2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Description of Business
Seaboard Corporation is a diversified international agribusiness and transportation company. In the United
States, Seaboard is primarily engaged in pork production and processing, and ocean transportation. Overseas,
Seaboard is primarily engaged in commodity merchandising, grain processing, sugar production, and electric
power generation.
Table of Contents
Letter to Stockholders.............................................................................................................................. 2
Division Summaries................................................................................................................................. 4
Principal Locations .................................................................................................................................. 6
Summary of Selected Financial Data ....................................................................................................... 7
Company Performance Graph ................................................................................................................. 8
Quarterly Financial Data (unaudited)........................................................................................................ 9
Management’s Discussion & Analysis of Financial Condition and Results of Operations .......................... 10
Management’s Responsibility for Financial Statements........................................................................... 27
Management’s Report on Internal Control over Financial Reporting ........................................................ 27
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements ........... 28
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting... 29
Consolidated Statements of Earnings .................................................................................................... 30
Consolidated Balance Sheets ................................................................................................................ 31
Consolidated Statements of Cash Flows ................................................................................................ 32
Consolidated Statements of Changes in Equity ...................................................................................... 33
Notes to Consolidated Financial Statements .......................................................................................... 34
Stockholder Information......................................................................................................................... 60
This report, including information included or incorporated by reference in this report, contains certain forward-
looking statements with respect to the financial condition, results of operations, plans, objectives, future
performance and business of Seaboard Corporation and its subsidiaries (Seaboard). Forward-looking statements
generally may be identified as statements that are not historical in nature; and statements preceded by, followed
by or that include the words "believes," "expects," "may," "will," "should," "could," "anticipates," "estimates,"
"intends," or similar expressions. In more specific terms, forward-looking statements, include, without limitation:
statements concerning projection of revenues, income or loss, capital expenditures, capital structure or other
financial items, including the impact of mark-to-market accounting on operating income; statements regarding the
plans and objectives of management for future operations; statements of future economic performance;
statements regarding the intent, belief or current expectations of Seaboard and its management with respect to:
(i) Seaboard's ability to obtain adequate financing and liquidity, (ii) the price of feed stocks and other materials
used by Seaboard, (iii) the sales price or market conditions for pork, grains, sugar and other products and
services, (iv) statements concerning management’s expectations of recorded tax effects under existing
circumstances, (v) the ability of the Commodity Trading and Milling segment to successfully compete in the
markets it serves and the volume of business and working capital requirements associated with the competitive
trading environment, (vi) the charter hire rates and fuel prices for vessels, (vii) the stability of the Dominican
Republic’s economy, fuel costs and related spot market prices and collection of receivables in the Dominican
Republic, (viii) the effect of the fluctuation in foreign currency exchange rates, (ix) statements concerning
profitability or sales volume of any of Seaboard’s segments, (x) the anticipated costs and completion timetable for
Seaboard’s scheduled capital improvements, or (xi) other trends affecting Seaboard's financial condition or results
of operations, and statements of the assumptions underlying or relating to any of the foregoing statements.
This list of forward-looking statements is not exclusive. Seaboard undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new information, future events, changes in
assumptions or otherwise. Forward-looking statements are not guarantees of future performance or results. They
involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the
forward-looking statements due to a variety of factors. The information contained in this report, including without
limitation the information under the headings "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and “Letter to Stockholders”, identifies important factors which could cause such
differences.
2007 Annual Report
1
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
This year, in March, marked the passing of the Chairman of our Company, Harry Bresky. The Company lost an
inspirational visionary leader, and I lost a mentor and my closest friend. Although Harry retired as CEO in 2006, I had
hoped that we would have had more time to lean on him for his wisdom and business counsel. Nevertheless, his
influence will always remain within the fabric of the Company.
Despite an extremely challenging business environment this past year, our financial results for 2007 were more than
satisfactory. We recorded an all-time high in revenue of $3.2 billion and our third highest net income in company
history. As we cautioned in previous shareholder letters, our earnings over the past few years have been
extraordinary, with company and industry profitability at historic levels. Now, with various disruptions, mostly on the
cost side, we will be challenged to sustain recent historical margins in all of our major businesses.
Last year, I mentioned that certain fundamental factors, including higher input costs, would affect our performance
and indeed they have. Most significant has been the unprecedented run up in grain and oil seed prices, primarily
stemming from U.S. Government legislation imposing mandates for renewable fuels. We did anticipate, to some
degree, the impact this would have in the grain markets and we positioned ourselves accordingly. However, these
additional purchases were not sufficient to offset the sustained and unprecedented upward movement in the
derivative and physical ingredient markets. The impact of these higher grain costs was principally responsible for the
overall decline in earnings year over year.
Seaboard Foods was hit the hardest by these cost increases, as margins narrowed significantly on the hog
production side. Higher grain prices accounted for most of the decline in operating income for our Pork division in
2007. We anticipate that overall margins in our integrated business will remain under pressure well into 2008. On
the positive side, we are starting to see some political and economic push back from food industry and environmental
groups which could help to stabilize prices. Over time, the pork market should compensate for higher grain prices
with fewer hogs, which will likely result in higher product prices. During this last year, we purchased the remaining 5
percent of Daily’s, our further processing business. Daily’s represents an important step in extending our reach in
the value chain of our integrated business model in pork, and represents an integral part of our brand building efforts.
We anticipate that construction of our biodiesel plant will be completed in the first quarter of 2008. This facility will be
able to convert certain by-products, principally pork fat from our plant as well as animal fat and vegetable oil from
third parties, into biodiesel. With this biodiesel plant in the U.S. and our conversion of sugar cane into ethanol in
Argentina, we are taking a conservative approach to fossil fuel alternatives with low cost raw material stock, efficient
energy conversions and proven technology.
Grain prices also had a significant impact on our Commodity Trading and Milling business. We saw a 57 percent
increase in sales in 2007. This was a function of higher grain prices combined with a 22 percent increase in unit
volumes. Operating income in 2007 was down from 2006, primarily because of our use of mark-to-market rather than
hedge accounting. Looking forward, as grain prices reach all time highs and level off at these higher levels, the
future is uncertain for our grain processing operations in lesser developed countries. Although bread and other grain-
based foods have become staples in our markets over the last 25 years, they are quickly becoming luxury items
within our consumer markets as product prices spiral higher. This is unfortunate, as flour is oftentimes fortified and
vitamin enriched and cannot be substituted with similar health benefits derived from local starch-based crops. In
2008, we expect higher volumes and sales through restructured operations in several milling locations and the
acquisition of a trading operation in Peru. In addition, we have entered the rice business through the formation of a
trading company in Geneva, Switzerland, with expectations for rice milling assets to follow. Although there are plenty
of challenges ahead for this division, we are optimistic that our integrated structure, loyal customer base and new-
found alliances will position us well for the future.
Seaboard Marine, our cargo shipping and logistics company, continues to perform exceptionally well. Despite the
marked increases in fuel and ship charter rates, Seaboard Marine has successfully maintained margins and
profitability. By expanding its service and flexibility with additional ships, trade lanes and ports of call, Seaboard
Marine has been able to take advantage of continuing strong economies in the majority of countries it serves in
Central and South America. As we continue our multi-year program to upgrade our cargo carrying equipment,
manage our owned and chartered vessel fleet and invest in port infrastructures, we expect to maintain our
competitive edge and enhance our quality of service. Although we are faced with external challenges such as
additional security demands and political and economic disruptions in certain locations, we believe our innovative and
customer oriented approach will ensure our place as a leader in the industry. Marine’s success in 2008 will depend,
in part, on how cost competitive U.S. goods are globally and the political and economic stability of the many countries
we serve in Central and South America and the Caribbean.
2
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
Tabacal, our Argentinean sugar operation, continued to do reasonably well in 2007, despite significant local
government intervention. In an effort to control local inflation, the government of Argentina continues to put in place
price controls on most basic foodstuffs, including sugar. Our volumes were also down modestly due to prolonged
below freezing temperatures during the growing season. During 2007, we expanded our acreage base in line with
the expansion of our milling capacity. This additional capacity will be used primarily to produce ethanol instead of
refined sugar. When we reach full production in 2009, we will triple our production of ethanol to approximately 48,000
cubic meters. This project is part of our program to enter the alternative fuels market with a low cost alternative to
grain-based renewable fuel.
As a company accustomed to the volatility and radical movements in commodity type businesses, we know the
importance of maintaining a strong and liquid balance sheet, particularly with the current fragility in the capital and
credit markets. We expect the markets for agricultural commodities, energy and freight to remain turbulent in 2008,
and we view this as a potential opportunity which our strong balance sheet will allow us to capitalize upon. We will
continue to seek avenues for expansion in our existing businesses through internal growth, strategic alliances and
outright acquisitions as opportunities arise. Although competition from hedge funds and private equity remains a
factor, there is a greater degree of caution and a more disciplined approach in the equity markets, which should give
us better access and more affordable growth strategies.
With unsettled world markets and an uncertain economic outlook in the U.S. and around the world, we are thankful to
be in basic and essential businesses which are somewhat recession proof. Maintaining a steady and consistent
approach in business and reinforcing our cultural values help to keep us on an even keel. As always, we are deeply
appreciative of the people at Seaboard who have helped build this company into a world class competitor with an
enviable reputation. You are all a part of this great Company, and I thank you for your contribution to our success.
Steven J. Bresky
President and
Chief Executive Officer
2007 Annual Report
3
S E A B O A R D C O R P O R A T I O N
Division Summaries
Pork Division
Seaboard’s Pork Division is one of the largest vertically integrated pork processors in the United States. Seaboard is
able to control animal production and processing from research and development in nutrition and genetics, to the
production of high quality meat products at our processing facility.
Seaboard’s processing facility is located in Guymon, Oklahoma. The facility has a daily double shift capacity to
process approximately 16,800 hogs and generally operates at capacity with additional weekend shifts depending on
market conditions. The Pork Division is making modifications to its processing plant that will increase daily double
shift capacity from approximately 16,800 hogs to approximately 18,500 hogs during 2008. Seaboard produces and
sells fresh and frozen pork products to further processors, foodservice operators, grocery stores, distributors and
retail outlets throughout the United States. Internationally, Seaboard sells to distributors in Japan, Mexico and other
foreign markets. Hogs processed at the plant principally include Seaboard-raised hogs as well as hogs raised by
third parties purchased under contract and in the spot market.
Seaboard’s hog production facilities consist of genetic and commercial breeding, farrowing, nursery and finishing
buildings located in Oklahoma, Kansas, Texas and Colorado. These facilities have a capacity to produce
approximately 4.0 million hogs annually. Seaboard owns and operates six centrally located feed mills to provide
formulated feed to these facilities and has additional feed mill capacity to support future growth.
Seaboard’s Pork Division also owns two bacon processing plants located in Salt Lake City, Utah and Missoula,
Montana. The processing plants produce premium sliced and pre-cooked bacon primarily for food service. These
operations represent Seaboard’s recent expansion of its integrated pork model into value-added products and are
expected to enhance Seaboard’s ability to penetrate into other further processed pork products.
Beginning in 2008, Seaboard will begin production of biodiesel at a new facility being constructed in Guymon,
Oklahoma. The biodiesel will be sold to a third party and will be produced from third party animal fat, vegetable oil,
and/or pork fat from Seaboard’s Guymon pork processing plant.
Seaboard’s Pork Division has an agreement with a similar size pork processor, Triumph Foods LLC (Triumph), to
market all of the pork products produced at Triumph’s plant in St. Joseph, Missouri. Pursuant to this agreement,
Seaboard is able to provide the same quality ensured products to its customers. The plant began operations in
January 2006 and Seaboard began marketing the related pork products for a fee primarily based on the number of
head processed by Triumph Foods and is entitled to be reimbursed for certain expenses.
Seaboard’s vertically integrated system provides a number of strategic advantages relative to other companies in the
industry. These advantages, which result largely from significant control of the production and processing chain, allow
Seaboard to produce high quality, safe products. The consistency and quality of Seaboard pork have allowed
Seaboard to become one of the leading exporters of pork products from the United States to Japan and other foreign
markets.
Commodity Trading & Milling Division
Seaboard’s Commodity Trading & Milling Division markets grain and oilseed products internationally to third party
customers and affiliated companies. These commodities are purchased worldwide with primary destinations in
Africa, South America, and the Caribbean.
The division sources, transports and markets approximately 3.5 million tons annually of wheat, corn, soybean meal
and other related commodities to the food and animal feed industries. The division strives to provide an efficient
supply of quality products and reliable services to industrial customers in selected markets. Seaboard integrates the
service of delivering commodities to its customers primarily through the use of company owned and chartered bulk
carriers.
Seaboard’s Commodity Trading and Milling Division has locations in 18 countries. The commodity trading business
operates through six offices in five countries and one non-consolidated affiliate location in South America. The grain
processing businesses operate through 26 locations in 14 countries consisting of six consolidated and eight non-
consolidated affiliates in Africa, South America, and the Caribbean. These businesses produce approximately one
and a half million metric tons of finished product per year.
4
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Division Summaries
Marine Division
Seaboard’s Marine Division provides containerized shipping service between the United States, the Caribbean Basin,
and Central and South America. Seaboard’s primary operations, located in Miami, include a 135,000 square-foot
warehouse for cargo consolidation and temporary storage, in addition to a 70 acre terminal at the Port of Miami. At
the Port of Houston, Seaboard operates a 62 acre cargo
includes approximately
690,000 square feet of on-dock warehouse space for temporary storage of bagged grains, resins and other cargoes.
Seaboard also makes scheduled vessel calls in Philadelphia, Pennsylvania, Fernandina Beach, Florida, New
Orleans, Louisiana and 40 foreign ports.
terminal
facility
that
Seaboard’s marine fleet consists of 12 owned and approximately 27 chartered vessels, as well as approximately
48,000 dry, refrigerated and specialized containers and units of related equipment. Within its service lanes,
Seaboard is one of the largest shippers in terms of cargo volume to and from the Port of Miami. Seaboard Marine
provides direct service to 25 countries. Seaboard also provides extended service from our domestic ports of call to
and from multiple foreign destinations through a network of connecting carrier agreements with major regional and
global carriers.
To maximize fleet utilization, Seaboard uses a network of offices and agents throughout the United States, Canada,
Latin America, and the Caribbean Basin to book both northbound and southbound cargo to and from the United
States and between the countries it serves. Seaboard’s full service capabilities, including agreements with a network
of connecting carriers, allow the transport by either truck or rail, of both import and export cargo to and from various
U.S. ports. Seaboard’s frequent sailings and fixed-day schedules make it convenient for customers to coordinate
manufacturing schedules and maintain inventories at cost-efficient levels. Seaboard’s approach is to work in
partnership with its customers and provide the most effective level of service throughout the United States to and
from Latin America and the Caribbean Basin and between the countries it serves.
Other Divisions
Seaboard’s other businesses consist largely of food-related businesses and electric power generation.
Seaboard is involved in the production and refining of sugar, and the production and processing of citrus products in
Argentina. These products are primarily marketed locally with some exports to the United States, other South
American countries and Europe. Seaboard’s mill, one of the largest in Argentina, currently has a processing capacity
of approximately 230,000 metric tons of sugar and approximately four million gallons of alcohol per year. During
2008, it is anticipated that construction will be completed on the alcohol distillery operation to increase the alcohol
production capacity to approximately 13 million gallons per year. The mill is located in the Salta Province of northern
Argentina with administrative offices in Buenos Aires, Argentina. Approximately 60,000 acres of land owned by
Seaboard in Argentina is planted with sugar cane which supplies the majority of the raw product processed by the
mill. In addition, approximately 3,000 acres of land is planted with orange trees. Depending on local harvest and
market conditions, sugar and citrus may be purchased from third parties for resale.
Seaboard owns two floating electric power generating facilities consisting of a system of diesel engines mounted on
barges with a combined rated capacity of approximately 112 megawatts. Seaboard operates as an independent
power producer which generates electricity into the local power grid. Seaboard is not directly involved in the
transmission or distribution of electricity but does have contracts to sell directly to third party users. Electricity is sold
under contract to certain large commercial users, a short-term contract with a government-owned distribution
company and on the spot market that is accessed by three wholly or partially government-owned distribution
companies and limited others.
Seaboard processes jalapeño peppers at its plant in Honduras. These products are shipped to the United States on
Seaboard Marine vessels and distributed from Seaboard’s port facilities.
2007 Annual Report
5
S E A B O A R D C O R P O R A T I O N
Principal Locations
Corporate Office
Seaboard Corporation
Shawnee Mission, Kansas
Pork
Seaboard Foods LP
Pork Division Office
Shawnee Mission, Kansas
Processing Plant
Guymon, Oklahoma
Live Production Operation Offices
Julesburg, Colorado
Hugoton, Kansas
Leoti, Kansas
Liberal, Kansas
Rolla, Kansas
Guymon, Oklahoma
Hennessey, Oklahoma
Optima, Oklahoma
Processed Meats
Salt Lake City, Utah
Missoula, Montana
High Plains Bioenergy, LLC
Guymon, Oklahoma
Commodity Trading & Milling
Commodity Trading Operations
Bermuda
Colombia
Ecuador
Peru*
South Africa
Switzerland
Les Moulins d’Haiti S.E.M.*
Haiti
Minoterie du Congo, S.A.
Republic of Congo
Mobeira, SARL
Mozambique
Molinos del Ecuador, C.A.*
Ecuador
National Milling Company
of Guyana, Inc.
Guyana
National Milling Corporation Limited
Zambia
Rafael del Castillo & Cia. S.A. *
Colombia
Seaboard West Africa Limited
Sierra Leone
Unga Holdings Limited*
Kenya and Uganda
Marine
Seaboard Marine Ltd.
Marine Division Office
Miami, Florida
Port Operations
Fernandina Beach, Florida
Houston, Texas
Miami, Florida
New Orleans, Louisiana
Philadelphia, Pennsylvania
Seaboard de Colombia, S.A.
Colombia
Seaboard de Nicaragua, S.A.
Nicaragua
Seaboard del Peru, S.A.
Peru
Seaboard Freight & Shipping Jamaica
Limited
Jamaica
Seaboard Honduras, S. de R.L. de C.V.
Honduras
Seaboard Marine Bahamas Ltd.
Bahamas
Seaboard Marine (Trinidad) Ltd.
Trinidad
Seaboard Marine of Haiti, S.E.
Haiti
SEADOM, S.A.
Dominican Republic
SeaMaritima S.A. de C.V.
Mexico
Sugar and Citrus
Ingenio y Refineria San Martin
del Tabacal SRL
Argentina
Agencias Generales Conaven, C.A.
Venezuela
Power
Agencia Maritima del Istmo, S.A.
Costa Rica
Transcontinental Capital Corp.
(Bermuda) Ltd.
Dominican Republic
Les Moulins de Madagascar, S.A.R.L.
Madagascar
Cayman Freight Shipping Services, Ltd.
Cayman Islands
Other
Lesotho Flour Mills Limited*
Lesotho
Life Flour Mill Ltd.*
Top Feeds Limited*
Nigeria
Minoterie de Matadi, S.A.R.L.*
Democratic Republic of Congo
JacintoPort International LP
Houston, Texas
Representaciones Maritimas y
Aereas, S.A.
Guatemala
Sea Cargo, S.A.
Panama
Mount Dora Farms de Honduras, S.R.L.
Honduras
Mount Dora Farms Inc.
Houston, Texas
*Represents a non-controlled, non-consolidated affiliate
6
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Summary of Selected Financial Data
(Thousands of dollars except per share amounts)
2007
Years ended December 31,
2006
2005
2004
2003
Net sales
Operating income
Net earnings
$ 3,213,301 $ 2,707,397
$ 2,688,894
$ 2,683,980
$ 1,981,340
$ 169,915
$ 296,995
$ 320,045
$ 251,254
$ 181,332
$ 258,689
$ 266,662
$ 168,096
Basic earnings per common share
$ 144.15
Diluted earnings per common share
$
144.15
$
$
205.09
205.09
$
$
212.20
211.94
$
$
133.94
133.94
$
$
$
$
68,786
31,842
25.37
25.37
Total assets
$ 2,093,699
$ 1,961,433
$ 1,816,321
$ 1,436,694
$ 1,325,691
Long-term debt, less current maturities $ 125,532
$ 137,817
$ 201,063
$ 262,555
$ 321,555
Stockholders’ equity
$ 1,354,228
$ 1,203,307
$ 977,870
$ 692,682
$ 520,565
Dividends per common share
$
3.00
$
3.00
$
3.00
$
3.00
$
3.00
As of December 31, 2006, Seaboard adopted Statement of Financial Accounting Standard No. 158 (SFAS 158),
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” The adoption of SFAS 158
reduced stockholders equity by $25,014,000 as an adjustment to Accumulated Other Comprehensive Loss. See
Note 10 to the Consolidated Financial Statements for further discussion.
In the fourth quarter of 2005, Seaboard made a one-time election to repatriate previously permanently invested
foreign earnings resulting in a total tax expense of approximately $11,586,000, recognized a tax benefit of
$21,428,000 for the finalization of certain tax years as a result of a settlement with the Internal Revenue Service and
recognized a tax benefit of $4,977,000 as a result of an agreement with the Puerto Rican Treasury department that
favorably resolved certain prior years’ tax issues. The net effect of these events was an increase in net earnings of
$14,819,000, or $11.78 per common share on a diluted earnings basis for the year. See Note 7 of the Consolidated
Financial Statements for further discussion.
In January 2005, Seaboard agreed to a tax settlement related to prior year tax returns resulting in a tax benefit of
$14,356,000, or $11.44 per common share, which was recognized in the fourth quarter of 2004.
In the fourth quarter of 2004, Seaboard recognized a $3,592,000 decline in value considered other than temporary in
its investment in a Bulgarian wine business as a charge to loss from foreign affiliates. See Note 13 to the
Consolidated Financial Statements for further discussion. As a result of its decision to sell this equity investment, in
the fourth quarter of 2004, Seaboard recharacterized the related accounting for income tax purposes from ordinary to
capital losses, which resulted in the reversal of a previously recorded tax benefit of $5,795,000 related to prior year
losses. The effect of these fourth quarter events related to this business was a decrease in net earnings of
$9,387,000, or $7.48 per common share.
