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 June 15, 1996
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commission file number 1-3390
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Seaboard Corporation
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Exact name of registrant as specified in its charter)
Delaware 04-2260388
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(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)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 June 15, 1996.
Total pages in filing - 13 pages
<TABLE>
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
June 15, 1996 and December 31, 1995
(Thousands of Dollars)
<CAPTION>
Part I - Financial Information
June 15, December 31,
1996 1995
------------ ------------
Assets
--------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,453 $ 5,529
Short-term investments 99,732 135,197
Receivables, net 135,449 117,709
Inventories 136,410 112,843
Income taxes receivable 8,538 --
Deferred income taxes 9,320 8,231
Prepaid expenses and deposits 16,281 14,251
------------ ------------
Total current assets 410,183 393,760
------------ ------------
Investments in and advances to foreign
subsidiaries not consolidated 23,853 26,140
------------ ------------
Property, plant and equipment 709,951 650,402
Accumulated depreciation (233,934) (211,987)
------------ ------------
Net property, plant and equipment 476,017 438,415
------------ ------------
Other assets 16,462 19,817
------------ ------------
Total assets $ 926,515 $ 878,132
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable and current maturities
of long-term debt $ 106,568 $ 40,826
Accounts payable 63,569 75,749
Income taxes payable -- 744
Other current liabilities 65,648 57,417
------------ ------------
Total current liabilities 235,785 174,736
------------ ------------
Long-term debt, less current maturities 297,361 297,440
------------ ------------
Deferred income taxes 18,051 14,569
------------ ------------
Other liabilities 26,000 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 $21 and ($150) at June 15,
1996 and December 31, 1995, respectively) (43) 251
Retained earnings 334,659 350,857
------------ ------------
Total stockholders' equity 349,318 365,810
------------ ------------
Total liabilities and stockholders' equity $ 926,515 $ 878,132
============ ============
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
Page 2
<TABLE>
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Twelve weeks ended June 15, 1996 and June 17, 1995
(Thousands of dollars except per share amounts)
<CAPTION>
June 15, June 17,
1996 1995
----------- -----------
<S> <C> <C>
Net sales $ 330,503 $ 255,402
Cost of sales and operating expenses 302,602 215,189
----------- -----------
Gross income 27,901 40,213
----------- -----------
Selling, general and administrative expenses 31,880 31,101
----------- -----------
Operating income (loss) (3,979) 9,112
----------- -----------
Income (loss) from foreign subsidiaries not
consolidated (499) 1,275
----------- -----------
Other income(expense):
Interest income 1,856 2,458
Interest expense (5,872) (3,228)
Miscellaneous (37) (83)
----------- -----------
Total other income (expense) (4,053) (853)
----------- -----------
Earnings (loss) before income taxes (8,531) 9,534
----------- -----------
Income tax expense(benefit):
Current (6,007) 3,094
Deferred 1,815 (324)
----------- -----------
Total income taxes (4,192) 2,770
----------- -----------
Net earnings (loss) $ (4,339) $ 6,764
=========== ===========
Earnings (loss) per common share $ (2.92) $ 4.55
=========== ===========
Dividends declared per common share $ .25 $ .25
=========== ===========
Average number of shares outstanding 1,487,520 1,487,520
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
Page 3
<TABLE>
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Twenty-Four weeks ended June 15, 1996 and June 17, 1995
(Thousands of dollars except per share amounts)
<CAPTION>
June 15, June 17,
1996 1995
----------- -----------
<S> <C> <C>
Net sales $ 628,134 $ 491,325
Cost of sales and operating expenses 580,029 409,025
----------- -----------
Gross income 48,105 82,300
Selling, general and administrative expenses 64,915 59,499
----------- -----------
Operating income (loss) (16,810) 22,801
----------- -----------
Income (loss) from foreign subsidiaries not
consolidated (431) 256
----------- -----------
Other income(expense):
Interest income 3,600 4,759
Interest expense (11,555) (5,762)
Miscellaneous 60 (130)
