UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________________ to ____________________
Commission file number 1-3390
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 (I.R.S. Employer
incorporation or organization) Identification No.)
9000 W. 67th Street, Shawnee Mission, Kansas 66202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 676-8800
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock American Stock Exchange
$1.00 Par Value
Securities registered pursuant of Section 12(g) of the Act:
None
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(Title of class)
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. X
(Continued)
FORM 10-K
SEABOARD CORPORATION
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant. The aggregate market value shall be computed by reference
to the price at which the stock was sold, or the average bid and asked prices
of such stock, as of a specified date within 60 days prior to the date of
filing.
$84,044,829 (March 14, 1997). On such date, 332,193 shares were held
by non-affiliates, and the stock was sold at $253.00 per share.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date: 1,487,519.75 shares of
Common Stock as of March 14, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Part I, item 1(b), a part of item 1(c)(1) and the financial information
required by item 1(d) and Part II, items 5, 6, 7 and 8 are incorporated by
reference to the Registrant's Annual Report to Stockholders furnished to the
Commission pursuant to Rule 14a-3(b).
Part III, a part of item 10 and items 11, 12 and 13 are incorporated by
reference to the Registrant's definitive proxy statement filed pursuant to
Regulation 14A for the 1997 annual meeting of stockholders (the "1997 Proxy
Statement").
This Form 10-K and its Exhibits (Form 10-K) contain 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-K 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, or (vi) 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-K, 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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FORM 10-K
SEABOARD CORPORATION
PART I
Item 1. Business
(a) General Development of Business
Seaboard Corporation, a Delaware corporation, the successor corporation
to a company first incorporated in 1928, and subsidiaries ("Registrant"), is
a diversified international agribusiness and transportation company which is
primarily engaged in domestic poultry and pork production and processing,
commodity merchandising, baking, flour milling and shipping. Overseas, the
Company is primarily engaged in flour and feed milling, shrimp and produce
farming and electric power generation. See Item 1 (c) (i) (ii) below for a
discussion of developments in specific segments.
(b) Financial Information about Industry Segments
The information required by Item 1 relating to Industry Segments is
hereby incorporated by reference to note 13 of Registrant's Consolidated
Financial Statements appearing on pages 45, 46 and 47 of the Registrant's
Annual Report to Stockholders furnished to the Commission pursuant to Rule
14a-3(b) and attached as Exhibit 13 to this Report.
(c) Narrative Description of Business
(1) Business Done and Intended to be Done by the Registrant
(i) Principal Products and Services
Registrant produces and processes poultry in the United States and sells
processed chicken and chicken parts, both directly and through commercial
distributors, to retail, food service and institutional markets, primarily
in the eastern half of the United States and foreign markets.
Registrant produces hogs and processes pork in the United States and
sells fresh pork to domestic and foreign markets. Hogs produced by Company
owned or leased facilities are processed at the Company's processing plant.
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SEABOARD CORPORATION
Registrant operates an ocean liner service for containerized cargo
between Florida and ports in the Caribbean Basin and South America.
Registrant also operates bulk carriers primarily in the Atlantic Basin.
Registrant is engaged in Puerto Rico in the milling of flour and the
production and distribution of a full line of baked goods. These goods are
distributed directly within Puerto Rico and neighboring islands to food
service and retail outlets.
Registrant trades commodities, such as bulk grains and oil seeds,
primarily in the Eastern Mediterranean and the Atlantic Basin.
Registrant, by itself or through non-controlled subsidiaries, produces
and processes produce and shrimp in Central and South America, primarily
for export to the U.S. and Europe. Registrant also brokers fruits, vegetables
and shrimp for independent growers. The majority of these products are
transported using the Registrant's shipping line and distribution facility in
Miami, Florida.
Registrant, by itself or through non-controlled subsidiaries, also
produces polypropylene bags, operates power generating facilities, operates
flour and animal feed mills, produces and refines sugarcane and citrus and
produces salmon.
The information required by Item 1 with respect to the amount or
percentage of total revenue contributed by any class of similar products or
services which account for 10% or more of consolidated revenue in any of the
last three fiscal years is hereby incorporated by reference to note 13 of
Registrant's Consolidated Financial Statements appearing on pages 45, 46 and
47 of the Registrant's Annual Report to Stockholders furnished to the
Commission pursuant to rule 14a-3(b) and attached as Exhibit 13 to this
report.
(ii) Status of Product or Segment
Registrant continues to expand its food production and processing
segment by further investing in poultry and pork production and processing
facilities. During 1996, the Registrant completed construction of an
integrated hog production and processing operation in Oklahoma, Kansas,
Texas and Colorado. These facilities include hog farrowing, nursing and
finishing buildings, feed mills and a processing plant. The processing plant,
which began operating in December, 1995, produces fresh and processed pork
marketed primarily in the Southwest United States and for export.
During 1996, the Registrant purchased a non-controlling interest in an
Argentinean company which produces and refines sugarcane and citrus.
Improvements are being made to existing operations and the sugarcane and
citrus fields are being expanded.
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SEABOARD CORPORATION
(iii) Sources and Availability of Raw Materials
None of Registrant's businesses utilize material amounts of raw
materials that are dependent on purchases from one supplier or a small group
of dominant suppliers.
(iv) Patents, Trademarks, Licenses, Franchises and Concessions
Registrant uses two trademarks; Gold-n-Fresh and Easy Entrees for
retail sales of poultry products. Registrant uses three trademarks, Season
Sweet , Chestnut Hill Farms , and Cumars Best in marketing fresh fruits,
vegetables and shrimp in the United States. Registrant's Puerto Rican Baking
business uses three registered trademarks: Holsum , Country Hearth and
Olympic Kids.
Patents, trademarks, franchises, licenses and concessions are not
material to any of Registrant's other businesses.
(v) Seasonal Business
Profitability of the poultry operations is generally higher in the
summer months. Profits from processed pork are generally higher in the fall
months. Produce operations are seasonal, depending on the crop being grown.
Generally, crops which are exported to the United States are only in
production from November through May. The Registrant's other businesses are
not seasonally dependent.
(vi) Practices Relating to Working Capital Items
There are no unusual industry practices or practices of Registrant
relating to working capital items.
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SEABOARD CORPORATION
(vii) Depending on a Single Customer or Few Customers
Registrant does not have sales to any one customer equal to 10% or more
of Registrant's consolidated revenues, nor sales to a few customers which,
if lost, would have a material adverse effect on any such segment or on
Registrant taken as a whole.
(viii) Backlog
Backlog is not material to Registrant's businesses.
(ix) Government Contracts
No material portion of Registrant's business involved government
contracts.
(x) Competitive Conditions
Competition in Registrant's food production and processing segment comes
from a variety of national and regional producers and is based primarily on
product performance, customer service and price. In the January 1997 issue
of Broiler Industry, an industry trade publication, the Registrant was ranked
as the ninth largest poultry processor in the United States based on average
weekly production of ready-to-cook chicken. In the October 1996 issue of
Successful Farming, an industry trade publication, the Registrant was ranked
in the top ten pork producers in the United States based on sows in
production.
Registrant's Puerto Rican baking business is the largest bakery in Puerto
Rico. Competition, based on price and product performance, comes primarily
from imported baked goods in the cookie and donut lines, and from one Puerto
Rican sliced bread baker.
Registrant believes it is among the top five ranking ocean liner
services for containerized cargoes in the Caribbean Basin. During the fourth
quarter of 1995, competition based on price and consumer service increased
significantly in certain markets served by the Registrant. During the
fourth quarter of 1996, container rates began to increase modestly.
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SEABOARD CORPORATION
(xi) Research and Development Activities
Registrant does not engage in material research and development
activities.
(xii) Environmental Compliance
Registrant believes that it is in substantial compliance with
applicable Federal, state and local provisions relating to environmental
protection, and no significant capital expenditures are contemplated in this
area.
(xiii) Number of Persons Employed by Registrant
As of December 31, 1996, Registrant, excluding non-controlled,
non-consolidated foreign subsidiaries, had 10,788 employees, of whom
9,089 were employed in the United States (including Puerto Rico).
(d) Financial Information about Foreign and Domestic Operations and
Export Sales
The financial information required by Item 1 relating to export sales
is hereby incorporated by reference to note 13 of Registrant's Consolidated
Financial Statements appearing on pages 45, 46 and 47 of Registrant's Annual
Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b)
and attached as Exhibit 13 to this report. Foreign sales, including sales
to non-consolidated foreign subsidiaries, represent less than 10% of
Registrant's consolidated revenue. Registrant did not have a material amount
of sales or transfers between geographic areas for the periods reported on
herein.
Registrant considers its relations with the governments of the countries
in which its foreign subsidiaries are located to be satisfactory, but these
foreign operations are subject to the normal risks of doing business abroad,
including expropriation, confiscation, war, insurrection, civil strife and
revolution, currency inconvertibility and devaluation, and currency exchange
controls. To minimize these risks, Registrant has insured certain
investments in and loans to its flour mill and shrimp farm in Ecuador and
its flour mill in Zaire to the extent deemed appropriate against certain of
these risks with the Overseas Private Investment Corporation, an agency of
the United States Government.
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SEABOARD CORPORATION
Item 2. Properties
The Registrant currently has production and distribution facilities in
the following states: Alabama, Colorado, Florida, Georgia, Kansas, Kentucky,
Maine, Oklahoma, Pennsylvania, New Jersey, North Carolina, Tennessee and
Texas. Additionally, the Registrant has wholly or partially owned facilities
in Argentina, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador,
Guatemala, Guyana, Honduras, Mozambique, Nigeria, Panama, Peru, Puerto Rico,
Sierra Leone, Venezuela and Zaire.
(1) Food Production and Processing
The principal poultry operations of the Registrant consists of five owned
and one leased processing plants. These plants are devoted to various
phases of slaughtering, dressing, cutting, packing, deboning or further-
processing chickens. The total slaughter capacity is approximately 232.4
million birds per year. To support these facilities, the Registrant operates
four feed mills, four hatcheries and a network of 670 contract growers that
supply pullet, breeder and broiler farms. These facilities are located in
Alabama, Georgia, Kentucky and Tennessee.
The construction in Oklahoma of a hog processing plant with a double
shift capacity of four million hogs per year was completed in December, 1995.
Registrant reached single shift capacity in the third quarter of 1996. Hog
production facilities currently consist of a combination of owned and leased
farrowing, nursery and finishing units to support 102,500 sows. Registrant
owns three feed mills which have a combined capacity to produce 850 thousand
tons of feed annually to support the hog production. These facilities are
located in Oklahoma, Texas, Kansas and Colorado.
The Registrant owns in whole or in part seven flour mills with capacity
to produce 49,400 cwts of bakery flour and mill feed per day. In addition,
Registrant has feed mill capacity of 35 tons per hour to produce formula
animal feed. The flour mills, located in Puerto Rico, Guyana, Ecuador,
Sierra Leone, Mozambique, Nigeria and Zaire, and the feed mills located in
Ecuador, Nigeria and Zaire are owned except for a flour mill in Sierra Leone
which is located on land which the Government of Sierra Leone has agreed to
lease for a remaining term of 17 years, and a Nigerian flour and feed mill
with a remaining lease term of 78 years and renewal option of 75 years.
The Registrant owns two bakeries in Puerto Rico.
The Registrant, by itself or through non-controlled subsidiaries,
operates approximately 3,100 acres of shrimp ponds in Honduras and Ecuador.
Approximately 2,400 acres are leased for a nineteen year term and the rest
are owned.
The Registrant owns a non-controlling interest in an Argentinean
company which owns approximately 37,000 acres of planted sugarcane and
approximately 4,200 acres of planted citrus. In addition, this company owns
a sugar mill with a capacity to process 140,000 tons of sugar per year.
(2) Transportation
Registrant leases a 166,400 square foot warehouse, office space and port
terminal land and facilities in Florida which are used in its containerized
cargo operations.
The Registrant owns six 9,000 metric-ton deadweight dry bulk carriers
and three containerized ocean cargo vessels with deadweights ranging from
6,818 to 12,648 metric-tons. In addition, Registrant timecharters, under
short-term agreements, between twelve and fifteen containerized ocean cargo
vessels with deadweights ranging from 2,488 to 9,200 metric-tons. Registrant
also bare boat charters, under long-term lease agreements, three
containerized ocean cargo vessels with deadweights ranging from 12,169 to
12,648 metric tons.
