UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-3390
Seaboard Corporation
(Exact name of registrant as specified in its charter)
Delaware 04-2260388
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9000 W. 67th Street, Shawnee Mission, Kansas 66202
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (913) 676-8800
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X . No ___.
There were 1,487,520 shares of common stock, $1.00 par value
per share, outstanding on October 27, 2000.
Total pages in filing - 19 pages
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
(Thousands of dollars)
(Unaudited)
September 30, December 31,
2000 1999
Assets
Current assets:
Cash and cash equivalents $ 27,480 $ 11,039
Short-term investments 129,451 91,609
Receivables, net 184,206 171,931
Inventories 227,750 192,847
Deferred income taxes 15,708 15,031
Prepaid expenses and deposits 29,058 20,395
Current assets of discontinued operations - 103,464
Total current assets 613,653 606,316
Investments in and advances to foreign affiliates 33,569
28,449
Net property, plant and equipment 610,533 480,415
Other assets 32,312 30,204
Non-current assets of discontinued operations - 132,407
Total assets $1,290,067 $1,277,791
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 68,928 $ 221,353
Current maturities of long-term debt 12,223 11,487
Accounts payable 50,430 61,529
Other current liabilities 168,166 103,697
Current liabilities of discontinued operations - 24,013
Total current liabilities 299,747 422,079
Long-term debt, less current maturities 330,666 318,017
Deferred income taxes 73,975 41,948
Other liabilities 33,043 34,924
Non-current liabilities of discontinued operations - 16,824
Total non-current and deferred liabilities 437,684 411,713
Minority interest 241 831
Stockholders' equity:
Common stock of $1 par value,
Authorized 4,000,000 shares;
issued 1,789,599 shares 1,790 1,790
Less 302,079 shares held in treasury (302) (302)
1,488 1,488
Additional capital 13,214 13,214
Accumulated other comprehensive income (37) (201)
Retained earnings 537,730 428,667
Total stockholders' equity 552,395 443,168
Total liabilities and stockholders' equity $1,290,067 $1,277,791
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Three months ended September 30, 2000 and 1999
(Thousands of dollars except per share amounts)
(Unaudited)
September 30, September 30,
2000 1999
Net sales $ 364,491 $ 318,769
Cost of sales and operating expenses 322,141 288,118
Gross income 42,350 30,651
Selling, general and administrative expenses 31,447 27,258
Operating income 10,903 3,393
Other income (expense):
Interest income 2,362 1,770
Interest expense (6,995) (7,955)
Income (loss) from foreign affiliates (884) 36
Minority interest 102 114
Miscellaneous 3,406 191
Total other income (expense), net (2,009) (5,844)
Earnings (loss) from continuing operations
before income taxes 8,894 (2,451)
Income tax expense (5,230) (666)
Earnings (loss) from continuing operations 3,664 (3,117)
Earnings from discontinued operations,
net of income taxes of $3,199 - 5,269
Net earnings $ 3,664 $ 2,152
Earnings (loss) per common share
from continuing operations $ 2.46 $ (2.09)
Earnings per common share
from discontinued operations - 3.54
Earnings per common share $ 2.46 $ 1.45
Dividends declared per common share $ .25 $ .25
Average number of shares outstanding 1,487,520 1,487,520
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
Nine months ended September 30, 2000 and 1999
(Thousands of dollars except per share amounts)
(Unaudited)
September 30, September 30,
2000 1999
Net sales $1,112,282 $ 884,686
Cost of sales and operating expenses 980,710 801,744
Gross income 131,572 82,942
Selling, general and administrative expenses 90,406 78,082
Operating income 41,166 4,860
Other income (expense):
Interest income 9,880 5,540
Interest expense (24,372) (23,972)
Loss from foreign affiliates (2,266) (474)
Minority interest 590 937
Miscellaneous 10,534 1,409
Total other income (expense), net (5,634) (16,560)
Earnings (loss) from continuing operations
before income taxes 35,532 (11,700)
Income tax expense (16,525) (44)
