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, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
_____________
Commission File Number 1-3390
Seaboard Corporation
_____________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 04-2260388
_______________________________ ___________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9000 W. 67th Street, Shawnee Mission, Kansas 66202
____________________________________________ _________
(Address of principal executive offices) (Zip Code)
(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 30, 1998.
Total pages in filing - 13 pages
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
(Thousands of dollars)
March 31, December 31,
1998 1997
Assets
Current assets:
Cash and cash equivalents $ 8,751 $ 8,552
Short-term investments 109,385 108,744
Receivables, net 185,587 175,640
Inventories 190,019 211,024
Deferred income taxes 10,179 9,730
Prepaid expenses and deposits 19,556 15,545
Total current assets 523,477 529,235
Investments in and advances to foreign affiliates 100,089 93,668
Net property, plant and equipment 479,772 486,373
Other assets 18,892 15,109
Total assets $1,122,230 $1,124,385
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 168,621 $ 157,445
Current maturities of long-term debt 6,854 6,843
Accounts payable 63,997 78,805
Other current liabilities 116,866 117,809
Total current liabilities 356,338 360,902
Long-term debt, less current maturities 306,393 306,666
Deferred income taxes 27,443 27,943
Other liabilities 30,549 29,859
Total non-current and deferred liabilities 364,385 364,468
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 (302) (302)
1,488 1,488
Additional capital 13,214 13,214
Accumulated other comprehensive income 11 10
Retained earnings 386,794 384,303
Total stockholders' equity 401,507 399,015
Total liabilities and stockholders' equity $1,122,230 $1,124,385
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Three months ended March 31, 1998 and 1997
(Thousands of dollars except per share amounts)
March 31, March 31,
1998 1997
Net sales $ 446,532 $ 400,180
Cost of sales and operating expenses 398,056 348,211
Gross income 48,476 51,969
Selling, general and administrative expenses 36,215 35,849
Operating income 12,261 16,120
Other income(expense):
Interest income 1,616 1,211
Interest expense (7,812) (7,760)
Loss from foreign affiliates (2,576) (1,649)
Miscellaneous 620 303
Total other income (expense), net (8,152) (7,895)
Earnings before income taxes 4,109 8,225
Income tax expense 1,245 2,889
Net earnings $ 2,864 $ 5,336
Earnings per common share $ 1.93 $ 3.59
Dividends declared per common share $ .25 $ .25
Average number of shares outstanding 1,487,520 1,487,520
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three months ended March 31, 1998 and 1997
(Thousands of dollars)
March 31, March 31,
1998 1997
Cash flows from operating activities:
Net earnings $ 2,864 $ 5,336
Adjustments to reconcile net earnings to
cash from operating activities:
Depreciation and amortization 15,334 13,904
Equity in losses of foreign affiliates 2,576 1,649
Deferred income taxes (949) 1,467
Changes in current assets and liabilities:
Receivables, net of allowance (9,947) (7,984)
Inventories 21,005 (15,280)
Prepaid expenses and deposits (4,011) 892
Current liabilities exclusive of debt (15,751) 11,722
Other, net (925) 912
Net cash from operating activities 10,196 12,618
Cash flows from investing activities:
Purchase of investments (66,758) (54,178)
Proceeds from the sale or maturity of investments 66,118 39,538
Capital expenditures, net (12,644) (15,378)
Proceeds from sale of equipment 3,848 865
Investments in and advances to foreign affiliates (8,997) 990
Investment in domestic affiliate (2,500) -
Notes receivable 394 (320)
Net cash from investing activities (20,539) (28,483)
Cash flows from financing activities:
Notes payable to bank, net 11,176 3,791
Proceeds from long-term debt - 10,032
Principal payments of long-term debt (262) (339)
Bond construction fund - (3,634)
Dividends paid (372) (372)
Net cash from financing activities 10,542 9,478
Net change in cash and cash equivalents 199 (6,387)
Cash and cash equivalents at beginning of year 8,552 11,467
Cash and cash equivalents at end of quarter $ 8,751 $ 5,080
See notes to condensed consolidated financial statements.
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 non-controlled foreign affiliates 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, 1997 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.
The Company adopted Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" as of January 1, 1998. This
statement establishes requirements for reporting and display of
comprehensive income and its components. For the three months ended
March 31, 1998 and 1997, Other Comprehensive Income adjustments
consisted of an immaterial unrealized gain on available-for-sale
securities, net of tax.
