UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
_____________
Commission File Number 1-3390
Seaboard Corporation
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2260388
- ------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9000 W. 67th Street, Shawnee Mission, Kansas 66202
- -------------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number,
including area code) (913) 676-8800
Not Applicable
- ----------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X . No ___.
There were 1,487,520 shares of common stock, $.01 par value per share,
outstanding on April 18, 1997.
Total pages in filing - 13 pages
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 1997 and December 31, 1996
(Thousands of Dollars)
<CAPTION>
March 31, December 31,
1997 1996
------------- ------------
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,080 $ 11,467
Short-term investments 104,928 90,373
Receivables, net 192,268 184,284
Inventories 200,981 185,701
Deferred income taxes 7,560 7,224
Prepaid expenses and deposits 13,438 14,330
------------ ------------
Total current assets 524,255 493,379
Investments in and advances to foreign
subsidiaries not consolidated 29,573 32,212
Net property, plant and equipment 466,770 466,161
Other assets 17,212 12,933
------------ ------------
Total assets $1,037,810 $1,004,685
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 153,948 $ 150,157
Current maturities of long-term debt 6,713 6,900
Accounts payable 57,105 72,398
Other current liabilities 86,702 59,687
------------ ------------
Total current liabilities 304,468 289,142
------------ ------------
Long-term debt, less current maturities 307,599 297,719
Deferred income taxes 24,524 22,721
Other liabilities 26,378 25,169
------------ ------------
Total non-current and deferred
liabilities 358,501 345,609
------------ ------------
Stockholders' equity:
Common stock of $1 par value,
Authorized 4,000,000 shares; issued
1,789,599 shares 1,790 1,790
Less 302,079 shares held in treasury,at par
value (302) (302)
------------ ------------
1,488 1,488
Additional capital 13,214 13,214
Unrealized gain (loss)on available-for-sale
securities, (net of a $20 deferred income
tax benefit and $8 deferred income tax
expense at March 31, 1997 and December
31, 1996, respectively) (41) 16
Retained earnings 360,180 355,216
------------ ------------
Total stockholders' equity 374,841 369,934
------------ ------------
Total liabilities and stockholders' equity $1,037,810 $1,004,685
============ ============
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
Page 2
<TABLE>
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Three Months ended March 31, 1997 and twelve weeks ended March 23, 1996
(Thousands of dollars except per share amounts)
<CAPTION>
March 31, March 23,
1997 1996
----------- -------------
<S> <C> <C>
Net sales $ 400,180 $ 297,631
Cost of sales and operating expenses 348,211 276,766
----------- -------------
Gross income 51,969 20,865
Selling, general and administrative expenses 35,849 33,035
----------- -------------
Operating income (loss) 16,120 (12,170)
----------- -------------
Other income(expense)
Interest income 1,211 1,744
Interest expense (7,760) (5,683)
Income (loss) from foreign subsidiaries
not consolidated (1,649) 68
Miscellaneous 303 97
----------- -------------
Total other income (expense), net (7,895) (3,774)
----------- -------------
Earnings (loss) before income taxes and cumulative
effect of a change in accounting principle 8,225 (15,944)
Income tax expense (benefit) 2,889 (5,232)
----------- -------------
Earnings (loss) before cumulative effect
of a change in accounting principle 5,336 (10,712)
Cumulative effect of changing the accounting for
inventories, net of income tax expense of $1,922 -- 3,006
----------- ------------
Net earnings (loss) $ 5,336 $ (7,706)
=========== ============
Earnings (loss) per common share before cumulative
effect of a change in accounting principle $ 3.59 $ (7.20)
Cumulative effect of changing the accounting
for inventories -- 2.02
------------ ------------
Earnings (loss) per common share $ 3.59 $ (5.18)
============ ============
Dividends declared per common share $ .25 $ .25
============ ============
Average number of shares outstanding $ 1,487,520 $ 1,487,520
============ ============
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
Page 3
<TABLE>
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and twelve weeks ended March 23, 1996
(Thousands of Dollars)
<CAPTION>
March 31, March 23,
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 5,336 $ (7,706)
Adjustments to reconcile net earnings to
Cash from operating activities:
Depreciation and amortization 13,904 11,765
Equity in (earnings) losses of
non-consolidated subsidiaries 1,649 (68)
Deferred income taxes 1,467 624
Changes in current assets and liabilities (10,650) (31,275)
Other, Net 912 1,634
------------ ----------
Net cash from operating activities 12,618 (25,026)
------------ ----------
Cash flows from investing activities:
Purchase of investments (54,178) (107,152)
Proceeds from the sale or maturity of
investments 39,538 142,525
Capital expenditures, net (15,378) (34,094)
Proceeds from sale of equipment 865 314
Investments and advances to foreign
subsidiaries not consolidated 990 5
Notes receivable (320) (1,254)
---------- -----------
Net cash from investing activities (28,483) 344
---------- -----------
Cash flows from financing activities:
Notes payable to bank, net 3,791 22,396
Proceeds from long-term debt 10,032 349
Principal payments of long-term debt (339) (243)
Bond construction fund (3,634) 2,030
Dividends paid (372) (372)
--------- ---------
Net cash from financing activities 9,478 24,160
--------- ---------
Net decrease in cash and cash equivalents (6,387) (522)
Cash and cash equivalents at beginning of year 11,467 5,529
--------- ---------
Cash and cash equivalents at end of quarter $ 5,080 $ 5,007
========= =========
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
Page 4
SEABOARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 1 - Accounting Policies and Basis of Presentation
The consolidated financial statements include the accounts of Seaboard
Corporation and its wholly owned domestic and foreign subsidiaries (the
"Company"). 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. The unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company for the
year ended December 31, 1996 as filed in its Annual Report on Form 10-K.
The accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of financial
position, results of operations and cash flows. Results of operations for
interim periods are not necessarily indicative of results to be expected for
a full year.
In 1997, the Company changed its quarters to four-three month quarters from
three-twelve week periods and one sixteen week period. Accordingly, the 1997
period reflects approximately thirteen weeks of operations compared to twelve
weeks for 1996.
Effective for the Company's fiscal year ending December 31, 1997, Statement
of Financial Accounting Standards No. 128,"Earnings Per Share", revises the
calculation and presentation provisions of Accounting Principles Board Opinion
15 and related interpretations. Retroactive application is required. The
Company believes the adoption of this Statement will not have a significant
effect on its reported earnings per share.
Note 2 - Inventories
<TABLE>
During 1996, the Company changed its method of accounting for spare parts
and supplies used in its poultry and pork processing operations. The following
is a summary of inventories at March 31, 1997 and December 31, 1996 (in
thousands):
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
At lower of last-in, first-out (LIFO) cost or
market:
Live poultry $ 28,627 $ 27,610
Dressed poultry 32,085 29,295
Feed and baking ingredients, packaging
supplies and other 7,864 7,353
----------- -----------
68,576 64,258
LIFO allowance (5,309) (6,000)
---------- -----------
Total inventories at lower of LIFO cost
or market 63,267 58,258
---------- ----------
At lower of first-in, first-out (FIFO) cost or
market:
Live hogs 74,165 68,409
Grain, flour and feed 36,730 30,461
Crops in production, fertilizers
and pesticides 5,524 10,097
Dressed pork 8,841 4,709
Other 12,454 13,767
----------- -----------
Total inventories at lower of
FIFO cost or market 137,714 127,443
----------- -----------
Total inventories $ 200,981 $ 185,701
=========== ===========
</TABLE>
Page 5
Note 3 - Contingencies
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.
=================================================
Page 6
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------------------------------------------------
March 31, December 31,
1997 1996
- --------------------------------------------------------------------------
Current ratio 1.72:1 1.71:1
Working capital $ 219.8 $ 204.2
- --------------------------------------------------------------------------
Cash from operating activities for the three months ended March 31, 1997
was $12.6 million, compared to $(25.0) million in the same quarter one year
earlier. The increase in cash was primarily related to the increase in net
earnings of $13.0 million and smaller increases in accounts receivable and
inventories for the first quarter of 1997 compared to the first quarter of
1996. Receivables and inventories increased for the quarter as a result of
increased sales and higher pork production levels, respectively.
The Company invested $13.3 million in property, plant and equipment in the
food production and processing segment for the three months ended March 31,
1997. Capital expenditures in the pork division of $8.4 million were
primarily for the completion of hog farrowing and finishing facilities.
Management expects additional expenditures in 1997 of approximately $11
million for current production facilities to be financed through internally
generated cash. The Company is in the initial planning stages for an
expansion of its hog production capacity by .5 million hogs per year to a
total of 2.5 million hogs per year. Management anticipates that this
expansion will be completed over the next eighteen to twenty-four months.
Management is currently evaluating alternative methods of implementing this
expansion, including construction of additional facilities by the Company,
engaging contract growers or additional operating leased facilities.
Capital expenditures of $3.8 million for the three months ended March 31,
1997 were made in the poultry division. The Company anticipates spending a
total of $37 million in 1997 to expand and convert the Athens, Georgia
facility from retail tray-pack production to foodservice production and to
add an additional cooking line at the Elberton, Georgia facility. Management
anticipates these expenditures will be financed by internally generated cash.