----------- -----------
Total other income (expense) (7,895) (1,133)
----------- -----------
Earnings (loss) before income taxes (25,136) 21,924
----------- -----------
Income tax expense(benefit):
Current (12,247) 7,625
Deferred 2,565 (505)
----------- -----------
Total income taxes (9,682) 7,120
----------- -----------
Net earnings (loss) $ (15,454) $ 14,804
=========== ===========
Earnings (loss) per common share $ (10.39) $ 9.95
=========== ===========
Dividends declared per common share $ .50 $ .50
=========== ===========
Average number of shares outstanding 1,487,520 1,487,520
=========== ===========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
Page 4
<TABLE>
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Twenty-Four weeks ended June 15, 1996 and June 17, 1995
(Thousands of Dollars)
<CAPTION>
June 15, June 17,
1996 1995
----------- -----------
<S> <C> <C>
Net cash provided by (used in)
operating activities $ (43,959) $ 14,160
----------- -----------
Cash flows from investing activities:
Purchase of investments (154,022) (299,928)
Proceeds from the sale or maturity of
investments 189,022 225,410
Capital expenditures, net (62,005) (91,411)
Notes receivable (243) 646
Investments and advances to foreign
subsidiaries not consolidated 1,855 4,599
----------- -----------
Net cash (used in) investing
activities (25,393) (160,684)
----------- -----------
Cash flows from financing activities:
Notes payable to bank 65,816 11,064
Proceeds from long-term debt 10,349 131,269
Principal payments (10,502) (2,115)
Deferred grants -- 3,927
Bond construction fund 3,357 1,626
Dividends paid (744) (744)
----------- -----------
Net cash provided by
financing activities 68,276 145,027
----------- -----------
Net (decrease) in cash and cash
equivalents (1,076) (1,497)
Cash and cash equivalents at beginning of year 5,529 4,773
----------- -----------
Cash and cash equivalents at end of quarter $ 4,453 $ 3,276
=========== ===========
<FN>
For purposes of the Condensed Consolidated Statements of Cash Flows, the
Company considers all demand deposits and overnight investments as cash.
See Notes to condensed consolidated financial statements.
</TABLE>
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 June 15, 1996, and the results of operations and cash flows for the
periods ended June 15, 1996 and June 17, 1995.
Note 2
- ------
The results of operations for the twenty-four weeks ended June 15, 1996 and
June 17, 1995 are not necessarily indicative of the results to be expected
for the full year.
Note 3
- ------
<TABLE>
The following is a summary of inventories at June 15, 1996 and December 31,
1995 (in thousands):
<CAPTION>
June 15, December 31,
1996 1995
----------- ------------
<S> <C> <C>
At lower of last-in, first-out (LIFO)
cost or market:
Live poultry $ 30,542 $ 26,442
Dressed poultry 22,328 21,219
Feed and baking ingredients, packaging
supplies and other 8,084 8,772
----------- ------------
60,954 56,433
LIFO allowance (12,224) (6,965)
----------- ------------
Total inventories at lower of
LIFO cost or market 48,730 49,468
----------- ------------
At lower of first-in, first-out (FIFO)
cost or market:
Live hogs 42,196 28,626
Grain, flour and feed 24,080 19,551
Dressed pork 3,580 166
Crops in production, fertilizers and
pesticides 9,185 7,639
Other 8,639 7,393
----------- ------------
Total inventories at lower of
FIFO cost or market 87,680 63,375
----------- ------------
Total inventories $ 136,410 $ 112,843
=========== ============
</TABLE>
Page 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
- -----------------------------------------------------------------------------
June 15, December 31,
1996 1995
- -----------------------------------------------------------------------------
Current ratio 1.74:1 2.25:1
Working capital $ 174.4 $ 219.0
- -----------------------------------------------------------------------------
Cash used in operating activities for the twenty-four weeks ending June 15,
1996 was $44 million compared to $14.2 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 $15.5 million and increased inventories and
receivables. Inventories increased primarily as a result of expansion of
the live hog herds, higher priced corn to grow the hogs and finished product
at the Company's pork processing plant which began operating in December,
1995. The increase in accounts receivable is primarily related to sales of
pork and poultry products, sales of wheat to affiliated, nonconsolidated
foreign flour mills and income taxes receivable resulting from the net loss.