During the fourth quarter of 2003, Seaboard sold its equity investment in Fjord Seafood ASA (Fjord), an integrated
salmon producer and processor headquartered in Norway, recognizing a gain of $18,036,000 or $14.37 per share.
The gain was not subject to tax. During 2003, Seaboard recorded its share of losses related to its investment in Fjord
totaling $15,546,000, or $12.38 per share including $12,421,000 for asset impairment charges. Seaboard’s share of
losses from Fjord during 2002 totaled $10,158,000, or $7.06 per share.
Also during 2003, Seaboard adopted SFAS No. 143, “Accounting for Asset Retirement Obligations,” Financial
Accounting Standards Board Interpretation No. 46, revised December 2003, “Consolidation of Variable Interest
Entities,” and changed its method of accounting for costs associated with the regularly scheduled drydocking of
vessels from the accrue-in-advance method to the direct-expense method. As a result of these changes, Seaboard
recorded a net cumulative effect of changes in accounting principles of $2,868,000, or $2.29 per share.
2007 Annual Report
7
S E A B O A R D C O R P O R A T I O N
Company Performance Graph
The Securities and Exchange Commission requires a five-year comparison of stock performance for Seaboard with
that of an appropriate broad equity market index and similar industry index. Seaboard's common stock is traded on
the American Stock Exchange, and one appropriate comparison is with the American Stock Exchange Market Value
Index. Because there is no single industry index to compare stock performance, the companies comprising the Dow
Jones Food and Marine Transportation Industry indices (the "Peer Group") were chosen as the second comparison.
The following graph shows a five-year comparison of cumulative total return for Seaboard, the American Stock
Exchange Market Value Index and the companies comprising the Dow Jones Food and Marine Transportation
Industry indices weighted by market capitalization for the five fiscal years commencing December 31, 2002, and
ending December 31, 2007. The information presented in the performance graph is historical in nature and is not
intended to represent or guarantee future returns.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Seaboard Corporation, The AMEX Composite Index
And A Peer Group
$800
$700
$600
$500
$400
$300
$200
$100
$0
12/02
12/03
12/04
12/05
12/06
12/07
Seaboard Corporation
AMEX Composite
Peer Group
* $100 invested on 12/31/02 in stock or index-including reinvestment of dividends.
Fiscal year ending December 31.
The comparison of cumulative total returns presented in the above graph was plotted using the following index values
and common stock price values:
Seaboard Corporation
AMEX Market Value (U.S. & Foreign)
Peer Group
$100.00 $118.03 $420.27
$175.20
$143.18
$100.00
$133.46
$110.15
$100.00
$637.70 $746.44 $622.63
$299.37
$257.04
$215.26
$163.46
$154.02
$128.32
12/31/02
12/31/03
12/31/04 12/31/05 12/31/06 12/31/07
8
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Quarterl y Financial Data (unaudited)
(UNAUDITED)
(Thousands of dollars except per share amounts)
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Total for
the Year
2007
Net sales
Operating income
Net earnings
$ 729,148
$ 742,219
$ 801,328
$ 940,606 $ 3,213,301
$ 56,818
$ 34,462
$ 49,601
$ 29,034 $ 169,915
$ 49,355
$ 42,657
$ 52,572
$ 36,748
$ 181,332
Earnings per common share
$ 39.13
$ 33.82
$ 41.75
$ 29.40 $ 144.15
Dividends per common share
$ 0.75
$ 0.75
$ 0.75
$ 0.75
$ 3.00
Market price range per common share:
High $ 2,455.00
$ 2,675.00
$ 2,468.82
$ 1,955.00
Low $ 1,760.00
$ 2,171.25
$ 1,850.99
$ 1,400.00
2006
Net sales
Operating income
Net earnings
$ 635,573
$ 688,937
$ 678,382
$ 704,505
$ 2,707,397
$ 60,857
$ 78,068
$ 75,668
$ 82,402
$ 296,995
$ 51,540
$ 69,190
$ 61,189
$ 76,770
$ 258,689
Earnings per common share
$ 40.86
$ 54.85
$ 48.51
$ 60.86
$ 205.09
Dividends per common share
$ 0.75
$ 0.75
$ 0.75
$ 0.75
$ 3.00
Market price range per common share:
High $ 1,594.00
$ 1,721.00
$ 1,460.00
$ 1,798.00
Low $ 1,223.00
$ 1,259.00
$ 1,140.00
$ 1,197.00
During the third and fourth quarters of 2007, Seaboard repurchased 8,643 and 8,446 shares, respectively, as
authorized by Seaboard’s Board of Directors. See Note 12 to the consolidated financial statements for further
discussion.
2007 Annual Report
9
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Seaboard is a diverse agribusiness and transportation company with global operations in several industries. Most of
the sales and costs of Seaboard’s segments are significantly influenced by worldwide fluctuations in commodity
prices or changes in foreign political and economic conditions. Accordingly, sales, operating income and cash flows
can fluctuate significantly from year to year. As each segment operates in unrelated industries and different
geographical locations, management evaluates their operations separately. Seaboard’s reporting segments are
based on information used by Seaboard’s Chief Executive Officer in his capacity as chief operating decision maker to
determine allocation of resources and assess performance.
Pork Segment
The Pork segment is primarily a domestic business with some export sales to Japan and other foreign markets.
Revenues from the sale of pork products are primarily generated from a single hog processing plant in Guymon,
Oklahoma, which operates at double shift capacity and two bacon further processing plants located in Salt Lake City,
Utah and Missoula, Montana. In 2007, Seaboard raised approximately 80% of the hogs processed at the Guymon
plant with the remaining hog requirements purchased primarily under contracts from independent producers. This
segment is Seaboard’s most capital intensive segment with approximately 37% of consolidated assets, including
approximately 64% of Seaboard’s fixed assets and material dollar amounts for live hog inventories.
Of Seaboard’s businesses, management believes the Pork segment also has the greatest exposure to commodity
price fluctuations. As a result, this segment’s operating income and cash flows can materially fluctuate from year to
year, significantly affecting Seaboard’s consolidated operating income and cash flows. Sales prices are directly
affected by both domestic and worldwide supply and demand for pork products and other proteins. Feed costs are
the most significant single component of the cost of raising hogs and can be materially affected by commodity prices
for corn and soybean meal. In addition, costs can be materially affected by market prices for hogs purchased from
third parties for processing at the plant.
The Pork segment is constructing a processing plant to produce biodiesel to be sold to a third party, which will be
produced from third party animal fat, vegetable oil and/or pork fat from Seaboard’s Guymon pork processing plant.
This plant is expected to be completed in the first quarter of 2008. During 2007, the Pork segment constructed
additional hog finishing space to allow hogs more time to reach the desired weight for processing at the Guymon
plant. Additional hog finishing space is currently under construction and is expected to be completed in 2008. During
2008, modifications will be made to the Guymon hog processing plant that will increase daily double shift processing
capacity from approximately 16,800 hogs to 18,500 hogs. In addition, the Pork segment previously announced plans
to expand its processed meats capabilities by constructing a separate further processing plant, primarily for bacon.
Construction of this facility was anticipated to begin in the second half of 2007; however the timing of this facility has
been delayed. Also, alternatives to construction may be considered for this project including acquisition of an existing
facility. As the Guymon plant operates at capacity, to improve operating income Seaboard is constantly working
towards improving the efficiencies of the Pork operations as well as considering ways to increase margins by
expanding product offerings.
During 2006, Triumph Foods began production at its new pork processing plant located in St. Joseph, Missouri, and
Seaboard began marketing the related pork products for a fee primarily based on the number of head processed by
Triumph Foods. This plant has similar capacity to Seaboard’s Guymon plant with the business based upon a similar
integrated model as Seaboard’s. Triumph Foods reached full double shift operating capacity during 2007.
Seaboard’s sales prices for its pork products are primarily based on a margin sharing arrangement that considers the
average sales price and mix of products sold from both Seaboard’s and Triumph Food’s hog processing plants.
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Management’s Discussion & Anal ysis
Commodity Trading and Milling Segment
The Commodity Trading and Milling segment operates overseas with locations in Africa, Bermuda, South America
and the Caribbean. These foreign operations can be significantly impacted by local crop production, political
instability, local government policies, economic and industry conditions, and currency fluctuations. This segment's
sales are also significantly affected by fluctuating prices for various commodities, such as wheat, corn and soybean
meal. Although this segment owns eight ships, most of the third party trading business is transacted with chartered
ships. Charter hire rates, influenced by available charter capacity for worldwide trade in bulk cargoes, and related
fuel costs can also impact business volumes and margins. The milling businesses, both consolidated and non-
consolidated affiliates, operate in foreign and, in most cases, lesser developed countries. Subsidized wheat and flour
exports can create fluctuating market conditions that can have a significant impact on both the trading and milling
businesses’ sales and operating income.
The majority of the Commodity Trading and Milling segment’s sales pertain to the commodity trading business with
transactions related to the sourcing from domestic and international locations and delivery of grains to third party and
affiliate customers in various international locations. The execution of these purchase and delivery transactions have
long cycles of completion which may extend for several months with a high degree of price volatility. As a result,
these factors can significantly affect sales volumes, operating income, working capital and related cash flows from
quarter-to-quarter.
Since selling some components of its third party commodity trading operations in 2005, Seaboard re-established its
commodity trading business in markets associated with the sale. Seaboard concentrates on the supply of raw
materials to its core milling operations and to third party commodity trades in support of these milling operations.
Seaboard continues to seek opportunities in trading and milling businesses in order to achieve greater scale, volumes
and profitability.
Marine Segment
The Marine segment provides containerized cargo shipping services primarily from the United States to 25 different
countries in the Caribbean Basin, and Central and South America. Fluctuations in economic conditions or unstable
local political situations in the countries in which Seaboard operates can affect import/export trade volumes. In
addition, containerized cargo rates can fluctuate depending on local supply and demand for shipping services. This
segment time-charters or leases the majority of its ocean cargo vessels and is also affected by fluctuations in charter
hire rates and fuel costs.
Seaboard’s marine business operates in many foreign countries and can experience significant fluctuations as a
result of local economic or political instability. In prior years, when certain countries have experienced such
instability, Seaboard’s volumes and operating profits have been significantly impacted.
In recent years, Seaboard has been able to increase cargo rates in most markets, which has helped offset higher
charter hire rates and fuel costs. Assuming this segment continues to expand its cargo volumes, needs for vessels,
cargo carrying and handling equipment will continue to increase over the next couple of years. Seaboard continues
to explore ways to increase volumes on existing routes while seeking opportunities to broaden its route structure in
the region.
Sugar and Citrus Segment
Seaboard’s Sugar and Citrus segment operates a vertically integrated sugar and citrus production and processing
complex in Argentina. This segment’s sales and operating income are significantly impacted by local and worldwide
sugar prices. Yields from the Argentine sugar harvest can have an impact on the local price of sugar. Also, but to a
lesser degree, price fluctuations of the world market can affect local sugar prices and can also impact export sale
volumes and prices. Depending on local harvest and market conditions, this business also purchases third party
sugar and citrus for resale. Over the past several years, Seaboard made various modifications to this business to
improve the efficiency of its operations.
The functional currency of the Sugar and Citrus segment is the Argentine peso. The currency exchange rate can
also have an impact on reported U.S. dollar sales, operating income and cash flows. Financing needs for the
2007 Annual Report
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Management’s Discussion & Anal ysis
foreseeable future will remain high for this operation as a result of ongoing expansion of sugar and alcohol
production, and planned construction of a 40 megawatt cogeneration plant beginning in 2008, along with the payment
of debt. Seaboard continues to explore ways to improve and expand its existing operations while considering other
alternatives to expand this segment.
Power Segment
Seaboard’s Power segment operates as an unregulated independent power producer in the Dominican Republic
(DR) generating power from diesel engines mounted on two barges. This segment’s financing needs have been
minimal for the existing operations. During the past few years, operating cash flows have fluctuated from inconsistent
customer collections. Seaboard has contracts to sell approximately 40% of its power to certain government-approved
commercial large users under long-term contracts and also has a short-term contract for approximately 40% of its
power with a government-owned distribution company. Energy produced in excess of contracted amounts is sold on
the spot market primarily to three wholly or partially-government-owned distribution companies or other power
producers who lack sufficient power production to service their customers. Seaboard continues to pursue additional
commercial contract customers, which would reduce dependency on the government for liquidity.
At times during early 2007 and throughout 2006, Seaboard’s power production was restricted by the regulatory
authorities in the Dominican Republic. The regulatory body schedules production based on the amount of funds
available to pay for the power produced and the relative costs of the power produced. Fuel is the largest cost
component but increases in fuel prices to a certain extent have generally been passed through to customers. In
addition, Seaboard is pursuing additional investment opportunities in the power industry.
LIQUIDITY AND CAPITAL RESOURCES
Summary of Sources and Uses of Cash
Cash and short-term investments as of December 31, 2007 decreased $176.2 million from December 31, 2006, while
cash from operating activities was $143.9 million for 2007. The decrease was primarily the result of cash being used
for capital expenditures of $164.2 million, a payment of $61.3 million for the repurchase of the minority interest as
discussed in Note 2 to the consolidated financial statements, scheduled principal payments of long-term debt of $63.5
million and $30.5 million used to repurchase common stock as discussed in Note 12 to the Consolidated Financial
Statements. Cash from operating activities for 2007 decreased $139.9 million compared to 2006, primarily reflecting
lower net earnings for the year and increases in working capital needs in the Commodity Trading and Milling segment
primarily for increased amounts of receivables and inventory.
Cash and short-term investments as of December 31, 2006 increased $97.7 million from December 31, 2005
primarily reflecting $283.8 million of cash generated from operations partially offset by capital expenditures of $85.9
million, reductions in notes payable to banks of $30.0 million and scheduled payments of long-term debt of $61.2
million. Cash from operating activities for 2006 decreased $47.4 million compared to 2005, primarily reflecting
increases in working capital needs in the Commodity Trading and Milling segment resulting from re-establishing its
commodity trading operations in markets along with the timing of normal transactions for trade payables and voyage
settlements, and decreased earnings for the Pork segment.
Capital Expenditures, Acquisitions and Other Investing Activities
During 2007 Seaboard invested $164.2 million in property, plant and equipment, of which $78.1 million was expended
in the Pork segment, $3.0 million in the Commodity Trading and Milling segment, $61.0 million in the Marine
segment, $21.4 million in the Sugar and Citrus segment and $0.7 million in the remaining businesses. For the Pork
segment, $31.7 million was spent on the construction of a biodiesel plant discussed below and $22.9 million was
spent constructing additional hog finishing space also discussed below. For the Marine segment, $21.8 million was
spent to purchase two containerized cargo vessels and $21.4 million was spent to purchase cargo carrying and
handling equipment. In the Sugar and Citrus segment, the capital expenditures were primarily used for expansion of
cane growing operations, various improvements to the sugar mill and expansion of alcohol distillery operations. All
other capital expenditures were primarily of a normal recurring nature and primarily included replacements of
machinery and equipment, and general facility modernizations and upgrades.
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Management’s Discussion & Anal ysis
The Pork segment is constructing a processing plant to produce biodiesel to be sold to a third party, which will be
produced from third party animal fat and vegetable oil and/or pork fat from Seaboard’s Guymon pork processing
plant. This plant is expected to be completed in the first quarter of 2008 at a total cost of $42.0 million with
approximately $4.0 million remaining to be spent. Since 2006, the Pork segment has been constructing additional
hog finishing space to allow hogs more time to reach the desired weight for processing at the Guymon pork
processing plant. The remaining construction on these facilities is expected to be completed during 2008 at an
approximate cost of $11.3 million for a total of $35.6 million. The Pork segment previously announced plans to
expand its processed meats capabilities by constructing a separate further processing plant, primarily for bacon, at an
approximate cost of $45.0 million. Construction of this facility was anticipated to begin in the second half of 2007;
however the timing of this facility has been delayed. In addition, other alternatives to construction may be considered
for this project including the acquisition of an existing facility. As a result, capital expenditures during 2008 for this
project, if any, have not been determined at this time.
The total 2008 capital expenditures budget is $155.5 million. In addition to the projects detailed above, the Pork
segment plans to spend an additional $22.6 million primarily for improvements to existing hog facilities, upgrades to
the Guymon pork processing plant and additional facility upgrades and related equipment. Some of the upgrades to
the Guymon pork processing plant will increase daily double shift capacity from approximately 16,800 hogs to 18,500
hogs. The Commodity Trading and Milling segment plans to spend $5.5 million primarily for milling facility upgrades
and related equipment. The Marine segment has budgeted $85.2 million primarily for additional cargo carrying and
handling equipment, the potential purchase of two containerized cargo vessels and the expansion of existing port
facilities. The Sugar and Citrus segment plans to spend $25.9 million primarily for expansion of cane growing
operations, the development of a 40 megawatt cogeneration plant, and various improvements to the mill. The
balance of $1.0 million is planned to be spent in all other businesses. Management anticipates paying for these
capital expenditures from available cash, the use of available short-term investments or Seaboard’s available
borrowing capacity. As of December 31, 2007 Seaboard had commitments of $39.0 million to spend on construction
projects, purchase equipment, and make facility improvements.
During 2006 Seaboard invested $85.9 million in property, plant and equipment, of which $30.3 million was expended
in the Pork segment, $4.0 million in the Commodity Trading and Milling segment, $30.4 million in the Marine
segment, $18.4 million in the Sugar and Citrus segment and $2.8 million in the remaining businesses. For the Pork
segment, $12.9 million was spent on the construction of a biodiesel plant as discussed above, improvements to the
Guymon processing plant and expanding the further processing capacity acquired from Daily’s. For the Marine
segment, $23.1 million was spent to purchase cargo carrying and hauling equipment, expansion of port facilities and
to purchase two containerized cargo vessels previously chartered. In the Sugar and Citrus segment, the capital
expenditures were primarily used for the purchase of land, expansion of the alcohol distillery operations,
improvements to the mill, and plantation and harvesting equipment. All other capital expenditures were of a normal
recurring nature and primarily included replacements of machinery and equipment, and general
facility
modernizations and upgrades.
During 2005 Seaboard invested $64.2 million in property, plant and equipment, of which $8.1 million was expended in
the Pork segment, $13.8 million in the Commodity Trading and Milling segment, $30.0 million in the Marine segment,
$11.2 million in the Sugar and Citrus segment and $1.1 million in the remaining businesses. For the Commodity
Trading and Milling segment, $10.3 million was spent to purchase a used bulk vessel and make necessary
improvements. For the Marine segment, $8.8 million was spent to purchase two previously chartered containerized
cargo vessels and a crane, with the remaining expenditures primarily used to purchase cargo carrying equipment. In
the Sugar and Citrus segment, the capital expenditures were primarily used for mill expansion, plantation
development and harvesting equipment. All other capital expenditures were of a normal recurring nature and
primarily included replacements of machinery and equipment, and general facility modernizations and upgrades.
In late September 2007, Seaboard acquired for $8.5 million a 40% non-controlling interest, including cash contributed
into the business, in a flour mill business located in Colombia. During the fourth quarter of 2007, Seaboard acquired
for $6.6 million a 50% non-controlling interest in a grain trading business in Peru. Both of these investments are
accounted for using the equity method.
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Management’s Discussion & Anal ysis
In January 2007, Seaboard repurchased the 4.74% equity interest in its subsidiary, Seaboard Foods LP, from the
former owners of Daily’s. As part of the Purchase Agreement, on January 2, 2007 Seaboard paid $30.0 million of the
purchase price for the 4.74% equity interest to the former owners of Daily’s. During the third quarter of 2007,
Seaboard paid approximately $31.2 million to the former owners of Daily’s as the final payment to repurchase their
minority interest in Seaboard Foods, LP. See Note 2 to the Consolidated Financial Statements for further discussion.
Seaboard is part of a consortium that has been awarded the right to construct two coal-fired 305 megawatt electric
generating plants in the Dominican Republic. The amount of equity required for the project is uncertain but
Seaboard’s 50% or less share of the investment could range from $40.0 to $75.0 million depending on the amount of
financing obtained by the group and the timing of the construction of the second plant. The timing of the project and
Seaboard’s ultimate involvement has not yet been determined. During the fourth quarter of 2006 Seaboard invested
$4.6 million, plus $0.7 million previously placed in escrow in 2004 for a total of $5.3 million, for a less than 20%
ownership interest in a company operating a 300 megawatt electricity generating facility in the Dominican Republic.
As discussed in Note 2 to the Consolidated Financial Statements, at the beginning of the third quarter of 2005,
Seaboard completed the acquisition of a bacon processing company (Daily’s) in exchange for $44.5 million in cash,
plus working capital adjustments of approximately $3.1 million, a 4.74% equity interest in Seaboard Foods LP
(formerly Seaboard Farms, Inc.) valued at $44.5 million, a put right associated with the 4.74% interest in Seaboard
Foods LP valued at $6.7 million and $0.4 million of acquisition costs incurred. The cash payment was funded with
proceeds from the sale of short-term investments.
As discussed in Note 2 to the Consolidated Financial Statements, effective May 9, 2005 Seaboard’s Commodity
Trading and Milling segment sold some components of its third party commodity trading operations for $26.5 million.
During 2006, Seaboard re-established its commodity trading business in markets associated with the sale in 2005 of
some components of its third party commodity trading operations.
Financing Activities, Debt and Related Covenants
The following table represents a summary of Seaboard’s available borrowing capacity as of December 31, 2007. At
December 31, 2007, there were no borrowings outstanding under the committed line and borrowings totaled $85.1
million under the uncommitted lines all related to foreign subsidiaries. Letters of credit reduced Seaboard’s borrowing
capacity under its committed and uncommitted credit lines by $56.5 million and $9.8 million, respectively, primarily
representing $42.7 million for Seaboard’s outstanding Industrial Development Revenue Bonds and $13.7 million
related to insurance coverages.
