2009 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...................................................... 25
Management’s Report on Internal Control over Financial Reporting ........................................................ 25
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements ........... 26
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting... 27
Consolidated Statements of Earnings .................................................................................................... 28
Consolidated Balance Sheets ................................................................................................................ 29
Consolidated Statements of Cash Flows ................................................................................................ 30
Consolidated Statements of Changes in Equity ...................................................................................... 31
Notes to Consolidated Financial Statements .......................................................................................... 32
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 volume of business and working capital requirements associated with the competitive
trading environment for the Commodity Trading and Milling segment, (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, (xii) the impact from the H1N1 flu incident on the demand and
overall market prices for pork products or (xiii) 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.
2009 Annual Report
1
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
This was a challenging year for us financially as we suffered through both the general worldwide recession plus
certain industry and country specific disruptions. With operations in 39 countries in a broad mix of industries, it is
practically impossible to hit on all cylinders; on the other hand, this diversification fuels our growth and reduces
volatility in our financial results. Globally, we can always count on supply and demand imbalances, political and
economic disruptions and extraordinary natural and man-made disasters to create both challenges and opportunities.
Controlling those areas which are within our control namely, quality of product, service and costs, and maintaining an
effective operating environment and a well-defined culture, remain our goal at Seaboard. In this regard, we have not
wavered in 2009.
Although net income for 2009 was down 37% from 2008, operating income, a more indicative reflection of
performance, was down 80% year to year, from $121.8 million to $23.7 million. Gross margins have narrowed overall
and we are mindful of the trend of our increased general and administrative expenses. Our balance sheet remains
extremely strong with plenty of liquidity to fund working capital increases, weather unexpected losses and make
substantial investments should opportunities arise. Over the last four years, we have spent almost $440 million in
capital improvements to drive growth and to keep us operationally efficient and cost effective. We continue to monitor
the marketplace in search of investments which are strategic and long-term in nature in hopes of finding
complementary and synergistic businesses to augment our existing portfolio.
It’s hard to imagine a more chaotic year than 2008 but 2009 proved to be even more extraordinary for us. Specifically,
we suffered through the havoc created by the H1N1 virus as it impacted the entire protein sector, including Seaboard
Foods. This resulted in a sharp reduction in prices and volumes for several months. In addition, political forces took
their toll in certain countries: in Argentina, with domestic price controls; in Venezuela, with nationalization of certain
ports of call and in the U.S., with the increased role and impact of the federal government in the economy and
commercial markets. Although each of these events affected us negatively, our diversification in business segments
and geographic locations allowed us to cushion the blow and no single event caused irreparable or irreversible
damage. As we expand our reach worldwide and broaden our interests, the probability of adverse incidents increases
but with a lesser impact on the company overall.
While pork processing and further processing margins continued to produce good results, losses from hog production
more than offset those positive results. The H1N1 flu and recessionary factors contributed to lower product prices by
reducing overall demand. While 2009 was a difficult year for everyone in the industry, we remain extremely confident
that the attributes of vertical integration such as food safety, product quality and consistency will provide us a
competitive advantage over the long-term. Hog producers cannot sustain continued losses and although processors
know this, competing meats, uncertainty in the export markets and permanent changes in feed grain usage/demand
have resulted in an environment which has created volatility in our earnings. Ultimately, we believe the US will adapt
to these changes by continuing to enlarge the supply of grain and by satisfying protein demand through efficient
animal production and processing.
Including our marketing agreement with Triumph Foods, Seaboard Foods markets about 9% market share of all pork
processed in the U.S., making us the fourth largest pork processor. We are also the second largest hog producer in
the U.S. It is our intention to leverage this position to capture additional margins with a broader mix of value-
added products, retail alliances and further processing activities.
Aside from these macro issues, we continue to launch new products for foodservice and retail markets in both the
U.S. and abroad. With consistent quality, food safety and farm to market identification, we expect our vertically
integrated system to continue to provide us significant opportunities as these issues become more and more
important to end consumers in both domestic and export markets. We are hopeful that the toughest times are behind
us.
Ocean transportation is one of the best indicators in gauging the health of the global economy and multi-lateral trade.
Consistent with the worldwide recession and contracted global trade, both Seaboard Marine volumes and overall
freight rates decreased in 2009. The strength of our many trade lanes depends on the health of tourism, textiles,
mining and GNP growth in the Caribbean Basin and Latin America. This year marked the first decrease in year-over-
year unit volumes for Seaboard Marine in over a decade. Many of our global competitors have suffered enormous
losses over the last year due to shrinking trade volumes and overcapacity. Price wars ensued early in the year
seemingly without regard for financial consequences. As trade patterns began to stabilize, shipping companies
throughout the world began the process of reducing capacity in a variety of ways to match trade volumes. Due to
reduced demand, ship charter rates decreased significantly and we were able to take advantage of these cost
savings. Over the last several years, we have upgraded our container fleet and cargo handling equipment and with
the decline in ship values, we continue to reconfigure our fleet through a combination of chartered and owned
tonnage. This is a great opportunity to utilize more modern, efficient and versatile vessels.
Sadly, our weekly service into Port-au-Prince, Haiti was interrupted by the devastating earthquake on January 12,
2010. We are currently maintaining our service via a twice weekly feeder vessel from Kingston, Jamaica through the
2
2009 Annual Report
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
temporary use of a sister company’s grain berth in Laffiteau, Haiti. Despite the tragedy, it has been gratifying to see
Seaboard Marine and Commodity Trading and Milling (CT&M) work together to quickly and creatively provide the
transportation and discharge facilities needed for critical relief and commercial cargoes.
Although many shipping lines drastically scaled back and suffered tremendous financial losses in 2009, Seaboard
Marine stayed the course. All routes were maintained at a high service level. The philosophy of creative and
responsive customer service will continue. Having created a network of strong port to port connections throughout the
Caribbean Basin and Latin America over the years, Seaboard Marine remains well positioned to take advantage of
growing trade volumes within the Western Hemisphere as the world economy recovers.
2009 proved to be another outstanding year for CT&M, an impressive result given the panic at the beginning of the
year with commodity prices in a freefall. Maintaining normal inventory and forward positions for our grain processing
facilities had a negative impact on earnings. However, our access to liquidity and lower replacement cost inputs
allowed our operations to retain solid margins. The quick rebound in the freight markets also supported CT&M’s
earnings as our ocean freight ownership contributed to bottom line results.
CT&M continues to expand its trading business to satisfy affiliate and third party raw material requirements by
opening up new origins of supply, improving logistics through greater control of vessel transportation and modernizing
port infrastructures. In lesser developed countries, controlling as many components of the supply chain as possible
becomes critical to quality of service. Toward this end, we have opened commodity and freight trading offices in
Europe, Latin America and the U.S. and we continue to pursue potential investments in selected grain origination
markets. In addition, we are expanding our presence in specialty commodities through investments in infrastructure in
Canada, rice milling assets in Guyana and a trading company acquisition which we expect to close in the near future.
This year we have been successful in further integrating our milling and trading businesses by moving more products
through our destination markets. This affords us a greater degree of security and product integrity. In 2010, we plan
to further expand this model to move more cargo through our sister division, Seaboard Marine, and thus exercise
more transactional control of our commodity trade.
CT&M plans to pursue the expansion of its industrial operations through the acquisition or green-field development of
additional grain based businesses, down-stream industries such as poultry, baking and pasta and the expansion and
renovation of our existing mill capacity in several markets. Our grain processing facilities remain a critical piece of our
integrated supply chain model.
Tragically, the massive earthquake in Haiti took the lives of 15 employees of Les Moulins d’ Haiti, our non-
consolidated milling operation near Port-au-Prince. Fortunately, the warehouse and storage facilities remain
operational and adequate insurance coverage was in place allowing Les Moulins d’ Haiti to rebuild and expand
capacity. We expect to resume milling operations in early 2011. Many of our employees and their families have lost
their homes and suffered terribly as a result of this disaster. It is our intention to continue to support our employees in
part through continued employment to support general cargo handling and flour merchandising through our private
port facilities.
Tabacal has made significant progress toward maximizing the long-term value of its land and assets through the
conversion of sugar cane into sugar, alcohol and energy. Despite some minor setbacks, this business should be well
positioned to take advantage of an improved world sugar and alcohol outlook. In the latter half of 2009, world sugar
prices rose sharply. This was triggered by India’s short crop and continued competition for sugar cane from ethanol.
In particular, Brazilian sugar production continues to compete directly with ethanol demand for domestic and export
consumption and sugar prices have risen in tandem with those of virtually all fossil fuel sources. Similarly, Argentina
has recently implemented a program requiring the blending of ethanol into gasoline. This government program should
help develop alcohol as a much needed source of energy as well as help stabilize the financial returns for land use.
Although we have seen a troubling decline in operating income over the last five years, we are not demoralized. In
fact, in the face of these uncertain times, our diversified and integrated structure has proven to be a durable and
sustainable model. Moreover, our success stems from the people who have devoted their careers to Seaboard, who,
I believe, display a genuine sense of ownership and pride. Our people have helped to successfully carry us through
good times and bad. In consistently adhering to the goal of producing quality products and services to our customers,
maintaining a competitive spirit and conducting ourselves with professionalism, integrity and respect, we should
continue to enjoy a good measure of success.
Steven J. Bresky
President and
Chief Executive Officer
2009 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. 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.
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
enabled Seaboard to expand its integrated pork model into value-added products and to enhance its ability to extend
production to include other further processed pork products.
In the second quarter of 2008, Seaboard commenced production of biodiesel at a 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 third parties. The facility can also produce biodiesel
from vegetable oil. Also, during 2009 Seaboard completed construction of and began operations at a majority-owned
ham-boning and processing plant in Mexico.
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 products to its customers that are produced in its own facilities.
Seaboard markets the 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 wheat, corn, soybean meal, rice and other similar
commodities in bulk 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 up to approximately 4.5 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 eight offices in seven countries and one non-consolidated affiliate location in South America. The
grain processing businesses operate facilities at 24 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.
4
2009 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 approximately 22 chartered vessels, as well as dry, refrigerated
and specialized containers and other 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. The sugar is 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 250,000 metric tons of sugar and approximately 14
million gallons of alcohol (hydrated and dehydrated) per year. 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.
Depending on local market conditions, sugar may also 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 the
third quarter of 2010. In addition, in the first quarter of 2010, the Company began sales of dehydrated alcohol to
certain local oil companies under the national bio-ethanol program which requires alcohol to be blended with
gasoline.
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 that expires at the end
of March 2010 with a government-owned distribution company and on the spot market that is accessed by three
wholly government-owned distribution companies and limited others. On March 2, 2009, an agreement became
effective under which Seaboard will sell the two barges. The agreement calls for the sale to occur on or around
January 1, 2011. 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.
Seaboard processes jalapeño peppers at its plant in Honduras. These products are shipped to the United States on
Seaboard Marine vessels and distributed from Seaboard’s port facilities.
2009 Annual Report
5
S E A B O A R D C O R P O R A T I O N
Principal Locations
Corporate Office
Seaboard Corporation
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
Seaboard de Mexico USA LLC
Mexico
Commodity Trading & Milling
Commodity Trading Operations
Bermuda
Colombia
Ecuador
Greece
Miami, Florida
Peru*
South Africa
Switzerland
Fairfield Rice Inc.*
Guyana
Les Moulins d’Haiti S.E.M.*
Haiti
Lesotho Flour Mills Limited*
Lesotho
Life Flour Mill Ltd.*
Premier Feeds Mills Company 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.*
Ecuador
National Milling Company
of Guyana, Inc.
Guyana
National Milling Corporation Limited
Zambia
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
Rafael del Castillo & Cia. S.A. *
Colombia
Seaboard Marine Bahamas Ltd.
Bahamas
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
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
Ingenio y Refineria San Martin
del Tabacal SRL
Argentina
Power
Transcontinental Capital Corp.
(Bermuda) Ltd.
Dominican Republic
Other
Mount Dora Farms de Honduras, S.R.L.
Honduras
Mount Dora Farms Inc.
Houston, Texas
*Represents a non-controlled, non-consolidated affiliate
6
2009 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)
2009
Years ended December 31,
2008
2007
2006
2005
Net sales
$ 3,601,308 $ 4,267,804
$ 3,213,301
$ 2,707,397
$ 2,688,894
Operating income
$ 23,723
$ 121,809
$ 169,915
$ 296,995
$ 320,045
Net earnings attributable to Seaboard $ 92,482
$ 146,919
$ 181,332
$ 258,689
$ 266,662
Basic earnings per common share
$ 74.74 $ 118.19
$ 144.15
$ 205.09
$ 212.20
Diluted earnings per common share
$
74.74
$
118.19
$ 144.15
$ 205.09
$ 211.94
Total assets
$ 2,337,133
$ 2,331,361
$ 2,093,699
$ 1,961,433
$ 1,816,321
Long-term debt, less current maturities $ 76,532 $ 78,560
$ 125,532
$ 137,817
$ 201,063
Stockholders’ equity
$ 1,545,419
$ 1,463,578
$ 1,355,199
$ 1,242,410 $ 1,013,904
Dividends per common share
$
3.00 $ 3.00
$ 3.00
$ 3.00
$ 3.00
Seaboard Corporation, and affiliated companies in its Commodity Trading and Milling segment, resolved a dispute
with a third party related to a 2005 transaction. As a result, Seaboard Overseas Limited received $16,787,000, net of
expenses, or $13.57 per common share in the third quarter of 2009 included in other income. There was no tax
expense on this transaction. See Note 11 to the Consolidated Financial Statements for further discussion.
