliates in the first quarter of 2010 increased by
$1.1 million compared to the first quarter of 2009. Based on the
uncertainty of local political and economic situations in the
countries in which the flour and feed mills operate, management
cannot predict future results.
Marine Segment
Three Months Ended
April 3, April 4,
(Dollars in millions) 2010 2009
Net sales $ 203.4 $ 206.9
Operating income $ 8.3 $ 19.7
Net sales for the Marine segment decreased $3.5 million for the
first quarter of 2010 compared to the first quarter of 2009. The
decrease was primarily the result of overall lower rates in 2010 as
rates in the first quarter of 2009 had just started to decline from
the impacts of the slow economic conditions and continued to decline
for most of 2009. The rate decrease was partially offset by higher
cargo volumes in certain markets served for the first quarter of
2010 as certain economic activity began to increase.
Operating income for the Marine segment decreased $11.4 million for
the first quarter of 2010 compared to the first quarter of 2009.
The decrease was primarily the result of lower cargo rates, as
discussed above, and higher fuel costs for vessels and increased
trucking costs on a per unit shipped basis. Partially offsetting
the decrease were cost decreases for charterhire and certain
terminal costs on a per unit shipped basis. Management cannot
predict changes in future cargo volumes and cargo rates or to what
extent changes in economic conditions in markets served will
continue to affect net sales or operating income during the
remainder of 2010. However, management anticipates this segment
will be profitable for the remainder of 2010.
Sugar Segment
Three Months Ended
April 3, April 4,
(Dollars in millions) 2010 2009
Net sales $ 53.8 $ 42.0
Operating income $ 11.3 $ 2.3
Income from affiliates $ 0.1 $ 0.2
Net sales for the Sugar segment increased $11.8 million for the
first quarter of 2010 compared to the first quarter of 2009. The
increase for the quarter primarily reflects increased sugar prices
and increases in both price and
17
volume for alcohol sales. During the first quarter of 2010,
Seaboard began sales of dehydrated alcohol to certain local oil
companies under the national bio-ethanol program which requires
alcohol to be blended with gasoline. As a result, Seaboard
anticipates higher sales for 2010 compared to 2009. However,
Argentine governmental authorities continue to attempt to control
inflation by limiting the price of basic commodities, including
sugar. Accordingly, management cannot predict sugar prices for
the remainder of 2010.
Operating income increased $9.0 million for the first quarter of
2010 compared to the first quarter of 2009. The increase is
primarily a result of higher margins from the increase in alcohol
sales and sugar prices discussed above. In addition, the first
quarter of 2009 included a $2.8 million charge to earnings related
to the write-down of citrus inventories and related costs as
discussed in Note 9 to the Condensed Consolidated Financial
Statements which did not occur in 2010. Management expects this
segment to be profitable for the remainder of 2010 although not at
the same level as the first quarter.
Power Segment
Three Months Ended
April 3, April 4,
(Dollars in millions) 2010 2009
Net sales $ 33.0 $ 21.2
Operating income $ 4.0 $ 1.4
Net sales for the Power segment increased $11.8 million for the
first quarter of 2010 compared to the first quarter of 2009
primarily reflecting higher rates. The higher rates were
attributable primarily to higher fuel costs, a component of pricing.
Operating income increased $2.6 million for the first quarter of
2010 compared to the first quarter of 2009 primarily as a result of
higher rates being in excess of higher fuel costs. There were no
depreciation charges in 2010 related to the assets classified as
held for sale although this was principally offset by increases in
other production costs. See Note 9 to the Condensed Consolidated
Financial Statements for the potential future sale of certain assets
of this business. Management cannot predict future fuel costs or the
extent to which rates will fluctuate compared to fuel costs,
although management anticipates this segment will remain profitable
for the remainder of 2010.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses increased by
$1.1 million for the three month period of 2010 compared to the same
period in 2009. The increase is primarily due to increased
personnel costs related to Seaboard's deferred compensation programs
(which are offset by the effect of the mark-to-market investments
recorded in other investment income discussed below). As a
percentage of revenues, SG&A decreased to 4.8% in the first quarter
of 2010 compared to 5.2% for the first quarter of 2009 as a result
of increased sales primarily in the Pork and Commodity Trading and
Milling segments.
Interest Expense
Interest expense decreased $1.5 million for the three month period
of 2010 compared to the same period in 2009. The decrease is
primarily the result of lower average level of both short and long-
term borrowings.
Foreign Currency Gains (Losses)
The fluctuations in foreign currency gains (losses), net in the
first quarter of 2010 compared to the first quarter of 2009
primarily reflects foreign currency losses in the first quarter of
2009 in the Commodity Trading and Milling segment related to
transactions denominated in various African currencies and the Euro.
Other Investment Income
Other investment income increased $1.6 million for the three month
period of 2010 compared to the same period in 2009. The increase
primarily reflected gains of $1.2 million in the mark-to-market
value of Seaboard's investments related to the deferred compensation
programs in the first quarter of 2010 compared to losses of $0.6
million for the same period in 2009.
Miscellaneous, Net
The decrease in miscellaneous, net income for the three month period
of 2010 compared to the same period in 2009 primarily reflected a
gain of $2.5 million on interest rate exchange agreements for the
three month period of 2009.
