2008 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 Consolidated 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 the 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 certain
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 ability of Seaboard to sell certain grain inventories in foreign countries at a current cost basis
and the related contract performance by customers, (ix) the effect of the fluctuation in foreign currency exchange
rates, (x) statements concerning profitability or sales volume of any of Seaboard’s segments, (xi) the anticipated
costs and completion timetable for Seaboard’s scheduled capital improvements, acquisitions and dispositions, or
(xii) 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.
2008 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
Despite the chaotic and extraordinary business climate in 2008, we managed to post reasonable returns, which, in
light of the global financial crisis, is a testament to our model of a diverse mix of vertically integrated commodity
businesses. Given the loss of confidence in the private sector, the tightening of credit from financial institutions and
the severe recession worldwide, we are fortunate to be in basic industries that may falter but should not fail when
managed carefully and conservatively. With government intervention around the world now a major force in the
fundamental workings of economies, we don’t expect a turnaround to a healthier market-driven economy for an
extended period. Needless to say, these are startling times.
In 2008, we achieved the highest revenue in the Company’s history at more than $4.2 billion, mostly as a result of
higher unit prices and, to a lesser extent, because of increased unit volume. Operating income of $121.8 million was
28% less than in 2007 and 47% less than our trailing five-year average. Generally, margins suffered due to higher
costs, but prices of our main inputs, namely grain, energy and transportation, declined sharply in the latter half of the
year and we hope it will be less volatile going forward. In 2008, the price fluctuations of these cost components were
nothing short of astounding, and we did a credible job of managing the risks. Of grave concern is the abrupt
slowdown in economies around the world and the potential for protectionism and shrinking international trade. We are
vulnerable in all major divisions as our reliance on exports from the U.S. and a market-driven economy are critical
components of our success.
On the bright side, the Commodity Trading and Milling Division had an unprecedented year in sales and operating
income and far surpassed its previous records in both areas. Well managed grain and ocean freight positions,
expanded trade with third parties, including results of our newly formed Rice business, and generally improved
margins all contributed toward sales of $1.9 billion and operating income of $ 96.5 million. As wheat and feed
ingredient prices moderated in the last half of the year, our milling volumes recovered at many locations in Africa and
the Americas, and we look forward to stability and perhaps growth in market share in select countries. This past year,
we altered several company structures at overseas locations through mergers, closures, expansions and additions,
and we will continue to make such changes where we believe it makes sense and when it affords us an opportunity to
improve our competitive position. We continue to expand our integrated model of supplying third parties and our own
affiliates with grain and grain by-products.
Seaboard Foods endured another year of high feed costs without a commensurate offset of higher product prices.
Congress has not, to date, legislated changes to the Renewable Fuel Standard, which mandates increased
production of biofuels through 2012. The unintended consequence of this provision of the U.S. Energy Policy Act is
the linking of the price of corn-based ethanol with that of fossil fuels. As a result, the production costs of all animal
proteins, including pork, have risen dramatically due to higher ingredient prices. We are optimistic that this will get
resolved in the long term through market forces. Until then, total meat supply, including beef and poultry, should
shrink, causing a better balance between cost and revenue for our vertically integrated pork operations.
In Guymon, Oklahoma, we completed construction of our 30-million-gallon biodiesel facility and began production
during the second quarter. This plant allows us to use our own animal fat as well as raw materials from third parties
as inputs. During the startup, we experienced some operational difficulties and incurred negative margins for the
year, but we expect better results in 2009. We also have enhanced our process to comply with all newly implemented
ASTM standards, which will allow us to meet European quality requirements and ship biofuel to these markets in the
future. In addition, during the first half of 2009, we expect to complete the construction of our ham-boning operation in
Reynosa, Mexico, and commence operations there, which will give us the flexibility to produce additional value-added
products for the high-volume Mexican market.
2009 also will be a challenging year as processing margins have narrowed sharply and hog production losses will
continue at least through the spring. One mitigating factor in 2008 was that, once again, the U.S. pork industry set a
new record volume of exports with a 49% year-over-year increase. Although analysts are predicting a marginal
decrease in these volumes in 2009, we are optimistic that continued strong exports will support domestic prices.
Currency levels, trade policies and economic health will significantly affect the level of pork exports that we realize in
2009.
In April 2008, Seaboard Foods published its first sustainability report entitled "Sustainability & Stewardship." We are
very excited about the release of this report as it illustrates the significant commitment that our company has made in
the areas of quality, customer service, employees, environment, animal care and civic responsibility.
Seaboard Marine had another good year enjoying record volumes and revenues. Managing costs, particularly
fluctuating fuel and charter hire costs, has been challenging with overall margins narrowing. Considerable effort has
been made to control expenses, improve customer service through increased frequency of port calls and solidify our
2
2008 Annual Report
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
U.S. and outport terminal infrastructures with capital programs. Of note, we extended our terminal lease at the Port of
Miami through 2028, began vessel calls to and from Brooklyn, NY, and expanded our terminal facilities in Colombia
and the Dominican Republic. We continue to upgrade our container fleet and hope to capitalize on lower ship values
to upgrade our fleet of vessels.
The worldwide container shipping industry will be plagued by overcapacity in 2009 largely because of the global
economic downturn. Given that Seaboard Marine’s business hinges on healthy multilateral trade within the Americas,
more so than in other global trade lanes, it is critical that government trade policies and local economies within our
regions remain market driven and robust. These elements are in play this year, and a confluence of negative factors
could affect volumes and rates for Seaboard Marine.
Our Sugar and Citrus operation in Argentina struggled this past year despite the fact we realized higher revenue.
Although sugar margins remained positive, citrus posted negative margins. Amid higher labor and administrative
costs, operating income was down sharply. We are reviewing our position in the citrus business this year with a view
toward mitigating some of the risks inherent in the fresh fruit and juice business.
The Argentine Government continues to attempt to manage inflation by putting price controls on certain staples and
imposing export taxes on critical agricultural products. This has resulted in a degree of political unrest among
farmers, in particular, and in the business community as a whole. Because the sugar industry is a large employer in
many underdeveloped regions of Argentina, we don’t expect the government’s actions to significantly affect our
business, except for its support of higher labor costs. On the positive side, the government has legislated a biofuels
program that will create domestic demand for ethanol. The new law should reduce the amount of sugar that the
country and Tabacal export each year at market-clearing world prices. Recent and ongoing investments in boiler and
distillery capacity will give us the flexibility to use sugar cane production to manufacture either sugar or alcohol for the
local market. With the planned completion of our investment in co-generation in 2010, we will have an extremely cost-
efficient and flexible facility that will maximize revenue from our farm production. Since our acquisition in 1996, we
have continually channeled profits into improving the productive assets of the Company, and we now have a world
class sugar cane production and processing complex that should provide the necessary cash flows to return
deployed capital.
Our power generation business in the Dominican Republic performed well in 2008 with increased operating income.
With formula-driven sales contracts with private users and government-related entities, the success of the business is
determined by cost containment and efficient performance of heavy fuel engines. On March 2, 2009, we provisionally
sold our power barges to a company that plans to deploy them to another location in early 2011. Until then, we will
continue to run the business and fulfill our contractual obligations to our current power users. Given our working
knowledge of the power industry in the Dominican Republic, our equity investment in a 300-MW facility and the
goodwill we believe we have built among our customer base, we plan to explore alternative energy investments in
this country. We have enjoyed the support of the Dominican Republic government and the business community for 20
years and would like to remain invested in this country.
Over the last five years (2004-2008), Seaboard has enjoyed a reasonable measure of success with regard to share
price, stockholder’s equity and revenue, realizing increases of 323%, 180% and 115%, respectively. Going forward,
we face a different set of challenges with many factors outside of our control. However, we can work to manage costs
and business risks, fortify our business model through integration and expansion and create a healthy work
environment and company culture. It is our hope that we can accomplish this and, if successful, we can repeat and
perhaps exceed our past financial performance.
As always, I am extremely appreciative of the hard work, integrity and company spirit that I see demonstrated day in
and day out at Seaboard. I am grateful to be a part of this organization and I hope, as fellow shareholders, you are as
well.
Steven J. Bresky
President and
Chief Executive Officer
2008 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 18,500 hogs and generally operates at capacity with additional weekend shifts depending on
market conditions. During 2008, the Pork Division made modifications to its processing plant that increased daily
double shift capacity from approximately 16,800 hogs to approximately 18,500 hogs. Seaboard produces and sells
fresh and frozen pork products to further processors, foodservice operators, grocery stores, distributors and retail
outlets throughout the United States. Seaboard also sells to distributors and further processors 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 milling 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 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 extend production to include other further processed pork products.
In the second quarter of 2008, Seaboard commenced production of biodiesel at a new facility constructed in Guymon,
Oklahoma. The biodiesel is produced from pork fat from Seaboard’s Guymon pork processing plant and from animal
fat supplied by non-Seaboard facilities. The biodiesel is sold to a third party. The facility can also produce biodiesel
from vegetable oil. Also during 2008, Seaboard entered into an agreement to build and operate a majority-owned
ham-boning and processing plant in Mexico. The plant is currently expected to be completed in the first half of 2009.
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 assured products to its customers that are produced in its own facilities.
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.
Commodity Trading & Milling Division
Seaboard’s Commodity Trading & Milling Division markets grain and oilseed products overseas to third party
customers and affiliated companies. These commodities are purchased worldwide with primary destinations in
Africa, South America, and the Caribbean.
The division annually sources, transports and markets approximately 4.2 million metric tons of wheat, corn, soybean
meal, rice and other related commodities to the food and animal feed industries. The division efficiently provides
quality products and reliable services to industrial customers in selected markets. Seaboard integrates the delivery of
commodities to its customers primarily through the use of company owned and chartered bulk carriers.
Seaboard’s Commodity Trading and Milling Division has facilities in 17 countries. The commodity trading business
operates through seven offices in six countries and one non-consolidated affiliate location in South America. The
grain processing businesses operate facilities at 25 locations in 12 countries and include four consolidated and nine
non-consolidated affiliates in Africa, South America, and the Caribbean. These businesses produce approximately
2.5 million metric tons of finished product per year.
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2008 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 off-
port warehouse for cargo consolidation and temporary storage and an 81 acre terminal at the Port of Miami. At the
Port of Houston, Seaboard operates a 62 acre cargo terminal facility that 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 to Brooklyn, New York, Fernandina Beach, Florida, New Orleans, Louisiana and 40
foreign ports.
Seaboard’s marine fleet consists of 12 owned and about 27 chartered vessels, as well as approximately 55,000 dry,
refrigerated and specialized containers and units of related equipment. Seaboard is the largest shipper 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 transport by truck or rail of 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 to provide the most reliable and effective level of service throughout the United States, Latin America and
the Caribbean Basin and between the countries it serves.
Other Divisions
In Argentina, Seaboard is involved in the production and refining of sugar and the production and processing of citrus
products. 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, has a processing capacity of
approximately 230,000 metric tons of sugar and approximately 13 million gallons of alcohol per year. During 2008,
construction was completed on the alcohol distillery operation which increased annual alcohol production capacity
from about four million gallons to approximately 13 million gallons. The mill is located in the Salta Province of
northern Argentina with administrative offices in Buenos Aires. 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. During 2008 this division began
construction of a 40 megawatt cogeneration power plant, which is expected to be completed in 2010.
Seaboard owns two floating electric power generating facilities in the Dominican Republic, 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 generating electricity for 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, under 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. On March 2, 2009, an agreement became effective under which Seaboard
will sell the two barges. Completion of the sale is dependent upon the satisfaction of several conditions, including
meeting certain baseline performance and emission tests. Failure to satisfy or cure any deficiencies could result in
the agreement being terminated. Seaboard is considering options to continue its power business in the Dominican
Republic after the sale of these assets is completed.
2008 Annual Report
5
S E A B O A R D C O R P O R A T I O N
Principal Locations
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
Power
Transcontinental Capital Corp.
(Bermuda) Ltd.
Dominican Republic
Corporate Office
Seaboard Corporation
Merriam, Kansas
Pork
Seaboard Foods LLC
Pork Division Office
Merriam, 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
Miami, Florida
Peru*
South Africa
Switzerland
Les Moulins d’Haiti S.E.M.*
Haiti
Lesotho Flour Mills Limited*
Lesotho
Life Flour Mill Ltd.*
Top Feeds Limited*
Nigeria
Minoterie de Matadi, S.A.R.L.*
Democratic Republic of Congo
Minoterie du Congo, S.A.
Republic of Congo
Moderna Alimentos, S.A.*
Molinos Champion, S.A.*
Molinos Electro Moderna, S.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
Brooklyn, New York
Fernandina Beach, Florida
Houston, Texas
Miami, Florida
New Orleans, Louisiana
Agencias Generales Conaven, C.A.
Venezuela
Agencia Maritima del Istmo, S.A.
Costa Rica
Cayman Freight Shipping Services, Ltd.
Cayman Islands
JacintoPort International LLC
Houston, Texas
Representaciones Maritimas y
Aereas, S.A.
Guatemala
Sea Cargo, S.A.