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.
2009 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 Amex Equities (formerly the NYSE Alternext US) 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 NYSE Amex Equities
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, 2004, and ending December 31, 2009. 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 NYSE Amex Composite Index
And A Peer Group
$200
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
12/04
12/05
12/06
12/07
12/08
12/09
Seaboard Corporation
NYSE Amex Composite
Peer Group
*$100 invested on 12/31/04 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
The comparison of cumulative total returns presented in the above graph was plotted using the following index values
and common stock price values:
Seaboard Corporation
NYSE Amex Equities
Peer Group
12/31/04
12/31/05
12/31/06 12/31/07 12/31/08 12/31/09
$100.00
$100.00
$100.00
$151.74
$125.80
$ 94.79
$177.61
$150.40
$114.71
$148.15 $120.61 $136.64
$178.95 $108.56 $147.27
$124.67 $ 95.96 $115.61
8
2009 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
2009
Net sales
$ 917,568
$ 869,830
$ 854,625
$ 959,285 $ 3,601,308
Operating income
$ 16,042
$ 2,769
$ (2,679)
$ 7,591 $ 23,723
Net earnings attributable to Seaboard $ 15,973
$ 26,919
$ 36,715
$ 12,875
$ 92,482
Earnings per common share
$ 12.89
$ 21.76
$ 29.69
$ 10.41 $ 74.74
Dividends per common share
$
0.75
$
0.75
$ 0.75
$ 0.75 $ 3.00
Closing market price range per common share:
High $ 1,215.00
$ 1,285.00
$ 1,382.82
$ 1,549.00
Low $ 805.00
$ 935.00
$ 1,040.00
$ 1,172.00
2008
Net sales
$ 993,668
$ 999,951
$ 1,131,691
$ 1,142,494 $ 4,267,804
Operating income
$ 59,382
$ 3,096
$ 31,714
Net earnings attributable to Seaboard $ 70,027
$ 20,963
$ 32,905
Earnings per common share
$ 56.28
$ 16.85
$ 26.47
Dividends per common share
$ 0.75
$ 0.75
$ 0.75
$
$
$
$
27,617 $ 121,809
23,024 $ 146,919
18.55 $ 118.19
0.75 $ 3.00
Closing 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
Seaboard Corporation, and affiliated companies in its Commodity Trading and Milling segment, resolved a dispute
with a third party related to a 2005 transaction. As a result, Seaboard Overseas Limited received $16,787,000, net of
expenses, or $13.57 per common share in the third quarter of 2009 included in other income. There was no tax
expense on this transaction. See Note 11 to the Consolidated Financial Statements for further discussion.
During the first and second quarters of 2009, Seaboard repurchased 3,233 and 435 common shares respectively, as
authorized by Seaboard’s Board of Directors. 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.
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.
2009 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 daily double shift processing capacity of 18,500 hogs, two bacon further
processing plants located in Salt Lake City, Utah and Missoula, Montana, and a ham-boning and processing plant in
Mexico. In 2009, Seaboard raised approximately 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 62% 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. 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.
The Pork segment also produces biodiesel to be sold to third parties. 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. See Note 6 to the
Consolidated Financial Statements for discussion on the expired federal tax credits for the operation. Also, during
2009 Seaboard completed construction of and began operations at a majority-owned ham-boning and processing
plant in Mexico.
The Pork segment 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. The Pork segment markets 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.
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.
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.
10
2009 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
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 countries
in the Caribbean Basin, Central and South America. As a result, fluctuations in economic conditions or unstable
political situations in the regions or countries in which Seaboard operates can affect import/export trade volumes.
When certain regions or countries experienced such conditions, 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 thus affected
by fluctuations in charter hire rates as well as fuel costs.
As a result of the recent global downturn in containerized trade, there soon could be distressed assets such as
vessels and handling equipment available at attractive prices. Seaboard will carefully evaluate such opportunities.
Seaboard also continues to explore ways to increase volumes on existing routes while seeking opportunities to
broaden its route structure in the region.
Sugar Segment
Seaboard’s Sugar segment operates a vertically integrated sugar 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 market conditions, this
business purchases from third parties sugar for resale. Over the past several years, Seaboard made various
modifications to this business to improve the efficiency of its operations and expand its sugar and alcohol operations.
In the first quarter of 2010, the Company began sales of dehydrated alcohol to certain local oil companies under the
national bio-ethanol program which requires alcohol to be blended with gasoline.
Prior to the first quarter of 2009, the Sugar segment was named Sugar and Citrus reflecting the citrus and related
juice operations of this business. During the first quarter of 2009, management reviewed its strategic options for the
citrus business in light of a continually difficult operating environment. In the first quarter of 2009, management
decided not to process, package or market the 2009 harvest for the citrus and related juice operations. In the second
quarter of 2009, management decided to integrate and transform some of the land previously used for citrus
production into sugar cane production.
The functional currency of the Sugar 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 and construction of a 40
megawatt cogeneration power plant expected to be completed in the third quarter of 2010. Seaboard continues to
explore ways to improve and expand its existing operations while considering other alternatives to expand this
segment.
Power Segment
Seaboard’s Power segment operates as an unregulated independent power producer in the Dominican Republic
(DR) generating power from diesel engines mounted on two barges. This segment’s financing needs have been
minimal for the existing operations. During the past few years, operating cash flows have fluctuated from inconsistent
customer collections. Seaboard has contracts to sell approximately 20% of the power it generates to certain
government-approved commercial large users under long-term contracts. Seaboard also has a short-term contract
that expires at the end of March 2010 for approximately 34% 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
2009 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
time, has significant past due balances. Energy produced in excess of contracted amounts is sold on the spot market
primarily to three wholly government-owned distribution companies or other power producers who lack sufficient
power production to service their customers.
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 Note 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, from time to time Seaboard
pursues 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, 2009 increased $95.9 million from December 31, 2008. The
increase was the result of cash generated by operating activities of $246.4 million, $16.8 million received from a gain
on a disputed sale as discussed in Note 11 to the Consolidated Financial Statements and $15.0 million received for
the potential sale of power barges, as discussed in Note 13 to the Consolidated Financial Statements. During 2009,
cash was used to reduce notes payable by $95.1 million, to reduce long-term debt by $46.9 million and for capital
expenditures of $54.3 million. Cash from operating activities for 2009 increased $135.1 million compared to 2008,
primarily as a result of decreases in working capital items of accounts receivable and inventory in 2009 compared to
increases in 2008, partially offset by lower net earnings in 2009 compared to 2008.
Cash and short-term investments as of December 31, 2008 increased $39.3 million from December 31, 2007, while
cash from operating activities was $111.3 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 $34.6 million compared to 2007, primarily reflecting lower net earnings for the
year.
Capital Expenditures, Acquisitions and Other Investing Activities
During 2009 Seaboard invested $54.3 million in property, plant and equipment, of which $15.2 million was expended
in the Pork segment, $14.7 million in the Marine segment, $21.6 million in the Sugar segment and $2.8 million in the
remaining businesses. For the Pork segment, the expenditures were primarily for improvements to existing hog
facilities, upgrades to the Guymon pork processing plant and construction of the ham-boning and processing plant in
Mexico. The ham-boning and processing plant was completed in the second quarter of 2009. For the Marine
segment, $10.3 million was spent to purchase cargo carrying and handling equipment. In the Sugar segment, $13.8
million was used for development of the cogeneration power plant with the remaining capital expenditures primarily
being used for 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.
The total 2010 capital expenditures budget is $90.3 million. The Pork segment plans to spend $16.9 million primarily
for improvements to existing facilities and related equipment. The Marine segment has budgeted to spend $34.1
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
and dry bulk vessels for the Commodity Trading and Milling segment during 2010. The Sugar segment plans to
spend $25.7 million, including $12.2 million for the continued development of a 40 megawatt cogeneration power
plant, with the remaining amount for normal upgrades to existing operations. The cogeneration power plant is
expected to be operational by the third quarter of 2010 for a total constructed cost of $37.2 million. The balance of
$13.6 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, 2009 Seaboard had commitments of $18.7 million to spend on construction projects,
purchase equipment, and make facility improvements.
12
2009 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
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 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. For the Marine segment, $36.5 million was spent to purchase cargo carrying and handling
equipment. In the Sugar 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.
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 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 and $22.9 million was spent constructing additional
hog finishing space. 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 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.
On March 2, 2009, an agreement became effective under which Seaboard will sell its two power barges in the
Dominican Republic on or around January 1, 2011 for $70.0 million. During March 2009, $15.0 million was paid to
Seaboard and the $55.0 million balance of the purchase price was paid into escrow and will be 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.
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.
Financing Activities, Debt and Related Covenants
In the fourth quarter of 2009, Seaboard obtained letter of credit financing that replaced existing letters of credit
resulting in an increase to borrowing capacity by approximately $16.3 million.
The following table represents a summary of Seaboard’s available borrowing capacity as of December 31, 2009. At
December 31, 2009, there were no borrowings outstanding under the committed lines of credit and borrowings under
the uncommitted lines of credit totaled $33.8 million, all related to foreign subsidiaries. Letters of credit reduced
Seaboard’s borrowing capacity under its committed and uncommitted credit lines by $41.7 million and $3.8 million,
respectively, primarily representing $26.4 million for Seaboard’s outstanding Industrial Development Revenue Bonds
and $16.8 million related to insurance coverage. Also included in notes payable at December 31, 2009 was a term
note of $47.5 million denominated in U.S. dollars.
2009 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
(Thousands of dollars)
Long-term credit facilities – committed
Short-term uncommitted demand notes
Uncommitted term note
Total borrowing capacity
Amounts drawn against lines
Uncommitted term note
Letters of credit reducing borrowing availability
Available borrowing capacity at December 31, 2009
Total amount
available
$ 300,000
135,588
47,500
483,088
(33,762)
(47,500)
(45,500)
$ 356,326
Seaboard has capacity under existing covenants to undertake additional debt financings of approximately $844.8
million. As of December 31, 2009, 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 $32.5 million per year, for a total of $36.4 million over
the next three years. As of December 31, 2009, Seaboard has cash and short-term investments of $469.2 million,
total working capital of $907.3 million and a $300.0 million line of credit maturing on July 10, 2013. Accordingly,
management believes Seaboard’s combination of internally generated cash, liquidity, capital resources and borrowing
capabilities will be adequate for its existing operations and any currently known potential plans for expansion of
existing operations or business segments for 2010. Management does, however, periodically review various
alternatives for future financing to provide additional liquidity for future operating plans. Despite 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 November 6, 2009, the Board of Directors authorized up to $100 million for a new share repurchase program.
The previous share repurchase program approved by the Board of Directors on August 7, 2007, ended on August 31,
2009. Seaboard used cash to repurchase 3,668 shares of common stock at a total price of $3.4 million in 2009,
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. See Note 12 for further discussion.
Contractual Obligations and Off-Balance-Sheet Arrangements
The following table provides a summary of Seaboard’s contractual cash obligations as of December 31, 2009.
(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 $ 134,393 $ 69,631
Contract grower finishing agreements
Other operating lease payments
85,892 12,106 21,621
18,762 33,403
291,958 19,467 32,340 27,110 213,041
$ 44,973
$ 19,789 $
-
Total lease obligations
Long-term debt
Short-term notes payable
Other purchase commitments
Total contractual cash obligations
and commitments
512,243 101,204 98,934
78,869 2,337 34,023 8,509
-
81,262 81,262 -
544,280 389,449 154,831
-
65,661 246,444
34,000
-
-
$1,216,654
$574,252 $287,788
$ 74,170 $ 280,444
14
2009 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
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. 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. 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 $1.4 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.
RESULTS OF OPERATIONS
Net sales for the year ended December 31, 2009 were $3,601.3 million, $4,267.8 million in 2008 and $3,213.3 million
in 2007. The decrease in net sales in 2009 was primarily the result of price decreases for commodities sold by the
commodity trading business, lower cargo volumes for the Marine segment and, to a lesser extent, a decrease in sales
prices for pork products. Partially offsetting the decreases were increased commodities trading volumes to non-
consolidated foreign affiliates. 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
segment.