Earnings (loss) from continuing operations 19,007 (11,744)
Earnings from discontinued operations,
net of income taxes of $9,376 - 15,442
Gain on disposal of discontinued operations,
net of income taxes of $56,560 91,172 -
Net earnings $ 110,179 $ 3,698
Earnings (loss) per common share
from continuing operations $ 12.77 $ (7.89)
Earnings per common share
from discontinued operations 61.29 10.38
Earnings per common share $ 74.06 $ 2.49
Dividends declared per common share $ .75 $ .75
Average number of shares outstanding 1,487,520 1,487,520
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 2000 and 1999
(Thousands of dollars)
(Unaudited)
September 30, September 30,
2000 1999
Cash flows from operating activities:
Net earnings $ 110,179 $ 3,698
Adjustments to reconcile net earnings to
cash from operating activities:
Net earnings from discontinued
operations - (15,442)
Net gain on disposal of discontinued
operations (91,172) -
Depreciation and amortization 36,175 33,675
Loss from foreign affiliates 2,266 474
Gain from sale of fixed assets (1,035) (1,410)
Gain from recognition of deferred
swap proceeds (3,760) -
Deferred income taxes 26,430 452
Changes in current assets and liabilities
(net of businesses acquired and disposed):
Receivables, net of allowance (12,275) (9,208)
Inventories (23,046) (26,688)
Prepaid expenses and deposits (8,663) (5,570)
Current liabilities exclusive of debt (15,581) (14,605)
Other, net (2,799) 2,494
Net cash from operating activities 16,719 (32,130)
Cash flows from investing activities:
Purchase of investments (1,136,511) (335,503)
Proceeds from the sale or maturity of
investments 1,098,997 413,248
Capital expenditures (92,997) (47,095)
Proceeds from sale of fixed assets 4,203 3,453
Additional investment in a controlled
subsidiary - (2,302)
Investments in and advances to foreign
affiliates (7,386) (879)
Acquisition of businesses (45,444) -
Proceeds from disposal of discontinued
operations, net of cash expenditures 356,107 -
Net cash from investing activities 176,969 30,922
Cash flows from financing activities:
Notes payable to bank, net (152,425) 45,775
Principal payments of long-term debt (23,706) (24,270)
Proceeds from interest rate swaps - 5,982
Dividends paid (1,116) (1,116)
Net cash from financing activities (177,247) 26,371
Net cash flows from discontinued operations - (17,042)
Net change in cash and cash equivalents 16,441 8,121
Cash and cash equivalents at beginning of year 11,039 20,716
Cash and cash equivalents at end of quarter $ 27,480 $ 28,837
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 1 - Accounting Policies and Basis of Presentation
The consolidated financial statements include the accounts of Seaboard
Corporation and its domestic and foreign subsidiaries (the "Company").
As more fully described in Note 2, the Company sold its Poultry
Division effective January 3, 2000. Accordingly, comparative 1999
financial results and notes have been restated to reflect the Poultry
Division as a discontinued operation. 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. The unaudited consolidated financial statements
should be read in conjunction with the consolidated financial
statements of the Company for the year ended December 31, 1999 as
filed in its Annual Report on Form 10-K/A.
The accompanying unaudited consolidated financial statements include
all adjustments (consisting only of normal recurring accruals) which,
in the opinion of management, are necessary for a fair presentation of
financial position, results of operations and cash flows. Results of
operations for interim periods are not necessarily indicative of
results to be expected for a full year.
In 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. Financial
statements and related disclosures contained in this report reflect,
where appropriate, changes to conform to these restatements.
For the three months ended September 30, 2000, other comprehensive
income adjustments totaled $(1.9) million as certain available-for-
sale securities with previously unrealized gains were sold during the
period. For all other periods presented, other comprehensive income
adjustments were immaterial.