Panama
*Represents a non-controlled, non-consolidated affiliate
6
2008 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)
2008
Years ended December 31,
2007
2006
2005
2004
Net sales
Operating income
Net earnings
$ 4,267,804 $ 3,213,301
$ 2,707,397
$ 2,688,894
$ 2,683,980
$ 121,809 $ 169,915
$ 296,995
$ 320,045
$ 251,254
$ 146,919 $ 181,332
$ 258,689
$ 266,662
$ 168,096
Basic earnings per common share
$ 118.19 $ 144.15
$ 205.09
$ 212.20
$ 133.94
Diluted earnings per common share
$ 118.19 $
144.15
$ 205.09
$ 211.94
$ 133.94
Total assets
$ 2,331,361 $ 2,093,699
$ 1,961,433
$ 1,816,321
$ 1,436,694
Long-term debt, less current maturities $ 78,560 $ 125,532
$ 137,817
$ 201,063
$ 262,555
Stockholders’ equity
$ 1,459,355 $ 1,354,228
$ 1,203,307
$ 977,870
$ 692,682
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.
2008 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 NYSE Alternext US (formerly the American Stock Exchange). On October 1, 2008, the NYSE Euronext
completed its acquisition of the American Stock Exchange. The new entity is known as NYSE Alternext US, however
the index is still referred to as the AMEX Composite and provides an appropriate comparison for Seaboard’s stock
performance. 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 AMEX Composite
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, 2003, and ending December 31, 2008. 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
$700
$600
$500
$400
$300
$200
$100
$0
12/03
12/04
12/05
12/06
12/07
12/08
Seaboard Corporation
AMEX Composite
Peer Group
*$100 invested on 12/31/03 in stock & 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 Composite
Peer Group
12/31/03
12/31/04
12/31/05 12/31/06 12/31/07 12/31/08
$100.00
$100.00
$100.00
$356.06
$124.13
$120.76
$540.27
$155.00
$115.63
$632.39
$184.30
$140.48
$527.50 $429.45
$217.52 $132.72
$149.92 $114.71
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2008 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 3rd
Quarter
Quarter
4th
Quarter
Total for
the Year
2008
Net sales
Operating income
Net earnings
$ 993,668
$ 999,951
$ 1,131,691 $ 1,142,494
$ 4,267,804
$ 59,382
$
3,096
$ 31,714 $ 27,617 $ 121,809
$ 70,027
$ 20,963
$ 32,905 $ 23,024 $ 146,919
Earnings per common share
Dividends per common share
$
$
56.28
0.75
$
$
16.85
$ 26.47
$ 18.55 $ 118.19
0.75
$ 0.75
$ 0.75 $ 3.00
Market price range per common share:
High $ 1,645.00
$ 1,854.00
$ 1,826.00
$ 1,359.00
Low $ 1,251.00
$ 1,470.00
$ 1,210.00
$ 795.00
2007
Net sales
Operating income
Net earnings
Earnings per common share
$ 39.13
$ 33.82
$ 41.75
Dividends per common share
$ 0.75
$ 0.75
$ 0.75
$ 729,148
$ 742,219
$ 801,328
$ 940,606 $ 3,213,301
$ 56,818
$ 34,462
$ 49,601
$ 49,355
$ 42,657
$ 52,572
$
$
$
$
29,034 $ 169,915
36,748 $ 181,332
29.40 $ 144.15
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
During the first, third and fourth quarters of 2008, Seaboard repurchased 369, 2,390 and 1,093 common shares
respectively, as authorized by Seaboard’s Board of Directors. During the third and fourth quarters of 2007, Seaboard
repurchased 8,643 and 8,446 common shares, respectively, as authorized by Seaboard’s Board of Directors. See
Note 12 to the Consolidated Financial Statements for further discussion.
During the fourth quarter of 2008, Seaboard recorded an impairment charge of $7,000,000 ($4,270,000 net of tax), or
$3.44 per share, related to the value of other intangible assets not subject to amortization. See Note 2 to the
Consolidated Financial Statements for further discussion. Also during the fourth quarter of 2008, Seaboard recorded
a write down of $5,653,000 ($4,940,000 net of tax), or $3.98 per share, for grain inventories related to its commodity
trading business that are committed to various customers in foreign countries for which customer contract
performance is a heightened concern. See Note 4 to the Consolidated Financial Statements for further discussion.
2008 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, Mexico, 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 2008, Seaboard raised about 75% 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 61% 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 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 constructed a processing plant to produce biodiesel to be sold to a third party. Biodiesel is
produced from pork fat from Seaboard’s Guymon pork processing plant and from animal fat provided by other parties.
The processing plant also can produce biodiesel from vegetable oil. This plant was completed in the second quarter
of 2008. During 2007 and 2008, the Pork segment constructed additional hog finishing space to allow hogs more
time to reach the desired weight for processing at the Guymon plant. During 2008, modifications were made to the
Guymon hog processing plant that increased daily double shift processing capacity from approximately 16,800 hogs
to 18,500 hogs. 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.
In April 2008, the Pork segment entered into an agreement to build and operate a majority-owned ham-boning and
processing plant in Mexico. This plant is currently expected to be completed in the first half of 2009. During the
second quarter of 2008, Seaboard decided to indefinitely delay previously announced plans to expand its processed
meats capabilities by either constructing a separate further processing plant, primarily for bacon, or acquiring an
existing facility.
During 2006, Triumph Foods began production at its 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 a capacity similar to that of Seaboard’s Guymon plant and operates upon an
integrated model similar to that of 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.
10
2008 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
Commodity Trading and Milling Segment
The Commodity Trading and Milling segment primarily operates overseas with locations in Africa, Bermuda, South
America, the Caribbean and Europe. 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 of various commodities, such as
wheat, corn, soybean meal and rice. 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 also affect business volumes and margins as they did during the recent period of
extreme price volatility. 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. Grain
is sourced 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.
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. As a result, fluctuations in economic conditions or
unstable political situations in the countries in which Seaboard operates can affect import/export trade volumes. In
prior years, when certain countries experienced such instability, Seaboard’s volumes and operating profits were
significantly affected. 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.
In recent years, Seaboard was able to raise cargo rates in most markets, which has helped offset higher charter hire
rates and fuel costs. As a result of cargo volume growth in recent years, this segment’s need for vessels and cargo
carrying and handling equipment has increased and is expected to increase further during 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 affected 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 in the world market can affect local sugar prices and export sales volumes and
prices. Depending on local harvest and market conditions, this business purchases from third parties 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
have an impact on reported U.S. dollar sales, operating income and cash flows. Financing needs for the foreseeable
future will remain high for this operation as a result of ongoing expansion of sugar production, construction of a 40
megawatt cogeneration power plant expected to be completed in 2010, and the payment of debt. Seaboard
continues to explore ways to improve and expand its existing operations while considering other alternatives to
expand this segment.
2008 Annual Report
11
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
All Other Segments
All Other segments primarily represents results from Seaboard’s Power division located in the Dominican Republic
(DR). The Power division operates as an unregulated independent power producer in the DR generating power from
diesel engines mounted on two barges. This division’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 45% of the power it generates to certain government-approved
commercial large users under long-term contracts. Seaboard also has a short-term contract for approximately 40%
of its power with a government-owned distribution company. This short-term contract exposes Seaboard to a
concentrated credit risk as the customer, from time to time, has significant past due balances. 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.
The DR regulatory body schedules power 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 generally have been passed on to customers. See footnote 13 to the Consolidated Financial Statements for
discussion on a pending sale of the two barges in the near future. Seaboard is considering options to continue its
power business in the Dominican Republic after the sale is completed. 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, 2008 increased $39.3 million from December 31, 2007, while
cash from operating activities was $109.9 million for 2008. The increase was primarily the result of the combination
of cash from operating activities, an increase in notes payable of $79.4 million in excess of cash used for capital
expenditures of $134.6 million, scheduled principal payments of long-term debt of $11.7 million and $5.0 million used
to repurchase common stock as discussed in Note 12 to the Consolidated Financial Statements. Cash from
operating activities for 2008 decreased $33.9 million compared to 2007, primarily reflecting lower net earnings for the
year.
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.
Capital Expenditures, Acquisitions and Other Investing Activities
During 2008 Seaboard invested $134.6 million in property, plant and equipment, of which $52.6 million was expended
in the Pork segment, $46.3 million in the Marine segment, $31.0 million in the Sugar and Citrus segment and $4.7
million in the remaining businesses. For the Pork segment, $12.8 million was spent constructing additional hog
finishing space, $9.3 million was spent on the construction of a biodiesel plant and $8.2 million was spent on the
ham-boning and processing plant discussed below. For the Marine segment, $36.5 million was spent to purchase
cargo carrying and handling equipment. In the Sugar and Citrus segment, $10.4 million was used for development of
the cogeneration power plant with the remaining capital expenditures being used primarily for expansion of alcohol
distillery operations and expansion of cane growing operations. All other capital expenditures were primarily of a
normal recurring nature and primarily included replacement of machinery and equipment, and general facility
modernizations and upgrades.
12
2008 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
In April 2008, the Pork segment entered into an agreement to build and operate a majority-owned ham-boning and
processing plant in Mexico. This plant is expected to be completed in the first half of 2009 at a total cost of $10.0
million with approximately $1.8 million remaining to be spent in 2009. During the second quarter of 2008, Seaboard
decided to indefinitely delay previously announced plans to expand its processed meats capabilities by either
constructing a separate further processing plant, primarily for bacon, or acquiring an existing facility. In addition,
during the first quarter of 2008 Seaboard decided not to proceed with any investment in the previously announced
consortium to construct two coal-fired 305 megawatt electric generating plants in the Dominican Republic.
The total 2009 capital expenditures budget is $111.0 million. In addition to the project discussed above, the Pork
segment plans to spend $18.4 million primarily for improvements to existing hog facilities, upgrades to the Guymon
pork processing plant and additional facility upgrades and related equipment. The Marine segment has budgeted
$58.0 million primarily for additional cargo carrying and handling equipment and port development projects. In
addition, management will be evaluating whether to purchase additional containerized cargo vessels for the Marine
segment during 2009. The Sugar and Citrus segment plans to spend $24.5 million, including $15.0 million for the
development of a 40 megawatt cogeneration power plant, with the remaining amount primarily for the expansion of
cane growing operations and harvesting equipment. The cogeneration power plant is expected to be operational by
the second quarter of 2010 with an additional $6.0 million spent during 2010. The balance of $8.3 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,
2008 Seaboard had commitments of $32.6 million to spend on construction projects, purchase equipment, and make
facility improvements.
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.
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, plantation and harvesting equipment. All other capital expenditures were of a normal
recurring nature and primarily included replacement of machinery and equipment, and general facility modernizations
and upgrades.
On March 2, 2009, an agreement became effective whereby Seaboard will sell its two power barges in the Dominican
Republic on or around January 1, 2011 for $70.0 million. Upon the satisfaction of certain conditions, which are
expected to be met during March 2009, $15.0 million will be paid to Seaboard and the $55.0 million balance of the
purchase price will be paid into escrow and paid to Seaboard at the closing of the sale. See Note 13 to the
Consolidated Financial Statements for further discussion.
In late September 2007, Seaboard acquired for $8.5 million a 40% non-controlling interest, including cash contributed
into the business, in a flour milling 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 investments are
accounted for using the equity method.
2008 Annual Report
13
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
In January 2007, Seaboard repurchased the 4.74% equity interest in its subsidiary, Seaboard Foods LLC, 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, LLC. See Note 2 to the Consolidated Financial Statements for further
discussion.
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.
Financing Activities, Debt and Related Covenants
On July 10, 2008, Seaboard entered into an Amended and Restated Credit Agreement that increased its committed
line of credit from $100.0 million to $300.0 million. This credit facility has a term of five years, maturing July 10, 2013.
The following table represents a summary of Seaboard’s available borrowing capacity as of December 31, 2008. At
December 31, 2008, borrowings outstanding under the committed lines of credit totaled $115.0 million and
borrowings under the uncommitted lines of credit totaled $5.6 million, all related to foreign subsidiaries. Letters of
credit reduced Seaboard’s borrowing capacity under its committed and uncommitted credit lines by $58.1 million and
$1.3 million, respectively, primarily representing $42.7 million for Seaboard’s outstanding Industrial Development
Revenue Bonds and $15.2 million related to insurance coverage.
(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, 2008
Total amount
available
$ 300,000
134,341
434,341
120,567
59,347
$ 254,427
Seaboard has capacity under existing covenants to undertake additional debt financings of approximately $836.5
million. As of December 31, 2008, 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 $1.5 million to $47.1 million per year, for a total of $50.6 million over
the next three years. Although the current global liquidity crisis and worldwide economic downturn could affect our
ability to fund operations, management believes Seaboard’s combination of internally generated cash, liquidity,
capital resources and borrowing capabilities will be adequate for its existing operations and any known potential plans
for expansion of existing operations or business segments for 2009. Seaboard recently secured a $300.0 million line
of credit for five years and has cash and short-term investments of $373.3 million with total net working capital of
$779.8 million as of December 31, 2008. In management’s view, the primary liquidity issues for 2009 pertain to its
customers’ and suppliers’ liquidity, financing capabilities and overall financial health, which could affect Seaboard’s
sales volumes or customer contract performance, procurement of or access to needed inventory, supplies and
equipment, and the timely collection of receivables along with related potential deterioration in the receivables aging.
Management does, however, periodically review various alternatives for future financing to provide additional liquidity
for future operating plans. Regardless of the current global business climate, 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
14
2008 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
which $14.5 million remained available at December 31, 2008. Under this repurchase plan, Seaboard used cash to
repurchase 3,852 shares of common stock at a total price of $5.0 million in 2008 and 17,089 shares of common stock
at a total price of $30.5 million in 2007. 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.