Operating income was $23.7 million in 2009, $121.8 million in 2008 and $169.9 million in 2007. The 2009 decrease
compared to 2008 primarily reflected lower commodity trading and Marine segment margins and a $32.6 million
fluctuation of marking to market Commodity Trading and Milling derivative contracts, respectively, as discussed
below. The decrease was partially offset by higher margins on pork products sold primarily from lower feed costs.
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 segment.
On January 12, 2010, Haiti was struck by an earthquake. Seaboard has a non-controlling interest in a foreign affiliate
with a flour mill operation in Lafiteau, Haiti. Part of this facility was severely damaged as a result of the earthquake.
This affiliate business intends to rebuild the damaged part of the facility and will continue to operate the portion of the
facility that was not damaged. This facility was fully insured, including business interruption and inventory coverage.
Seaboard also sells wheat and flour to this business through Seaboard’s commodity trading operations. In addition,
the primary port in Haiti, located in Port-au-Prince from which Seaboard Marine’s vessels normally dock, was
severely damaged. Seaboard is not the owner operator of this port location but does operate a small terminal facility
nearby that sustained minor damage from the earthquake, which is covered by insurance. Currently, Seaboard has
no indication how long it will take before regular service can be resumed to Haiti’s primary port but is currently routing
cargoes through secondary ports in Haiti and the Dominican Republic. Based on management’s current
expectations, which includes assessment of anticipated insurance proceeds, this event will not have a material
impact on the financial statements.
Pork Segment
(Dollars in millions)
Net sales
Operating income (loss)
2009
2007
$ 1,065.3 $ 1,126.0 $ 1,003.8
$ (15.0) $ (45.9) $ 39.5
2008
Net sales of the Pork segment decreased $60.7 million for the year ended December 31, 2009 compared to 2008.
The decrease was primarily the result of a decrease in overall sales prices for pork products, partially offset by higher
volumes of pork products sold for export. Increased volumes were made possible by the expansion in daily capacity
2009 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
at the Guymon processing plant during the first quarter of 2008. The lower sales prices for pork products appear to
be the result of an excess supply of pork products in the domestic market, the world economic challenges as well as
the impacts of H1N1 flu related concerns. In April 2009, reports of a new flu strain believed to originate in Mexico
rapidly received wide-spread public attention. In response to initial reports referring to this strain as “swine flu”,
certain countries banned U.S. pork exports and this segment noted a decrease in overall market prices for its pork
products. By year-end, several foreign markets lifted their bans on imports of U.S. pork products and prices began to
improve slightly.
Operating loss decreased $30.9 million for the year ended December 31, 2009 compared with 2008. The
improvement was primarily a result of cost decreases more than offsetting the sales price decreases discussed
above. The cost decreases primarily were related to lower feed costs (principally from lower corn prices), the impact
of using the LIFO method for determining certain inventory costs, and lower costs of third party hogs. LIFO increased
operating results by $17.9 million in 2009 compared to a decrease of $17.2 million in 2008 primarily as a result of
lower costs to purchase corn and soybean meal during 2009. Also, in 2008 Seaboard incurred an impairment charge
of $7.0 million as discussed below.
Management is unable to predict future market prices for pork products or the cost of feed and hogs purchased from
third parties. Management anticipates this segment's results to improve to profitable levels in 2010 as sales prices
for pork products begin to increase as long as costs, such as the price of corn used for feed, do not increase
significantly. As discussed in Note 6 to the Consolidated Financial Statements, there is a possibility that some
amount of the biodiesel plant could be deemed impaired during some future period including fiscal 2010, which may
result in a charge to earnings if current projections are not met.
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.
Commodity Trading and Milling Segment
(Dollars in millions)
Net sales
Operating income as reported
Less mark-to-market adjustments
Operating income excluding mark-to-market adjustments
Income from foreign affiliates
2009
2008
$ 1,531.6
$ 1,897.4
$
$
$
24.8
14.5
39.3
19.1
$
$
$
96.5
(18.1)
78.4
12.6
2007
$ 1,152.0
$ 20.9
13.2
34.1
$
$ 5.2
Net sales of the Commodity Trading and Milling segment decreased $365.8 million for the year ended December 31,
2009 compared to 2008. The decrease was primarily the result of price decreases for commodities sold by the
commodity trading business, especially for wheat, partially offset by increased commodity trading volumes to non-
consolidated foreign affiliates. As worldwide commodity price fluctuations cannot be predicted, management is
unable to predict the level of future sales.
Operating income decreased $71.7 million for 2009 compared to 2008. The decrease primarily reflected certain long
inventory positions, especially wheat, taken by Seaboard which provided higher than average commodity trading
margins during the first six months of 2008 as the price of these commodities significantly increased to historic highs
at the time of sale in 2008. In addition, the decrease includes a $32.6 million fluctuation of marking to market the
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Management’s Discussion & Anal ysis
derivative contracts as discussed below. Operating income was also impacted by certain grain inventory related
write-downs in 2009 and 2008 as discussed in Note 4 to the Consolidated Financial Statements.
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 2010, excluding the potential effects of marking to market
derivative contracts.
If Seaboard had not applied mark-to-market accounting to its derivative instruments, operating income for 2009 and
2007 would have been higher by $14.5 million and $13.2 million, respectively, and 2008 would have been lower by
$18.1 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 or losses as revenue is recognized and thus, these mark-to-market adjustments could reverse in
fiscal 2009. Management believes eliminating these adjustments, as noted in the table above, provides a more
reasonable presentation to compare and evaluate year-to-year financial results for this segment.
Income from foreign affiliates for the year ended December 31, 2009 increased $6.5 million from 2008 primarily as a
result of favorable market conditions for certain foreign affiliates. The increase was also the result of one of the
entities discontinuing its operations by selling its trade name and certain assets to an entity in exchange for a minority
ownership in such entity and a separate sale of land and building to a third party. Seaboard’s proportionate share of
these two transactions represents approximately $2.3 million of the income from foreign affiliates for 2009. See Note
5 to the Consolidated Financial Statements for further discussion. 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 2010 income from foreign affiliates will be lower than 2009.
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.
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. The increase also
reflected the $31.3 million fluctuation of marking to market the derivative contracts as discussed above.
Income from foreign affiliates for the year ended December 31, 2008 increased $7.4 million from 2007 as a result of
favorable market conditions.
Marine Segment
(Dollars in millions)
Net sales
Operating income
2009 2008
2007
$ 737.6 $ 958.0 $ 822.2
$ 24.1 $ 62.4 $ 104.2
Net sales of the Marine segment decreased $220.4 million for the year ended December 31, 2009, compared to 2008
primarily as a result of economic declines in most markets served by Seaboard resulting in lower cargo volumes and,
to a lesser extent, lower cargo rates especially during the last half of 2009.
Operating income decreased by $38.3 million compared to 2008. The decrease was primarily the result of lower
rates, as discussed above, not being offset by comparable decreases in certain costs, such as port costs and
2009 Annual Report
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Management’s Discussion & Anal ysis
stevedoring. However, significant decreases did occur related to fuel costs for vessels, charterhire and trucking
expenses on a per unit shipped basis. Management cannot predict changes in future cargo volumes and cargo rates
or to what extent changes in economic conditions in markets served will continue to affect net sales or operating
income during 2010. However, management anticipates this segment will be profitable in 2010 although somewhat
lower during the first half than 2009 given the recent fluctuations in global trade volume and cargo rates.
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.
Sugar Segment
(Dollars in millions) 2009 2008 2007
Net sales
Operating income (loss)
Income from foreign affiliates
$ 143.0
$ 142.1 $ 125.9
$ (0.9) $ 3.7 $ 15.5
$ 1.0 $ 0.5 $ 0.4
Net sales of the Sugar segment increased $0.9 million for the year ended December 31, 2009 compared to 2008.
The increase is primarily the result of increased volumes produced and sold in the export markets partially offset by
lower domestic sugar prices and the elimination of the citrus operations. Argentine governmental authorities continue
to attempt to control inflation by limiting the price of basic commodities, including sugar. Accordingly, management
cannot predict sugar prices for 2010.
Operating income decreased $4.6 million during 2009 compared to 2008 primarily as a result of lower margins on
alcohol sales from lower sales prices and lower margins from the citrus operations. Although the citrus operations
had negative margins for 2008, during 2009 the negative margins were slightly higher as this segment recorded a
$5.3 million charge to earnings during the first and second quarters of 2009 related to the write-down of citrus
inventories, the integration and transformation of land previously used for citrus production into sugar cane production
and related costs as discussed in Note 9 to the Condensed Consolidated Financial Statements. The decrease also
reflects higher selling and administrative personnel costs in 2009. Management anticipates higher operating income
in this segment for 2010 compared to 2009. In the first quarter of 2010, this segment began sales of dehydrated
alcohol to certain local oil companies under the national bio-ethanol program which requires alcohol to be blended
with gasoline. In addition, the construction of a 40 megawatt cogeneration power plant is expected to be completed
during the third quarter of 2010.
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. 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.
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Management’s Discussion & Anal ysis
Power Segment
(Dollars in millions)
Net sales
Operating income
2009
2008
$ 107.1 $ 129.4
$ 7.8
$ 8.2
2007
$ 94.0
$ 5.4
Net sales for the Power segment decreased $22.3 million for 2009 compared to 2008 primarily reflecting lower rates.
The lower rates were attributable primarily to lower fuel costs, a component of pricing. Operating income increased
$0.4 million during 2009 compared to 2008 primarily as a result of lower production costs partially offset by higher
administrative personnel costs. Management cannot predict future fuel costs or the extent to which rates will
fluctuate compared to fuel costs, although management anticipates this segment to remain profitable in 2010. See
Note 13 to the Consolidated Financial Statements for the pending sale of certain assets of this business on or around
January 1, 2011. Accordingly, such assets are classified as held for sale as of December 31, 2009 and depreciation
ceased on these assets as of January 1, 2010.
Net sales for the Power segment increased $35.4 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 $2.4 million during 2008 compared to 2007 primarily as a result of higher rates being in excess of higher
fuel costs.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the year ended December 31, 2009 increased by $18.0
million over 2008 to $193.9 million. This increase was primarily due to increased personnel costs, including
increased costs of $13.9 million, included in Corporate expenses, 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). As a percentage of revenues, SG&A increased to 5.4% for 2009 compared to 4.1% for 2008
primarily as a result of decreased sales in the Commodity Trading and Milling and Marine segments.
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.
Interest Expense
Interest expense totaled $13.2 million, $15.4 million and $12.6 million for the years ended December 31, 2009, 2008
and 2007, respectively. Interest expense decreased for 2009 compared to 2008, primarily as a result of a lower
average level of both short-term and long-term borrowings outstanding during 2009 partially offset by higher average
interest rates on short-term borrowings outstanding. 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 Income
Interest income totaled $17.3 million, $14.9 million and $18.9 million for the years ended December 31, 2009, 2008
and 2007, respectively. The increase for 2009 primarily reflected an increase in average funds invested. The
decrease for 2008 primarily reflected a decrease in average funds invested.
Foreign Currency Gains (Losses)
Foreign currency gains (losses) totaled $2.4 million, $(19.7) million and $0.1 million for the years ended
December 31, 2009, 2008 and 2007, respectively. The fluctuation for 2009 compared to 2008 primarily related to the
unusually high currency losses incurred during the fourth quarter of 2008, as noted below, from the global liquidity
crisis occurring at that time which did not occur during 2009. 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
2009 Annual Report
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Management’s Discussion & Anal ysis
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 primarily 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 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 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.
Other Investment Income, Net
Other
investment income, net totaled $15.5 million, $7.5 million and $6.1 million for the years ended
December 31, 2009, 2008 and 2007, respectively. Other investment income for 2009 primarily reflected income of
$6.0 million in the Power segment related to the settlement of a receivable, not directly related to its business and
purchased at a discount, gains of $4.3 million in the mark-to-market value of Seaboard’s investments related to the
deferred compensation programs and gains of $2.8 million on debt trading securities. Other investment income for
2008 primarily reflected $8.9 million on equity securities transactions, income of $7.6 million in the Power segment
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.
Gain on Disputed Sale, Net
In July 2009, Seaboard Corporation, and affiliated companies in its Commodity Trading and Milling segment, resolved
a dispute with a third party related to a 2005 transaction in which a portion of its trading operations was sold to a firm
located abroad. As a result of this action, Seaboard Overseas Limited received $16.8 million, net of expenses, in the
third quarter of 2009. There was no tax expense on this transaction.
Miscellaneous, Net
Miscellaneous, net totaled $6.5 million, $2.5 million and $5.2 million and for the years ended December 31, 2009,
2008 and 2007, respectively. For 2009, miscellaneous, net included a $5.3 million gain on interest exchange
agreements. 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.
Income Tax Expense
The effective tax benefit rate decreased for 2009 compared to 2008 primarily from lower permanently deferred foreign
earnings and lower domestic taxable loss. 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.