(Thousands of dollars)
Long-term credit facilities – committed
Short-term uncommitted demand notes
Total borrowing capacity
Amounts drawn against lines
Letters of credit reducing borrowing availability
Available borrowing capacity at December 31, 2007
Total amount
available
$ 100,000
182,817
282,817
85,088
66,310
$ 131,419
Seaboard currently has capacity under existing covenants to undertake additional debt financings of approximately
$1,091.5 million. As of December 31, 2007, Seaboard is in compliance with all restrictive covenants relating to these
arrangements. See Note 8 to the Consolidated Financial Statements for a summary of the material terms of
Seaboard’s credit facilities, including financial ratios and covenants.
Scheduled long-term debt maturities range from $2.1 million to $46.9 million per year, for a total of $60.9 million, over
the next three years. Management believes Seaboard’s current combination of internally generated cash, liquidity,
capital resources and borrowing capabilities will be adequate for its existing operations and any currently known
potential plans for expansion of existing operations or business segments. Management does, however, periodically
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Management’s Discussion & Anal ysis
review various alternatives for future financings to provide additional liquidity for future operating plans. Management
intends to continue seeking opportunities for expansion in the industries in which Seaboard operates, utilizing existing
liquidity and available borrowing capacity, and currently does not plan to pursue other financing alternatives.
On August 7, 2007, the Board of Directors authorized Seaboard to repurchase from time to time prior to August 31,
2009 up to $50.0 million market value of its Common Stock in open market or privately negotiated purchases, of
which $19.5 million remained available at December 31, 2007. As of December 31, 2007, Seaboard used cash to
repurchase 17,089 shares of common stock at a total price of $30.5 million, including commissions. The stock
repurchase will be funded by cash on hand or available short-term borrowing capacity. Shares repurchased are
retired and resume status of authorized and unissued shares. The Board’s stock repurchase authorization does not
obligate Seaboard to acquire a specific amount of common stock and the stock repurchase program may be modified
or suspended at any time at Seaboard’s discretion.
In the fourth quarter of 2005, Seaboard issued 6,313.34 shares to its parent company, Seaboard Flour LLC, as a
result of a tax benefit of $8.3 million. See Note 12 to the Consolidated Financial Statements for further discussion.
Contractual Obligations and Off-Balance-Sheet Arrangements
A summary of Seaboard’s contractual cash obligations as of December 31, 2007 is as follows:
(Thousands of dollars)
Payments due by period
Total
Less than
1 year
1-3
years
3-5
years
More than
5 years
Vessel time and voyage-charter commitments $ 82,251
Contract grower finishing agreements
Other operating lease payments
32,042
108,437 12,044 23,944 20,371
11,256
10,652
6,869
$ 68,596 $ 13,655
$ -
Total lease obligations
Long-term debt
Short-term notes payable
Other purchase commitments
Total contractual cash obligations
and commitments
222,730 91,896
137,444 11,912 49,000
85,088 85,088 -
48,251 27,240
34,023
-
64,852
870,933 554,122 251,959
$1,316,195 $743,018 $349,210 $126,115
$ 97,852
The Marine segment enters into contracts to time-charter vessels for use in its operations. To support the operations
of the Pork segment, Seaboard has contract grower finishing agreements in place with farmers to raise a portion of
Seaboard’s hogs according to specifications. Seaboard has entered into grain and feed ingredient purchase
contracts to support the live hog operations of the Pork segment and has contracted for the purchase of additional
hogs from third parties. The Commodity Trading and Milling segment also enters into commodity purchase contracts
and ocean freight contracts, primarily to support sales commitments. Seaboard is also currently negotiating to extend
its lease for its port terminal operations in Miami, which is scheduled to expire on September 30, 2008. See Note 11
to the Consolidated Financial Statements for a further discussion and for a more detailed listing of other purchase
commitments.
Seaboard has also issued $2.0 million of guarantees to support certain activities of non-consolidated affiliates or third
parties who provide services for Seaboard. See Note 11 to the Consolidated Financial Statements for a detailed
discussion.
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15
$ -
52,078
3,265
55,343
42,509
-
-
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
RESULTS OF OPERATIONS
Net sales for the year ended December 31, 2007 increased to $3,213.3 million from $2,707.4 million in 2006 and
$2,688.9 million for 2005. The increase in net sales in 2007 was primarily the result of increased prices for
commodities sold by the commodity trading business and, to a lesser extent, increased commodity trading volumes
and higher volumes for marine cargo services. The increase in net sales in 2006 was primarily the result of higher
cargo volumes and higher average rates for marine cargo services and, to a lesser degree, the acquisition of Daily’s
in July of 2005, higher sales volume and prices of sugar, and higher sales volumes at certain African milling locations.
Substantially offsetting the increase in 2006 was lower commodity trading volumes as the result of the sale of some
components of Seaboard’s third party commodity trading operations in May 2005, and lower sales prices for pork
products.
Operating income decreased to $169.9 million in 2007, down from $297.0 million in 2006 and $320.0 million in 2005.
The 2007 decrease compared to 2006 primarily reflects the higher feed costs for hogs, including the effect on LIFO
reserves, primarily from the increased price of corn and, to a lesser degree, the effect of the mark-to-market of
derivatives in the Commodity Trading and Milling segment, and the pension settlement loss in the first quarter of 2007
as discussed in Note 10 of the Consolidated Financial Statements. The 2006 decrease compared to 2005 primarily
reflects the lower pork prices partially offset by higher cargo volumes and higher average rates for marine cargo
services and, to a lesser degree, higher sugar prices.
Pork Segment
(Dollars in millions)
Net sales
Operating income
2007
2006
2005
$ 1,003.8 $ 1,002.7 $ 1,023.9
$ 39.5 $ 138.3 $ 182.7
Net sales for the Pork segment increased $1.1 million for the year ended December 31, 2007 compared to 2006.
The increase is primarily the net result of higher overall prices for pork products sold and higher marketing fee income
principally offset by lower overall sales volume of pork products. While the number of hogs processed actually
increased slightly, overall pork product sales were down slightly primarily as a result of lower weights of internal hogs
processed. Overall, export sales volumes increased significantly more than export sale prices decreased for an
overall increase in export sales while domestic sale volumes decreased significantly more than domestic sale prices
increased for an overall decrease in domestic sales. Marketing fee income increased as a result of an increase in the
number of head processed by Triumph Foods.
Operating income decreased $98.8 million for the year ended December 31, 2007 compared with 2006. The
decrease is primarily as a result of higher feed costs, primarily from the increased price of corn, and to a lesser
extent, soybean meal, especially during the fourth quarter of 2007. Also decreasing operating income was the impact
of using the LIFO method for determining certain inventory costs which decreased operating income by $25.0 million
in 2007 compared to an increase of $0.9 million in 2006, primarily as a result of higher feed costs. These higher
costs were partially offset by increased marketing fee income. During the fourth quarter of 2007, the Pork segment
incurred an operating loss of $5.6 million primarily from the negative LIFO impact of $9.8 million.
Management is unable to predict future market prices for pork products or the cost of feed and third party hogs.
Since the last half of 2006, feed costs continue to rise significantly, primarily from the higher cost of corn as the
demand for corn has increased due to, among other things, demand by ethanol plants. Also, over the past few years,
market prices for pork products were higher than historic norms while recent prices for pork products sold have
declined. As a result of current market conditions and unpredictable grain prices, management is unable to predict
whether this segment will be profitable for 2008. In addition, as discussed in Note 2 to the Consolidated Financial
Statements, depending on management’s future plans for expansion of Daily’s, there is a possibility that either
goodwill or other intangible assets, or both, could be deemed impaired during some future period including fiscal
2008, which may result in a material charge to earnings.
Net sales for the Pork segment decreased $21.2 million for the year ended December 31, 2006 compared to 2005,
primarily as a result of lower sales prices for pork products and, to a lesser extent, decreased sales volumes of pork
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Management’s Discussion & Anal ysis
products. Sales volumes decreased as a result of fewer weekend production shifts in 2006 compared to 2005.
Partially offsetting the decrease was sales contributed from the acquisition of Daily’s in July 2005 as discussed in
Note 2 to the Consolidated Financial Statements.
Operating income decreased $44.4 million for the year ended December 31, 2006 compared with 2005 primarily as a
result of lower prices for pork products. This decrease was partially offset by lower costs for third party hogs used for
processing and a higher percentage of Seaboard-raised hogs processed which cost less than third party hogs. Also
during 2006, Seaboard was able to partially offset market increases in the price of corn, a primary feed ingredient for
hogs, with commodity derivative gains.
Commodity Trading and Milling Segment
(Dollars in millions)
Net sales
Operating income
Income from foreign affiliates
2007
2006
$ 1,152.0 $ 735.6
$ 20.9 $ 37.2
$ 5.2
$ 6.3
2005
$ 835.7
$ 34.4
$ 8.1
Net sales for the Commodity Trading and Milling segment increased $416.4 million for the year ended December 31,
2007 compared to 2006. The increase primarily reflects increased prices for commodities sold, especially for wheat,
and, to a lesser extent, increased commodity trading volumes with third parties. The increased trading volumes to
third parties are primarily a result of Seaboard expanding its business in new and existing markets. As worldwide
commodity price fluctuations cannot be predicted, management is unable to predict the level of future sales.
Operating income for this segment decreased $16.3 million for 2007 compared to 2006. This decrease primarily
reflects the fluctuation of $19.3 million in 2007 compared to 2006 of marking to market derivative contracts, as
discussed below. The decrease was also the result of lower margins from certain milling operations, especially in
Zambia. The lower margins at certain milling locations are the result of less favorable market conditions, primarily
from competitive pressures and higher wheat costs. Partially offsetting these decreases were increased margins on
sales per metric ton to certain foreign non-consolidated affiliates and also increased trading volumes to third parties
as discussed above. Due to the uncertain political and economic conditions in the countries in which Seaboard
operates, management is unable to predict future operating results, but anticipates positive operating income for
2008 based on current market prices for commodities, excluding the potential effects of marking to market derivative
contracts.
Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for 2007 would
have been higher by $13.2 million, whereas operating income for 2006 and 2005 would have been lower by $6.2
million and $3.9 million, respectively. Included in the 2007 amount, during the fourth quarter of 2007 this segment for
the first time entered into certain forward freight agreements, viewed as taking long positions in the freight market as
well as covering certain short freight sales, which may or may not result in actual losses when future trades are
executed, resulting in a mark-to-market loss of $5.6 million as of December 31, 2007. While management believes
its commodity futures and options, foreign exchange contracts and forward freight agreements are primarily economic
hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the
extensive record-keeping required to account for commodity transactions as hedges for accounting purposes.
Accordingly, while the changes in value of the derivative instruments were marked to market, the changes in value of
the firm purchase or sales contracts were not. As products are delivered to customers, these mark-to-market
adjustments should be primarily offset by realized margins as revenue is recognized.
Income from foreign affiliates for the year ended December 31, 2007 decreased $1.1 million from 2006 as a result of
less favorable market conditions primarily from competitive pressures and higher wheat costs. Based on the
uncertainty of local political and economic situations in the countries in which the flour and feed mills operate, and
increasing grain costs, management cannot predict future results.
2007 Annual Report
17
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
Net sales for the Commodity Trading and Milling segment decreased $100.1 million for the year ended December 31,
2006 compared to 2005. The decrease primarily reflects the sale of some components of Seaboard’s third party
commodity trading operations in May 2005. Partially offsetting the decrease was Seaboard re-establishing its
commodity trading operations in markets associated with the sale discussed above and increased sales volumes at
certain African milling operations primarily as a result of expanding existing businesses.
Operating income for this segment increased $2.8 million for 2006 compared to 2005. This increase primarily reflects
the positive fluctuation of $2.3 million in 2006 compared to 2005 of marking to market derivative contracts, as
discussed above. The increase was also the result of improved income from higher sales volume at certain African
milling operations as noted above. The increase was partially offset by the lower sales volume as a result of the sale
discussed above.
Income from foreign affiliates for the year ended December 31, 2006 decreased $1.8 million from 2005. The
decrease primarily reflects better local operating conditions in 2005 compared to 2006 for certain African affiliates.
Marine Segment
(Dollars in millions)
Net sales
Operating income
2007
2006
2005
$ 822.2 $ 741.6 $ 638.3
$ 104.2 $ 106.0 $ 90.9
Net sales for the Marine segment increased $80.6 million for the year ended December 31, 2007, compared to 2006
primarily reflecting higher cargo volumes. Cargo volumes were higher as a result of continued favorable economic
conditions in most markets served and the expansion of services provided in certain markets. Cargo rates overall
remained relatively flat as a result of increased competition.
Operating income for the Marine segment decreased by $1.8 million over 2006. The decrease was primarily the
result of higher dry dock expenses and increased fuel costs for vessels on a per unit shipped basis more than
offsetting the increase in higher cargo volumes discussed above. Although management cannot predict changes in
future volumes and cargo rates or to what extent changes in competition and economic conditions will impact net
sales or operating income, it does expect this segment to remain profitable in 2008, although lower than 2007.
Net sales for the Marine segment increased $103.3 million for the year ended December 31, 2006, compared to 2005
as a result of higher cargo volumes in most markets and higher average cargo rates in certain markets. Cargo
volumes were higher as a result of favorable economic conditions in most markets served. Cargo rates were higher
as a result of general rate increases across many markets and higher cost-recovery surcharges for fuel. Operating
income for the Marine segment increased by $15.1 million over 2005, primarily reflecting the increased rates and
volumes discussed above, partially offset by higher costs of fuel, inland transportation costs, charter hire, and selling
expenses.
Sugar and Citrus Segment
(Dollars in millions)
Net sales
Operating income
Income (loss) from foreign affiliates
2007
2006
2005
$ 125.9 $ 123.4 $ 89.0
$ 15.5 $ 19.2 $ 11.9
$ 0.4 $ (1.1) $ 0.1
Net sales for the Sugar and Citrus segment increased $2.5 million for the year ended December 31, 2007 compared
to 2006. The increase primarily reflects higher citrus sales partially offset by lower sugar sales. Citrus sales
increased primarily as a result of higher sales volume from larger purchases of citrus from third parties for resale
during the fourth quarter of 2007 compared to 2006. Sugar sales decreased primarily as a result of lower sales
volume partially offset by higher domestic sugar prices. Sales volumes decreased primarily from lower export sales
as the result of lower sales of purchased sugar from third parties for resale. Although domestic Argentine prices
increased, governmental authorities continue to attempt to control inflation by limiting the price of basic commodities,
including sugar. Accordingly, management cannot predict whether sugar prices will continue to increase for 2008.
18
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
Operating income decreased $3.7 million during 2007 compared to 2006 primarily as a result of higher overall sugar
production costs in excess of domestic price increases, as discussed above, and also an increase in administrative
expenses, primarily from higher personnel costs. Management expects positive operating income in this segment for
2008.
Net sales for the Sugar and Citrus segment increased $34.4 million for the year ended December 31, 2006 compared
to 2005. The increase primarily reflects overall higher sales volume of sugar from increased purchases of sugar from
third parties for resale and overall higher sugar prices, especially for export sales. Operating income increased $7.3
million during 2006 compared to 2005 primarily as a result of higher sugar prices discussed above. The higher sales
volume of purchased sugar did not significantly increase operating income as additional income was primarily offset
by increased selling costs. The increase is also the result of, but to a lesser extent, decreased losses in the citrus
operations as a result of improved prices for citrus products sold.
The loss from foreign affiliates in 2006 primarily represents the expense of canceling a franchisee agreement incurred
during the first quarter of 2006.
Power Segment
(Dollars in millions)
Net sales
Operating income
2007
2006
$ 94.0 $ 87.8
$ 5.4 $ 8.5
2005
$ 77.7
$ 9.6
Net sales for the Power segment increased $6.2 million for the year ended December 31, 2007 compared to 2006
primarily reflecting higher rates. The higher rates were attributable primarily to higher fuel costs, a component of
pricing. For the year, 2007 power production levels were relatively flat compared to 2006. At times during early 2007
and throughout 2006, Seaboard’s power production was restricted by the regulatory authorities in the Dominican
Republic (DR). The DR regulatory body schedules production based on the amount of funds available to pay for the
power produced and the relative costs of the power produced.
Operating income decreased $3.1 million during 2007 compared to 2006. The decrease was primarily the result of
fuel cost increases being higher than the increase in rates discussed above. The decrease was also the result of, but
to a lesser extent, lower recovery of bad debts during 2007 than 2006 which resulted in a reversal of bad debt
expense for each year. Management cannot predict future fuel costs or the extent to which the regulatory authority
will restrict Seaboard’s future production of power, although management expects this segment to remain profitable
for 2008.
Net sales for the Power segment increased $10.1 million for the year ended December 31, 2006 compared to 2005
primarily reflecting higher rates partially offset by lower power production levels. Rates increased during 2006
primarily as a result of higher fuel costs, a component of pricing. At times during 2006, Seaboard’s power production
was restricted by the regulatory authorities in the Dominican Republic (DR) as discussed above. Operating income
decreased $1.1 million during 2006 compared to 2005. The decrease was primarily the result of lower production
levels while fuel costs, transmission and other regulatory fees charged to Seaboard increased more than rates
increased.
All Other Segments
(Dollars in millions)
Net sales
Operating income
Loss from foreign affiliate
2007
2006
$ 15.4 $ 16.4
$ 1.5
$ 0.6
$ (1.2)
$ (1.7)
2005
$ 24.4
$ 2.6
$ (7.9)
Net sales and operating income decreased for 2007 compared to 2006 due to decreased volumes and increased
production costs in the jalapeño pepper operations. For 2008, management expects operating income for All Other
Segments to remain positive.
2007 Annual Report
19
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
Net sales and operating income decreased for 2006 compared to 2005 primarily as a result of discontinuing a portion
of Seaboard’s transportation business during the second half of 2005 and combining the remaining related party
portion of the business with the Pork segment. Operating income also decreased during 2006 as a result of
increased transportation costs in the jalapeño pepper operations.
The loss from foreign affiliate reflects Seaboard’s share of losses from its equity method investment in a Bulgarian
wine business (the Business). In 2007 and 2006, Seaboard recorded 50% of the losses from the Business compared
to 100% in 2005. No additional losses in future years will be incurred as Seaboard has discontinued using the equity
method of accounting for this investment and there is no remaining book value as of December 31, 2007. See Note 5
to the Consolidated Financial Statements for further discussion.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the year ended December 31, 2007 increased by $14.8
million over 2006 to $172.1 million. This increase is primarily due to increased personnel costs principally related to
the growth of the business and, to a lesser extent, the result of the $3.7 million pension settlement loss recognized in
the first quarter of 2007 related to Mr. H. H. Bresky’s retirement payment in February 2007 as discussed in Note 10 to
the Consolidated Financial Statements. As a percentage of revenues, SG&A decreased to 5.4% for 2007 compared
to 5.8% for 2006 primarily as a result of increased sales in the Commodity Trading and Milling and Marine segments.
SG&A expenses for the year ended December 31, 2006 increased by $18.0 million over 2005 to $157.2 million. This
increase is primarily due to increases in the Marine segment reflecting increased costs related to the volume growth
of this business, the acquisition of Daily’s in the Pork segment and, to a lesser extent, additional selling costs related
to higher sales volume in the Sugar and Citrus segment. As a percentage of revenues, SG&A increased to 5.8% for
2006 compared to 5.2% for 2005 primarily as a result of the sale of some components of Seaboard’s third party
commodity trading operations in May 2005 discussed above.
Interest Expense
Interest expense totaled $12.6 million, $18.8 million and $22.2 million for the years ended December 31, 2007, 2006
and 2005, respectively. Interest expense decreased for 2007 compared to 2006, reflecting a lower average level of
long-term borrowings outstanding during 2007 and lower average interest rates on short-term borrowings. Interest
expense decreased for 2006 compared to 2005, primarily reflecting a lower average level of short-term and long-term
borrowings outstanding during 2006.
Interest Income
Interest income totaled $18.9 million, $25.3 million and $14.2 million for the years ended December 31, 2007, 2006
and 2005, respectively. The decrease for 2007 primarily reflects a decrease in interest received on outstanding
customer receivable balances in the Power segment, partially offset by an increase in average funds invested and
higher interest rates on funds invested. The increase for 2006 primarily reflects the higher level of average funds
invested during 2006, an increase in interest received on outstanding customer receivable balances in the Power
segment and, to a lesser extent, higher interest rates on funds invested.
Minority and Other Noncontrolling Interests
Minority and other noncontrolling interests expense decreased $6.9 million in 2007 compared to 2006, primarily a
result of no longer having the minority interest associated with the Daily’s acquisition due to the equity interest being
repurchased by Seaboard effective January 1, 2007 as discussed in Note 2 of the Consolidated Financial
Statements.
Foreign Currency Gains (Losses)
Foreign currency gains (losses) totaled $0.1 million, $1.2 million and $(1.0) million for the years ended December 31,
2007, 2006 and 2005, respectively. As discussed in Note 5 to the consolidated financial statements, during the fourth
quarter of 2007 Seaboard recognized $1.3 million in foreign currency gains related to discontinuing the equity method
of accounting related to its investment in a Bulgarian wine business. The remaining fluctuations for 2007 compared
to 2006 primarily relates to currency fluctuations in certain African operations of the Commodity Trading and Milling
segment. The fluctuations for 2006 compared to 2005 primarily relate to changes in the value of the Dominican
Republic (DR) peso compared to the U.S. dollar incurred by the Power division related to its peso-denominated net
20
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
assets, primarily trade receivables. Seaboard operates in many developing countries throughout the world. The
political and economic conditions of these markets, along with fluctuations in the value of the U.S. dollar, cause
volatility in currency exchange rates which expose Seaboard to fluctuating foreign currency gains and losses which
cannot be predicted by Seaboard.