As more fully described in Note 2, during the first nine months of
2000 the Company sold its Poultry Division and acquired the assets of
an existing hog production operation, a cargo terminal facility and a
flour and feed milling facility. The following table summarizes the
noncash transactions resulting from the Poultry Division sale:
Nine Months Ended
(Thousands of dollars) September 30, 2000
Decrease in net assets of discontinued operation $195,034
Decrease in net working capital (including current
income tax liability) 65,145
Increase in deferred income tax liability 4,756
Gain on disposition, net of income taxes 91,172
Proceeds from disposition, net of cash expenditures $356,107
The following table summarizes the noncash transactions resulting from
the acquisition of the hog production operation, cargo terminal
facility and flour and feed milling facility:
Nine Months Ended
(Thousands of dollars) September 30, 2000
Increase in net working capital $ 8,654
Increase in fixed assets 76,781
Increase in other assets 600
Increase in long-term debt (37,091)
Increase in other liabilities (3,500)
Cash paid $ 45,444
Note 2 - Acquisitions and Dispositions of Businesses
Effective January 3, 2000, the Company completed the sale of 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 resulted
in a pre-tax gain of approximately $148 million ($91 million after
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 1999 financial results have been restated to reflect the
Poultry Division as a discontinued operation. 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.
During the first quarter of 2000, the Company purchased the assets of
an existing hog production operation for approximately $75 million,
consisting of $34 million in cash and the assumption of $34 million in
debt, $4 million of currently payable liabilities and $3 million
payable over the next four years. The transaction was accounted for
using the purchase method and would not have significantly affected
net earnings or earnings per share on a pro forma basis.
During the second quarter of 2000, the Company purchased the assets of
a cargo terminal facility for approximately $9.1 million consisting of
$8.2 million in cash, including transaction expenses, and the
assumption of $0.9 million in debt. The transaction was accounted for
using the purchase method and would not have significantly affected
net earnings or earnings per share on a pro forma basis.
During the third quarter of 2000, the Company purchased the assets of
a flour and feed milling facility in the Republic of Congo for
approximately $5.9 million, consisting of $3.4 million in cash and
$2.5 million payable over the next ten years. The transaction was
accounted for using the purchase method and would not have
significantly affected net earnings or earnings per share on a pro
forma basis.
During the third quarter of 2000, the Company discontinued the
business of marketing fruits and vegetables grown through joint
ventures or independent growers by selling certain assets of its
Produce Division resulting in a $2.0 million loss.
Note 3 - Inventories
During 1999 the Company changed its method of accounting for certain
inventories of the Pork Division from FIFO to LIFO, retroactive to
January 1, 1999. The following is a summary of inventories at
September 30, 2000 and December 31, 1999 (in thousands):
September 30, December 31,
2000 1999
At lower of LIFO cost or market:
Live hogs and related materials $106,498 $ 75,662
Dressed pork and related materials 6,516 8,360
113,014 84,022
LIFO allowance 4,691 4,026
Total inventories at lower of LIFO cost
or market 117,705 88,048
At lower of FIFO cost or market:
Grain, flour and feed 52,484 41,772
Sugar produced and in process 22,504 22,398
Crops in production and related materials 4,691 7,490
Wine and spirits, finished and in process 12,048 12,555
Other 18,318 20,584
Total inventories at lower of FIFO cost
or market 110,045 104,799
Total inventories $227,750 $192,847
Low commodity prices during 2000 and 1999 have created a positive LIFO
allowance as overall pork feed costs have decreased below base year
levels. This change in LIFO allowance is reflected in earnings as an
adjustment to cost of sales.
Note 4 - Contingencies
The Company is a defendant in a pending arbitration proceeding and
related litigation in Puerto Rico brought by the owner of a chartered
barge and tug which were damaged by fire after delivery of the cargo.
Damages of $47.6 million are alleged. The Company received a ruling
in the arbitration proceeding in its favor which dismisses the
principal theory of recovery although the ruling has been appealed.
The Company believes that the ruling will be upheld on appeal and it
will have no responsibility for the loss.
During the first quarter of 2000, the Company resolved to the mutual
satisfaction of all parties litigation brought in federal court by a
third-party hog supplier claiming breach of agreement, common law
fraud and violation of the federal RICO statute and the Company's
counterclaims in this litigation. The resolution did not have a
material effect on the Company's financial position, results of
operations or cash flows.
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 5 - Segment Information
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.
