2012 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 diverse global 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
also has an interest in turkey operations in the United States.
Table of Contents
Letter to Stockholders ....................................................................................................................................... 2
Principal Locations ........................................................................................................................................... 5
Division Summaries ...... ……………………………………………………………………………………………6
Summary of Selected Financial Data ................................................................................................................. 8
Company Performance Graph ........................................................................................................................... 9
Quarterly Financial Data (unaudited) ................................................................................................................10
Management’s Discussion & Analysis of Financial Condition and Results of Operations ..................................11
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 Comprehensive Income .........................................................................................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, turkey and other products and services; (iv) the recorded tax
effects under certain circumstances and changes in tax laws; (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 fuel costs and related spot market prices in the
Dominican Republic; (viii) the effect of the fluctuation in foreign currency exchange rates; (ix) the profitability or
sales volume of any of Seaboard’s segments; (x) the anticipated costs and completion timetable for Seaboard’s
scheduled capital improvements, acquisitions and dispositions; or (xi) other trends affecting Seaboard's financial
condition or results of operations, and statements of the assumptions underlying or relating to any of the foregoing
statements.
This list of forward-looking statements is not exclusive. Seaboard undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions
or otherwise. Forward-looking statements are not guarantees of future performance or results. They involve risks,
uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking
statements due to a variety of factors. The information contained in this report, including, without limitation, the
information under the headings "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and “Letter to Stockholders” identifies important factors which could cause such differences.
2012 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
2012 was another excellent year with operating income at $309.7 million, which was 31% better than our five year
average. Book value increased approximately 12% to $1,927 per share and has doubled over the last six years. This
year marked another all-time record in revenue, led by the commodity trading and milling division and in four of our
five major businesses. Revenue growth is no measure of profitability, yet in our businesses, global expansion is
critical to our success given the global nature of our individual industries. We have cast a wider net worldwide
through internal expansion, outright acquisitions and additional partnerships.
The company’s expansion has led to operations in over 40 countries in five distinct but related industries. As the
company grows, we are finding synergies between divisions, particularly between our trading, protein and
transportation divisions, through a sharing of common customers, human resources, commercial and government
networks. This has not been a “natural” behavior among autonomous and independently minded operations:
however, in the end, we believe this company connection will help us individually and collectively become a more
powerful and competitive company.
Each year brings a different set of challenges to the free market system making consistent earnings difficult to attain.
We are faced with increased government regulations, political trade barriers, unpredictable government actions and
artificial economic conditions. With this uncertain landscape also comes the opportunity to invest, not just in the
United States, but worldwide. We have made some key acquisitions domestically and abroad, added partnerships in
Africa and the Far East and executed well on operating and capital expenditure plans. In commodity businesses like
ours, tough competition always challenges us to improve the quality of our products, services and customer
relationships. In general, we are making inroads into more value added markets, particularly at Seaboard Foods and
Butterball. Additionally, we see great opportunity in the clean energy field and “green” activities as it impacts all
our divisions which are large users of heavy fuel, natural gas, diesel and alternative fuels. We plan to stay very
current and invested in this area as it should be a game changer in the United States and elsewhere.
Commodity Trading & Milling
This was an outstanding year for the trading and milling group with record sales, solid earnings and commodity
volumes that exceeded seven million metric tons for the second consecutive year. We have doubled our milling and
trading volumes over the last five years. The group currently has ten principal trading offices and twenty eight
industrial locations on five continents. Our business model remains the same; integrating our grain processing
business with third party trade and elongating our supply chain from origination of raw materials to finished
product. In today’s trading environment, it is essential to have a formidable position in each of these key areas,
namely commodity origination, freight logistics and customer relationships. Each year we drive toward improving
on these key components.