Loss from the Sale of a Portion of Operations
As discussed in Note 2 to the Consolidated Financial Statements, Seaboard sold some components of its third party
commodity trading operations in May 2005. Because Seaboard does not use hedge accounting for its commodity
and foreign exchange agreements, gains of $2.2 million from the mark-to-market of the sold derivative instruments
were recorded in cost of sales prior to the date of the sale while the change in value of the related firm sales
commitment was not, resulting in a loss on the sale from this transaction totaling $1.7 million.
investment
Other Investment Income, Net
Other
the years ended
December 31, 2007, 2006 and 2005, respectively. The increase for 2007 compared to 2006 primarily reflects a gain
recognized by the Power segment for the settlement of a receivable, not related to its business, purchased at a
discount. The increase for 2006 primarily reflects the gain realized on a sale of domestic equity securities.
totaled $6.1 million, $4.4 million and $2.0 million
income, net
for
Miscellaneous, Net
Miscellaneous, net totaled $5.2 million, $10.2 million and $5.7 million for the years ended December 31, 2007, 2006
and 2005, respectively. During the second quarter of 2007, Seaboard recognized a gain of $4.1 million from a
favorable settlement received in June 2007 related to a land expropriation in Argentina. This land settlement was
recorded as miscellaneous income since the land was expropriated prior to Seaboard’s purchase of the sugar and
citrus business, thus never a part of the sugar and citrus operations recorded by Seaboard. For 2006 and 2005,
miscellaneous, net included the impact of changing interest rates on interest rate swap agreements. During the
second quarter of 2006, Seaboard terminated all interest rate exchange agreements by making a payment in the
amount of $1.0 million to unwind these swaps. Seaboard paid a weighted average fixed rate of 5.51% on the notional
amount of $150.0 million and received a variable interest rate in return before termination. These contracts were
marked-to-market. During 2006, Seaboard recorded a gain of $3.4 million compared to a gain of $3.0 million in 2005,
related to these swaps, reflecting the difference between the contracted fixed rate compared to variable rates during
those years. These swap agreements did not qualify as hedges for accounting purposes and accordingly, changes in
the market value were recorded to earnings as interest rates change. See Note 9 to the Consolidated Financial
Statements for additional discussion. Also included in 2006 and 2005 is income of $5.4 million and $1.3 million,
respectively, of put option value change as discussed in Note 2 to the Consolidated Financial Statements
Income Tax Expense
The effective tax rate decreased for 2007 compared to 2006 primarily from lower domestic taxable income resulting in
a higher percentage of permanently deferred foreign earnings compared to domestic taxable income and, to a lesser
extent, a change in valuation allowances resulting in a net benefit in 2007. The effective tax rate increased for 2006
compared to 2005 primarily reflecting favorable tax settlements in 2005. Also, during the second quarter of 2006,
Seaboard recorded a $2.8 million tax benefit related to a settlement with the Internal Revenue Service. See Note 7 to
the Consolidated Financial Statements for additional discussion of these items.
OTHER FINANCIAL INFORMATION
Seaboard 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, in all material respects, with all such regulations. Laws and
regulations in the states where Seaboard currently conducts its pork operations are restrictive. Future changes in
environmental or corporate farming laws could adversely affect the manner in which Seaboard operates its business
and its cost structure.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 157 (SFAS 157), "Fair Value Measurements.” This statement establishes a single authoritative
definition of fair value when accounting rules require the use of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair value measurements. Seaboard will be required to adopt this
2007 Annual Report
21
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
statement as of January 1, 2008. However, in February 2008, the FASB issued FASB Staff Position 157-2 which
defers the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually).
Seaboard will be required to adopt SFAS 157 for these nonfinancial assets and nonfinancial liabilities as of January
1, 2009. Management believes the adoption of SFAS 157 will not have a material impact on Seaboard’s financial
position or net earnings.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (SFAS 159), “The Fair
Value Option for Financial Assets and Financial Liabilities.” This statement provides companies with an option to
report selected financial assets and liabilities at fair value. Seaboard will be required to adopt this statement as of
January 1, 2008. Management believes the adoption of SFAS 159 will not have a material impact on Seaboard’s
financial position or net earnings.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R) (SFAS 141R),
“Business Combinations.” This statement defines the acquirer as the entity that obtains control of one or more
businesses in the business combination, establishes the acquisition date as the date that the acquirer achieves
control and requires the acquirer to recognize the assets acquired, liabilities assumed and any noncontrolling interest
at their fair values as of the acquisition date. This statement also requires that acquisition-related costs of the
acquirer be recognized separately from the business combination and will generally be expensed as incurred.
Seaboard will be required to adopt this statement as of January 1, 2009. The impact of adopting SFAS 141R will be
limited to any future business combinations for which the acquisition date is on or after January 1, 2009.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (SFAS 160),
“Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51”. This statement will
change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity. Seaboard will be required to adopt this statement as of January 1, 2009.
The adoption of SFAS 160 will not have a material impact on Seaboard’s financial position or net earnings.
Management does not believe its businesses have been materially adversely affected by general inflation.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates. Management has identified the accounting estimates believed to be the most
important to the portrayal of Seaboard’s financial condition and results, and which require management’s most
difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters
that are inherently uncertain. Management has reviewed these critical accounting estimates with the Audit
Committee of the Board of Directors. These critical accounting policies include:
Allowance for doubtful accounts – Seaboard primarily uses a specific identification approach, in management’s best
judgment, to evaluate the adequacy of this reserve for estimated uncollectible receivables as of the consolidated
balance sheet date. Changes in estimates, developing trends and other new information can have a material effect
on future evaluations. Furthermore, Seaboard’s receivables are heavily weighted towards foreign receivables
($273.7 million or 71.2% at December 31, 2007), including receivables due from foreign affiliates ($90.0 million at
December 31, 2007) and receivables in the Power segment, which generally represent more of a collection risk than
its domestic receivables. Receivables due from foreign affiliates are generally associated with entities located in
foreign countries considered underdeveloped, as discussed below, which can experience conditions causing sudden
changes to their ability to repay such receivables on a timely basis or in full. For the Power segment which operates
in the Dominican Republic (DR), collection patterns have been sporadic and are sometimes based upon negotiated
settlements for past due receivables resulting in material revisions to the allowance for doubtful accounts from year to
year. Future collections of receivables or lack thereof could result in a material charge or credit to earnings
depending on the ultimate resolution of each individual customer past due receivable. Bad debt expense for the
years ended December 31, 2007, 2006 and 2005 was $1.4 million, $2.5 million and $4.0 million, respectively.
22
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
Investments in and advances to foreign affiliates – Management uses the equity method of accounting for these
investments. At the balance sheet date, management will evaluate equity investments and related advances for a
potential decline in value deemed to be other than temporary when management believes conditions warrant such an
assessment. If management believes conditions warrant an assessment, such assessment encompasses various
methods to determine net realizable value, including methods based on the probability weighting of various future
projected net cash flow scenarios expected to be generated by the long-lived assets of the entity, and the resulting
ability of that entity to repay its debt and equity based on priority, probability weighting of various future projected net
cash flow scenarios expected to be realized through the sale of the ownership interest of the investment, or other
methods to assess the fair value of the investment. These projected cash flows and other methods are subjective in
nature and are based on management’s best estimates and judgment. In addition, in most cases there is very little
industry market data available for the countries in which these operations conduct their business. Since these
investments mostly involve entities in foreign countries considered underdeveloped, changes in the local economy or
political environment may occur suddenly and can materially alter the evaluation and estimates used to project cash
flows. In most cases, Seaboard has an ongoing business relationship through sales of grain to these entities that
also includes receivables from these foreign affiliates as discussed above. Management considers the long-term
business prospects of such investments when making its assessment. At December 31, 2007, the total investment in
and advances to foreign affiliates was $60.7 million. See Note 5 to the Consolidated Financial Statements for further
discussion.
Goodwill and Other Intangible Assets – Goodwill and other indefinite-life intangible assets, not subject to
amortization, are evaluated annually for impairment at the quarter-end closest to the anniversary date of the
acquisition, or more frequently if circumstances indicate that impairment is likely. The impairment tests require
management to make judgments in determining what assumptions to use in estimating fair value. One of the
methods used by Seaboard to determine fair value is the income approach using discounted future projected cash
flows. Some of the key assumptions utilized in determining future projected cash flows include estimated growth
rates, expected future sales prices and costs, and future capital expenditures requirements. Judgment is also
required in assigning probability weighting to the various future cash flow scenarios. The probability weighting
percentages used and the various future projected cash flow models prepared by management are based on current
facts and circumstances existing at the time of preparation and management’s best estimates and judgment of future
operating results. Seaboard cannot predict the occurrence of certain future events that might adversely affect the
reported value of goodwill and indefinite-life intangible assets that may include, but are not limited to, a change in the
business climate, a negative change in relationships with significant customers, and changes to strategic decisions,
including decisions to expand, made in response to economic and competitive conditions. Changes in these facts,
circumstances and management’s estimates and judgment could result in an impairment of goodwill and/or other
intangible assets resulting in a material charge to earnings. See Note 2 to the Consolidated Financial Statements for
further discussion regarding the Pork segment and its recorded intangible asset values related to Daily’s. At
December 31, 2007, Seaboard has goodwill of $40.6 million and other intangible assets not subject to amortization of
$24.0 million.
Accrued Pension Liability – The measurement of Seaboard’s pension liability and related expense is dependent on a
variety of assumptions and estimates regarding future events. These assumptions include discount rates, assumed
rate of return on plan assets, compensation increases, turnover rates, mortality rates and retirement rates. The
discount rate and return on plan assets are important elements of liability and expense measurement and are
reviewed on an annual basis. The effect of changing the discount rate and assumed rate of return on plan assets by
50 basis points would increase pension expense by approximately $1.2 million per year. The effects of actual results
differing from the assumptions are primarily accumulated in accrued pension liability and amortized over future
periods and, therefore, generally affect Seaboard’s recognized pension expense in such future periods.
2007 Annual Report
23
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
Income Taxes – Income taxes are determined by management based on current tax regulations in the various
worldwide taxing jurisdictions in which Seaboard conducts its business. In various situations, accruals have been
made for estimates of the tax effects for certain transactions, business structures, the estimated reversal of timing
differences and future projected profitability of Seaboard’s various business units based on management’s
interpretation of existing facts, circumstances and tax regulations. Should new evidence come to management’s
attention which could alter previous conclusions or if taxing authorities disagree with the positions taken by Seaboard,
the change in estimate could result in a material adverse or favorable impact on the financial statements. As of
December 31, 2007, Seaboard has deferred tax assets of $43.5 million, net of the valuation allowance of
$18.1 million, and deferred tax liabilities of $129.7 million. For the years ended December 31, 2007, 2006 and 2005,
income tax expense included $(22.5) million, $6.5 million and $5.4 million for deferred taxes to federal, foreign, state
and local taxing jurisdictions.
Contingent liabilities – Management has evaluated Seaboard’s various exposures, including environmental
exposures of its Pork segment. Based on currently available information and analysis, management has analyzed
the potential probability of the various exposures and believes that all such items have been adequately accrued for
and reflected in the consolidated balance sheet as of December 31, 2007. Changes in information, legal statutes or
events could result in management making changes in estimates that could have a material adverse impact on the
financial statements.
DERIVATIVE INFORMATION
Seaboard is exposed to various types of market risks from its day-to-day operations. Primary market risk exposures
result from changing commodity prices, freight rates, foreign currency exchange rates and interest rates. Changes in
commodity prices impact the cost of necessary raw materials and other inventories, finished product sales and firm
sales commitments. Seaboard uses various grain and meal futures and options purchase contracts to manage
certain risks of increasing prices of raw materials and firm sales commitments or anticipated sales contracts. Short
sales contracts are then used to offset the open purchase derivatives when the related commodity inventory is
purchased in advance of the derivative maturity, effectively offsetting the initial futures or option purchase contract.
From time to time, hog futures are used to manage risks of increasing prices of live hogs acquired for processing, and
pork bellies and hog futures are used to manage risks of fluctuating prices of pork product inventories and related
future sales. Because changes in foreign currency exchange rates impact the cash paid or received on foreign
currency denominated receivables and payables, Seaboard manages certain of these risks through the use of foreign
currency forward exchange agreements. Changes in interest rates impact the cash required to service variable rate
debt. From time to time, Seaboard uses interest rate swaps to manage risks of increasing interest rates. From time
to time, Seaboard may enter into speculative derivative transactions related to its market risks.
During the fourth quarter of 2007, the Commodity Trading and Milling segment for the first time entered into certain
forward freight agreements, viewed as taking long positions in the freight market as well as covering short freight
sales, which may or may not result in actual losses when future trades are executed. These forward freight
agreements which extend into 2009 are viewed by management as an economic hedge against the potential of future
rising charter hire rates to be incurred by this segment for bulk cargo shipping while conducting its business of
delivering grains to customers in many international locations.
Inventories that are sensitive to changes in commodity prices, including carrying amounts at December 31, 2007 and
2006, are presented in Note 4 to the Consolidated Financial Statements. Raw material requirements, finished
product sales, and firm sales commitments are also sensitive to changes in commodity prices. The tables below
provide information about Seaboard’s derivative contracts that are sensitive to changes in commodity prices.
Although used to manage overall market risks, Seaboard does not perform the extensive record-keeping required to
account for commodity transactions as hedges. Management continues to believe its commodity futures and options
are primarily economic hedges although they do not qualify as hedges for accounting purposes. Since these
derivatives are not accounted for as hedges, fluctuations in the related commodity prices could have a material
impact on earnings in any given year. The following tables present the notional quantity amounts, the weighted
average contract prices, the contract maturities, and the fair values of the open commodity derivative positions at
December 31, 2007.
24
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
Trading:
Contract Volumes
Quantity Units
Wtd.-avg.
Price/Unit
Maturity
Fair Value
(000’s)
Futures Contracts:
Corn purchases – long
Corn sales – short
11,002,682 bushels
6,036,725 bushels
Wheat purchases – long
Wheat sales – short
9,426,493 bushels
3,562,723 bushels
Soybean purchases – long
Soybean sales – short
680,000 bushels
420,000 bushels
Soybean meal purchases – long
78,800
Soybean meal sales – short 132,600
tons
tons
Hog purchases – long
11,400,000 pounds
Pork bellies purchases – long
Sun seed pellets purchases – long
Sun seed pellets sales – short
Options Contracts:
Wheat calls purchased – long
720,000 pounds
146,968 bushels
55,113 bushels
2,825,735 bushels
Wheat calls written – short
4,577,205 bushels
$
4.53
5.02
7.78
8.11
11.23
10.93
303.68
274.14
.70
.86
15.59
15.35
.49
.21
Wheat puts purchased – long
125,000 bushels
$
.35
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
$
2,260
(1,874)
11,129
(4,225)
554
(446)
2,525
(8,082)
(996)
2
171
(79)
2,143
(1,213)
$
(30)
At December 31, 2006, Seaboard had net trading contracts to purchase (sell) 12,208,000 bushels of grain with a fair
value of $1,223,000, 8,100 tons of meal with a fair value of $492,000, and 15,560,000 pounds of hog with a fair value
of $(83,000).
The table below provides information about the forward currency exchange agreements entered into and financial
instruments sensitive to foreign currency exchange rates at December 31, 2007. The information below is presented
in U.S. dollar equivalents and the majority of the contracts mature through 2008. The table presents the contract
amounts in fair values and weighted average contractual exchange rate.
December 31, 2007
(Dollars in thousands)
Trading:
Forward exchange agreements (receive $U.S./pay South African Rand (ZAR))
Related weighted average contractual exchange rates:
Contract
Amounts
Fair Values
$ 100,452
$
(472)
Forward exchange agreements (receive $U.S./pay ZAR)
6.94
Forward exchange agreements (receive $U.S./pay Euro (EUR))
$ 26,706
$ (1,186)
Related weighted average contractual exchange rates:
Forward exchange agreements (receive $U.S./pay EUR)
.71
Forward exchange agreement, including projected
Interest due at maturity (receive Japanese Yen/pay $U.S.)
Related weighted average contractual exchange rates:
$ 63,081
$ (1,945)
Forward exchange agreements (receive Japanese Yen/pay $U.S.)
108.13
At December 31, 2006, Seaboard had net agreements to exchange the equivalent of $42.8 million of South African
rand at an average contractual exchange rate of 7.17 ZAR to one U.S. dollar and a fair value of $(0.6) million. At
December 31, 2006, Seaboard also had net agreements to exchange the equivalent of $58.4 million of Japanese Yen
at an average contractual exchange rate of 114.30 Yen to one U.S. dollar and a fair value of $(0.8) million.
2007 Annual Report
25
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
The table below provides information about the forward freight agreements at December 31, 2007. The table
presents the per day contract amount and its related fair value.
December 31, 2007
Trading:
Forward freight agreement during 2008
Forward freight agreement during 2009
$ 61,250
$ 41,500
Per Day
Contract Amount
Fair Value
(000’s)
$ (3,546)
$ (2,043)
The table below provides information about Seaboard's non-trading financial instruments sensitive to changes in
interest rates at December 31, 2007. For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates. At December 31, 2007, long-term debt included foreign
subsidiary obligations of $1.7 million denominated in CFA francs (a currency used in several central African
countries), $0.3 million payable in Argentine pesos, and $0.1 million denominated in Mozambique metical. At
December 31, 2006, long-term debt included foreign subsidiary obligations of $1.8 million denominated in CFA
francs, $0.3 million payable in Argentine pesos, and $0.6 million denominated in Mozambique metical. 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)
2008
2009
2010
2011
2012 Thereafter
Total
Long-term debt:
Fixed rate
$ 11,632 $ 46,891
$
2,109 $ 1,477 $ 32,546
$
709
$ 95,364
Average interest rate
6.85%
6.34%
11.38% 8.87% 7.03%
15.92%
6.86%
Variable rate
$
280
$
-
$
- $
- $
-
$ 41,800
$ 42,080
Average interest rate
7.00%
-
-
-
- 3.49%
3.52%
Non-trading financial instruments sensitive to changes in interest rates at December 31, 2006 consisted of fixed rate
long-term debt totaling $159.1 million with an average interest rate of 7.09%, and variable rate long-term debt totaling
$42.1 million with an average interest rate of 4.00%.
During the second quarter of 2006, Seaboard terminated all interest rate exchange agreements with a total notional
value of $150.0 million. Seaboard made payments in the amount of $1.0 million to unwind these swaps. Seaboard
had originally entered into these five, ten-year interest rate exchange agreements during 2001 in which Seaboard
paid a stated fixed rate and received a variable rate of interest on a total notional amount of $150.0 million.
26
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Management’s Responsibility for Consolidated Financial Statements
The management of Seaboard Corporation and its consolidated subsidiaries (Seaboard) is responsible for the
preparation of its consolidated financial statements and related information appearing in this report. Management
believes that the consolidated financial statements fairly present Seaboard’s financial position and results of
operations in conformity with U.S. generally accepted accounting principles and necessarily includes amounts that
are based on estimates and judgments which it believes are reasonable based on current circumstances with due
consideration given to materiality.
Management relies on a system of internal controls over financial reporting that is designed to provide reasonable
assurance that assets are safeguarded, transactions are executed in accordance with company policy and U.S.
generally accepted accounting principles, and are properly recorded, and accounting records are adequate for
preparation of financial statements and other information and disclosures. The concept of reasonable assurance is
based on recognition that the cost of a control system should not exceed the benefits expected to be derived and
such evaluations require estimates and judgments. The design and effectiveness of the system are monitored by a
professional staff of internal auditors.
All internal control systems, no matter how well designed, have inherent limitations. Internal control over financial
reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and
breakdowns resulting from human failures. Therefore, even those systems determined to be effective can provide
only reasonable assurance with respect to financial statement preparation and presentation.
The Board of Directors pursues its review of auditing, internal controls and financial statements through its audit
committee, composed entirely of independent directors. In the exercise of its responsibilities, the audit committee
meets periodically with management, with the internal auditors and with the independent registered public accounting
firm to review the scope and results of audits. Both the internal auditors and the registered public accounting firm
have unrestricted access to the audit committee with or without the presence of management.
The consolidated financial statements have been audited by the independent registered public accounting firm of
KPMG LLP. Their responsibility is to examine records and transactions related to the consolidated financial
statements to the extent required by the standards of the Public Company Accounting Oversight Board. KPMG has
rendered their opinion that the consolidated financial statements are fairly presented, in all material respects, in
conformity with U.S. generally accepted accounting principles. Their report is included herein.
Management’s Report on Internal Control over Financial Reporting
The management of Seaboard Corporation and its consolidated subsidiaries (Seaboard) is responsible for
establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange
Act Rule 13a-15(f). Under the supervision and with the participation of management and its Internal Audit
Department, Seaboard conducted an evaluation of the effectiveness of its internal control over financial reporting
based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on its evaluation under the framework in Internal
Control – Integrated Framework, management concluded that Seaboard’s internal control over financial reporting was
effective as of December 31, 2007.
Seaboard’s registered independent public accounting firm, that audited the consolidated financial statements included
in the annual report, have issued an audit report on the effectiveness of Seaboard’s internal control over financial
reporting. Their report is included herein.
2007 Annual Report
27
S E A B O A R D C O R P O R A T I O N
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Seaboard Corporation:
We have audited the accompanying consolidated balance sheets of Seaboard Corporation and subsidiaries (the
Company) as of December 31, 2007 and 2006, 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, 2007. 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 standards of the Public Company Accounting Oversight Board (United
States). 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, 2007 and 2006, and the results of
their operations and their cash flows for each of the years in the three-year period ended December 31, 2007, in
conformity with U.S. generally accepted accounting principles.
