UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
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
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
(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 10K/A or any amendment to this Form 10K/A.
X
(Continued)
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.
$61,089,875 (March 3, 2000). On such date, 349,085 shares were
held by non-affiliates, and the closing price of the stock was $175.00
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 3, 2000.
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 7, 7A and parts
of item 8 are incorporated by reference to sections of the
Registrant's Consolidated Financial Statements.
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 2000 annual meeting of stockholders
(the "2000 Proxy Statement").
This Form 10-K/A and its Exhibits (Form 10-K/A) 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/A 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 cost to purchase third-party hogs for slaughter at
the Company's hog processing facility and the sale price for pork
products from such operations, (v) the price for the Company's
products and services, (vi) the effect of Tabacal on the consolidated
financial statements of the Company, or (vii) other trends affecting
the Company's financial condition or results of operations. Readers
are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially as a result of various
factors. The accompanying information contained in this Form 10-K/A,
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.
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" or "Company"), is a diversified international
agribusiness and transportation company which is primarily engaged in
domestic pork production and processing, and cargo shipping.
Overseas, the Company is primarily engaged in commodity merchandising,
flour and feed milling, produce farming, sugar production, and
electric power generation. See Item 1(c) (1) (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 12 of Registrant's
Consolidated Financial Statements.
(c) Narrative Description of Business
(1) Business Done and Intended to be Done by the Registrant
(i) Principal Products and Services
Registrant produces hogs and processes pork in the United States
and sells fresh pork to further processors, foodservice and retail,
primarily in the western half of the United States and foreign
markets. Hogs produced at Company owned or leased facilities as well
as third-party hogs are processed at the Company's processing plant.
Registrant operates an ocean liner service for containerized
cargo primarily between Florida and ports in the Caribbean Basin and
Central and South America.
Registrant sources and trades commodities, such as bulk grains
and oilseeds, for its subsidiaries, affiliates and third parties
primarily in Africa, the Caribbean, Central and South America, the
Eastern Mediterranean and Europe. Registrant operates its own bulk
carriers primarily in the Atlantic Basin to conduct a portion of its
commodity trading activities. Registrant, by itself or through non-
controlled subsidiaries, operates flour and feed mills in Africa, the
Caribbean and South America.
Registrant operates a power generating facility in the Dominican
Republic, produces and refines sugarcane and produces and processes
citrus in Argentina, and produces wine in Bulgaria.
Registrant, by itself or through non-controlled affiliates,
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. The
Registrant, through non-controlled affiliates, produces salmon and
processes seafood in Maine.
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 12 of Registrant's Consolidated Financial
Statements.
(ii) Status of Product or Segment
In December 1999, the Registrant agreed to sell its domestic
poultry operations. The sale was completed on January 3, 2000.
Registrant continues to expand its pork segment by further
investing in pork production and processing facilities. The
Registrant is currently making arrangements to increase annual
production to approximately three and one-half million hogs per year.
In late February 2000, Registrant signed an agreement to acquire
approximately 22,000 additional sows effective late March or early
April 2000. The Registrant plans to construct a second vertically
integrated pork operation capable of processing over four million hogs
annually although the timing has not been finalized.
The Registrant's Argentine subsidiary continues to make
improvements to existing facilities and expand the sugarcane fields.
In January 2000, the Registrant signed a construction contract to
build a 71.2 megawatt barge-mounted power plant to be located in the
Dominican Republic and anticipates supplying power in the fourth
quarter of 2000.
(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
The following names of the Registrant's businesses are registered
trademarks: Seaboardr, Seaboard Farmsr and Seaboard Mariner.
Patents, trademarks, franchises, licenses and concessions are not
material to any of Registrant's other segments.
(v) Seasonal Business
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. Sugar prices in
Argentina are generally lower during the typical sugar cane harvest
period between June and November. The Registrant's other segments are
not seasonally dependent to any material extent.
(vi) Practices Relating to Working Capital Items
There are no unusual industry practices or practices of
Registrant relating to working capital items.
(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. All of the sales of
the power segment are to the state-owned electric company of the
Dominican Republic. No other segments have 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 involves government
contracts.
(x) Competitive Conditions
Competition in Registrant's pork segment comes from a variety of
national and regional producers and is based primarily on product
performance, customer service and price. In the October 1999 issue of
Successful Farming, an industry trade publication, the Registrant was
ranked in the top five pork producers in the United States based on
sows in production.
Registrant's ocean liner service for containerized cargoes faces
competition based on price and customer service. A new U.S. shipping
law, The Ocean Reform Act of 1998, went into effect in May 1999 and
permits shipping companies to enter into unregulated confidential rate
agreements with shippers. Management is not able to predict the
impact of this new law, if any, on the Registrant. Registrant
believes it is among the top five ranking ocean liner services for
containerized cargoes in the Caribbean Basin based on cargo volume.
Registrant's sugar business faces significant competition for
sugar sales in the local Argentine market. Sugar prices in Argentina
are higher than world markets due to current Argentine government
price protection policies. The entire Argentine sugar industry is
experiencing financial difficulties with Tabacal and certain large
competitors incurring operating losses in part because Argentine sugar
prices are below historical levels.
Registrant's Bulgarian wine production business faces increasing
competition for quality grapes from local grape suppliers.
(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, 1999, Registrant, excluding non-controlled,
non-consolidated foreign subsidiaries, had 9,763 employees, of whom
4,246 were employed in the United States. These totals exclude 5,690
employees of the Poultry division which was sold on January 3, 2000,
and presented as a discontinued operation in the Company's 1999
financial statements.
(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 12 of Registrant's
Consolidated Financial Statements. 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 affiliate shrimp farm in Ecuador, its winery in
Bulgaria and its affiliate flour mills, in Democratic Republic of
Congo, Ecuador, Haiti, Lesotho, Mozambique and Zambia, to the extent
deemed appropriate against certain of these risks with the Overseas
Private Investment Corporation, an agency of the United States
Government. In addition, the Company has purchased commercial
insurance to cover certain forms of political risk if physical damage
is done to its own and affiliate facilities abroad.
Item 2. Properties
(1) Pork
The Registrant owns a hog processing plant in Oklahoma with a
double shift capacity in excess of four million hogs per year. Hog
production facilities currently consist of a combination of owned and
leased farrowing, nursery and finishing units to support 160,000 sows.
Registrant owns three feed mills which have a combined capacity to
produce 850,000 tons of feed annually to support the hog production.
These facilities are located in Oklahoma, Texas, Kansas and Colorado.
(2) Marine
Registrant leases a 135,000 square foot warehouse and more than
90 acres of port terminal land and facilities in Florida which are
used in its containerized cargo operations. In addition, Registrant
timecharters, under short-term agreements, between sixteen and twenty
containerized ocean cargo vessels with deadweights ranging from 2,600
to 17,565 metric-tons. Registrant also bareboat charters, under long-
term lease agreements, three containerized ocean cargo vessels with
deadweights ranging from 12,169 to 12,648 metric tons.
(3) Commodity Trading and Milling
The Registrant owns in whole or in part ten flour mills with
capacity to produce over 5,000 metric tons of flour per day. In
addition, Registrant has feed mill capacity of 75 metric tons per hour
to produce formula animal feed. The flour mills, located in Angola,
Democratic Republic of Congo, Ecuador, Guyana, Haiti, Lesotho,
Mozambique, Nigeria, Sierra Leone and Zambia, and the feed mills
located in Ecuador, Lesotho, Nigeria and Zambia are owned; in Lesotho,
Nigeria and Sierra Leone the land the mills are located on is leased
under long-term agreements. The Registrant owns seven 9,000 metric-
ton deadweight dry bulk carriers.
(4) Sugar and Citrus
Registrant has a controlling interest in an Argentine company
which owns approximately 33,000 acres of planted sugarcane and
approximately 2,700 acres of planted citrus. In addition, this
company owns a sugar mill with a capacity to process approximately
165,000 metric tons of sugar per year.
(5) Power
Registrant owns a floating power generating facility, capable of
producing 40 megawatts of power, located in Santo Domingo, Dominican
Republic.
(6) Wine
Registrant owns a controlling interest in a Bulgarian winery with
a capacity to produce approximately 41 million liters of wine per
year. Related facilities are located on approximately 330 acres of
owned land.
(7) Other
Registrant leases 1,900 acres in Honduras and 1,000 acres in
Arizona for growing produce. Registrant also leases 40,000 square
feet of refrigerated space and 70,000 square feet of dry space in the
Port of Miami for warehousing produce products.
Registrant, by itself or through non-controlled affiliates,
operates approximately 3,100 acres of shrimp ponds in Honduras and
Ecuador. Approximately 1,600 acres are leased and the rest are owned.
Registrant owns a non-controlling interest in a company in Maine
capable of producing over 11 million pounds of salmon per year.
Registrant owns a non-controlling interest in a company in Maine with
a 20,000 square feet facility for processing seafood and related
products.
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.
Poultry facilities sold in January 2000 consisted of four fully
integrated processing facilities and two further processing facilities
located in Georgia, Tennessee and Kentucky. Each processing facility
contained a hatchery, feed mill and processing plant.
Item 3. Legal Proceedings
The Company is subject to legal proceedings related to the normal
conduct of its business, including as a defendant in a maritime
arbitration claim and third-party hog supplier claim more fully
described in Note 11 of Registrant's Consolidated Financial
Statements. 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.
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 (74) President of Registrant; President and Treasurer of
Seaboard Flour Corporation (SFC)
Joe E. Rodrigues (63) Executive Vice President and Treasurer
Rick J. Hoffman (45) Vice President
Steven J. Bresky (46) Vice President
Robert L. Steer (40) Vice President - Chief Financial Officer
Douglas W. Schult (43) Vice President - Human Resources
James L. Gutsch (46) Vice President - Engineering
David M. Becker (38) General Counsel and Assistant Secretary
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 - Chief Financial Officer
of Registrant since April 1998 and previously 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 and by M.G. Waldbaum from January 1993 to January
1995.
Mr. Gutsch has served as Vice President - Engineering of
Registrant since December 1998. He has been employed with the
Registrant since 1984.
Mr. Becker has served as General Counsel and Assistant Secretary
of Registrant since April 1998 and previously Assistant Secretary of
Registrant since May 1994.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's common stock is traded on the American Stock
Exchange under the symbol SEB. The Company had 308 shareholders of
record of shares of its common stock as of December 31, 1999. The
remaining information required by Item 5 is included under the caption
"Quarterly Financial Data" included in Item 8 below.
Item 6. Selected Financial Data
(Thousands of dollars except per share amounts)Years ended December 31,
1999 1998 1997 1996 1995
Net sales $1,255,304 $1,265,366 $1,303,753 $ 962,652 $ 715,362
Earnings (loss) from
continuing operations $ (13,587)$ 31,427 $ 35,070 $ 5,203 $ 3,241
Net earnings $ 47 $ 50,938 $ 29,079 $ 5,388 $ 18,508
Earnings (loss) per
common share from
continuing operations $ (9.13)$ 21.12 $ 23.58 $ 3.50 $ 2.18
Earnings per common share $ 0.03 $ 34.24 $ 19.55 $ 3.62 $ 12.44
Total assets $1,277,791 $1,215,897 $1,119,327 $1,002,892 $ 876,079
Long-term debt $ 318,017 $ 313,324 $ 290,521 $ 281,574 $ 281,240
Stockholders' equity $ 443,168 $ 444,728 $ 395,368 $ 367,782 $ 364,116
Dividends per common
share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
In August 2000, the Company announced that assets of its Produce
Division had been overstated in prior periods and management
determined to restate the Company's financial statements for each of
the prior periods effected. See Note 1 to the Consolidated Financial
Statements for further discussion.
In December 1999, the Company agreed to sell its Poultry
Division. The sale was completed on January 3, 2000. Accordingly,
the Company's financial statements and data above have been restated
to reflect the Poultry Division as a discontinued operation for all
periods presented. See Note 13 to the Consolidated Financial
Statements for further discussion.
As described in Note 4 to the Consolidated Financial Statements,
the Company changed its method of accounting for certain inventories
from FIFO to LIFO in 1999. The net effect of this change in 1999 was
to increase net earnings by $2,456,000 or $1.65 per common share.
In December 1998, the Company sold its baking and flour milling
operations in Puerto Rico, recognizing an after-tax gain of
$33,272,000 or $22.37 per common share. See Note 2 to the
Consolidated Financial Statements for further discussion.