During the fourth quarter of 1999, the Company changed its method of
accounting for certain inventories of the Pork segment from FIFO to
LIFO, retroactively effective as of January 1, 1999. Quarterly data
for 1999 has been restated accordingly.
The Sugar and Citrus segment represents Ingenio y Refineria San Martin
del Tabacal S.A. (Tabacal), an Argentine company primarily engaged in
growing and refining sugarcane and, to a lesser extent, citrus
production. The entire Argentine sugar industry is experiencing
financial difficulties, with Tabacal and certain large competitors
incurring operating losses because Argentine sugar prices are below
historical levels. As a result of these operating losses for Tabacal,
at year-end 1999 the Company evaluated the recoverability of Tabacal's
long-lived assets and believes that the value of those assets is
presently recoverable. However, any further long-term 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.
Management continues to consider various strategic alternatives for
the Produce Division (included in "All Other" below). Continued
losses in this division could result in a determination that the
carrying values of certain assets are not recoverable, resulting in a
charge to earnings for the impairment of such assets.
Sales to External Customers:
Three Months Ended Nine Months Ended
September 30, September 30,
(Thousands of dollars) 2000 1999 2000 1999
Pork $169,185 $138,101 $ 525,071 $394,319
Marine 95,651 74,061 260,135 216,265
Commodity Trading and Milling 68,540 75,698 235,068 190,053
Sugar and Citrus 17,906 15,091 42,457 30,222
Power 6,141 6,110 19,503 16,715
Wine 1,156 2,851 4,591 9,730
All Other 5,912 6,857 25,457 27,382
Segment/Consolidated Totals $364,491 $318,769 $1,112,282 $884,686
Operating Income
Three Months Ended Nine Months Ended
September 30, September 30,
(Thousands of dollars) 2000 1999 2000 1999
Pork $ 14,568 $ 11,195 $ 54,978 $ 24,114
Marine 3,562 (4,631) 6,096 (5,509)
Commodity Trading and Milling (1,835) (140) (959) 1,756
Sugar and Citrus (417) (443) (4,217) (9,243)
Power 492 1,656 3,480 4,547
Wine (1,922) (838) (5,321) (3,053)
All Other (2,926) (1,665) (10,479) (2,265)
Segment Totals $ 11,522 $ 5,134 $ 43,578 $ 10,347
Corporate items (619) (1,741) (2,412) (5,487)
Segment/Consolidated Totals $ 10,903 $ 3,393 $ 41,166 $ 4,860
Total Assets
September 30, December 31,
(Thousands of dollars) 2000 1999
Pork $ 503,416 $ 401,316
Marine 109,569 97,561
Commodity Trading and Milling 184,129 161,477
Sugar and Citrus 185,574 167,972
Power 78,684 21,068
Wine 28,162 29,156
All Other 26,802 38,931
Segment Totals 1,116,336 917,481
Corporate items 173,731 124,439
Discontinued Poultry Operations - 235,871
Consolidated Totals $1,290,067 $1,277,791
Administrative services provided by the corporate office are primarily
allocated to the individual segments based on the size and nature of
their operations. Corporate assets include short-term investments,
certain 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, in 1999, general corporate
overhead previously allocated to the discontinued Poultry operations
as discussed in Note 2.
Note 6 - Subsequent Event
In October 2000, the Company entered into an agreement with a
Bulgarian wine company and its affiliated wine marketing company to
combine wine operations. Under the agreement, the Company will
contribute its entire interest in its wine business (a controlling
interest) and cash in exchange for a minority interest and preferred
stock in the combined entity. Currently, the fair value of the
combined entity has not been determined. If the fair value of the
minority interest acquired by the Company is deemed less than the
carrying value of the Company's interest contributed, the Company
could incur a loss on this transaction. The closing of this
transaction is subject to bank and governmental approvals but is
expected to occur during the fourth quarter of 2000.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
As more fully described in Note 2 to the Condensed Consolidated
Financial Statements, the Company completed the sale of its Poultry
Division to ConAgra, Inc. effective January 3, 2000. As a result, the
Company's 1999 financial results have been restated to reflect the
Poultry Division as a discontinued operation. In August 2000, the
Company announced that its management had recently discovered that
assets of its Produce Division had been overstated in prior periods
and, as a result, management determined to restate the Company's
financial statements for each of the prior periods effected. The
discussions and figures below are based on the restated presentation.