As discussed in Note 10 to the consolidated financial statements, the Company adopted Statement of Financial
Accounting Standards No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,
in 2006.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), Seaboard Corporation's internal control over financial reporting as of December 31, 2007, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated February 28, 2008 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Kansas City, Missouri
February 28, 2008
28
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Seaboard Corporation:
We have audited Seaboard Corporation’s internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO). Seaboard Corporation’s management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying “Management’s Report on Internal Control over Financial Reporting”. Our
responsibility is to express an opinion on the effectiveness of the Company’s internal control over financial reporting
based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in all material respects. Our audit included
obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed
risk. Our audit also included performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, Seaboard Corporation maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 2007 and
2006, 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, 2007, and our report dated February 28, 2008 expressed an unqualified
opinion on those consolidated financial statements.
Kansas City, Missouri
February 28, 2008
2007 Annual Report
29
S E A B O A R D C O R P O R A T I O N
Consolidated Statement of Earnings
(Thousands of dollars except per share amounts)
Net sales:
Products
Service revenues
Other
Total net sales
Cost of s ales and operating expenses:
Products
Services
Other
Total cost of sales and operating expenses
Gross income
Selling, general and adminis trative expenses
Operating income
Other income (expense):
Interest expense
Interest income
Income from foreign affiliates
Minority and other noncontrolling interests
Foreign currency gain (loss ), net
Loss from the sale of a portion of operations
Other investment income, net
Miscellaneous, net
Total other income (expense), net
Earnings before income taxes
Income tax expense
Net earnings
Years ended December 31,
2007
2006
2005
$
2,268,310
851,038
93,953
3,213,301
$
1,858,588
760,964
87,845
2,707,397
$
1,950,896
660,313
77,685
2,688,894
2,120,412
667,146
83,769
2,871,327
341,974
172,059
169,915
1,591,146
586,142
75,870
2,253,158
454,239
157,244
296,995
1,654,390
511,394
63,793
2,229,577
459,317
139,272
320,045
(12,588)
18,867
3,874
64
120
-
6,065
5,192
21,594
191,509
(10,177)
181,332
$
(18,774)
25,257
4,022
(6,883)
1,210
-
4,381
10,216
19,429
316,424
(57,735)
258,689
$
(22,165)
14,186
362
(4,521)
(1,032)
(1,748)
1,962
5,723
(7,233)
312,812
(46,150)
266,662
$
Basic earnings per common share
$
144.15
$
205.09
$
212.20
Diluted earnings per common share
$
144.15
$
205.09
$
211.94
Weighted average s hares outstanding
Basic
Diluted
1,257,901
1,257,901
1,261,367
1,261,367
1,256,645
1,258,202
Dividends declared per common share
$
3.00
$
3.00
$
3.00
See accompanying notes to consolidated financial statements.
30
2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Consolidated Balance Sheets
(Thousands of dollars except per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Receivables:
Trade
Due from foreign affiliates
Other
Allowance for doubtful accounts
Net receivables
Inventories
Deferred income taxes
Other current as sets
Total current as sets
Investments in and advances to foreign affiliates
Net property, plant and equipment
Goodwill
Intangible assets, net
Other ass ets
Total Assets
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks
Current maturities of long-term debt
Accounts payable
Accrued compensation and benefits
Accrued voyage costs
Income taxes payable
Accrued financial derivative liabilities
Other accrued liabilities
Total current liabilities
Long-term debt, less current maturities
Deferred income taxes
Accrued pension liability
Other liabilities
Total non-current and deferred liabilities
Minority and other noncontrolling interests
Commitments and contingent liabilities
Stockholders' equity:
Common stock of $1 par value. Authorized 4,000,000 shares;
issued and outstanding 1,244,278 and 1,261,367 shares
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total stockholders' equity
Total Liabilities and Stockholders' Equity
December 31,
2007
2006
$
47,346
286,660
$
31,369
478,859
251,005
90,019
26,349
367,373
(8,060)
359,313
392,946
19,558
77,710
202,112
52,416
37,158
291,686
(14,638)
277,048
341,366
12,894
55,033
1,183,533
1,196,569
60,706
730,395
40,628
30,895
47,542
42,457
637,813
28,372
28,760
27,462
$
2,093,699
$
1,961,433
$
85,088
11,912
135,398
72,258
38,129
8,441
9,192
62,510
422,928
125,532
105,697
50,498
33,845
315,572
971
$
62,975
63,415
103,429
78,818
30,860
2,525
1,422
45,798
389,242
137,817
119,861
44,279
27,824
329,781
39,103
1,244
-
(78,651)
1,431,635
1,261
21,574
(82,493)
1,262,965
1,354,228
1,203,307
$
2,093,699
$
1,961,433
See accompanying notes to consolidated financial statements.
2007 Annual Report
31
S E A B O A R D C O R P O R A T I O N
Consolidated Statement of Cash Flows
(Thousands of dollars)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to cash
from operating activities :
Depreciation and amortization
Income from foreign affiliates
Put option value change
Other investment income, net
Foreign currency exchange los ses (gains)
Minority and noncontrolling interest
Loss from the sale of a portion of operations
Deferred income taxes
Gain from s ale of fixed assets
Changes in current assets and liabilities,
net of portion of operations sold and bus ines s acquired:
Receivables, net of allowance
Inventories
Other current assets
Current liabilities, exclus ive of debt
Other, net
Net cash from operating activities
Cash flows from investing activities:
Purchas e of s hort-term investments
Proceeds from the sale of short-term inves tments
Proceeds from the maturity of short-term investments
Purchas e of long-term investments
Proceeds from the sale of a portion of operations
Acquisition of business
Investments in and advances to foreign affiliates, net
Capital expenditures
Repurchase of minority interest in a controlled subs idiary
Proceeds from the sale of fixed assets
Other, net
Net cash from investing activities
Cash flows from financing activities:
Notes payable to banks, net
Principal payments of long-term debt
Repurchase of common stock
Dividends paid
Dividends paid to minority and noncontrolling interests
Other, net
Net cash from financing activities
Effect of exchange rate change on cash
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Years ended December 31,
2007
2006
2005
$
181,332
$
258,689
$
266,662
79,221
(3,874)
-
(6,065)
4,496
(64)
-
(26,740)
(1,285)
(80,360)
(52,699)
(20,968)
63,255
7,630
71,258
(4,022)
(5,400)
(4,381)
38
6,883
-
6,358
(705)
65,106
(362)
(1,300)
(1,962)
(25)
4,521
1,748
5,371
(2,081)
(49,613)
(11,349)
17,915
(1,815)
(99)
37,247
(46,283)
(25,417)
15,678
12,229
143,879
283,757
331,132
(1,683,849)
1,851,589
24,842
(2,000)
-
-
(13,238)
(164,173)
(61,260)
4,148
(4,754)
(2,560,280)
2,437,331
25,230
(4,585)
-
-
1,144
(85,886)
-
3,498
(2,954)
(819,643)
561,291
-
-
26,471
(47,993)
(399)
(64,241)
-
4,933
3,988
(48,695)
(186,502)
(335,593)
19,111
(63,536)
(30,488)
(3,765)
(136)
-
(78,814)
(393)
15,977
31,369
(29,963)
(61,270)
-
(3,784)
(2,741)
(2,419)
(100,177)
(331)
(3,253)
34,622
91,149
(60,580)
-
(3,770)
(2,073)
(762)
23,964
499
20,002
14,620
Cash and cash equivalents at end of year
$
47,346
$
31,369
$
34,622
See accompanying notes to consolidated financial statements.
32 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Consolidated Statement of Changes in Equity
(Tho usands o f do llars except per share amo unts)
Balances, January 1, 2005
Comprehens ive income
Net earnings
Other comprehensive income net
of income tax benefit of $606:
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pens ion cost
Unrealized loss on cash flow hedges
Amortization of deferred
gains on interest rate swaps
Comprehens ive income
Issuance of 6,313 shares of common stock to Parent
Excess of fair value over book value
of equity in subsidiary issued to
a third party
Dividends on common s tock
Balances, December 31, 2005
Comprehens ive income
Net earnings
Other comprehensive income net
of income tax benefit of $2,117:
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pens ion cost
Unrealized loss on cash flow hedges
Amortization of deferred
gains on interest rate swaps
Comprehens ive income
Adjus tment to initially apply FASB
Statement No. 158, net of tax benefit of $11,253
Dividends on common s tock
Balances, December 31, 2006
Comprehens ive income
Net earnings
Other comprehensive income net
of income tax expense of $(2,492):
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pens ion cost
Unrealized loss on cash flow hedges
Amortization of deferred
gains on interest rate swaps
Comprehens ive income
Repurchas e of Common Stock
Dividends on common s tock
Balances, December 31, 2007
Accumulated
Other
Common Additional Comprehensive
Stock
$ 1,255
Capital
$
-
Loss
$ (53,741)
Retained
Earnings
$
745,168
Total
692,682
$
266,662
266,662
757
671
(666)
155
(201)
6
8,311
13,263
1,261
21,574
(53,025)
(3,770)
1,008,060
757
671
(666)
155
(201)
267,378
8,317
13,263
(3,770)
977,870
258,689
258,689
(2,582)
433
(2,085)
(22)
(198)
(25,014)
1,261
21,574
(82,493)
(3,784)
1,262,965
(2,582)
433
(2,085)
(22)
(198)
254,235
(25,014)
(3,784)
1,203,307
(2,908)
(212)
7,059
55
(152)
(17)
(21,574)
-
$ 1,244
$
-
$ (78,651)
181,332
181,332
(2,908)
(212)
7,059
55
(152)
185,174
(30,488)
(3,765)
1,354,228
$
(8,897)
(3,765)
1,431,635
$
See accompanying notes to consolidated financial statements.
2007 Annual Report 33
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Note 1
Summary of Significant Accounting Policies
Operations of Seaboard Corporation and its Subsidiaries
Seaboard Corporation and its subsidiaries (Seaboard) is a diversified international agribusiness and transportation
company. In the United States, Seaboard is primarily engaged in pork production and processing, and ocean
transportation. Overseas, Seaboard is primarily engaged in commodity merchandising, grain processing, sugar
production, and electric power generation. Seaboard Flour LLC (the Parent Company) is the owner of 71.8% of
Seaboard’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
investments in non-controlled foreign 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.
Short-term Investments
Short-term investments are retained for future use in the business and may include money market accounts,
municipal debt securities, corporate bonds and U.S. government obligations and, on a limited basis, foreign
government bonds, high yield bonds, currency futures and domestic equity securities. All short-term investments
held by Seaboard are categorized as available-for-sale and are reported at fair value with any related unrealized
gains and losses reported net of tax, as a component of accumulated other comprehensive income. When held, the
cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income. Gains and losses on sale of investments are generally based on the
specific identification method.
Accounts Receivable
Accounts receivable are recorded at the invoiced amount and generally do not bear interest. The Power segment,
however, collects interest on certain past due accounts and the Commodity Trading and Milling segment provides
extended payment terms for certain customers and/or markets due to local business conditions. The allowance for
doubtful accounts is Seaboard’s best estimate of the amount of probable credit losses in Seaboard’s existing
accounts receivable. For most operating segments, Seaboard uses a specific identification approach to determine, in
management’s best judgment, the collection value of certain past due accounts. For the Marine segment, the
allowance for doubtful accounts is based on an aging percentage methodology primarily based on historical write-off
experience. Seaboard reviews its allowance for doubtful accounts monthly. Account balances are charged off
against the allowance after all means of collection have been exhausted and the potential for recovery is considered
remote.
Inventories
Seaboard uses the lower of last-in, first-out (LIFO) cost or market for determining inventory cost of live hogs, fresh
pork product and related materials. Grain, flour and feed inventories at foreign milling operations are valued at the
lower of weighted average cost or market. All other inventories, including further processed pork products, are
valued at the lower of first-in, first-out (FIFO) cost or market.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and are being depreciated generally on the straight-line method
over useful lives ranging from 3 to 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.
Routine and planned major maintenance, repairs, and minor renewals are expensed as incurred while major
renewals and improvements are capitalized.
Impairment of Long-lived Assets
At each balance sheet date, long-lived assets, primarily fixed assets, are reviewed for impairment when 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
34 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to
be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-life intangible assets are evaluated annually for impairment at the quarter-end closest to
the anniversary date of the acquisition, or more frequently if circumstances indicate that impairment is likely.
Separable intangible assets with finite lives are amortized over their useful lives. Any one event or a combination of
events such as change in the business climate, a negative change in relationships with significant customers, and
changes to strategic decisions, including decisions to expand, made in response to economic or competitive
conditions could require an interim assessment prior to the next required annual assessment. The most recent
impairment tests performed and current market conditions indicate goodwill and other intangible assets are not
impaired as of December 31, 2007. See Note 2 for further discussion regarding the Pork Segment and its recorded
intangible asset values related to Daily’s.
Accrued Self-Insurance
Seaboard is self-insured for certain levels of general and vehicle liability, property, workers’ compensation, product
recall and health care coverage. The cost of these self-insurance programs is accrued based upon estimated
settlements for known and anticipated claims. Any resulting adjustments to previously recorded reserves are
reflected in current operating results.
Deferred Grants
Included in other liabilities at December 31, 2007 and 2006 is $7,317,000 and $7,740,000, respectively, of deferred
grants. The deferred grants represent economic development funds contributed by government entities that were
limited to construction of a pork processing facility in Guymon, Oklahoma. Deferred grants are being amortized as a
reduction of depreciation expense over the life of the assets acquired with the funds.
Asset Retirement Obligation
Seaboard has recorded long-lived assets and a related liability for the asset retirement obligation costs associated
with the closure of the hog lagoons it is legally obligated to close in the future should Seaboard cease operations or
plan to close such lagoons voluntarily in accordance with a changed operating plan. Based on detailed assessments
and appraisals obtained to estimate the future retirement costs, Seaboard has determined and recorded the present
value of the projected costs with the retirement asset depreciated over the economic life of the related asset. The
following table shows the changes in the asset retirement obligation during 2007 and 2006.
(Thousands of dollars)
Beginning balance
Accretion expense
Liability for additional lagoons placed in service
Adjustment to existing lagoons
Ending balance
Years ended December 31,
2007
$ 7,229
574
151
163
2006
$ 6,730
499
-
-
$ 8,117
$ 7,229
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. However, in the future as these timing differences reverse, a lower
statutory tax rate may apply pursuant to the provisions for domestic manufacturers of the American Jobs Creation Act
of 2004. In accordance with the Financial Accounting Standards Board Staff Position No. 109-1, Application of FASB
Statement No. 109, “Accounting for Income Taxes, to the Tax Deduction on Qualified Production Activities Provided
by the American Jobs Creation Act of 2004”, Seaboard will recognize the benefit or cost of this change in the future.
Revenue Recognition
Revenue of the containerized cargo service is recognized ratably over the transit time for each voyage with expenses
associated with containerized cargo service being recognized as incurred. Revenue of the commodity trading
business is recognized when the commodity is delivered to the customer and the sales price is fixed or determinable.
Revenues from all other commercial exchanges are recognized at the time products are shipped or delivered in
2007 Annual Report 35
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
accordance with shipping terms, or services rendered, the customer takes ownership and assumes risk of loss,
collection is reasonably assured and the sales price is fixed or determinable. As a result of a marketing agreement
with Triumph Foods, beginning in 2006 Seaboard’s sales prices for its pork products included in product revenues are
primarily based on a margin sharing arrangement that considers the average sales price and mix of products sold
from both Seaboard’s and Triumph Foods' hog processing plants. Seaboard earns a fee for marketing the pork
products of Triumph Foods and recognizes this fee as service revenue primarily based on the number of head
processed by Triumph Foods.
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities, the 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.
Earnings Per Common Share
Earnings per common share are based upon the weighted average shares outstanding during the period. Basic and
diluted earnings per share are the same for the years ended December 31, 2007 and 2006. Basic and diluted
earnings per share are different for the year ended December 31, 2005 as a result of the issuance of shares to the
Parent Company in the fourth quarter of 2005. See Note 12 for further discussion.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, management considers all demand deposits and
overnight investments as cash equivalents. The amounts paid for interest and income taxes are as follows:
(Thousands of dollars)
Interest (net of amounts capitalized)
Income taxes (net of refunds)
Years ended December 31,
2007
2006 2005
$ 11,733
$ 19,461
20,993
47,515
$ 23,116
68,243
Supplemental Noncash Transactions
As more fully described in Note 2, Seaboard acquired a bacon processor in July 2005. Also, Seaboard repurchased
the 4.74% equity interest in Seaboard Foods LP from the former owners of Daily’s effective January 1, 2007. The
following table summarizes the non-cash transactions resulting from this acquisition and this repurchase:
(Thousands of dollars)
Year ended
December 31,
2007
2005
Increase in net working capital $ - $ 11,430
Increase in fixed assets 7,976 28,798
Increase in intangible assets 3,745 30,800
Increase in goodwill 12,256 28,372
Decrease (Increase) in non-controlling interest 37,933 (31,225)
Increase in other non-controlling interest - (219)
Increase in put option value - (6,700)
Increase in deferred income tax liability
(650)
-
Increase in additional paid-in capital - (13,263)
Cash paid $61,260 $ 47,993
36 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
As more fully described in Note 2, Seaboard sold some components of its third party commodity trading operations in
May 2005. The following table summarizes the non-cash transactions resulting from this sale:
(Thousands of dollars)
Decrease in net working capital
Decrease in fixed assets
Decrease in other assets
Loss on the sale of a portion of operations
Net proceeds from sale
Year ended
December 31, 2005
$ 28,055
76
88
(1,748)
$ 26,471
In the fourth quarter of 2007, the Power segment received $4,500,000 of fixed assets for the settlement of a
receivable, not related to its business, purchased at a discount, and recognized a gain of $3,596,000 included in
other investment income. In the fourth quarter of 2005, Seaboard issued 6,313.34 shares to its Parent Company as a
result of a tax benefit of $8,317,000. See Note 12 for further discussion.
Foreign Currency Transactions and Translation
Seaboard 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. Certain of the 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 Seaboard’s foreign subsidiaries and affiliates primarily conduct business. These
fluctuations result in exchange gains and losses. The activities of these foreign subsidiaries and affiliates are
primarily conducted with U.S. subsidiaries or operate in hyper-inflationary environments. As a result, the financial
statements of certain foreign subsidiaries and affiliates are re-measured using the U.S. dollar as the functional
currency. Included in foreign currency gain (loss), net for the years ended December 31, 2007 and 2006 are foreign
currency gains of $1,000,000 and $1,695,000, respectively, recorded in December 2007 and 2006. This gain reflects
the re-measurement as of December 31, 2007 and 2006 of a note payable denominated in Japanese Yen, as
discussed in Note 8, of a foreign consolidated subsidiary accounted for on a one-month lag except for this re-
measurement of this note payable. This currency gain was primarily offset by a mark-to-market currency loss at
December 31, 2007 and 2006 from a foreign currency derivative contract discussed in Note 9.
Seaboard’s Sugar and Citrus segment and three non-controlled, non-consolidated foreign affiliates (milling
businesses in Colombia, Kenya and Lesotho), 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. Translation gains and losses are recorded as components of other comprehensive loss.
U.S. dollar denominated net asset or liability conversions to the local currency are recorded through income.
Derivative Instruments and Hedging Activities
Seaboard follows Statement of Financial Accounting Standards No. 133 (SFAS 133), “Accounting for Derivative
Investments and Hedging Activities,” as amended to account for its derivative contracts. This statement 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. Derivatives qualify for treatment as hedges for
accounting purposes when there is a high correlation between the change in fair value of the instrument and the
related change in value of the underlying commitment. In order to designate a derivative financial instrument as a
hedge for accounting purposes, extensive record keeping is required. For derivatives that qualify as hedges for
accounting purposes, the change in fair value has no net impact on earnings, to the extent the derivative is
considered effective, until the hedged transaction affects earnings. For derivatives that are not designated as
hedging instruments for accounting purposes, or for the ineffective portion of a hedging instrument, the change in fair
value does affect current period net earnings.
Seaboard holds and issues certain derivative instruments to manage various types of market risks from its day-to-day
operations primarily including commodity futures and option contracts and foreign currency exchange agreements,
2007 Annual Report 37
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
and from time-to-time, forward freight agreements and interest rate exchange agreements. While management
believes each of these instruments primarily are entered into in order to effectively manage various market risks, as
of December 31, 2007 none of the derivatives are designated and accounted for as hedges primarily as a result of
the extensive record-keeping requirements. From time to time, Seaboard may enter into speculative derivative
transactions related to its market risks.
Accounting Changes and New Accounting Standards
In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes”,
which defines the threshold for recognizing the benefits of tax-return positions in the financial statements as “more-
likely-than-not” to be sustained by the taxing authority. FIN 48 also prescribes a method for computing the tax benefit
of such tax positions to recognize in the financial statements. In addition, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure and transition. As of January 1, 2007,
Seaboard adopted FIN 48. The adoption of FIN 48 did not have a material impact on Seaboard’s financial position or
net earnings. See Note 7 for further discussion.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 157 (SFAS 157), "Fair Value Measurements". This statement establishes a single authoritative
definition of fair value when accounting rules require the use of fair value, sets out a framework for measuring fair
value, and requires additional disclosures about fair-value measurements. Seaboard will be required to adopt this
statement on January 1, 2008. However, in February 2008, the FASB issued FASB Staff Position 157-2 which defers
the effective date of SFAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized
or disclosed at fair value in an entity’s financial statements on a recurring basis (at least annually). Seaboard will be
required to adopt SFAS 157 for these nonfinancial assets and nonfinancial liabilities as of January 1, 2009.
Management believes the adoption of SFAS 157 will not have a material impact on Seaboard’s financial position or
net earnings.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158 (SFAS 158), “Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans.” As of December 31, 2006, Seaboard
adopted SFAS 158. See Note 10 for further discussion.
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159 (SFAS 159), “The Fair
Value Option for Financial Assets and Financial Liabilities.” This statement provides companies with an option to
report selected financial assets and liabilities at fair value. Seaboard will be required to adopt this statement as of
January 1, 2008. Management believes the adoption of SFAS 159 will not have a material impact on Seaboard’s
financial position or net earnings.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141(R) (SFAS 141R),
“Business Combinations.” This statement defines the acquirer as the entity that obtains control of one or more
businesses in the business combination, establishes the acquisition date as the date that the acquirer achieves
control and requires the acquirer to recognize the assets acquired, liabilities assumed and any noncontrolling interest
at their fair values as of the acquisition date. This statement also requires that acquisition-related costs of the
acquirer be recognized separately from the business combination and will generally be expensed as incurred.