Note 2 - Inventories
The following is a summary of inventories at March 31, 1998 and
December 31, 1997 (in thousands):
March 31, December 31,
1998 1997
At lower of last-in, first-out (LIFO) cost or
market:
Live poultry $ 26,139 $ 27,116
Dressed poultry 21,860 32,496
Feed and baking ingredients, packaging
supplies and other 6,512 6,970
54,511 66,582
LIFO allowance (2,910) (4,744)
Total inventories at lower of LIFO cost
or market 51,601 61,838
At lower of first-in, first-out (FIFO) cost or
market:
Live hogs 79,764 76,484
Grain, flour and feed 22,459 37,575
Crops in production, fertilizers and
pesticides 10,704 11,166
Dressed pork 8,300 8,388
Other 17,191 15,573
Total inventories at lower of FIFO cost
or market 138,418 149,186
Total inventories $190,019 $211,024
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.
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
March 31, December 31,
1998 1997
Current ratio 1.47:1 1.47:1
Working capital $167.1 $168.3
Cash from operating activities for the three months ended March 31,
1998 was $10.2 million, compared to $12.6 million in the same quarter
one year earlier. The decrease in cash flows was primarily related to
decreases in net income and changes in deferred income taxes,
partially offset by increases in depreciation and amortization.
Overall working capital did not change significantly in the first
quarter of 1998 compared to the first quarter of 1997. Changes in
individual components of working capital are primarily related to the
sell-off of a build-up of poultry leg-quarter inventory, and the
timing of normal transactions including voyage settlements and trade
payables.
The Company invested $11.0 million in property, plant and equipment in
the food production and processing segment for the three months ended
March 31, 1998.
Capital expenditures in the pork division of $4.5 million were
primarily for improvements to the pork processing plant. During
1998, an additional $15.0 million is expected to be spent on
existing facilities. In connection with previously disclosed
plans to expand production from two million to four million hogs
per year, the Company is currently making arrangements to produce
an additional one million hogs per year, increasing annual
production to three million head. This increase in hog
production will be accomplished through a combination of operating
lease arrangements and third party contract growers. The timing
of the second million head of additional annual production
capacity, which would expand production to four million hogs per
year, as well as the Company's previously announced plans to
construct a second processing plant, has not been finalized.
Capital expenditures of $5.9 million for the three months ended March
31, 1998 were made in the poultry division, primarily for the
continuing expansion projects at the Athens and Elberton, Georgia,
poultry facilities. The Company anticipates spending $15.0 million
over the next nine months to complete these expansions and make
general upgrades to other poultry facilities. 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, 1998 included $0.6
million in general modernization and efficiency upgrades of plant and
equipment.
Capital expenditures in the transportation segment through March 31,
1998 totaled $1.1 million for general replacement and upgrades of
property and equipment.
During the three months ended March 31, 1998, the Company made $9.1
million in advances to and non-voting investments in Ingenio y
Refineria San Martin del Tabacal S.A. (Tabacal) in which the Company
owns a non-controlling interest. For the remainder of 1998, the
Company anticipates guaranteeing loans made to Tabacal by third
parties and/or making additional advances to and/or non-voting
investments in Tabacal of approximately $10.0 million.
In the first quarter of 1998, the Company's one-year revolving credit
facilities maturing during the first quarter of 1998 were extended for
an additional year. As of March 31, 1998, the Company had $141.4
million outstanding under one-year revolving credit facilities
totaling $160.0 million and $27.2 million outstanding under short-term
uncommitted credit lines totaling $92.5 million.
In January 1998, the Company invested $2.5 million for a minority
interest in a new limited liability company in Maine. The new company
acquired the assets of an existing seafood company which processes and
distributes prepackaged smoked seafood and related products. The
investment is being accounted for using the equity method.
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, 1998 increased by $46.3
million compared to the three months ended March 31, 1997. Operating
income decreased by $3.8 million compared to the same quarter one year
ago.
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 31, March 31, March 31,
1998 1997 1998 1997
Food Production and
Processing Segment $ 277.2 $ 251.5 $ 1.7 $ 7.5
Commodity Trading
and Milling Segment 82.6 70.8 2.5 2.7
Transportation Segment 78.3 68.6 7.9 6.6
Other 8.4 9.3 0.2 (0.7)
$ 446.5 $ 400.2 $ 12.3 $ 16.1
Food Production and Processing Segment
An industry wide surplus of meat has resulted in lower sales prices in
most meat markets beginning in the latter part of 1997. Despite lower
poultry and pork prices, net sales for the food production and
processing segment increased $25.7 million for the first quarter of
1998 compared to the first quarter of 1997 primarily as a result of
increased poultry and pork sales volumes. Operating income decreased
$5.8 million for the first quarter of 1998 compared to the first
quarter of 1997 primarily as a result of lower pork margins described
below.