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 net effect of this change in 1996,
exclusive of the cumulative effect, was to increase net earnings by
$788,000 or $.53 per common share.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
As more fully described in Note 1 to the Consolidated Financial
Statements, in August 2000, the Company announced that assets of its
Produce Division had been overstated in prior periods and management
determined to restate the Company's financial statements for each of
the prior periods effected. As more fully described in Note 13 to the
Consolidated Financial Statements, in December 1999 the Company agreed
to sell its Poultry Division for $375 million, consisting of the
assumption of approximately $16 million in indebtedness and the
remainder in cash, subject to certain adjustments. The sale was
completed on January 3, 2000 resulting in a pre-tax gain of
approximately $148 million ($90 million after estimated taxes). The
Company's financial statements have been restated to reflect the
Poultry Division as a discontinued operation for all periods
presented. As a result, the Poultry Division is no longer presented
as a reportable segment, and two other divisions, Power and Wine, now
qualify as reportable segments of the Company. Restated Poultry
results are presented as earnings (losses) from discontinued
operations, net of applicable income taxes, and exclude general
corporate overhead and certain interest charges previously allocated
to that division. The discussions and figures below are based on these
restated presentations.
Liquidity and Capital Resources
(Dollars in millions) 1999 1998 1997
Current ratio 1.44:1 1.64:1 1.46:1
Working capital $ 184.2 231.1 165.0
Cash from operating activities $ (40.5) 59.5 116.2
Capital expenditures $ 67.7 26.9 48.3
Long-term debt, exclusive of
current maturities $ 318.0 313.3 290.5
Total capitalization* $ 854.9 847.3 760.2
* Total capitalization is defined as stockholders' equity and
noncurrent liabilities.
Cash provided by operating activities for 1999 decreased $100.0
million compared to 1998. The decrease is primarily related to
changes in certain components of working capital, which include
Tabacal for 1999 (see Sugar and Citrus segment discussion below), and
a decrease in net earnings from continuing operations. Changes in
components of working capital are primarily related to the timing of
normal transactions for voyage settlements, trade payables and
receivables. Within the Commodity Trading and Milling segment there
was a higher value of inventory in transit at December 31, 1999 than
at December 31, 1998 resulting in increases in grain inventory and
prepaid expense balances and a partially offsetting increase in
deferred revenue balances. Current liabilities exclusive of debt
increased only slightly during 1999 as the Company paid $14.6 million
in taxes related to the 1998 gain from the sale of baking and flour
milling operations in Puerto Rico primarily offsetting the increase in
deferred revenue balances.
Cash provided by operating activities for 1998 decreased $56.7 million
compared to 1997. The decrease in cash flows was primarily related to
a decrease in net earnings from continuing operations and changes in
certain components of working capital. Changes in components of
working capital are primarily related to the timing of normal
transactions for voyage settlements, trade payables and receivables.
Within the Commodity Trading and Milling segment there was a smaller
value of inventory in transit at December 31, 1998 compared to
December 31, 1997 resulting in a decrease in deferred revenue balances
and a partially offsetting decrease in related grain inventories.
Cash from investing activities for 1999 increased $44.7 million
compared to 1998. The increase is primarily related to a net sale and
maturity of investments in 1999 compared to a net purchase of
investments in 1998. The net purchase of investments in 1998 related
to the $72.4 million in cash received from the sale of baking and
flour milling operations. During 1998, investments in and advances to
foreign affiliates included $45.8 million to Tabacal. As further
discussed in Note 5 to the Consolidated Financial Statements, Tabacal
has been consolidated since December 31, 1998. As such, funds
invested in Tabacal during 1999 are reflected within the appropriate
components of the cash flow statements, including capital
expenditures. The Company invested $67.7 million in the property,
plant and equipment of continuing operations during 1999 as described
below.
The Company invested $22.1 million in the Pork segment during 1999
primarily for the expansion of existing hog production facilities and
for improvements to the pork processing plant. The Company plans to
invest $10.0 million in 2000 for general upgrades to the pork
processing plant and continued expansion of existing hog production
facilities. The Company previously disclosed plans to construct a
second vertically integrated pork operation and is currently making
arrangements to increase annual production to approximately three and
one-half million hogs. Management anticipates that this increase in
hog production will primarily be accomplished through a combination of
operating lease arrangements, third party contract growers or the
purchase of existing businesses. The timing of the remaining
expansion plans, primarily related to a second processing plant, has
not been finalized.
Capital expenditures in the Marine segment during 1999 totaled $20.0
million primarily for the purchase of two vessels previously chartered
and for general replacement and upgrades of property and equipment.
During 2000, the Company anticipates spending $7.5 million for general
replacement and upgrades of property and equipment.
Capital expenditures in the Commodity Trading and Milling segment
totaled $4.8 million, including $2.0 million to purchase a previously
chartered bulk carrier vessel from a wholly-owned subsidiary of
Seaboard Flour Corporation, the owner of 75.3% of the Company's
outstanding common stock. During 2000, the Company anticipates
spending $4.2 million for general replacement and upgrades of property
and equipment.
Capital expenditures in the Sugar and Citrus segment totaled $15.0
million primarily for improvements to existing operations and
expansion of sugarcane fields. During 2000, the Company anticipates
spending $14.5 million for improvements to existing operations and
expansion of sugarcane fields.
Capital expenditures in all other segments for 1999 totaled $5.8
million in general modernization and efficiency upgrades of plant and
equipment. Management anticipates that the planned capital
expenditures for 2000 will be financed by internally generated cash.
During 1999, the Company invested $2.8 million to acquire additional
shares of a Bulgarian winery originally acquired in 1998. During
1999, the Company invested $1.7 million for a minority interest in a
flour mill in Angola which is being accounted for using the equity
method.
In January 2000, the Company signed a construction contract to build a
71.2 megawatt barge-mounted power plant for approximately $50 million
to be located in the Dominican Republic. The Company is currently
evaluating financing options including potential leasing alternatives
and expects to begin supplying power during the fourth quarter of
2000.
In February 2000, the Company signed an agreement to purchase assets
of an existing hog production operation for approximately $75 million,
consisting of $36 million in cash, the assumption of $33 million in
debt and $6 million payable over the next four years. The transaction
is expected to close in late March or early second quarter of 2000 and
will be accounted for using the purchase method.
Cash from investing activities in 1998 increased $53.8 compared to
1997, primarily as a result of proceeds received from the disposition
of businesses. On December 30, 1998, the Company completed the sale
of its baking and flour milling businesses in Puerto Rico. These
businesses were sold for $81.4 million and the assumption of $11.8
million of liabilities resulting in a gain of $54.5 million ($33.3
million after taxes). The proceeds from the sale consisted of
approximately $72.4 million in cash and $9.0 million in notes
receivable. See Note 2 to the Consolidated Financial Statements for
further discussion.
During 1998 the Company invested $26.9 million in property, plant and
equipment of continuing operations. Capital expenditures in the Pork
segment totaled $16.3 million primarily for improvements to the pork
processing plant. Capital expenditures in the Marine segment totaled
$5.2 million for general replacement and upgrades of property and
equipment. Capital expenditures in all other segments totaled $5.4
million in general modernization and efficiency upgrades of plant and
equipment. During 1998, the Company made $45.8 million in advances to
and non-voting investments in Tabacal for working capital
requirements, reduction of debt, general modernization, efficiency
upgrades of plant and equipment, and expansion of sugarcane fields.
In November 1998, the Company purchased a milling business in Zambia
by assuming liabilities of $10.2 million. In October 1998, the
Company purchased a controlling interest in an existing Bulgarian
winery by acquiring newly issued shares for $15.0 million. These
acquisitions were accounted for using the purchase method and would
not have significantly affected net earnings or earnings per share on
a pro forma basis.
In July 1998, the Company completed the acquisition of a 50% interest
in a flour mill in Lesotho for approximately $5.0 million. In June
1998, the Company, in a joint venture with two other partners,
completed its acquisition of an interest in a flour mill in Haiti.
The Company made an investment of $3.0 million for a minority interest
in the joint venture, which in turn owns 70% of a Haitian company
which owns the flour mill. These investments are being accounted for
using the equity method.
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 smoked seafood and related products. The investment is
being accounted for using the equity method.
Cash from financing activities in 1999 increased $90.6 million
compared to 1998 primarily related to proceeds from short-term
borrowings and, to a lesser extent, terminating interest rate swap
agreements. See further discussion of terminated swap agreements
under "Derivative Information" below.
During 1999, the Company prepaid at a discount certain long-term debt
obligations assumed with the purchase of the Bulgarian winery in
October 1998 and adjusted certain balances related to the acquisition.
During 1999, the Company also prepaid at a discount other higher cost,
U.S. dollar denominated foreign subsidiary debt obligations. These
prepayments reduced total long-term debt obligations by $13.5 million.
Changes to the preliminary purchase price allocations and other non-
cash adjustments related to these transactions resulted in immaterial
adjustments to several balance sheet line items, primarily reductions
to minority interest, net property, plant and equipment, and long-term
debt.
During 1999, the Company's one-year revolving credit facilities
totaling $145.0 million were increased to $153.3 million and extended
for an additional year. In addition, the existing five-year revolving
credit facility totaling $25.0 million was increased to $26.7 million.
During 1999, the Company repaid the outstanding advances totaling
$10.0 million on the five-year revolving credit facility and
subsequently borrowed the full $26.7 million. As of December 31,
1999, the Company had $150.9 million outstanding under one-year
revolving credit facilities totaling $153.3 million and $70.5 million
outstanding under short-term uncommitted credit lines totaling $145.0
million.
Subsequent to year-end, the Company's one-year revolving credit
facilities totaling $153.3 million maturing in the first quarter of
2000 were reduced to $141.0 million and extended for an additional
year and short-term uncommitted credit lines totaling $145.0 million
were reduced to $132.5 million. During the first several months of
2000 the Company anticipates repaying approximately $118.3 million in
notes payable and industrial development revenue bonds from the
proceeds of the Poultry Division sale.
Cash from financing activities in 1998 decreased $37.6 million
compared to 1997 primarily related to repayments of short-term
borrowings.
Cash used in discontinued poultry operations in 1999 primarily
represents capital expenditures ($52.9 million including expansion
projects) in excess of net operating cash flows. As part of the
agreement to sell the Poultry Division, the Company plans to spend an
additional $13.1 million in 2000 to complete these expansions on
behalf of the buyer. This amount will be included as a reduction of
the gain recorded on the sale in January 2000. Cash provided by
discontinued poultry operations in 1998 primarily represents net
operating cash flows in excess of capital expenditures ($18.6
million). The increase in cash from discontinued operations in 1998
over 1999 and 1997 is primarily a result of higher earnings and lower
capital expenditures in 1998 compared to 1999 and 1997.
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, including
proceeds from the sale of the Poultry Division, are adequate for its
current and intended operations.
Results of Operations
Net sales totaled $1,255.3 million for the year ended December 31,
1999, compared to sales of $1,265.4 million for the year ended
December 31, 1998. Operating income of $12.4 million for 1999
decreased $17.4 million compared to 1998.
Net sales totaled $1,265.4 million for the year ended December 31,
1998, compared to sales of $1,303.8 million for the year ended
December 31, 1997. Operating income of $29.8 million for 1998
decreased $49.1 million compared to 1997.
Pork Segment
(Dollars in millions) 1999 1998 1997
Net sales $ 571.2 500.4 531.6
Operating income $ 37.7 (1.1) 38.4
Net sales increased $70.8 million to $571.2 million in 1999 compared to
1998. This increase is primarily the result of an increase in sales
volume and, to a lesser extent, improved prices for finished pork
products. The increase in sales volume is the result of the hog
processing plant operating at full capacity on a double-shift basis
during 1999. The plant employed a second shift during the first half
of 1998, but did not achieve full double-shift capacity until the third
quarter of 1998. An excess supply of live hogs depressed pork prices
during 1998 and the first half of 1999. During the second half of 1999
the excess declined, resulting in improved prices for the year.
Although management cannot predict pork prices for 2000, it is
anticipated that prices for finished pork products will continue to be
favorable.
Operating income increased $38.8 million to $37.7 million in 1999
compared to 1998. This increase is primarily a result of improved
sales prices, and to a lesser extent, a decrease in the cost of Company
raised hogs. The decrease in the cost of Company raised hogs is
primarily the result of lower grain prices. The Company also continued
to benefit from low prices for third-party hogs purchased during 1999.
However, an increase in this cost during the fourth quarter of 1999
compared to extremely low prices for third-party hogs during the fourth
quarter of 1998 resulted in a slight increase in this cost for the
year. In addition, effective January 1, 1999, the Company changed its
method of accounting for certain pork inventories from FIFO to LIFO,
increasing operating income in 1999 by $4.0 million. Although
management cannot predict the cost of third-party hogs or grain prices
for 2000, it is anticipated that market conditions for these items
should continue to be favorable.