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 June 2009, the FASB issued ASC Topic 810-10 (formerly Financial Accounting Standard (FAS) No. 167
“Amendments to FASB Interpretation No. 46(R)”). This Topic amends Interpretation 46(R) and requires an enterprise
to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial
interest in a variable interest entity (VIE). This analysis identifies the primary beneficiary of a VIE as the enterprise
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Management’s Discussion & Anal ysis
that has both the power to direct the most significant activities of a VIE and the obligation to absorb losses or the right
to receive benefits from the VIE.
This Topic eliminates the quantitative approach previously required for determining the primary beneficiary of the VIE,
which was based on determining which enterprise absorbs the majority of the entity’s expected losses, receives a
majority of the entity’s expected residual returns, or both. This Topic also amends Interpretation 46(R) to require
ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and requires
certain additional disclosures about the VIE. Seaboard will be required to adopt this Topic as of January 1, 2010.
Management believes the adoption of this Topic 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 ($181.6 million or 59.7% at December 31, 2009), including receivables due from foreign affiliates
($47.4 million at December 31, 2009) and receivables in the Power segment, which generally represent more of a
collection risk than its domestic receivables. Receivables due from foreign affiliates are generally associated with
entities located in foreign countries considered underdeveloped, as discussed below, which can experience
conditions causing sudden changes to their ability to repay such receivables on a timely basis or in full. For the
Power segment, which operates in the Dominican Republic (DR), collection patterns have been sporadic and are
sometimes based upon negotiated settlements for past due receivables resulting in material revisions to the
allowance for doubtful accounts from year to year. For example, currently the Power segment sells approximately
34% of its power generation to a government-owned distribution company under a short-term contract that expires at
the end of March 2010 and for which Seaboard bears a concentrated credit risk as this customer is usually behind in
its payments on account. As of December 31, 2009, this customer account had billings outstanding of $12.8 million.
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, 2009, 2008 and 2007 was $2.1 million, $0.8 million and $1.4 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, sales 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.
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
2009 Annual Report
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Management’s Discussion & Anal ysis
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 $43.2 million at December 31, 2009.
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, 2009, 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, 2009, Seaboard has deferred tax assets of $65.3 million, net of the valuation allowance of
$28.6 million, and deferred tax liabilities of $114.4 million. For the years ended December 31, 2009, 2008 and 2007,
income tax expense included $(11.5) million, $(6.3) million and $(22.5) million, respectively, for deferred taxes to
federal, foreign, state and local taxing jurisdictions.
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 decreasing both the discount rate and assumed rate of return on plan
22
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Management’s Discussion & Anal ysis
assets by 50 basis points would be an increase in pension expense of approximately $1.6 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 if it exceeds the 10% corridor and, therefore, could affect
Seaboard’s recognized pension expense in such future periods, as permitted under ASC Topic 715 (formerly FAS
No. 87, “Employers’ Accounting for Pensions”). Accordingly, accumulated gains or losses in excess of the 10%
corridor 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 increased by approximately $3.1 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
2010 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, 2009 and 2008, 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.
From time-to-time, the Commodity Trading and Milling segment enters 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. Forward freight agreements had virtually no net exposure to a change in market price as the two open
forward freight agreements offset each other at December 31, 2008. As of December 31, 2009, there were no such
agreements outstanding.
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 and again in March 2009, Seaboard entered into ten-year interest rate exchange agreements
which involves the exchange of fixed-rate and variable-rate interest payments over the life of the agreements without
the exchange of the underlying notional amounts to mitigate the effects of fluctuations in interest rates on variable
rate debt. Seaboard agreed to pay a fixed rate and receive a variable rate of interest on two notional amounts of
$25.0 million each. In June 2009, Seaboard terminated both interest rate exchange agreements with a total notional
value of $50.0 million. As of December 31, 2009, there were no interest rate exchange agreements outstanding.
2009 Annual Report
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Management’s Discussion & Anal ysis
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 to a
hypothetical 10% adverse change in market prices or in foreign exchange rates and interest rates as of December
31, 2009 and December 31, 2008. 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 186
Energy related resources
Foreign currencies
Interest rates
23,080
-
$ 9,808
284
$ 5,788
868
253
21,414
570
December 31, 2009 December 31, 2008
The table below provides information about Seaboard's non-trading financial instruments sensitive to changes in
interest rates at December 31, 2009. For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates. At December 31, 2009, long-term debt included foreign
subsidiary obligations of $0.7 million denominated in CFA francs (a currency used in several central African
countries), $0.2 million payable in Argentine pesos and the foreign subsidiary obligations denominated in
Mozambique metical were repaid in 2009. At December 31, 2008, long-term debt included foreign subsidiary
obligations of $1.1 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.
(Dollars in thousands)
2010
2011
2012
2013
2014 Thereafter
Total
Long-term debt:
Fixed rate
$2,105
$1,477
$32,546
$ 556
$ 153
$
-
Average interest rate
11.33%
8.87% 7.03%
15.92%
15.92%
-
$36,837
7.52%
Variable rate
$ 232
$ -
$ - $ - $ 7,800
$34,000 $42,032
Average interest rate
7.00%
-
-
-
0.39% 0.41%
0.44%
Non-trading financial instruments sensitive to changes in interest rates at December 31, 2008 consisted of fixed rate
long-term debt totaling $83.6 million with an average interest rate of 6.84%, and variable rate long-term debt totaling
$42.1 million with an average interest rate of 1.44%.
24
2009 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, 2009.
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.
2009 Annual Report
25
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, 2009 and 2008, 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, 2009. 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, 2009 and 2008, and the results of
their operations and their cash flows for each of the years in the three-year period ended December 31, 2009, in
conformity with U.S. generally accepted accounting principles.
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, 2009, 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 5, 2010 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Kansas City, Missouri
March 5, 2010
26
2009 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, 2009, 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, 2009, 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, 2009 and
2008, 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, 2009, and our report dated March 5, 2010 expressed an unqualified
opinion on those consolidated financial statements.
Kansas City, Missouri
March 5, 2010
2009 Annual Report
27
S E A B O A R D C O R P O R A T I O N
Consolidated Statement of Earnings
(Thousands of dollars except per share amounts)
Net sales:
Products (includes sales to foreign affiliates
of $543,066, $587,922 and $299,174)
Service revenues
Other
Total net sales
Cost of s ales and operating expens es:
Products
Services
Other
Total cost of sales and operating expenses
Gross income
Selling, general and adminis trative expenses
Operating income
Other income (expense):
Interest expense
Interest income
Income from foreign affiliates
Foreign currency gain (loss ), net
Other investment income, net
Gain on disputed sale, net of expenses
Miscellaneous, net
Total other income, net
Earnings before income taxes
Income tax benefit (expens e)
Net earnings
Less: Net (income) los s attributable to noncontrolling interests
Net earnings attributable to Seaboard
Years ended December 31,
2009
2008
2007
$
2,718,736
$
3,144,432
$
2,268,310
775,498
107,074
3,601,308
993,942
129,430
4,267,804
851,038
93,953
3,213,301
2,619,396
671,598
92,701
3,383,695
217,613
193,890
23,723
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
(13,158)
17,336
20,158
2,432
15,500
16,787
6,463
65,518
89,241
2,276
91,517
965
92,482
$
$
(15,354)
14,939
13,084
(19,713)
7,522
-
2,539
3,017
124,826
22,689
147,515
(596)
146,919
$
$
(12,588)
18,867
3,874
120
6,065
-
5,192
21,530
191,445
(10,177)
181,268
64
181,332
$
$
Earnings per common share
$
74.74
$
118.19
$
144.15
Weighted average shares outstanding
1,237,452
1,243,087
1,257,901
Dividends declared per common s hare
$
3.00
$
3.00
$
3.00
See accompanying notes to consolidated financial statements.
28
2009 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
Deferred costs
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
Commitments and contingent liabilities
December 31,
2009
2008
$
61,857
407,351
$
60,594
312,680
194,764
47,352
35,861
277,977
(7,330)
270,647
498,587
10,490
95,788
80,582
207,534
100,434
60,012
367,980
(7,303)
360,677
508,995
14,195
20,546
94,167
1,425,302
1,371,854
82,232
691,343
40,628
20,676
76,952
68,091
763,675
40,628
22,285
64,828
$
2,337,133
$
2,331,361
$
81,262
2,337
141,193
84,165
112,889
33,874
62,320
$
177,205
47,054
122,869
72,857
50,252
48,382
73,472
518,040
592,091
76,532
59,546
64,161
73,435
78,560
81,205
70,920
45,007
273,674
275,692
Stockholders' equity:
Common stock of $1 par value. Authorized 1,250,000 and 4,000,000 s hares;
issued and outstanding 1,236,758 and 1,240,426 s hares
Accumulated other comprehensive loss
Retained earnings
Total Seaboard stockholders' equity
Noncontrolling interests
Total equity
Total Liabilities and Stockholders' Equity
1,237
(114,786)
1,655,222
1,240
(111,703)
1,569,818
1,541,673
1,459,355
3,746
4,223
1,545,419
1,463,578
$
2,337,133
$
2,331,361
See accompanying notes to consolidated financial statements.
2009 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 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
Dividends received from foreign affiliates
Other investment income, net
Foreign currency exchange losses
Deferred income taxes
Los s (gain) from sale of fixed ass ets
Gain on dis puted sale, net of expenses
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 noncontrolling interest in a controlled subsidiary
Proceeds from the s ale of fixed assets
Payment received for the potential sale of power barges
Net proceeds from disputed sale
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 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,
2009
2008
2007
$
91,517
$
147,515
$
181,268
91,841
(20,158)
7,906
(15,500)
6,578
(15,298)
530
(16,787)
-
90,381
(13,084)
1,333
(7,522)
19,606
(7,602)
39
-
7,000
93,861
1,552
(58,823)
69,738
9,400
(14,518)
(119,859)
(44,344)
43,264
9,057
79,221
(3,874)
1,954
(6,065)
4,496
(26,740)
(1,285)
-
-
(80,360)
(52,699)
(20,968)
63,255
7,630
246,357
111,266
145,833
(346,522)
211,403
66,842
(3,108)
71
(54,276)
-
3,255
15,000
16,787
46
(287,411)
204,494
61,675
-
(710)
(134,634)
-
4,412
-
-
(442)
(1,683,849)
1,851,589
24,842
(2,000)
(15,192)
(164,173)
(61,260)
4,148
-
-
(4,754)
(90,502)
(152,616)
(50,649)
(95,072)
(46,914)
(3,370)
(3,711)
(112)
(291)
(149,470)
(5,122)
1,263
60,594
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
Cash and cash equivalents at end of year
$
61,857
$
60,594
$
47,346
See accompanying notes to consolidated financial statements.
30 2009 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
(Thousands of do llars except per share amo unts)
Balances, January 1, 2007
Comprehensive income:
Net earnings
Other comprehensive income net
of income tax expense of $(2,492):
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pension cost
Unrealized loss on cash flow hedges
Amortization of deferred
gains on interest rate swaps
Total Comprehensive income
Purchase of noncontrolling interests
Dividends paid to noncontrolling interests
Repurchase of Common Stock
Dividends on common stock
Balances, December 31, 2007
Comprehensive income:
Net earnings
Other comprehensive income net
of income tax benefit of $11,525:
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pension cost
Total Comprehensive income
Addition of noncontrolling interests
Dividends paid to noncontrolling interests
Repurchase of Common Stock
Dividends on common stock
Balances, December 31, 2008
Comprehensive income:
Net earnings
Other comprehensive income net
of income tax benefit of $3,206:
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pension cost
Total Comprehensive income
Addition of noncontrolling interests
Dividends paid to noncontrolling interests
Repurchase of Common Stock
Dividends on common stock
Balances, December 31, 2009
Accumulated
Other
Common Additional Comprehensive Retained Noncontrolling
Stock
$ 1,261
Capital
$
21,574
Loss
$ (82,493)
Earnings
1,262,965
$
Interest
$
39,103
Total
1,242,410
$
181,332
(64)
181,268
(2,908)
(212)
7,059
55
(152)
(17)
(21,574)
1,244
-
(78,651)
(37,932)
(136)
971
(8,897)
(3,765)
1,431,635
(2,908)
(212)
7,059
55
(152)
185,110
(37,932)
(136)
(30,488)
(3,765)
1,355,199
146,919
596
147,515
(9,492)
632
(24,192)
(4)
1,240
-
(111,703)
(5,008)
(3,728)
1,569,818
(9,492)
632
(24,192)
114,463
2,760
(104)
(5,012)
(3,728)
1,463,578
2,760
(104)
4,223
92,482
(965)
91,517
(9,365)
798
5,484
(3)
-
-
$ 1,237
$
-
$ (114,786)
$
600
(112)
(3,367)
(3,711)
1,655,222
$
3,746
(9,365)
798
5,484
88,434
600
(112)
(3,370)
(3,711)
1,545,419
$
See accompanying notes to consolidated financial statements.