Seaboard will be required to adopt this statement as of January 1, 2009. The impact of adopting SFAS 141R will be
limited to any future business combinations for which the acquisition date is on or after January 1, 2009.
In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160 (SFAS 160),
“Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51.” This statement will
change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity. Seaboard will be required to adopt this statement as of January 1, 2009.
The adoption of SFAS 160 will not have a material impact on Seaboard’s financial position or net earnings.
Note 2
Acquisitions, Dispositions and Repurchase of Minority Interest
On July 5, 2005, Seaboard completed the acquisition effective July 3, 2005 of Daily’s, a bacon processor located in
the western United States, for a total purchase price of $99,181,000. The purchase price consisted of $44,488,000 in
cash, plus working capital adjustments of $3,098,000, a 4.74% equity interest in Seaboard Foods LP (Foods,
previously Seaboard Farms, Inc.) with a book value of $31,225,000 and fair value over book value of $13,263,000
38 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
recorded as additional paid-in capital for a total value of $44,488,000, a put option associated with the 4.74% equity
interest estimated to have a fair value of $6,700,000, as discussed below, and $407,000 of additional acquisition
costs incurred. The value of the 4.74% ownership interest issued to the Sellers was based on an earnings multiple of
the business which approximates fair value. The acquisition included Daily’s two bacon processing plants located in
Salt Lake City, Utah and Missoula, Montana. Daily’s produces premium sliced and pre-cooked bacon primarily for
food service. This acquisition continues Seaboard’s expansion of its integrated pork model into value-added products
and is expected to enhance Seaboard’s ability to venture into other further processed pork products.
The sellers of Daily’s had an option to put their 4.74% equity interest in Foods back to Seaboard after two years for
the greater of $40,000,000 or a formula determined value as of the put date. The minimum put option value of
$40,000,000 expired after five years. Likewise, Seaboard had a call provision after five years of operations whereby
Seaboard could reacquire the 4.74% equity interest for the greater of $45,000,000 or a formula determined value. On
December 27, 2006, Seaboard entered into a Purchase Agreement to repurchase the 4.74% equity interest in Foods
from the former owners of Daily’s effective January 1, 2007. As part of the Purchase Agreement, on January 2, 2007
Seaboard paid $30,000,000 of the purchase price for the 4.74% equity interest to the former owners of Daily’s. The
total purchase price was equal to the greater of $40,000,000 or the same formula-determined value of the original put
option, determined as of June 30, 2007, less the amount of interest which accrued on the initial $30,000,000 portion
of the purchase price from January 2, 2007 through the date on which the balance of the purchase price was paid.
Based on the formula of operating results and certain net cash flows through June 30, 2007, the final purchase price
was determined to be $61,260,000, including transaction costs of $53,000. Seaboard paid the balance of the
purchase price owed to the former owners of Daily’s of $31,207,000 in August 2007. The total purchase price for the
4.74% equity interest in Seaboard Foods LP of $61,260,000 represents $23,327,000 in excess of book value.
Seaboard applied the purchase method of accounting for this step acquisition by allocating the purchase price to the
fair value of the net assets acquired to the extent of the 4.74% change in ownership. Depreciation and amortization
of $593,000 was recorded in the second quarter representing the amount of depreciation on the write-up of fixed
assets and amortization of intangible asset from January 1, 2007 through June 30, 2007.
The agreement to repurchase the 4.74% equity interest resulted in the put option obligation being reduced to zero, as
the purchase price is representative of the fair value of the 4.74% equity interest, with the offset to income as of
December 31, 2006. The decrease of the put option obligation was primarily the result of the passage of time
decreasing this exposure to Seaboard. Included in Miscellaneous, net for the years ended December 31, 2006 and
2005 is the change in fair value of the put option obligation for each year since the date of acquisition of
approximately $5,400,000 and $1,300,000, respectively.
Operating results for Daily’s are included in Seaboard’s Consolidated Statement of Earnings from the date of
acquisition. Pro forma results of operations are not presented, as the effects of the acquisition are not considered
material to Seaboard’s results of operations.
The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and
liabilities assumed at January 1, 2007, the effective date of the repurchase, and July 3, 2005, the effective date of the
acquisition.
(Thousands of dollars)
January 1, 2007
July 3, 2005
Net working capital
Net property, plant and equipment
Intangible assets
Goodwill (tax basis of $0 and $21,673, respectively)
Increase in other non-controlling interest
Increase in deferred tax liability
Net assets acquired
$ -
7,976
3,745
12,256
-
(650)
$ 23,327
$ 11,430
28,798
30,800
28,372
(219)
-
$ 99,181
The intangible assets acquired include $24,000,000 of trade names and registered trademarks which are not subject
to amortization. The remaining intangible asset balance acquired consists primarily of contractual and direct
customer relationships, and covenants not to compete and will be amortized over five years. The intangible asset
2007 Annual Report 39
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
from the repurchase is for customer relationships and will be amortized over fifteen years. The factors that
contributed to a purchase price that resulted in the recognition of goodwill related to the acquisition were the
expansion of Pork’s integrated model into value-added products allowing further realization from Pork’s existing
products, enhancing Pork’s ability to venture into other further processed pork products and access to an expanded
base of industry knowledge and expertise. The factor that contributed to a purchase price that resulted in the
recognition of goodwill from the repurchase was a formula based re-purchase price resulting in a value in excess of
historical book values. As a result of the acquisition and repurchase, the Pork Division is the only segment with
goodwill or intangible assets.
The following table is a summary of goodwill and intangible assets acquired from the Daily’s acquisition and
Seaboard’s repurchase of Daily’s 4.74% equity interest in Foods, at December 31, 2007 and 2006.
(Thousands of dollars)
Intangibles subject to amortization:
Gros s carrying amount:
Customer relationships
Covenants not to compete
Accumulated amortization:
Customer relationships
Covenants not to compete
Net carrying amount:
Customer relationships
Covenants not to compete
Intangibles subject to amortization, net
Intangibles not subject to amortization:
Carrying amount-trade names and registered trademarks
Total intangible ass ets, net
Goodwill
December 31,
2007
2006
$
9,045
1,500
$
5,300
1,500
10,545
6,800
(2,900)
(750)
(3,650)
6,145
750
6,895
24,000
30,895
40,628
(1,590)
(450)
(2,040)
3,710
1,050
4,760
24,000
28,760
28,372
Total goodwill and intangible assets, net
$
71,523
$
57,132
The amortization expense of amortizable intangible assets for the years ended December 31, 2007 and 2006 was
approximately $1,610,000 and $1,360,000, respectively. Amortization expense for the five succeeding years is
$1,610,000 for each of the next two years, $930,000 in the third year and $250,000 each for the fourth and fifth year.
As discussed above, the Pork segment recorded goodwill and other intangibles assets not subject to amortization in
connection with its acquisition of Daily’s. The fair value of these intangible assets as of December 31, 2007 is
partially based on certain scenarios that include management’s ability and intention to grow and expand Daily’s
through construction or acquisition of additional capacity. However, based in part on recent market conditions,
management is currently evaluating such future plans for expanding Daily’s capacity. Accordingly, depending on the
ultimate outcome of management’s decision for the future plans of expanding Daily’s capacity, there is a possibility
that either this goodwill or other intangible assets, or both, could be deemed impaired during some future period
including fiscal 2008, which may result in a material charge to earnings.
Effective May 9, 2005 Seaboard’s Commodity Trading and Milling segment agreed to sell some components of its
third party commodity trading operations, consisting primarily of certain forward sales contracts, certain grain
inventory and all related contracts to support such sales contracts, including commodity futures and options, foreign
exchange agreements, purchase contracts and charter agreements for $26,471,000. This transaction closed on May
27, 2005. The counterparty to this transaction is a South African company. During 2006 and 2007, Seaboard re-
40 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
established its commodity trading business in markets associated with the sale in 2005 of some components of its
third party commodity trading operations. Seaboard continues to focus on the supply of raw materials to its core
milling operations and the transaction of third party commodity trades in support of these operations.
Since Seaboard does not use hedge accounting for its commodity and foreign exchange derivative instruments, the
derivative instruments included in the sale were marked to market through the effective date of the sale while the
change in value of the related commodity forward purchase and sale agreements were not. As a result, derivative
gains relating to derivative instruments sold totaling $2,161,000 were included in operating income prior to the sale of
a portion of the operations resulting in a loss on the sale transaction totaling $1,748,000.
Since Seaboard has conducted its commodity trading business with third parties, consolidated subsidiaries, and
foreign affiliates on an interrelated basis and continues trading with third parties in certain markets, operating income
from the business sold cannot be clearly distinguished from the remaining operations of Seaboard’s Commodity
Trading and Milling segment without making numerous subjective assumptions primarily with respect to mark-to-
market accounting.
Note 3
Investments
Seaboard’s short-term investments are treated as available-for-sale securities and are stated at their fair market
values. As of December 31, 2007 and 2006, the short-term investments primarily consisted of fixed rate municipal
notes and bonds, auction rate securities (ARS), variable rate demand notes (VRDN) and money market funds. At
December 31, 2007 and 2006, cost and fair market value were not materially different for these investments. The
ARS have maturities over one year but provide liquidity through a periodic auction typically held every 7, 28 or 35
days at which time the rate is reset. The VRDNs have maturities over one year, however, liquidity is provided with a
put feature to the tender agent which allows the holder to sell the VRDN at par plus accrued interest with a seven day
notice. Because the ARS and VRDN investments are frequently re-priced, they trade in the market on par-in, par-out
basis. In addition, Seaboard has investments in domestic equity securities with a cost basis of $3,444,000 and
$3,960,000 at December 31, 2007 and 2006, respectively. All available-for-sale securities are classified as current
assets as they are readily available to support Seaboard’s current operating needs. At December 31, 2007 and
2006, short-term investments included $13,127,000 and $10,309,000, respectively, held by a wholly-owned
consolidated insurance captive to pay Seaboard’s retention of accrued outstanding workers’ compensation claims.
The following is a summary of the estimated fair value of available-for-sale securities classified as short-term
investments at December 31, 2007 and 2006.
(Thousands of dollars)
Auction rate securities
Fixed rate municipal notes and bonds
Variable rate demand notes
Money market funds
Domestic equity securities
Asset backed securities
Other
Total short-term investments
December 31,
2007
2006
$ 10,125 $ 199,325
192,753
216,232
51,872
26,850
25,193
18,481
3,646 5,361
3,286
8,040
-
4,355
$ 286,660 $ 478,859
The following table summarizes the estimated fair value of fixed rate municipal notes and bonds designated as
available-for-sale classified by the contractual maturity date of the security as of December 31, 2007.
(Thousands of dollars)
Due within one year
Due after one year through three years
Due after three years
Total fixed rate municipal notes and bonds
2007
$ 37,799
93,083
85,350
$ 216,232
2007 Annual Report 41
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
In addition to its short-term investments, as of December 31, 2007 and 2006 Seaboard also had long-term
investments totaling $9,800,000 and $8,010,000, respectively, included in other assets on the Consolidated Balance
Sheets. Included in this amount is a $5,313,000 investment for a less than 20% ownership interest in a company
operating a 300 megawatt electricity generating facility in the Dominican Republic. This investment is accounted for
using the cost method of accounting. Also, see Note 10 for a discussion of assets held in conjunction with
investments related to Seaboard’s deferred compensation plans.
Note 4
Inventories
A summary of inventories at the end of each year is as follows:
(Thousands of dollars)
At lower of LIFO cost or market:
Live hogs and materials
Fresh pork and materials
LIFO adjustm ent
Total inventories at lower of LIFO cost or m arket
At lower of FIFO cost or market:
Grain, primarily wheat and corn, and soybean meal
Sugar produced and in process
Other
Total inventories at lower of FIFO cost or m arket
Grain, flour and feed at lower of weighted average cost or market
December 31,
2007
2006
$
181,019
$
149,521
18,550
199,569
(23,509)
176,060
100,082
35,180
33,782
169,044
47,842
19,443
168,964
1,458
170,422
80,068
25,124
29,016
134,208
36,736
Total inventories
$
392,946
$
341,366
The use of the LIFO method decreased 2007 net earnings by $15,230,000 ($12.11 per common share), and
increased 2006 and 2005 net earnings by $541,000 ($0.43 per common share), and $67,000 ($0.05 per common
share), respectively. If the FIFO method had been used for certain inventories of the Pork segment, inventories
would have been higher by $23,509,000 as of December 31, 2007 and lower by $1,458,000 as of December 31,
2006.
Note 5
Investments in and Advances to Foreign Affiliates
Seaboard’s investments in and advances to non-controlled, non-consolidated foreign affiliates are primarily with
businesses conducting flour, maize and feed milling. As of December 31, 2007, the location and percentage
ownership of these foreign affiliates are as follows: Democratic Republic of Congo (50%), Lesotho (50%), Kenya
(35%), and Nigeria (45-48%) in Africa; Colombia (40%) and Ecuador (50%) in South America; and Haiti (23%) in the
Caribbean. Also, Seaboard has an investment in a grain trading business in Peru (50%). In addition, Seaboard has
investments in and advances to two sugar-related businesses in Argentina (46% - 50%). The equity method is used
to account for these investments.
In late September 2007, Seaboard acquired for $8,500,000 a 40% non-controlling interest, including cash contributed
into the business, in a flour mill business located in Colombia. During the fourth quarter of 2007, Seaboard acquired
for $6,620,000 a 50% non-controlling interest in a grain trading business in Peru. Both of these investments are
accounted for using the equity method. At December 31, 2007, Seaboard’s investment in foreign affiliates includes
$4,891,000 related to the difference between the amount at which these investments are carried and the amount of
underlying equity in net assets. The amortizable assets are being amortized to earnings from foreign affiliates over
the remaining life of the assets.
42 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Seaboard also has an investment in a Bulgarian wine business (the Business). In February 2005, the Board of
Directors of the Business and the majority of the owners of the Business, including Seaboard, agreed to pursue the
sale of the entire Business or all of its assets. Since March 2007, this business has been unable to make its
scheduled loan payments and has been in technical default on its bank debt. During the fourth quarter of 2007,
Seaboard signed an agreement to allow a bank to take majority ownership of the Business resulting in a loss of
significant influence by Seaboard. Accordingly, after recording its share of operating losses for the fourth quarter,
Seaboard discontinued using the equity method of accounting. In accordance with FASB Staff Position APB 18-1,
Seaboard reversed $2,801,000 of previously recorded foreign currency translation gains out of Accumulated Other
Comprehensive Loss in the equity section of the balance sheet related to this investment, wrote-off the remaining
investment balance of $1,472,000, and recognized as income the remaining net amount of foreign currency gains of
$1,329,000 as of December 31, 2007. In 2007 and 2006, Seaboard recorded 50% of the losses from the Business
compared to 100% in 2005.
During the fourth quarter of 2006, Seaboard’s remaining individual investments in and advances to the Nigerian non-
consolidated foreign affiliates of $1,048,000 were written down to zero as a result of Seaboard’s proportionate share
of operating losses for these entities. Accordingly, Seaboard has discontinued the application of the equity method of
accounting for these non-consolidated foreign affiliates until such time Seaboard’s share of the investee’s net income
equals the share of net losses not recognized during the period the equity method is suspended.
During 2005, milling operations ceased at Seaboard’s non-controlled, non-consolidated foreign affiliate in Angola.
Seaboard is exploring various alternatives to reopen the operation. As a result, during 2005 Seaboard fully reserved
its past due receivables from grain sales to this affiliate by incurring a charge to bad debts and increasing its
allowance for doubtful accounts in the amount of $1,500,000. The investment in and advances to this affiliate was
written off as a result of Seaboard’s share of operating losses incurred during 2005 by this affiliate. During 2007,
Seaboard wrote-off the remaining receivables from this affiliate and related allowance for doubtful accounts of
$5,351,000 as the potential for recovery is considered remote.
Seaboard generally is the primary provider of choice for grains and supplies purchased by the non-controlled foreign
affiliates primarily conducting grain processing. Sales of grain and supplies to these non-consolidated foreign
affiliates included in consolidated net sales for the years ended December 31, 2007, 2006 and 2005 amounted to
$299,174,000, $242,442,000, and $232,864,000, respectively. At December 31, 2007 and 2006, Seaboard had
$59,538,000 and $38,748,000, respectively, of investments in and advances to, and $89,144,000 and $51,227,000,
respectively, of receivables due from these foreign affiliates.
Combined condensed financial information of the non-controlled, non-consolidated foreign affiliates for their fiscal
periods ended within each of Seaboard’s years ended, excluding the Bulgarian wine operation’s financial position as
of December 31, 2007 for Other Businesses, are as follows:
Commodity Trading and Milling Segment
December 31,
(Thousands of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
2007
$ 613,695
$ 12,263
$ 347,040
$ 218,781
$ 128,259
2006
516,471
10,511
234,212
151,562
82,650
2005
501,972
19,995
215,269
138,670
76,599
2007 Annual Report 43
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Other Businesses
(Thousands of dollars)
2007
December 31,
2006
Net sales $ 30,053
29,096
Net loss $ (2,621)
(4,548)
Total assets $ 13,802
38,590
Total liabilities $ 11,021
42,160
Total equity $ 2,781
(3,570)
2005
28,611
(7,427)
45,668
44,266
1,402
Note 6
Property, Plant and Equipment
A summary of property, plant and equipment at the end of each year is as follows:
(Thousands of dollars)
Land and improvements
Buildings and improvements
Machinery and equipment
Vessels and vehicles
Office furniture and fixtures
Construction in progress
Accumulated depreciation and amortization
Useful
Lives
15 years
30 years
3-20 years
3-18 years
5 years
December 31,
2007
2006
$ 144,894
303,315
668,451
160,085
22,932
80,904
$ 127,101
290,377
617,738
136,350
20,061
25,609
1,380,581
(650,186)
1,217,236
(579,423)
Net property, plant and equipment
$ 730,395 $ 637,813
Note 7
Income Taxes
Income taxes attributable to continuing operations for the years ended December 31, 2007, 2006 and 2005 differ
from the amounts computed by applying the statutory U.S. Federal income tax rate of 35 percent to earnings (loss)
before income taxes for the following reasons:
(Thousands of dollars)
Computed “expected” tax expense
Adjustments to tax expense attributable to:
Foreign tax differences
Tax-exempt investment income
State income taxes, net of federal benefit
Change in valuation allowance
Repatriation
Federal and foreign audit settlements
Other
2007
Years ended December 31,
2006
2005
$ 67,028
$ 110,749
$ 109,484
(40,841) (48,630)
(4,276)
(4,658)
7,310
1,078
(3,890)
(5,754)
-
(2,509)
(1,019)
(6,676)
-
-
(46,184)
(1,046)
6,202
4,290
11,586
(26,405)
(11,777)
Total income tax expense
$ 10,177
$ 57,735
$ 46,150
44 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Earnings before income taxes consists of the following:
(Thousands of dollars)
United States
Foreign
Total
The components of total income taxes are as follows:
(Thousands of dollars)
Current:
Federal
Foreign
State and local
Deferred:
Federal
Foreign
State and local
Years ended December 31,
2006
2007
2005
$ 38,788
$ 152,721
$ 139,725
$ 176,699
$ 156,551
$ 156,261
$ 191,509 $316,424
$ 312,812
Years ended December 31,
2007
2006
2005
$ 24,192
5,935
2,542
$ 40,032
6,795
4,438
$ 28,885
5,578
6,314
(21,789)
1,453
(2,156)
(570)
847
6,193
1,287
37
4,049
Income tax expense
Unrealized changes in other comprehensive income
10,177
2,492
57,735
(13,370)
46,150
(606)
Total income taxes
$ 12,669
$ 44,365
$ 45,544
Components of the net deferred income tax liability at the end of each year are as follows:
(Thousands of dollars)
Deferred income tax liabilities:
Cash basis farming adjustment
Deferred earnings of foreign subsidiaries
Depreciation
LIFO
Other
Deferred income tax assets:
Reserves/accruals
Tax credit carryforwards
Net operating and capital loss carryforwards
Foreign minimum tax credit carryforward
Other
Valuation allowance
December 31,
2007
2006
$ 12,639 $ 12,852
6,816 6,652
96,525
91,176
31,585
15,717
1,525
3,328
129,676
149,139
35,289
5,154
13,734
7,233
246
61,656
18,119
38,678
4,179
15,769
5,573
619
64,818
22,646
Net deferred income tax liability
$ 86,139 $ 106,967
Seaboard adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income
Taxes, on January 1, 2007. Beginning January 1, 2007, Seaboard recognized interest accrued related to
unrecognized tax benefits and penalties in income tax expense as Seaboard believes it is more closely related to
income tax expense instead of financing related items. Prior to the adoption of FIN 48 on January 1, 2007, Seaboard
recognized interest accrued related to unrecognized tax benefits in interest expense and penalties in selling, general
2007 Annual Report 45
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
and administrative expenses. For the years ended December 31, 2007, 2006 and 2005, such interest and penalties
were not material. The Company had approximately $121,000 and $0 accrued for the payment of interest and
penalties on uncertain tax positions at December 31, 2007, and 2006, respectively.
As of December 31, 2007, Seaboard had $433,000 in total unrecognized tax benefits all of which, if recognized,
would affect the effective tax rate. Seaboard does not have any uncertain tax positions in which it is reasonably
possible that the total amounts of the unrecognized tax benefits will significantly increase or decrease within 12
months of the reporting date. During 2007, there were no additions based on uncertain tax positions related to the
current year, reductions for uncertain tax positions of prior years, settlements or reductions due to a lapse of the
applicable statute of limitations. A reconciliation of the beginning and ending amount of unrecognized tax benefits is
as follows:
(Thousands of dollars)
Balance at January 1, 2007
Additions for uncertain tax positions of prior years
Balance at December 31, 2007
$ 320
113
$ 433
During the fourth quarter of 2004, President Bush signed into law H.R. 4520, the American Jobs Creation Act (“Act”).