In the past year, we have increased our ownership of one of our major trading businesses, began flour and feed
milling operations in Ghana, built out and began operations of a large bakery in Central Africa and contracted for
the construction of four Eco-design bulk cargo vessels in China. Going forward, we plan on opening a new trade
office in the Far East, adding other milling locations in Africa and further investing in specialty trade and logistics
businesses. In addition, we are looking to broaden our footprint with investments in the Black Sea, Northern Africa
and perhaps the Far East. As the milling industry becomes more competitive, we continue to look for opportunities
to invest in further processing facilities for flour and feed based products, from pasta and other baked goods to
broiler and layer operations. As the lesser developed countries evolve and standards of living improve, it becomes
increasingly important to get closer to the end customer. This means providing safe, convenient and good tasting
products at an affordable price. The transition from generic wholesale goods to more consumer- driven, branded
products is coming and we want to be at the forefront. We believe we can capitalize on this through our quality
initiatives, marketing skills, product presentation and food safety protocols. These skill sets are not easy to replicate
in the difficult operating environments where the Seaboard model excels.
Although we mostly operate in volatile and insecure countries, we are consistently profitable due to the diversity in
our global portfolio. With our global footprint we now have the depth to originate grain from all competitive origins,
manage ship logistics cost effectively and capture synergies between our milling facilities and trade offices.
2
2012 Annual Report
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
Seaboard Foods
Although operating income fell far short of last year, it was 15% better than our five year average. Results were
particularly solid from further processing. Daily’s, our bacon processing company, had record sales and earnings.
Generally, pork volumes were about even with last year but grain prices were significantly higher than the previous
year and adversely impacted our integrated model of production and processing. As long as ethanol mandates and
crop insurance programs remain in place in the US, grain prices will remain high and dampen profitability and the
prospect for growth in the protein sector. Per capita consumption of pork in the US remains flat and meat
consumption has declined about 10% over the last five years. Growth will also be limited as many of the traditional
exports markets for pork will be at risk with the quest for self-sufficiency, trade barriers, and a stronger dollar.
We continue our campaign to enhance quality and lower costs through an aggressive capital spending plan. On the
production side, we added finishing barns in Kansas and a feed mill in Colorado. We have added cooling space and
refrigeration in our Guymon, Oklahoma plant to further improve the quality, texture and shelf life of our primary
products. We have begun the process of significantly improving truck transportation costs by utilizing cleaner, more
economical fuels and making improvements in transportation systems management.
2013 will be a challenging year with the uncertainty in grain costs and expected limits on export volume growth.
Opportunities lie in our ability to further capitalize on our integrated system. As customers become more focused on
production practices, food safety, traceability and nutrition, we are well positioned to execute on these demands.
Seaboard Marine
2012 was a marked improvement financially over 2011 despite the fact that global and regional carriers are
competing in a stalled market with flat container rates and cargo volumes. Fundamentally, the shipping industry is
weak with an oversupply of ships, slow global trade and high fuel expenses. With less control over unit revenue, our
focus has been on cost reductions in ship chartering and fuel expense while holding the line on terminal and trucking
costs. We have been selling off our aging vessel fleet and replacing it with a mixture of more modern chartered and
owned tonnage. Given the continued weakness in the freight markets, we believe our timing is good to reinvest in
our fleet which will contribute toward lower unit costs on cargo carried.
In addition to ship renewal, we have devoted most of our capital expenditures toward new state of the art,
environmentally friendly refrigerated containers and additional port equipment to more efficiently handle cargo. As
other ocean carriers consolidate their services and reduce costs through larger volumes, we believe it is more
important than ever to provide a “premium” service through dependable and reliable service while maintaining
strong lines of communication with our customers.
This year marks our 30 year anniversary at Seaboard Marine. From two chartered ships and a small liner service in
1983, we now operate 36 ships in 27 countries with multiple routes from the US and multiple shipping points in the
Americas. This growth is a testament to our loyal and expanded customer base and the dedicated personnel who
understand what customer service means and do their best to provide it.
Tabacal
Tabacal, our Argentine sugar and alcohol business, had another strong year both operationally and financially. Our
employees, operating in a country whose political and economic environment is quite challenging, despite a drought
and significant labor issues, were able to mill more sugar cane and produce more alcohol than ever before. The
alcohol business, which mostly sells to the national biofuels program, accounted for over a third of Tabacal’s
operating profits in 2012. Our sugar business, with its reputation as a reliable supplier of high quality sugar was
able to maintain its loyal customer base and enjoyed another year of significant profits.