2009 Annual Report 31
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 and SFC Preferred LLC (Parent Companies) are the
owners of 72.3% 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.
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 their estimated 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 their estimated 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 segment,
however, collects interest on certain past due accounts and the Commodity Trading and Milling segment provides
extended payment terms for certain customers and/or markets due to local business conditions. The allowance for
doubtful accounts is Seaboard’s best estimate of the amount of probable credit losses. For most operating
segments, Seaboard uses a specific identification approach to determine, in management’s judgment, the collection
value of certain past due accounts based on contractual terms. 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.
Deferred Costs
Deferred costs represent inventory delivered to customers and related shipping costs incurred for certain commodity
trades that Seaboard has received the majority of payments for the trades (which are recorded as deferred revenues)
but has not yet recognized as revenue as the final sale price is not yet fixed and determinable. The corresponding
deferred margin on such trades is not deemed material.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and are being depreciated generally on the straight-line method
over useful lives ranging from 3 to 30 years. Property, plant and equipment leases which are deemed to be
installment purchase obligations have been capitalized and included in the property, plant and equipment accounts.
Routine and planned major maintenance, repairs, and minor renewals are expensed as incurred while major
renewals and improvements are capitalized.
32 2009 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
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 goodwill and other intangible assets are
not impaired as of December 31, 2009. However, future conditions and marketplace changes could significantly
impact prospective determinations of estimated cash flows as of December 31, 2009.
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, 2009 and 2008 was $6,469,000 and $6,894,000, 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. For 2009, the adjustment to existing lagoons relates to
changes in certain state regulations for lagoon closures. The following table shows the changes in the asset
retirement obligation during 2009 and 2008.
(Thousands of dollars)
Beginning balance
Accretion expense
Liability for additional lagoons placed in service
Adjustment to existing lagoons
Years ended December 31,
2009
$ 8,846
652
-
1,592
2008
$ 8,117
602
127
-
Ending balance
$11,090
$ 8,846
2009 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
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 Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
Topic 740-10-55 (formerly FASB Staff Position No. 109-1, “Application of FASB Statement No. 109, Accounting for
Income Taxes, to the Tax Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of
2004”), Seaboard will recognize the benefit or cost of this change in the future.
Revenue Recognition
Revenue of the containerized cargo service is recognized ratably over the transit time for each voyage with expenses
associated with containerized cargo service being recognized as incurred. Revenue of the commodity trading
business is recognized when the commodity is delivered to the customer, 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. Net cash from operating activities was increased and net cash from
investing activities was decreased from prior year presentation by $1,333,000 and $1,954,000 for 2008 and 2007,
respectively, to conform to the 2009 presentation of dividends received from foreign affiliates. 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,
2009
2008 2007
$ 13,845
$ 14,037
(10,542)
10,815
$ 11,733
20,993
Supplemental Noncash Transactions
As more fully described in Note 13, in May 2009 Seaboard received sovereign government bonds of the Dominican
Republic with a par value of $20,000,000 denominated in U.S. dollars to satisfy the same amount of outstanding
billings owed by a customer that Seaboard had classified as long-term. During the fourth quarter of 2009, Seaboard
sold a portion of these bonds with par value of $9,700,000. At December 31, 2009, the remaining $10,300,000 par
value of bonds are classified as available-for-sale short term investments on the Consolidated Balance Sheet. During
January and February 2010, Seaboard sold the remaining bonds resulting in an immaterial loss.
34 2009 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
As more fully described in Note 2, Seaboard 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.
(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 segment 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, 2009, 2008 and 2007 was a
foreign currency gain of $4,794,000, a foreign currency loss of $(4,575,000) and a foreign currency gain of
$1,000,000, respectively. These losses and gains reflect the re-measurements as of December 31, 2008 and 2007
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 gains for 2009
and 2007 and losses for 2008 were primarily offset by a mark-to-market currency loss for December in 2009 and
2007 and a gain in December for 2008 from a foreign currency derivative contract discussed in Note 9. The note
payable and related foreign currency derivative were terminated in December 2009.
Seaboard’s Sugar 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
2009 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
of December 31, 2009, 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.
New Accounting Standards
In June 2009, the FASB issued ASC Topic 810-10 (formerly Financial Accounting Standard (FAS) No. 167
“Amendments to FASB Interpretation No. 46(R)”). This Topic amends Interpretation 46(R) and requires an enterprise
to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial
interest in a variable interest entity (VIE). This analysis identifies the primary beneficiary of a VIE as the enterprise
that has both the power to direct the most significant activities of a VIE and the obligation to absorb losses or the right
to receive benefits from the VIE.
This Topic eliminates the quantitative approach previously required for determining the primary beneficiary of the VIE,
which was based on determining which enterprise absorbs the majority of the entity’s expected losses, receives a
majority of the entity’s expected residual returns, or both. This Topic also amends Interpretation 46(R) to require
ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and requires
certain additional disclosures about the VIE. Seaboard will be required to adopt this Topic as of January 1, 2010.
Management believes the adoption of this Topic will not have a material impact on Seaboard’s financial position or
net earnings.
Recently Adopted Accounting Standards
Seaboard adopted FASB ASC Topic 810-10-65 (formerly FAS No. 160, “Noncontrolling Interests in Consolidated
Financial Statements - an amendment of ARB No. 51”) as of January 1, 2009. This Topic changed the accounting
and reporting for minority interests, which are now recharacterized as noncontrolling interests. The noncontrolling
interests are now classified as a component of equity. Noncontrolling interests are included in total stockholder’s
equity for all years stockholder’s equity is presented. This Topic did not have a material impact on Seaboard’s
financial position or net earnings.
Note 2
Acquisitions and Repurchase of Noncontrolling 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.
As a result of the Daily’s acquisition and repurchase, the Pork segment 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, 2009 and 2008.
36 2009 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)
Intangibles subject to amortization:
Gros s carrying amount:
Customer relationships
Covenants not to compete
Accumulated amortization:
Customer relationships
Covenants not to compete
Net carrying amount:
Customer relationships
Covenants not to compete
Intangibles subject to amortization, net
Intangibles not subject to amortization:
Carrying amount-trade names and registered trademarks
Total intangible ass ets, net
Goodwill
December 31,
2009
2008
$
9,045
1,500
$
9,045
1,500
10,545
10,545
(5,519)
(1,350)
(6,869)
3,526
150
3,676
17,000
20,676
40,628
(4,210)
(1,050)
(5,260)
4,835
450
5,285
17,000
22,285
40,628
Total goodwill and intangible assets, net
$
61,304
$
62,913
The amortization expense of amortizable intangible assets for the years ended December 31, 2009, 2008 and 2007
was $1,610,000, $1,610,000, and $1,610,000, respectively. Amortization expense for the five succeeding years is
$930,000 for the next year and $250,000 each for the second, third, fourth and fifth year.
As of December 31, 2009, the Pork segment had $28,372,000 of goodwill and $17,000,000 of other intangible assets
not subject to amortization in connection with its acquisition of Daily’s in 2005. In 2008, 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 annual 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. As of July 4, 2009, Seaboard conducted its annual evaluation for
impairment of this goodwill and other intangible assets related to Daily’s and, based on current market conditions
indicating future sale price increases, additional processed meats sales volumes and related levels of estimated
operating margins determined there was no impairment as of December 31, 2009.
Note 3
Short Term Investments
In April 2009, the FASB issued ASC Topic 320-10-65 (previously Staff Position FAS 115-2 and FAS 124-2
“Recognition and Presentation of Other-Than-Temporary Impairments”). This Topic amends the other-than-
temporary guidance for debt securities to make the guidance more operational. This Topic also expands the
disclosures required in Topic 320-10 to interim periods. Seaboard adopted this Topic in the second quarter of 2009.
The adoption of this Topic did not have an impact on Seaboard’s financial position or net earnings.
Seaboard’s short-term investments are treated as either available-for-sale securities or trading securities. All of
Seaboard’s available-for-sale and trading securities are classified as current assets as they are readily available to
support Seaboard’s current operating needs. All of Seaboard’s short term investments are recorded at their
estimated fair market values.
2009 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
As of December 31, 2009 and 2008, the available-for-sale investments primarily consisted of money market funds,
fixed rate municipal notes and bonds, corporate bonds and U.S. Government agency securities. At December 31,
2009 and 2008, short-term investments included $14,710,000 and $14,553,000, respectively, held by a wholly-owned
consolidated insurance captive to pay Seaboard’s retention of accrued outstanding workers’ compensation claims. At
December 31, 2009 and 2008, amortized cost and estimated fair market value were not materially different for these
investments. As of December 31, 2009, the trading securities primarily consisted of high yield debt securities. As of
December 31, 2009 and 2008, unrealized gains related to trading securities were $2,206,000 and $2,763,000,
respectively.
The following is a summary of the amortized cost and estimated fair value of short-term investments for both
available for sale and trading securities at December 31, 2009 and 2008.
Amortized Fair Amortized Fair
(Thousands of dollars) Cost Value Cost Value
2009
2008
$153,699 $153,699
Money market funds
148,609
144,794
Fixed rate municipal notes and bonds
35,449
Corporate bonds
34,663
16,272 25,338
U.S. Government agency securities 15,907
10,210 -
Foreign government debt securities 10,300
8,484 4,250
Asset backed debt securities 8,447
1,900
Variable rate demand notes 1,900
7,900
3,069 6,975
3,060
Other
$ 79,059
170,150
5,006
$ 79,059
173,096
4,800
25,514
-
Total available for sale short-term investments 372,770 377,692 298,678
High yield trading debt securities 24,784
Other trading debt securities 2,669
Domestic trading equity securities
26,771 -
2,888
- 9,008
-
-
- -
11,771
4,068
7,900
6,472
300,909
Total available for sale and trading short-term investments
$400,223
$407,351
$ 307,686 $ 312,680
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, 2009.
(Thousands of dollars)
Due within one year
Due after one year through three years
Due after three years
Total fixed rate securities
2009
$ 55,764
99,562
58,471
$213,797
In addition to its short-term investments, Seaboard also has trading securities related to Seaboard’s deferred
compensation plans classified in other current assets on the Condensed Consolidated Balance Sheets. See Note 9
for information on the types of trading securities held related to the deferred compensation plans and Note 10 for a
discussion of assets held in conjunction with investments related to Seaboard’s defined benefit pension plan.
38 2009 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.
(Thousands of dollars)
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
December 31,
2009
2008
$
192,999
$
201,654
22,398
215,397
(22,807)
192,590
174,508
47,429
46,804
268,741
26,480
228,134
(40,672)
187,462
179,774
56,259
36,964
272,997
Grain, flour and feed at lower of weighted average cost or market
Total inventories
37,256
498,587
$
48,536
508,995
$
The use of the LIFO method increased 2009 earnings by $10,898,000 ($8.81 per common share) and 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. If the FIFO method had been used for certain inventories of the Pork segment, inventories
would have been higher by $22,807,000 and $40,672,000 as of December 31, 2009 and 2008, respectively.
As of December 31, 2009, Seaboard had $10,784,000 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. 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 incur a
material write-down in value of this inventory if Seaboard is not successful in selling at the current carrying value. For
similar inventories that existed prior to December 31, 2009, Seaboard incurred a write-down in the first quarter of
2009 in the amount of $8,801,000 (with no tax benefit recognized), or $7.10 per share and a write-down of
$7,010,000 in 2008, including $5,653,000 ($4,940,000 net of tax), or $3.98 per share, recorded in the fourth quarter
of 2008.
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, 2009, the location and percentage
ownership of these foreign affiliates are as follows: Democratic Republic of Congo (50%), Lesotho (50%), Kenya
(35%), and Nigeria (25-48%) 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.
2009 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
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, 2009, Seaboard’s investment in foreign affiliates included
$3,778,000 related to the excess 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 had 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 ASC Topic
323-10-35 (formerly 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, 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.
In prior years, Seaboard’s equity investments in its Nigerian non-consolidated foreign affiliates were written down to
zero and Seaboard suspended using the equity method of accounting for these non-consolidated foreign affiliates as
losses allocated to Seaboard exceeded the investment. During the fourth quarter of 2009, the application of the
equity method of accounting was resumed for these entities as a result of Seaboard’s proportionate share of income
exceeding the share of losses not recognized during the prior periods. A significant factor to this occurring was the
result of one of the entities discontinuing its feed mill operations by selling its trade name and certain assets to an
entity in exchange for a minority ownership in such entity, and a separate sale of land and building to a third party for
cash. Seaboard’s proportionate share of these two asset sales represents approximately $2,323,000 of the income
from foreign affiliates for 2009.