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SEABOARD CORPORATION
(3) Other
Registrant owns a floating power generating facility, capable of
producing 40 megawatts of power, located in the Port of Rio Haino in Santo
Domingo, Dominican Republic. Registrant manages a second power generating
facility capable of producing 17.5 megawatts of power also located in the
Dominican Republic.
Management believes that the Registrant's present facilities are
generally adequate and suitable for its current purposes. In general,
facilities are fully utilized; however, seasonal fluctuations in inventories
and production may occur as a reaction to market demands for certain products.
Certain foreign flour mills may operate at less than full capacity due to
unavailability of foreign exchange to pay for imported raw materials.
Item 3. Legal Proceedings
The Company is subject to legal proceedings related to the normal
conduct of its business. Although in the opinion of management, none of
these actions are expected to result in a final judgement having a
materially adverse effect on the consolidated financial statements of the
Company, the Company is a defendant in a maritime arbitration claim more
fully described in Note 12 of the consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the last quarter of the fiscal year
covered by this report to a vote of security holders.
Executive Officers of Registrant
The following table lists the executive officers and certain
significant employees of Registrant. Generally, each executive officer is
elected at the Annual Meeting of the Board of Directors following the Annual
Meeting of Stockholders and holds his office until the next such annual
meeting or until his successor is duly chosen and qualified. There are no
arrangements or understandings pursuant to which any executive officer was
elected.
Name (Age) Positions and Offices with Registrant and Affiliates
H. Harry Bresky (71) President of Registrant; President and
Treasurer of Seaboard Flour Corporation (SFC)
Joe E. Rodrigues (60) Executive Vice President and Treasurer
Rick J. Hoffman (42) Vice President
Steven J. Bresky (43) Vice President
Robert L. Steer (37) Vice President - Finance
Douglas W. Schult (40) Vice President - Human Resources
David M. Becker (35) Assistant Secretary and Director of Legal Affairs
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FORM 10-K
SEABOARD CORPORATION
Mr. H. Harry Bresky has served as President of Registrant since 1967
and as President of SFC since 1987, and as Treasurer of SFC since 1973.
Mr. Bresky is the father of Steven J. Bresky.
Mr. Rodrigues has served as Executive Vice President and Treasurer of
Registrant since December 1986.
Mr. Hoffman has served as Vice President of Registrant since April 1989.
Mr. Steven J. Bresky has served as Vice President of Registrant since
April 1989.
Mr. Steer has served as Vice President - Finance of Registrant since
April 1996. He has been employed with the Registrant since 1984.
Mr. Schult has served as Vice President - Human Resources of Registrant
since April 1996. He has been employed with the Registrant since February
1995, by M.G. Waldbaum from January 1993 to January 1995 and prior to that
by IBP, Inc.
Mr. Becker has served as Assistant Secretary of Registrant since May
1994. He has been employed with the Registrant since 1993 and prior to that
was employed by the law firm Stinson Mag and Fizzell PC.
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FORM 10-K
SEABOARD CORPORATION
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information required by Item 5 is hereby incorporated by reference
to "Stock Listing" and "Quarterly Financial Data" appearing on pages 48 and
28, respectively, of Registrant's Annual Report to Stockholders furnished to
the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this
Report.
Item 6. Selected Financial Data
The information required by Item 6 is hereby incorporated by reference
to the "Summary of Selected Financial Data" appearing on page 4 of
Registrant's Annual Report to Stockholders furnished to the Commission
pursuant to Rule 14a-3(b) and attached as Exhibit 13 of this Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by Item 7 is hereby incorporated by reference
to "Management's Discussion and Analysis of Financial Condition and Results
of Operations" appearing on pages 22 through 27 of Registrant's Annual Report
to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and
attached as Exhibit 13 to this Report.
Item 8. Financial Statements and Supplementary Data
The information required by Item 8 is hereby incorporated by reference
to Registrant's "Quarterly Financial Data," "Independent Auditor's Report,"
"Consolidated Statements of Earnings," "Consolidated Statements of
Stockholders' Equity," " Consolidated Balance Sheets," " Consolidated
Statements of Cash Flows" and "Notes to Consolidated Financial Statements"
appearing on pages 28 through 47 of Registrant's Annual Report to Stockholders
furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit
13 to this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
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FORM 10-K
SEABOARD CORPORATION
PART III
Item 10. Directors and Executive Officers of Registrant
Refer to "Executive Officers of Registrant" in Part I.
Information required by this item relating to directors of Registrant
has been omitted since Registrant filed a definitive proxy statement within
120 days after December 31, 1996, the close of its fiscal year. The
information required by this item relating to directors is incorporated by
reference to "Item 1" appearing on pages 3 and 4 of the 1997 Proxy statement.
The information required by this item relating to late filings of reports
required under Section 16(a) of the Securities Exchange Act of 1934 is
incorporated by reference to the last paragraph on page 2 of the Registrant's
1997 Proxy Statement.
Item 11. Executive Compensation
This item has been omitted since Registrant filed a definitive proxy
statement within 120 days after December 31, 1996, the close of its fiscal
year. The information required by this item is incorporated by reference to
"Executive Compensation and Other Information," "Retirement Plans" and
"Compensation Committee Interlocks and Insider Participation" appearing on
pages 5, 6, 7 and 9 of the 1997 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management
This item has been omitted since Registrant filed a definitive proxy
statement within 120 days after December 31, 1996, the close of its fiscal
year. The information required by this item is incorporated by reference to
"Principal Stockholders" appearing on page 2 and "Election of Directors" on
page 3 of the 1997 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
This item has been omitted since Registrant filed a definitive proxy
statement within 120 days after December 31, 1996, the close of its fiscal
year. The information required by this item is incorporated by reference to
"Compensation Committee Interlocks and Insider Participation" appearing on
page 9 of the 1997 Proxy Statement.
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FORM 10-K
SEABOARD CORPORATION
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Consolidated financial statements.
See Index to Consolidated Financial Statements on page F-1.
2. Consolidated financial statement schedules.
See Index to Consolidated Financial Statements on page F-2.
3. Exhibits.
3.1 - Registrant's Certificate of Incorporation, as amended,
incorporated by reference to Exhibit 3.1 of Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1992.
3.2 - Registrant's By-laws, as amended - incorporated by
reference to Exhibit 3.2 of Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1992.
4.1 - Note Purchase Agreement dated December 1, 1993 between
the Registrant and various purchasers as listed in the exhibit.
The Annexes and Exhibits to the Note Purchase Agreement have
been omitted from the filing, but will be provided
supplementally upon request of the Commission. Incorporated
by reference to Exhibit 4.1 of Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993.
4.2 Seaboard Corporation 6.49% Senior Note Due December 1,
2005 issued pursuant to the Note Purchase Agreement described
above. Incorporated by reference to Exhibit 4.2 of
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.
4.3 Note Purchase Agreement dated June 1, 1995 between the
registrant and various purchasers as listed in the exhibit.
The Annexes and Exhibits to the Note Purchase Agreement have
been omitted from the filing, but will be provided
supplementally upon request of the Commission. Incorporated
by reference to Exhibit 4.3 of Registrant's Form 10-Q for the
quarter ended September 9, 1995.
4.4 Seaboard Corporation 7.88% Senior Note Due June 1, 2007
issued pursuant to the Note Purchase Agreement described above.
Incorporated by reference to Exhibit 4.4 of Registrant's Form
10-Q for the quarter ended September 9, 1995.
4.5 - Seaboard Corporation Note Agreement dated as of December
1, 1993 ($100,000,000 Senior Notes due December 1, 2005).
First Amendment to Note Agreement. Incorporated by reference
to Exhibit 4.7 of Registrant's Form 10-Q for the quarter ended
March 23, 1996.
4.6 - Seaboard Corporation Note Agreement dates as of June 1,
1995 ($125,000,000 Senior Notes due June 1, 2007). First
Amendment to Note Agreement. Incorporated by reference to
Exhibit 4.8 of Registrant's Form 10-Q for the quarter ended
March 23, 1996.
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SEABOARD CORPORATION
* 10.1 Registrant's Executive Retirement Plan dated October 18,
1994. Incorporated by reference to Exhibit 10.1 of
Registrant's Form 10-Q for the quarter ended September 10, 1994.
* 10.2 Registrant's Summary of Benefits for Excess 401(k)
Contributions (Supplemental Executive Retirement Plan).
Incorporated by reference to Exhibit 10.2 of Registrant's
Form 10-Q for the quarter ended September 10, 1994.
* 10.3 Registrant's Supplemental Executive Retirement Plan for
H. Harry Bresky dated March 21, 1995. Incorporated by
reference to Exhibit 10.3 of Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.
* 10.4 Employment Agreement for Joe E. Rodrigues dated July 9,
1986 and amended August 10, 1990. Incorporated by reference
to Exhibit 10.5 of Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
* 10.5 First Amendment to Registrant's Executive Retirement
Plan dated December 31, 1995. Incorporated by reference to
Exhibit 10.6 of Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.
13 - Sections of Annual Report to security holders
incorporated by reference herein.
18 - Letter regarding change in accounting principles.
21 - List of subsidiaries.
27 - Financial Data Schedule (included in electronic copy
only).
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by Registrant during the last quarter
of the fiscal year covered by this report.
(c) Exhibits
Exhibits begin on page 16.
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SEABOARD CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SEABOARD CORPORATION
By /s/H. Harry Bresky By /s/Robert L. Steer
- --------------------------- ---------------------------
H. Harry Bresky, President R.L. Steer, Vice President -
(principal executive officer) Finance (principal financial
and accounting officer)
Date: March 27, 1997 Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
Registrant and in the capacities and on the dates indicated.
/s/H. Harry Bresky /s/J. E. Rodrigues
- ---------------------------- -------------------------
H. Harry Bresky, Director J. E. Rodrigues, Director
Date: March 27, 1997 Date: March 27, 1997
/s/David A. Adamsen /s/Thomas J. Shields
- ----------------------------- -------------------------
David A. Adamsen, Director Thomas J. Shields, Director
Date: March 27, 1997 Date: March 27, 1997
15
SEABOARD CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements and Schedule
(Form 10-K)
Securities and Exchange Commission
For the year ended December 31, 1996
(With Independent Auditors' Report Thereon)
SEABOARD CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Financial Statements
--------------------
Stockholders'
Annual Report Page
------------------
Independent Auditors' Report 34
Consolidated Balance Sheets as of December 31, 1996
and December 31, 1995 37
Consolidated Statements of Earnings for the years
ended December 31, 1996, December 31, 1995 and
December 31, 1994 35
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1996, December 31, 1995 and
December 31, 1994 36
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, December 31, 1995 and
December 31, 1994 39
Notes to Consolidated Financial Statements 40
The foregoing are incorporated by reference.
The individual financial statements of the minority-owned nonconsolidated
foreign subsidiaries which would be required if each such foreign subsidiary
were a Registrant are omitted, because (a) the Registrant's and its other
subsidiaries' investments in and advances to such foreign subsidiaries do
not exceed 20% of the total assets as shown by the most recent consolidated
balance sheet; (b) the Registrant's and its other subsidiaries' proportionate
share of the total assets (after intercompany eliminations) of such foreign
subsidiaries do not exceed 20% of the total assets as shown by the most
recent consolidated balance sheet; and (c) the Registrant's and its other
subsidiaries' equity in the earnings before income taxes and extraordinary
items of the foreign subsidiaries does not exceed 20% of such income of the
Registrant and consolidated subsidiaries compared to the average income for
the last five fiscal years.
Combined condensed financial information as to assets, liabilities and
results of operations have been presented for minority-owned nonconsolidated
foreign subsidiaries in note 6 of "Notes to the Consolidated Financial
Statements."
(Continued)
F-1
SEABOARD CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Schedule
--------
Page
----
II - Valuation and Qualifying Accounts for the years ended
December 31, 1996, 1995 and 1994 F-4
All other schedules are omitted as the required information is inapplicable
or the information is presented in the consolidated financial statements or
related consolidated notes.