Contractual Obligations and Off-Balance-Sheet Arrangements
The following table provides a summary of Seaboard’s contractual cash obligations as of December 31, 2008.
(Thousands of dollars)
Total 1 year years years
Payments due by period
Less than 1-3 3-5
More than
5 years
Vessel time and voyage-charter commitments $ 99,731 $ 94,985
Contract grower finishing agreements
Other operating lease payments
96,416 12,043 23,003
29,435
298,259 16,661
19,632 41,738
27,206 224,957
$ 4,746 $ -
$ -
Total lease obligations
Long-term debt
Short-term notes payable
Other purchase commitments
Total contractual cash obligations
and commitments
125,614 47,054
494,406 123,689 57,184 46,838 266,695
41,953
-
67,847 -
177,205 177,205 - -
692,743 459,746 165,150
3,505 33,102
$1,489,968 $ 807,694
$ 225,839
$ 147,787 $ 308,648
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 enters into commodity purchase contracts and
ocean freight contracts, primarily to support sales commitments. Seaboard also leases various facilities and
equipment under noncancelable operating lease agreements. On May 30, 2008, Seaboard Marine Ltd. (“Seaboard
Marine”), entered into an Amended and Restated Terminal Agreement with Miami-Dade County (“County”) for Marine
Terminal Operations (“Amended Terminal Agreement”), pursuant to which Seaboard Marine renewed its existing
Terminal Agreement with the County at the Port of Miami. The Amended Terminal Agreement enables Seaboard
Marine to continue its existing operations at the Port of Miami. 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 and
third parties who provide services for Seaboard. See Note 11 to the Consolidated Financial Statements for a detailed
discussion.
2008 Annual Report
15
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, 2008 increased to $4,267.8 million from $3,213.3 million in 2007 and
$2,707.4 million for 2006. The increase in net sales in 2008 was primarily the result of significant price increases for
commodities sold by the commodity trading business and, to a lesser extent, increased commodity trading volumes.
Also increasing sales were higher cargo rates and, to a lesser extent, higher cargo volumes for the Marine division.
The increase in net sales in 2007 was primarily the result of higher 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.
Operating income decreased to $121.8 million in 2008, from $169.9 million in 2007 and $297.0 million in 2006. The
2008 decrease compared to 2007 primarily reflected the higher feed costs for hogs as a result of higher corn prices
and, to a lesser extent, higher soybean meal prices. Also decreasing operating income were lower margins on
marine cargo services as a result of higher fuel prices and other related operating costs. The decreases were
partially offset by the result of higher commodity trading margins that are not expected to repeat and the effect of the
mark-to-market of derivatives in the Commodity Trading and Milling segment along with the higher cargo rates for the
Marine division. The 2007 decrease compared to 2006 primarily reflected 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.
Pork Segment
(Dollars in millions)
Net sales
Operating income (loss)
2008
2007
2006
$ 1,126.0 $ 1,003.8 $1,002.7
$ (45.9) $ 39.5 $ 138.3
Net sales of the Pork segment increased $122.2 million for the year ended December 31, 2008 compared to 2007.
The increase was primarily the result of higher pork sales volumes, which reflected increases in both domestic and
export sales. The increased volumes were made possible by the expansion in daily capacity at the Guymon
processing plant during the first quarter of 2008. Sales of biodiesel related to the start-up of the new biodiesel
processing plant during the second quarter of 2008 also contributed to the increase in net sales. To a lesser extent,
the results of the Pork segment were affected by higher pork product prices.
Operating income decreased $85.4 million for the year ended December 31, 2008 compared with 2007. The
decrease was primarily a result of higher feed costs from higher corn prices and to a lesser extent, soybean meal
prices. To a lesser extent, operating losses related to the start-up of the biodiesel plant affected operating income. In
addition, as further discussed in Note 2 to the Consolidated Financial Statements, during the fourth quarter of 2008
Seaboard incurred an impairment charge of $7.0 million related to Daily’s trade name. Partially offsetting these
decreases was the increase in sales prices for pork products noted above.
Management is unable to predict future market prices for pork products or the cost of feed and hogs purchased from
third parties. Raw material costs in feed rations were extremely volatile during 2008 but have shown signs of stability
recently, although at levels notably higher than historical averages. Absent another year of extreme market volatility
during 2009, management anticipates this segment's results to improve to profitable levels after the first quarter of
2009. In addition, as discussed in Note 2 and 6 to the Consolidated Financial Statements, there is a possibility that
some amount of either goodwill or other intangible assets not subject to amortization, or both, related to Daily’s and
some amount of the biodiesel plant could be deemed impaired during some future period including fiscal 2009, which
may result in a charge to earnings if current projections are not met.
Net sales of the Pork segment increased $1.1 million for the year ended December 31, 2007 compared to 2006. The
increase was 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
16
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Management’s Discussion & Anal ysis
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 was primarily 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.
Commodity Trading and Milling Segment
(Dollars in millions)
Net sales
Operating income
Income from foreign affiliates
2008
2007
$ 1,897.4 $ 1,152.0
$ 96.5
$ 12.6
$
$
20.9
5.2
2006
$ 735.6
$ 37.2
$ 6.3
Net sales of the Commodity Trading and Milling segment increased $745.4 million for the year ended December 31,
2008 compared to 2007. The increase was primarily the result of significantly higher prices of commodities sold by
the commodity trading business, especially wheat, and, to a lesser extent, increased commodity trading volumes.
The increased trading volumes were primarily a result of Seaboard expanding its business in new and existing
markets, including trading rice. As worldwide commodity price fluctuations cannot be predicted, management is
unable to predict the level of future sales.
Operating income increased $75.6 million for 2008 compared to 2007. The increase primarily reflected increased
commodity trading margins and, to a lesser extent, the increased commodity trading volumes discussed above. The
increase in commodity trading margins primarily reflected certain long inventory positions, principally wheat,
previously taken by Seaboard, which provided higher than average commodity trading margins during the first half of
2008, as the price of these commodities significantly increased to historic highs at the time of sale. However,
management does not expect to be able to continue these significant favorable margins in 2009. The increase also
reflected the $31.3 million fluctuation of marking to market the derivative contracts as discussed below.
Due to the uncertain political and economic conditions in the countries in which Seaboard operates and the current
volatility in the commodity markets management is unable to predict future sales and operating results. However,
management anticipates positive operating income for 2009 although materially lower than 2008, excluding the
potential effects of marking to market derivative contracts. It should be noted the unprecedented high level of grain
prices during the first half of 2008 and the significant decrease in grain prices during the second half of 2008 increase
certain business risks for each of the commodity trading, consolidated milling and foreign affiliate operations in this
segment. Those risks, including holding high priced inventory or the potential for reduced sales volumes, can
increase if governments impose sales price controls, grain prices remain volatile and/or competitors hold lower priced
positions, or customers default, which could result in write-downs of inventory values and an increase in bad debt
expense. In addition, see Note 4 to the Condensed Consolidation Financial Statement for discussion regarding
certain grain inventories and related write-downs for 2008. If any one or more of these conditions develop, the result
could materially lower operating income and could result in operating losses for any one or all of the commodity
trading, consolidated milling and/or foreign affiliate operations.
If Seaboard had not applied mark-to-market accounting to its derivative instruments, operating income for 2008 and
2006 would have been lower by $18.1 million and $6.2 million, respectively, and operating income for 2007 would
have been higher by $13.2 million. 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 these
types of 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 marked to
market. As products are delivered to customers, these mark-to-market adjustments should be primarily offset by
realized margins as revenue is recognized. Accordingly, these mark-to-market gains could reverse in fiscal 2009.
2008 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
Income from foreign affiliates for the year ended December 31, 2008 increased $7.4 million from 2007 as a result of
favorable market conditions. Based on the uncertainty of local political and economic situations in the countries in
which the flour and feed mills operate, management cannot predict future results although management anticipates
that 2009 income from foreign affiliates will be lower than 2008.
Net sales of the Commodity Trading and Milling segment increased $416.4 million for the year ended December 31,
2007 compared to 2006. The increase primarily reflected 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 were primarily a result of Seaboard expanding its business in new and existing markets.
Operating income decreased $16.3 million for 2007 compared to 2006. This decrease primarily reflected 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 were 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.
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.
Marine Segment
(Dollars in millions)
Net sales
Operating income
2008 2007
2006
$ 958.0 $ 822.2 $ 741.6
$ 62.4 $ 104.2 $ 106.0
Net sales of the Marine segment increased $135.8 million for the year ended December 31, 2008, compared to 2007
primarily as a result of higher cargo rates and, to a lesser extent, higher cargo volumes. Cargo rates were higher in
certain markets primarily as a result of higher cost-recovery surcharges for fuel. Cargo volumes were higher as a
result of the expansion of services provided in certain markets and favorable economic conditions during 2008 in
several Latin American markets served.
Operating income decreased by $41.8 million compared to 2007. The decrease was primarily the result of
significantly higher fuel costs for vessels on a per unit shipped basis. Operating income also decreased as a result of
higher operating costs on a per unit shipped basis including charter hire and owned-vessel operating costs, trucking,
terminal costs and stevedoring. In addition, the decrease reflected an accounting error totaling $6.3 million relating to
prior periods that was recorded in the second quarter of 2008, as discussed in Note 1 to the Consolidated Financial
Statements. Management cannot predict changes in future cargo volumes and cargo rates or to what extent changes
in economic conditions in markets served will affect net sales or operating income during 2009. However, given the
recent decline in global trade, management anticipates a material decrease in operating income during 2009
compared to 2008 despite expected lower charter hire and fuel expenses.
Net sales of the Marine segment increased $80.6 million for the year ended December 31, 2007, compared to 2006
primarily as a result of 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
remained relatively flat as a result of increased competition. Operating income 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.
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2008 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
Sugar and Citrus Segment
(Dollars in millions)
Net sales
Operating income
Income (loss) from foreign affiliates
2008 2007 2006
$ 142.1
$ 125.9 $ 123.4
$ 3.7 $ 15.5 $ 19.2
$ 0.5 $ 0.4 $ (1.1)
Net sales of the Sugar and Citrus segment increased $16.2 million for the year ended December 31, 2008 compared
to 2007. The increase primarily reflected higher domestic sugar prices. 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 2009.
Seaboard expects to at least maintain its historical sales volume to Argentinean customers.
Operating income decreased $11.8 million during 2008 compared to 2007 primarily as a result of losses incurred by
the citrus and juice businesses, principally from citrus quality issues and increased production costs for the juice
business. In addition, operating income decreased as a result of higher selling and administrative personnel costs.
Total gross margin from sugar sales did not increase in 2008 compared to 2007 as the higher sugar prices discussed
above were primarily offset by a higher percentage of sales from sugar purchased from third parties for resale. This
sugar had a significantly lower margin compared to sugar produced by Seaboard. Increased production costs also
affected gross margin from sugar sales. Management expects higher operating income in this segment for 2009
compared to 2008. In addition, management is reviewing its strategic options for the citrus business in light of what
may be a continually difficult operating environment.
Net sales of the Sugar and Citrus segment increased $2.5 million for the year ended December 31, 2007 compared
to 2006. The increase primarily reflected 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. 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.
The loss from foreign affiliates in 2006 primarily represented the expense of canceling a franchisee agreement
incurred during the first quarter of 2006.
All Other Segments
(Dollars in millions)
Net sales
Operating income
Loss from foreign affiliate
2008
2007
$ 144.3 $ 109.4
$ 6.0
$ 8.9
$ (1.7)
$ -
2006
$ 104.2
$ 10.0
$ (1.2)
Net sales and operating income for all other segments primarily represented results from the Dominican Republic
Power division. Net sales increased $34.9 million for 2008 compared to 2007 primarily as a result of higher rates.
The higher rates were attributable primarily to higher fuel costs, a component of pricing. Operating income increased
$2.9 million during 2008 compared to 2007 primarily as a result of higher rates being in excess of higher fuel costs.
Management cannot predict future fuel costs or the extent to which rates will fluctuate compared to fuel costs,
although management anticipates this division to remain profitable in 2009. See Note 13 to the Consolidated
Financial Statements for the potential future sale of certain assets of this business.
Net sales increased $5.2 million for the year ended December 31, 2007 compared to 2006 primarily as a result of
higher rates. The higher rates were attributable primarily to higher fuel costs, a component of pricing. Operating
income decreased $4.0 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.
2008 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
The loss from foreign affiliate in 2007 and 2006 reflected 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. No additional losses were incurred in 2008 or will be incurred in future years as Seaboard has
discontinued using the equity method of accounting for this investment and there was 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, 2008 increased by $3.8
million over 2007 to $175.9 million. This increase was primarily due to increased personnel costs. Partially offsetting
the increase were decreased costs related to Seaboard’s deferred compensation programs (which are offset by the
effect of the mark-to-market investments recorded in other investment income discussed below). Also, partially
offsetting the increase was a $3.7 million pension settlement loss recognized in the first quarter of 2007 related to the
late 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 4.1% for 2008 compared to 5.4% for 2007 primarily
as a result of increased sales in the Commodity Trading and Milling segment.
SG&A expenses for the year ended December 31, 2007 increased by $14.8 million from 2006 to $172.1 million. This
increase was 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.