LIQUIDITY AND CAPITAL RESOURCES
September 30, December 31,
2000 1999
Current ratio 2.05:1 1.44:1
Working capital $313.9 $184.2
Cash from operating activities for the nine months ended September 30,
2000 increased $48.8 million compared to the same period one year
earlier. The increase in cash flows was primarily related to an
increase in net earnings from continuing operations, partially offset
by changes in components of working capital. Changes in components of
working capital, net of businesses acquired and disposed, are
primarily related to the timing of normal transactions for voyage
settlements, trade payables and receivables.
Cash from investing activities for the nine months ended September 30,
2000 increased $146.0 million compared to the same period one year
earlier. The increase is primarily related to proceeds from the sale
of discontinued poultry operations, partially offset by acquisitions,
capital expenditures and net purchases of investments. See Note 2 to
the Condensed Consolidated Financial Statements for further discussion
of the Poultry Division sale and the acquisition of the assets of a
hog production operation, cargo terminal facility and flour and feed
milling facility.
The Company invested $93.0 million in property, plant and equipment
for the nine months ended September 30, 2000, of which $24.4 million
was expended in the Pork segment, $5.1 million in the Marine segment,
$9.6 million in the Sugar and Citrus segment, $49.0 million in the
Power segment and $4.9 million in other businesses of the Company.
The Company invested $24.4 million in the Pork segment primarily for
the expansion of hog production facilities and for improvements to the
pork processing plant. The Company plans to invest $3.4 million
during the remainder of 2000 for continued expansion of hog production
facilities, construction of a new feed mill and general upgrades to
the pork processing plant. The Company continues to plan for a second
processing plant and is currently pursuing zoning, permitting and
development plans for a selected location in northeast Kansas. If the
location is deemed viable for development and the requisite zoning
permits are obtained, management anticipates that construction would
begin in early 2001 and, although not yet finalized, anticipates total
projected construction costs of approximately $140 million.
Management is currently evaluating financing alternatives for the
second processing plant.
The Company invested $5.1 million in the Marine segment primarily for
container and other material handling equipment. The Company plans to
invest $11.2 million during the remainder of 2000 primarily to
purchase a previously chartered vessel and for additional equipment.
In addition, the Company plans to purchase a second previously
chartered vessel in the first quarter of 2001.
The Company invested $9.6 million in the Sugar and Citrus segment
primarily for improvements to existing facilities and sugarcane
fields. During the remainder of 2000, the Company anticipates
spending $0.5 million for additional improvements.
The Company invested $49.0 million in the Power segment primarily for
the construction of a 71.2 megawatt barge-mounted power plant located
in the Dominican Republic. During the remainder of 2000, the Company
anticipates spending $2.0 million to complete installation.
During the first quarter of 2000, the Company purchased a minority
interest in a flour and feed mill operation in Kenya for $7.5 million.
This transaction was accounted for using the equity method.
In October 2000, the Company entered into an agreement to merge its
Bulgarian wine operations. See Note 6 to the Condensed Consolidated
Financial Statements for further discussion.
In the first quarter of 2000, 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 the short-term uncommitted credit lines totaling $145.0
million were reduced to $132.5 million. In the second quarter of
2000, short-term uncommitted credit lines were reduced an additional
$10.0 million to $122.5 million. As of September 30, 2000, the
Company had $30.0 million outstanding under one-year revolving credit
facilities and $38.9 million outstanding under short-term uncommitted
credit lines. During the first nine months of 2000, the Company
repaid approximately $176.1 million in notes payable, industrial
development revenue bonds and other debt primarily with proceeds from
the Poultry Division sale. As a result of these repayments,
approximately $3.8 million in unamortized proceeds from prior
terminations of interest rate agreements related to these notes were
recognized as miscellaneous income.
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 will be
adequate for its current and intended operations.