Net sales decreased $31.2 million to $500.4 million in 1998 compared to
1997. This decrease is the result of lower pork prices partially
offset by an increase in sales volume. Lower sales prices for most
pork products resulted from an industry wide excess supply of live hogs
and, to a lesser extent, pricing pressure from the Asian economic
situation. The increase in sales volume is the result of the hog
processing plant operating at double-shift production during all of
1998. The plant did not employ a second shift until part way through
the second quarter of 1997. During the third quarter of 1998, the
plant reached full capacity on a double-shift basis.
Operating income decreased $39.5 million to $(1.1) million in 1998
compared to 1997. This decrease is primarily the result of lower
prices for finished pork products without a comparable decrease in the
cost of production. This decrease was partially offset by an increase
in the percentage of cheaper third-party hogs processed compared to
Company raised hogs.
Marine Segment
(Dollars in millions) 1999 1998 1997
Net sales $ 307.7 310.9 309.3
Operating income $ (1.9) 17.4 27.3
Net sales decreased $3.2 million to $307.7 million in 1999 compared to
1998. Cargo volumes and applicable cargo rates decreased in the first
half of 1999 compared to 1998 primarily as a result of weak economic
conditions in certain South American markets served by the Company.
During the second half of 1999, overall cargo volume increased from
1998 due to improvements in certain markets, but the effect on net
sales was largely offset as rates remained depressed.
Operating income from the Marine segment decreased $19.3 million to
$(1.9) million in 1999 compared to 1998, primarily as a result of
lower cargo rates discussed above. Management expects that these
situations will continue to have a negative effect on financial
results during 2000. A new U.S. shipping law, The Ocean Reform Act of
1998, went into effect in May 1999 and permits shipping companies to
enter into unregulated confidential rate agreements with shippers.
Management is not able to determine the impact, if any, this new law
had on 1999 financial results.
Net sales increased $1.6 million to $310.9 million in 1998 compared to
1997. During the first half of 1998, the Company experienced higher
cargo volumes in certain markets the Company serves. During the last
half of 1998, cargo volumes and applicable cargo rates decreased
primarily as a result of weakening economic conditions in certain
South American markets the Company serves and, to a lesser extent,
from trade disruptions relating to Hurricane Mitch in Central America
during the fourth quarter of 1998.
Operating income decreased $9.9 million to $17.4 million in 1998
compared to 1997. This decrease is primarily a result of lower cargo
volumes and rates during the last half of 1998, trade disruptions
relating to Hurricane Mitch during the fourth quarter of 1998 and, to
a lesser extent, an increase in various general and administrative
costs.
Commodity Trading and Milling Segment
(Dollars in millions) 1999 1998 1997
Net sales $ 259.5 306.4 313.9
Operating income $ 2.6 10.5 9.5
Net sales decreased $46.9 million to $259.5 million in 1999 compared
to 1998, primarily as a result of lower wheat sales to certain foreign
affiliates, lower soybean sales to third parties and, to a lesser
extent, a decrease in commodity prices sold in foreign markets. Wheat
sales to certain foreign affiliates decreased as political unrest
resulted in economic problems that reduced consumer purchasing power
and thus lowered milling volumes. Such decreases were partially
offset by the addition of sales during 1999 from the Company's milling
operations in Zambia acquired in late 1998.
Operating income decreased $7.9 million to $2.6 million in 1999
compared to 1998, primarily as a result of the decrease in wheat sales
and margins to certain foreign affiliates as discussed above and
operating losses from the Company's milling operations in Zambia
acquired in late 1998. Continued political unrest and economic
problems in countries where the Company does business could continue
to have a negative effect on financial results during 2000.
Net sales decreased $7.5 million to $306.4 million in 1998 compared to
1997. This decrease is primarily the result of a decrease in
commodity prices sold in foreign markets partially offset by an
increase in tonnage sold. Operating income increased $1.0 million to
$10.5 million in 1998 compared to 1997. This increase is primarily
the result of increased income from operating certain mills in foreign
countries.
Sugar and Citrus Segment
(Dollars in millions) 1999 1998 1997
Net sales $ 46.9 - -
Operating income $ (15.9) - -
As discussed in Note 5 to the Consolidated Financial Statements,
comparative operating results for the Sugar and Citrus segment are not
presented as Tabacal was accounted for on the equity method in 1998.
However, lower sugar prices have offset increased volumes resulting in
lower revenues and higher losses in 1999 compared to 1998. Lower
sugar prices are primarily the result of an excess supply of sugar in
Argentina and, to a lesser extent, lower sugar prices on the world
market. Also, during the second quarter of 1999 severance charges of
$3.0 million were incurred related to certain employee layoffs enacted
to reduce future operating costs. Although management cannot predict
sugar prices for 2000, it is anticipated that sugar prices will remain
at low levels that result in operating losses for the Company. During
1998, the loss from foreign affiliates attributable to Tabacal was
$15.8 million.
As a result of recent operating results for Tabacal, the Company has
evaluated the recoverability of Tabacal's long-lived assets and
believes that the value of those assets are presently recoverable.
However, any further decline in sugar prices would likely result in
the carrying values not being recoverable, which would result in a
material charge to earnings for the impairment of these assets.
Power Segment
(Dollars in millions) 1999 1998 1997
Net sales $ 23.0 26.2 30.3
Operating income $ 7.9 8.8 7.9
Net sales decreased $3.2 million to $23.0 million in 1999 compared to
1998. Operating income decreased $0.9 million to $7.9 million in 1999
compared to 1998. These decreases are primarily a result of the
termination of operations in October 1998 of a customer that was the
only user of service from a generating station owned by the Company.
Net sales decreased $4.1 million to $26.2 million in 1998 compared to
1997, primarily as a result of the customer discussed above decreasing
usage throughout 1998 prior to terminating operations in October.
Despite the decrease in sales, operating income increased $0.9 million
to $8.8 million in 1998 compared to 1997 primarily due to the recovery
of previously written off receivables associated with the termination
of service discussed above.
Wine Segment
(Dollars in millions) 1999 1998 1997
Net sales $ 12.9 - -
Operating income $ (5.9) - -
As discussed in Note 2 to the Consolidated Financial Statements, the
Company acquired an existing Bulgarian winery in October 1998. No
results are presented for 1998 as the winery is reported on a three-
month lag. Operating losses in 1999 are primarily a result of
acquiring more expensive wine materials on the open market to
supplement local grape shortages and reserving for uncollectible
advances for raw materials. Although management is not able to
predict the amount of operating losses for 2000, it is anticipated
that operating losses will continue during 2000.
Other Operations
(Dollars in millions) 1999 1998 1997
Net sales $ 34.3 121.5 118.6
Operating income $ (4.7) (0.4) (0.4)
Net sales from other operations decreased $87.2 million to $34.3
million in 1999 compared to 1998, while operating income decreased
$4.3 million to $(4.7) million in 1999 compared to 1998. These
decreases are primarily a result of the sale of the Puerto Rican
baking operations in December 1998 as discussed in Note 2 to the
Consolidated Financial Statements. Changes in net sales and operating
income from other operations in 1998 compared to 1997 were not
significant.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) totaled $107.8
million, $119.3 million and $116.4 million for the years ended December
31, 1999, 1998 and 1997, respectively. As a percent of revenues, SG&A
decreased to 8.6% in 1999 compared to 9.4% in 1998 primarily as a
result of the sale of the Puerto Rican baking operations in December
1998. This decrease is partially offset by the consolidation of
Tabacal results in 1999, including the $3.0 million of severance
charges discussed above, and the winery and Zambia milling operations
acquired in late 1998. As a percent of revenues, SG&A increased to
9.4% in 1998 compared to 8.9% in 1997 primarily as a result of various
cost increases in the Marine segment.
Interest Income
Interest income totaled $7.4 million, $7.1 million and $6.1 million for
the years ended December 31, 1999, 1998 and 1997, respectively. The
increase in 1999 reflects an increase in interest rates partially
offset by a decrease in average funds invested. The increase in 1998
is primarily the result of an increase in average funds invested.
Interest Expense
Interest expense totaled $31.4 million, $26.4 million and $25.6 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
The increase during 1999 over 1998 reflects an increase in both long-
term and short-term average borrowings and an increase in interest
rates. The increase in average borrowings during 1999 is primarily
attributable to the consolidation of Tabacal in December 1998.
Loss from Foreign Affiliates
Loss from foreign affiliates totaled $1.4 million, $17.1 million and
$8.7 million for the years ended December 31, 1999, 1998 and 1997,
respectively. Losses during 1998 and 1997 are primarily attributable
to the operations of Tabacal. As discussed in Note 5 to the
Consolidated Financial Statements, Tabacal is included in 1999
consolidated operations. During 1998, losses increased from Tabacal as
a result of lower sugar prices and planned operating efficiencies and
harvest production levels not being realized.
Gain on Disposition of Businesses
On December 30, 1998, the Company completed the sale of its baking and
flour milling businesses in Puerto Rico resulting in a pre-tax gain of
$54.5 million ($33.3 million after taxes). See Note 2 to the
Consolidated Financial Statements for further discussion.
Miscellaneous Income
Miscellaneous income totaled $3.1 million, $3.9 million and $1.2
million for the years ended December 31, 1999, 1998 and 1997,
respectively. The increases in 1999 and 1998 over 1997 are primarily
the result of gains on the sale of fixed assets in the Marine segment
as older, fully depreciated equipment was replaced in the normal course
of business.
Income Tax Expense
The effective tax rates increased significantly during 1999 and 1998
primarily as a result of significant increases in overall losses from
foreign entities for which tax benefits are not available within their
respective countries or to offset domestic income.
Discontinued Operations
Earnings from discontinued poultry operations, net of income taxes,
decreased in 1999 compared to 1998 due primarily to lower overall sales
prices for poultry products, partially offset by lower finished feed
costs. An increase in poultry production within the industry has
resulted in lower prices for most poultry products while the Russian
economic situation continued to have a negative effect on domestic
prices for dark meat sales.
Earnings from discontinued operations, net of income taxes, increased
in 1998 compared to 1997 primarily as a result of significantly lower
finished feed costs, improved sales prices and, to a lesser extent,
uninterrupted operations of a plant that was shut down for one week in
1997 for a process conversion.
Other Financial Information
The Company is subject to various federal and state regulations
regarding environmental protection and land and water 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 material regulations. Laws and regulations
in the states where the Company currently conducts its pork operations
are becoming more restrictive. These and future changes could delay
the Company's expansion plans or increase related development costs.
Future changes in environmental or corporate farming laws could affect
the manner in which the Company operates its business and its cost
structure.
During the second quarter of 1998 the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and all hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities at their fair values. Accounting for
changes in the fair value of a derivative depends on its designation
and effectiveness. For derivatives that qualify as effective hedges,
the change in fair value will have no net impact on earnings until the
hedged transaction affects earnings. For derivatives that are not
designated as hedging instruments, or for the ineffective portion of a
hedging instrument, the change in fair value will affect current
period net earnings. During the second quarter of 1999 the Financial
Accounting Standards Board amended SFAS No. 133 delaying the effective
date. The Company will adopt SFAS No. 133 during the first quarter of
fiscal 2001. Depending on market interest rates and the types of
financial hedging derivatives in place at the time of adoption, if
any, adoption of this statement could result in significant
adjustments to the Company's balance sheet as financial derivatives
are recorded as assets or liabilities at fair value with corresponding
adjustments to Other Comprehensive Income. The Company does not
believe adoption will have a material impact on the Company's net
earnings or cash flows.
The Company has not experienced nor does it expect to experience any
significant Year 2000 issues or disruptions in operations. The
Company believes that the total costs, including equipment
replacements and internal costs consisting primarily of payroll
related costs, to resolve Year 2000 issues were not material to the
Company's consolidated financial statements.
The Company does not believe its businesses have been materially
adversely affected by general inflation.
Derivative Information
The Company is exposed to various types of market risks from its day-
to-day operations. Primary market risk exposures result from changing
interest rates and commodity prices. Changes in interest rates impact
the cash required to service variable rate debt. From time to time,
the Company uses interest rate swaps to manage risks of increasing
interest rates. Changes in commodity prices impact the cost of
necessary raw materials as well as the selling prices of finished
products. The Company uses corn, wheat, soybeans and soybean meal
futures and options to manage risks of increasing prices of raw
materials. The Company uses hog futures and options to manage risks
of decreasing prices of pork products. The Company is also subject to
foreign currency exchange rate risk on a short-term note payable
denominated in foreign currency. This risk is managed through the use
of a foreign currency forward exchange agreement.