The Act allowed Seaboard a one-time election to repatriate permanently invested foreign earnings at a 5.25%
effective U.S. income tax rate rather than the statutory 35% rate, if certain domestic reinvestment requirements were
met. Management concluded its evaluation of this provision of the Act in the fourth quarter of 2005 and declared and
paid a qualifying intercompany dividend of approximately $220,000,000. The dividend was paid from existing cash
from foreign operations and by incurring $65,000,000 of new borrowings by a foreign subsidiary (see Note 8 for
further discussion). Total taxes resulting from this dividend were approximately $11,586,000, including foreign
withholding taxes incurred. As of December 31, 2007, Seaboard has not provided for U.S. Federal Income and
foreign withholding taxes on $395,705,000 of undistributed earnings from foreign operations as Seaboard intends to
reinvest such earnings indefinitely outside of the United States. Determination of the tax that might be paid on these
undistributed earnings if eventually remitted is not practicable.
The Act also repealed an export tax benefit and provides for a nine percent deduction on U.S. manufacturing income.
Both are phased in over the next five years. Management expects these two changes to largely offset each other in
future years.
Seaboard’s tax returns are regularly audited by federal, state and foreign tax authorities, which may result in
adjustments. Seaboard’s U.S. federal income tax returns have been reviewed through the 2004 tax year. In the
second quarter of 2006, Seaboard reached a settlement with the Internal Revenue Service on its audit of Seaboard’s
2004 and 2003 U.S. Federal Tax Returns. The favorable resolution of these tax issues resulted in a tax benefit of
$2,786,000 for items previously reserved which was recorded in the second quarter of 2006. Also, in the fourth
quarter of 2005, the Joint Committee on Taxation (JCT) approved Seaboard’s settlement with the Internal Revenue
Services (IRS) of its 2000-2002 U.S. Federal Tax Returns. The favorable resolution of these tax issues resulted in a
tax benefit of $21,428,000 for items previously reserved. Additionally, in February 2006 Seaboard entered into a
Closing Agreement with the Puerto Rican Treasury Department which favorably resolved certain prior years’ tax
issues. The resolution of these issues resulted in Seaboard recording a tax benefit of $4,977,000 in the fourth
quarter of 2005 for items previously reserved.
Seaboard has tax holidays in two foreign countries resulting in tax savings of approximately $2,646,000, $3,969,000
and $4,311,000 respectively, or $2.10, $3.15 and $3.43 per diluted earnings per common share for the years ended
December 31, 2007, 2006 and 2005, respectively. One of these expired at the end of 2007 and the other one expires
in 2012.
Management believes Seaboard’s future taxable income will be sufficient for full realization of the net deferred tax
assets. The valuation allowance relates to the tax benefits from foreign net operating losses and from losses on
investments that would be recognized as capital losses. Management does not believe these benefits are more likely
than not to be realized due to limitations imposed on the deduction of these losses. In the event Seaboard generates
sufficient capital gains to utilize the capital losses, a tax benefit will be recognized. The decrease in the valuation
46 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
allowance for 2007 was primarily the result of the realization of capital gains and a decrease of foreign deferred tax
assets. At December 31, 2007, Seaboard had foreign net operating loss carryforwards (NOLs) of approximately
$38,380,000 a portion of which expire in varying amounts between 2008 and 2012, and others that have indefinite
expiration periods. At December 31, 2007, Seaboard had federal capital loss carryforwards of approximately
$4,853,000 expiring in 2008.
At December 31, 2007, Seaboard had state tax credit carry forwards of approximately $7,929,000, $7,268,000 of the
state tax credits carryforward indefinitely and $661,000 expire between 2012 and 2017. As discussed more fully in
Note 12, during fiscal 2005, Seaboard filed tax returns utilizing NOLs that were available to use from its Parent
Company pursuant to an earlier agreement. The Company issued shares of common stock to its Parent Company in
exchange for the NOLs.
Note 8
Notes Payable and Long-term Debt
Notes payable amounting to $85,088,000 and $62,975,000 at December 31, 2007 and 2006, respectively, consisted
of obligations due banks on demand or based on Seaboard’s ability and intent to repay within one year. At
December 31, 2007, Seaboard had a committed line totaling $100,000,000 and uncommitted lines totaling
approximately $182,817,000 of which $158,317,000 of the uncommitted lines relate to foreign subsidiaries. At
December 31, 2007, there were no borrowings outstanding under the committed line and borrowings totaled
$85,088,000 under the uncommitted lines all related to foreign subsidiaries. The borrowings outstanding at
December 31, 2007 primarily represented $57,628,000 denominated in Japanese Yen, $25,825,000 denominated in
South African Rand and $1,372,000 denominated in Argentine pesos. At December 31, 2007, Seaboard’s borrowing
capacity under its committed and uncommitted line was reduced by letters of credit (LCs) totaling $56,471,000, and
$9,839,000, respectively, primarily including $42,688,000 of LCs for Seaboard’s outstanding Industrial Development
Revenue Bonds (IDRBs) and $13,708,000 related to insurance coverages. The weighted average interest rates for
outstanding notes payable were 5.33% and 2.63% at December 31, 2007 and 2006, respectively.
The notes payable to banks under the credit lines are unsecured. The lines of credit do not require compensating
balances. Facility fees on these agreements are not material.
A summary of long-term debt at the end of each year is as follows:
(Thousands of dollars)
Private placements:
7.88% senior notes, repaid in 2007
5.80% senior notes, due 2008 through 2009
6.21% senior notes, due 2009
6.21% senior notes, due 2008 through 2012
6.92% senior notes, due 2012
Industrial Development Revenue Bonds, floating rates
(3.49% - 3.50% at December 31, 2007) due 2014 through 2027
Bank debt, 6.87% – 7.60%, due 2008 through 2010
Foreign subsidiary obligations, 2.00% – 17.50%, due 2009 through 2010
Foreign subsidiary obligation, floating rate due 2008
Capital lease obligations and other
Current maturities of long-term debt
Long-term debt, less current maturities
December 31,
2007
2006
$ -
$ 25,000
13,000
19,500
38,000
5,357
31,000
41,800
3,684
1,841
280
2,482
38,000
6,429
31,000
41,800
34,075
2,443
288
2,697
137,444
201,232
(11,912)
(63,415)
$ 125,532
$ 137,817
2007 Annual Report 47
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Of the 2007 foreign subsidiary obligations, $1,692,000 is denominated in CFA francs, $280,000 is payable in
Argentine pesos, and the remaining $149,000 is denominated in Mozambique metical. Of the 2006 foreign subsidiary
obligations, $1,847,000 is denominated in CFA francs, $288,000 is payable in Argentine pesos, and the remaining
$596,000 is denominated in Mozambique metical.
Seaboard consolidates a limited liability company deemed to be a VIE. As a result, bank debt totaling $24,803,000
as of December 31, 2006 is included in the table above. This bank debt was paid off during 2007. The weighted
average interest rate was 7.54% at December 31, 2006.
At December 31, 2007, Seaboard had bank debt secured by hog production facilities and equipment with a net book
value of $32,865,000.
The terms of the note agreements pursuant to which the senior notes, IDRBs, bank debt and credit lines were issued
require, among other terms, the maintenance of certain ratios and minimum net worth, the most restrictive of which
requires consolidated funded debt not to exceed 50% of consolidated total capitalization; an adjusted leverage ratio
of less than 3.5 to 1.0; requires the maintenance of consolidated tangible net worth, as defined, of not less than
$507,000,000 plus 25% of cumulative consolidated net income beginning October 2, 2004; limits aggregate dividend
payments to $10.0 million plus 50% of consolidated net income less 100% of consolidated net losses beginning
January 1, 2002 plus the aggregate amount of Net Proceeds of Capital Stock for such period ($428,727,000 as of
December 31, 2007) or $15,000,000 per year under certain circumstances; limits the sum of subsidiary indebtedness
and priority indebtedness to 10% of consolidated tangible net worth; and limits Seaboard’s ability to acquire
investments and sell assets under certain circumstances. Seaboard is in compliance with all restrictive debt
covenants relating to these agreements as of December 31, 2007.
Annual maturities of long-term debt at December 31, 2007 are as follows: $11,912,000 in 2008, $46,891,000 in
2009, $2,109,000 in 2010, $1,477,000 in 2011, $32,546,000 in 2012 and $42,509,000 thereafter.
Note 9
Derivatives and Fair Value of Financial Instruments
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.
The cost and fair values of investments and long-term debt at December 31, 2007 and 2006 are presented below.
December 31,
(Thousands of dollars)
Short-term investments
Long-term debt
2007
2006
Cost
Fair Value
Cost
Fair Value
$ 284,553
$ 286,660
$ 477,019 $ 478,859
137,444
140,720 201,232
200,489
The fair value of the short-term investments is based on quoted market prices at the reporting date for these or
similar investments. The fair value of long-term debt is determined by comparing interest rates for debt with similar
terms and maturities.
Commodity Instruments
Seaboard uses various grain, meal, hog and pork bellies futures and options to manage its exposure to price
fluctuations for raw materials and other inventories, finished product sales and firm sales commitments. However,
due to the extensive record-keeping required to designate the commodity derivative transactions as hedges for
accounting purposes, Seaboard marks to market its commodity futures and options primarily as a component of cost
of sales. Management continues to believe its commodity futures and options are primarily economic hedges
although they do not qualify as hedges for accounting purposes. Since these derivatives are not accounted for as
hedges, fluctuations in the related commodity prices could have a material impact on earnings in any given year.
From time to time, Seaboard may enter into speculative derivative transactions not directly related to its raw material
requirements.
At December 31, 2007 and 2006, Seaboard had open net contracts to purchase and (sell) 11,182,000 and
12,208,000 bushels of grain with fair values of $7,489,000 and $1,223,000, respectively, and (54,000) and 8,100 tons
48 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
of soybean meal with fair values of $(5,557,000) and $492,000, respectively and 11,400,000 and 15,560,000 pounds
of hogs with fair values of $(996,000) and $(83,000), respectively included with other accrued financial derivative
liabilities or current assets on the Consolidated Balance Sheets. In addition, at December 31, 2007 Seaboard also
had contracts to buy 720,000 pounds of pork bellies with a fair value of $2,000. For the years ended December 31,
2007, 2006 and 2005 Seaboard realized net gains (losses) of $18,469,000 $12,157,000, and $(1,156,000) related to
commodity contracts, primarily included in cost of sales on the Consolidated Statements of Earnings.
Foreign currency exchange agreements
Seaboard enters into foreign currency exchange agreements to manage the foreign currency exchange rate risk with
respect to certain transactions denominated in foreign currencies. The change in value of the foreign exchange
agreements are marked to market as a component of cost of sales on the Consolidated Statements of Earnings and
are included on other current assets or accrued financial derivatives liabilities on the Consolidated Balance Sheets as
of December 31, 2007 and 2006. Since these agreements are not accounted for as hedges, fluctuations in the
related currency exchange rates could have a material impact on earnings in any given year.
At December 31, 2007 and 2006, Seaboard had trading foreign exchange contracts (receive $U.S./pay South African
Rand (ZAR)) to cover its firm sales commitments and trade receivables with notional amounts of $99,854,000 and
$41,458,000, respectively, with a fair value of $(471,000), and $(644,000), respectively, included in accrued financial
derivative liabilities on the Consolidated Balance Sheet.
At December 31, 2007 and 2006, Seaboard had trading foreign exchange contracts (receive $U.S./pay ZAR) to cover
various foreign currency working capital needs for notional amounts of $598,000 and $1,319,000 respectively, with
fair values of $(1,000) and $5,000.
At December 31, 2007 Seaboard had trading foreign exchange contracts (receive $U.S./pay Euro) to cover its firm
sales commitments and trade receivables with a notional amount of $26,706,000 with a fair value of $(1,186,000)
included in accrued financial derivative liabilities on the Consolidated Balance Sheet.
At December 31, 2007 and 2006, Seaboard had trading foreign exchange contracts (receive Japanese Yen/pay
$U.S.) to cover note payable borrowings for an uncommitted line of credit denominated in Japanese Yen for notional
amounts of $63,081,000 and $58,435,000, respectively, with fair values of $(1,945,000) and $(783,000).
Forward Freight Agreements
During the fourth quarter of 2007, the Commodity Trading and Milling segment entered into certain forward freight
agreements, viewed as taking long positions in the freight market as well as covering short freight sales, which may
or may not result in actual losses when future trades are executed. These forward freight agreements which extend
into 2009 are viewed by management as an economic hedge against the potential of future rising charter hire rates to
be incurred by this segment for bulk cargo shipping while conducting its business of delivering grains to customers in
many international locations. At December 31, 2007, Seaboard had agreements to pay $61,250 per day during 2008
and $41,500 per day during 2009 with fair values of $(3,546,000) and $(2,043,000), respectively, included with other
accrued financial derivative liabilities on the Consolidated Balance Sheet. The loss related to these agreements is
recorded in cost of sales on the Consolidated Statement of Earnings.
Interest Rate Exchange Agreements
In prior years, Seaboard entered into interest rate exchange agreements which involved 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 mitigate the effects of fluctuations in interest rates on variable rate debt. Prior to 2005, these interest rate
exchange agreements were terminated resulting in deferred gains from terminated net proceeds. At December 31,
2007, the net deferred gains were fully amortized while at December 31, 2006, the deferred gains (net of tax) were
$152,000 and was included in accumulated other comprehensive loss on the Consolidated Balance Sheet. These
interest rate exchange agreements originally accounted for as hedges decreased interest expense by $249,000 for
the year ended December 31, 2007 and $324,000 for each year ended December 31, 2006 and 2005 resulting from
amortization of the deferred gain.
At December 31, 2005 Seaboard had five, ten-year interest rate exchange agreements outstanding that were not
paired with specific variable rate contracts, whereby Seaboard paid a stated fixed rate and received a variable rate of
interest on a total notional amount of $150,000,000. While Seaboard had certain variable rate debt, these interest
rate exchange agreements did not qualify as hedges for accounting purposes. During the second quarter of 2006,
2007 Annual Report 49
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Seaboard terminated all interest rate exchange agreements with a total notional value of $150,000,000. Seaboard
made payments in the amount of $1,028,000 to unwind these swaps. For the years ended December 31, 2006 and
2005 the net gain for interest rate exchange agreements not accounted for as hedges were $3,374,000 and
$2,996,000, respectively, and are included in Miscellaneous, net in the Consolidated Statements of Earnings.
Included in the gains for 2006 and 2005 are net payments of $909,000 and $4,047,000 respectively, during 2006 and
2005 for the difference between the fixed rate paid and variable rate received on these contracts.
Note 10
Employee Benefits
Seaboard maintains a defined benefit pension plan (the Plan) for its domestic salaried and clerical employees. The
Plan generally provides eligibility for participation after one year of service upon attaining the age of 21. Benefits are
generally based upon the number of years of service and a percentage of final average pay. Seaboard has
historically based pension contributions on minimum funding standards to avoid the Pension Benefit Guaranty
Corporation variable rate premiums established by the Employee Retirement Income Security Act of 1974. However,
because of Seaboard’s positive liquidity position for the past three years, management authorized additional
contributions to be made. In February 2006 Seaboard made a contribution of $3,811,000 which was the maximum
deductible contribution allowed for the 2005 plan year. In April 2007, Seaboard made a deductible contribution of
$10,000,000 for the 2006 plan year. At this time management does not plan on making any contributions for the
2007 or 2008 plan year during fiscal 2008.
Plan assets are invested to achieve a diversified overall portfolio consisting primarily of individual stocks, bonds and
mutual funds. Seaboard is willing to accept a moderate level of risk to potentially achieve higher investment returns.
The overall portfolio is evaluated relative to customized benchmarks, and is expected to exceed the customized
benchmark over five year rolling periods and longer. The investment strategy is periodically reviewed for continued
appropriateness. Derivatives, real estate investments, non-marketable and private equity or placement securities are
not allowed investments under the Plan. Seaboard’s asset allocation targets and actual investment composition
within the Plan are as follows:
Target Percentage of Portfolio
2007
Domestic Large Cap Equity
Domestic Small and Mid Cap Equity
35%
15%
37%
14%
International Equity
Fixed Income
15% 17%
35% 32%
2006
37%
14%
17%
32%
Actual Plan Composition at December 31,
Seaboard also sponsors non-qualified, unfunded supplemental executive plans and has certain individual, non-
qualified, unfunded supplemental retirement agreements for certain retired employees. The unamortized prior
service cost is being amortized over the average remaining working lifetime of the active participants for this plan.
The measurement date for these plans is December 31. Management is considering funding options but currently
has no plans to provide funding for these supplemental executive plans in advance of when the benefits are paid.
Assumptions used in determining pension information for the plans were:
Weighted-average assumptions
Discount rate used to determine obligations
Discount rate used to determine net periodic benefit cost
Expected return on plan assets
Years ended December 31,
2006
2007
2005
6.50%
5.75%
7.50%
5.75%
5.50%
7.50%
5.50%
6.00%
7.50%
Long-term rate of increase in compensation levels 4.00-5.00% 4.00-5.00%
4.00-5.00%
For 2007, management selected the discount rate based on a model-based result where the timing and amount of
cash flows approximates the estimated payouts. For 2006 and 2005, management selected the discount rate based
on Moody’s year-end published Aa corporate bond yield, rounded to the nearest quarter percentage point and
50 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
compared this rate for reasonableness to a model-based result which the timing and amount of cash outflows
approximates the estimated payouts. The expected return on Plan assets assumption is based on the weighted
average of asset class expected returns that are consistent with historical returns. The assumed rate was selected to
match the 50th percentile rounded to the nearest quarter percentage point of model-based results that reflect the
Plan’s asset allocation. The measurement date for the Plan is December 31. The unrecognized net actuarial losses
are amortized over the average remaining working lifetime of the active participants for these plans.
In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158 (SFAS 158), “Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans”. This statement required companies to fully
recognize, as an asset or liability, the overfunded or underfunded status of its benefit plan(s) with the offset to
accumulated other comprehensive income, a component of stockholders' equity. This statement requires employers
to recognize previously disclosed but unrecognized gains/losses, prior service costs/credits, and transition
assets/obligations when recognizing a plan’s funded status as a component of shareholders’ equity in accumulated
other comprehensive income. As of December 31, 2006, Seaboard adopted SFAS 158. The adoption of SFAS 158
increased pension liabilities by $15,427,000, reduced prepaid pension assets by $13,342,000, reduced intangible
pension assets by $7,498,000 and reduced total shareholders’ equity by $25,014,000, net of a deferred tax asset of
$11,253,000. SFAS 158 did not have an effect on 2006 net earnings or prior year financial statements.
The changes in the plans’ benefit obligations and fair value of assets for the Plan, supplemental executive plans and
retirement agreements for the years ended December 31, 2007 and 2006, and a statement of the funded status as of
December 31, 2007 and 2006 are as follows:
December 31, 2007
2006
Assets exceed Accumulated Accumulated
accumulated benefits benefits
(Thousands of dollars) benefits exceed assets exceed assets
Reconciliation of benefit obligation:
Benefit obligation at beginning of year $ 68,950 $ 52,380 $ 100,706
2,736 2,266 4,415
Service cost
3,893 2,558 5,902
Interest cost
15,131
(7,582) 3,070
Actuarial gains
Benefits paid
(4,824)
(1,519)
(2,341)
Plan amendments - 1,142 -
-
Settlement
- (8,709)
Benefit obligation at end of year
$ 65,656 $ 51,188 $ 121,330
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Settlement
$ 67,138 $ - $ 57,383
7,996
6,541
-
10,000 10,228
6,583
(2,341) (1,519) (4,824)
- (8,709) -
Fair value of plan assets at end of year
$ 81,338 $ - $ 67,138
Funded status
$ 15,682 $ (51,188) $ (54,192)
The funded status for the Plan was $15,682,000 and $(1,812,000) at December 31, 2007 and 2006, respectively.
The accumulated benefit obligation for the Plan was $59,674,000 and $62,950,000 and for the other plans was
$32,750,000 and $39,346,000 at December 31, 2007 and 2006, respectively. Expected future net benefit payments
for all plans during each of the next five years and in aggregate for the five year period beginning with the sixth year
are as follows: $4,857,000, $7,028,000, $6,160,000, $5,403,000, $6,195,000, and $47,970,000, respectively.
2007 Annual Report 51
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive income
(AOCI) at December 31, 2007 and 2006 are as follows:
(Thousands of dollars) 2007 2006
Accumulated loss, net of gain $(22,522) $(33,379)
(7,931)
Prior service cost, net of credit (8,483)
(81)
Transitional obligation (65)
Total Accumulated Other Comprehensive Income
$(31,070)
$(41,391)
The net periodic benefit cost of these plans was as follows:
(Thousands of dollars)
Components of net periodic benefit cost:
Years ended December 31,
2007 2006
2005
Service cost $ 5,002
Interest cost
Expected return on plan assets
Settlement
Amortization and other
6,451
(5,486)
3,671
2,224
$ 3,913
$ 4,415
5,137
5,902
(4,462) (4,115)
- -
2,815
1,323
Net periodic benefit cost $11,862
$ 8,670
$ 6,258
The amounts in AOCI expected to be recognized as components of net periodic benefit cost in 2008 are as follows:
(Thousands of dollars)
2008
Accumulated loss, net of gain
$ 796
Prior service cost, net of credit 923
Transition obligation 16
Estimated net periodic benefit cost
$ 1,735
Mr. H. H. Bresky retired as President and CEO of Seaboard effective July 6, 2006. As a result of Mr. Bresky’s
retirement, he was entitled to a lump sum payment of $8,709,000 from Seaboard’s Executive Retirement Plan.