Net sales of poultry products totaled $125.2 million in the first
quarter of 1998, an increase of $8.7 million compared to the first
quarter of 1997. This increase is primarily a result of increased
sales volume at the Elberton, Georgia, plant and, to a lesser extent,
selling off a build-up of leg-quarter inventory. The addition of an
additional cooking line at the Elberton location in late 1997 has
increased its processing capacity. Gross income from poultry sales
increased to $7.5 million in the first quarter of 1998 from $6.3
million in the first quarter of 1997, primarily as a result of lower
finished feed costs, partially offset by lower sales prices.
Management cannot predict whether grain prices will remain at current
levels during the remainder of the year.
Net sales for the pork operations increased by $16.8 million to $121.7
million in the first quarter of 1998 compared to the first quarter of
1997. The increase primarily resulted from increased sales of pork at
the hog processing plant, which operated at double-shift production
during the first quarter of 1998, compared with single-shift
production in the first quarter of 1997. Despite higher sales
volumes, lower prices for finished pork products without a comparable
decrease in the cost of production resulted in a decrease in gross
income to $1.5 million for the first quarter of 1998 compared to $10.5
million for the first quarter of 1997. Management anticipates that
lower pork prices will continue to have a negative effect on financial
results during 1998 compared to 1997.
Commodity Trading and Milling Segment
Net sales from commodity trading and milling activity increased by
$11.8 million to $82.6 million in the first quarter of 1998 compared
to the first quarter of 1997. The increase is primarily a result of
higher volumes of commodity sales, mainly soybeans, to foreign
markets. Operating income for the first quarter of 1998 decreased
$0.2 million when compared to the first quarter of 1997 primarily as a
result of costs associated with the collection of certain receivables.
Transportation Segment
Net sales from containerized cargo operations increased by $9.7
million to $78.3 million in the first quarter of 1998 compared to the
first quarter of 1997. Operating income from containerized cargo
operations increased by $1.3 million in the first quarter of 1998
compared to the same quarter one year ago. These increases are
primarily related to increased cargo volumes in certain markets that
the Company serves.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses increased $0.4
million to $36.2 million for the first quarter of 1998 compared to the
first quarter of 1997. As a percentage of revenues, SG&A decreased to
8.1% from 9.0% compared to the first quarter of 1997 primarily as a
result of increased pork production.
Other Income and Expense
Interest income increased during the quarter compared to the same
quarter one year earlier resulting primarily from an increase in
average invested funds.
Losses from foreign affiliates for the first quarter of 1998 are
primarily attributable to the operations of Tabacal. During the first
quarter of 1997, losses attributable to Tabacal were reduced by
interest income recorded on the related advances. During the second
quarter of 1997, the Company ceased recording interest income.
Subsequently, the Company recorded the advances as long-term when
it was determined that they would not be repaid on a short-term
basis. The Company anticipates incurring losses during 1998 similar
to 1997.
Other Financial Information
The Company will adopt Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and
Related Information" for the year ending December 31, 1998. This
statement requires companies to report certain information about
operating segments in their financial statements and establishes
standards for related disclosures about products and services,
geographic areas and major customers. SFAS 131 defines operating
segments as components of an enterprise about which separate financial
information is available that is evaluated regularly by management in
deciding how to allocate resources and in assessing performance.
Application to interim financial statements in the year of adoption is
not required, however, comparative information for interim periods in
the year of adoption will be reported in the financial statements for
interim periods in fiscal 1999.
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 27, 1998 in
Newton, Massachusetts. Two items were submitted to a vote of
stockholders as described in the Company's Proxy Statement dated March
26, 1998. The table below briefly describes the proposals and results
of the stockholders' vote.
Votes in Votes
Favor Against Abstain
1. To elect:
H. Harry Bresky, 1,441,755.25 0 1,783
Joe E. Rodrigues 1,441,765.25 0 1,773
David A. Adamsen 1,441,665.25 0 1,873
and Thomas J. Shields 1,441,665.25 0 1,873
As directors.
2. To ratify selection of
KPMG Peat Marwick LLP
As independent auditors. 1,441,999.25 560 979
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, 1998.
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, (v) the anticipated
improvement in the financial results of Tabacal, 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-Q
under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" identifies important factors
which could cause such differences.
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 14, 1998
Seaboard Corporation
by: /s/ Robert L. Steer
Robert L. Steer, Vice President-Chief
Financial Officer (Authorized officer
and principal financial and accounting
officer)
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