Interest Expense
Interest expense totaled $15.4 million, $12.6 million and $18.8 million for the years ended December 31, 2008, 2007
and 2006, respectively. Interest expense increased for 2008 compared to 2007, primarily as a result of a higher
average level of short-term borrowings outstanding during 2008 partially offset by a lower average level of long-term
borrowings outstanding. 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 Income
Interest income totaled $14.9 million, $18.9 million and $25.3 million for the years ended December 31, 2008, 2007
and 2006, respectively. The decrease for 2008 primarily reflected a decrease in average funds invested. The
decrease for 2007 primarily reflected a decrease in interest received on outstanding customer receivable balances in
the Power division, partially offset by an increase in average funds invested and 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 $(19.7) million, $0.1 million and $1.2 million for the years ended
December 31, 2008, 2007 and 2006, respectively. The fluctuation for 2008 compared to 2007 primarily related to
currency translation and realized losses in the commodity trading business related to transactions denominated in
South African rand and, to a lesser extent, the Euro Zone euro principally during the fourth quarter of 2008. Although
Seaboard does not utilize hedge accounting, the commodity trading business does utilize foreign currency exchange
contracts to manage its risks and exposure to foreign currency fluctuations caused by the South African rand and the
Euro Zone euro. Management believes the gains and losses, including the mark-to-market effects, of these foreign
currency contracts relate to the underlying commodity transactions and classifies such gains and losses in cost of
sales. In addition, the 2008 loss includes currency losses related to the yen based borrowing by the Sugar & Citrus
segment, principally during the fourth quarter of 2008. A significant portion of this currency loss was offset by a
currency gain on the underlying debt, which was recorded in a cumulative translation adjustment account in equity as
of December 31, 2008. Seaboard operates in many developing countries. The political and economic conditions of
20
2008 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
these markets, along with fluctuations in the value of the U.S. dollar, cause volatility in currency exchange rates which
exposes Seaboard to fluctuating foreign currency gains and losses which cannot be predicted by Seaboard.
investment
income, net
totaled $7.5 million, $6.1 million and $4.4 million
Other Investment Income, Net
Other
the years ended
December 31, 2008, 2007 and 2006, respectively. Other investment income for 2008 primarily reflected $8.9 million
on equity securities transactions, income of $7.6 million in the Power division related to the settlement of a receivable,
not directly related to its business and purchased at a discount, and income of $1.1 million related to the assignment
of rights related to an investment as discussed in Note 13 to the Consolidated Financial Statements. Partially
offsetting the above income items was a $9.6 million loss in the mark-to-market value of Seaboard’s investments
related to the deferred compensation programs in 2008. The increase for 2007 compared to 2006 primarily reflected
a $3.6 million gain recognized by the Power division for the settlement of a receivable, not related to its business,
purchased at a discount.
for
Miscellaneous, Net
Miscellaneous, net totaled $2.5 million, $5.2 million and $10.2 million for the years ended December 31, 2008, 2007
and 2006, 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, miscellaneous,
net included the impact of Seaboard terminating all interest rate exchange agreements resulting in a gain of $3.4
million related to these swaps. See Note 9 to the Consolidated Financial Statements for additional discussion. Also
included in 2006 was income of $5.4 million of put option value change as discussed in Note 2 to the Consolidated
Financial Statements.
Income Tax Expense
The effective tax rate decreased for 2008 compared to 2007 primarily from lower domestic taxable income resulting in
a tax benefit based on domestic taxable loss compared to permanently deferred foreign earnings. 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. 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 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 December 2007, the FASB issued Statement of Financial Accounting Standards (FAS) No. 141(R), “Business
Combinations” (FAS 141R). 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 FAS 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 FAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—
an amendment of ARB No. 51” (FAS 160). 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. Management believes the adoption of FAS 160 will
not have a material impact on Seaboard’s financial position or net earnings.
2008 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
In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which amended FAS No. 157, "Fair Value
Measurements” (FAS 157). This FSP defers the effective date of FAS 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 FAS 157 for these nonfinancial assets and
nonfinancial liabilities as of January 1, 2009, which primarily pertains to impairment charges related to goodwill, other
intangible assets not subject to amortization and property, plant and equipment. Management believes the adoption
of FAS 157 deferral provisions 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 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 total current and long-term receivables are heavily weighted toward
foreign receivables ($268.7 million or 69.1% at December 31, 2008), including receivables due from foreign affiliates
($100.4 million at December 31, 2008) and receivables in the Power division, 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 division 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. For example, currently the Power division sells approximately
40% of its power generation to a government-owned distribution company under a short-term contract for which
Seaboard bears a concentrated credit risk as this customer is usually behind in its payments on account. As of
December 31, 2008, this customer account had billings outstanding of $27.3 million, including $20.0 million classified
as long-term. 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, 2008, 2007 and 2006 was $0.8 million, $1.4 million and $2.5 million, respectively.
Valuation of Inventories – Inventories are generally valued at the lower of cost or market. In determining market,
management makes assumptions regarding replacement costs, estimated sales prices, estimated costs to complete,
estimated disposal costs, and normal profit margins. For commodity trading inventories, when contract performance
by a customer becomes a concern, management must also evaluate available options to dispose of the inventory,
including assumptions about potential negotiated changes to sales contracts, sale prices in alternative markets in
various foreign countries and potentially additional transportation costs. At times, management must consider
probability weighting various viable alternatives in its determination of the net realizable value of the inventories.
These assumptions and probabilities are subjective in nature and are based on management’s best estimates and
judgments existing at the time of preparation. Changes in future market prices of grains or facts and circumstances
could result in a material write-down in value of inventory or increased future margins on the sale of inventory. See
Note 4 to the Consolidated Financial Statements for further discussion of inventories with a value of approximately
$27.9 million that are committed to various customers in foreign countries for which customer contract performance is
a heightened concern as of December 31, 2008.
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2008 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
Impairment of Long-lived Assets – At each balance sheet date, long-lived assets, primarily property, plant and
equipment, 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 group. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Some of the key assumptions utilized in determining future
projected cash flows include estimated growth rates, expected future sales prices and estimated costs. In some
cases, 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 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 long-lived assets, which include but are not limited to, a change in the business
climate, government incentives, a negative change in relationships with significant customers, and changes to
strategic decisions 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 fixed assets resulting in a
material charge to earnings. See Note 6 to the Consolidated Financial Statements for further discussion on the Pork
Segment and its recorded value for the biodiesel processing plant of $45.3 million.
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. In some cases,
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 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, including an impairment charge of $7.0 million recorded in the fourth quarter of 2008 related to Daily’s trade
name. At December 31, 2008, Seaboard had goodwill of $40.6 million and other intangible assets not subject to
amortization of $17.0 million.
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, 2008, Seaboard has deferred tax assets of $61.8 million, net of the valuation allowance of
$21.1 million, and deferred tax liabilities of $128.8 million. For the years ended December 31, 2008, 2007 and 2006,
income tax expense included $(6.3) million, $(22.5) million and $6.5 million, respectively, for deferred taxes to federal,
foreign, state and local taxing jurisdictions.
2008 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
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 $1.3 million per year. The effects of actual results
differing from the assumptions (i.e. gains or losses) 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 unless the actual results fall within the 10% corridor as permitted under FAS No. 87, “Employers’ Accounting
for Pensions”. Accordingly, accumulated gains or losses in excess of 10% of the greater of plan assets or the
projected benefit obligation are amortized over the average future service of active participants. The unrecognized
losses as of December 31, 2008 exceeded this 10% threshold as a result of the significant investment losses incurred
during 2008. As a result, Seaboard’s pension expense for its defined benefit pension plan for its salaried and clerical
employees will increase by approximately $3.0 million for 2009 as compared to 2008 due to loss amortization. See
Note 10 to the Consolidated Financial Statements for further discussion of management’s assumptions and projected
2009 expense.
DERIVATIVE INFORMATION
Seaboard is exposed to various types of market risks in its day-to-day operations. Primary market risk exposures
result from changing commodity prices, freight rates, foreign currency exchange rates and interest rates. Although
used to manage overall market risks, Seaboard does not perform the extensive record-keeping required to account
for derivative transactions as hedges. Management believes it uses derivatives primarily as 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 prices could have a material impact on earnings in any given year. From time to
time, Seaboard may enter into speculative derivative transactions related to its market risks.
Changes in commodity prices affect the cost of necessary raw materials and other inventories, finished product sales
and firm sales commitments. Seaboard uses various grain and oilseed 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. From time to time, Seaboard may enter into short positions in energy related resources (i.e. heating oil,
crude oil, etc.) to manage certain exposures related to bioenergy margins. Inventories that are sensitive to changes
in commodity prices, including carrying amounts at December 31, 2008 and 2007, 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.
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 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.
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2008 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
Because changes in foreign currency exchange rates affect 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 affect the cash required to service variable rate debt. From
time to time, Seaboard uses interest rate swaps to manage risks of increasing interest rates.
In December 2008, Seaboard entered into a ten-year interest rate exchange agreement which involves the exchange
of fixed-rate and variable-rate interest payments over the life of the agreement without the exchange of the underlying
notional amounts to mitigate the effects of fluctuations in interest rates on variable rate debt. Seaboard pays a fixed
rate and receives a variable rate of interest on a notional amount of $25.0 million.
As previously disclosed, during July 2008 the Pork segment significantly increased the number of hog, grain and
oilseed futures contracts entered into based on market conditions that existed at that point. During the latter part of
the fourth quarter of 2008, as a result of changes in market conditions since July, these additional positions were
closed leaving remaining open positions more closely approximating historical levels.
While Seaboard previously presented the market value of derivative instruments in a table, Seaboard began using
sensitivity analysis in the second quarter of 2008 to evaluate the effect that changes in the market value will have on
these derivative instruments. Seaboard feels that sensitivity analysis more appropriately reflects the potential market
value exposure associated with the use of derivative instruments. The following table presents the sensitivity of the
fair value of Seaboard’s open net commodity future and option contracts, forward freight agreements, foreign
currency contracts and interest rate exchange agreements for all divisions to a hypothetical 10% adverse change in
market prices or in foreign exchange rates and interest rates as of December 31, 2008 and December 31, 2007. For
all open derivatives, the fair value of such positions is a summation of the fair values calculated for each item by
valuing each net position at quoted market prices as of the applicable date.
(Thousands of dollars)
Grains and oilseeds
Hogs and pork bellies 868
Energy related resources
Forward freight agreements
Foreign currencies
Interest rates
21,414
570
253
-
$ 5,788
$ 9,533
759
-
3,183
19,330
-
December 31, 2008 December 31, 2007
Forward freight agreements shown above in the sensitivity analysis for 2008 has no net exposure to a change in
market price as the two open forward freight agreements offset each other at December 31, 2008.
The table below provides information about Seaboard's non-trading financial instruments sensitive to changes in
interest rates at December 31, 2008. For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates. At December 31, 2008, long-term debt included foreign
subsidiary obligations of $1.1 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, 2007, long-term debt included foreign subsidiary obligations of $1.7 million denominated in CFA
francs, $0.3 million payable in Argentine pesos, and $0.1 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.
2008 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
(Dollars in thousands)
2009
2010
2011
2012
2013 Thereafter
Total
Long-term debt:
Fixed rate
$46,792
$ 2,028
$ 1,477
$32,546
$ 556
$
153
$ 83,552
Average interest rate
6.32%
10.99% 8.87%
7.03%
15.92%
15.92%
6.84%
Variable rate
$ 262
$ -
$ - $ - $ -
$ 41,800 $ 42,062
Average interest rate
7.00%
-
-
-
-
1.41%
1.44%
Non-trading financial instruments sensitive to changes in interest rates at December 31, 2007 consisted of fixed rate
long-term debt totaling $95.4 million with an average interest rate of 6.86%, and variable rate long-term debt totaling
$42.1 million with an average interest rate of 3.52%.
26
2008 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, 2008.
Seaboard’s registered independent public accounting firm, that audited the consolidated financial statements included
in the annual report, has issued an audit report on the effectiveness of Seaboard’s internal control over financial
reporting. Their report is included herein.
2008 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, 2008 and 2007, 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, 2008. 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 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 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, 2008 and 2007, and the results of
their operations and their cash flows for each of the years in the three-year period ended December 31, 2008, 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, 2008, 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 March 2, 2009 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Kansas City, Missouri
March 2, 2009
28
2008 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, 2008, 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 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, 2008, based on criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
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, 2008 and
2007, 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, 2008, and our report dated March 2, 2009 expressed an unqualified
opinion on those consolidated financial statements.
Kansas City, Missouri
March 2, 2009
2008 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 s ales :
Products (includes s ales to foreign affiliates
of $587,922, $299,174 and $242,442)
Service revenues
Other
Total net sales
Cos t of sales and operating expens es:
Products
Services
Other
Total cos t of sales and operating expens es
Gross income
Selling, general and administrative expenses
Operating income
Other income (expense):
Interes t expense
Interes t income
Income from foreign affiliates
Minority and other noncontrolling interests
Foreign currency gain (loss), net
Other inves tment income, net
Miscellaneous , net
Total other income (expense), net
Earnings before income taxes
Income tax benefit (expense)
Net earnings
Years ended December 31,
2008
2007
2006
$
3,144,432
$
2,268,310
$
1,858,588
993,942
129,430
4,267,804
851,038
93,953
3,213,301
760,964
87,845
2,707,397
3,005,924
847,956
116,253
3,970,133
297,671
175,862
121,809
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
(15,354)
14,939
13,084
(596)
(19,713)
7,522
2,539
2,421
124,230
22,689
146,919
$
(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
$
Basic earnings per common share
$
118.19
$
144.15
$
205.09
Diluted earnings per common s hare
$
118.19
$
144.15
$
205.09
Weighted average shares outs tanding
Basic
Diluted
1,243,087
1,243,087
1,257,901
1,257,901
1,261,367
1,261,367
Dividends declared per common s hare
$
3.00
$
3.00
$
3.00
See accompanying notes to consolidated financial statements.