F-2
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Seaboard Corporation:
Under date of March 3, 1997, we reported on the consolidated balance sheets
of Seaboard Corporation and subsidiaries as of December 31, 1996 and 1995 and
the consolidated statements of earnings, stockholders' equity and cash flows
for each of the years in the three-year period ended December 31, 1996 as
contained in the December 31, 1996 annual report to stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year ended December 31,
1996. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the financial statement schedule as
listed in the accompanying index. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
As discussed in note 5 to the consolidated financial statements, the Company
changed its method of accounting for spare parts and supplies inventories in
1996.
KPMG Peat Marwick LLP
Kansas City, Missouri
March 3, 1997
F-3
Schedule II
<TABLE>
SEABOARD CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In Thousands)
<CAPTION>
Balance at Write-offs Balance
beginning Provision net of at end
of year (1) recoveries of year
----------- --------- ---------- --------
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful
accounts $ 17,088 4,122 1,762 $ 19,448
=========== ========= ========== =========
Year ended December 31, 1995:
Allowance for doubtful
accounts $ 9,196 10,554 2,662 $ 17,088
=========== ======== ========== =========
Year ended December 31, 1994:
Allowance for doubtful
accounts $ 6,556 2,910 270 $ 9,196
=========== ======== ========== =========
(1) Charged to selling, general and administrative expenses.
</TABLE>
F-4
<TABLE>
Summary of Selected Financial Data
Seaboard Corporation and Subsidiaries
<CAPTION>
- --------------------------------------------------------------------------------------------------
(Thousands of dollars except per share amounts) Years ended December 31,
- --------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Net sales $ 1,464,362 $ 1,173,977 $ 983,804 $ 1,142,144 $ 1,053,655
==================================================================================================
Net earnings $ 5,846 $ 20,202 $ 35,201 $ 35,891 $ 31,075
==================================================================================================
Earnings per common share $ 3.93 $ 13.58 $ 23.67 $ 24.13 $ 20.89
==================================================================================================
Total assets $ 1,004,685 $ 878,132 $ 675,211 $ 647,332 $ 485,121
==================================================================================================
Long-term debt $ 297,719 $ 297,440 $ 177,666 $ 194,506 $ 78,123
==================================================================================================
Stockholders' equity $ 369,934 $ 365,810 $ 346,080 $ 304,356 $ 269,581
==================================================================================================
Dividends per common share $ 1.00 $ 1.00 $ 1.00 $ .75 $ .50
==================================================================================================
<FN>
As described in Note 5 to the consolidated financial statements, the
Company changed its method of accounting for spare parts and supplies
inventories in 1996. The cumulative effect of this change at January 1,
1996 was to increase net earnings by $3,006,000 or $2.02 per common share.
In addition, the effect of this change in 1996, exclusive of the cumulative
effect, was to increase net earnings by $788,000 or $.53 per common share.
Included in Net Earnings and Earnings Per Common Share for the year ended
December 31, 1993 is the cumulative effect of changing the method of
accounting for income taxes. Net Earnings was increased by $11,000,000 and
Earnings Per Common Share increased by $7.40 to reflect this change. Net
Earnings and Earnings Per Common Share for the year ended December 31, 1993
also include the reversal of deferred taxes on undistributed earnings of
certain foreign subsidiaries that management believes are permanently invested.
Net Earnings increased by $9,074,000 and Earnings Per Common Share increased
by $6.10 as a result of this reversal of deferred taxes.
</TABLE>
(Graphs omitted from this page, see appendix.)
Seaboard Corporation and Subsidiaries
Financial Summary
(Graphs omitted from this page, see appendix.)
Management's Discussion and Analysis
Liquidity and Capital Resources
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Current ratio 1.71:1 2.25:1 3.31:1
Working capital $ 204.2 $ 219.0 $ 259.5
Cash from operating activities $ (72.8) $ 42.2 $ 50.3
Capital expenditures $ 110.5 $ 229.5 $ 87.6
Long-term debt, exclusive of
current maturities $ 297.7 $ 297.4 $ 177.7
Total capitalization* $ 715.5 $ 703.4 $ 562.7
- -----------------------------------------------------------------------------
* Total capitalization is defined as stockholders' equity and
noncurrent liabilities.
</TABLE>
Cash provided by operating activities declined $115.0 million compared to
1995 due to lower earnings and increased inventories and receivables.
Inventories increased primarily as a result of the expansion of the live hog
herd and finished product at the pork processing plant which began operating
in December, 1995 and higher priced feed raw materials. Inventories of
dressed poultry also increased due to the timing of export sales.
Inventories also increased $6.2 million as a result of the Company changing
its method of accounting for spare parts and supplies used in its poultry
and pork processing operations (see Note 5 to consolidated financial
statements for further discussion). The increase in receivables was primarily
related to increased sales of pork and poultry products and short-term
advances to a nonconsolidated foreign subsidiary.
The decline in cash provided by operating activities of $8.1 million in 1995
compared to 1994 was primarily attributable to increased inventories and
receivables. Inventories increased as a result of the expansion of the live
hog herd and the timing of export sales of dressed poultry and commodity
grains. Receivables increased in the transportation segment mostly due to
increased sales. Partially offsetting the increase in inventories and
receivables were increases in accounts payable and accrued liabilities.
Accounts payable increased primarily as a result of higher inventory levels.
Accrued liabilities increased due to advance payments on export sales,
deferred hedging gains and revenues on incomplete voyages.
The Company invested $110.5 million in property, plant and equipment during
1996, of which $99.1 million was expended in the food production and
processing segment, $8.6 million in the transportation segment and $2.8
million in other areas of the Company's business.
During 1996, capital expenditures for hog farrowing and finishing facilities,
two feed mills and a pork processing plant amounted to $83 million.
Cumulative capital expenditures on these facilities since 1992 total $306.2
million. The Company expects additional expenditures for these initial
facilities to total approximately $7.2 million during the next year.
Management anticipates these expenditures will be financed by internally
generated cash and through the issuance of exempt facility revenue bonds.
Other capital expenditures in the food production and processing segment for
1996 consisted of $16.1 million in expanding processing capacity, general
modernization and efficiency upgrades of plant and equipment. The Company
anticipates spending $37.3 million to upgrade and expand its poultry
facilities during the next year. Management anticipates these expenditures
will be financed by internally generated cash.
Capital expenditures in the transportation segment during 1996 totaled $8.6
million for general replacement and upgrades of property and equipment.
Capital expenditures totaled $229.5 million in property, plant and equipment
during 1995, of which $192.2 million was expended in the food production and
processing segment and $34.1 million in the transportation segment and $3.2
million in other areas of the Company's business.
During 1995, capital expenditures for hog farrowing and finishing facilities,
two feed mills and a pork processing plant amounted to $159.7 million. Capital
expenditures of $8.5 million were made at the Company's poultry processing
plant in Athens, Georgia to expand processing capacity. Other capital
expenditures in the food production and processing segment for 1995 included
$24.0 million in general modernization and efficiency upgrades of plant and
equipment.
Capital expenditures in the transportation segment during 1995 totaled $34.1
million. The Company purchased two cargo vessels for $14.7 million for use
in the ocean liner service, and other capital expenditures of $19.4 million
were for general replacement and upgrades of property and equipment.
In August 1996, 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 $5.9 million gain on the sale of the vessels which was deferred
and will be recognized over the term of the charter agreements. The charters
are accounted for as operating leases.
In July 1996, 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
sugarcane and citrus production for consumption in Argentina and for export.
The investment is being accounted for using the equity method of accounting.
As of December 31, 1996, the Company had advanced $27.6 million to Tabacal
for improvements of existing operations, expanding sugarcane and citrus fields
and working capital requirements. The Company anticipates making additional
loans or guaranteeing loans made to Tabacal by third parties in amounts not
expected to exceed $20 million.
In October 1996, the Company acquired a 50 percent interest in a flour mill
located in Mozambique for $4.6 million with $1 million paid at closing and
the balance to be paid in installments over the next six years. The investment
is being accounted for using the equity method of accounting.
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. At December 31, 1996, the
Company had $75 million outstanding under the one-year revolving credit
facilities and $75.2 million outstanding under the remaining short-term
uncommitted credit lines totaling $115 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.
As of December 31, 1996, economic incentive grants totaling $12.4 million had
been used to fund construction projects. Use of these funds, contributed by
government entities, was limited to construction of a pork processing
facility. For accounting purposes, these grants have been recorded in other
liabilities and are being amortized over the life of the assets constructed
with the funds.
In February 1995, the Company borrowed the proceeds of $3.3 million in
Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds issued by
the Guymon Utilities Authority. The funds were used to finance certain costs
associated with the construction of a pork processing plant.
In June 1995, the Company issued $125 million in unsecured Senior Notes to
various lenders, the proceeds of which are being used to finance the
construction of hog production facilities, a pork processing plant and for
general corporate purposes. The notes bear interest at 7.88% and mature
in equal installments of $25 million on June 1, 2003, 2004, 2005, 2006 and
2007.
In December 1995, the Company borrowed the proceeds of $9.6 million in
Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds issued by
the Kansas Development Finance Authority. The funds were used to finance
certain costs associated with hog production facilities.
Long-term debt of $17.4 million was repaid in 1995 in advance of its scheduled
maturity.
Subsequent to year-end, the Company's one year revolving credit facilities
were increased to $160 million as a result of the extension of an existing
facility and the establishment of a new facility. In addition, the existing
five-year revolving credit facility was also extended and reduced to $25
million. The Company also expects to borrow approximately $10 million of
Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds to be issued
by the Oklahoma Development Finance Authority. The funds will be used to
finance certain costs associated with hog production facilities.
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 of $1,464.4 million for the year ended December 31, 1996, increased
by $290.4 million compared to the year ended December 31, 1995. Operating
income in 1996 decreased by $11.5 million compared to 1995 to total $19.7
million.
Net sales increased by $190.2 million compared to 1994 to total $1,174
million for the year ended December 31, 1995. Operating income of $31.2
million in 1995 decreased by $15.9 million compared to 1994.
Food Production And Processing Segment
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 844.5 652.5 638.3
Operating income $ (3.9) 10.1 10.7
- -----------------------------------------------------------------------------
</TABLE>
In 1996, net sales for the food production and processing segment increased
$192 million compared to 1995 as a result of increased poultry and pork sales.
Operating income for 1996 decreased $14 million compared to 1995 as a result
of significantly higher grain prices during most of 1996. As described in
Note 5 to the consolidated financial statements, the Company changed its
method of accounting for spare parts and supplies inventories in 1996. The
effect of this change was to decrease the operating loss in the food
production and processing segment in 1996 by $1.3 million. In the fourth
quarter of 1996, grain prices decreased substantially. Grain commodities are
a significant component of the Company's costs. Management expects this
decrease in grain prices to have a positive effect on the Company's operating
income in the first half of 1997.
Net sales of poultry products totaled $501.7 million in 1996 an increase of
$43.1 million compared to 1995. The increase 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 decreased by $26.6 million
compared to 1995 to total $28.5 million. The decrease in gross income was
primarily related to higher finished feed costs.
Net sales within the pork operations increased $142.7 million in 1996 to
total $234.3 million. The increase is related to sales of pork as a result
of the new hog processing plant reaching full single-shift capacity during
1996. The market hogs produced at the Company's live hog operations are
slaughtered at the pork processing plant. The increase in sales was
partially offset by a $56.1 million decrease in sales resulting from
discontinuing the operations at the Albert Lea, Minnesota pork processing
plant in December 1995.
The pork operations reported gross income of $3 million in 1996, an increase
of $6.6 million compared to 1995. The increase in gross income is primarily
related to large increases in hog production and reaching full single-shift
capacity at the new hog processing plant in 1996 along with the
discontinuation of unprofitable operations at the Albert Lea plant in
December 1995. The increase was partially offset by higher finished feed
costs and start-up costs associated with the processing plant.
Net sales for the food production and processing segment in 1995 increased
$14.2 million compared to 1994 as a result of increased poultry sales. In
1995, operating income decreased by $.6 million compared to 1994. The
decrease in operating income was primarily related to higher general and
administrative expenses at the Company's pork operations.
Net sales of poultry products totaled $458.6 million in 1995, an increase of
$32.5 million compared to 1994. The increase was primarily due to higher
sales prices attributable to higher demand for export product. Gross income
on poultry products increased by $4.4 million compared to 1994 to total $55.1
million. The increase in gross income was primarily related to higher
selling prices partially offset by higher finished feed costs.