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 and 2009 of Other Businesses, were as follows:
Commodity Trading and Milling Segment
December 31,
(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
40 2009 Annual Report
2009 2008
2007
$ 1,051,621 1,053,818
613,695
$ 45,867 34,955
12,263
$ 412,849 412,555
347,040
$ 215,146 247,337
211,694
$ 197,703 165,218
135,346
December 31,
2009 2008
2007
$ 22,293 20,660
30,053
$ 2,169 923
(2,621)
$ 11,544 15,506
$ 6,265 11,396
13,802
11,021
$ 5,279 4,110
2,781
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,
2009
2008
$ 164,290
345,031
697,656
161,125
25,769
32,868
$ 161,115
339,672
760,225
167,126
25,236
32,177
1,426,739
(735,396)
1,485,551
(721,876)
Net property, plant and equipment
$ 691,343 $ 763,675
During the first half of 2008, Seaboard started operations at its newly constructed biodiesel plant. The ongoing
profitability of this plant is primarily based on future sales prices, the price of alternative inputs, enforcement of
government usage mandates and reinstituting federal tax credits, which expired at the end of 2009. Management
believes the federal tax credits will be renewed retroactive to January 1, 2010, sometime during 2010. Several tax
credits were allowed to expire at the end of 2009 and the U.S. Congress has indicated these will be specifically
reviewed again in 2010. As of December 31, 2009, Seaboard performed an impairment evaluation of this plant and
determined there was no impairment based on management’s current assumptions of future production volumes,
sales prices, cost inputs and the probabilities of the combination of federal usage mandates and tax credits being
renewed. However, if the federal tax credits are not renewed as discussed above, and future market conditions do
not produce projected sales prices or expected cost inputs or there is a material change in the enforcement of
government usage mandates or other 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 2010, which may result
in a charge to earnings. The net book value of these assets as of December 31, 2009 was $43,162,000.
As of December 31, 2009, the net book value of $20,090,000 for two barges previously classified as machinery and
equipment was reclassified as held for sale in non-current other assets. See Note 13 to the Consolidated Financial
Statements for further discussion.
2009 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
Note 7
Income Taxes
Income taxes attributable to continuing operations for the years ended December 31, 2009, 2008 and 2007 differed
from the amounts computed by applying the statutory U.S. Federal income tax rate of 35 percent to earnings (loss)
before income taxes excluding noncontrolling interest for the following reasons:
(Thousands of dollars)
Years ended December 31,
2008
2007
2009
Computed “expected” tax expense excluding noncontrolling interest $ 31,572
Adjustments to tax expense attributable to:
$ 43,481
$ 67,028
Foreign tax differences
Tax-exempt investment income
State income taxes, net of federal benefit
Change in valuation allowance
Federal tax credits
Change in pension deferred tax
Other
(20,332) (54,232)
(1,809) (2,554)
(3,010) (1,966)
(2,146)
(1,977)
(3,672) (4,390)
335
(3,508)
(1,386)
629
(40,841)
(4,658)
1,078
(5,754)
(1,124)
131
(5,683)
Total income tax expense (benefit)
$ (2,276)
$ (22,689)
$ 10,177
Earnings before income taxes consisted of the following:
(Thousands of dollars)
United States
Foreign
Years ended December 31,
2009
2008 2007
$ (14,511)
104,717
$ (28,988)
$ 38,788
153,218 152,721
Total earnings excluding noncontrolling interest
Plus earnings attributable to noncontrolling interest
90,206
965 (596) 64
124,230 191,509
Total earnings before income taxes $
89,241 $ 124,826 $ 191,445
The components of total income taxes were as follows:
(Thousands of dollars)
Current:
Federal
Foreign
State and local
Deferred:
Years ended December 31,
2009 2008
2007
$ 943
8,454 8,259
(125) 823
$ (25,462) $ 24,192
5,935
2,542
Federal (18,216)
Foreign
State and local
10,285
(3,617)
Income tax expense (benefit)
Unrealized changes in other comprehensive income
(2,276)
(3,206)
(1,280)
(1,425)
(3,604)
(22,689)
(11,525)
(21,789)
1,453
(2,156)
10,177
2,492
Total income taxes
$ (5,482)
$ (34,214)
$ 12,669
As of December 31, 2009 and 2008, Seaboard had income taxes receivable of $4,923,000 and $24,688,000,
respectively, primarily related to domestic tax jurisdictions and had income taxes payable of $2,048,000 and
$3,946,000, respectively, primarily related to foreign tax jurisdictions.
42 2009 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
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
Deferred earnings of foreign subsidiaries
Net operating and capital loss carryforwards
Foreign minimum tax credit carryforward
Other
Valuation allowance
Net deferred income tax liability
December 31,
2009
2008
$ 11,065 $
-
100,815
242
2,233
12,001
2,749
94,313
17,330
2,368
$ 114,355 $ 128,761
$ 50,097 $
12,659
1,733
18,648
10,104
679
48,708
9,271
-
16,381
8,152
314
93,920
28,621
82,826
21,075
$ 49,056 $
67,010
Seaboard recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense.
For the years ended December 31, 2009, 2008 and 2007, such interest and penalties were not material. The
Company had approximately $1,153,000 and $726,000 accrued for the payment of interest and penalties on
uncertain tax positions at December 31, 2009, and 2008, respectively.
As of December 31, 2009 and 2008, Seaboard had $3,395,000 and $3,464,000, 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. 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
Settlements
Lapse of statute of limitations
Ending balance at December 31
2009
2008
3,464 $ 433
$
206
(184)
32
(15)
(108)
-
(77)
3,108
-
-
$ 3,395 $
3,464
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.
As of December 31 2009, Seaboard had not provided for U.S. Federal Income and foreign withholding taxes on
$655,964,000 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.
2009 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
Seaboard has tax holidays in one foreign country in 2009 and 2008 and had tax holidays in two foreign countries in
2007 which resulted in tax savings of approximately $3,259,000, $1,961,000, and $2,646,000 or $2.63, $1.58, and
$2.10 per diluted earnings per common share for the years ended December 31, 2009, 2008 and 2007, 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 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 $7,546,000 in the
valuations allowance for 2009 was primarily the result of foreign minimum income tax credits which are subject to a
limited carryforward period and taxable income limitations, partially offset by the realization of capital loss
carryforwards. At December 31, 2009, Seaboard had foreign net operating loss carryforwards (NOLs) of
approximately $36,110,000 a portion of which expire in varying amounts between 2010 and 2016, while others have
indefinite expiration periods.
At December 31, 2009, Seaboard had state tax credit carryforwards of approximately $12,368,000 net of valuation
allowance, all of which carryforward indefinitely.
Note 8
Notes Payable and Long-term Debt
Notes payable amounting to $81,262,000 and $177,205,000 at December 31, 2009 and 2008, respectively, consisted
of obligations due banks on demand or based on Seaboard’s ability and intent to repay within one year. In the fourth
quarter of 2009, Seaboard obtained letter of credit financing that replaced existing letters of credit resulting in an
increase to borrowing capacity by approximately $16,303,000. At December 31, 2009, Seaboard had a committed
line totaling $300,000,000, maturing July 10, 2013, and uncommitted lines totaling approximately $135,588,000 of
which $98,588,000 of the uncommitted lines relate to foreign subsidiaries. At December 31, 2009, there were no
borrowings outstanding under the committed line and borrowings outstanding under the uncommitted lines totaled
$33,762,000, all related to foreign subsidiaries. The uncommitted borrowings outstanding at December 31, 2009
primarily represented $24,899,000 denominated in South African rand. 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 term note denominated in Japanese Yen was paid off in
December 2009 and replaced with a term note denominated in U.S. dollars with a balance of $47,500,000 at
December 31, 2009. The weighted average interest rates for outstanding notes payable were 6.07% and 6.04% at
December 31, 2009 and 2008, respectively.
At December 31, 2009, Seaboard’s borrowing capacity under its committed and uncommitted lines were reduced by
letters of credit (LCs) totaling $41,720,000, and $3,780,000, respectively, primarily including $26,385,000 of LCs for
Seaboard’s outstanding Industrial Development Revenue Bonds (IDRBs) and $16,802,000 related to insurance
coverages.
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.
44 2009 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The following table is a summary of long-term debt at the end of each year.
(Thousands of dollars)
Private placements:
5.80% senior notes, repaid in 2009
6.21% senior notes, repaid in 2009
6.21% senior notes, due 2010 through 2012
6.92% senior notes, due 2012
Industrial Development Revenue Bonds, floating rates
(.39% - .44% at December 31, 2009) due 2014 through 2027
Bank debt, 6.87% – 7.60%, repaid in 2009
Foreign subsidiary obligations, 17.00%, due 2010
Foreign subsidiary obligation, floating rate
Capital lease obligations and other
Current maturities of long-term debt
Long-term debt, less current maturities
December 31,
2009
2008
$ - $ 6,500
-
38,000
3,214
4,286
31,000
31,000
41,800
41,800
-
688
232
1,935
319
1,217
262
2,230
78,869
125,614
(2,337)
(47,054)
$ 76,532
$ 78,560
Of the 2009 foreign subsidiary obligations, $688,000 was denominated in CFA francs, $232,000 was payable in
Argentine pesos, and the foreign subsidiary obligations denominated in Mozambique metical was repaid in 2009. 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.
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
dividend payments to $10,000,000 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
($535,883,000 as of December 31, 2009) 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, 2009.
Annual maturities of long-term debt at December 31, 2009 are as follows: $2,337,000 in 2010, $1,477,000 in 2011,
$32,546,000 in 2012, $556,000 in 2013, $7,953,000 in 2014 and $34,000,000 thereafter.
Note 9
Derivatives and Fair Value of Financial Instruments
Seaboard adopted ASC Topic 820 (formerly FAS No. 157, "Fair Value Measurements") on January 1, 2008 with the
exception of nonfinancial assets and nonfinancial liabilities that were deferred by ASC Topic 820-10 (formerly the
Financial Accounting Standards Board Staff Position FAS 157-2). Seaboard adopted ASC Topic 820 for these
nonfinancial assets and nonfinancial liabilities as of January 1, 2009. The adoption of ASC Topic 820 for nonfinancial
assets and liabilities did not have a material impact on Seaboard’s financial position or net earnings.
ASC Topic 820 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). ASC Topic 820 utilizes a fair value hierarchy
2009 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
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, 2009 and also the level within the fair value hierarchy used to measure each
category of assets.
(Thousands of dollars)
Assets:
Available-for-sale securities – short-term
investments:
Money market funds
Fixed rate municipal notes and bonds
Corporate bonds
U.S. Government agency securities
Foreign government debt securities
Asset backed debt securities
Variable rate demand notes
Other
Trading securities- short term investments:
High yield debt securities
Other debt securities
Trading securities – other current assets:
Domestic equity securities
Foreign equity securities
Fixed income mutual funds
U.S. Treasury securities
Money market funds
U.S. Government agency securities
Other
Derivatives
Total Assets
Total Liabilities – Derivatives
Balance
December 31,
2009 Level 1
Level 2
Level 3
$153,699
148,609
35,449
16,272
10,210
8,484
1,900
3,069
26,771
2,888
10,834
7,054
2,027
1,466
2,649
2,516
139
5,040
$ 439,076
$ 8,231
$153,699
-
-
-
-
-
-
-
$ -
148,609
35,449
16,272
10,210
8,484
1,900
3,069
-
-
26,771
2,888
10,834
3,327
2,027
-
2,649
-
139
4,610
$177,285
$ 2,288
-
3,727
-
1,466
-
2,516
-
430
$ 261,791
$ 5,943
$ -
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
In April 2009, the FASB issued ASC Topic 820-10-65-4 (formerly FASB Staff Position FAS 157-4 “Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly”). This Topic provides additional guidance for estimating fair value when the
volume and level of activity for the asset or liability have significantly decreased. Seaboard adopted this Topic in the
second quarter of 2009. The adoption of this Topic did not have an impact on Seaboard’s financial position or net
earnings.
46 2009 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
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 estimated by comparing interest rates for debt with similar terms and maturities.
The amortized cost and estimated fair values of investments and long-term debt at December 31, 2009 and 2008 are
presented below.
December 31,
2009
2008
(Thousands of dollars) Amortized Cost Fair Value Amortized Cost Fair Value
Short-term investments, available for sale $ 372,770
27,453
Short-term investments, trading debt securities
-
Short-term investments, trading equity securities
78,869
Long-term debt
$ 377,692 $ 298,678 $ 300,909
-
29,659
-
9,008
82,415 125,614
-
11,771
131,822
In March 2008, the FASB issued ASC Topic 815-10 (formerly FAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No. 133”). This Topic changed 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 ASC Topic 815, and how derivative instruments and related hedged items affect an
entity’s financial position, net earnings, and cash flows. Seaboard adopted this Topic as of January 1, 2009. This
Topic did not have an impact on Seaboard’s financial position or net earnings. While management believes its
derivatives 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.