30
2008 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
Deferred revenue
Accrued voyage costs
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 1,240,426 and 1,244,278 shares
Accumulated other comprehensive loss
Retained earnings
Total stockholders' equity
Total Liabilities and Stockholders' Equity
December 31,
2008
2007
$
60,594
312,680
$
47,346
286,660
207,534
100,434
60,012
367,980
(7,303)
360,677
508,995
14,195
114,713
251,005
90,019
26,349
367,373
(8,060)
359,313
392,946
19,558
77,710
1,371,854
1,183,533
68,091
763,675
40,628
22,285
64,828
60,706
730,395
40,628
30,895
47,542
$
2,331,361
$
2,093,699
$
177,205
47,054
122,869
72,857
50,252
48,382
73,472
$
85,088
11,912
135,398
72,258
19,986
38,129
60,157
592,091
78,560
81,205
70,920
45,007
275,692
4,223
422,928
125,532
105,697
50,498
33,845
315,572
971
1,240
(111,703)
1,569,818
1,244
(78,651)
1,431,635
1,459,355
1,354,228
$
2,331,361
$
2,093,699
See accompanying notes to consolidated financial statements.
2008 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 cas h
from operating activities:
Depreciation and amortization
Income from foreign affiliates
Put option value change
Other investment income, net
Foreign currency exchange losses
Minority and noncontrolling interest
Deferred income taxes
Los s (gain) from sale of fixed ass ets
Intangible asset impairment charge
Changes in current ass ets and liabilities,
net of portion of operations sold and business acquired:
Receivables, net of allowance
Inventories
Other current assets
Current liabilities, exclusive of debt
Other, net
Net cash from operating activities
Cash flows from investing activities:
Purchase of short-term investments
Proceeds from the s ale of short-term investments
Proceeds from the maturity of short-term investments
Purchase of long-term investments
Investments in and advances to foreign affiliates, net
Capital expenditures
Repurchase of minority interest in a controlled s ubsidiary
Proceeds from the s ale 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,
2008
2007
2006
$
146,919
$
181,332
$
258,689
90,381
(13,084)
-
(7,522)
19,606
596
(7,602)
39
7,000
(14,518)
(119,859)
(44,344)
43,264
9,057
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)
-
(49,613)
(11,349)
17,915
(1,815)
(99)
109,933
143,879
283,757
(287,411)
204,494
61,675
-
623
(134,634)
-
4,412
(442)
(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)
(151,283)
(48,695)
(186,502)
79,354
(11,679)
(5,012)
(3,728)
(104)
(1,081)
57,750
(3,152)
13,248
47,346
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
Cash and cash equivalents at end of year
$
60,594
$
47,346
$
31,369
See accompanying notes to consolidated financial statements.
32 2008 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, 2006
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
Comprehens ive income
Net earnings
Other comprehensive income net
of income tax benefit of $11,525:
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pens ion cost
Comprehens ive income
Repurchas e of Common Stock
Dividends on common s tock
Balances, December 31, 2008
Accumulated
Other
Common Additional Comprehensive
Stock
$ 1,261
Capital
$
21,574
Loss
$ (53,025)
Retained
Earnings
1,008,060
$
Total
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
181,332
181,332
(2,908)
(212)
7,059
55
(152)
(17)
(21,574)
-
1,244
-
(78,651)
(8,897)
(3,765)
1,431,635
(2,908)
(212)
7,059
55
(152)
185,174
(30,488)
(3,765)
1,354,228
146,919
146,919
(9,492)
632
(24,192)
(4)
-
-
$ 1,240
$
-
$ (111,703)
(5,008)
(3,728)
1,569,818
$
(9,492)
632
(24,192)
113,867
(5,012)
(3,728)
1,459,355
$
See accompanying notes to consolidated financial statements.
2008 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 72.1% 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.
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.
During the second quarter of 2008, an accounting error at the Marine segment was discovered in previously issued
financial statements. The error arose in the Marine segment’s consolidation and intercompany elimination process of
its foreign outport operations. The error, if properly recorded, would have decreased sales and net earnings in 2006
by $2,101,000, decreased sales and net earnings in 2007 by $4,171,000 and decreased sales and net earnings in
the first quarter of 2008 by $964,000. As the effect on prior periods was not considered material, an adjustment to
decrease sales and net earnings by $7,236,000 was recorded in the second quarter of 2008.
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. Investments held by Seaboard
that are categorized as available-for-sale are reported at fair value with any related unrealized gains and losses
reported net of tax, as a component of accumulated other comprehensive income. Investments held by Seaboard
that are categorized as trading securities are reported at fair value with any unrealized gains and losses included in
other investment income on the Consolidated Statement of Earnings. Debt securities that are categorized as held to
maturity, are recorded at amortized cost, which 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 division,
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. For most operating
segments, Seaboard uses a specific identification approach to determine, in management’s 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.
34 2008 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
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
Long-lived assets, primarily property, plant and equipment, 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 undiscounted net cash flows
expected to be generated by the asset. If such assets are determined to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated 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. See Note 6 for further discussion on the Pork Segment and its recorded value of the biodiesel processing plant.
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 estimated 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 indicated no impairment to Goodwill but an
impairment charge to other intangible assets in the amount of $7,000,000 was recorded as of December 31, 2008.
See Note 2 for further discussion on 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. Changes in estimates to previously recorded reserves are reflected in
current operating results.
Deferred Grants
Included in other liabilities at December 31, 2008 and 2007 was $6,894,000 and $7,317,000, 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 in non-current other liabilities on the Consolidated Balance Sheet, 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 2008 and 2007.
(Thousands of dollars)
Beginning balance
Accretion expense
Liability for additional lagoons placed in service
Adjustment to existing lagoons
Ending balance
Years ended December 31,
2008
$ 8,117
602
127
-
2007
$ 7,229
574
151
163
$ 8,846
$ 8,117
2008 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
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 FAS 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, collection is reasonably assured, 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 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 all periods presented.
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 following table shows the amounts paid for interest and income
taxes.
(Thousands of dollars)
Interest (net of amounts capitalized)
Income taxes (net of refunds)
Years ended December 31,
2008
2007 2006
$ 14,037
$ 11,733
10,815
20,993
$ 19,461
47,515
Supplemental Noncash Transactions
As more fully described in Note 2, Seaboard repurchased the 4.74% equity interest in Seaboard Foods LLC from the
former owners of Daily’s effective January 1, 2007. The following table summarizes the non-cash transactions
resulting from this repurchase.
36 2008 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
(Thousands of dollars)
December 31, 2007
Year ended
Increase in fixed assets $ 7,976
Increase in intangible assets 3,745
Increase in goodwill 12,256
Decrease in non-controlling interest 37,933
Increase in deferred income tax liability
(650)
Cash paid $ 61,260
In the fourth quarter of 2007, the Power division received $4,500,000 of fixed assets for the settlement of a
receivable, not related to its business and purchased at a discount, and recognized a gain of $3,596,000 included in
other investment income.
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, 2008, 2007 and 2006 were
foreign currency losses of $(4,575,000) and foreign currency gains of $1,000,000 and $1,695,000, respectively.
These losses and gains reflect the re-measurements as of December 31, 2008, 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. The currency loss for 2008 and gains for 2007 and
2006 were primarily offset by a mark-to-market currency gain at December 31, 2008 and losses 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 recognizes 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,
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, 2008, 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.
2008 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
Accounting Changes and New Accounting Standards
In December 2007, the FASB issued Statement of Financial Accounting Standards (FAS) No. 141(R), “Business
Combinations” (FAS 141R). 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 FAS 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 FAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—
an amendment of ARB No. 51” (FAS 160). 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. Management believes the adoption of FAS 160 will
not have a material impact on Seaboard’s financial position or net earnings.
In February 2008, the FASB issued FASB Staff Position (FSP) FAS 157-2 which amended FAS No. 157, "Fair Value
Measurements” (FAS 157). This FSP defers the effective date of FAS 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 FAS 157 for these nonfinancial assets and
nonfinancial liabilities as of January 1, 2009, which primarily pertains to impairment charges related to goodwill, other
intangible assets not subject to amortization and property, plant and equipment. Management believes the adoption
of FAS 157 deferral provisions will not have a material impact on Seaboard’s financial position or net earnings.
Note 2
Acquisitions and Repurchase of Minority Interest
On July 5, 2005, Seaboard acquired Daily’s, a bacon processor located in the western United States. As part of this
acquisition, a 4.74% equity interest in Seaboard Foods LLC was issued to the sellers. 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. 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 LLC 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 was 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 year ended December 31, 2006 was
the change in fair value of the put option obligation of approximately $5,400,000.
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.
(Thousands of dollars)
January 1, 2007
Net property, plant and equipment
Intangible assets
Goodwill (tax basis of $0)
Increase in deferred tax liability
Net assets acquired
38 2008 Annual Report
$ 7,976
3,745
12,256
(650)
$ 23,327
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 intangible asset from the repurchase is for customer relationships and will be amortized over fifteen years. As a
result of the Daily’s 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, 2008 and 2007.
(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 (tax basis of $21,673)
December 31,
2008
2007
$
9,045
1,500
$
9,045
1,500
10,545
10,545
(4,210)
(1,050)
(5,260)
4,835
450
5,285
17,000
22,285
40,628
(2,900)
(750)
(3,650)
6,145
750
6,895
24,000
30,895
40,628
Total goodwill and intangible assets, net
$
62,913
$
71,523
The amortization expense of amortizable intangible assets for the years ended December 31, 2008, 2007 and 2006
was $1,610,000, $1,610,000 and $1,360,000 respectively. Amortization expense for the five succeeding years is
$1,610,000 for the next year, $930,000 in the second year and $250,000 each for the third, fourth and fifth year.
The Pork segment recognized $28,372,000 of goodwill and $24,000,000 of other intangible assets not subject to
amortization in connection with its acquisition of Daily’s in 2005. Previously, the fair value of these intangible assets
was partially based on certain scenarios that included management’s ability and intention to grow and expand Daily’s
through construction or acquisition of additional capacity. During the second quarter of 2008, management decided
to indefinitely delay plans for expanding Daily’s capacity. As of June 28, 2008, Seaboard conducted its annual
evaluation for impairment of this goodwill and other intangible assets and, based on current market conditions
indicating projected future sale price increases and related levels of estimated operating margins, determined there
was no impairment. However, revised projected future sales prices as of December 31, 2008 indicated the potential
for impairment. In addition, the overall downturn of the United States economy and Seaboard’s stock price trading
below book value during the fourth quarter of 2008 provided additional indicators that Seaboard should reassess its
evaluation for impairment related to Daily’s intangible assets. This reassessment included downward revisions in
previously used future projected sales volumes and royalty rate assumptions used in the measurement of Daily’s
trade name as a result of the current economic conditions. This analysis resulted in a $7,000,000 impairment charge
recorded in cost of sales on the Consolidated Statements of Earnings during the fourth quarter of 2008 to write down
the recorded value of Daily’s trade name to its estimated fair value of $17,000,000 as of December 31, 2008. After
this impairment charge, there was no indication of potential impairment of Goodwill related to Daily’s as the revised
estimated enterprise fair value of Daily’s exceeded its book value as of December 31, 2008. If future market
conditions do not produce projected future sale price increases or additional processed meats sales volumes, and
related levels of estimated operating margins, there remains the possibility that some additional amount of either this
goodwill or the remaining amount of recorded other intangible assets not subject to amortization, or both, could be
deemed impaired during some future period including fiscal 2009, which may result in a charge to earnings.
2008 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
Note 3
Investments
Seaboard’s short-term investments are treated as available-for-sale securities with the exception of domestic equity
securities held at December 31, 2008 that are treated as trading securities. All of Seaboard’s short term investments
are recorded at their estimated fair market values. At December 31, 2008 and 2007, cost and estimated fair market
value were not materially different for these investments. See Note 9 for cost and fair value of short-term investments
as of December 31, 2008 and 2007.
As of December 31, 2008 and 2007, the available-for-sale investments primarily consisted of fixed rate municipal
notes and bonds, money market funds, variable rate demand notes (VRDN), and U.S. Government agency securities.
In addition, Seaboard had available-for-sale investments in auction rate securities and domestic equity securities at
December 31, 2007, all of which were sold during 2008. The VRDNs are variable rate securities and 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 VRDN investments are frequently re-priced,
they trade in the market on a par-in, par-out basis. 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, 2008 and 2007, short-
term investments included $14,553,000 and $13,127,000, 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 short-term investments for both available for sale and
trading securities at December 31, 2008 and 2007.
(Thousands of dollars)
Fixed rate municipal notes and bonds
Money market funds
U.S. Government agency securities
Variable rate demand notes
Auction rate securities
Domestic available for sale equity securities
Other
Total available for sale short-term investments
Domestic trading equity securities
December 31,
2008
2007
$ 216,232
$ 173,096
18,481
79,059
-
25,514
26,850
7,900
- 10,125
- 3,646
15,340 11,326
300,909
11,771
286,660
-
Total available for sale and trading short-term investments
$ 312,680
$ 286,660
The following table summarizes the estimated fair value of fixed rate securities designated as available-for-sale
classified by the contractual maturity date of the security as of December 31, 2008.