The Company invested $63.3 million in property, plant and equipment through
June 15, 1996 in the food production and processing segment. Capital
expenditures of $48.7 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 $270.9
million. The Company expects additional expenditures for hog farrowing and
finishing facilities and working capital to total approximately $47 million in
the next two years, of which approximately $15.2 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 June 15, 1996 included $6.1 million in general modernization and
efficiency upgrades of plant and equipment.
Capital expenditures in the transportation segment through June 15, 1996
totaled $4.5 million for general replacement and upgrades of property and
equipment.
At December 31, 1995, the Company had $33.8 million outstanding under short-
term uncommitted credit lines from banks that totaled $122 million. In the
first quarter of 1996, the Company entered into a $75 million one-year
revolving credit facility and a five-year $50 million revolving credit
facility with a group of banks and certain uncommitted credit lines were
reduced by $17 million. As of June 15, 1996, the Company had $73 million
outstanding under the one-year revolving credit facility and $26.6 million
outstanding under the remaining short-term uncommitted credit lines totaling
Page 7
$105 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 limited by existing debt covenants.
Subject to completion of definitive documentation, the Company intends to
sell three vessels to a third party for $28.5 million. The vessels will then
be chartered from the third party for terms ranging from seven to ten years.
The Company will realize 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 will be accounted for as operating leases.
Subsequent to the end of the second quarter, the Company purchased a 50%
interest in Ingenio Y Refineria San Martin Del Tabacal S.A. (Tabacal).
Tabacal is an Argentinian company primarily engaged in growing and refining
sugar cane for consumption in Argentina and for export. The Company's net
equity investment in Tabacal is $8.1 million. The Company has not assumed
or guaranteed any of the liabilities of Tabacal. The investment will be
accounted for using the equity method of accounting. The Company also
acquired a one-third interest in a holding company which owns 22% of the
outstanding shares of Tabacal. The Company has no control over the manner in
which the holding company votes its shares of Tabacal. The Company's
investment in the holding company is approximately $700,000 and 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 twenty-four weeks ended June 15, 1996
increased by $75.1 million and $136.8 million, respectively, compared to the
same periods one year earlier. Operating income for the twelve and twenty-
four weeks ended June 15, 1996 decreased by $13.1 million and $39.6 million,
respectively, compared to the same periods one year ago.
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 Segment $ 36.2 $ 48.5 $ (7.9) $ (24.3)
Commodity Segment 41.8 91.2 .3 2.3
Transportation Segment (4.9) (7.0) (8.2) (19.8)
Other 2.0 4.1 2.7 2.2
----------- ----------- ---------- -----------
$ 75.1 $ 136.8 $ (13.1) $ (39.6)
=========== =========== ========== ===========
Page 8
Food Production And Processing Segment
Corn is the most significant component of the feed used to grow the
Company's poultry and hog inventories. Gross income of both the poultry and
pork product lines have been affected by the rising price of corn. The price
of July corn futures on the Chicago Board of Trade as quoted on June 14, 1996
was $1.88 per bushel higher compared to the same time one year earlier.
Management cannot predict if corn prices will recover to previous levels in
the current year. The Company implements hedging strategies to manage
exposure to fluctuations in these commodity markets; however, prolonged
periods of high corn prices have caused and will continue to cause an
increase in the cost to grow livestock. Because poultry inventories are
valued at LIFO, the higher cost of corn is reflected in earnings when
purchased. The pork inventories are valued at FIFO, accordingly most of
the higher cost corn is in inventory and will affect cost of sales in future
quarters as hogs mature and are processed. If the Company is not able to
recover these higher costs through higher sales prices, the Company's gross
income will continue to be negatively affected. While the Company realized
higher sales prices for poultry products late in the second quarter,
Management, at this time, is not able to assess whether the increases will
be sustainable or the likelihood of further increases in sales price.
Net sales of poultry products for the quarter and year-to-date were
$112.1 million and $222.4 million, respectively. This is an increase of
$5.2 million and $19.7 million, respectively, compared to the same periods
one year earlier. The increase in sales of poultry products is 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 are partially attributable to higher poultry markets
and partially attributable to a change in product mix which increased the
volume of cooked products. Gross income on poultry products for the quarter
and year-to-date were $3.1 million and $3.5 million, respectively. Gross
income decreased for the quarter and year-to-date by $7.6 million and $18.3
million, respectively, compared to the same periods one year earlier. The
decrease in gross income is primarily related to higher feed costs partially
offset by higher poultry prices and improved yields.
