FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 7, 1996
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commission file number 1-3390
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Seaboard Corporation
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(Exact name of registrant as specified in its charter)
Delaware 04-2260388
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
9000 W. 67th Street, Shawnee Mission, KS 66202
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Address of principal executive offices) (Zip Code)
913-676-8800
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(Registrant's telephone number, including area code)
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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 number of shares outstanding of each of the issuer's classes of
common stock, as of latest practicable date. Common stock of $1 par value,
1,487,520 shares outstanding, as of September 7, 1996.
Total pages in filing - 13 pages
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 7, 1996 and December 31, 1995
(Thousands of Dollars)
Part I - Financial Information
September 7, December 31,
1996 1995
------------ ------------
Assets
------
Current assets:
Cash and cash equivalents $ 8,443 $ 5,529
Short-term investments 106,036 135,197
Receivables, net 154,379 117,709
Inventories 142,681 112,843
Income taxes receivable 12,265 --
Deferred income taxes 8,638 8,231
Prepaid expenses and deposits 16,807 14,251
------------ -----------
Total current assets 449,249 393,760
------------ -----------
Investments in and advances to foreign
subsidiaries not consolidated 31,964 26,140
------------ -----------
Property, plant and equipment 698,611 650,402
Accumulated depreciation (237,062) (211,987)
------------ -----------
Net property, plant and equipment 461,549 438,415
------------ -----------
Other assets 15,321 19,817
------------ -----------
Total assets $ 958,083 $ 878,132
============ ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable and current maturities
of long-term debt $ 115,565 $ 40,826
Accounts payable 69,632 75,749
Income taxes payable -- 744
Other current liabilities 75,342 57,417
------------ -----------
Total current liabilities 260,539 174,736
------------ -----------
Long-term debt, less current maturities 297,231 297,440
------------ -----------
Deferred income taxes 21,288 14,569
------------ -----------
Other liabilities 26,963 25,577
------------ -----------
Stockholders' equity:
Common stock of $1 par value,
Authorized 4,000,000 shares;
issued 1,789,599 shares 1,790 1,790
Less 302,079 shares held in treasury,
at par value 302 302
------------ -----------
1,488 1,488
Additional capital 13,214 13,214
Unrealized gain (loss) on debt securities,
(net of deferred income tax benefit
(expense) of $23 and ($150) at September
7, 1996 and December 31, 1995,
respectively) (48) 251
Retained earnings 337,408 350,857
------------ -----------
Total stockholders' equity 352,062 365,810
------------ -----------
Total liabilities and stockholders' equity $ 958,083 $ 878,132
============ ===========
Page 2
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Twelve weeks ended September 7, 1996 and September 9, 1995
(Thousands of dollars except per share amounts)
September 7, September 9,
1996 1995
------------ ------------
Net sales $ 350,739 $ 288,263
Cost of sales and operating expenses 311,314 248,341
------------ ------------
Gross income 39,425 39,922
Selling, general and administrative
expenses 30,139 30,426
------------ ------------
Operating income 9,286 9,496
------------ ------------
Income (loss) from foreign
subsidiaries not consolidated (557) 1,701
------------ ------------
Other income(expense):
Interest income 1,762 3,349
Interest expense (6,358) (4,648)
Miscellaneous 898 39
------------ ------------
Total other income (expense) (3,698) (1,260)
------------ ------------
Earnings before income taxes 5,031 9,937
------------ ------------
Income tax expense(benefit):
Current (2,011) 4,002
Deferred 3,921 (1,145)
------------ ------------
Total income taxes 1,910 2,857
------------ ------------
Net earnings $ 3,121 $ 7,080
============ ============
Earnings per common share $ 2.10 $ 4.76
============ ============
Dividends declared per common share $ .25 $ .25
============ ============
Average number of shares outstanding $1,487,520 $1,487,520
============ ============
See notes to condensed consolidated financial statements.
Page 3
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Thirty-Six weeks ended September 7, 1996 and September 9, 1995
(Thousands of dollars except per share amounts)
September 7, September 9,
1996 1995
------------ ------------
Net sales $ 978,873 $ 779,588
Cost of sales and operating expenses 891,343 657,366
------------ ------------
Gross income 87,530 122,222
Selling, general and administrative
expenses 95,054 89,925
------------ ------------
Operating income (loss) ( 7,524) 32,297
------------ ------------
Income (loss) from foreign subsidiaries
not consolidated (988) 1,957
------------ ------------
Other income(expense):
Interest income 5,362 8,108
Interest expense (17,913) (10,410)
Miscellaneous 958 ( 91)
------------ ------------
Total other income (expense) (11,593) (2,393)
------------ ------------
Earnings (loss) before income taxes (20,105) 31,861
------------ ------------
Income tax expense(benefit):
Current (14,258) 11,627
Deferred 6,486 (1,650)
------------ ------------
Total income taxes (7,772) 9,977
------------ ------------
Net earnings (loss) $ (12,333) $ 21,884
============ ============
Earnings (loss) per common share $ (8.29) $ 14.71
============ ============
Dividends declared per common share $ .75 $ .75
============ ============
Average number of shares outstanding $1,487,520 $1,487,520
============ ============
See notes to condensed consolidated financial statements.