(Thousands of dollars)
Due within one year
Due after one year through three years
Due after three years
Total fixed rate securities
2008
$ 54,431
86,528
72,991
$ 213,950
In addition to its short-term investments, as of December 31, 2008 and 2007 Seaboard also had long-term
investments totaling $11,748,000 and $9,800,000, 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.
40 2008 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 4
Inventories
The following table is a summary of inventories at the end of each year.
(Tho usands of do llars)
At lower of LIFO cost or market:
Live hogs and materials
Fresh pork and materials
LIFO adjustment
Total inventories at lower of LIFO cost or market
At lower of FIFO cost or market:
Grains and oilseeds
Sugar produced and in process
Other
Total inventories at lower of FIFO cost or market
Grain, flour and feed at lower of weighted average cost or market
December 31,
2008
2007
$
201,654
26,480
228,134
(40,672)
187,462
179,774
56,259
36,964
272,997
48,536
$
181,019
18,550
199,569
(23,509)
176,060
100,082
35,180
33,782
169,044
47,842
Total inventories
$
508,995
$
392,946
The use of the LIFO method decreased 2008 and 2007 net earnings by $10,469,000 ($8.42 per common share) and
$15,230,000 ($12.11 per common share), respectively, and increased 2006 by $541,000 ($0.43 per common share).
If the FIFO method had been used for certain inventories of the Pork segment, inventories would have been higher by
$40,672,000 and $23,509,000 as of December 31, 2008 and 2007, respectively.
As of December 31, 2008, Seaboard had $27,901,000 recorded in grain inventories related to its commodity trading
business that are committed to various customers in foreign countries for which customer contract performance is a
heightened concern. This amount is net of a write-down of $7,010,000, including $5,653,000 ($4,940,000 net of tax),
or $3.98 per share, recorded in the fourth quarter of 2008, based on management’s estimate of net realizable value
considering all of the facts and circumstances at this time. However, if Seaboard is successful in realizing more value
from this inventory than what is currently estimated, or if Seaboard is unable to collect amounts from these customers
as currently estimated or Seaboard is forced to find other customers for a portion of this inventory, it is possible that
Seaboard could either recover previous write-downs when the inventory is sold or could incur an additional material
write-down in value of this inventory if Seaboard is not successful in selling at current carrying value.
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, 2008, 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 (25-50%) in South America; and Haiti (23%) in
the Caribbean. Also, Seaboard has an investment in a grain trading business in Peru (50%). Seaboard generally is
the primary provider of choice for grains and supplies purchased by these non-controlled foreign affiliates. As
Seaboard conducts its commodity trading business with third parties, consolidated subsidiaries and foreign affiliates
on an interrelated basis, gross margin on foreign affiliates cannot be clearly distinguished without making numerous
assumptions primarily with respect to mark-to-market accounting for commodity derivatives. 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 all of the above investments.
2008 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 September 2007, Seaboard acquired for $8,500,000 a 40% non-controlling interest, including cash contributed into
the business, in a flour milling business 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, 2008, Seaboard’s investment in foreign affiliates included
$4,080,000 related to the difference between the amount at which these investments were 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.
Seaboard also has an investment in a Bulgarian wine business (the Business). Beginning in March 2007, this
business was unable to make its scheduled loan payments and was 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. In February 2009, Seaboard received approximately $64,000 for all of its remaining shares
outstanding in this Business.
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 of 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.
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 and net sales and net loss for 2008 of Other Businesses, were as follows:
Commodity Trading and Milling Segment
December 31,
2008
2007
$ 1,053,818 613,695
$ 34,955 12,263
$ 412,555 347,040
$ 256,247 218,781
$ 156,308 128,259
2008
December 31,
2007
$ 20,660 30,053
$ 923 (2,621)
$ 15,506 13,802
$ 11,396 11,021
$ 4,110 2,781
2006
516,471
10,511
234,212
151,562
82,650
2006
29,096
(4,548)
38,590
42,160
(3,570)
(Thousands of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
Other Businesses
(Thousands of dollars)
Net sales
Net income (loss)
Total assets
Total liabilities
Total equity
42 2008 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 6
Property, Plant and Equipment
The following table is a summary of property, plant and equipment at the end of each year.
(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,
2008
2007
$ 161,115
339,672
760,225
167,126
25,236
32,177
$ 144,894
303,315
668,451
160,085
22,932
80,904
1,485,551
1,380,581
(721,876) (650,186)
Net property, plant and equipment
$ 763,675
$ 730,395
During the first half of 2008, Seaboard started operations at its processing plant to produce biodiesel. The ongoing
profitability of this plant is primarily based on future sales prices, the price of alternative inputs, government usage
mandates and the continuation of a federal tax credit, which is set to expire at the end of 2009. During the fourth
quarter of 2008, a combination of continued start-up expenses, a decrease in fuel prices and relatively high input
prices resulted in an operating loss. Seaboard performed an impairment evaluation of this plant as of December 31,
2008 but determined there was no impairment based on management’s current assumptions of future production
volumes, sale prices, cost inputs and the probabilities of the combination of federal usage mandates and tax credits
extensions. However, if future market conditions do not produce projected sale prices or expected cost inputs or
there is a material change in the government usage mandates or available tax credits, there is a possibility that some
amount of the recorded value of this processing plant could be deemed impaired during some future period including
2009, which may result in a charge to earnings. The recorded value of these assets as of December 31, 2008 was
$45,278,000.
Note 7
Income Taxes
Income taxes attributable to continuing operations for the years ended December 31, 2008, 2007 and 2006 differed
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
Federal tax credits
Federal and foreign audit settlements
Other
2008
Years ended December 31,
2007
2006
$ 43,481
$ 67,028
$ 110,749
(54,232) (40,841)
(2,554) (4,658)
(1,966) 1,078
(1,977) (5,754)
(4,390) (1,124)
-
-
(5,552)
(1,051)
(48,630)
(4,276)
7,310
(3,890)
(1,087)
(2,509)
68
Total income tax expense (benefit)
$ (22,689)
$ 10,177
$ 57,735
2008 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
Earnings before income taxes consisted of the following:
(Thousands of dollars)
United States
Foreign
Total
The components of total income taxes were as follows:
(Thousands of dollars)
Current:
Federal
Foreign
State and local
Deferred:
Federal
Foreign
State and local
Years ended December 31,
2007
2008
2006
$ (28,988) $ 38,788 $ 139,725
$ 153,218 $ 152,721 $ 176,699
$ 124,230 $ 191,509 $ 316,424
Years ended December 31,
2008
2007
2006
$ (25,462)
8,259
823
$ 24,192
5,935
2,542
$ 40,032
6,795
4,438
(1,280) (21,789)
1,453
(1,425)
(2,156)
(3,604)
(570)
847
6,193
Income tax expense (benefit)
Unrealized changes in other comprehensive income
(22,689)
(11,525)
10,177
2,492
57,735
(13,370)
Total income taxes
$ (34,214) $ 12,669
$ 44,365
As of December 31, 2008, Seaboard had income taxes receivable of $24,688,000 primarily related to domestic tax
jurisdictions and had income taxes payable of $3,946,000 primarily related to foreign tax jurisdictions. As of
December 31, 2007, Seaboard had income taxes payable of $8,441,000.
Components of the net deferred income tax liability at the end of each year were 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
Net deferred income tax liability
44 2008 Annual Report
December 31,
2008
2007
$ 12,001 $ 12,639
2,749 6,816
91,176
94,313
15,717
17,330
3,328
2,368
128,761
129,676
48,708
9,271
16,381
8,152
35,289
5,154
13,734
7,233
246
314
82,826
21,075
61,656
18,119
$ 67,010 $ 86,139
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 recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense.
For the years ended December 31, 2008, 2007 and 2006, such interest and penalties were not material. The
Company had approximately $726,000 and $121,000 accrued for the payment of interest and penalties on uncertain
tax positions at December 31, 2008, and 2007, respectively.
As of December 31, 2008 and 2007, Seaboard had $3,464,000 and $433,000, respectively, in total unrecognized tax
benefits all of which, if recognized, would affect the effective tax rate. Seaboard does not have any material 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 2008 and 2007, there were no settlements or
reductions due to a lapse of the applicable statute of limitations. The following table is a reconciliation of the
beginning and ending amount of unrecognized tax benefits.
(Thousands of dollars)
Beginning balance at January 1
Additions for uncertain tax positions of prior years
Decreases for uncertain tax positions of prior years
Additions for uncertain tax positions of current year
Ending balance at December 31
2008
2007
$
433
$ 320
-
113
(77)
-
3,108
-
$ 3,464
$ 433
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.
As of December 31 2008, Seaboard had not provided for U.S. Federal Income and foreign withholding taxes on
$532,461,000 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.
Seaboard has tax holidays in one foreign country in 2008 and had tax holidays in two foreign countries in 2007 and
2006 which resulted in tax savings of approximately $1,961,000, $2,646,000 and $3,969,000, or $1.58, $2.10 and
$3.15 per diluted earnings per common share for the years ended December 31, 2008, 2007 and 2006, respectively.
One of these expired at the end of 2007 and the other 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, U.S. charitable
contribution carryforwards 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. The increase of $2,956,000 in the valuation allowance for 2008 was primarily the result of U.S.
charitable contributions of appreciated property made in 2008 which are subject to a five year carryforward period
and certain taxable income limitations, partially offset by the realization of capital loss carryforwards. At December
31, 2008, Seaboard had foreign net operating loss carryforwards (NOLs) of approximately $32,811,000 a portion of
which expire in varying amounts between 2009 and 2012, while others have indefinite expiration periods.
At December 31, 2008, Seaboard had state tax credit carry forwards of approximately $10,451,000, $9,787,000 of
the state tax credits carryforward indefinitely and $664,000 expire between 2012 and 2017.
2008 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
Note 8
Notes Payable and Long-term Debt
Notes payable amounting to $177,205,000 and $85,088,000 at December 31, 2008 and 2007, respectively, consisted
of obligations due banks on demand or based on Seaboard’s ability and intent to repay within one year. On July 10,
2008, Seaboard entered into an Amended and Restated Credit Agreement that increased its committed line of credit
from $100,000,000 to $300,000,000. This credit facility has a term of five years, maturing July 10, 2013. At
December 31, 2008, Seaboard had a committed line totaling $300,000,000 and uncommitted lines totaling
approximately $134,341,000 of which $99,841,000 of the uncommitted lines relate to foreign subsidiaries. At
December 31, 2008, borrowings outstanding under the committed line totaled $115,000,000 and borrowings
outstanding under the uncommitted lines totaled $5,567,000, all related to foreign subsidiaries. The uncommitted
borrowings outstanding at December 31, 2008 primarily represented $5,188,000 denominated in Argentine pesos. At
December 31, 2008, Seaboard’s borrowing capacity under its committed and uncommitted lines were reduced by
letters of credit (LCs) totaling $58,071,000, and $1,276,000, respectively, primarily including $42,688,000 of LCs for
Seaboard’s outstanding Industrial Development Revenue Bonds (IDRBs) and $15,208,000 related to insurance
coverages. Also included in Notes Payable at December 31, 2008 was a term note of $56,638,000 denominated in
Japanese Yen which was converted during the fourth quarter of 2008 from a previous uncommitted line. The
weighted average interest rates for outstanding notes payable were 6.04% and 5.33% at December 31, 2008 and
2007, 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.
The following table is a summary of long-term debt at the end of each year.
(Thousands of dollars)
Private placements:
5.80% senior notes, due 2009
6.21% senior notes, due 2009
6.21% senior notes, due 2009 through 2012
6.92% senior notes, due 2012
Industrial Development Revenue Bonds, floating rates
(1.25% - 1.57% at December 31, 2008) due 2014 through 2027
Bank debt, 6.87% – 7.60%, due 2009 through 2010
December 31,
2008
2007
$ 6,500 $ 13,000
38,000
38,000
4,286
5,357
31,000
31,000
41,800
41,800
319
3,684
Foreign subsidiary obligations, 2.00% – 17.00%, due 2009 through 2010
1,217
1,841
Foreign subsidiary obligation, floating rate due 2009
Capital lease obligations and other
Current maturities of long-term debt
Long-term debt, less current maturities
262
280
2,230
2,482
125,614
137,444
(47,054)
(11,912)
$ 78,560
$ 125,532
Of the 2008 foreign subsidiary obligations, $1,074,000 was denominated in CFA francs, $262,000 was payable in
Argentine pesos, and the remaining $143,000 was denominated in Mozambique metical. Of the 2007 foreign
subsidiary obligations, $1,692,000 was denominated in CFA francs, $280,000 was payable in Argentine pesos, and
the remaining $149,000 was denominated in Mozambique metical.
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
$1,150,000,000 plus 25% of cumulative consolidated net income beginning March 29, 2008; limits aggregate
46 2008 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
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
($497,863,000 as of December 31, 2008) 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, 2008.
Annual maturities of long-term debt at December 31, 2008 are as follows: $47,054,000 in 2009, $2,028,000 in 2010,
$1,477,000 in 2011, $32,546,000 in 2012, $556,000 in 2013 and $41,953,000 thereafter.