We anticipate this year will present many challenges with large carryover stocks, a potentially record cane crop and
a negligible increase in demand. However, we believe that relying on our strong agricultural production group, our
integrated model and the potential increase in ethanol use will help the company return steady cash flows and profits
in the next several years.
2012 Annual Report
3
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
TCC
Our power production business in the Dominican Republic had another great year with the start-up of our new 106
MW dual fuel power generation plant in March 2012. As mentioned in last year’s shareholder letter, we expected
good returns from this new power facility and we have. Utilizing natural gas as our primary fuel source, we were
able to lower our operating costs which flowed to earnings. Unfortunately, we were unable to run 100% on natural
gas but we will focus over the next several years on opportunities to capitalize on this raw material supply which
could contribute significantly to our bottom line. We are researching the potential of lower cost supplies of natural
gas as the economic and political landscape develops in the United States regarding natural gas exports.
We continue to lease one of the power barges we sold in 2011 which has added incrementally to our revenue and
earnings base. With record cash collections in 2012 we enter 2013 with a solid financial position in the local
market. We expect 2013 will bring positive but lower comparable results due to higher natural gas purchase costs
and the expiration of our tax holiday during 2012. Seaboard will continue to evaluate new business opportunities in
the power sector in the Dominican Republic and in other countries.
Butterball
2012 was another excellent year for Butterball with increased volumes and revenue and prospects for further
expansion and profitability. Despite the fact that the drought in the corn-belt contributed to higher grain costs and
the extreme heat in the Midwest impacted our turkey production, we managed to exceed our expectations on
earnings and continued to improve on operational initiatives.
We are pleased with our acquisition of 50% of Butterball. Now in our second full year of operations, we continue to
be impressed by the strength of the brand name, the depth and strength of the workforce and the array of great
tasting further processed products (Butterball is much more than whole birds at Thanksgiving!). As we continue on
a path to develop our product lines, including R&D on consumer products, and improve on our integrated model, we
are optimistic that our performance and results will continue to improve year after year. As a company with a great
brand name, it is incumbent upon us to uphold and increase brand awareness through superlative quality, innovative
and great tasting products and a strong advertising campaign.
Seaboard is no longer a small company with a handful of regional businesses. It now stands among the Fortune 500
(#427) and relies on over 22,000 individuals at our subsidiaries and affiliates on five continents to perform a
multitude of tasks. I believe our people are intensely loyal and dedicated and contribute immeasurably toward the
success of this company. I thank all our employees who make this company what we are today and what we will be
tomorrow. As always, it is our loyal customers who appreciate and rely on our services and products that we are
most grateful to and we hope to give you cause to continue to support us as we move forward in improving what we
do.
We look forward to 2013 and the challenges ahead. As I have said before, big is not better (oftentimes it’s worse)
and I speak for all of those at Seaboard in saying that, although growth has its benefits, it is not the largest measure
of success. Being the best at what we do is our goal and it is our personal pride and pride in the company which will
help us get there.
Steven J. Bresky
President and
Chief Executive Officer
4
2012 Annual Report
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
Processed Meats
Salt Lake City, Utah
Missoula, Montana
High Plains Bioenergy, LLC
Guymon, Oklahoma
Seaboard de Mexico USA LLC
Mexico
Commodity Trading and Milling
Commodity Trading Operations
Australia*
Canada
Chapel Hill, North Carolina
Colombia
Ecuador
Greece
Isle of Man
Peru*
South Africa
African Poultry Development Limited*
Democratic Republic of Congo,
Kenya and Zambia
Compania Industrial de Productos
Agreopecuarios SA*
Rafael del Castillo & Cia. S.A*
Colombia
Fairfield Rice Inc.*
National Milling Company
of Guyana, Inc.
Guyana
Les Moulins d’Haiti S.E.M.*
Haiti
Lesotho Flour Mills Limited*
Lesotho
Flour Mills of Ghana
Ghana
Life Flour Mill Ltd.*
Premier Feeds Mills Company Limited*
Nigeria
LMM Farine, S.A.