Commodity Instruments
Seaboard uses various grain, meal, hog, pork bellies and energy resource related futures and options to manage its
risk to price fluctuations for raw materials and other inventories, finished product sales and firm sales commitments.
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, 2008.
Commodity derivatives are recorded at fair value with any changes in fair value being 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.
At December 31, 2009, Seaboard had open net derivative contracts to sell 13,955,000 bushels of grain, 1,344,000
gallons of heating oil and 87,900 tons of soybean meal and to purchase 2,720,000 pounds of hogs. At
December 31, 2008, Seaboard had open net contracts to purchase and (sell) (8,305,000) bushels of grain with a fair
value of $(3,272,000) 61,000 tons of soybean meal with a fair value of $(589,000) and 13,200,000 pounds of hogs
with a fair value of $(23,000), 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. For the years ended December 31, 2009, 2008 and 2007 Seaboard recognized net realized and
unrealized gains of $7,047,000, $36,156,000, and $18,469,000, 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. These foreign exchange agreements are recorded
at fair value with changes in value marked to market as a component of cost of sales on the Consolidated Statements
of Earnings as management believes they are primarily related to the underlying commodity transaction, with the
exception of the Japanese Yen foreign exchange agreement. The change in value of the Japanese Yen foreign
exchange agreement was 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.
2009 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
At December 31, 2009, Seaboard had trading foreign exchange contracts to cover its firm sales and purchase
commitments and related trade receivables and payables with notional amounts of $193,379,000 primarily related to
the South African Rand and the Euro. At December 31, 2009, Seaboard did not have any trading foreign exchange
contracts to cover various foreign currency working capital needs related to the South African Rand.
At December 31, 2008, 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 with a fair
value of $1,817,000, included in other accrued liabilities on the Consolidated Balance Sheet. At December 31, 2008,
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, with fair values of $(114,000).
At December 31, 2008, 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, with fair values of $(2,367,000),
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, 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, with
fair values of $1,017,000.
Forward Freight Agreements
The Commodity Trading and Milling segment enters 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 expired in the fourth quarter of 2009, are
not accounted for as hedges but 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, 2009, there were no outstanding
forward freight agreements. 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. Since these agreements are not accounted
for as hedges, the change in value related to these agreements is recorded in cost of sales-products on the
Consolidated Statement of Earnings. Forward freight agreements had no net exposure to a change in market price
as the two open forward freight agreements offset each other at December 31, 2008. As of December 31, 2009,
there were no such agreements outstanding.
Interest Rate Exchange Agreements
In December 2008 and again in March 2009, Seaboard entered into ten-year interest rate exchange agreements
which involves the exchange of fixed-rate and variable-rate interest payments over the life of the agreements without
the exchange of the underlying notional amounts to mitigate the effects of fluctuations in interest rates on variable
rate debt. Seaboard agreed to pay a fixed rate and receive a variable rate of interest on two notional amounts of
$25,000,000 each. In June 2009, Seaboard terminated both interest rate exchange agreements with a total notional
value of $50,000,000. Seaboard received payments in the amount of $3,981,000 to unwind these agreements. Since
these interest rate exchange agreements were not accounted for as hedges, the change in value related to these
agreements were recorded in Miscellaneous, net in the Condensed Consolidated Statements of Earnings. As of
December 31, 2009, there were no such agreements outstanding.
Counterparty Credit Risk
Seaboard is subject to counterparty credit risk related to its foreign currency exchange agreements and forward
freight agreements. The maximum amount of loss due to the credit risk of the counterparties for these agreements,
should the counterparties fail to perform according to the terms of the contracts, is $430,000 as of December 31,
2009. Seaboard’s foreign currency exchange agreements have a maximum amount of loss due to credit risk in the
amount of $430,000 with several counterparties. Seaboard does not hold any collateral related to these agreements.
48 2009 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The following table provides the amount of gain or (loss) recognized for each type of derivative and where it was
recognized in the Condensed Consolidated Statement of Earnings for the year ended December 31, 2009.
(Thousands of dollars)
December 31, 2009
Commodities
Foreign currencies
Foreign currencies
Interest rate
Location of Gain or (Loss)
Recognized in Income on
Derivative
Cost of sales-products
Cost of sales-products
Foreign currency
Miscellaneous, net
Amount of Gain or (Loss)
Recognized in Income on
Derivative
$ 7,047
(27,676)
(1,980)
5,312
The following table provides the fair value of each type of derivative held as of December 31, 2009 and where
each derivative is included on the Condensed Consolidated Balance Sheets.
(Thousands of dollars)
Commodities
Foreign currencies
Note 10
Liability Derivatives
Asset Derivatives
Balance
Sheet
Location
Other current assets
Other current assets
Balance
Sheet Fair
Fair
Value
Value
Location
$4,610 Other current liabilities $2,288
430 Other current liabilities 5,943
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 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. In July 2009,
Seaboard made a deductible contribution of $14,615,000 for the 2008 plan year as a result of the significant
investment losses incurred in the Plan during the fourth quarter of 2008. Management anticipates making an
additional deductible contribution to the Plan currently estimated to be between $8,000,000 and $15,000,000 for the
2009 and 2010 plan years.
In December 2008, the FASB issued ASC Topic 715-20-65 (formerly FSP FAS 132(R)-1, “Employers’ Disclosures
about Postretirement Benefit Plan Assets,” amending FASB Statement No. 132(R), “Employers’ Disclosures about
Pensions and Other Postretirement Benefits”). This Topic required more detailed disclosures regarding defined
benefit pension plan assets, including investment policies and strategies, major categories of plan assets, valuation
techniques used to measure the fair value of plan assets and significant concentration of risk within plan assets.
Seaboard adopted these new disclosure requirements as of December 31, 2009. The adoption of this Topic did not
have an impact on Seaboard’s financial position or net earnings.
Assets are invested in the Plan to achieve a diversified overall portfolio consisting primarily of individual stocks,
money market funds, collective investment funds, 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:
2009 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
Domestic Large Cap Equity
Domestic Small and Mid Cap Equity
36%
14%
Target Allocation
2009
29%
12%
International Equity
Fixed Income
Cash and cash equivalents
15% 9%
34% 31%
1% 19%
2008
33%
13%
14%
39%
1%
Actual Plan Composition at December 31,
As described in Note 9 to the Consolidated Financial Statements, ASC Topic 820 utilizes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following table
shows the Plan assets measured at estimated fair value as of December 31, 2009 and also the level within the fair
value hierarchy used to measure each category of assets.
(Thousands of dollars)
Assets:
Domestic equity securities
Money market funds
Collective investment funds
U.S. Government agency securities
Fixed income mutual funds
Foreign equity securities
Corporate bonds
U.S. Treasury securities
Mutual funds-equities
Total Assets
Balance
December 31,
2009
Level 1
Level 2
Level 3
$ 19,355
18,898
11,566
8,875
8,087
7,003
4,179
4,012
2,854
$ 84,829
$ 19,355
18,898
-
-
8,087
2,402
-
-
2,854
$ 51,596
$
$
-
-
11,566
8,875
-
4,601
4,179
4,012
-
$ 33,233
$
-
-
-
-
-
-
-
-
-
-
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,
2008
2009
2007
Weighted-average assumptions
Discount rate used to determine obligations 5.25-6.25% 6.25%
Discount rate used to determine net periodic benefit cost
Expected return on plan assets
6.25%
7.50%
6.50%
7.50%
6.50%
5.75%
7.50%
Long-term rate of increase in compensation levels 4.00-5.00% 4.00-5.00%
4.00-5.00%
Management selected the discount rate based on a model-based result where the timing and amount of cash flows
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.
50 2009 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The 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, 2009 and 2008, and a statement of the funded status as of
December 31, 2009 and 2008 were as follows:
December 31, 2009
2008
Assets exceed Accumulated Accumulated
accumulated benefits benefits
(Thousands of dollars) benefits exceed assets exceed assets
Reconciliation of benefit obligation:
Benefit obligation at beginning of year $
$ 60,287
Service cost 2,925 3,115
3,611
4,669 1,188
Interest cost 4,572
Actuarial losses
Benefits paid (2,504)
Plan amendments -
$116,844
5,199
7,510
8,023
(3,790) (4,662)
1,215 -
72,627
Benefit obligation at end of year
$ 82,289
$ 65,626 $132,914
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year $ 58,321
Actual return (loss) on plan assets
Employer contributions
Benefits paid
14,397
14,615
(2,504)
$
$ 81,338
-
- (20,626)
3,790
2,271
(3,790) (4,662)
Fair value of plan assets at end of year
$ 84,829
$
-
$ 58,321
Funded status
$ 2,540
$ (65,626)
$ (74,593)
The funded status of the Plan was $2,540,000 and ($14,306,000) at December 31, 2009 and 2008, respectively. The
accumulated benefit obligation for the Plan was $74,666,000 and $65,994,000 and for the other plans was
$45,381,000 and $38,593,000 at December 31, 2009 and 2008, 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: $6,161,000, $5,404,000, $5,797,000, $6,177,000, $6,665,000, and $47,450,000, respectively.
The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive income
(AOCI) at December 31, 2009 and 2008 were as follows:
(Thousands of dollars) 2009 2008
Accumulated loss, net of gain $
$ (56,322)
Prior service cost, net of credit (8,209) 7,796)
Transitional obligation (32) (49)
(48,346)
Total Accumulated Other Comprehensive Income
$ (56,587)
$ (64,167)
The net periodic benefit cost of these plans was as follows:
(Thousands of dollars)
Components of net periodic benefit cost:
2009
Years ended December 31,
2008
2007
Service cost $ 6,040
Interest cost
Expected return on plan assets
Settlement
Amortization and other
8,183
(4,761)
-
5,017
Net periodic benefit cost $ 14,479
$ 5,002
$ 5,199
7,510
6,451
(6,029) (5,486)
3,671
2,224
-
1,582
$ 8,262
$11,862
2009 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 accumulated unrecognized losses for 2008 in the Plan as of December 31, 2008 exceeded the 10% deferral
threshold as permitted under U.S. GAAP as a result of the significant investment losses incurred during 2008.
Accordingly, Seaboard’s pension expense for the Plan increased by approximately $3,140,000 for 2009 as compared
to 2008 as a result of loss amortization. In addition, pension expense for the Plan increased an additional $1,725,000
for 2009 as compared to 2008 as a result of reduced expected return on assets, from the decline of assets in the Plan
during 2008, partially offset by approximately $457,000 in expected earnings from the 2009 contribution discussed
above. Effective January 1, 2010, Seaboard split a portion of employees from the Plan into a new defined benefit
pension. However, the split did not change the employees benefit and thus pension expense should not be materially
impacted.
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 ASC Topic 715 (formerly
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 2010 are as follows:
(Thousands of dollars)
2010
Accumulated loss, net of gain
$ 3,128
Prior service cost, net of credit 930
Transition obligation 16
Estimated net periodic benefit cost
$ 4,074
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 $509,000, $498,000, and $453,000 for the
years ended December 31, 2009, 2008 and 2007, 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
$1,868,000, $1,812,000, and $1,709,000 for the years ended December 31, 2009, 2008 and 2007, 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
$1,378,000, $1,038,000, and $893,000 for the years ended December 31, 2009, 2008 and 2007, respectively.
Beginning in 2006, Seaboard established a deferred compensation plan which allows certain employees to reduce
their compensation in exchange for values in four 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 $4,340,000, $(9,539,000) and $2,298,000 for the years ended
52 2009 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
December 31, 2009, 2008 and 2007, respectively. Included in other liabilities at December 31, 2009 and 2008 are
$22,430,000 and $15,930,000, respectively, representing the market value of the payable to the employees upon
distribution or exercise for each plan. 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, 2009 and 2008, $26,729,000 and $22,225,000, 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
2009, 2008, and 2007 totaled $4,253,000, $(9,618,000) and $2,183,000, respectively.
Note 11
Commitments and Contingencies
In July 2009, Seaboard Corporation, and affiliated companies in its Commodity Trading and Milling segment, resolved
a dispute with a third party related to a 2005 transaction in which a portion of its trading operations was sold to a firm
located abroad. As a result of this action, Seaboard Overseas Limited received approximately $16,787,000, net of
expenses, in the third quarter of 2009. There was no tax expense on this transaction.
Seaboard is subject to various 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, 2009, Seaboard had guarantees
outstanding to two third parties with a total maximum exposure of $1,354,000. 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, 2009, Seaboard had outstanding letters of credit (LCs) with various banks which reduced its
borrowing capacity under its committed and uncommitted credit facilities as discussed in Note 8 by $41,720,000 and
$3,780,000, respectively. Included in these amount are LCs totaling $26,385,000, which support the IDRBs included
as long-term debt and $16,802,000 of LCs related to insurance coverage.