Note 9
Derivatives and Fair Value of Financial Instruments
As discussed in Note 1, Seaboard adopted FAS 157 on January 1, 2008 with the exception of the disclosure
requirements for nonfinancial assets and nonfinancial liabilities that were deferred. FAS 157 discusses valuation
techniques, such as the market approach (prices and other relevant information generated by market conditions
involving identical or comparable assets or liabilities), the income approach (techniques to convert future amounts to
single present amounts based on market expectations including present value techniques and option-pricing), and
the cost approach (amount that would be required to replace the service capacity of an asset which is often referred
to as replacement cost). FAS 157 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Quoted Prices In Active Markets for Identical Assets - Observable inputs such as unadjusted quoted prices
in active markets for identical assets or liabilities that the Company has the ability to access at the measurement
date.
Level 2: Significant Other Observable Inputs - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or
liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Significant Unobservable Inputs - Unobservable inputs that reflect the reporting entity’s own assumptions.
The following table shows assets and liabilities measured at fair value (derivatives exclude margin accounts) on a
recurring basis as of December 31, 2008 and also the level within the fair value hierarchy used to measure each
category of assets.
Balance
December 31,
2008
Level 1
Level 2
Level 3
(Thousands of dollars)
Assets:
$ 300,909
Available-for-sale securities
Trading securities- short term investments 11,771
Trading securities – other current assets
Derivatives
Total Assets
Total Liabilities – Derivatives
$ -
$ 221,850
- -
$ 79,059
11,771
15,362 6,816
16,587
3,601
22,178
20,188
$ 355,046 $ 122,779 $ 232,267 $ -
$ 22,381 $ 19,137 $ 3,244 $ -
-
-
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 fair value of long-term debt is determined by comparing interest rates for debt with similar terms and maturities.
The cost and fair values of investments and long-term debt at December 31, 2008 and 2007 are presented below.
December 31,
(Thousands of dollars)
2008
2007
Cost
Fair Value
Cost
Fair Value
Short-term investments, available for sale $ 298,678 $ 300,909 $ 284,553 $ 286,660
Short-term investments, trading
Long-term debt
9,008 11,771 - -
125,614
131,822
137,444
140,720
2008 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
In March 2008, the FASB issued FAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an
amendment of FASB Statement No. 133” (FAS 161). This statement will change the disclosure requirements for
derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about how and
why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for
under Statement No. 133 and its related interpretations, and how derivative instruments and related hedged items
affect an entity’s financial position, net earnings, and cash flows. Seaboard will be required to adopt these new
disclosures as of January 1, 2009.
Commodity Instruments
Seaboard uses various grain, meal, hog, pork bellies and energy related resources futures and options to manage its
exposure to price fluctuations for raw materials and other inventories, finished product sales and firm sales
commitments. While management believes its commodity futures and options 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 these types of transactions as hedges for accounting purposes. From time to time,
Seaboard may enter into speculative derivative transactions not directly related to its raw material requirements. The
nature of Seaboard’s market risk exposure has not changed materially since December 31, 2007. The fair value of
these commodity derivatives are included with other current assets or other accrued liabilities on the Consolidated
Balance Sheet. The change in fair value of the commodity derivatives are marked to market as a component of cost
of sales on the Consolidated Statements of Earnings. 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.
As previously disclosed, during July 2008 the Pork segment significantly increased the number of hog, grain and
oilseed futures contracts entered into based on market conditions that existed at that point in time. During the latter
part of the fourth quarter of 2008, as a result of changes in market conditions since July, these additional positions
were closed leaving remaining open positions more closely approximating historical levels.
At December 31, 2008 and 2007, Seaboard had open net contracts to purchase and (sell) (8,305,000) and
11,182,000 bushels of grain with fair values of $(3,272,000) and $7,489,000, respectively, and 61,000 and (54,000)
tons of soybean meal with fair values of $(589,000) and $(5,557,000), respectively, and 13,200,000 and 11,400,000
pounds of hogs with fair values of $(23,000) and $(996,000), respectively, included with other accrued liabilities or
other current assets on the Consolidated Balance Sheets. At December 31, 2008, Seaboard had contracts to sell
1,722,000 tons of heating oil with a fair value of $59,000. 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, 2008,
2007 and 2006 Seaboard recognized net realized and unrealized gains of $36,156,000 $18,469,000, and
$12,157,000, respectively, 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 fair value of the foreign exchange agreements
are included in other current assets or other accrued liabilities on the Consolidated Balance Sheets as of December
31, 2008 and 2007. 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 as management believes these primarily related to the
underlying commodity transaction with the exception of the Yen foreign exchange agreement. The change in value of
the Yen foreign exchange agreement is marked to market as a component of foreign currency gain (loss) on the
Consolidated Statements of Earnings. 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, 2008 and 2007, 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 $77,343,000 and
$99,854,000, respectively, with a fair value of $1,817,000, and $(471,000), respectively, included in other accrued
liabilities on the Consolidated Balance Sheet.
At December 31, 2008 and 2007, Seaboard had trading foreign exchange contracts (receive $U.S./pay ZAR) to cover
various foreign currency working capital needs for notional amounts of $28,490,000 and $598,000 respectively, with
fair values of $(114,000) and $(1,000), respectively.
48 2008 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
At December 31, 2008 and 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 $43,076,000 and $26,706,000
respectively, with fair values of $(2,367,000) and $(1,186,000), respectively, included in other accrued liabilities on
the Consolidated Balance Sheet.
At December 31, 2008, Seaboard had trading foreign exchange contracts (pay $U.S./receive Canadian Dollars) to
cover its purchase commitments and trade payables with a notional amount of $105,000 with fair values of $6,000.
At December 31, 2008 and 2007, Seaboard had trading foreign exchange contracts (receive Japanese Yen/pay
$U.S.) to cover note payable borrowings for a term note denominated in Japanese Yen for notional amounts of
$58,781,000 and $63,081,000, respectively, with fair values of $1,017,000 and $(1,945,000), respectively.
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, 2008, Seaboard had agreements to pay $41,500 and receive $47,750
per day during 2009 with fair values of $(11,636,000) and $13,917,000, respectively, included with other accrued
liabilities and other current assets on the Consolidated Balance Sheet. 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 liabilities on the Consolidated Balance Sheet. The
change in value related to these agreements is recorded in cost of sales on the Consolidated Statement of Earnings.
Interest Rate Exchange Agreements
In December 2008, Seaboard entered into a ten-year interest rate exchange agreement which involves the exchange
of fixed-rate and variable-rate interest payments over the life of the agreement without the exchange of the underlying
notional amounts to mitigate the effects of fluctuations in interest rates on variable rate debt. Seaboard pays a fixed
rate and receives a variable rate of interest on a notional amount of $25,000,000. The fair value of this interest rate
derivative was not material at December 31, 2008.
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,
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 year ended December 31, 2006, the
net gain for interest rate exchange agreements not accounted for as hedges was $3,374,000 and was included in
Miscellaneous, net in the Consolidated Statements of Earnings. Included in the gain for 2006 are net payments of
$909,000 during 2006 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, which resulted in a slightly overfunded status in the Plan as of December 31,
2007. As a result of the significant investment losses incurred in the Plan during the fourth quarter of 2008,
management is currently evaluating the amount of an additional contribution to be made for the 2008 plan year during
fiscal 2009. Although no final decision is expected until sometime late in the first quarter or early in the second
2008 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
quarter, it is expected a contribution will be made in the range of $2,000,000 to $15,000,000. As a result of this
contribution, at this time management does not anticipate making a contribution for the 2009 plan year.
Assets are invested in the Plan 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 provides investment
managers’ discretion and is periodically reviewed by management 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 were as follows:
Actual Plan Composition at December 31,
Target Percentage of Portfolio
2008
Domestic Large Cap Equity
Domestic Small and Mid Cap Equity
36%
14%
33%
13%
International Equity
Fixed Income
Cash
15% 14%
34% 39%
1%
1%
2007
37%
14%
17%
32%
0%
In December 2008, the FASB issued FSP 132(R)-1 which amends FAS No. 132(R), “Employers’ Disclosures About
Pensions and Other Postretirement Benefits.” This FSP requires more detailed disclosures about employers’ plan
assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan
assets, and valuation techniques used to measure the fair value of plan assets. Seaboard will be required to adopt
these new disclosure requirements as of December 31, 2009 and provide this additional information at that time.
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.
Management 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:
Years ended December 31,
2007
2008
2006
Weighted-average assumptions
Discount rate used to determine obligations 6.25%
Discount rate used to determine net periodic benefit cost 6.50%
6.50%
5.75%
5.75%
5.50%
Expected return on plan assets 7.50%
7.50%
7.50%
Long-term rate of increase in compensation levels 4.00-5.00% 4.00-5.00%
4.00-5.00%
For 2008 and 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, management selected the discount rate based
on Moody’s year-end published Aa corporate bond yield, rounded to the nearest quarter percentage point and
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 selected was
based on model-based results that reflect the Plan’s asset allocation and related long-term projected returns. The
measurement date for all plans is December 31. The unrecognized net actuarial losses are generally amortized over
the average remaining working lifetime of the active participants for these plans.
In September 2006, the FASB issued FAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans” (FAS 158). 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
50 2008 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
component of stockholders' equity. This statement requires employers to recognize previously disclosed but
unrecognized gains or losses, prior service costs or credits, and transition assets or 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 FAS 158. The adoption of FAS 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. FAS 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, 2008 and 2007, and a statement of the funded status as of
December 31, 2008 and 2007 were as follows:
December 31, 2008
2007
Accumulated
benefits accumulated benefits
(Thousands of dollars) exceed assets benefits exceed assets
Assets exceed Accumulated
Reconciliation of benefit obligation:
Benefit obligation at beginning of year $116,844
Service cost
5,199 2,736
Interest cost 7,510 3,893
$ 68,950 $ 52,380
2,266
2,558
3,070
Actuarial losses (gains)
Benefits paid (4,662) (2,341)
(1,519)
Plan amendments - - 1,142
(8,709)
Settlement - -
8,023 (7,582)
Benefit obligation at end of year $132,914 $ 65,656
$ 51,188
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year
$ 81,338
Actual return (loss) on plan assets (20,626)
Employer contributions
Benefits paid
Settlement
$ 67,138 $ -
6,541 -
10,228
2,271 10,000
(4,662) (2,341)
(1,519)
- - (8,709)
Fair value of plan assets at end of year
$ 58,321
$ 81,338 $ -
Funded status
$(74,593)
$ 15,682 $ (51,188)
The funded status of the Plan was ($14,306,000) and $15,682,000 at December 31, 2008 and 2007, respectively.
The accumulated benefit obligation for the Plan was $65,994,000 and $59,674,000 and for the other plans was
$38,593,000 and $32,750,000 at December 31, 2008 and 2007, 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: $4,969,000, $8,103,000, $5,547,000, $6,393,000, $6,245,000, and $54,070,000, respectively.
The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive income
(AOCI) at December 31, 2008 and 2007 were as follows:
(Thousands of dollars) 2008 2007
Accumulated loss, net of gain $ (56,322) $ (22,522)
(8,483)
Prior service cost, net of credit (7,796)
(65)
Transitional obligation (49)
Total Accumulated Other Comprehensive Income
$ (64,167) $ (31,070)
2008 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 net periodic benefit cost of these plans was as follows:
(Thousands of dollars)
Components of net periodic benefit cost:
2008
Years ended December 31,
2007
2006
Service cost $ 5,199
Interest cost
Expected return on plan assets
Settlement
Amortization and other
$ 4,415
$ 5,002
7,510
5,902
6,451
(6,029) (5,486) (4,462)
3,671 -
-
2,224
1,582
2,815
Net periodic benefit cost $ 8,262
$11,862
$ 8,670
The late 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 FAS No. 88, “Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension for Termination Benefits.”
The amounts in AOCI expected to be recognized as components of net periodic benefit cost in 2009 are as follows:
(Thousands of dollars)
2009
Accumulated loss, net of gain
$ 4,076
Prior service cost, net of credit 802
Transition obligation 16
Estimated net periodic benefit cost
$ 4,894
The accumulated unrecognized losses for 2008 in the Plan as of December 31, 2008 exceeded the 10% deferral
threshold as permitted under FAS No. 87, “Employers’ Accounting for Pensions” as a result of the significant
investment losses incurred during 2008. Accordingly, Seaboard’s pension expense for the Plan will increase by
approximately $3,000,000 for 2009 as compared to 2008 as a result of loss amortization. In addition, pension
expense for the Plan is expected to increase an additional $1,739,000 as a result of reduced expected return on
assets, from the decline of assets in the Plan during 2008.
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 $498,000, $453,000 and $442,000 for the
years ended December 31, 2008, 2007 and 2006, 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 was
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 this plan an amount equal to 100% of employee contributions up to a maximum of 3% of
employee compensation. Employee vesting is based upon years of service with 20% vested after one year of service
and an additional 20% vesting with each additional complete year of service. Contribution expense for this plan was
$1,812,000, $1,709,000 and $1,643,000 for the years ended December 31, 2008, 2007 and 2006, respectively. In
addition, Seaboard maintains a defined contribution plan covering most of its hourly, non-union employees and two
defined contribution plans covering most of Daily’s employees. Contribution expense for these plans was
$1,038,000, $893,000 and $664,000 for the years ended December 31, 2008, 2007 and 2006, respectively.