Net sales of live hogs and pork products totaled $91.6 million in 1995
compared to $98.3 million in 1994. The 1994 net sales included the last
three months of slaughter operations at the Company's Minnesota plant. After
discontinuing the slaughter, the remaining operations at this plant
consisted of processing hams and bacon until December 1995 when it was leased
to a third party. Live hog sales increased during 1995 as the Company's herd
grew in anticipation of opening its new processing plant. The pork
operations reported negative gross income of $3.6 million in 1995 compared
to negative gross income of $2 million in 1994. The decrease was primarily
related to higher cost of raw product used in processing hams and bacon.
The Company enters into forward purchase contracts, futures and options to
manage its exposure to price fluctuations in the commodity markets. These
commodity instruments generally involve the anticipated purchase of feed
grains and the sale of hogs. At December 31, 1996, the Company had net
contracts to purchase 5.1 million bushels of grain and sell 146.5 million
pounds of hogs.
Gains and losses on commodity instruments designated as hedges and for which
there is high correlation between changes in the value of the instrument and
changes in the value of the hedged commodity are deferred and ultimately
recognized in operations as part of the cost of the commodity. Gains and
losses on qualifying hedges of firm commitments or probable anticipated
transactions are also deferred and recognized as adjustments of the carrying
amounts of the commodities when the hedged transaction occurs. Realized
gains and losses on qualifying commodity instruments which were designated
as hedges are deferred and are ultimately recognized as part of the
measurement of the hedged transactions. Commodity instruments not qualifying
as hedges for financial reporting purposes are marked to market and included
in cost of sales and operating expenses in the consolidated statements of
operations. Realized gains and (losses) from commodity contracts reported
in operating income for the years ended December 31, 1996 and 1995 were
$(12.9) million and $1.9 million, respectively.
Commodity Trading and Milling
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 315.6 208.0 107.4
Operating income $ 18.1 8.5 8.6
- --------------------------------------------------------------------------
</TABLE>
Net sales from commodity trading and milling increased by $107.6 million in
1996 compared to 1995. The increase is primarily related to increased sales
of wheat and other grains in foreign markets. Operating income from
commodity trading increased by $9.6 million compared to 1995, primarily as a
result of improved margins due to lower unit freight costs.
Net sales from commodity trading activity increased by $100.6 million in
1995 compared to 1994. The increase is primarily related to expanded trading
of wheat, soybeans, corn and other grains in foreign markets. Operating
income was adversely affected by higher ship operating expenses.
Transportation Segment
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 266.6 277.1 210.6
Operating income $ 6.5 16.9 29.2
- --------------------------------------------------------------------------
</TABLE>
Net sales and operating income from containerized cargo operations decreased
by $10.5 million and $10.4 million respectively, in 1996 compared to 1995.
The decrease in sales and operating income was primarily related to lower
freight rates resulting from increased competition in certain markets
serviced by the Company compared to the same period one year earlier. The
decrease in sales was partially offset by the increase in unit cargo volumes
shipped. The decrease in operating income was partially offset by lower
overhead expenses as a result of improving efficiency levels. During the
fourth quarter of 1996, container rates began to increase moderately.
Management cannot predict whether rates will continue to improve.
Net sales from containerized cargo operations increased by $66.5 million in
1995 compared to 1994. The increase resulted primarily from new services to
South America and the Carribean Basin and increased volume within existing
services in Central America. Net sales from other transportation services
were not material.
Operating income from the containerized cargo operations decreased by $12.3
million in 1995 compared to 1994. The decrease was primarily related to
lower freight rates in 1995 compared to 1994 in certain markets in which the
Company operates. Through the third quarter of 1995, freight rates on revenue
producing units remained almost unchanged compared to the same period in
1994. In the fourth quarter of 1995, rates declined sharply due to
competitive pressures. Operating income was further impacted by costs
associated with expanding services, including higher rates on vessels the
Company has on charter.
Other Operations
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
(Dollars in millions) 1996 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 37.7 36.3 27.5
Operating income $ 5.1 1.0 2.9
- --------------------------------------------------------------------------
</TABLE>
Net sales from other operations was almost unchanged in 1996 compared to
1995. Operating income increased by $4.1 million compared to 1995 due
primarily to a reduction in operating expenses resulting from lower
maintenance costs in electric power generation and improved receivables
collections.
Net sales from other operations increased $8.8 million in 1995 compared to
1994. The increase is primarily related to expanded electric power generation
service within the Dominican Republic. Operating income decreased during the
year as a result of increased reserves on certain foreign receivables.
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative (SG&A) totaled $128.8 million, $139.2
million and $112.3 million for the years ended December 31, 1996, 1995 and
1994, respectively. The 1996 decrease reflects the Company's focus on cost
controls, improved receivable collections and start-up of pork processing
operations. The increase in SG&A for 1995 is primarily related to general
and administrative costs associated with the staffing and expenditures of
the pork operations, increased reserves for potential uncollectible
receivables primarily with foreign customers, and expenses related to
expanded shipping routes and product lines.
Interest Income
- ---------------
Interest income totaled $9.1 million, $11.5 million and $9.7 million for the
years ended December 31, 1996, 1995 and 1994, respectively. The decrease
in 1996 of $2.4 million resulted primarily from a decline in invested funds.
The increase in 1995 of $1.8 million resulted primarily from investing the
proceeds of $125 million of long-term debt issued in June 1995.
Interest Expense
- ----------------
Interest expense, net of capitalized interest, totaled $26.9 million, $15.7
million and $13.1 million for the years ended December 31, 1996, 1995 and
1994, respectively. Interest expense increased during 1996 compared to 1995
as a result of increased short-term borrowings and the issuance of long-term
debt in June 1995. Interest expense increased in 1995 compared to 1994 as a
result of the issuance of long-term debt and increased short-term borrowings.
From time to time, the Company enters into interest rate exchange agreements
in the management of interest rate risk. These agreements effectively convert
specifically identified variable rate debt into fixed-rate debt. At December
31, 1996, there were no outstanding agreements.
Other Financial Information
- ---------------------------
Results from foreign subsidiaries not consolidated for 1996 reflect the
upgrading and expansion of operations of Tabacal. The Company anticipates
incurring additional losses during 1997 as Tabacal continues its upgrading
and expansion activities.
Miscellaneous income in 1994 included a $2.9 million gain from liquidating
an interest rate exchange agreement during the second quarter. The Company
entered into this interest rate exchange agreement as an anticipatory hedge
against interest rate risk associated with anticipated variable rate
financing. The anticipated liability to be hedged was not incurred.
The Company has operations in and transactions with customers in a number
of foreign countries. The currencies of these countries fluctuate in
relation to the U.S. dollar. Most of the Company's major contracts and
transactions, however, are denominated in U.S. dollars. The Company had no
material foreign currency transaction gains or losses during the years ended
December 31, 1996, 1995 and 1994.
The activities of foreign subsidiaries are primarily conducted with U.S.
affiliates, or they operate in hyper-inflationary environments. As a result,
the Company translates, for consolidation purposes, using the U.S. dollar as
the functional currency. The gains and losses that result from remeasurement
are reported in earnings. Foreign currency losses for the years ended
December 31, 1996, 1995 and 1994, were not material. Foreign currency
exchange restrictions imposed upon the Company's wholly owned foreign
subsidiaries and certain minority-owned foreign subsidiaries do not have a
significant effect on the consolidated financial position of the Company.
The Company is subject to various federal and state regulations regarding
environmental protection and land use. Among other things, these regulations
affect the disposal of livestock waste and corporate farming matters in
general. Management believes it is in compliance with all such regulations.
Future changes in environmental or corporate farming laws could affect the
manner in which the Company operates its business and its cost structure.
The Company does not believe its businesses have been materially adversely
affected by general inflation.
<TABLE>
Quarterly Financial Data
(Unaudited)
Seaboard Corporation and Subsidiaries
<CAPTION>
- -------------------------------------------------------------------------------
(Thousands of dollars 1st 2nd 3rd 4th Total for
except per share amounts) Quarter Quarter Quarter Quarter the Year
- -------------------------------------------------------------------------------
1996
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 297,631 330,503 350,739 485,489 1,464,362
Operating income $ (7,242) (3,668) 9,606 18,083 16,779
Net earnings $ (7,706) (4,149) 3,316 14,385 5,846
Earnings per common
share $ (5.18) (2.79) 2.23 9.67 3.93
Dividends per common
share $ .25 .25 .25 .25 1.00
Market price range per common share:
High $ 270 246 3/4 221 266
Low $ 233 203 196 210
===============================================================================
<CAPTION>
- -------------------------------------------------------------------------------
1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 235,923 255,402 288,263 394,389 1,173,977
Operating income $ 13,689 9,112 9,496 (1,093) 31,204
Net earnings $ 8,040 6,764 7,080 (1,682) 20,202
Earnings per common
share $ 5.40 4.55 4.76 (1.13) 13.58
Dividends per common
share $ .25 .25 .25 .25 1.00
Market price range per common share:
High $ 230 304 295 270
Low $ 159 233 241 243 3/8
===============================================================================
The Company's first three quarters of each fiscal year consist of three
four-week periods. The fourth quarter has four four-week periods.
</TABLE>
As described in Note 5 to the consolidated financial statements, the
Company changed its method of accounting for spare parts and supplies
inventories during the fourth quarter of 1996. This change has been applied
retroactively to January 1, 1996 and, accordingly, the first three quarters
of 1996 have been restated. The cumulative effect of this change at January
1, 1996 was to increase net earnings by $3,006,000 or $2.02 per common share
for the first quarter of 1996. In addition, the effect of this change in
1996, exclusive of the cumulative effect, was to increase net earnings and
earnings per common share by $403,000 ($.27 per share), $190,000 ($.13 per
share), and $195,000 ($.13 per share), respectively, for the first, second
and third quarters of 1996. There was no effect on the fourth quarter of
1996. The pro forma effect of retroactive application of this new method
would not materially affect the results of operations for any of the 1995
quarters.
This Report 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 Report 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, or (vi) 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 report including without limitation the information under
the headings "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Letter to Stockholders" identifies important
factors which could cause such differences.
Responsibility For Financial Statements
The consolidated financial statements appearing in this annual report
have been prepared by the Company in conformity with generally accepted
accounting principles and necessarily include amounts based upon judgments
with due consideration given to materiality.
The Company relies on a system of internal accounting controls that is
designed to provide reasonable assurance that assets are safeguarded, that
transactions are executed in accordance with Company policy and are properly
recorded, and that accounting records are adequate for preparation of
financial statements and other information. The concept of reasonable
assurance is based on recognition that the cost of a control system should
not exceed the benefits expected to be derived and that such evaluations
require estimates and judgements. The design and effectiveness of the system
are monitored by a professional staff of internal auditors.
The consolidated financial statements have been audited by the
independent accounting firm of KPMG Peat Marwick LLP, whose responsibility
is to examine records and transactions and to gain an understanding of the
system of internal accounting controls to the extent required by generally
accepted auditing standards and render an opinion as to the fair presentation
of the consolidated financial statements.
The board of directors pursues its review of auditing, internal controls
and financial statements through its audit committee, consisting of a majority
of directors who are not employed by the Company. In the exercise of its
responsibilities, the audit committee meets periodically with management, with
the internal auditors and with the independent accountants to review the scope
and results of examinations. Both the internal auditors and independent
accountants have free access to the committee with or without the presence of
management.
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of Seaboard
Corporation and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of earnings, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31,
1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Seaboard
Corporation and subsidiaries at December 31, 1996 and 1995 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted
accounting principles.
As discussed in Note 5 to the consolidated financial statements, the
Company changed its method of accounting for spare parts and supplies
inventories in 1996.