Madagascar
Minoterie de Matadi, S.A.R.L.*
Societe Africaine de Developpement
Industriel Alimentaire*
Democratic Republic of Congo
Minoterie du Congo, S.A.
Republic of Congo
Moderna Alimentos, S.A.*
Molinos Champion, S.A.*
Ecuador
National Milling Corporation Limited
Zambia
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
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
Seaboard de Nicaragua, S.A.
Nicaragua
Seaboard del Peru, S.A.
Peru
Seaboard Freight & Shipping
Jamaica Limited
Jamaica
Seaboard Honduras, S.de R.L. de
C.V.
Honduras
Seaboard Marine (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
Turkey
Butterball LLC*
Division Office
Garner, North Carolina
Processing Plants
Huntsville, Arkansas
Jonesboro, Arkansas
Ozark, Arkansas
Carthage, Missouri
Mt. Olive, North Carolina
Representaciones Maritimas y Aereas, S.A.
Guatemala
Other
Mount Dora Farms de Honduras,
Sea Cargo, S.A.
Panama
Seaboard de Colombia, S.A.
Colombia
S.R.L.
Honduras
Mount Dora Farms Inc.
Houston, Texas
*Represents a non-controlled, non-consolidated affiliate
2012 Annual Report
5
S E A B O A R D C O R P O R A T I O N
Division Summaries
Pork Division
Seaboard was a pioneer in the vertical integration of the U.S. Pork industry and its Pork Division is one of the
largest producers and processors in the United States. Seaboard is able to efficiently control pork production across
the entire life cycle of the hog, beginning with research and development in nutrition and genetics and extending to
the production of high quality meat products at our processing and further processing facilities.
Seaboard’s hog processing facility is located in Guymon, Oklahoma. The facility is a double shift operation that
processes approximately 19,700 hogs per day and generally operates at capacity. Weekend shifts are added as
market conditions dictate. Hogs processed at the plant are primarily Seaboard raised hogs. In addition, the remaining
hogs processed are raised by third parties and purchased under contract or occasionally in the open market. Seaboard
produces and sells fresh and frozen pork products to further processors, food service operators, grocery stores,
distributors and retail outlets throughout the United States. Seaboard also sells to distributors, trading companies and
further processors in Japan, Mexico and numerous other foreign markets.
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 over four
million hogs annually. Seaboard owns and operates six centrally located feed mills to provide formulated feed to
these hogs.
Seaboard’s Pork Division also owns two further processing plants located in Salt Lake City, Utah and Missoula,
Montana. The processing plants produce sliced and pre-cooked bacon primarily for the food service industry and, to
a lesser extent, retail markets. These operations have enabled Seaboard to expand its integrated pork model into
value-added products and have enhanced its ability to extend production closer to the retail and value added
markets.
Seaboard produces biodiesel at a facility in Guymon, Oklahoma. The biodiesel is primarily 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 blenders for distribution and in the retail markets. The facility can also produce biodiesel from
vegetable oil.
Seaboard’s Pork Division has an agreement with a similar size pork processor, Triumph Foods LLC (Triumph), to
market substantially all of the pork products produced at Triumph’s plant in St. Joseph, Missouri. The agreement
enhances the efficiency of Seaboard’s sales and marketing efforts and expands Seaboard’s geographic footprint.
Seaboard receives a fee on a per head basis on all Triumph products. In 2012, Seaboard was ranked number 2 in
pork production and number 4 in processing in the U.S. (including Triumph volume).
Commodity Trading and Milling Division
Seaboard’s Commodity Trading and Milling Division is an integrated grain trading, grain processing and logistics
operation. This division sources, transports and markets approximately seven million metric tons per year of wheat,
corn, soybean meal and other commodities primarily to third party customers and affiliated companies. These
commodities are purchased worldwide, with primary destinations in Africa, South America and the Caribbean.
Seaboard integrates the delivery of commodities to its customers through the use of company owned and chartered
bulk carriers.
Seaboard’s Commodity Trading and Milling Division operates facilities in 21 countries. The commodity trading
business has eight offices in seven countries in addition to two non-consolidated affiliates in two other countries.