RESULTS OF OPERATIONS
Net sales for the three and nine months ended September 30, 2000
increased $45.7 and $227.6 million, respectively, compared to the same
periods one year earlier. Operating income for the three and nine
months ended September 30, 2000 increased $7.5 and $36.3 million,
respectively, compared to the same periods one year earlier.
Pork Segment
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2000 1999 2000 1999
Net sales $ 169.2 138.1 $ 525.1 394.3
Operating income $ 14.6 11.2 $ 55.0 24.1
Net sales for the Pork segment increased $31.1 and $130.8 million,
respectively, for the three and nine months ended September 30, 2000
compared to the same periods in 1999, as a result of higher pork
prices and, to a lesser extent, an increase in sales volume. An
excess supply of hogs had depressed pork prices through the first half
of 1999. The excess has since declined resulting in improved prices.
Sales volume increased as the plant ran extended shifts to take
advantage of positive margins.
Operating income for the Pork segment increased $3.4 and $30.9
million, respectively, for the three and nine months ended September
30, 2000 compared to the same periods in 1999. These increases are
primarily a result of improved sales prices and volumes as discussed
above. As a result of recent acquisitions, the Company also benefited
from the increased number of lower cost Company raised hogs
slaughtered. While the cost of third-party hogs increased, third-
party hogs as a percent of total hogs slaughtered decreased.
Management is unable to predict future market prices for hogs or pork
but anticipates overall margins will remain favorable during the
remainder of 2000.
Marine Segment
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2000 1999 2000 1999
Net sales $ 95.7 74.1 $ 260.1 216.3
Operating income (loss) $ 3.6 (4.6) $ 6.1 (5.5)
Net sales for the Marine segment increased $21.6 and $43.8 million,
respectively, for the three and nine months ended September 30, 2000
compared to the same periods in 1999. These increases resulted
primarily from significant increases in volumes, while cargo rates
increased slightly. Management believes that weak economic conditions
in certain South American markets continue to depress rates, however,
volumes have increased and cargo rates have increased slightly,
primarily in the third quarter. A new 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 has had on financial results.
Operating income from the Marine segment increased $8.2 and $11.6
million, respectively, for the three and nine months ended September
30, 2000 compared to the same periods in 1999, primarily as a result
of the increased volumes discussed above partially offset by higher
fuel costs. Management expects that operating income will remain
positive for the remainder of 2000.
Commodity Trading and Milling Segment
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2000 1999 2000 1999
Net sales $ 68.5 75.7 $ 235.1 190.1
Operating income (loss) $ (1.8) (0.1) $ (1.0) 1.8
Net sales for the Commodity Trading and Milling segment decreased $7.2
million and increased $45.0 million, respectively, for the three and
nine months ended September 30, 2000 compared to the same periods in
1999. While sales for the three month period declined, sales for the
nine month period have increased primarily as a result of increased
commodity sales to third-parties and certain foreign affiliates.
Operating income for this segment decreased $1.7 and $2.8 million,
respectively, for the three and nine months ended September 30, 2000
compared to the same periods in 1999. The decreases are primarily a
result of losses incurred from various milling operations, partially
offset by margins on the increased commodity sales discussed above.
Sugar and Citrus Segment
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2000 1999 2000 1999
Net sales $ 17.9 15.1 $ 42.5 30.2
Operating (loss) $ (0.4) (0.4) $ (4.2) (9.2)
Net sales for the Sugar and Citrus segment increased $2.8 million and
$12.3 million, respectively, for the three and nine months ended
September 30, 2000 compared to the same periods in 1999. The
increases are primarily a result of higher sales volumes, partially
offset by lower prices.
Operating income for this segment increased $5.0 million for the nine
months ended September 30, 2000 compared to the same period in 1999,
primarily as a result of improved margins and lower operating costs.
During the second quarter of 1999, severance charges of $3.0 million
were incurred related to certain employee layoffs. Management is
unable to predict operating results for the remainder of 2000.
As a result of operating results for Tabacal, at year-end 1999 the
Company evaluated the recoverability of Tabacal's long-lived assets
and believes that the value of those assets are presently recoverable.