KPMG Peat Marwick LLP
Kansas City, Missouri
March 3, 1997
<TABLE>
Seaboard Corporation and Subsidiaries
Consolidated Statements of Earnings
(Thousands of dollars except per share amounts)
<CAPTION>
Years ended December 31,
-------------------------------------
1996 1995 1994
-------------------------------------
<S> <C> <C> <C>
Net sales $ 1,464,362 $ 1,173,977 $ 983,804
Cost of sales and operating expenses 1,315,782 1,003,604 824,411
------------ ----------- ----------
Gross income 148,580 170,373 159,393
------------ ----------- ----------
Selling, general and administrative
expenses 128,835 139,169 112,295
------------ ----------- ----------
Operating income 19,745 31,204 47,098
Income(loss) from foreign subsidiaries
not consolidated (2,966) 2,035 3,113
------------ ----------- ----------
16,779 33,239 50,211
------------ ----------- ----------
Other income (expense):
Interest income 9,095 11,506 9,704
Interest expense (26,864) (15,686) (13,136)
Miscellaneous 1,292 (440) 2,352
------------ ----------- ----------
Total other income (expense), net (16,477) (4,620) (1,080)
------------ ----------- ----------
Earnings before income taxes
and cumulative effect of a
change in accounting principle 302 28,619 49,131
Income tax (expense) benefit 2,538 (8,417) (13,930)
------------ ----------- ----------
Earnings before cumulative
effect of a change in
accounting principle 2,840 20,202 35,201
Cumulative effect of changing the
accounting for inventories, net of
income tax expense of $1,922 3,006 -- --
------------ ----------- ----------
Net earnings $ 5,846 $ 20,202 $ 35,201
============ =========== ==========
Earnings per common share:
Earnings before cumulative effect
of a change in accounting
principle $ 1.91 $ 13.58 $ 23.67
Cumulative effect of changing the
accounting for inventories 2.02 -- --
------------ ----------- ----------
Earnings per common share $ 3.93 $ 13.58 $ 23.67
============ =========== ==========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Seaboard Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
(Thousands of dollars except per share amounts)
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
Unrealized
Gain (Loss)
Common Treasury Additional on Debt Retained
Stock Stock Capital Securities Earnings
------- -------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1994 $ 1,790 $ (302) $ 4,440 $ - $298,428
Capital contribution - - 8,774 - -
Net unrealized loss on
marketable debt
securities, net of income
tax benefit of $466 - - - (764) -
Net earnings - - - - 35,201
Dividends on common stock
($1.00 per share) - - - - (1,487)
------- -------- ---------- ---------- ---------
Balances,December 31, 1994 1,790 (302) 13,214 (764) 332,142
Net unrealized gain on
marketable debt
securities, net of
income tax expense
of $616 _ _ _ 1,015 -
Net earnings - - - - 20,202
Dividends on common stock
($1.00 per share) - - - - (1,487)
------- -------- ---------- ---------- ---------
Balances,December 31, 1995 1,790 (302) 13,214 251 350,857
Net unrealized loss on
marketable debt
securities, net of
income tax benefit
of $142 - - - (235) _
Net earnings _ _ _ _ 5,846
Dividends on common stock
($1.00 per share) - - - - (1,487)
-------- -------- ---------- --------- ---------
Balances,December 31, 1996 $ 1,790 $ (302) $ 13,214 $ 16 $355,216
======== ======== ========== ========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Seaboard Corporation and Subsidiaries
Consolidated Balance Sheets
(Thousands of dollars)
<CAPTION>
December 31,
----------------------------
1996 1995
Assets ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 11,467 $ 5,529
Short-term investments 90,373 135,197
Receivables:
Trade 151,380 112,038
Due from foreign subsidiaries not consolidated 37,995 7,317
Other 14,357 15,442
------------ ------------
203,732 134,797
Allowance for doubtful receivables (19,448) (17,088)
------------ ------------
Net receivables 184,284 117,709
Inventories 185,701 112,843
Deferred income taxes 7,224 8,231
Prepaid expenses and deposits 14,330 14,251
------------ ------------
Total current assets 493,379 393,760
Investments in and advances to foreign
subsidiaries not consolidated 32,212 26,140
Net property, plant and equipment 466,161 438,415
Other assets 12,933 19,817
------------ ------------
Total Assets $ 1,004,685 $ 878,132
============ ============
<FN>
See accompanying notes to consolidated financial statements.
<CAPTION>
Seaboard Corporation and Subsidiaries
(Thousands of dollars)
December 31,
----------------------------
Liabilities and Stockholders' Equity 1996 1995
------------ ------------
<S> <C> <C>
Current liabilities:
Notes payable $ 150,157 $ 33,815
Current maturities of long-term debt 6,900 7,011
Accounts payable 72,398 75,749
Accrued liabilities 43,587 44,745
Accrued payroll 16,100 13,416
------------ ------------
Total current liabilities 289,142 174,736
------------ ------------
Long-term debt, less current maturities 297,719 297,440
Deferred income taxes 22,721 14,569
Other liabilities 25,169 25,577
------------ ------------
Total non-current and deferred liabilities 345,609 337,586
------------ ------------
Commitments and contingent liabilities
Stockholders' equity:
Common stock of $1 par value. Authorized
4,000,000 shares; issued 1,789,599 shares
including 302,079 shares of treasury stock 1,790 1,790
Shares held in treasury, at par value (302) (302)
------------ ------------
1,488 1,488
Additional capital 13,214 13,214
Unrealized gain on debt securities, net of
income tax expense of $8 and $150 in 1996
and 1995, respectively 16 251
Retained earnings 355,216 350,857
------------ ------------
Total stockholders' equity 369,934 365,810
------------ ------------
Total Liabilities and Stockholders' Equity $ 1,004,685 $ 878,132
============ ============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
Seaboard Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Thousands of dollars)
<CAPTION>
Years ended December 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 5,846 $ 20,202 $ 35,201
Adjustments to reconcile net earnings
to cash from operating activities:
Depreciation and amortization 50,914 44,944 33,403
Equity in (earnings) losses of non-
consolidated foreign subsidiaries 2,966 (2,035) (3,113)
Deferred income taxes 9,159 (5,558) (873)
Changes in current assets and liabilities
(net of businesses acquired):
Receivables, net of allowance (66,575) (13,014) (11,981)
Inventories (72,858) (39,600) (2,282)
Prepaid expenses and deposits (79) (6,546) 669
Current liabilities exclusive of debt (1,825) 46,889 (2,160)
Other, net (310) (3,037) 1,420
------------ ------------ ------------
Net cash from operating activities (72,762) 42,245 50,284
------------ ------------ ------------
Cash flows from investing activities:
Purchase of investments (327,020) (691,590) (814,399)
Proceeds from the sale of investments 300,265 423,358 602,580
Proceeds from maturity of investments 71,202 309,331 251,826
Capital expenditures (110,491) (229,499) (87,583)
Investments and advances to foreign
subsidiaries not consolidated (6,476) 6,349 1,180
Proceeds from the sale of equipment 31,831 4,711 4,547
Notes receivable 719 1,300 (2,655)
Acquisition of businesses -- (3,500) (180)
------------ ------------ -------------
Net cash from investing activities (39,970) (179,540) (44,684)
------------ ------------ -------------
Cash flows from financing activities:
Notes payable to banks, net 116,342 13,239 4,521
Proceeds from issuance of long-term debt 10,000 142,471 12,202
Principal payments of long-term debt (12,394) (19,094) (34,851)
Deferred grant revenue 350 3,927 8,073
Dividends paid (1,487) (1,487) (1,487)
Capital contribution -- -- 8,774
Bond construction fund 5,859 (1,005) (5,169)
------------ ------------ -------------
Net cash from financing activities 118,670 138,051 (7,937)
------------ ------------ -------------
Net increase (decrease) in cash and cash
equivalents 5,938 756 (2,337)
Cash and cash equivalents at beginning of year 5,529 4,773 7,110
------------ ------------ -------------
Cash and cash equivalents at end of year $ 11,467 $ 5,529 $ 4,773
============ ============ =============
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
Seaboard Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
Note 1
Summary of Significant Accounting Policies
- --------------------------------------------------------------------------
Operations of Seaboard Corporation and its Subsidiaries
- -------------------------------------------------------
Seaboard Corporation and its subsidiaries (the Company) is a diversified
international agribusiness and transportation company which is primarily
engaged in domestic poultry and pork production and processing, commodity
merchandising, baking, flour milling and shipping. Overseas, the Company
is primarily engaged in flour and feed milling, shrimp and produce farming
and electric power generation.
Principles of Consolidation and Investment in Affiliates
- --------------------------------------------------------
The consolidated financial statements include the accounts of Seaboard
Corporation and its wholly owned domestic and foreign subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation. The Company's investments in minority-owned, non-controlled
foreign subsidiaries are accounted for by the equity method.
Short-Term Investments
- ---------------------
The short-term investments are retained for future use in the business
and include time deposits, commercial paper, tax exempt bonds, corporate bonds
and U.S. government obligations. All short-term investments held by the
Company are categorized as available-for-sale and are reported at fair value
with unrealized gains and losses reported, net of tax, as a separate component
of stockholders' equity. The amortized cost of debt securities is adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income.
Inventories
- -----------
The Company uses the lower of last-in, first-out (LIFO) or market for
determining cost for poultry and baking product inventories. Live hogs,
dressed pork, produce, grain inventories held in milling operations, seafood,
parts and supplies inventories are valued at the lower of first-in, first-out
(FIFO) cost or market.
Property, Plant and Equipment
- -----------------------------
Property, plant and equipment are carried at cost and are being
depreciated generally on the straight-line method over useful lives ranging
from 3 to 45 years. Property, plant and equipment leases which are deemed to
be installment purchase obligations have been capitalized and included in
the property, plant and equipment accounts. Maintenance, repairs and minor
renewals are charged to operations while major renewals and betterments are
capitalized.
Deferred Grant Revenue
- ----------------------
Included in other liabilities at December 31, 1996 and 1995 is $11,974,000
and $12,000,000, respectively, of deferred grant revenue. Deferred grant
revenue represents economic development funds contributed to the Company by
government entities that are limited to construction of a hog processing
facility in Guymon, Oklahoma. Deferred grants are being amortized to income
over the life of the assets acquired with the funds.
Revenue Recognition
- -------------------
The Company recognizes revenue on commercial exchanges at the time title
to the goods transfers to the buyer. Revenue of the Company's ocean freight
service is recognized ratably over the transit time for each voyage.
Use of Estimates
- ----------------
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and 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.
Income Taxes
- ------------
Deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable
to future years to differences between the financial statement carrying
amounts and the tax bases of existing assets and liabilities.
Earnings Per Common Share
- -------------------------
Earnings per common share are based upon the average shares outstanding
during the period. Average shares outstanding were 1,487,520 for each of the
three years ended December 31, 1996, 1995 and 1994, respectively.
Cash and Cash Equivalents
- -------------------------
For purposes of the consolidated statements of cash flows, the Company
considers all demand deposits and overnight investments as cash equivalents.
Included in accounts payable are outstanding checks in excess of cash
balances of $20,820,000 and $28,117,000 at December 31, 1996 and 1995,
respectively. The amounts paid for income taxes and interest are as
follows:
<TABLE>
<CAPTION>
Years ended December 31,
- ---------------------------------------------------------------------------
(Thousands of dollars) 1996 1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Interest (net of amounts capitalized) $ 27,120 $ 14,598 $ 13,415
========= ========= =========
Income taxes $ (10,362) $ 25,384 $ 14,464
========= ========= =========
</TABLE>
See Note 6 for non-cash financing for an investment in foreign subsidiary
not consolidated.
Foreign Currency
- ----------------
The value of the U.S. dollar fluctuates in relation to the currencies of
countries where the Company's foreign subsidiaries conduct business. These
fluctuations result in exchange gains and losses. The activities of these
foreign subsidiaries are primarily conducted with U.S. affiliates or they
operate in hyper-inflationary environments. As a result, the Company
translates the financial statements of foreign subsidiaries using the U.S.
dollar as the functional currency. The gains and losses that result from
remeasurement are reported in earnings and are not material for the years
ended December 31, 1996, 1995 and 1994. Foreign currency exchange
restrictions imposed upon the Company's wholly owned foreign subsidiaries
and certain minority-owned foreign subsidiaries do not have a significant
effect on the consolidated financial position of the Company.
Financial Instruments
- ---------------------
The Company enters into 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
hedge the effects of fluctuations in interest rates. The difference to be
paid or received is accrued as interest rates change and is recognized as an
adjustment to interest expense. These agreements effectively convert variable-
rate debt into fixed-rate debt.