The table below provides information about the Company's non-trading
financial instruments sensitive to changes in interest rates at
December 31, 1999. For debt obligations, the table presents principal
cash flows and related weighted average interest rates by expected
maturity dates. At December 31, 1999, long-term debt includes foreign
subsidiary obligations of $5.1 million denominated in U.S. dollars and
$12.8 million payable in Argentine pesos. At December 31, 1998, long-
term debt includes foreign subsidiary obligations of $21.5 million
denominated in U.S. dollars and $14.6 million payable in Argentine
pesos. The Argentine peso is currently pegged to the U.S. dollar and
accordingly, management believes there is minimal exchange rate risk.
Weighted average variable rates are based on rates in place at the
reporting date. Short-term instruments including short-term
investments, non-trade receivables and current notes payable have
carrying values that approximate market and are not included in this
table due to their short-term nature.
(Dollars in thousands) 2000 2001 2002 2003 2004 Thereafter Total
Long-term debt:
Fixed rate $8,964 23,388 22,842 47,126 47,149 102,145 $251,614
Average interest rate 5.84% 7.02% 6.78% 7.48% 7.48% 8.01% 7.53%
Variable rate $2,523 - 26,667 - 6,000 42,700 $ 77,890
Average interest rate 5.00% - 6.57% - 5.85% 6.17% 6.25%
Non-trading financial instruments sensitive to changes in interest
rates at December 31, 1998 consisted of fixed rate long-term debt
totaling $263,749 million with an average interest rate of 7.71%, and
variable rate long-term debt totaling $68,183 million with an average
interest rate of 5.60%. At December 31, 1998, the Company had
interest rate exchange agreements in place effectively fixing the
interest rate on $200 million of variable rate debt to a fixed,
weighted average rate of 6.33%. During 1999 the Company terminated
these agreements for proceeds totaling $6.0 million.
Inventories that are sensitive to changes in commodity prices,
including carrying amounts and fair values at December 31, 1999 and
1998 are presented in Note 4 to the Consolidated Financial Statements.
Projected raw material requirements, finished product sales, and firm
sales commitments may also be sensitive to changes in commodity prices.
The tables below provide information about the Company's derivative
contracts that are sensitive to changes in commodity prices. Although
used to manage overall market risks, certain contracts do not qualify
as hedges for financial reporting purposes. As a result, they are
classified as trading instruments and carried at fair market value.
Contracts that qualify as hedges for financial reporting purposes are
classified as non-trading instruments. Gains and losses on non-trading
instruments are deferred and recognized as adjustments of the carrying
amounts of the commodities when the hedged transaction occurs. The
following tables present the notional quantity amounts, the weighted
average contract prices, the contract maturities, and the fair value of
the position of the Company's open trading and non-trading derivatives
at December 31, 1999.
<TABLE>
<CAPTION>
Trading:
Contract Volumes Wtd.-avg. Fair
Futures Contracts Quantity (000's) Units Price/Unit Maturity Value (000's)
<S> <C> <C> <C> <C>
Corn purchases - long 1,010 bushels $ 1.99 2000 $ 54
Corn sales - short 1,045 bushels 2.13 2000 (50)
Hog sales - short 1,440 pounds 0.59 2000 16
<CAPTION>
Contract Volumes Wtd.-avg. Exercise Fair
Option Contracts Quantity (000's) Units Price/Unit Maturity Value (000's)
<S> <C> <C> <C> <C>
Corn puts written - long 2,300 bushels $ 2.11 2000 $ (273)
Corn puts purchased - short 2,000 bushels 1.90 2000 40
Corn calls written - short 2,060 bushels 2.39 2000 (137)
Corn calls purchased - long 2,725 bushels 2.57 2000 110
Wheat puts written - long 1,885 bushels 2.70 2000 (402)
Wheat puts purchased - short 1,345 bushels 2.71 2000 362
Wheat calls written - short 1,750 bushels 3.40 2000 (5)
Wheat calls purchased - long 2,585 bushels 3.12 2000 55
Soybean meal calls purchased - long 5.6 tons 145.98 2000 32
Soybean meal puts written - long 5.6 tons 135.98 2000 (8)
Non-trading:
<CAPTION>
Contract Volumes Wtd.-avg. Fair
Futures Contracts Quantity (000's) Units Price/Unit Maturity Value (000's)
<S> <C> <C> <C> <C>
Corn purchases - long 2,130 bushels $ 2.06 2000 $ (32)
Corn sales - short 2,950 bushels 2.01 2000 (118)
Wheat purchases - long 405 bushels 3.24 2000 (60)
Wheat sales - short 870 bushels 2.77 2000 91
Soybean meal purchases - long 28.2 tons 144.20 2000 72
Soybean meal sales - short 31.4 tons 145.07 2000 (53)
</TABLE>
At December 31, 1998, the Company had net trading contracts to purchase
10.8 million bushels of grain (fair value of $(628,000)) and 115,000
tons of meal (fair value of $68,000), and net contracts to sell 1.4
million pounds of hogs (fair value of $(11,000)). At December 31,
1998, the Company had net non-trading contracts to purchase 1.1 million
bushels of grain (fair value of $(101,000)) and 4,000 tons of meal
(fair value of $44,000).
The table below provides information about the Company's financial
instruments and related derivative financial instruments sensitive to
foreign currency exchange rates, consisting of a Japanese Yen (Yen)
denominated note obligation and a foreign currency forward exchange
agreement. Information is presented in U.S. dollar equivalents. The
table presents the notional amounts and weighted average exchange rate
by contractual maturity date. The notional amount is generally used
to calculate the contractual payments to be exchanged under the
contract. Due to the short-term nature of these instruments, their
carrying and contract values approximate market.
(Dollars in thousands) 1999 1998
Short-term notes payable:
Variable rate (Yen) $20,000 $16,560
Average interest rate 7.19% 5.85%
Related derivative:
Forward exchange agreement, including projected
interest due at maturity (receive Yen/pay $US) $20,363 $ 16,616
Exchange rate 104.13 116.63
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by Item 7A is hereby incorporated by
reference to the material under the captions "Financial Instruments"
and "Commodity Instruments" within Note 1 of the Registrant's
Consolidated Financial Statements, and to the material under the
caption "Derivative Information" within "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in
Item 7 above.
Item 8. Financial Statements and Supplementary Data
The selected quarterly financial data required by Item 8 is as follows:
(Unaudited)
(Thousands of dollars 1st 2nd 3rd 4th Total for
except per share amounts) Quarter Quarter Quarter Quarter the Year
1999
Net sales $ 256,936 308,981 318,769 370,618 $1,255,304
Operating income $ 405 1,062 3,393 7,508 $ 12,368
Earnings (loss) from
continuing operations $ (4,432) (4,195) (3,117) (1,843) $ (13,587)
Net earnings (loss) $ (612) 2,158 2,152 (3,651) $ 47
Earnings (loss) per common
share from continuing
operations $ (2.98) (2.82) (2.09) (1.24) $ (9.13)
Earnings (loss) per common
share $ (0.41) 1.45 1.45 (2.46) $ 0.03
Dividends per common share $ .25 .25 .25 .25 $ 1.00
Market price range per common
share:
High $ 457 340 320 262
Low $ 298 256 216 185 1/4
1998
Net sales $ 321,344 329,949 303,486 310,587 $1,265,366
Operating income $ 10,822 11,546 (65) 7,467 $ 29,770
Earnings (loss) from
continuing operations $ 2,852 4,073 (7,483) 31,985 $ 31,427
Net earnings $ 2,806 7,347 4,062 36,723 $ 50,938
Earnings (loss) per common
share from continuing
operations $ 1.92 2.74 (5.03) 21.49 $ 21.12
Earnings per common share $ 1.89 4.94 2.73 24.68 $ 34.24
Dividends per common share $ .25 .25 .25 .25 $ 1.00
Market price range per common
share:
High $ 435 375 1/16 336 445
Low $ 365 265 1/2 261 256
In August 2000, the Company announced that assets of its Produce
Division had been overstated in prior periods and management
determined to restate the Company's financial statements for each of
the prior periods effected. See Note 1 to the Consolidated Financial
Statements for further discussion. The effect of this restatement in
1999 was to increase (decrease) net earnings and earnings per common
share by $(304,000) ($(0.20) per share), $102,000 ($0.06 per share),
$(110,000) ($(0.07) per share) and $119,000 ($0.08 per share),
respectively, for the first, second, third and fourth quarters of
1999. The effect of this restatement in 1998 was to increase
(decrease) net earnings and earnings per common share by $(58,000)
($(0.04) per share), $(585,000) ($(0.39) per share), $(956,000)
($(0.64) per share) and $182,000 ($0.11 per share), respectively, for
the first, second, third and fourth quarters of 1998.
In December 1999, the Company agreed to sell its Poultry
Division. The sale was completed on January 3, 2000. Accordingly,
the Company's financial statements and data above have been restated
to reflect the Poultry Division as a discontinued operation for all
periods presented. See Note 13 to the Consolidated Financial
Statements for further discussion.
As described in Note 4 to the Consolidated Financial Statements,
the Company changed its method of accounting for certain inventories
from FIFO to LIFO during the fourth quarter of 1999. This change has
been applied retroactively to January 1, 1999 and accordingly, the
first three quarters of 1999 have been restated. The effect of this
change in 1999 was to increase (decrease) net earnings and earnings
per common share by $(1,341,000) ($(0.90) per share), $2,995,000
($2.02 per share), $2,187,000 ($1.47 per share) and $(1,385,000)
($(0.94) per share), respectively, for the first, second, third and
fourth quarters of 1999.
In the fourth quarter of 1998, the Company sold its baking and
flour milling operations in Puerto Rico, recognizing an after-tax gain
of $33,272,000 or $22.37 per common share. See Note 2 to the
Consolidated Financial Statements for further discussion.
The remaining information required by Item 8 is hereby
incorporated by reference to Registrant's Consolidated Financial
Statements under the captions "Independent Auditors' Report,"
"Consolidated Statements of Earnings," "Consolidated Balance Sheets,"
"Consolidated Statements of Stockholders' Equity," "Consolidated
Statements of Cash Flows" and "Notes to Consolidated Financial
Statements."
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
Not applicable.
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, 1999, 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 2000 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 2000 Proxy Statement.
Item 11. Executive Compensation
This item has been omitted since Registrant filed a definitive
proxy statement within 120 days after December 31, 1999, 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 through 8
and 10 of the 2000 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, 1999, 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 pages 3 and 4 of the 2000 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, 1999, 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 10 of the 2000 Proxy
Statement.
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.
2.1 - Asset Purchase Agreement by and between Seaboard
Corporation and ConAgra, Inc., dated December 6, 1999.
Incorporated by reference to Exhibit 2.1 of
Registrant's Form 8-K, dated January 3, 2000.
2.2 - Addendum to Asset Purchase Agreement dated
December 30, 1999. Incorporated by reference to
Exhibit 2.2 of Registrant's Form 8-K, dated January 3,
2000.
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 2.1 of Registrant's Form 10-Q
for the quarter ended March 31, 1999.
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.
* 10.1 Registrant's Executive Retirement Plan dated
January 1, 1997. The addenda have been omitted from
the filing, but will be provided supplementary upon
request of the Commission. Incorporated by reference
to Exhibit 10.1 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997.
* 10.2 Registrant's Amended and Restated Supplemental
Executive Retirement Plan. Incorporated by reference
to Exhibit 10.2 of Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1998.
* 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 Registrant's Executive Deferred Compensation
Plan dated January 1, 1999. Incorporated by reference
to Exhibit 10.1 of Registrant's Form 10-Q for the
quarter ended March 31, 1999.
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
On January 18, 2000 the Registrant filed a report on Form 8-K,
dated January 3, 2000, disclosing the sale of its poultry businesses.
This sale is further described in Note 13 to the Consolidated
Financial Statements.
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 Robert L. Steer, Vice President - Chief
(principal executive officer) Financial Officer (principal financial and
accounting officer)
Date: August 28, 2000 Date: August 28, 2000
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.
By /s/H. Harry Bresky By /s/J.E. Rodrigues
H. Harry Bresky, Director J.E. Rodrigues, Director
Date: August 28, 2000 Date: August 28, 2000
By /s/David A. Adamsen By /s/Thomas J. Shields
David A. Adamsen, Director Thomas J. Shields, Director
Date: August 28, 2000 Date: August 28, 2000
EXHIBIT 18
February 28, 2000
The Board of Directors
Seaboard Corporation
We have audited the consolidated balance sheets of Seaboard
Corporation and subsidiaries as of December 31, 1999 and 1998 and
the related consolidated statements of earnings, changes in
equity and cash flows for each of the years in the three-year
period ended December 31, 1999 and have reported thereon under
date of February 28, 2000, as contained in the December 31, 1999
annual report to shareholders. The aforementioned consolidated
financial statements and our audit report thereon are
incorporated by reference in the Company's annual report on Form
10K/A for the year ended December 31, 1999. As stated in Note 4,
the Company changed its method of accounting for certain
inventories from the first-in, first-out method to the last-in,
first-out (LIFO) method and states that the newly adopted
accounting principle is preferable in the circumstances because
the LIFO method of valuing inventories more closely matches
current costs and revenues in periods of price level changes. 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.