Page 4
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Thirty-Six weeks ended September 7, 1996 and September 9, 1995
(Thousands of Dollars)
September 7, September 9,
1996 1995
------------ ------------
Cash flows from operating activities:
Net earnings (loss) $ (12,333) $ 21,884
Adjustment to reconcile net earnings to
net cash provided by (used in) operating
activities:
Depreciation and amortization 36,410 27,897
Deferred income taxes 6,312 (1,119)
Other operating activities 1,335 (9,819)
Changes in assets and liabilities:
Receivables (48,935) (11,028)
Inventories (29,838) (20,688)
Prepaid expenses and deposits (2,556) (5,596)
Liabilities, excluding debt 12,345 27,730
------------ -----------
Net cash provided by (used in)
operating activities (37,260) 29,261
------------ -----------
Cash flows from investing activities:
Purchase of investments (234,602) (560,015)
Proceeds from the sale or maturity of
investments 263,291 519,138
Capital expenditures, net (59,544) (140,194)
Notes receivable 797 1,188
Investments and advances to foreign
subsidiaries not consolidated ( 6,812) 5,424
------------ -----------
Net cash (used in) investing
activities (36,870) (174,459)
------------ -----------
Cash flows from financing activities:
Notes payable to bank 75,114 10,723
Proceeds from long-term debt 10,348 131,369
Principal payments (10,932) (2,879)
Deferred grants 350 3,927
Bond construction fund 3,280 3,393
Dividends paid (1,116) (1,116)
------------ -----------
Net cash provided by
financing activities 77,044 145,417
------------ -----------
Net increase in cash and cash equivalents 2,914 219
Cash and cash equivalents at beginning of
year 5,529 4,773
------------ -----------
Cash and cash equivalents at end of quarter $ 8,443 $ 4,992
============ ===========
Page 5
SEABOARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 1
- ------
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting of
normal recurring accruals) necessary to present fairly the financial
position as of September 7, 1996, and the results of operations and cash
flows for the periods ended September 7, 1996 and September 9, 1995.
Note 2
- ------
The results of operations for the thirty-six weeks ended September 7, 1996
and September 9, 1995 are not necessarily indicative of the results to be
expected for the full year.
Note 3
- ------
The following is a summary of inventories at September 7, 1996 and December
31, 1995 (in thousands):
September 7, December 31,
1996 1995
------------ ------------
At lower of last-in, first-out (LIFO)
cost or market:
Live poultry $ 30,967 $ 26,442
Dressed poultry 18,237 21,219
Feed and baking ingredients,
packaging supplies and other 8,995 8,772
------------ ------------
58,199 56,433
LIFO allowance (13,137) (6,965)
------------ ------------
Total inventories at lower of
LIFO cost or market 45,062 49,468
------------ ------------
At lower of first-in, first-out (FIFO)
cost or market:
Live hogs 53,220 28,626
Grain, flour and feed 20,805 19,551
Dressed pork 3,283 166
Crops in production, fertilizers and
pesticides 9,663 7,639
Other 10,648 7,393
------------ ------------
Total inventories at lower of
FIFO cost or market 97,619 63,375
------------ ------------
Total inventories $ 142,681 $ 112,843
============ ============
Page 6
Management's Discussion and Analysis
LIQUIDITY AND CAPITAL RESOURCES
___________________________________________________________________________
September 7, December 31,
(Dollars in millions) 1996 1995
- ---------------------------------------------------------------------------
Current ratio 1.72:1 2.25:1
Working capital $ 188.7 $ 219.0
- ---------------------------------------------------------------------------
Cash used in operating activities for the thirty-six weeks ending
September 7, 1996 was $37.3 million compared to $29.3 million of cash
provided by operations for the same period one year earlier. The decrease
in cash was primarily related to the net loss of $12.3 million and increased
inventories, receivables and liabilities exclusive of debt. Inventories
increased primarily as a result of expansion of the live hog herd, higher
priced feed raw materials and finished product at the Guymon pork plant
which began operating in December, 1995. The increase in receivables was
primarily related to increased sales of pork and poultry products, sales of
wheat to affiliated nonconsolidated foreign flour mills, advances to a
nonconsolidated foreign subsidiary and income taxes receivable resulting from
the net loss. The increase in liabilities consists primarily of accrued
voyage expenses.