Gains and losses on termination of interest rate exchange agreements are
deferred and recognized over the term of the underlying debt instrument as an
adjustment to interest expense. At December 31, 1996 and 1995, net deferred
gains on terminated interest rate exchange agreements were not material. In
cases where there is no remaining underlying debt instrument, gains and
losses on termination are recognized currently in miscellaneous income
(expense). At December 31, 1996, the Company had no interest rate exchange
agreements outstanding.
During 1994, the Company terminated an interest rate exchange agreement
with a notional principal amount of $30,000,000 that was initially considered
to be an anticipatory hedge. The anticipated liability to be hedged was not
incurred and, accordingly, deferral accounting was discontinued in the second
quarter of 1994. Included in miscellaneous income for 1994 is a $2,911,000
gain related to settling this agreement.
Commodity Contracts
- -------------------
The Company enters into forward purchase contracts, futures and options
to manage its exposure to price fluctuations in the commodity markets. These
commodity instruments generally involve the anticipated purchase of feed
grains and the sale of hogs. At December 31, 1996, the Company had net
contracts to purchase 5.1 million bushels of grain and sell 146.5 million
pounds of hogs.
Gains and losses on commodity instruments designated as hedges and for
which there is high correlation between changes in the value of the instrument
and changes in the value of the hedged commodity are deferred and ultimately
recognized in operations as part of the cost of the commodity. Gains and
losses on qualifying hedges of firm commitments or probable anticipated
transactions are also deferred and recognized as adjustments of the carrying
amounts of the commodities when the hedged transaction occurs. Realized
gains and losses on qualifying commodity instruments which were designated
as hedges are deferred and are ultimately recognized as part of the
measurement of the hedged transactions. Commodity instruments not qualifying
as hedges for financial reporting purposes are marked to market and included
in cost of sales and operating expenses in the consolidated statements of
operations. At December 31, 1996 and 1995, the net deferred gain (loss) on
commodity instruments was $(6,402,000) and $4,701,000, respectively, and is
included in accrued liabilities in the consolidated balance sheets. Cash
flows from commodity instruments are classified in the same category as cash
flows from the hedged commodities in the consolidated statements of cash
flows.
Note 2
Acquisitions
- --------------------------------------------------------------------------
In January 1995, the Company acquired for $3,500,000 all the outstanding
common stock of a hatchery company which previously sold day old chicks to
the Company's poultry operations.
In January 1994, the Company acquired an additional 15% of the outstanding
common stock of Atlantic Salmon (Maine), Limited Liability Company, for
$180,000, bringing the total investment in the entity to 40%. The Company
accounts for this investment using the equity method.
None of these acquisitions would have significantly affected net earnings
or earnings per share on a pro forma basis.
Note 3
Transactions with Parent Company
- --------------------------------
Seaboard Flour Corporation (the Parent Company) is the owner of 75.3%
of the Company's outstanding common stock. At December 31, 1996 and 1995,
the Company had a net receivable balance from the Parent Company of $53,000
and $2,207,000, respectively. Interest on receivables was charged at the
prime rate during 1996, 1995 and 1994. For the years ended December 31, 1996,
1995 and 1994 net interest income amounted to $37,000, $275,000, and $217,000,
respectively.
During 1994 the Delaware Chancery Court approved the settlement of a
stockholders' derivative action brought in 1990 against the Company and
certain subsidiaries, the Parent Company and the directors of the Company at
that time. Under the settlement, the Company received $10,800,000 from the
Parent Company and the directors of which $2,026,000 was paid to the
plaintiff's counsel. The settlement proceeds to the Company of $8,774,000
have been recorded as Contributed Capital in Stockholders' Equity.
<TABLE>
Note 4
Short-Term Investments
- ----------------------
<CAPTION>
The following is a summary of available-for-sale securities
at December 31, 1996:
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Estimated
(Thousands of dollars) Cost Gains Losses Fair Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
government agencies $ 20,353 -- 4 $ 20,349
Obligations of states and
political subdivisions 41,506 -- -- 41,506
Other debt securities 28,490 28 -- 28,518
- -----------------------------------------------------------------------------
Total debt securities $ 90,349 28 4 $ 90,373
=============================================================================
<FN>
</TABLE>
<TABLE>
<CAPTION>
The following is a summary of available-for-sale securities
at December 31, 1995:
Gross Gross
Unrealized Unrealized
Amortized Holding Holding Estimated
(Thousands of dollars) Cost Gains Losses Fair Value
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury securities
and obligations of U.S.
government agencies $ 48,299 313 -- $ 48,612
Obligations of states and
political subdivisions 55,975 -- -- 55,975
Other debt securities 30,522 88 -- 30,610
- -----------------------------------------------------------------------------
Total debt securities $ 134,796 401 -- $ 135,197
=============================================================================
<FN>
Substantially all available-for-sale securities have contractual
maturities within two years and are available to meet current operating needs.
Included in other assets at December 31, 1996 and 1995 are $315,000 and
$6,174,000, respectively, of unexpended bond proceeds held in trust that are
invested in accordance with the bond issuance agreement. The cost of these
investments approximates fair value.
The gross realized gains on sales of available-for-sale securities
totaled $143,000, $296,000 and $32,000 and the gross realized losses totaled
$45,000, $174,000 and $404,000 for the years ended December 31, 1996, 1995
and 1994, respectively.
</TABLE>
Note 5
Inventories
- -----------
During the fourth quarter of 1996, the Company changed its method of
accounting for spare parts and supplies used in its poultry and pork
processing operations, retroactively effective as of January 1, 1996.
Previously, these spare parts and supplies were expensed when purchased.
Under the new method, such purchases will be recorded as inventory and charged
to operations when used. Due to the growth of these inventories, primarily as
a result of completion of the new pork processing plant in Oklahoma, the
Company believes the new method is preferable as it provides a better matching
of revenues and expenses. The cumulative effect of this accounting change at
January 1, 1996 was to increase net income by $3,006,000 or $2.02 per common
share. The effect of this accounting change was to increase income before
cumulative effect of change in accounting principle by $788,000 or $.53 per
common share for the year ended December 31, 1996. The pro forma effect of
retroactive application of this new method of accounting would not materially
affect the results of operations for the years ended December 31, 1995 and
1994.
<TABLE>
<CAPTION>
A summary of inventories at the end of each year is as follows:
December 31,
- ------------------------------------------------------------------------------
(Thousands of dollars) 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
At lower of LIFO cost or market:
Live poultry $ 27,610 $ 26,442
Dressed poultry 29,295 21,219
Feed and baking ingredients, packaging
supplies and other 7,353 8,772
- ------------------------------------------------------------------------------
64,258 56,433
LIFO allowance (6,000) (6,965)
- ------------------------------------------------------------------------------
Total inventories at lower of LIFO cost
or market 58,258 49,468
At lower of FIFO cost or market:
Live hogs 68,409 28,626
Grain, flour and feed 30,461 19,551
Crops in production, fertilizers and pesticides 10,097 7,639
Dressed pork 4,709 166
Other 13,767 7,393
- ------------------------------------------------------------------------------
Total inventories at lower of FIFO cost
or market 127,443 63,375
- ------------------------------------------------------------------------------
Total inventories $ 185,701 $ 112,843
==============================================================================
<FN>
The use of the LIFO method increased net earnings in 1996 by $589,000
($.40 per share), decreased net earnings in 1995 by $3,401,000 ($2.29 per
share) and increased net earnings in 1994 by $1,515,000 ($1.02 per share).
The increases in net earnings during 1996 and 1994 were primarily the result
of declining purchase prices. If the FIFO method had been used, inventories
would have been $6,000,000 and $6,965,000 higher than those reported at
December 31, 1996 and 1995, respectively.
</TABLE>
Note 6
Investments in and Advances to Foreign Subsidiaries Not Consolidated
- --------------------------------------------------------------------
The Company has made investments in and advances to minority-owned,
non-controlled foreign flour milling, feed milling, sugar refining,
polypropylene bag manufacturing, prefabricated residential and commercial
construction and shrimp farming subsidiaries. The subsidiaries are located
in Sierra Leone, Nigeria, Mozambique and Zaire in Africa and Argentina and
Ecuador in South America, and are accounted for by the equity method. Certain
of these subsidiaries operate under restrictions imposed by local governments
which limit the Company's ability to have significant influence on their
operations.
These restrictions have resulted in a loss in value of these investments
and advances that is other than temporary. The Company suspended the use of
the equity method for these investments and recognized the impairment in
value by a charge to earnings in years prior to 1994.
In July 1996, the Company purchased for $8,800,000 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
sugarcane and citrus production. The Company accounts for this investment
using the equity method.
In October 1996, the Company acquired for $4,600,000 a 50% interest in a
flour mill located in Mozambique. The Company paid $1 million at closing
with the balance to be paid in installments over the next six years. The
Company accounts for this investment using the equity method.
Sales of grain and supplies to non-consolidated foreign subsidiaries are
included in consolidated net sales for the years ended December 31, 1996,
1995 and 1994, and amounted to $93,117,000, $29,585,000 and $16,255,000
respectively.
Combined condensed financial information of the minority-owned,
non-controlled, non-consolidated foreign subsidiaries for their fiscal
periods ended within each of the Company's years ended are as follows:
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------
(Thousands of dollars) 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 191,600 $ 139,209 $ 102,000
Net earnings (6,089) 3,776 9,220
Total assets 291,979 160,238 150,313
Total liabilities 211,333 91,208 82,522
Total equity $ 80,646 $ 69,030 $ 67,791
=============================================================================
</TABLE>
Note 7
<TABLE>
<CAPTION>
Property, Plant and Equipment
- -----------------------------
A summary of property, plant and equipment at the end of each year
is as follows:
December 31,
- -----------------------------------------------------------------------------
(Thousands of dollars) 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Land and improvements $ 47,022 $ 36,799
Buildings and improvements 163,153 127,405
Machinery and equipment 398,887 315,564
Transportation equipment 82,808 112,493
Office furniture and fixtures 11,807 10,547
Construction in progress 9,606 47,594
- -----------------------------------------------------------------------------
713,283 650,402
Accumulated depreciation and amortization (247,122) (211,987)
- -----------------------------------------------------------------------------
Net property, plant and equipment $ 466,161 $ 438,415
=============================================================================
<FN>
Approximately $855,000, $3,414,000 and $335,000 of interest costs were
capitalized as part of property, plant and equipment in the years ended
December 31, 1996, 1995 and 1994, respectively.
</TABLE>
Note 8
Income Taxes
- ------------
Total income taxes for the years ended December 31, 1996, 1995 and 1994
differ from the amounts computed by applying the statutory U.S. Federal
income tax rate to earnings before income taxes and cumulative effect of a
change in accounting principle for the following reasons:
<TABLE>
<CAPTION>
Years ended December 31,
- ------------------------------------------------------------------------------
(Thousands of dollars) 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed tax expense on earnings
before income taxes and cumulative
effect of a change in accounting
principle $ 105 $ 10,017 $ 17,196
Adjustments to tax expense attributable
to:
Foreign tax differences (3,789) (1,066) (2,527)
Tax-exempt investment income (603) (1,122) (845)
State income taxes, net of Federal
benefit 820 475 1,134
Other 929 113 (1,028)
- ------------------------------------------------------------------------------
$ (2,538) $ 8,417 $ 13,930
==============================================================================
<FN>
The components of total income taxes are as follows:
<CAPTION>
Years Ended December 31,
- ------------------------------------------------------------------------------
(Thousands of dollars) 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ (12,450) $ 13,498 $ 12,654
State and local 611 1,094 1,683
Deferred 9,301 (6,175) (407)
- ------------------------------------------------------------------------------
Income tax expense (benefit) (2,538) 8,417 13,930
Cumulative effect of changing the
accounting for inventories 1,922 -- --
Stockholders' equity, for unrealized
change in debt securities (142) 616 (466)
- ------------------------------------------------------------------------------
Total income taxes $ (758) $ 9,033 $ 13,464
==============================================================================
<CAPTION>
Components of the net deferred income tax liability at the end of each year
are as follows :
December 31,
- -----------------------------------------------------------------------------
(Thousands of dollars) 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Deferred income tax liabilities:
Cash basis farming adjustment $ 19,036 $ 19,036
Deferred earnings of foreign
subsidiaries 2,218 4,133
Depreciation 25,111 8,711
Other 1,774 3,182
- -----------------------------------------------------------------------------
48,139 35,062
- -----------------------------------------------------------------------------
Deferred income tax assets:
Reserves/accruals 19,032 22,816
Foreign losses 4,651 4,089
Other 11,530 4,154
- -----------------------------------------------------------------------------
35,213 31,059
Valuation allowance 2,571 2,335
- -----------------------------------------------------------------------------
Net deferred income tax liability $ 15,497 $ 6,338
=============================================================================
</TABLE>
The valuation allowance represents accumulated losses on certain
foreign subsidiaries that will not be recognized without future liquidation
or sale of these subsidiaries.