Commitments
As of December 31, 2009 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,
2010
2011
2012
2013
2014
Thereafter
Hog procurement contracts
$ 169,494 $ 148,932 $ -
$ - $
- $
Grain and feed ingredients
79,455 3,298
Grain purchase contracts for resale
97,000 -
Fuel purchase contract
Equipment purchases
and facility improvements
22,612 -
16,127 2,601
Other purchase commitments
4,761 -
Total firm purchase commitments
389,449 154,831
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Vessel, time and voyage-charter
arrangements
Contract grower finishing agreements
69,631 22,843 22,130 18,005 1,784
12,106 11,285 10,336 9,710 9,052 33,403
-
Other operating lease payments
19,467 17,490 14,850 13,601 13,509 213,041
Total unrecognized firm commitments
$ 490,653 $ 206,449 $47,316 $ 41,316 $ 24,345 $ 246,444
2009 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
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, 2009. During 2009, 2008
and 2007, this segment paid $163,047,000, $155,400,000 and $131,490,000, 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, 2009. This segment also has short-term freight contracts in place for delivery of future grain sales.
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 2009, 2008 and 2007 totaled $82,728,000, $115,877,000 and $88,761,000,
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 2009, 2008 and 2007, Seaboard paid $13,703,000, $13,389,000 and $13,280,000, respectively, under
contract grower finishing agreements.
Seaboard also leases various facilities and equipment under noncancelable operating lease agreements including a
terminal operations agreement at the Port of Miami which runs through 2028. Rental expense for operating leases
amounted to $26,404,000, $23,147,000 and $20,174,000 in 2009, 2008 and 2007, 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 $11,129,000 remained available upon expiration on August 31, 2009.
On November 6, 2009, the Board of Directors authorized Seaboard to repurchase from time to time prior to October
31, 2011 up to $100 million market value of its Common Stock in open market or privately negotiated purchases
which may be above or below the traded market price. Such purchases may be made by Seaboard or Seaboard may
from time to time enter into a 10b5-1 plan authorizing a third party to make such purchases on behalf of Seaboard.
The stock repurchase will be funded by cash on hand. Any shares repurchased will be retired and shall resume the
status of authorized and unissued shares. Any stock repurchases will be made in compliance with applicable legal
requirements and the timing of the repurchases and the number of shares to be repurchased at any given time may
depend on market conditions, Securities and Exchange Commission regulations and other factors. 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 suspended at any time at Seaboard’s discretion.
Seaboard used cash to repurchase 3,668 shares of common stock at a total price of $3,370,000 in 2009, 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.
54 2009 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The components of accumulated other comprehensive loss, net of related taxes, are summarized as follows:
(Thousands of dollars)
Years ended December 31,
2008
2007
2009
Cum ulative foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pension cost
$
(77,576)
2,579
(39,789)
$
(68,211)
1,781
(45,273)
$
(58,719)
1,149
(21,081)
Accumulated other comprehensive loss
$
(114,786)
$
(111,703)
$
(78,651)
The foreign currency translation adjustment primarily represents the effect of the Argentine peso currency exchange
fluctuation on the net assets of the Sugar 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,
2009, the Sugar segment had $170,061,000 in net assets denominated in Argentine pesos and $46,644,000 in net
liabilities denominated in U.S. dollars in Argentina.
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 2009 and 2008, the unrecognized pension cost includes $12,740,000
and $15,721,000, respectively, related to employees at certain subsidiaries for which no tax benefit has been
recorded.
Stockholders approved an amendment to decrease the number of authorized shares of common stock from
4,000,000 shares to 1,250,000 shares at the annual meeting on April 27, 2009.
Note 13
Segment Information
Seaboard Corporation had five reportable segments through December 31, 2009: Pork, Commodity Trading and
Milling, Marine, Sugar, and Power, each offering a specific product or service. Seaboard’s reporting segments are
based on information used by Seaboard’s Chief Executive Officer in his capacity as chief operating decision maker to
determine allocation of resources and assess performance. Each of the five main segments is separately managed
and each was started or acquired independent of the other segments. The Pork segment produces and sells fresh
and frozen pork products to further processors, foodservice operators, grocery stores, distributors and retail outlets
throughout the United States, and to Japan, 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 segment produces and
processes sugar and alcohol in Argentina primarily to be marketed locally. The Power segment operates as an
unregulated independent power producer in the Dominican Republic generating power from a system of diesel
engines mounted on two barges. Revenues for the All Other segment are primarily derived from the jalapeño pepper
processing operations.
The Pork segment derives approximately 12% percent of its revenues from a few customers in Japan through one
agent. Substantially all of its hourly employees at its Guymon processing plant are covered by a collective bargaining
agreement. The Pork segment incurred an impairment charge of $7,000,000 related to the Daily’s trade name in the
fourth quarter of 2008 (see Note 2 for further discussion). In addition, as of December 31, 2009, the Pork segment
had fixed assets with a net book value of $43,162,000 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.
Prior to the first quarter of 2009, the Sugar segment was named Sugar and Citrus reflecting the citrus and related
juice operations of this business. During the first quarter of 2009, management reviewed its strategic options for the
citrus business in light of a continually difficult operating environment. In March 2009, management decided not to
process, package or market the 2009 harvest for the citrus and related juice operations. As a result, during the first
quarter of 2009, a charge to earnings primarily in cost of sales of $2,803,000 was recorded primarily to write-down
2009 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
the value of related citrus and juice inventories to net realizable value, considering such remaining inventory will not
be marketed similar to prior years but instead liquidated. In the second quarter of 2009, management decided to
integrate and transform the land previously used for citrus production into sugar cane production and thus incurred an
additional charge to earnings primarily in cost of sales of approximately $2,497,000 during the second quarter of 2009
in connection with this change in business. The remaining fixed assets from the citrus operations, primarily buildings
and equipment, have either been sold under long-term agreements or integrated into the sugar business. However,
since such sale agreements are long-term and collectibility of the sales price is not reasonably assured, the sale is
being recognized under the cost recovery method and thus the gain on sale, which is not material, will not be
recognized until proceeds collected exceed the net book value of the assets sold.
The Power segment sells approximately 34% of its power generation to a government-owned distribution company
under a short-term contract that expires at the end of March 2010 for which Seaboard bears a concentrated credit
risk as this customer, from time to time, has significant past due balances. In May 2009, Seaboard received
sovereign government bonds of the Dominican Republic with a par value of $20,000,000 denominated in U.S. dollars,
with an 8% tax free coupon rate, to satisfy the same amount of outstanding billings from this customer that Seaboard
had classified as long-term. During the fourth quarter of 2009, Seaboard sold a portion of these bonds with par value
of $9,700,000 resulting in an immaterial loss. The remaining $10,300,000 par value of bonds are classified as
available-for-sale short term investments on the Consolidated Balance Sheet as of December 31, 2009. During
January and February 2010, Seaboard sold the remaining bonds resulting in an immaterial loss.
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. During March 2009, $15,000,000 was paid to Seaboard (recorded as long-term
deferred revenue) and the $55,000,000 balance of the purchase price was paid into escrow and will be paid to
Seaboard at the closing of the sale. The net book value of the two barges was $20,090,000 as of December 31, 2009
and is classified as held for sale in non-current other assets. Accordingly, Seaboard will cease depreciation on
January 1, 2010 for these two barges but continue to operate these two barges until a few weeks prior to the closing
date of the sale. 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 and the sale
abandoned. 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.
The loss from foreign affiliate in 2007 for the “All Other” segment reflects Seaboard’s share of losses from its equity
method investment in a Bulgarian wine business (the Business). There was no remaining book value as of
December 31, 2007. 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 sold all of its shares in this Business. See Note 5 to the Consolidated Financial Statements for further
discussion.
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.
56 2009 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Sales to External Customers:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar
Power
All Other
Segment/Consolidated Totals
Operating Income:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Income from Foreign Affiliates:
(Thousands of dollars)
Comm odity Trading and Milling
Sugar
All Other
Segment/Consolidated Totals
Depreciation and Amortization:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Years ended December 31,
2008
2007
2009
$
1,065,338
1,531,572
737,629
142,966
107,074
16,729
$
1,125,969
1,897,374
958,027
142,148
129,430
14,856
$
1,003,790
1,152,035
822,221
125,882
93,951
15,422
$
3,601,308
$
4,267,804
$
3,213,301
Years ended December 31,
2008
2007
2009
$
(15,025)
24,839
24,113
(851)
8,172
1,498
42,746
(19,023)
$
(45,934)
96,517
62,365
3,690
7,845
1,033
125,516
(3,707)
$
39,528
20,905
104,156
15,484
5,402
634
186,109
(16,194)
$
23,723
$
121,809
$
169,915
Years ended December 31,
2008
2007
2009
$
19,128
1,030
-
$
12,629
455
-
$
5,232
360
(1,718)
$
20,158
$
13,084
$
3,874
Years ended December 31,
2008
2007
2009
$
53,182
4,681
21,772
7,732
3,783
431
$
53,288
4,509
19,994
8,030
3,926
415
$
47,258
4,501
16,568
6,510
3,747
320
91,581
260
90,162
219
78,904
317
$
91,841
$
90,381
$
79,221
2009 Annual Report 57
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Total Assets:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Investment in and Advances to Foreign Affiliates:
(Thousands of dollars)
Comm odity Trading and Milling
Sugar
Segment/Consolidated Totals
Capital Expenditures:
(Thousands of dollars)
Pork
Comm odity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
December 31,
2009
2008
$
774,718
521,618
236,382
205,155
75,348
8,988
1,822,209
514,924
$
800,062
543,303
267,268
225,716
73,501
7,721
1,917,571
413,790
$
2,337,133
$
2,331,361
December 31,
2009
2008
$
79,883
2,349
$
66,578
1,513
$
82,232
$
68,091
Years ended December 31,
2008
2007
2009
$
15,188
2,650
14,697
21,603
39
87
54,264
12
$
52,649
4,333
46,309
30,964
53
311
134,619
15
$
78,085
3,013
61,045
21,424
218
362
164,147
26
$
54,276
$
134,634
$
164,173
Administrative services provided by the corporate office allocated to the individual segments represent corporate
services rendered to and costs incurred for each specific segment 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.
Geographic Information
Seaboard had sales in South Africa totaling $292,547,000, $437,362,000 and $322,998,000 for the years ended
December 31, 2009, 2008 and 2007, respectively, representing approximately 8%, 10% and 10% of total sales for
each respective year. No other individual foreign country accounted for 10% or more of sales to external customers.
58 2009 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The following table provides a geographic summary of net sales based on the location of product delivery.
(Thousands of dollars)
Years ended December 31,
2008
2009
2007
Caribbean, Central and South America
$ 1,406,749
$ 1,726,789
$ 1,151,032
Africa
United States
Pacific Basin and Far East
Canada/Mexico
Europe
Eastern Mediterranean
Totals
969,324
1,269,505
855,412
165,721
146,601
42,537
14,964
924,470
162,122
143,665
17,534
23,719
810,084
936,825
154,127
91,513
26,584
43,136
$ 3,601,308
$ 4,267,804
$ 3,213,301
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,
2009
2008
$ 547,111
$ 594,908
87,712
26,239
53,559
85,156
30,234
54,444
$ 714,621
$ 764,742
At December 31, 2009 and 2008, Seaboard had approximately $134,261,000 and $168,303,000, 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.
2009 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 of Seaboard
David A. Adamsen
Director and Audit Committee Member
Vice President – Wholesale Sales,
C&S Wholesale Grocers
Douglas W. Baena
Director and Audit Committee Chair
Self-employed, engaging in facilitation of equipment
leasing financings and consulting
Officers
Joseph E. Rodrigues
Director
Retired, former Executive Vice President and
Treasurer of Seaboard
Edward I. Shifman, Jr.
Director and Audit Committee Member
Retired, former Managing Director and Executive
Vice President of Wachovia Capital Finance
Steven J. Bresky
President and Chief Executive Officer
David S. Oswalt
Vice President, Taxation and Business Development
Robert L. Steer
Senior Vice President, Chief Financial Officer
Ty A. Tywater
Vice President, Audit Services
David M. Becker
Vice President, General Counsel and Secretary
Barry E. Gum
Vice President, Finance and Treasurer
James L. Gutsch
Vice President, Engineering
Ralph L. Moss
Vice President, Governmental Affairs
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
Zachery J. Holden
Assistant Secretary
Adriana N. Hoskins
Assistant Treasurer
Hugo D. Rossi
Sugar
Armando G. Rodriguez
Power
Stock Transfer Agent and Registrar of Stock
Availability of 10-K Report
Computershare Trust Company, N.A.
P.O. Box 43078
Providence, Rhode Island 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
Amex Equities (formerly, NYSE Alternext US) under
the symbol SEB. Seaboard had 192 shareholders of
record of its common stock as of February 5, 2010.
60 2009 Annual Report
Seaboard files its Annual Report on Form 10-K with
the Securities and Exchange Commission. Copies of
the Form 10-K for fiscal 2009 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/investor-sec.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.