Very truly yours,
KPMG LLP
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
Agencia Maritima
del Istmo, S.A. Same Costa Rica
Agencias Generales
Conaven, C.A. Conaven Venezuela
Almacenadora
Conaven, S.A. Same Venezuela
Atlantic Salmon
(Maine) Limited
Liability Company* Same Maine
Cape Fear Railways, Inc. Same North Carolina
Cayman Freight Shipping
Services, Ltd.* Same Cayman Islands
Chestnut Hill Farms, Inc. Same Florida
Chestnut Hill Farms
Honduras, S.A. de C.V. Same Honduras
Consorcio Naviero de
Occidente, C.A. Conaven Venezuela
ContiSea LLC* Same Maine
Cultivos Marinos,
S.A. de C.V. CUMAR Honduras
Delta Packaging
Company Ltd.* Same Nigeria
Desarrollo Industrial
Bioacuatico, S.A.* DIBSA Ecuador
Ducktrap River Fish
Farm, L.L.C.* Same Maine
Empacadora Litoral,
S.A. de C.V. Same Honduras
Globe International
Holdings, S.A.* Same Nigeria
H&O Shipping Limited Same Liberia
Haiti Agro Processors
Holdings, Ltd* Same Cayman Islands
Ingenio y Refineria
San Martin del Tabacal Tabacal Argentina
KWABA - Sociedade Industrial
e Comercial, SARL* KWABA Angola
Les Moulins d'Haiti S.E.M.
(LHM)* Same Haiti
EXHIBIT 21
(continued)
Lesotho Flour Mills Limited* Same Lesotho
Life Flour Mill Ltd.* Same Nigeria
Minoterie de Matadi, S.A.R.L.* Midema Democratic Republic
of Congo
Mobeira, SARL* Same Mozambique
Molinos Champion, S.A.* Mochasa Ecuador
Molinos del Ecuador, C.A.* Molidor Ecuador
National Milling Company
of Guyana, Ltd. Same Guyana
National Milling Company
Limited Same Zambia
Port of Miami Cold Storage,
Inc. Same Florida
Representaciones Maritimas
y Aereas, S.A. Remarsa Guatemala
S.B.D., LLC Same Delaware
Samovar International
Finance, Inc. Same Puerto Rico
SASCO Engineering Co./
Seaboard Sales Corporation
Ltd. Same Bermuda
Sea Cargo, S.A. Same Panama
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, Inc. Same Oklahoma
Seaboard Freight & Shipping
Jamaica Limited Same Jamaica
Seaboard Guyana, Ltd. Same Bermuda
Seaboard Holdings Ltd. Same British
Virgin Islands
Seaboard Marine Bahamas, Ltd. Same Bahamas
Seaboard Marine Ltd. Same Liberia
Seaboard Marine of Florida,
Inc. Same Florida
Seaboard Overseas Limited Same Bahamas
EXHIBIT 21
(continued)
Seaboard Ship Management Inc. Same Florida
Seaboard Shipping Services
(PTY) Ltd. Same South Africa
Seaboard Trading and Shipping
Ltd. Same Minnesota
Seaboard Transport Inc. Same Oklahoma
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.
(Bermuda) Ltd. Same Bermuda
Vinprom Rousse AD Same Bulgaria
Zenith Investments, Ltd.* Same Nigeria
*Represents a non-controlled, non-consolidated affiliate.
SEABOARD CORPORATION AND SUBSIDIARIES
Consolidated Financial Statements and Schedule
(Form 10-K/A)
Securities and Exchange Commission
For the year ended December 31, 1999
(With Independent Auditors' Report Thereon)
SEABOARD CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Financial Statements
Page
Independent Auditors' Report F-3
Consolidated Statements of Earnings for the years
ended December 31, 1999, December 31, 1998 and
December 31, 1997 F-4
Consolidated Balance Sheets as of December 31, 1999
and December 31, 1998 F-5
Consolidated Statements of Changes in Equity for the
years ended December 31, 1999, December 31, 1998 and
December 31, 1997 F-7
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, December 31, 1998 and
December 31, 1997 F-8
Notes to Consolidated Financial Statements F-9
The foregoing are incorporated by reference.
The individual financial statements of the nonconsolidated foreign affiliates
which would be required if each such foreign affiliate were a Registrant are
omitted, because (a) the Registrant's and its other subsidiaries' investments
in and advances to such foreign affiliates 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 affiliates 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 affiliates
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 nonconsolidated foreign affiliates in
Note 5 of "Notes to the Consolidated Financial Statements."
F-1
(Continued)
SEABOARD CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Schedule
Page
II - Valuation and Qualifying Accounts for the years ended
December 31, 1999, 1998 and 1997 F-36
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
We have audited the accompanying consolidated balance sheets of Seaboard
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of earnings, changes in equity and cash flows for each
of the years in the three-year period ended December 31, 1999. 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
also 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 as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for each of the years in the three-
year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the consolidated financial statements, the
accompanying consolidated balance sheets as of December 31, 1999 and 1998, and
the related consolidated statements of earnings, changes in equity and cash
flows for each of the years in the three-year period ended December 31, 1999
have been restated.
As discussed in Note 4 to the consolidated financial statements, the Company
changed its method of accounting for certain inventories from the first-in,
first-out method to the last-in, first-out method in 1999.
KPMG LLP
Kansas City, Missouri
February 28, 2000,
except as to the third paragraph of
Note 1, which is as of August 14, 2000
F-3
Seaboard Corporation and Subsidiaries
Consolidated Statements of Earnings
(Thousands of dollars except per share amounts)
Years ended December 31,
1999 1998 1997
Net sales $1,255,304 $1,265,366 $1,303,753
Cost of sales and operating expenses 1,135,176 1,116,253 1,108,523
Gross income 120,128 149,113 195,230
Selling, general and administrative expenses 107,760 119,343 116,378
Operating income 12,368 29,770 78,852
Other income (expense):
Interest income 7,446 7,072 6,127
Interest expense (31,418) (26,371) (25,577)
Loss from foreign affiliates (1,413) (17,105) (8,733)
Gain on disposition of business - 54,544 -
Minority interest 1,283 - -
Miscellaneous 3,128 3,908 1,221
Total other income (expense), net (20,974) 22,048 (26,962)
Earnings (loss) from continuing operations
before income taxes (8,606) 51,818 51,890
Income tax expense (4,981) (20,391) (16,820)
Earnings (loss) from continuing operations (13,587) 31,427 35,070
Earnings (loss) from discontinued operations,
net of income taxes of $8,278, $11,753 and
$(3,616), for 1999, 1998 and 1997
respectively 13,634 19,511 (5,991)
Net earnings $ 47 $ 50,938 $ 29,079
Earnings per common share:
Earnings (loss) from continuing
operations $ (9.13) $ 21.12 $ 23.58
Earnings (loss) from discontinued
operations 9.16 13.12 (4.03)
Earnings per common share $ 0.03 $ 34.24 $ 19.55
See accompanying notes to consolidated financial statements.
F-4
Seaboard Corporation and Subsidiaries
Consolidated Balance Sheets
(Thousands of dollars)
December 31,
Assets 1999 1998
Current assets:
Cash and cash equivalents $ 11,039 $ 20,716
Short-term investments 91,609 155,763
Receivables:
Trade 141,838 133,282
Due from foreign affiliates 31,383 25,319
Other 27,785 21,418
201,006 180,019
Allowance for doubtful receivables (29,075) (26,117)
Net receivables 171,931 153,902
Inventories 192,847 144,720
Deferred income taxes 15,031 14,604
Prepaid expenses and deposits 20,395 12,268
Current assets of discontinued operations 103,464 92,059
Total current assets 606,316 594,032
Investments in and advances to foreign affiliates 28,449 28,416
Net property, plant and equipment 480,415 462,856
Other assets 30,204 33,506
Non-current assets of discontinued operations 132,407 97,087
Total Assets $1,277,791 $1,215,897
See accompanying notes to consolidated financial statements.
F-5
Seaboard Corporation and Subsidiaries
Consolidated Balance Sheets
(Thousands of dollars)
December 31,
Liabilities and Stockholders' Equity 1999 1998
Current liabilities:
Notes payable to banks $ 221,353 $ 158,980
Current maturities of long-term debt 11,487 18,608
Accounts payable 61,529 58,662
Accrued liabilities 54,408 71,295
Deferred revenues 31,929 15,384
Accrued payroll 17,360 16,353
Current liabilities of discontinued operations 24,013 23,650
Total current liabilities 422,079 362,932
Long-term debt, less current maturities 318,017 313,324
Deferred income taxes 41,948 44,506
Other liabilities 34,924 27,609
Non-current liabilities of discontinued
operations 16,824 17,116
Total non-current and deferred liabilities 411,713 402,555
Minority interest 831 5,682
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 (302) (302)
1,488 1,488
Additional capital 13,214 13,214
Accumulated other comprehensive income (201) (81)
Retained earnings 428,667 430,107
Total stockholders' equity 443,168 444,728
Total Liabilities and Stockholders' Equity $1,277,791 $1,215,897
See accompanying notes to consolidated financial statements.
F-6
<TABLE>
Seaboard Corporation and Subsidiaries
Consolidated Statements of Changes in Equity
(Thousands of dollars except per share amounts)
Years ended December 31, 1999, 1998 and 1997
<CAPTION>
Accumulated
Other
Common Treasury Additional Comprehensive Retained Comprehensive
Stock Stock Capital Income Earnings Income
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997 $1,790 $ (302) $ 13,214 $ 16 $ 353,064
Net earnings - - - - 29,079 $29,079
Other comprehensive income,
net of income tax benefit
of $3 - - - (6) - (6)
Comprehensive income - - - - - 29,073
Dividends on common stock
($1.00 per share) - - - - (1,487)
Balances, December 31, 1997 1,790 (302) 13,214 10 380,656
Net earnings - - - - 50,938 50,938
Other comprehensive income,
net of income tax benefit
of $56 - - - (91) - (91)
Comprehensive income - - - - - 50,847
Dividends on common stock
($1.00 per share) - - - - (1,487)
Balances, December 31, 1998 1,790 (302) 13,214 (81) 430,107
Net earnings - - - - 47 47
Other comprehensive income,
net of income tax benefit
of $77 - - - (120) - (120)
Comprehensive income - - - - - $ (73)
Dividends on common stock
($1.00 per share) - - - - (1,487)
Balances, December 31, 1999 $1,790 $ (302) $ 13,214 $ (201) $ 428,667
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
F-7
Seaboard Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Thousands of dollars)
Years ended December 31,
1999 1998 1997
Cash flows from operating activities:
Net earnings $ 47 $ 50,938 $ 29,079
Adjustments to reconcile net earnings to cash from
operating activities:
Net (earnings) loss from discontinued operations(13,634) (19,511) 5,991
Depreciation and amortization 45,582 40,479 41,746
Loss from foreign affiliates 1,413 17,105 8,733
Deferred income taxes (2,985) 10,884 2,719
Gain from sale of fixed assets (1,984) (2,737) (1,798)
Gain from disposition of businesses - (54,544) -
Changes in current assets and liabilities
(net of businesses acquired and disposed):
Receivables, net of allowance (18,029) 7,471 (16,231)
Inventories (48,127) 35,341 (19,020)
Prepaid expenses and deposits (8,127) (1,040) (1,398)
Current liabilities exclusive of debt 3,532 (24,576) 61,086
Other, net 1,837 (346) 5,266
Net cash from operating activities (40,475) 59,464 116,173
Cash flows from investing activities:
Purchase of investments (443,978) (446,868) (277,437)
Proceeds from the sale of investments 456,903 311,433 193,303
Proceeds from the maturity of investments 51,073 85,053 65,754
Capital expenditures (67,713) (26,913) (48,324)
Investments in and advances to foreign
affiliates, net (1,446) (48,586) (41,834)
Proceeds from the sale of fixed assets 5,042 9,795 7,117
Investment in domestic affiliate - (2,500) -
Additional investment in a controlled subsidiary (2,791) - -
Acquisition of business (net of cash acquired) - (1,388) -
Proceeds from disposition of businesses - 72,359 -
Net cash from investing activities (2,910) (47,615) (101,421)
Cash flows from financing activities:
Notes payable to banks, net 62,373 (15,025) 7,288
Proceeds from issuance of long-term debt 26,667 - 10,213
Principal payments of long-term debt (26,807) (7,400) (1,278)
Dividends paid (1,487) (1,487) (1,487)
Proceeds from termination of interest
rate swap agreements 5,982 - -
Bond construction fund - - (1,055)
Net cash from financing activities 66,728 (23,912) 13,681
Net cash flows from discontinued operations (33,020) 24,227 (31,348)
Net change in cash and cash equivalents (9,677) 12,164 (2,915)
Cash and cash equivalents at beginning of year 20,716 8,552 11,467
Cash and cash equivalents at end of year $ 11,039 $ 20,716 $ 8,552
See accompanying notes to consolidated financial statements.