At December 31, 1996 and 1995, no provision has been made in the
accounts for Federal income taxes which would be payable if the undistributed
earnings of certain foreign subsidiaries were distributed to the Company
since management has determined that the earnings are permanently invested
in these foreign operations. Should such accumulated earnings be distributed,
the resulting Federal income taxes would amount to approximately $28,000,000.
Note 9
Notes Payable and Long-Term Debt
- --------------------------------
Notes payable amounting to $150.2 million and $33.8 million at December
31, 1996 and 1995, respectively, consisted of obligations due banks within
one year. At December 31, 1995, these funds were outstanding under the
Company's short-term uncommitted credit lines from banks totaling $122
million. During 1996 the Company entered into new agreements and accordingly,
at December 31, 1996 these funds are outstanding under the Company's one-year
revolving credit facilities totaling $90 million and short-term uncommitted
credit lines from banks totaling $115 million. Subsequent to year-end, the
Company's one-year revolving credit facilities were increased to $160 million
as a result of the extension of an existing facility and the establishment
of a new facility.
Weighted average interest rates on the notes payable were 6.11% and 6.22%
at December 31, 1996 and 1995, respectively. These notes are unsecured and
do not require compensating balances or fees.
During 1996, the Company entered into a five-year $50 million revolving
credit facility. Subsequent to year-end, the revolving credit facility was
extended and reduced to $25 million. The Company is in the process of
obtaining approximately $10 million of Adjustable Rate, Seven-Day Demand
Exempt Facility Revenue Bonds.
A summary of long-term debt at the end of each year is as follows:
<TABLE>
<CAPTION>
December 31,
- -----------------------------------------------------------------------------
(Thousands of dollars) 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Private placements:
6.49% senior notes, due 2001 through 2005 $ 100,000 $ 100,000
7.88% senior notes, due 2003 through 2007 125,000 125,000
Industrial Development Revenue Bonds (IDRB's),
floating rates (4.60% -4.88% at December 31,
1996) due through 2025 52,900 52,900
Revolving credit facility, floating rate
(5.95% at December 31, 1996) due 2001 10,000 --
Bank notes, 6.43% floating, paid in 1996 -- 10,000
Term loan, 3.92%, due 1997 5,700 6,000
Capital lease obligations and other 11,019 10,551
- -----------------------------------------------------------------------------
304,619 304,451
Current maturities of long-term debt (6,900) (7,011)
- -----------------------------------------------------------------------------
Long-term debt, less current maturities $ 297,719 $ 297,440
=============================================================================
</TABLE>
Redemption of the IDRB's is assured under irrevocable bank letters of
credit issued by major banks. Although those IDRB's mature between 2004 and
2025, the bonds are deemed to mature between 1998 and 2001, the years in
which the bank letters of credit and committed extensions thereto expire.
Poultry processing facilities, having a depreciated cost of $21,546,000 at
December 31, 1996, secure certain bond issues.
The terms of the note agreements pursuant to which the Senior Notes and
the IDRB's were issued require, among other terms, the maintenance of certain
ratios and minimum net worth, the most restrictive of which requires the
ratio of consolidated funded debt to consolidated shareholders' equity, as
defined, not to exceed .90 to 1, and the maintenance of consolidated tangible
net worth, as defined, of not less than $250,000,000. The Company is in
compliance with all restrictive debt covenants relating to the Senior Notes
and IDRB's as of December 31, 1996.
Annual maturities of long-term debt at December 31, 1996 are as follows:
$6,900,000 in 1997, $19,768,000 in 1998, $22,446,000 in 1999, $6,446,000 in
2000, $26,164,000 in 2001, and $222,895,000 thereafter.
Note 10
Fair Value of Financial Instruments
- -----------------------------------
The fair value of the Company's short-term investments is based on quoted
market prices at the reporting date for these or similar investments. At
December 31, 1996 and 1995 the fair value of the Company's short-term
investments was $90,373,000 and $135,197,000, respectively, with an amortized
cost of $90,349,000 and $134,796,000 at December 31, 1996 and 1995,
respectively.
The fair value of long-term debt is determined by comparing interest rates
for debt with similar terms and maturities. At December 31, 1996 and 1995
the fair value of the Company's long-term debt was $300,075,000 and
$310,499,000, respectively, with a carrying value of $304,619,000 and
$304,451,000 at December 31, 1996 and 1995, respectively.
Other 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.
Note 11
Employee Benefits
- -----------------
The Company maintains defined benefit pension plans for its domestic
salaried, clerical and poultry employees. The plans generally provide for
normal retirement at age 65 and eligibility for participation after one year's
service upon attaining the age of 21. The Company bases pension contributions
on funding standards established by the Employee Retirement Income Security
Act of 1974. Benefits are generally based upon the number of years of
service and a percentage of final average pay. Plan assets are invested in
equity securities, fixed income bonds and short-term cash equivalents. The
net periodic pension cost of these plans was as follows:
<TABLE>
<CAPTION>
Years ended December 31,
- -------------------------------------------------------------------------------
(Thousands of dollars) 1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned during
the period $ 1,874 $ 1,303 $ 1,532
Interest cost on projected benefit
obligation 2,204 2,233 2,132
Actual return on assets (3,498) (3,964) (667)
Net amortization and deferral 1,291 1,916 (1,281)
- -------------------------------------------------------------------------------
Net periodic pension cost $ 1,871 $ 1,488 $ 1,716
===============================================================================
</TABLE>
<TABLE>
Assumptions used in determining pension information were:
<CAPTION>
Years ended December 31,
- -------------------------------------------------------------------------------
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected long-term rate of return on
assets 8.50-9.00% 8.50-9.00% 7.50-9.00%
Discount rate 7.75% 7.00% 8.75%
Long-term rate of increase in
compensation levels 4.25-4.50% 4.25-4.50% 5.00%
- -------------------------------------------------------------------------------
<FN>
The funded status and accrued pension cost at December 31, 1996 and 1995
for all defined benefit plans is shown below:
<CAPTION>
December 31,
- -------------------------------------------------------------------------------------------------
(Thousands of dollars) 1996 1995
- -------------------------------------------------------------------------------------------------
Assets exceed Accumulated Assets exceed Accumulated
accumulated benefits exceed accumulated benefits exceed
benefits assets benefits assets
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
value of benefit obligations:
Vested benefit obligation $ 19,978 $ 6,728 $ 965 $ 26,932
Nonvested benefit obligation 1,460 62 49 1,493
- -------------------------------------------------------------------------------------------------
Accumulated benefit obligation 21,438 6,790 1,014 28,425
Effects of projected future
compensation levels 1,767 1,111 579 3,599
- -------------------------------------------------------------------------------------------------
Projected benefit obligation 23,205 7,901 1,593 32,024
Plan assets at fair value 24,224 5,584 1,163 24,682
- -------------------------------------------------------------------------------------------------
Projected benefit obligation
greater than (less than) plan
assets (1,019) 2,317 430 7,342
Recognized minimum liability -- 387 -- 1,184
Unrecognized net liability at
transition (1,298) (39) (8) (1,534)
Unrecognized prior service cost 2,634 (544) -- 2,329
Unrecognized net gain (loss) 4,356 (915) 76 (2,992)
- -------------------------------------------------------------------------------------------------
Accrued pension cost $ 4,673 $ 1,206 $ 498 $ 6,329
- -------------------------------------------------------------------------------------------------
</TABLE>
The Company has non-qualified unfunded supplemental retirement plans for
certain executive employees. Pension expense for these plans was $3,128,000,
$3,073,000, and $2,760,000 for the years ended December 31, 1996, 1995 and
1994, respectively. Included in other liabilities at December 31, 1996 and
1995 is $10,347,000 and $9,064,000, respectively, representing the accrued
benefit obligation for these plans.
The Company maintains a defined contribution plan covering most of its
domestic salaried and clerical employees. The Company contributes to the
plan an amount equal to 100% of employee contributions up to a maximum of 3%
of employee compensation. Employee vesting is based upon years of service
with 20% vested after one year of service and an additional 20% vesting with
each additional complete year of service. Contribution expense was
$1,294,000, $1,265,000 and $1,051,000 for the years ended December 31, 1996,
1995 and 1994, respectively.
Note 12
Commitments and Contingencies
- -----------------------------
The Company leases various ships, facilities and equipment under
noncancelable operating lease agreements. Rental expense for the operating
leases amounted to $45,591,000, $40,521,000, and $34,457,000 in 1996, 1995
and 1994, respectively. Minimum lease commitments under noncancelable leases
with initial terms greater than one year at December 31, 1996, were
$38,563,000 for 1997, $25,001,000 for 1998, $14,888,000 for 1999, $14,296,000
for 2000, $9,067,000 for 2001 and $16,395,000 thereafter. It is expected that,
in the ordinary course of business, leases will be renewed or replaced.
The Company is a defendant in a pending arbitration proceeding and related
litigation in Puerto Rico brought by the owner of a chartered barge and tug
which were damaged by fire after delivery of the cargo. Damages of $47.6
million are alleged. The Company is vigorously defending the action and
believes that it has no responsibility for the loss. The Company
also believes that it would have a claim for indemnity if it were held liable
for any loss.
The Company is subject to various other legal proceedings related to the
normal conduct of its business. 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 the Company.
Note 13
Segment Information
- -------------------
The Company principally operates in three business segments: food
production and processing, commodity trading and milling and transportation.
Corporate assets include cash, short-term investments, notes receivable,
corporate equipment and other miscellaneous assets which are not related to
a specific business segment. As described in Note 5, the Company changed
its method of accounting for spare parts and supplies inventories in 1996.