However, any further long-term 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
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2000 1999 2000 1999
Net sales $ 6.1 6.1 $ 19.5 16.7
Operating income $ 0.5 1.7 $ 3.5 4.5
Net sales for the Power segment were unchanged for the three months
ended September 30, 2000 and increased $2.8 million for the nine
months ended September 30, 2000 compared to the same periods in 1999.
Sales increased during 2000 primarily as a result of a fuel adjustment
clause allowing the Company to pass on higher fuel costs, partially
offset by a decrease in rates resulting from a new contract effective
in the third quarter of 2000.
Operating income decreased $1.2 million and $1.0 million,
respectively, for the three and nine months ended September 30, 2000
compared to the same periods in 1999, primarily as a result of the new
supply contract and certain start up expenses associated with the new
power barge. The new power barge began operation in October of 2000.
Wine Segment
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2000 1999 2000 1999
Net sales $ 1.2 2.9 $ 4.6 9.7
Operating loss $ (1.9) (0.8) $ (5.3) (3.1)
Net sales for the Wine segment decreased $1.7 million and $5.1
million, respectively, for the three and nine months ended September
30, 2000 compared to the same periods in 1999. The decreases are a
result of lower sales volumes in certain European markets.
Operating income for this segment decreased $1.1 million and $2.2
million, respectively, for the three and nine months ended September
30, 2000 compared to the same periods in 1999. The decreases in
operating income primarily result from lower sales discussed above,
the cost of acquiring wine materials on the open market to supplement
local grape shortages and increasing reserves for uncollectible
receivables and advances for raw materials. Management anticipates
that operating losses will continue during 2000.
All Other
Three Months Ended Nine Months Ended
September 30, September 30,
(Dollars in millions) 2000 1999 2000 1999
Net sales $ 5.9 6.9 $ 25.5 27.4
Operating loss $ (2.9) (1.7) $ (10.5) (2.3)
Operating income from all other businesses decreased for the three and
nine months ended September 30, 2000, compared to the same periods in
1999. This decrease was primarily the result of low yields and
quality which decreased margins on seasonal produce sales, primarily
melons, and to a lesser extent, losses related to the pickle and
pepper operations in Honduras. In addition, at the end of the melon
growing season in June 2000, management increased reserves for certain
related grower advances. Although management is not able to predict
the amount of operating losses for 2000, it is anticipated that losses
will continue to a lesser extent for the remainder of the year.
During the third quarter of 2000 the Company discontinued the business
of marketing fruits and vegetables grown through joint ventures or
independent growers by selling certain assets of its Produce Division
(see Note 2 to the Condensed Consolidated Financial Statements).
Management continues to consider various strategic alternatives for
the remaining portions of this division. Continued losses in the
remaining operations could result in a determination that the carrying
values of certain assets are not recoverable, resulting in a charge to
earnings for the impairment of any such assets.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses increased $4.2 and
$12.3 million, respectively, for the three and nine months ended
September 30, 2000 compared to the same periods in 1999. The increase
is primarily a result of costs associated with acquired operations in
the Pork segment and the increases in reserves for certain
uncollectible grower advances in the Produce Division and
uncollectible advances for raw materials in the Wine Segment as
discussed above. As a percentage of revenues, SG&A for the third
quarter of 2000 remained unchanged from the third quarter of 1999 at
8.6%. For the nine months ended September 30, 2000 SG&A decreased to
8.1% from 8.8% for the same period in 1999. This decrease is
primarily attributable to increases in revenues in the Marine and
Sugar & Citrus segments without a corresponding increase in SG&A
costs.
Interest Income
Interest income increased $0.6 and $4.3 million, respectively, for the
three and nine months ended September 30, 2000 compared to the same
periods in 1999. The increase reflects an increase in average funds
invested and, to a lesser extent, an increase in interest rates.
Average funds invested increased primarily as a result of the proceeds
from the sale of the Poultry Division in January 2000.
Loss from Foreign Affiliates
Losses from foreign affiliates increased $0.9 and $1.8 million,
respectively, for the three and nine months ended September 30, 2000
compared to the same periods in 1999, primarily from lower earnings at
certain milling operations in Africa.