F-8
Seaboard Corporation and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
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 primarily engaged in
domestic pork production and processing, and cargo shipping. Overseas, the
Company is primarily engaged in commodity merchandising, flour and feed
milling, produce farming, sugar production, and electric power generation.
Seaboard Flour Corporation is the owner of 75.3% of the Company's outstanding
common stock.
Principles of Consolidation and Investments in Affiliates
The consolidated financial statements include the accounts of Seaboard
Corporation and its domestic and foreign subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
The Company's investments in non-controlled affiliates are accounted for by the
equity method. Financial information from certain foreign subsidiaries and
affiliates is reported on a one- to three-month lag depending on the specific
entity. As more fully described in Note 13, in December 1999 the Company
agreed to sell its Poultry Division. Accordingly, the Company's financial
statements and notes have been restated to reflect the Poultry Division as a
discontinued operation for all periods presented.
Restatement for Accounting Error
In August 2000, the Company announced that its management had discovered
that assets of its Produce Division had been overstated in prior periods due to
accounting errors and irregularities in the Produce Division's books and
records. The overstatements related primarily to the crops in production and
related materials in Honduras as reported by the Miami headquarters of the
Produce Division. As a result, management determined to restate the Company's
financial statements for each of the prior periods effected back to fiscal
1995. Financial statements and related disclosures contained in this report
reflect, where appropriate, changes to conform to these restatements. Net
earnings and balance sheet amounts as previously reported and as restated are
as follows:
F-9
(Thousands of dollars) Net Earnings as Net Earnings
For the Years Ended: Previously Reported as Restated
December 31, 1999 $ 240 $ 47
December 31, 1998 $ 52,355 $ 50,938
December 31, 1997 $ 30,574 $ 29,079
Total Assets Stockholders' Equity
as Previously as as Previously as
(Thousands of dollars) Reported Restated Reported Restated
December 31, 1999 $1,285,326 $1,277,791 $448,425 $ 443,168
December 31, 1998 $1,223,134 $1,215,897 $449,792 $ 444,728
Short-term Investments
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 component of accumulated
other comprehensive income. The cost of debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income.
Inventories
Effective January 1, 1999, the Company changed its method of accounting
from the lower of first-in, first-out (FIFO) cost or market to the lower of
last-in, first-out (LIFO) cost or market for determining inventory cost of live
hogs, dressed pork product and related materials. All other inventories are
valued at the lower of 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 30 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 improvements are
capitalized.
F-10
Deferred Grant Revenue
Included in other liabilities at December 31, 1999 and 1998 is $10,704,000
and $11,127,000, respectively, of deferred grant revenue. Deferred grant
revenue represents economic development funds contributed to the Company by
government entities that were 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.
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.
Comprehensive Income
For the years ended December 31, 1999, 1998 and 1997, other comprehensive
income adjustments were not material and consisted of unrealized gains on
available-for-sale securities and foreign currency cumulative translation
adjustments, net of tax.
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 containerized
cargo 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.
Impairment of Long-lived Assets
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the asset to
future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
F-11
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. See Note 12 for discussion of
recoverability of Sugar and Citrus segment's long-lived assets.
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, 1999, 1998 and 1997, respectively. Basic and
diluted earnings per share are the same for all periods presented.
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 $23,483,000 and $19,997,000 at December 31, 1999 and 1998, respectively.
The amounts paid (received) for income taxes and interest are as follows:
Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Interest (net of amounts capitalized) $ 33,090 26,444 24,753
Income taxes $ 15,432 (3,608) 7,987
F-12
Supplemental Noncash Transactions
As more fully described in Notes 2 and 5, during 1998 the Company
purchased two businesses, consolidated a previously non-controlled foreign
affiliate and disposed of its Puerto Rican baking and flour milling operations.
The following table summarizes the noncash transactions resulting from the
acquisitions and consolidation of the foreign affiliate:
Year ended December 31,
(Thousands of dollars) 1998
Increase in other working capital $ 38,539
Decrease in investments in and advances to
foreign affiliates (96,733)
Increase in fixed assets 114,867
Increase in other net assets 9,198
Increase in notes payable and long-term debt (58,801)
Minority interest (5,682)
Cash paid, net of cash acquired and consolidated $ 1,388
The following table summarizes the noncash transactions resulting from the
disposition of businesses:
Year ended December 31,
(Thousands of dollars) 1998
Decrease in short-term investments $ 3,429
Decrease in other working capital 1,303
Decrease in fixed assets 19,736
Decrease in other net assets 1,347
Long-term note receivable from sale (8,000)
Gain on disposal 54,544
Proceeds from disposition of businesses $ 72,359
Foreign Currency
The Company has operations in and transactions with customers in a number
of foreign countries. The currencies of the 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. In addition, the value of the U.S.
dollar fluctuates in relation to the currencies of countries where certain of
the Company's foreign subsidiaries and affiliates primarily conduct business.
These fluctuations result in exchange gains and losses. The activities of
F-13
these foreign subsidiaries and affiliates are primarily conducted with U.S.
subsidiaries or operate in hyper-inflationary environments. As a result, the
Company translates the financial statements of certain foreign subsidiaries and
affiliates using the U.S. dollar as the functional currency. The exchange
gains and losses reported in earnings were not material for the years ended
December 31, 1999, 1998 and 1997. Foreign currency exchange restrictions
imposed upon the Company's foreign subsidiaries and foreign affiliates do not
have a significant effect on the consolidated financial position of the
Company.
Certain foreign subsidiaries use local currency as their functional
currency. Assets and liabilities of these subsidiaries are translated to U.S.
dollars at year-end exchange rates, and income and expense items are translated
at average rates for the year. Resulting translation gains and losses were not
material for the years ended December 31, 1999, 1998 and 1997. Translation
gains and losses are recorded as components of accumulated other comprehensive
income.
Financial Instruments
The Company, from time-to-time, 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. These
agreements effectively convert specifically identified, variable-rate debt into
fixed-rate debt. The Company also has a foreign currency exchange agreement to
manage a foreign currency exchange risk on a short-term note which is payable
in foreign currency. Differences to be paid or received are accrued as
interest or exchange rates change and are recognized as an adjustment to
interest expense. See Note 8 for a description of outstanding exchange rate
agreements.
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, 1999 and 1998, net deferred
gains on terminated interest rate exchange agreements totaled $6,435,000 and
$784,000, respectively. In cases where there is no remaining underlying debt
instrument, gains and losses on termination are recognized currently in
miscellaneous income (expense).
Commodity Instruments
The Company enters into forward purchase and sale 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, 1999, the Company had net
contracts to purchase 1.0 million bushels of grain and 8.0 tons of meal, and
net contracts to sell 1.4 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
F-14
transactions are also deferred and recognized as adjustments of the carrying
amounts of the commodities when the hedged transaction occurs. When a
qualifying hedge is terminated or ceases to meet the specific criteria for use
of hedge accounting, any deferred gains or losses through that date continue to
be deferred. Commodity instruments not qualifying as hedges for financial
reporting purposes are marked to market and included in cost of sales in the
consolidated statements of operations. For the years ended December 31, 1999,
1998 and 1997, losses on commodity contracts reported in operating income were
$592,000, $3,139,000 and $2,962,000, respectively. At December 31, 1999, the
net deferred loss on commodity instruments was $426,000, compared to a net
deferred gain at December 31, 1998 of $92,000. These amounts are included in
deferred revenues 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 and Dispositions of Businesses
In December 1999, the Company agreed to sell its Poultry Division. The
sale of this division is presented as a discontinued operation and is more
fully described in Note 13.
In October 1998, the Company purchased a controlling interest in an
existing Bulgarian winery by acquiring newly issued shares for $15,000,000.
During 1999, the Company further increased its interest in the winery by
purchasing previously issued shares for $2,791,000. In November 1998, the
Company purchased a flour and feed milling operation in Zambia by assuming
liabilities of approximately $10,232,000. These acquisitions were accounted
for using the purchase method and would not have significantly affected sales,
net earnings or earnings per share on a pro forma basis.
On December 30, 1998, the Company completed the sale of its Puerto Rican
baking and flour milling businesses, to a management group led by the President
of the baking businesses. These assets were sold for $81,359,000 and the
assumption of $11,770,000 in liabilities. The proceeds consisted of
$72,359,000 in cash, an $8,000,000 interest bearing subordinated note
receivable due in 2004, and a $1,000,000 interest bearing note receivable
subsequently collected in the first quarter of 1999. The Company recognized a
pre-tax gain of $54,544,000 ($33,272,000 after tax) in connection with this
transaction.
The following pro forma unaudited financial data reflects the pro forma
impact on the Company's results of operations as if the sale was consummated at
the beginning of each year presented, excluding the gain on the sale, with pro
forma adjustments to give effect to reducing short-term borrowings, interest
income earned on short-term investments and certain other adjustments, together
with related income tax effects:
F-15
Years ended December 31,
(Thousands of dollars, except per share amounts) 1998 1997
Net sales $1,174,190 1,209,776
Earnings (loss) from continuing operations $ (4,146) 32,166
Net earnings $ 16,128 26,979
Earnings (loss) per share from continuing
operations $ (2.79) 21.62
Earnings per share $ 10.84 18.14
The pro forma financial information is not necessarily indicative of the
results of operations that would have occurred had the sale been consummated on
the dates assumed, nor are they necessarily indicative of future operating
results.
Note 3
Short-term Investments
Substantially all available-for-sale securities have contractual
maturities within two years and are available to meet current operating needs.
The amortized cost of these investments approximates fair value at December 31,
1999 and 1998. The gross realized gains and losses on sales of available-for-
sale securities were not material for the years ended December 31, 1999, 1998
and 1997. The following is a summary of the estimated fair value of available-
for-sale securities at December 31, 1999 and 1998:
December 31,
(Thousands of dollars) 1999 1998
U.S. Treasury securities and obligations of U.S.
government agencies $ 33,960 $ 39,265
Obligations of states and political subdivisions 35,526 60,877
Other securities 22,123 55,621
Total securities $ 91,609 $ 155,763
F-16
Note 4
Inventories
During the fourth quarter of 1999, the Company changed its method of
accounting for certain inventories of the Pork Division from FIFO to LIFO,
retroactively effective as of January 1, 1999. The Company believes the new
method is preferable because the LIFO method of valuing inventories more
closely matches current costs and revenues in periods of price level changes.
The net effect of this change was to increase net earnings from continuing
operations by $2,456,000 or $1.65 per common share.
A summary of inventories at the end of each year is as follows:
December 31,
(Thousands of dollars) 1999 1998
At lower of LIFO (FIFO for 1998) cost or market:
Live hogs and related materials $ 75,662 $ 73,804
Dressed pork and related materials 8,360 8,766
84,022 82,570
LIFO allowance 4,026 -
Total inventories at lower of LIFO cost or market 88,048 82,570
At lower of FIFO cost or market:
Grain, flour and feed 41,772 6,478
Sugar produced and in process 22,398 26,025
Crops in production and related materials 7,490 5,408
Wine and other spirits 8,391 4,288
Other 24,748 19,951
Total inventories at lower of FIFO cost or market 104,799 62,150
Total inventories $ 192,847 $ 144,720
F-17
Note 5
Investments in and Advances to Foreign Affiliates
The Company has made investments in and advances to non-controlled foreign
affiliates primarily conducting business in flour and feed milling. The
foreign affiliates are located in Angola, the Democratic Republic of Congo,
Lesotho, Mozambique, Nigeria and Sierra Leone in Africa; Ecuador in South
America; and Haiti in the Caribbean. These investments are accounted for by
the equity method.
The Company's investments in foreign affiliates are primarily carried at
the Company's equity in the underlying net assets of each subsidiary. Certain
of these foreign affiliates 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 1997.
During the second quarter of 1999, the Company invested $1.7 million for a
minority interest in a flour mill in Angola. In July 1998, the Company
acquired for $5,000,000 a non-controlling interest in a flour mill in Lesotho.