The Company invested $75.5 million in property, plant and equipment through
September 7, 1996 in the food production and processing segment. Capital
expenditures of $64.5 million were for construction of hog farrowing and
finishing facilities, two feed mills and the Guymon pork processing plant.
Cumulative capital expenditures on these facilities since 1992 total $286.2
million. The Company expects additional expenditures for hog farrowing and
finishing facilities and working capital to total approximately $39 million
in the next two years, of which approximately $6.6 million is currently under
contract. Management anticipates the facilities will be financed from cash.
Capital expenditures of $1 million were made to complete a $9.5 million
expansion of processing capacity at the Company's poultry plant in Athens,
Georgia.
Other capital expenditures in the food production and processing segment
through September 7, 1996 included $10 million in general modernization and
efficiency upgrades of plant and equipment.
Capital expenditures in the transportation segment through September 7, 1996
totaled $7.6 million for general replacement and upgrades of property and
equipment.
Page 7
At December 31, 1995, the Company had $33.8 million outstanding under short-
term uncommitted credit lines from banks that totaled $122 million. During
1996, the Company entered into one-year revolving credit facilities totaling
$90 million and a five-year $50 million revolving credit facility and reduced
certain uncommitted credit lines. As of September 7, 1996, the Company had
$82.5 million outstanding under the one-year revolving credit facilities and
$26 million outstanding under the remaining short-term uncommitted credit
lines totaling $87.5 million. The Company borrowed $10 million of the five-
year revolving credit facility, the proceeds of which were used to retire $10
million in existing term loans. Utilization of the five-year revolving credit
facility is subject to debt covenant compliance.
During the quarter the Company sold three vessels used in the transportation
segment to a third party for $28.5 million. The vessels have been chartered
from the third party for terms ranging from seven to ten years. The Company
realized a $5.5 million gain on the sale of the vessels which will be deferred
and recognized over the term of the charter agreements. The charters are
accounted for as operating leases.
During the quarter, the Company purchased for $8.8 million a non-controlling
interest in Ingenio y Refineria San Martin del Tabacal S.A. (Tabacal).
Tabacal is an Argentinean company primarily engaged in growing and refining
sugar cane and citrus production for consumption in Argentina and for export.
The investment will be accounted for using the equity method of accounting.
As of September 7, 1996, the Company had advanced $9.2 million to Tabacal for
working capital requirements. Subsequent to quarter end, the Company has
advanced an additional $9.7 million.
Subsequent to the end of the third quarter, the Company acquired for $4.6
million a 50% interest in a flour mill located in Mozambique. The purchase
price consisted of $1 million payable at closing and a note of $3.6 million
payable in installments during the next six years. The investment will be
accounted for using the equity method of accounting.
Management intends to continue seeking opportunities for expansion in the
industries in which it operates and believes that the Company's liquidity,
capital resources and borrowing capabilities are adequate for its current
and intended operations.
RESULTS OF OPERATIONS
Net sales for the twelve and thirty-six weeks ended September 7, 1996
increased by $62.5 million and $199.3 million, respectively, compared to
the same periods one year earlier. Operating income for the twelve and
thirty-six weeks ended September 7, 1996 decreased by $.2 million and
$39.8 million, respectively, compared to the same periods one year ago.
Page 8
The segment distribution of the increase (decrease) in net sales and
operating income compared to the prior year are as follows (in millions):
Net Sales Operating Income
----------------------- ----------------------
Quarter Year-to-Date Quarter Year-to-Date
----------------------- ----------------------
Food Production and
Processing $ 62.6 $ 111.6 $ ( .1) $ (22.1)
Commodity 1.8 92.5 2.0 4.6
Transportation (2.7) (9.8) (1.8) (21.6)
Other .8 5.0 ( .3) (.7)
-------- --------- -------- ---------
$ 62.5 $ 199.3 $ ( .2) $ (39.8)
======== ========= ======== =========
Food Production And Processing Segment
Net sales of poultry products for the quarter and year-to-date were $130.1
million and $352.6 million, respectively. This is an increase of $21.6
million and $41.3 million, respectively, compared to the same periods one
year earlier. The increase in sales of poultry products was primarily related
to increased production resulting from expanded processing capacity and an
increase in the average selling price of poultry products. The increased sales
prices were partially attributable to higher poultry markets and changes in
product mix. Gross income on poultry products for the quarter and year-to
- -date were $12 million and $15.5 million, respectively. Gross income
decreased for the quarter and year-to-date by $4.1 million and $22.4 million,
respectively, compared to the same periods one year earlier. The decrease
in gross income is primarily related to higher feed costs.
Net sales from the pork operations for the quarter and year-to-date totaled
$60.4 million and $121.6 million, respectively. Net sales increased by $38.1
million and $64.5 million, respectively, compared to the same periods one
year earlier. The increase resulted primarily from sales of pork products
at the Company's hog processing plant which began operations in December 1995.