18
OTHER FINANCIAL INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Seaboard is exposed to various types of market risks in its day-to-
day operations. Seaboard utilizes derivative instruments to
mitigate some of these risks including both purchases and sales of
futures and options to hedge inventories, forward purchase and sale
contracts and forward purchases. Primary market risk exposures
result from changing commodity prices, foreign currency exchange
rates and interest rates. From time to time, Seaboard may also
enter into speculative derivative transactions not directly related
to its raw material requirements. The nature of Seaboard's market
risk exposure related to these items has not changed materially
since December 31, 2009. See Note 5 to the Condensed Consolidated
Financial Statements for further discussion.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures - Seaboard's
management evaluated, under the direction of our Chief Executive and
Chief Financial Officers, the effectiveness of Seaboard's disclosure
controls and procedures as defined in Exchange Act Rule 13a-15(e) as
of April 3, 2010. Based upon and as of the date of that evaluation,
Seaboard's Chief Executive and Chief Financial Officers concluded
that Seaboard's disclosure controls and procedures were effective to
ensure that information required to be disclosed in the reports it
files and submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported as and when required.
It should be noted that any system of disclosure controls and
procedures, however well designed and operated, can provide only
reasonable, and not absolute, assurance that the objectives of the
system are met. In addition, the design of any system of disclosure
controls and procedures is based in part upon assumptions about the
likelihood of future events. Due to these and other inherent
limitations of any such system, there can be no assurance that any
design will always succeed in achieving its stated goals under all
potential future conditions.
Change in Internal Controls - There has been no change in Seaboard's
internal control over financial reporting required by Exchange Act
Rule 13a-15 that occurred during the fiscal quarter ended April 3,
2010 that has materially affected, or is reasonably likely to
materially affect, Seaboard's internal control over financial
reporting.
PART II - OTHER INFORMATION
Item 1A. Risk Factors
There have been no material changes in the risk factors as
previously disclosed in Seaboard's Annual Report on form 10-K for
the year ended December 31, 2009.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table contains information regarding Seaboard's
purchase of its common stock during the quarter.
Issuer Purchases of Equity Securities
Approximate
Total Dollar
Number Value of
of Shares Shares
Purchased that May
as Part Yet Be
Total Average of Publicly Purchased
Number of Price Announced Under the
Shares Paid per Plans Plans or
Period Purchased Share or Programs Programs
January 1 to January 31, 2010 406 1,263.07 406 99,487,192
February 1 to February 28, 2010 2,580 1,280.04 2,580 96,184,699
March 1 to April 3, 2010 2,466 1,352.00 2,466 92,850,677
Total 5,452 1,311.32 5,452 92,850,677
All purchases during the quarter were made under the authorization
from our Board of Directors to purchase up to $100 million market
value of Seaboard common stock announced on November 6, 2009. An
expiration date of October 31, 2011 has been specified for this
authorization. All purchases were made through open-market
purchases and all the repurchased shares have been retired.
19
Item 6. Exhibits
31.1 Certification of the Chief Executive Officer Pursuant to
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer Pursuant to
Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted 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
This Form 10-Q contains forward-looking statements with respect to
the financial condition, results of operations, plans, objectives,
future performance and business of Seaboard Corporation and its
subsidiaries (Seaboard). Forward-looking statements generally may
be identified as statements that are not historical in nature; and
statements preceded by, followed by or that include the words
"believes," "expects," "may," "will," "should," "could,"
"anticipates," "estimates," "intends," or similar expressions. In
more specific terms, forward-looking statements, include, without
limitation: statements concerning projection of revenues, income or
loss, capital expenditures, capital structure or other financial
items, including the impact of mark-to-market accounting on
operating income; statements regarding the plans and objectives of
management for future operations; statements of future economic
performance; statements regarding the intent, belief or current
expectations of Seaboard and its management with respect to:
(i) Seaboard's ability to obtain adequate financing and liquidity,
(ii) the price of feed stocks and other materials used by Seaboard,
(iii) the sales price or market conditions for pork, grains, sugar
and other products and services, (iv) statements concerning
management's expectations of recorded tax effects under certain
circumstances, (v) the volume of business and working capital
requirements associated with the competitive trading environment for
the Commodity Trading and Milling segment, (vi) the charter hire
rates and fuel prices for vessels, (vii) the stability of the
Dominican Republic's economy, fuel costs and related spot market
prices and collection of receivables in the Dominican Republic,
(viii) the ability of Seaboard to sell certain grain inventories in
foreign countries at current cost basis and the related contract
performance by customers, (ix) the effect of the fluctuation in
foreign currency exchange rates, (x) statements concerning
profitability or sales volume of any of Seaboard's segments, (xi)
the anticipated costs and completion timetable for Seaboard's
scheduled capital improvements, acquisitions and dispositions, (xii)
the anticipated renewal of federal tax credits for biodiesel or
(xiii) other trends affecting Seaboard's financial condition or
results of operations, and statements of the assumptions underlying
or relating to any of the foregoing statements.
This list of forward-looking statements is not exclusive. Seaboard
undertakes no obligation to publicly update or revise any forward-
looking statement, whether as a result of new information, future
events, changes in assumptions or otherwise. Forward-looking
statements are not guarantees of future performance or results.
They involve risks, uncertainties and assumptions. Actual results
may differ materially from those contemplated by the forward-looking
statements due to a variety of factors. The information contained
in this report, including without limitation the information under
the headings "Management's Discussion and Analysis of Financial
Condition and Results of Operations," identifies important factors
which could cause such differences.
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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.
SEABOARD CORPORATION
by: /s/ Robert L. Steer
Robert L. Steer, Senior Vice President,
Chief Financial Officer
(principal financial officer)
Date: May 10, 2010
by: /s/ John A. Virgo
John A. Virgo, Vice President,
Corporate Controller
and Chief Accounting Officer
(principal accounting officer)
Date: May 10, 2010
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