In June 1998, the Company, in a joint venture with two other partners, acquired
an interest in a flour mill in Haiti. The Company made an investment of
$3,000,000 for a minority interest in the joint venture, which in turn owns 70%
of a Haitian company which owns the flour mill. These investments are being
accounted for using the equity method.
Ingenio y Refineria San Martin del Tabacal S.A. (Tabacal) is an Argentine
company primarily engaged in growing and refining sugarcane and, to a lesser
extent, citrus production. The Company accounted for this investment using the
equity method from July 1996 (date of acquisition) through December 1998.
Losses from foreign affiliates during 1998 and 1997 are primarily attributable
to the operations of Tabacal. Effective December 31, 1998, the Company
obtained voting control over a majority of the capital stock of Tabacal.
Accordingly, as of December 31, 1998, Tabacal is accounted for as a
consolidated subsidiary. See Note 1 for further discussion of the effects of
the consolidation on the 1998 balance sheet.
Sales of grain and supplies to non-consolidated foreign affiliates are
included in consolidated net sales for the years ended December 31, 1999, 1998
and 1997, and amounted to $69,739,000, $107,424,000 and $79,946,000,
respectively.
Combined condensed financial information of the non-controlled, non-
consolidated foreign affiliates for their fiscal periods ended within each of
the Company's years ended, excluding Tabacal's 1999 operating results and 1999
and 1998 balance sheets, are as follows:
F-18
December 31,
(Thousands of dollars) 1999 1998 1997
Net sales $ 166,592 217,362 208,340
Net loss $ (8,966) (20,497) (13,831)
Total assets $ 122,008 137,381 240,511
Total liabilities $ 61,557 72,995 193,094
Total equity $ 60,451 64,386 47,417
Note 6
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) 1999 1998
Land and improvements $ 81,317 $ 76,750
Buildings and improvements 154,647 153,092
Machinery and equipment 388,887 353,917
Transportation equipment 82,174 71,506
Office furniture and fixtures 13,697 12,048
Construction in progress 14,023 6,926
734,745 674,239
Accumulated depreciation and amortization (254,330) (211,383)
Net property, plant and equipment $ 480,415 $ 462,856
Note 7
Income Taxes
Income taxes attributable to continuing operations for the years ended
December 31, 1999, 1998 and 1997 differ from the amounts computed by applying
the statutory U.S. Federal income tax rate to earnings (loss) from continuing
operations before income taxes for the following reasons:
F-19
Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Computed "expected" tax expense (benefit) $(3,012) $18,136 $18,162
Adjustments to tax expense (benefit) attributable to:
Foreign tax differences 8,988 7,680 705
Tax-exempt investment income (358) (730) (621)
State income taxes, net of Federal benefit 12 199 944
Other (649) (4,894) (2,370)
Income tax expense - continuing operations 4,981 20,391 16,820
Income tax expense (benefit) - discontinued
operations 8,278 11,753 (3,616)
Total income tax expense $13,259 $32,144 $13,204
The components of total income taxes are as follows:
Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Current:
Federal $ 2,976 $(11,570) $ 7,227
Foreign (including Puerto Rico) 5,332 17,126 6,469
State and local (419) (118) 909
Deferred:
Federal (3,445) 14,300 2,587
Foreign (including Puerto Rico) (6) 110 (730)
State and local 543 543 358
Income tax expense - continuing operations 4,981 20,391 16,820
Unrealized changes in other comprehensive
income (77) (56) (3)
Income tax expense (benefit) - discontinued
operations 8,278 11,753 (3,616)
Total income taxes $13,182 $ 32,088 $13,201
F-20
Components of the net deferred income tax liability at the end of each year are
as follows:
December 31,
(Thousands of dollars) 1999 1998
Deferred income tax liabilities:
Cash basis farming adjustment $ 17,162 $ 18,084
Deferred earnings of foreign subsidiaries 1,749 4,819
Depreciation 64,116 52,853
Other 4,123 775
87,150 76,531
Deferred income tax assets:
Reserves/accruals 48,591 40,001
Foreign losses 2,420 3,165
Other 11,372 5,613
62,383 48,779
Valuation allowance 2,150 2,150
Net deferred income tax liability $ 26,917 $ 29,902
The Company believes that its future taxable income will be sufficient for
full realization of the deferred tax assets. The valuation allowance
represents the effect of accumulated losses on certain foreign subsidiaries
that will not be recognized without future liquidation or sale of these
subsidiaries.
At December 31, 1999 and 1998 current income taxes payable totaled
$7,155,000 and $14,699,000, respectively.
At December 31, 1999 and 1998, 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 $30,000,000.
F-21
Note 8
Notes Payable and Long-term Debt
Notes payable amounting to $221,353,000 and $158,980,000 at December 31,
1999 and 1998, respectively, consisted of obligations due banks within one
year. At December 31, 1999, these funds were outstanding under the Company's
one-year revolving credit facilities totaling $153.3 million and short-term
uncommitted credit lines from banks totaling $145.0 million, less outstanding
letters of credit commitments totaling $6.0 million. Subsequent to year-end,
the Company's one-year revolving credit facilities totaling $153.3 million
maturing in the first quarter of 2000 were reduced to $141.0 million and
extended for an additional year and short-term uncommitted credit lines
totaling $145.0 were reduced to $132.5 million. Weighted average interest
rates on the notes payable were 7.24% and 6.18% at December 31, 1999 and 1998,
respectively.
Included in notes payable at December 31, 1999 and 1998, are $20,000,000
and $16,560,000, respectively, payable in Japanese Yen (Yen) and outstanding
under a $20 million uncommitted line of credit. At December 31, 1999 and 1998,
the Company had foreign exchange contracts in place effectively fixing the
exchange rate on this $20,000,000 note payable at 104.13 Yen to one U.S.
dollar, and on the $16,560,000 note payable at 116.63 Yen to one U.S. dollar,
respectively.
Notes payable, the revolving credit facilities and uncommitted credit
lines from banks are unsecured and do not require compensating balances.
Facility fees on these agreements are not material.
F-22
A summary of long-term debt at the end of each year is as follows:
December 31,
(Thousands of dollars) 1999 1998
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 (IDRBs),
floating rates (5.75% - 6.78% at
December 31, 1999) due through 2027 48,700 48,700
Revolving credit facility, floating rate
(6.57% at December 31, 1999) due 2002 26,667 10,000
Foreign subsidiary obligations
(9.00% - 14.50%) due 2001 through 2007 15,353 26,665
Foreign subsidiary obligations, floating rate
(5.00% at December 31, 1999) due 2000 2,522 9,484
Term loan, 3.00%, due 2000 5,415 5,415
Capital lease obligations and other 5,847 6,668
329,504 331,932
Current maturities of long-term debt (11,487) (18,608)
Long-term debt, less current maturities $ 318,017 $ 313,324
Of the 1999 foreign subsidiary obligations, $5,085,000 is denominated in
U.S. dollars and the remaining $12,790,000 is payable in Argentine pesos. Of
the 1998 foreign subsidiary obligations, $21,532,000 was denominated in U.S.
dollars and the remaining $14,617,000 was payable in Argentine pesos.
At December 31, 1999, Argentine land and sugar production facilities and
equipment with a depreciated cost of $17,621,000, secure certain bond issues
and foreign subsidiary debt. Included in other assets at December 31, 1999 and
1998 are $1,532,000 and $1,477,000, respectively, of unexpended bond proceeds
held in trust that are invested in accordance with the bond issuance
agreements.
The terms of the note agreements pursuant to which the senior notes,
IDRBs, term loan and revolving credit facilities 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; requires
the maintenance of consolidated tangible net worth, as defined, of not less
than $250,000,000; and limits the Company's ability to sell assets under
F-23
certain circumstances. The Company is in compliance with all restrictive debt
covenants relating to these agreements as of December 31, 1999.
At December 31, 1998, the Company had interest rate exchange agreements in
place effectively fixing the interest rate on $200 million of variable rate
debt to a fixed, weighted-average rate of 6.33%. These contracts were
scheduled to expire in 2007. However, during 1999 the Company terminated these
agreements for proceeds totaling $5,982,000. These proceeds will be amortized
as a reduction of interest expense through the original expiration dates in
2007, or recognized as other income to the extent of any early repayment of the
related debt. Unamortized proceeds of $582,000 at December 31, 1999 relate to
agreements associated with debt of the Company's discontinued poultry
operations (see Note 13) and will be recognized as a component of the gain on
the disposal in the first quarter of 2000. Ownership of these agreements,
including any amortization of termination proceeds, increased interest expense
in 1999 by $799,000 and in 1998 by $808,000.
Annual maturities of long-term debt at December 31, 1999 are as follows:
$11,487,000 in 2000, $23,388,000 in 2001, $49,509,000 in 2002, $47,126,000 in
2003, $53,149,000 in 2004 and $144,845,000 thereafter.
Note 9
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, 1999 and 1998 the fair value of the Company's short-term
investments was $91,609,000 and $155,763,000, respectively, with an amortized
cost of $91,684,000 and $155,682,000 at December 31, 1999 and 1998,
respectively.
The fair value of long-term debt is determined by comparing interest rates
for debt with similar terms and maturities. At December 31, 1999 and 1998 the
fair value of the Company's long-term debt was $325,275,000 and $347,269,000,
respectively, with a carrying value of $329,504,000 and $331,932,000 at
December 31, 1999 and 1998, 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.
F-24
Note 10
Employee Benefits
The Company maintains defined benefit pension plans for its domestic
salaried and clerical employees. The Company also sponsors non-qualified,
unfunded supplemental executive plans. 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 changes in
the plans' benefit obligations and fair value of assets for the years ended
December 31, 1999 and 1998, and a statement of the funded status as of
December 31, 1999 and 1998 are as follows:
December 31,
(Thousands of dollars) 1999 1998
Reconciliation of benefit obligation:
Benefit obligation at beginning of year $ 30,072 $ 35,786
Service cost 2,419 2,640
Interest cost 2,231 2,558
Actuarial losses (gains) (1,685) 1,514
Benefits paid (1,273) (2,075)
Divestitures (see Note 2) - (10,351)
Benefit obligation at end of year 31,764 30,072
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of
year 26,213 30,763
Actual return on plan assets 2,734 3,492
Employer contributions 48 1,028
Benefits paid (1,273) (2,075)
Divestitures (see Note 2) - (6,995)
Fair value of plan assets at end of year 27,722 26,213
F-25
Funded status (4,042) (3,859)
Unrecognized transition obligation 1,052 1,213
Unamortized prior service cost (1,966) (2,188)
Unrecognized net actuarial gains (5,315) (3,167)
Accrued benefit cost $ (10,271) $ (8,001)
Assumptions used in determining pension information were:
Years ended December 31,
1999 1998 1997
Weighted-average assumptions:
Discount rate 8.00% 7.25% 7.50%
Expected return on plan assets 8.75% 8.75% 8.75%
Long-term rate of increase in compensation
levels 4.50% 4.50% 4.25-4.50%
The net periodic benefit cost of these plans was as follows:
Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Components of net periodic benefit cost:
Service cost $ 2,419 $ 2,640 $ 2,506
Interest cost 2,231 2,558 2,282
Expected return on plan assets (2,268) (2,692) (2,407)
Amortization and other (65) (68) (94)
Net periodic benefit cost $ 2,317 $ 2,438 $ 2,287
As of December 31, 1999, the projected benefit obligation and accumulated
benefit obligation for unfunded pension plans were $3,583,000 and $2,685,000,
respectively. As of December 31, 1998, the projected benefit obligation and
accumulated benefit obligation for unfunded pension plans were $2,561,000 and
$2,143,000, respectively. As more fully described in Note 13, the Poultry
Division was sold in January 2000 and is presented as a discontinued operation.
Poultry employees retain benefits in the primary pension plan summarized above
and are treated as terminated and fully vested at the date of the sale. This
results in a $1.6 million curtailment gain and will be recognized as a
component of the gain on the sale in January 2000. A plan for certain
F-26
production employees of the Poultry Division was assumed by the buyer and the
above information for 1998 and 1997 has been excluded from the presentation
above.
The Company has certain individual, non-qualified, unfunded supplemental
retirement agreements for certain executive employees. Pension expense for
these plans was $658,000, $514,000 and $574,000 for the years ended
December 31, 1999, 1998 and 1997, respectively. Included in other liabilities
at December 31, 1999 and 1998 is $8,492,000 and $8,207,000, 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 $1,157,000,
$1,102,000 and $916,000 for the years ended December 31, 1999, 1998 and 1997,
respectively.
Note 11
Commitments and Contingencies
The Company leases various ships, facilities and equipment under
noncancelable operating lease agreements.