During the second quarter of 1996, sales of market hogs to third parties were
discontinued. The market hogs produced at the Company's live hog operations
are slaughtered at the pork processing plant. The net increase in sales was
partially offset by the decrease in sales resulting from discontinuing the
operations at the Albert Lea, Minnesota pork processing plant in December
1995.
Gross income from pork operations for the quarter was $2.2 million, an
increase of $1.8 million compared to the same period one year earlier. The
increase in gross income is primarily related to an increase in the number
of hogs processed at the Company's processing plant and higher sales prices
Page 9
on pork products. Year-to-date gross income was a negative $2.6 million,
a decline of $1.3 million compared to the same period one year ago. The
decline was primarily related to start-up costs associated with the Company's
hog processing plant.
The segment's operating income for the quarter was almost unchanged compared
to the same period one year earlier despite higher finished feed costs. The
increase in finished feed costs was offset by higher sales prices for poultry
and pork products and efficiencies in the pork operations resulting from
increased production of live hogs. Year-to-date operating income declined
by $22.1 million compared to the same period one year ago. The decline was
primarily related to higher finished feed costs. The higher finished feed
costs are primarily a result of higher corn prices. Higher corn prices which
have impacted and will continue to impact the cost of livestock for the next
quarter declined significantly subsequent to the end of the third quarter.
Significant declines in the price of corn should lessen the cost of growing
livestock in future quarters. At this time, management cannot assess whether
corn will remain at lower price levels or the net effect the lower priced
corn will have on operating income.
Commodity Trading
Net sales from commodity trading activity increased for the quarter and year-
to-date by $ 1.8 million and $92.5 million, respectively, compared to the
same periods one year earlier. The increase is primarily related to expanded
trading of wheat, soybeans, corn and other grains in foreign markets.
Transportation Segment
Net sales from containerized cargo operations decreased for the quarter and
year-to-date by $2.7 million and $9.8 million, respectively, compared to the
same periods one year earlier despite an increase in the number of revenue
producing units moved. The decline was primarily related to lower freight
rates in certain markets serviced by the Company compared to the same periods
one year earlier.
Operating income decreased by $1.8 million and $21.6 million, respectively,
compared to the same periods one year earlier. The decrease was primarily
related to lower freight rates. Management cannot predict when rates in these
markets will improve.
Other Operations
Net sales from electric power generating increased for the quarter and
year-to-date by $0.8 million and $5.4 million, respectively, compared to the
same periods one year earlier.
Page 10
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the quarter and year-
to-date totaled $30.1 million and $95.1 million, respectively. Year-to-date
SG&A increased by $5.1 million compared to the same period one year earlier.
The increase was primarily related to reserves for potentially uncollectible
foreign receivables and SG&A costs associated with opening the Company's hog
processing plant in Guymon, Oklahoma. The increases were partially offset
by the decrease in SG&A costs from discontinuing the operations at the Albert
Lea, Minnesota pork processing plant in December, 1995.
Interest Income and Expense
Interest income decreased for the quarter and year-to-date by $1.6 million
and $2.7 million, respectively, compared to the same periods one year earlier.
The decrease in interest income resulted primarily from a decline in invested
funds. Interest expense increased for the quarter and year-to-date by $1.7
million and $7.5 million, respectively, compared to the same periods one
year earlier. The increase was primarily related to increased short-term
borrowing and the issuance of long-term debt in the second quarter of 1995.
The Company does not believe its businesses have been materially adversely
affected by general inflation.
Page 11
SEABOARD CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K. Seaboard Corporation has not filed any reports on
Form 8-K during the twelve week period ended September 7, 1996.
This Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, which may include statements
concerning projection of revenues, income or loss, capital expenditures,
capital structure or other financial items, statements regarding the plans
and objectives of management for future operations, statements of future
economic performance, statements of the assumptions underlying or relating to
any of the foregoing statements and other statements which are other than
statements of historical fact. These statements appear in a number of places
in this Form 10-Q and include statements regarding the intent, belief or
current expectations of the Company and its management with respect to (I)
the cost and timing of the completion of new or expanded facilities, (ii)
the Company's financing plans, (iii) the Company's competitive position, (iv)
the supply and price of feed stocks and other materials used by the Company,
(v) the demand and price for the Company's products and services, (vi)
utilization of plant capacity, or (vii) other trends affecting the Company's
financial condition or results of operations and acquisition of new business.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially as a result of various factors.
The accompanying information contained in this Form 10-Q, including with
limitation the information under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" identifies
important factors which could cause such differences.
Page 12
PART II - OTHER INFORMATION
---------------------------
SIGNATURE
---------
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 and principal financial officer.
DATE: October 21, 1996
Seaboard Corporation
by: /s/ Robert Steer
------------------------------------
Robert Steer, Vice President-Finance
Page 13
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