Net sales from the pork operations for the quarter and year-to-date totaled
$39.5 million and $61.2 million, respectively. Net sales increased by $22.8
million and $26.5 million, respectively, compared to the same periods one
year earlier. The increase resulted primarily from sales of pork products
at the hog processing plant in Guymon, Oklahoma 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 hog processing plant. The net
increase was partially offset by the discontinued operations at the Albert
Lea, Minnesota hog processing plant in December 1995 when the Company leased
the plant to a third party. Management expects increases in sales as the
Oklahoma plant increases its production.
Gross income in the pork operations for the quarter and year-to-date was
a negative $0.2 million and a negative $4.9 million, respectively. The gross
margin declined by $0.1 million and $3.1 million, respectively, compared to
the same periods one year earlier. The decline is primarily related to the
Page 9
hog processing plant in Guymon, Oklahoma. The plant is in the initial stage
of operations and is not expected to operate at single shift capacity until
the third quarter of 1996. The Company expects third quarter results to
continue to be adversely affected from operating at less than full capacity
and higher grain costs.
Operating income decreased for the quarter and year-to-date by $7.9 million
and $24.2 million, respectively, compared to the same period one year
earlier. The decline was primarily related to higher finished feed costs
and operating the pork plant at less than capacity.
Commodity Trading
Net sales from commodity trading activity increased for the quarter and
year-to-date by $49.5 million and $91.2 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 $4.9 million and $7 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 $8.2 million and $19.8 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 $2.1 million and $4.6 million, respectively, compared to the same
periods one year earlier. Operating income decreased for the same periods
by $1 million and $1.5 million, respectively, primarily as a result of
increasing reserves on the receivables from the sale of electric power in the
Dominican Republic.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the quarter and year-
to-date totaled $31.9 million and $64.9 million, respectively. SG&A
increased by $.8 million and $5.4 million respectively, compared to the same
periods one year earlier. The increase was primarily related to reserves
for potential uncollectible receivables discussed above. The increased
selling, general and administrative expenses associated with opening the
pork plant in Oklahoma were offset by the decrease in selling, general and
Page 10
administrative expenses from the discontinued operations at the Albert Lea,
Minnesota pork processing plant in December, 1995.
Interest Income and Expense
Interest income declined for the quarter and year-to-date by $0.6 million
and $1.2 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 during the quarter and year-
to-date by $2.6 million and $5.8 million, respectively, compared to the
same periods one year earlier. The increase was primarily related to the
issuance of long-term debt in the second quarter of 1995 and increased short-
term borrowings.
Income Tax Benefit
The second quarter effective rate of the income tax benefit increased
compared to the first quarter as a result of reversing approximately $750,000
of deferred taxes provided on undistributed earnings of foreign subsidiaries
recorded in the first quarter. These deferred taxes were reversed when the
applicable earnings were permanently invested as part of the Tabacal purchase.
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 June 15, 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. 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
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: July 29, 1996
Seaboard Corporation
by: /s/ Robert Steer
-------------------------------------
Robert Steer, Vice President-Finance
by: /s/ Jesse H. Bechtold
------------------------------------
Jesse H. Bechtold, Chief Accounting Officer
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECOND
QUARTER 10-Q FILING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-15-1996
<CASH> 4453
<SECURITIES> 99732
<RECEIVABLES> 135449
<ALLOWANCES> 21610
<INVENTORY> 136410
<CURRENT-ASSETS> 410183
<PP&E> 709951
<DEPRECIATION> 233934
<TOTAL-ASSETS> 926515
<CURRENT-LIABILITIES> 235785
<BONDS> 297361
0
0
<COMMON> 1488
<OTHER-SE> 347830
<TOTAL-LIABILITY-AND-EQUITY> 926515
<SALES> 628134
<TOTAL-REVENUES> 628134
<CGS> 580029
<TOTAL-COSTS> 580029
<OTHER-EXPENSES> 64915
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11555
<INCOME-PRETAX> (25136)
<INCOME-TAX> (9682)
<INCOME-CONTINUING> (15454)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15454)
<EPS-PRIMARY> (10.39)
<EPS-DILUTED> (10.39)
</TABLE>