In addition, the Company is a party to master lease programs with limited
partnerships which own certain of the facilities used by the Company in
connection with its hog production. These arrangements are accounted for as
operating leases. Under these arrangements, the Company has certain rights to
acquire any or all of the leased properties at the conclusion of their
respective lease terms at a price based on estimated fair market value of the
property. In the event the Company does not acquire any property which it has
ceased to lease, the Company has a limited obligation to the lessors for any
deficiency between the amortized cost of the property and the price for which
it is sold up to a specific amount.
Rental expense for operating leases amounted to $58,253,000, $57,515,000
and $48,628,000 in 1999, 1998 and 1997, respectively. Minimum lease
commitments under noncancelable leases with initial terms greater than one year
at December 31, 1999, were $23,020,000 for 2000, $15,283,000 for 2001,
$11,223,000 for 2002, $9,039,000 for 2003, $6,666,000 for 2004 and $35,560,000
thereafter. It is expected that, in the ordinary course of business, leases
will be renewed or replaced.
In January 2000, the Company signed a construction contract to build a
71.2 megawatt barge-mounted power plant for approximately $50 million to be
located in the Dominican Republic. The Company is currently evaluating
financing options including potential leasing alternatives and expects to begin
supplying power during the fourth quarter of 2000.
In February 2000, the Company signed an agreement to purchase assets of an
existing hog production operation for approximately $75 million, consisting of
$36 million in cash, the assumption of $33 million in debt and $6 million
payable over the next four years. The transaction is expected to close in late
F-27
March or early second quarter of 2000 and will be accounted for using the
purchase method.
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 $47,600,000
are alleged. The Company recently received a ruling in its favor which
dismisses the principal theory of recovery although the appeal period has not
expired. Accordingly, the Company believes that it has no responsibility for
the loss.
The Company is a defendant in a lawsuit brought in federal court by a
third-party hog supplier claiming breach of agreement, common law fraud and
violation of the federal RICO statute. Damages of approximately $25 million
are alleged. Any amount awarded under the RICO count would be trebled. The
Company has counterclaimed asserting breach of agreement and claiming damages
of approximately $16 million. The Company believes it has meritorious defenses
to all counts and that the RICO count is without merit.
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 12
Segment Information
Seaboard Corporation has six reportable segments: Pork, Marine, Commodity
Trading and Milling, Sugar and Citrus, Power, and Wine, each offering a
specific product or service. The Pork segment sells fresh and value-added pork
products mainly to further processors and foodservice companies both
domestically and overseas. The Marine segment, primarily based out of the Port
of Miami, offers containerized cargo shipping services throughout Latin America
and the Caribbean. The Commodity Trading and Milling segment sources bulk and
bag commodities primarily overseas and operates foreign flour and feed mills.
The Sugar and Citrus segment produces and processes sugar and citrus in
Argentina to be marketed locally and for export to the United States and
Europe. The Power segment generates electric power from a floating generating
facility located in the Dominican Republic. The Wine segment, located in
Bulgaria, produces wines, brandies and other beverages to be marketed
throughout Europe and for export to the United Kingdom, Canada, Russia and the
United States. Revenues from all other segments are primarily derived from
operations including produce farming and baking (sold in December 1998, see
Note 2). Each of the six main segments is separately managed and each was
started or acquired independent of the other segments.
In December 1999, the Company agreed to sell its Poultry Division (see
Note 13). As a result, the Poultry Division is no longer reported as a
separate segment and two other operations, Power and Wine, now qualify as
reportable segments of the Company. As discussed in Note 13, certain amounts
F-28
have been restated to exclude general corporate overhead previously allocated
to the discontinued operation.
The Company accounted for its investment in Tabacal using the equity
method through December 1998. Effective December 31, 1998, the Company
obtained voting control over a majority of the capital stock of Tabacal.
Accordingly, during 1999 the operating results of Tabacal are accounted for as
a consolidated subsidiary. Due to the significance of Tabacal's operating
results, it is reported as an additional segment (Sugar and Citrus) in 1999.
Results in 1999 include severance charges of $3.0 million related to certain
employee layoffs enacted to reduce future operating costs. The December 31,
1998, total assets by segment information has been restated to reflect Tabacal
as a separate segment. No comparative 1998 segment operating results
information is provided as Tabacal's results were reported under the equity
method in 1998.
The entire Argentine sugar industry is experiencing financial
difficulties, with Tabacal and certain large competitors incurring operating
losses in part because Argentine sugar prices are below historical levels. As
a result of these recent operating losses for Tabacal, the Company has
evaluated the recoverability of Tabacal's long-lived assets and believes that
the value of those assets are presently recoverable. However, any further
decline in sugar prices would likely result in the carrying values not being
recoverable, which would result in a material charge to earnings for the
impairment of these assets.
The following tables set forth specific financial information about each
segment as reviewed by the Company's management. Operating income for segment
reporting is prepared on the same basis as that used for consolidated operating
income. Operating income is used as the measure of evaluating segment
performance because management does not consider interest and income tax
expense on a segment basis.
Sales to External Companies: Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Pork $ 571,159 $ 500,357 $ 531,587
Marine 307,663 310,903 309,306
Commodity Trading and Milling 259,489 306,406 313,900
Sugar and Citrus 46,855 - -
Power 22,975 26,183 30,336
Wine 12,859 - -
All other 34,304 121,517 118,624
Segment/Consolidated Totals $1,255,304 $1,265,366 $1,303,753
F-29
Operating Income: Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Pork $ 37,661 $ (1,122) $ 38,378
Marine (1,893) 17,379 27,297
Commodity Trading and Milling 2,615 10,505 9,542
Sugar and Citrus (15,909) - -
Power 7,942 8,839 7,879
Wine (5,946) - -
All other (4,673) (395) (390)
Segment Totals 19,797 35,206 82,706
Corporate Items (7,429) (5,436) (3,854)
Consolidated Totals $ 12,368 $ 29,770 $ 78,852
Depreciation and Amortization: Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Pork $ 20,759 $ 20,676 $ 20,225
Marine 9,651 8,451 9,476
Commodity Trading and Milling 3,230 2,985 3,037
Sugar and Citrus 7,102 - -
Power 1,547 1,638 1,623
Wine 362 - -
All other 2,160 6,125 6,212
Segment Totals 44,811 39,875 40,573
Corporate Items 771 604 1,173
Consolidated Totals $ 45,582 $ 40,479 $ 41,746
F-30
Capital Expenditures: Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Pork $ 22,072 $ 16,304 $ 31,850
Marine 20,001 5,151 9,020
Commodity Trading and Milling 4,816 1,162 1,464
Sugar and Citrus 14,998 - -
Power 389 79 1,381
Wine 3,746 - -
All other 715 3,200 4,381
Segment Totals 66,737 25,896 48,096
Corporate Items 976 1,017 228
Consolidated Totals $ 67,713 $ 26,913 $ 48,324
Total Assets: December 31,
(Thousands of dollars) 1999 1998
Pork $ 401,316 $ 387,699
Marine 97,561 99,609
Commodity Trading and Milling 161,477 108,822
Sugar and Citrus 167,972 162,094
Power 21,068 32,736
Wine 29,156 31,066
All other 38,931 35,990
Segment Totals 917,481 858,016
Corporate Items 124,439 168,735
Discontinued Poultry Operations 235,871 189,146
Consolidated Totals $1,277,791 $1,215,897
Administrative services provided by the corporate office are primarily
allocated to the individual segments based on the size and nature of their
operations. Prior to the third quarter of 1999, these costs were primarily
allocated based on revenues. This change is deemed to provide a more accurate
allocation and does not have a material impact on prior period comparative
F-31
information. Corporate assets include short-term investments, investments in
and advances to foreign affiliates, fixed assets, deferred tax amounts and
other miscellaneous items. Corporate operating losses represent certain
operating costs not specifically allocated to individual segments and general
Corporate overhead previously allocated to the discontinued Poultry operations.
Geographic Information
No individual foreign country accounts for 10% or more of sales to
external customers. The following table provides a geographic summary of the
Company's net sales based on the location of product delivery:
Years ended December 31,
(Thousands of dollars) 1999 1998 1997
United States $ 639,167 $ 651,581 $ 683,851
Caribbean, Central and South America 355,337 336,868 315,409
Africa 102,022 126,150 160,524
Pacific Basin and Far East 84,148 72,033 82,975
Canada/Mexico 40,294 35,972 20,676
Eastern Mediterranean 13,124 39,436 37,123
Europe 21,212 3,326 3,195
Totals $1,255,304 $1,265,366 $1,303,753
The following table provides a geographic summary of the Company's long-
lived assets according to their physical location and primary port for Company
owned vessels:
December 31,
(Thousands of dollars) 1999 1998
United States $ 331,765 $ 323,458
Argentina 111,486 103,968
All other 37,164 35,430
Totals $ 480,415 $ 462,856
F-32
At December 31, 1999 and 1998, the Company had approximately $93,624,000
and $80,096,000, respectively, of foreign receivables, excluding receivables
due from foreign affiliates, which represent more of a collection risk than the
Company's domestic receivables. The Company believes that its allowance for
doubtful receivables is adequate.
Note 13
Discontinued Operations / Subsequent Event
In December 1999, the Company agreed to sell its Poultry Division to
ConAgra, Inc. for $375 million, consisting of the assumption of approximately
$16 million in indebtedness and the remainder in cash, subject to certain
adjustments. The sale was completed on January 3, 2000 resulting in a pre-tax
gain on the sale of approximately $148 million ($90 million after estimated
taxes). This gain is based on certain estimates including a final working
capital adjustment and construction costs the Company is required to fund in
2000 to complete certain expansion projects on behalf of the buyer. Any
differences between these estimates and their actual settlement will change the
gain accordingly.
The Company's financial statements have been restated to reflect the
Poultry Division as a discontinued operation for all periods presented.
Operating results of the discontinued poultry operations are summarized below.
The amounts exclude general corporate overhead previously allocated to the
Poultry Division for segment reporting purposes. The amounts include interest
on debt at the Poultry Division assumed by the buyer and an allocation of the
interest on the Company's general credit facilities based on a ratio of the net
assets of the discontinued operations to the total net assets of the Company
plus existing debt under the Company's general credit facilities. The results
for 1999 reflect activity through November 1999 (the measurement date); results
for 1998 and 1997 reflect activity for each entire year. Net losses incurred
after the measurement date (for the month of December 1999) totaled $4,180,000
and have been deferred as a component of current assets of discontinued
operations at December 31, 1999. These losses will be recognized in January
2000 as a reduction of the gain realized on the sale.
Years ended December 31,
(Thousands of dollars) 1999 1998 1997
Net sales $437,695 514,503 476,580
Operating income (loss) $ 27,023 36,414 (4,076)
Earnings (loss) from discontinued operations $ 13,634 19,511 (5,991)
F-33
Assets and liabilities of the discontinued poultry operations are summarized
below:
December 31,
(Thousands of dollars) 1999 1998
Receivables $ 27,367 $ 27,681
Inventories 70,532 62,889
Prepaid expenses and deposits 1,385 1,489
Deferred net loss after measurement date 4,180 -
Current assets of discontinued operations $ 103,464 $ 92,059
Net property, plant and equipment $ 132,224 $ 96,893
Other assets 183 194
Non-current assets of discontinued operations $ 132,407 $ 97,087
Accounts payable $ 14,189 $ 14,819
Accrued liabilities 9,824 8,831
Current liabilities of discontinued operations $ 24,013 $ 23,650
Long-term debt $ 16,145 $ 16,145
Other liabilities 679 971
Non-current liabilities of discontinued
operations $ 16,824 $ 17,116
F-34
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Seaboard Corporation:
Under date of February 28, 2000, we reported on the consolidated balance sheets
of Seaboard Corporation and subsidiaries as of December 31, 1999 and 1998, and
the related consolidated statements of earnings, changes in equity and cash
flows for each of the years in the three-year period ended December 31, 1999,
as contained in the December 31, 1999 annual report to stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10K/A for the year ended December 31,
1999. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated 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 4 to the consolidated financial statements, the Company
changed its method of accounting for certain inventories from the first-in,
first-out method to the last-in, first-out method in 1999.
KPMG LLP
Kansas City, Missouri
February 28, 2000
F-35
<TABLE>
<CAPTION>
Schedule II
SEABOARD CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In Thousands)
Balance at Provision Write-offs net Aquisitions Balance at
beginning of year (1) of recoveries and Disposals end of year
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful accounts $26,117 7,105 4,147 -- $29,075
Year ended December 31, 1998:
Allowance for doubtful accounts $20,658 5,902 1,790 1,347 $26,117
Year ended December 31, 1997:
Allowance for doubtful accounts $19,448 3,845 2,635 -- $20,658
<FN>
(1) Charged to selling, general and administrative expenses.
</TABLE>
F-36