52 2008 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
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 also 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 three investments. However, as a result of U.S. tax legislation passed in 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
(income) for these two deferred compensation plans, which primarily includes amounts related to the change in fair
value of the underlying investment accounts, was $(9,539,000), $2,298,000 and $2,466,000 for the years ended
December 31, 2008, 2007 and 2006, respectively. Included in other liabilities at December 31, 2008 and 2007 are
$15,930,000 and $24,009,000, 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, 2008 and
2007, $22,225,000 and $27,773,000, respectively, were included in other current assets on the Consolidated Balance
Sheets. Investment income (loss) related to the mark-to-market of these investments for 2008, 2007, and 2006
totaled $(9,618,000), $2,183,000 and $2,358,000, respectively.
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 has appealed the reduced
penalty to seek a further reduction in the penalty.
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, 2008, 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, 2008, Seaboard had outstanding $62,389,000 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 $15,208,000 of
LCs related to insurance coverage.
2008 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, 2008 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,
2009
2010
2011
2012
2013
Thereafter
Hog procurement contracts $ 163,861 $ 154,012 $ 67,340 $ - $ - $ -
Grain and feed ingredients 112,471 706 - - - -
Grain purchase contracts for resale 144,142 - - - - -
Fuel purchase contract 11,987 - - - - -
Equipment purchases
and facility improvements 21,630 10,432 507 - - -
Other purchase commitments 5,655 - - - - -
Total firm purchase commitments 459,746 165,150 67,847 - - -
Vessel, time and voyage-charter
arrangements 94,985 4,746 - - - -
Contract grower finishing agreements 12,043 11,905 11,098 10,134 9,498 41,738
Other operating lease payments 16,661 15,015 14,420 13,984 13,222 224,957
Total unrecognized firm commitments $ 583,435 $ 196,816 $ 93,365 $ 24,118 $22,720 $ 266,695
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, 2008. During 2008, 2007
and 2006, this segment paid $155,400,000, $131,490,000 and $114,921,000, 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, 2008. This segment also has short-term freight contracts in place for delivery of future grain sales.
The Power division has entered into a contract for the supply of substantially all fuel required through June 2009 at
market-based prices. The fuel commitment shown above reflects the average price per barrel at December 31, 2008
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 2008, 2007 and 2006 totaled $115,877,000, $88,761,000 and $91,747,000,
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 2008, 2007 and 2006, Seaboard paid $13,389,000, $13,280,000 and $13,646,000, respectively, under
contract grower finishing agreements.
54 2008 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
On May 30, 2008, Seaboard Marine Ltd. (“Seaboard Marine”), entered into an Amended and Restated Terminal
Agreement with Miami-Dade County (“County”) for Marine Terminal Operations (“Amended Terminal Agreement”),
pursuant to which Seaboard Marine renewed its existing Terminal Agreement with the County at the Port of Miami.
The Amended Terminal Agreement will enable Seaboard Marine to continue its existing operations at the Port of
Miami. The Amended Terminal Agreement has a term through September 30, 2028, with two five-year renewal
options, the exercise of which are subject to certain conditions. The total minimum payments over the initial term of
the Amended Terminal Agreement approximate $283,000,000. This minimum amount could increase if certain
conditions are met. In addition, the Amended Terminal Agreement requires Seaboard Marine to fund approximately
$5,000,000 in terminal upgrades subject to certain conditions. The Amended Terminal Agreement also requires the
County to make certain improvements to Seaboard Marine’s container yard and adjacent berths at the Port of Miami.
Seaboard also leases various facilities and equipment under noncancelable operating lease agreements. Rental
expense for operating leases amounted to $20,413,000, $17,904,000 and $16,008,000 in 2008, 2007 and 2006,
respectively.
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 $14,500,000 remained available at December 31, 2008. Under this repurchase plan, Seaboard used cash to
repurchase 3,852 shares of common stock at a total price of $5,012,000 in 2008 and 17,089 shares of common stock
at a total price of $30,488,000 in 2007. 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.
The components of accumulated other comprehensive loss, net of related taxes, are summarized as follows:
(Thousands of dollars)
Years ended December 31,
2007
2006
2008
Cum ulative foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pension cost
Net unrealized loss on cash flow hedges
Deferred gain on interest rate swaps
$
(68,211)
1,781
(45,273)
-
-
$
(58,719)
1,149
(21,081)
-
-
$
(55,811)
1,361
(28,140)
(55)
152
Accumulated other comprehensive loss
$
(111,703)
$
(78,651)
$
(82,493)
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, 2008, the Sugar and Citrus segment had $176,908,000 in net assets denominated in Argentine pesos,
$16,154,000 in net assets denominated in U.S. dollars and $56,638,000 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.
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 2008 and 2007, the unrecognized pension cost includes $15,721,000
and $5,457,000, respectively, related to employees at certain subsidiaries for which no tax benefit has been
recorded.
2008 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
Note 13
Segment Information
Seaboard Corporation had four reportable segments through December 31, 2008: Pork, Commodity Trading and
Milling, Marine, and Sugar and Citrus, 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 four 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, Mexico and certain other foreign markets. The Commodity Trading and
Milling segment internationally markets wheat, corn, soybean meal, rice and other similar commodities in bulk to third
party customers and to non-consolidated foreign affiliates. This segment also 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. Revenues for All
Other segments are primarily derived from the Power division, which operates as an unregulated independent power
producer in the Dominican Republic generating power from a system of diesel engines mounted on two barges.
The Pork segment derives approximately 12% percent of its revenues from a few customers in Japan through one
agent. 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 Triumph 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 incurred an impairment charge of $7,000,000 related to the Daily’s trade name in the fourth
quarter of 2008. As of December 31, 2008, the Pork segment has $28,372,000 of goodwill and $17,000,000 of other
intangibles not subject to amortization in connection with its acquisition of Daily’s. See Note 2 for further discussion
including the potential for additional future impairment of these intangible assets, In addition, as of December 31,
2008, the Pork segment had fixed assets with a net book value of $45,278,000 related to its biodiesel processing
plant which began operations during 2008. See Note 6 for discussion of the potential for future impairment of these
fixed assets.
In previously filed annual reports, Seaboard had separately reported its Power division as a reportable segment. This
division does not meet the technical requirements for reporting as a separate segment and is not expected to in the
future. Accordingly, the Power division is now reported as a part of “All Other” and prior periods have been
appropriately reclassified. The Power division sells approximately 40% of its power generation to a government-
owned distribution company under a short-term contract for which Seaboard bears a concentrated credit risk as this
customer, from time to time, has significant past due balances. As of December 31, 2008, this customer account had
total billings outstanding of $27,300,000, of which $20,000,000 was reclassified to long-term as of December 31,
2008 based on current collection negotiations.
On March 2, 2009, an agreement became effective under which Seaboard will sell its two power barges in the
Dominican Republic for $70,000,000, which will use such barges for private use. The agreement calls for the sale to
occur on or around January 1, 2011. Upon the satisfaction of certain conditions, which are expected to be met during
March 2009, $15,000,000 will be paid to Seaboard and the $55,000,000 balance of the purchase price will be paid
into escrow and paid to Seaboard at the closing of the sale. The book value of the two barges was $23,851,000 as of
December 31, 2008. Seaboard will continue to operate these two barges until the closing date of the sale, with an
estimated annual depreciation cost of approximately $3,600,000. Seaboard will be responsible for the wind down
and decommissioning costs of the barges. Completion of the sale is dependent upon several issues, including
meeting certain baseline performance and emission tests. Failure to satisfy or cure any deficiencies could result in
the agreement being terminated. Seaboard could be responsible to pay liquidated damages of up to approximately
$15,000,000 should it fail to perform its obligations under the agreement, after expiration of applicable cure and grace
periods. Seaboard will retain all other physical properties of this business and is considering options to continue its
power business in the Dominican Republic after the sale of these assets is completed.
56 2008 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’s investment in a Bulgarian wine business (the Business) and related losses from this Business are
included in the All Other Segments. As discussed in Note 5, after recording its share of operating losses for the
fourth quarter of 2007, 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. In June 2008, Seaboard received $1,078,000 from another shareholder of the Business in exchange for
the assignment by Seaboard to the shareholder of all rights to Seaboard’s previous loans and advances to the
Business. The proceeds of this transaction were recorded in Other Investment Income. In February 2009, Seaboard
received approximately $64,000 for all of its remaining shares outstanding in this Business.
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 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.
Sales to External Customers:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
All Other
Segment/Consolidated Totals
Operating Income:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
All Other
Segment Totals
Corporate
Consolidated Totals
Income from Foreign Affiliates:
(Thousands of dollars)
Comm odity Trading and Milling
Sugar and Citrus
All Other
Segment/Consolidated Totals
Years ended December 31,
2007
2006
2008
$
1,125,969
1,897,374
958,027
142,148
144,286
$
1,003,790
1,152,035
822,221
125,882
109,373
$
1,002,656
735,583
741,563
123,378
104,217
$
4,267,804
$
3,213,301
$
2,707,397
Years ended December 31,
2007
2006
2008
$
(45,934)
96,517
62,365
3,690
8,878
125,516
(3,707)
$
39,528
20,905
104,156
15,484
6,036
186,109
(16,194)
$
138,303
37,225
106,033
19,184
10,001
310,746
(13,751)
$
121,809
$
169,915
$
296,995
Years ended December 31,
2007
2006
2008
$
12,629
455
-
$
5,232
360
(1,718)
$
6,323
(1,060)
(1,241)
$
13,084
$
3,874
$
4,022
2008 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
Depreciation and Amortization:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
All Other
Segment Totals
Corporate
Consolidated Totals
Total Assets:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
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
Segment/Consolidated Totals
Capital Expenditures:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar and Citrus
All Other
Segment Totals
Corporate
Consolidated Totals
Years ended December 31,
2007
2006
2008
$ 53,288
4,509
19,994
8,030
4,341
90,162
219
$ 47,258
4,501
16,568
6,510
4,067
78,904
317
$ 43,744
3,974
13,502
5,800
3,955
70,975
283
$ 90,381
$ 79,221
$ 71,258
December 31,
2008
2007
$ 800,062
543,303
267,268
225,716
81,222
1,917,571
413,790
$ 783,288
447,211
231,278
171,978
71,640
1,705,395
388,304
$ 2,331,361
$ 2,093,699
December 31,
2008
2007
$ 66,578
1,513
$ 68,091
$ 59,538
1,168
$ 60,706
Years ended December 31,
2007
2006
2008
$ 52,649
4,333
46,309
30,964
364
134,619
15
$ 134,634
$ 78,085
3,013
61,045
21,424
580
164,147
26
$ 164,173
$ 30,324
4,024
30,429
18,379
1,140
84,296
1,590
$ 85,886
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, fixed assets, deferred tax amounts and other miscellaneous items.
Corporate operating losses represent certain operating costs not specifically allocated to individual segments.
58 2008 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
Geographic Information
Seaboard had sales in South Africa totaling $437,362,000, $322,998,000 and $172,067,000 for the years ended
December 31, 2008, 2007 and 2006, respectively, representing approximately 10%, 10% and 6% of total sales for
each respective year. No other individual foreign country accounted for 10% or more of sales to external customers.
The following table provides a geographic summary of net sales based on the location of product delivery.
(Thousands of dollars)
United States
Years ended December 31,
2007
2008
2006
$ 924,470
$ 936,825
$ 1,027,295
Caribbean, Central and South America
1,726,789
1,151,032
Africa
Pacific Basin and Far East
Canada/Mexico
Eastern Mediterranean
Europe
Totals
1,269,505
162,122
143,665
23,719
17,534
810,084
154,127
91,513
43,136
26,584
845,577
588,050
147,560
78,044
3,979
16,892
$ 4,267,804
$ 3,213,301
$ 2,707,397
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,
2008
2007
$ 594,908
$ 593,271
85,156
30,234
54,444
68,545
39,229
29,350
$ 764,742
$ 730,395
At December 31, 2008 and 2007, Seaboard had approximately $168,303,000 and $183,647,000, 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.
2008 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 Sales,
C&S Wholesale Grocers
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
Ty A. Tywater
Vice President, Audit Services
Barry E. Gum
Vice President, Finance and Treasurer
James L. Gutsch
Vice President, Engineering
Chief Executive Officers of Principal Seaboard Operations
Rodney K. Brenneman
Pork
David M. Dannov
Commodity Trading and Milling
Edward A. Gonzalez
Marine
John A. Virgo
Vice President, Corporate Controller and Chief
Accounting Officer
Adriana N. Hoskins
Assistant Treasurer
Richard A. Watt
Sugar & Citrus
Armando G. Rodriguez
Power
Stock Transfer Agent and Registrar of Stock
Availability of 10-K Report
Seaboard files its Annual Report on Form 10-K with
the Securities and Exchange Commission. Copies of
the Form 10-K for fiscal 2008 are available without
charge by writing Seaboard Corporation, 9000 West
67th Street, Shawnee Mission, Kansas 66202,
Attention: Shareholder Relations or via the Internet at.
http://www.seaboardcorp.com/investors/Annual.aspx.
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.
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 02940-3078
(800) 884-4225
Auditors
KPMG LLP
1000 Walnut, Suite 1000
Kansas City, Missouri 64106
Stock Listing
Seaboard’s common stock is traded on the NYSE
Alternext US (formerly, American Stock Exchange)
under the symbol SEB. Seaboard had 191
shareholders of record of its common stock as of
February 6, 2009.
60 2008 Annual Report