The effect of this change was to decrease the operating loss in the food
production and processing segment in 1996 by $1,293,000. Business segment
information for the years ended December 31, 1996, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Thousands of dollars) 1996
- -----------------------------------------------------------------------------------------------------------------------
Food Commodity Unallocated
Production Trading Corporate
and and Items and
Processing Milling Transportation Other Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 844,460 315,609 266,571 37,722 -- $ 1,464,362
Intersegment sales -- -- 3,717 -- (3,717) --
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 844,460 315,609 270,288 37,722 (3,717) $ 1,464,362
=======================================================================================================================
Operating income (loss) $ (3,920) 18,119 6,475 5,124 (6,053) 19,745
====================================================================================================
Loss from foreign subsidiaries
not consolidated (2,966)
Interest income 9,095
Interest expense (26,864)
Other corporate income 1,292
- -----------------------------------------------------------------------------------------------------------------------
Earnings before income taxes
and cumulative effect of changing
the accounting for inventories $ 302
=======================================================================================================================
Identifiable assets $ 610,486 119,722 98,756 30,208 -- 859,172
====================================================================================================
Corporate assets 145,513
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 1,004,685
=======================================================================================================================
Depreciation and amortization $ 33,222 3,196 11,850 1,583 1,063 $ 50,914
=======================================================================================================================
Capital expenditures $ 99,143 1,935 8,598 25 790 $ 110,491
=======================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Thousands of dollars) 1995
- -----------------------------------------------------------------------------------------------------------------------
Food Commodity Unallocated
Production Trading Corporate
and and Items and
Processing Milling Transportation Other Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 652,537 207,987 277,130 36,323 -- $ 1,173,977
Intersegment sales -- -- 4,676 -- (4,676) --
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 652,537 207,987 281,806 36,323 (4,676) $ 1,173,977
=======================================================================================================================
Operating income (loss) $ 10,121 8,462 16,936 980 (5,295) 31,204
====================================================================================================
Income from foreign subsidiaries
not consolidated 2,035
Interest income 11,506
Interest expense (15,686)
Other corporate expense (440)
- -----------------------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 28,619
=======================================================================================================================
Identifiable assets $ 471,120 59,460 120,435 25,153 -- 676,168
====================================================================================================
Corporate assets 201,964
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 878,132
=======================================================================================================================
Depreciation and amortization $ 25,746 2,941 13,711 1,521 1,025 $ 44,944
=======================================================================================================================
Capital expenditures (excluding
acquisitions) $ 192,246 1,228 34,136 965 924 $ 229,499
======================================================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Thousands of dollars) 1994
- -----------------------------------------------------------------------------------------------------------------------
Food Commodity Unallocated
Production Trading Corporate
and and Items and
Processing Milling Transportation Other Eliminations Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales to unaffiliated customers $ 638,251 107,399 210,632 27,522 -- $ 983,804
Intersegment sales -- -- 6,372 -- (6,372) --
- -----------------------------------------------------------------------------------------------------------------------
Net sales $ 638,251 107,399 217,004 27,522 (6,372) $ 983,804
=======================================================================================================================
Operating income (loss) $ 10,663 8,620 29,195 2,895 (4,275) 47,098
====================================================================================================
Income from foreign subsidiaries
not consolidated 3,113
Interest income 9,704
Interest expense (13,136)
Other corporate income 2,352
- -----------------------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 49,131
=======================================================================================================================
Identifiable assets $ 274,673 42,634 86,928 28,580 432,815
===================================================================================================
Corporate assets 242,396
- -----------------------------------------------------------------------------------------------------------------------
Total assets $ 675,211
=======================================================================================================================
Depreciation and amortization $ 20,200 2,923 7,925 1,466 889 $ 33,403
=======================================================================================================================
Capital expenditures (excluding
acquisitions) $ 61,917 688 23,107 635 1,236 $ 87,583
=======================================================================================================================
</TABLE>
<TABLE>
Export sales by geographic area are as follows:
<CAPTION>
Years ended December 31,
- --------------------------------------------------------------------------------
(Thousands of dollars) 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Africa $ 145,486 $ 85,915 $ 50,900
Caribbean and South America 63,853 43,494 36,525
Europe 41,811 20,628 --
Eastern Mediterranean 33,502 37,405 --
Pacific Basin and Far East 33,069 7,155 2,525
Other 24,923 28,449 17,779
- --------------------------------------------------------------------------------
Total export sales $ 342,644 $ 223,046 $ 107,729
================================================================================
<FN>
At December 31, 1996 and 1995 the Company had approximately $51.0 million
and $47.1 million of foreign receivables which represents more of a collection
risk than the Company's domestic receivables. The Company believes that its
allowance for doubtful receivables is adequate.
</TABLE>
<TABLE>
APPENDIX
SEABOARD CORPORATION AND SUBSIDIARIES
<CAPTION>
Graph data
Years ended December 31,
1992 1993 1994 1995 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary of Selected Financial Data:
TOTAL ASSETS (THOUSANDS OF DOLLARS) $ 485,121 647,332 675,211 878,132 1,004,685
STOCKHOLDERS' EQUITY (THOUSANDS OF
DOLLARS) $ 269,581 304,356 346,080 365,810 369,934
EARNINGS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $ 20.89 16.73 23.67 13.58 1.91
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 7.40 2.02
------------------------------------------------------------
EARNINGS PER COMMON SHARE (DOLLARS) $ 20.89 24.13 23.67 13.58 3.93
Financial Summary:
CURRENT RATIO 3.22:1 3.29:1 3.31:1 2.25:1 1.71:1
CAPITAL EXPENDITURES (THOUSANDS OF
DOLLARS) $ 35,286 87,328 87,583 229,499 110,491
NET SALES (THOUSANDS OF DOLLARS) $1,053,655 1,142,144 983,804 1,173,977 1,464,362
WORKING CAPITAL
(THOUSANDS OF DOLLARS) $ 209,811 280,466 259,521 219,024 204,237
DEPRECIATION AND AMORTIZATION
(THOUSANDS OF DOLLARS) 29,601 34,429 33,403 44,944 50,914
NET EARNINGS(THOUSANDS OF DOLLARS) 31,075 35,891 35,201 20,202 5,846
</TABLE>
EXHIBIT 18
The Board of Directors
Seaboard Corporation
We have audited the consolidated balance sheets of Seaboard Corporation and
subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996 and have reported
thereon under date of March 3, 1997. The aforementioned consolidated
financial statements and our audit report theron are incorporated by
reference in the Company's annual report on Form 10-K for the year ended
December 31, 1996. As stated in Note 5, the Company changed its method of
accounting for spare parts and supplies used in its poultry and pork
processing operations and states that due to the growth of these inventories,
primarily as a result of the new pork processing plant in Oklahoma, the newly
adopted accounting principle is preferable in the circumstances because it
provides a better matching of revenues and costs. In accordance with your
request, we have reviewed and discussed with Company officials the
circumstances and business judgment and planning upon which the decision to
make this change in the method of accounting was based.
With regard to the aforementioned accounting change, authoritative criteria
have not been established for evaluating the preferability of one acceptable
method of accounting over another acceptable method. However, for purposes of
Seaboard Corporation's compliance with the requirements of the Securities and
Exchange Commission, we are furnishing this letter.
Based on our review and discussion, with reliance on management's business
judgment and planning, we concur that the newly adopted method of accounting
is preferable in the Company's circumstances.
KPMG Peat Marwick LLP
Kansas City, Missouri
March 3, 1997
EXHIBIT 21
SUBSIDIARIES NAMES UNDER STATE OR OTHER
OF THE WHICH SUBSIDIARIES JURISDICTION
REGISTRANT DO BUSINESS OF INCORPORATION
A & W Interlining American Interlining Maryland
Services Corp. Company
Western Coat Pad Company
Acuacultura y Tecnologia Acuatecsa Ecuador
Acuatecsa S.A.*
African Camellia Shipping Ltd. Same Liberia
African Coffee Company, S.P.R.L.* ACC Zaire
African Dahlia Shipping Ltd. Same Liberia
African Evergreen Shipping Ltd. Same Liberia
African Fern Shipping Ltd. Same Liberia
African Gardenia Shipping Ltd. Same Liberia
African Hyacinth Shipping Ltd. Same Liberia
Agencia Maritima del Istmo, S.A. Same Costa Rica
Agencias Generales Conaven, C.A. Conaven Venezuela
Agro Internacional de Honduras, Same Honduras
S.A. de C.V.
Almacenadora Conaven, S.A. Same Venezuela
Atlantic Salmon (Maine) Limited Same Maine
Liability Company*
Buttercup Shipping Limited Same Liberia
Cape Fear Railways, Inc. Same North Carolina
Cayman Freight Shipping Same Cayman Islands
Services, Ltd.*
Chestnut Hill Farms, Inc. Same Florida
Chestnut Hill Farms Honduras, Same Honduras
S.A. de C.V.
Chestnut Hill Farms de Same Venezuela
Venezuela, S.A.
Citrus Export S.A. de C.V. CITREX Honduras
Consorcio Naviero de Conaven Venezuela
Occidente, C.A.
Continental de Ventas y Contiventas, S.A. Ecuador
Mercadeo S.A.*
EXHIBIT 21
(continued)
Cultivos Marinos, S.A. de C.V. CUMAR Honduras
Delta Packaging Company Ltd. Same Nigeria
Desarrollo Industrial DIBSA Ecuador
Bioacuatico, S.A.*
Empacadora Litoral, S.A. Same Honduras
de C.V.
Energy System Management, Ltd. Same British Virgin
Islands
Frutas de Rancho Nuevo Litonil, S.A. Same Costa Rica
Granjas Porcinas del Ecuador
(Granporsa) S.A.* Granporsa Ecuador
Guymon Housing Partners Limited Same Oklahoma
Partnership*
Guymon Development Company Same Oklahoma
L.L.C.*
H& O Shipping Limited Same Liberia
H.F.P. Engineering (Nigeria)
Limited Same Nigeria
Harinas de Puerto Rico, Inc. Same Delaware
Holsum Bakers of Puerto Rico Same Division of
Seaboard
Corporation
Ingenio Y Refineria San Martin
del Tabacal* Tabacal Argentina
Interamericana de Tejidos, C.A.* Interama Ecuador
Inversiones y Servicios
Diversos, S.A. Inversa Guatemala
Life Flour Mill Ltd.* Same Nigeria
Life Shipping Company Limited* Same Nigeria
Minoterie De Matadi, S.A.R.L.* Same Zaire
Mobeira, S.A.* Same Mozambique
Molinos Champion, S.A.* Mochasa Ecuador
Molinos Equarivort, C.A.* Same Ecuador
Molinos del Ecuador, C.A.* Molidor Ecuador
National Milling Company of Same Guyana
Guyana, Ltd.
Port of Miami Cold Storage, Inc. Same Florida
EXHIBIT 21
(continued)
Representaciones Maritimas y Remarsa Guatemala
Aereas, S.A.
SASCO Engineering Co./ Same U.S. Virgin
Seaboard Sales Corporation Islands
Sandy Isle Food Imports, N.V. Same St. Maarten,
Netherlands,
Antilles
Sea Cargo, S.A. Same Panama
Seaboard Bakeries, Inc. Same Delaware
Seaboard Export Corporation Same Delaware
Seaboard Express Ltd. Same Bermuda
Seaboard de Colombia, S.A. Same Colombia
Seaboard de Honduras, S.A. de C.V. Same Honduras
Seaboard del Peru, S.A. Same Peru
Seaboard Farms of Seaboard Farms of Georgia
Athens, Inc. Athens, Inc.
Jordan Hatchery
Seaboard Farms of Same Tennessee
Chattanooga, Inc.
Seaboard Farms of Seaboard Farms of Georgia
Elberton, Inc. Elberton, Inc.
Seaboard Farms of
Canton
Seaboard Farms of Same Kentucky
Kentucky, Inc.
Seaboard Farms of Same Minnesota
Minnesota, Inc.
Seaboard Farms of Same Florida
Orlando, Inc.
Seaboard Farms, Inc. Same Oklahoma
Seaboard Florida Ltd. Same Bermuda
Seaboard Guyana, Ltd. Same Bermuda
Seaboard Holdings Ltd. Same British Virgin
Islands
Seaboard Intrepid, Ltd. Same Bermuda
Seaboard Marine Bahamas, Ltd. Same Bahamas
Seaboard Marine Ltd. Same Liberia
EXHIBIT 21
(continued)
Seaboard Marine of Florida, Inc. Same Florida
Seaboard (Nigeria) Limited Same Nigeria
Seaboard Overseas Limited Same Bahamas
S.B.D., Inc. Same Delaware
Seaboard Ship Management Inc. Same Florida
Seaboard Shipping Services
(PTY) Ltd. Same South Africa
Seaboard Trading and Shipping Ltd. Same Minnesota
Seaboard Trading de Mexico,
S.A. de C.V. Same Mexico
Seaboard Transport Inc. Same Oklahoma
Seaboard Voyager Ltd. Same Bermuda
Seaboard West Africa Limited Same Sierra Leone
Seadom, S.A.* Same Dominican
Republic
Secuador Limited Same Bermuda
Shilton Limited Same Cayman Islands
Top Feeds Limited* Same Nigeria
Transcontinental Capital Corp. Same Bermuda
(Bermuda) Ltd.
Zenith Investments, Ltd.* Same Nigeria
*Represents a minority-owned, non-controlled, non-consolidated subsidiary.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FISCAL 1996 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11467
<SECURITIES> 90373
<RECEIVABLES> 184284
<ALLOWANCES> 19448
<INVENTORY> 185701
<CURRENT-ASSETS> 493379
<PP&E> 713283
<DEPRECIATION> 247122
<TOTAL-ASSETS> 1004685
<CURRENT-LIABILITIES> 289142
<BONDS> 297719
0
0
<COMMON> 1488
<OTHER-SE> 368446
<TOTAL-LIABILITY-AND-EQUITY> 1004685
<SALES> 1464362
<TOTAL-REVENUES> 1464362
<CGS> 1315782
<TOTAL-COSTS> 1315782
<OTHER-EXPENSES> 128835
<LOSS-PROVISION> 4122
<INTEREST-EXPENSE> 26864
<INCOME-PRETAX> 302
<INCOME-TAX> (2538)
<INCOME-CONTINUING> 2840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 3006
<NET-INCOME> 5846
<EPS-PRIMARY> 3.93
<EPS-DILUTED> 3.93
</TABLE>