Miscellaneous Income
Miscellaneous income increased $3.2 and $9.1 million, respectively,
for the three and nine months ended September 30, 2000 compared to the
same periods in 1999. For the three months, this increase is
primarily attributable to the gain on the sale of certain marketable
securities held for sale and increased profitability from a domestic
affiliate, partially offset by the loss on sale of certain produce
assets. For the nine months, the increase is also attributable to the
recognition of unamortized proceeds from prior terminations of
interest rate agreements associated with debt repaid during the
periods.
Income Tax Expense
For the three and nine months ended September 30, 2000, the Company's
tax expense is primarily attributable to net income from domestic
entities, primarily the Pork Segment, as compared to net losses from
domestic entities in the comparative 1999 periods. The effective tax
rates for the comparative 1999 periods were impacted by overall losses
from foreign entities for which tax benefits are not available within
their respective countries or to offset domestic income.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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, soybean and soybean meal
futures and options to manage risks of increasing prices of raw
materials. 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 Company's market risk exposure
related to these items has not changed materially since December 31,
1999.
SEABOARD CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 2. Legal Proceedings
On September 21, 2000, the United States Environmental Protection
Agency (USEPA) obtained four Warrants and Orders for Entry and
Investigation issued by the United States District Court for the
Western District of Oklahoma, Docket Nos. M00 197-AR to 200-AR
inclusive, with respect to four facilities located in Beaver County,
Oklahoma, one of which is presently being leased and three of which
the Company is obligated to lease upon the completion of construction.
In connection with obtaining the warrants, the USEPA indicated they
were investigating whether violations of the Clean Water Act, 33 USC
1251, et seq. occurred. At present, these matters involve only an
investigation under the Clean Water Act, and, accordingly, no relief
has yet been sought by USEPA. However, should an enforcement action
result, the government may seek (a) to require the Company to obtain
requisite permits in order to engage in operations or continue with
construction, as the case may be, and (b) civil penalties as provided
in the Clean Water Act.
On June 2, 2000, a Complaint was filed by the Sierra Club against the
Company, Seaboard Farms, Inc. and Shawnee Funding, Limited Partnership
in the United States District Court for the Western District of
Oklahoma, No. CIV-00-979-L, seeking declaratory relief and civil
penalties. An amended complaint was filed August 17, 2000. The
Sierra Club alleges several violations of the Clean Water Act, and
intends to seek injunctive relief and a civil penalty of $25,000 for
each day of each violation. The Company asserts the claims of the
Sierra Club are false and misleading, and intends to contest them
vigorously.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - 27.1 Financial Data Schedule
(b) Reports on Form 8-K. On August 9, 2000 the Registrant filed a
report on Form 8-K announcing the discovery of information
revealing that assets of its Produce Division had been overstated
in prior periods and its intent to restate financial statements
for the affected periods.
This Form 10-Q contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995, which include
statements concerning projection of revenues, income or loss, capital
expenditures, capital structure or other financial items, statements
regarding the plans and objectives of management for future
operations, statements of future economic performance, statements of
the assumptions underlying or relating to any of the foregoing
statements and other statements which are other than statements of
historical fact. These statements appear in a number of places in
this Form 10-Q and include statements regarding the intent, belief or
current expectations of the Company and its management with respect to
(i) the cost and timing of the completion of new or expanded
facilities, (ii) the Company's financing plans, (iii) the 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, (iv) the price for the Company's products and services,
(v) the effect of Tabacal and/or the Wine segment on the consolidated
financial statements of the Company, (vi) the expected closing of a
transaction for the Bulgarian wine business, or (vii) other trends
affecting the Company's financial condition or results of operations.
Readers are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially as a result of various
factors. The accompanying information contained in this Form 10-Q
under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations" identifies important factors
which could cause such differences.
PART II - OTHER INFORMATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
DATE: October 30, 2000
Seaboard Corporation
by: /s/ Robert L. Steer
Robert L. Steer, Vice President-Chief
Financial Officer (Authorized officer
and principal financial and accounting
officer)