Other capital expenditures in the food production and processing segment for
the three months ended March 31, 1997 included $1.1 million in general
modernization and efficiency upgrades of plant and equipment.
Capital expenditures in the transportation segment through March 31, 1997
totaled $1.8 million for general replacement and upgrades of property and
equipment.
During the three months ended March 31, 1997, the Company made short-term
advances of $12.3 million to Ingenio y Refineria San Martin del Tabacal S.A.
(Tabacal) in which the Company owns a non-controlling interest. As of March
31, 1997, advances totaled $39.9 million for improvements of existing
operations, expanding sugarcane and citrus fields and working capital. For
the remainder of 1997, the Company anticipates making additional advances
or guaranteeing loans made to Tabacal by third parties in amounts not expected
to exceed $17 million.
Page 7
In the first quarter of 1997, the Company's one-year revolving credit
facilities were increased to $160 million as a result of the extension and
increase of an existing facility and the establishment of a new facility.
As of March 31, 1997, the company had $145 million outstanding under the
one-year revolving credit facilities and $8.9 million outstanding under the
short-term uncommitted credit lines totaling $119.5 million. At December 31,
1996, the Company had $150.2 million outstanding under the Company's one-year
revolving credit facilities totaling $90 million and short-term uncommitted
credit lines from banks totaling $115 million.
During the first quarter of 1997, the existing five-year revolving credit
facility was extended and reduced from $50 million to $25 million. In
addition, the Company borrowed the proceeds of $10 million of Adjustable Rate,
Seven-Day Demand Exempt Facility Revenue Bonds issued by the Oklahoma
Development Finance Authority. These funds were 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 for the three months ended March 31, 1997 increased by $102.6
million compared to the twelve weeks ended March 23, 1996. Operating income
increased by $28.3 million compared to the same quarter one year ago. In
1997, the Company changed its quarters to four-three month quarters from
three-twelve week periods and one sixteen week period. Accordingly, the
1997 period reflects approximately thirteen weeks of operations compared to
twelve weeks for 1996.
The segment distribution of net sales and operating income compared to the
prior year are as follows (in millions):
Net Sales Operating Income
----------------------- ---------------------
March 31, March 23, March 31, March 23,
1997 1996 1997 1996
--------- --------- --------- ---------
Food Production and
Processing Segment $ 251.5 $ 157.5 $ 7.5 $ (12.6)
Commodity Trading and
Milling Segment 70.8 73.9 2.7 3.9
Transportation Segment 68.6 57.0 6.6 (2.9)
Other 9.3 9.2 (0.7) (0.6)
--------- --------- --------- ---------
$ 400.2 $ 297.6 $ 16.1 $ (12.2)
========= ========= ========= =========
Page 8
Food Production and Processing Segment
- --------------------------------------
Net sales for the food production and processing segment increased $94 million
for the first quarter of 1997 compared to the first quarter of 1996 primarily
as a result of increased poultry and pork sales and the longer accounting
period. Operating income increased $20.1 million for the first quarter of
1997 compared to the first quarter of 1996 primarily as a result of lower
grain prices and the pork processing plant operating at full single-shift
capacity. Corn is the most significant component of the finished feed used
to grow the Company's poultry and pork inventories. Management expects that
these decreases in grain prices will continue to have a positive effect on
the Company's 1997 operating income through the second quarter compared to
1996.
Net sales of poultry products totaled $116.5 million in the first quarter of
1997, an increase of $6.2 million compared to the first quarter of 1996
primarily as the result of a longer accounting period. Lower finished feed
costs and a reduction in packaging costs are the primary reasons gross income
from poultry sales increased to $6.3 million from $.9 million for the first
quarter of 1996.
Net sales within the pork operations increased by $83.1 million to $104.9
million in the first quarter of 1997, compared to the first quarter of 1996.
The increase primarily resulted from increased sales of pork at the hog
processing plant, which reached full single-shift capacity during the second
half of 1996, and higher pork prices. Management expects continued increases
in sales as the hog processing plant commences double-shift operations during
the second quarter of 1997. The Company anticipates that it will achieve full
double-shift capacity in late 1997 or early 1998. Lower finished feed costs,
increased productivity levels at the sow farms and increased utilization of
the hog processing plant are the primary reasons gross income increased $14.9
million to $10.5 million when compared to negative gross income of $4.4 for
the first quarter of 1996.
Commodity Trading and Milling Segment
- -------------------------------------
Net sales from commodity trading and milling activity decreased by $3.1
million in the first quarter of 1997 compared to the first quarter of 1996.
The decrease is primarily a result of lower wheat sales to foreign markets.