Under IRS regulations, there is a six month delay of benefit payments for key employees and thus Mr. Bresky was
not paid his lump sum until February 2007. This lump sum payment exceeded the Company’s service and interest
cost components under this plan and thus required Seaboard to recognize a portion of its actuarial losses. However,
Seaboard was not relieved of its obligation until the settlement was paid in 2007. Accordingly, the settlement loss of
$3,671,000 was not recognized until February 2007 in accordance with SFAS No. 88, “Employers Accounting for
Settlements and Curtailments of Defined Benefit Pension for Termination Benefits.”
Seaboard participates in a multi-employer pension fund, which covers certain union employees under a collective
bargaining agreement. Seaboard is required to make contributions to this plan in amounts established under the
collective bargaining agreement. Contribution expense for this plan was $453,000, $442,000 and $452,000 for the
years ended December 31, 2007, 2006 and 2005, respectively. The applicable portion of the total plan benefits and
net assets of this plan is not separately identifiable although Seaboard has received notice the pension fund is under
funded. Seaboard could, under certain circumstances, be liable for unfunded vested benefits or other expenses of
this jointly administered union plan. Seaboard has not established any liabilities for potential future withdrawal as
such withdrawal from this plan is not probable.
Seaboard maintains a defined contribution plan covering most of its domestic salaried and clerical employees.
Seaboard 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 for the significant plan. Contribution
expense for this plan was $1,709,000, $1,643,000 and $1,604,000 for the years ended December 31, 2007, 2006
and 2005, respectively. In addition, Seaboard maintains a defined contribution plan covering most of its hourly, non-
union employees and in 2005 assumed responsibility for and sponsorship of two defined contribution plans covering
52 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
most of Daily’s employees. Contribution expense for these plans was $617,000, $554,000 and $440,000 for the
years ended December 31, 2007, 2006 and 2005, respectively.
Beginning in 2006, Seaboard established a deferred compensation plan which allows certain employees to reduce
their compensation in exchange for values in three investments. Seaboard has an Investment Option Plan which
allowed certain employees to reduce their compensation in exchange for an option to acquire interests measured by
reference to two investments. However, as a result of U.S. tax legislation passed in October 2004, reductions to
compensation earned after 2004 are no longer allowed under the Investment Option Plan. The exercise price for
each investment option was established based upon the fair market value of the underlying investment on the date of
grant. Under both plans, Seaboard contributes 3% of the employees reduced compensation. Seaboard’s expense
for these two deferred compensation plans, which primarily includes amounts related to the change in fair value of the
underlying
the years ended
December 31, 2007, 2006 and 2005, respectively. Included in other liabilities at December 31, 2007 and 2006 are
$24,009,000 and $19,009,000, respectively, representing the market value of the payable to the employees upon
exercise for both plans. In conjunction with these plans, Seaboard purchased the specified number of units of the
employee-designated investment plus the applicable option price for the Investment Option Plan. These investments
are treated as trading securities and are stated at their fair market values. Accordingly, as of December 31, 2007 and
2006, $27,773,000 and $22,787,000 were included in other current assets on the Consolidated Balance Sheets.
Investment income related to the mark-to-market of these investments for 2007, 2006, and 2005 totaled $2,183,000,
$2,358,000 and $1,376,000, respectively.
investment accounts, was $2,298,000, $2,466,000 and $1,433,000
for
Note 11
Commitments and Contingencies
During the fourth quarter of 2005, Seaboard’s subsidiary, Seaboard Marine, received a notice of violation letter from
U.S. Customs and Border Protection demanding payment of a significant penalty for an alleged failure to manifest
narcotics in connection with Seaboard Marine’s shipping operations, in violation of a federal statute and regulation.
In response to Seaboard Marine’s petition for relief, the amount of the penalty has been reduced to an amount which
will not have a material adverse effect on the consolidated financial statements. Seaboard is reviewing the reduction
and will continue to have discussions with U.S. Customs and Border Protection toward a further reduction in the
penalty of Seaboard.
In September 2007, Seaboard Marine settled a lawsuit brought by an individual for injuries as a result of an accident
occurring during vessel loading operations in late 2004. Seaboard’s Protection and Indemnity Insurer provided
indemnity and defense for the case, and paid $7.5 million to fund the settlement. Although initially disputing
coverage, in February 2008 Seaboard’s Protection and Indemnity Insurer advised Seaboard that it will not seek
recovery from Seaboard of the settlement paid.
Seaboard is subject to various other legal proceedings related to the normal conduct of its business, including various
environmental related actions. 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 Seaboard.
Contingent Obligations
Certain of the non-consolidated affiliates and third party contractors who perform services for Seaboard have bank
debt supporting their underlying operations. From time to time, Seaboard will provide guarantees of that debt
allowing a lower borrowing rate or facilitating third party financing in order to further business objectives. Seaboard
does not issue guarantees of third parties for compensation. As of December 31, 2007, Seaboard had guarantees
outstanding to two third parties with a total maximum exposure of $1,978,000. Seaboard has not accrued a liability
for any of the third party or affiliate guarantees as management considers the likelihood of loss to be remote.
As of December 31, 2007, Seaboard had outstanding $67,629,000 of letters of credit (LCs) with various banks.
Included in this amount are LCs that reduced Seaboard’s borrowing capacity under its committed credit facilities as
discussed in Note 8 totaling $42,688,000, which support the IDRBs included as long-term debt and $13,708,000 of
LCs related to insurance coverages.
2007 Annual Report 53
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Commitments
As of December 31, 2007 Seaboard had various firm noncancelable purchase commitments and commitments under
other agreements, arrangements and operating leases as described in the table below.
Purchase commitments
(Thousands of dollars)
Years ended December 31,
2008
2009
2010
2011
2012
Thereafter
Hog procurement contracts
$137,986 $152,827 $ 97,530 $64,852 $ -
$ -
Grain and feed ingredients
99,518 1,177 -
-
-
-
Grain purchase contracts for resale
249,239 -
-
-
-
-
Fuel purchase contract
Equipment purchases
and facility improvements
22,562 -
-
-
-
-
38,610 425 -
-
-
-
Other purchase commitments
6,207 -
-
-
- -
Total firm purchase commitments
554,122 154,429 97,530 64,852 -
-
Vessel, time and voyage-charter
arrangements
Contract grower finishing agreements
68,596 13,655 -
12,044 12,041 11,903 11,098 9,273 52,078
-
-
-
Other operating lease payments
11,256 5,942 4,710 3,985 2,884 3,265
Total unrecognized firm commitments
$646,018 $186,067 $114,143 $79,935 $12,157 $55,343
Seaboard has contracted with third parties for the purchase of live hogs to process at its pork processing plant and
has entered into grain and feed ingredient purchase contracts to support its live hog operations. The commitment
amounts included in the table are based on projected market prices as of December 31, 2007. During 2007, 2006
and 2005, this segment paid $131,490,000, $114,921,000 and $155,406,000, respectively for live hogs purchased
under committed contracts.
The Commodity Trading and Milling segment enters into grain purchase contracts and ocean freight contracts,
primarily to support firm sales commitments. These contracts are valued based on projected commodity prices as of
December 31, 2007. This segment also has short-term freight contracts in place for delivery of future grain sales.
The Power segment has entered into a contract for the supply of substantially all fuel required through June 2008 at
market-based prices. The fuel commitment shown above reflects the average price per barrel at December 31, 2007
for the minimum number of barrels specified in the agreement.
The Marine segment enters into contracts to time-charter vessels for use in its operations. These contracts range
from short-term time-charters for a few months and long-term commitments ranging from one to three years. This
segment’s charter hire expenses during 2007, 2006 and 2005 totaled $88,761,000, $91,747,000 and $76,668,000,
respectively.
To support the operations of the Pork segment, Seaboard has contract grower finishing agreements in place with
farmers to raise a portion of Seaboard’s hogs according to Seaboard’s specifications under long-term service
agreements. Under the terms of the agreements, additional payments would be required if the grower achieves
certain performance standards. The contract grower finishing obligations shown above do not reflect these incentive
payments which, given current operating performance, total approximately $1,500,000 per year. In the event the
farmer is unable to perform at an acceptable level, Seaboard has the right to terminate the contract. During the years
ended 2007, 2006 and 2005, Seaboard paid $13,280,000, $13,646,000 and $12,970,000, respectively, under
contract grower finishing agreements.
Seaboard also leases various facilities and equipment under noncancelable operating lease agreements. Seaboard
is currently negotiating to extend its lease for its port terminal operations in Miami, which is scheduled to expire on
September 30, 2008. Rental expense for operating leases amounted to $14,565,000, $13,132,000 and $11,542,000
in 2007, 2006 and 2005, respectively.
54 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Note 12
Stockholders’ Equity and Accumulated Other Comprehensive Loss
On August 7, 2007, the Board of Directors authorized Seaboard to repurchase from time to time prior to August 31,
2009 up to $50,000,000 market value of its Common Stock in open market or privately negotiated purchases, of
which $19,512,000 remained available at December 31, 2007. As of December 31, 2007, Seaboard used cash to
repurchase 17,089 shares of common stock at a total price of $30,488,000, including commissions of $38,000. The
stock repurchase will be funded by cash on hand or short-term available borrowing capacity. Shares repurchased
are retired and resume status of authorized and unissued shares.
In a 2002 transaction (the Transaction) between Seaboard and its parent company, Seaboard Flour LLC (the Parent
Company), Seaboard effectively repurchased shares of its common stock owned by the Parent Company in return for
repayment of all indebtedness owed by the Parent Company to Seaboard. As a part of the Transaction, the Parent
Company transferred to Seaboard rights to receive possible future cash payments from a subsidiary of the Parent
Company and Seaboard also received tax NOLs which allowed Seaboard to reduce the amount of future income
taxes it otherwise would pay. Seaboard agreed to issue to the Parent Company new shares of common stock with a
value equal to the cash received and/or the NOLs utilized.
On September 15, 2005, Seaboard filed tax returns utilizing the NOLs resulting in reducing its federal income tax by
$8,317,000. Based on terms of the Transaction, the price of the shares of Seaboard’s common stock to be issued to
the Parent Company is equal to the ten day rolling average closing price prior to October 1, 2005, which was
$1,317.44. This resulted in Seaboard issuing 6,313.34 shares to Parent Company on November 3, 2005. As all
contingencies regarding the issuance of the shares to the Parent Company were resolved as of October 1, 2005, the
weighted average number of common shares on a diluted basis includes the effect of the weighted average dilutive
securities amounting to 1,557 shares for the year ended December 31, 2005. The right to receive any cash
payments expired on September 17, 2007 without Seaboard receiving any payments or issuing any additional shares
to the Parent Company.
As discussed in Note 2, as a result of issuing a 4.74% equity interest in Seaboard Foods LP in connection with the
acquisition of Daily’s during 2005, the difference between the fair value of this equity interest compared to the book
value was recorded as additional paid-in capital in the amount of $13,263,000.
The components of accumulated other comprehensive loss, net of related taxes, are summarized as follows:
(Thousands of dollars)
Cumulative foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pension cost
Net unrealized loss on cash flow hedges
Deferred gain on interest rate swaps
Years ended December 31,
2006
2005
2007
$
(58,719)
1,149
(21,081)
-
-
$
(55,811)
1,361
(28,140)
(55)
152
$
(53,229)
928
(1,041)
(33)
350
Accumulated other comprehensive loss
$
(78,651)
$
(82,493)
$
(53,025)
The foreign currency translation adjustment primarily represents the effect of the Argentine peso currency exchange
fluctuation on the net assets of the Sugar and Citrus segment. When the Argentine government lifted the one to one
parity of the peso to the U.S. dollar at the end of 2001, the peso lost significant value against the dollar. At December
31, 2007, the Sugar and Citrus segment had $141,893,000 in net assets denominated in Argentine pesos,
$10,360,000 in net assets denominated in U.S. dollars and $57,628,000 of liabilities denominated in Japanese Yen in
Argentina.
As discussed in Note 10, as of December 31, 2006 Seaboard adopted SFAS 158 resulting in a $25,014,000 increase
in unrecognized pension cost net of a deferred tax benefit of $11,253,000.
2007 Annual Report 55
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
With the exception of the provision related to the foreign currency translation gains and losses discussed above,
which are taxed at a 35% rate, income taxes for components of accumulated other comprehensive loss were
recorded using a 39% effective tax rate. For 2007, the unrecognized pension cost includes $5,457,000 related to
employees at certain subsidiaries for which no tax benefit has been recorded.
Note 13
Segment Information
Seaboard Corporation had five reportable segments through December 31, 2007: Pork, Commodity Trading and
Milling, Marine, Sugar and Citrus, and Power, each offering a specific product or service. Seaboard’s reporting
segments are based on information used by Seaboard’s Chief Executive Officer in his capacity as chief operating
decision maker to determine allocation of resources and assess performance. Each of the five main segments is
separately managed and each was started or acquired independent of the other segments. The Pork segment
produces and sells fresh and frozen pork products to further processors, foodservice operators, grocery stores,
distributors and retail outlets throughout the United States, and to Japan and to certain other foreign markets. The
Commodity Trading and Milling segment internationally markets wheat, corn, soybean meal and other similar
commodities in bulk to third party customers and to non-consolidated foreign affiliates, and operates flour, maize and
feed mills in foreign countries. The Marine segment, based in Miami, Florida, provides containerized cargo shipping
services between the United States, the Caribbean Basin, and Central and South America. The Sugar and Citrus
segment produces and processes sugar, citrus and alcohol in Argentina primarily to be marketed locally. The Power
segment operates as an unregulated independent power producer in the Dominican Republic generating power from
a system of diesel engines mounted on two barges. Revenues for the All Other segment are primarily derived from
the jalapeño pepper processing operations.
The Pork segment derives approximately 13% percent of its revenues from a few customers in Japan through one
agent. In addition, approximately all of its hourly employees at its Guymon processing plant are covered by a
collective bargaining agreement. During the first quarter of 2006, Triumph Foods began production at its new pork
processing plant and Seaboard began marketing the related pork products for a fee primarily based on the number of
head processed by Triumph Foods. The Triumph Foods plant reached full double shift operating capacity during
2007.
The Pork segment has $28,372,000 of goodwill and $24,000,000 of other intangibles not subject to amortization in
connection with its acquisition of Daily’s. As discussed in Note 2, depending on management’s future plans for
expansion, there is a possibility that either this goodwill or other intangible assets, or both, could be deemed impaired
during some future period including fiscal 2008, which may result in a material charge to earnings.
At times during early 2007 and throughout 2006, Seaboard’s power production was restricted by the regulatory
authorities in the Dominican Republic. The regulatory body schedules production based on the amount of funds
available to pay for the power produced and the relative costs of the power produced.
Seaboard’s produce division, representing the majority of sales in the All Other segment, derives almost all of its
revenues from one customer.
Seaboard’s investment in a Bulgarian wine business (the Business) and related losses from this Business are
included in the All Other Segment. As discussed in Note 5, after recording its share of operating losses for the fourth
quarter, Seaboard discontinued using the equity method of accounting and wrote-off the remaining investment
balance as of December 31, 2007. In 2007 and 2006, Seaboard recorded 50% of the losses from the Business
compared to 100% in 2005.
The following tables set forth specific financial information about each segment as reviewed by management.
Operating income for segment reporting is prepared on the same basis as that used for consolidated operating
income. Operating income, along with income (loss) from foreign affiliates for the Commodity Trading and Milling
segment, is used as the measure of evaluating segment performance because management does not consider
interest and income tax expense on a segment basis.
56 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Sales to External Customers:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
Power
All Other
Segment/Consolidated Totals
Operating Income:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Income (Loss) from Foreign Affiliates:
(Thousands of dollars)
Comm odity Trading and Milling
Sugar and Citrus
All Other
Segment/Consolidated Totals
Depreciation and Amortization:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Years ended December 31,
2006
2005
2007
$
1,003,790
1,152,035
822,221
125,882
93,951
15,422
$
1,002,656
735,583
741,563
123,378
87,845
16,372
$
1,023,885
835,662
638,296
88,969
77,685
24,397
$
3,213,301
$
2,707,397
$
2,688,894
Years ended December 31,
2006
2005
2007
$ 39,528
20,905
104,156
15,484
5,402
634
186,109
(16,194)
$ 138,303
37,225
106,033
19,184
8,471
1,530
310,746
(13,751)
$ 182,749
34,374
90,922
11,884
9,561
2,604
332,094
(12,049)
$ 169,915
$ 296,995
$ 320,045
Years ended December 31,
2006
2005
2007
$ 5,232
360
(1,718)
$ 3,874
$6,323
(1,060)
(1,241)
$4,022
$8,138
111
(7,887)
$ 362
Years ended December 31,
2006
2005
2007
$ 47,258
4,501
16,568
6,510
3,747
320
78,904
317
$ 43,744
3,974
13,502
5,800
3,763
192
70,975
283
$ 41,098
3,344
11,047
5,176
3,831
375
64,871
235
$ 79,221
$ 71,258
$ 65,106
2007 Annual Report 57
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Total Assets:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Investment in and Advances to Foreign Affiliates:
(Thousands of dollars)
Comm odity Trading and Milling
Sugar and Citrus
All Other
Segment/Consolidated Totals
Capital Expenditures:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
Power
All Other
Segment Totals
Corporate
Consolidated Totals
December 31,
2007
Decem ber 31,
2006
$ 783,288
447,211
231,278
171,978
64,647
6,993
1,705,395
388,304
$ 721,514
301,672
176,673
133,971
66,978
8,464
1,409,272
552,161
$ 2,093,699
$ 1,961,433
December 31,
2007
2006
$ 59,538
1,168
-
$ 60,706
$ 38,748
636
3,073
$ 42,457
Years ended December 31,
2006
2005
2007
$ 78,085
3,013
61,045
21,424
218
362
164,147
26
$ 164,173
$ 30,324
4,024
30,429
18,379
107
1,033
84,296
1,590
$ 85,886
$ 8,070
13,811
30,028
11,195
277
820
64,201
40
$ 64,241
Administrative services provided by the corporate office allocated to the individual segments represent corporate
services rendered to and costs incurred for each specific division with no allocation to individual segments of general
corporate management oversight costs. Corporate assets include short-term investments, other current assets
related to deferred compensation plans, 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.
Geographic Information
Seaboard had sales in South Africa totaling $322,998,000, $172,067,000 and $167,748,000 for the years ended
December 31, 2007, 2006 and 2005, respectively, representing approximately 10%, 6% and 6% of total sales for
each respective year. No other individual foreign country accounts for 10% or more of sales to external customers.
58 2007 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The following table provides a geographic summary of net sales based on the location of product delivery.
(Thousands of dollars)
United States
Caribbean, Central and South America
Africa
Pacific Basin and Far East
Canada/Mexico
Eastern Mediterranean
Europe
Totals
Years ended December 31,
2006
2007
2005
$ 936,825
$ 1,027,295
$ 992,322
1,151,032
810,084
154,127
91,513
43,136
26,584
845,577
588,050
147,560
78,044
3,979
16,892
839,305
570,975
164,584
74,788
29,312
17,608
$ 3,213,301
$ 2,707,397
$ 2,688,894
The following table provides a geographic summary of Seaboard’s long-lived assets according to their physical
location and primary port for the vessels:
(Thousands of dollars)
United States
Argentina
Dominican Republic
All other
Totals
December 31,
2007
2006
$ 593,271
$ 520,215
68,545
39,229
29,350
55,386
31,251
31,325
$ 730,395
$ 638,177
At December 31, 2007 and 2006, Seaboard had approximately $183,647,000 and $142,848,000, respectively, of
foreign receivables, excluding receivables due from foreign affiliates, which generally represent more of a collection
risk than the domestic receivables. Management believes its allowance for doubtful accounts is adequate.
2007 Annual Report 59
S E A B O A R D C O R P O R A T I O N
Stockholder Information
Board of Directors
Steven J. Bresky
Director and Chairman of the Board
President and Chief Executive Officer
David A. Adamsen
Director
Vice President – Wholesale & Manufacturing,
The Penn Traffic Company
Douglas W. Baena
Director
Chief Executive Officer, CreditAmerica Corporation
Officers
Kevin M. Kennedy
Director
Chief Financial Officer, Nautilus Holdings Ltd.
Joseph E. Rodrigues
Director
Retired, former Executive Vice President and
Treasurer
Steven J. Bresky
President and Chief Executive Officer
Ralph L. Moss
Vice President, Governmental Affairs
Robert L. Steer
Senior Vice President, Chief Financial Officer
David S. Oswalt
Vice President, Taxation and Business Development
David M. Becker
Vice President, General Counsel and Secretary
Barry E. Gum
Vice President, Finance and Treasurer
James L. Gutsch
Vice President, Engineering
Chief Executive Officers of Principal Seaboard Operations
John A. Virgo
Vice President, Corporate Controller and Chief
Accounting Officer
Adriana N. Hoskins
Assistant Treasurer
Rodney K. Brenneman
Pork
David M. Dannov
Commodity Trading and Milling
Edward A. Gonzalez
Marine
Richard A. Watt
Sugar & Citrus
Armando G. Rodriguez
Power
Stock Transfer Agent and Registrar of Stock
Availability of 10-K Report
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 0290-3078
(800) 884-4225
Auditors
KPMG LLP
1000 Walnut, Suite 1000
Kansas City, Missouri 64106
Stock Listing
Seaboard’s common stock is traded on the American
Stock Exchange under the symbol SEB. Seaboard
had 218 shareholders of record of its common stock
as of February 8, 2008.
Seaboard files its Annual Report on Form 10-K with
the Securities and Exchange Commission. Copies of
the Form 10-K for fiscal 2007 are available without
charge by writing Seaboard Corporation, 9000 West
67th Street, Shawnee Mission, Kansas 66202,
Attention: Shareholder Relations or via the Internet at
www.seaboardcorp.com. Seaboard provides
access to its most recent Form 10-K, 10-Q and 8-K
reports on its Internet website, free of charge, as soon
as reasonably practicable after those reports are
electronically filed with the Securities and Exchange
Commission.
60 2007 Annual Report