Operating income for the first quarter of 1997 decreased $1.2 million when
compared to the first quarter of 1996 primarily as a result of lower feedmeal
prices in foreign markets.
Transportation Segment
- ----------------------
Net sales from containerized cargo operations increased by $11.6 million
to $68.6 million in the first quarter of 1997 compared to the first quarter
of 1996. This increase is primarily a result of overall higher container
rates and increased cargo volumes in certain markets that the Company serves
combined with the longer accounting period. Operating income from
containerized cargo operations increased by $9.5 million in the first quarter
of 1997 compared to the same quarter one year ago. The increase in operating
income was primarily related to higher container rates and lower operating
expenses. A year ago, container rates were under significant competitive
pressure but stabilized and began to improve in the fourth quarter of fiscal
1996. Management cannot predict whether rates will continue to improve
during 1997.
Page 9
Selling, General and Administrative Expenses
- --------------------------------------------
Selling, general and administrative (SG&A) expenses increased $2.8 million to
$35.8 million for the first quarter of 1997 compared to the first quarter of
1996 primarily as a result of a longer accounting period. As a percentage of
revenues, SG&A decreased to 9.0% from 11.1% compared to the first quarter of
1996 as a result of higher pork sales and lower operating expenses in the
transportation segment.
Other Income and Expense
- ------------------------
Interest income declined during the quarter compared to the same quarter one
year earlier resulting primarily from a decrease in average invested funds.
Interest expense increased during the quarter compared to the same quarter
one year earlier primarily as a result of increased short-term borrowings.
Results from foreign subsidiaries not consolidated for the first quarter of
1997 are primarily attributable to the upgrading and expansion of operations
of Tabacal. The Company anticipates incurring additional losses during 1997
as Tabacal continues its upgrading and expansion activities.
Page 10
SEABOARD CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders was held on April 28, 1997 in Newton,
Massachusetts. Two items were submitted to a vote of stockholders as
described in the Company's Proxy Statement dated March 27, 1997. The table
below briefly describes the proposals and results of the stockholders' vote.
Votes in Votes Broker
Favor Against Abstain Nonvotes
------------ ------- ------- --------
1. To elect:
H. Harry Bresky, 1,366,524.25 0 440 0
Joe E. Rodrigues 1,366,634.25 0 330 0
David A. Adamsen 1,366,434.25 0 530 0
and Thomas J. Shields 1,366,634.25 0 330 0
As directors.
2. To ratify selection
ofKPMG Peat Marwick
LLP As independent
auditors. 1,366,404.25 50 510 0
Page 11
SEABOARD CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K. Seaboard Corporation has not filed any reports
on Form 8-K during the quarter ended March 31, 1997.
This Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995, which include statements
concerning projection of revenues, income or loss, capital expenditures,
capital structure or other financial items, statements regarding the plans
and objectives of management for future operations, statements of future
economic performance, statements of the assumptions underlying or relating
to any of the foregoing statements and other statements which are other than
statements of historical fact. These statements appear in a number of places
in this Form 10-Q and include statements regarding the intent, belief or
current expectations of the Company and its management with respect to (i) the
cost and timing of the completion of new or expanded facilities, (ii) the
Company's financing plans, (iii) the price of feed stocks and other materials
used by the Company, (iv) the price for the Company's products and services,
or (v) other trends affecting the Company's financial condition or results of
operations. Readers are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially as a result of various factors.
The accompanying information contained in this Form 10-Q under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" identifies important factors which could cause such differences.
Page 12
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: May 12, 1997
Seaboard Corporation
by: /s/ Robert L. Steer
------------------------
Robert L. Steer,
Vice President-Finance
(Authorized officer and principal
financial and accounting officer)
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
QUARTER 10-Q FILING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5080
<SECURITIES> 104928
<RECEIVABLES> 192268
<ALLOWANCES> 19371
<INVENTORY> 200981
<CURRENT-ASSETS> 524255
<PP&E> 727701
<DEPRECIATION> 260931
<TOTAL-ASSETS> 1037810
<CURRENT-LIABILITIES> 304468
<BONDS> 0
0
0
<COMMON> 1488
<OTHER-SE> 373353
<TOTAL-LIABILITY-AND-EQUITY> 1037810
<SALES> 400180
<TOTAL-REVENUES> 400180
<CGS> 348211
<TOTAL-COSTS> 348211
<OTHER-EXPENSES> 35849
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7760
<INCOME-PRETAX> 8225
<INCOME-TAX> 2889
<INCOME-CONTINUING> 5336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5336
<EPS-PRIMARY> 3.59
<EPS-DILUTED> 3.59
</TABLE>