The grain processing businesses operate facilities at 28 locations in 14 countries, and include five consolidated and
twelve non-consolidated affiliates in Africa, South America and the Caribbean. Seaboard and its affiliates produce
approximately three million metric tons of wheat flour, maize meal and manufactured feed per year in addition to
other related grain based products.
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 an off-port warehouse for
cargo consolidation and temporary storage and a terminal at the Port of Miami. At the Port of Houston, Seaboard
operates a cargo terminal facility that includes on-dock warehouse space for temporary storage of bagged grains,
resins and other cargoes. Seaboard also makes scheduled vessel calls to Brooklyn, New York, New Orleans,
6
2012 Annual Report
S E A B O A R D C O R P O R A T I O N
Division Summaries
Louisiana and various foreign ports in the Caribbean Basin and Central and South America.
This Division’s fleet consists of owned and chartered vessels, and includes dry, refrigerated and specialized
containers and other cargo related equipment. Seaboard is the largest shipper in terms of cargo volume in the Port of
Miami. Seaboard provides extensive service between our domestic ports of call and multiple foreign destinations.
To maximize fleet utilization, Seaboard uses a network of offices and agents throughout the United States, Canada,
Latin America and the Caribbean Basin to sell freight to and from multiple points. Seaboard’s full service
capabilities, including through agreements with 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 allow customers
to coordinate manufacturing schedules and maintain inventories at cost-efficient levels.
Sugar Division
In Argentina, Seaboard grows sugar cane, produces and refines sugar and produces alcohol. The sugar is primarily
marketed locally, with some exports to the United States and other South American countries. Seaboard’s sugar
processing plant, one of the largest in Argentina, has an annual capacity to produce approximately 250,000 metric
tons of sugar and approximately 15 million gallons of alcohol per year. The mill is located in the Salta Province of
Argentina, with administrative offices in Buenos Aires. Land owned by Seaboard in Argentina is planted with sugar
cane, which supplies the majority of the raw material processed. Depending on local market conditions, sugar may
also be purchased from third parties for resale. In addition, this division sells dehydrated alcohol to certain oil
companies under the Argentine government bio-ethanol program, which requires alcohol to be blended with
gasoline. This division also owns a 38 megawatt cogeneration power plant. The plant is powered by the burning of
sugarcane by-products during the harvest season, which is between May and November.
Power Division
In the Dominican Republic, Seaboard is an independent power producer generating electricity for the local power
grid from two floating power generating facilities with a combined capacity of 178 megawatts. Seaboard is not
directly involved in the transmission or distribution of electricity. Seaboard primarily sells power on the spot
market. Principal buyers are government-owned distribution companies and partially government-owned generation
companies. Through early 2011, this division operated two floating electric power generating facilities consisting of
a system of diesel engines mounted onto barge-type vessels located on the Ozama River in Santo Domingo. On
April 8, 2011, Seaboard closed the sale of its two power generating facilities. On April 20, 2011, a short-term lease
agreement was signed allowing Seaboard to resume operations of one of the facilities (72 megawatts). Seaboard
continues to operate this facility under a short-term lease agreement that may be canceled by either party. In
addition, Seaboard retained all other physical properties of this business and constructed a new 106 megawatt
floating power generating facility. This new facility was delivered in January 2012 and began commercial
operations in March 2012.
Other Divisions
On December 6, 2010, Seaboard purchased a 50 percent non-controlling voting interest in Butterball, LLC
(Butterball). Butterball is a vertically integrated producer, processor and marketer of branded and non-branded
turkeys and other turkey products. Butterball has five processing plants and numerous live production and feed
milling operations located in North Carolina, Arkansas, Missouri and Kansas. Butterball produces approximately
one billion pounds of turkey each year. Butterball is a national supplier to retail and foodservice outlets, and also
exports products to Mexico and numerous other foreign markets. On December 31, 2012, Butterball purchased the
assets of Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.
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.
2012 Annual Report
7
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)
Net sales
Operating income
Years ended December 31,
2012
$6,189,133
2011
$5,746,902
2010
2009
2008
$ 4,385,702
$ 3,601,308 $ 4,267,804
$ 309,661
$ 407,204
$ 321,066
Net earnings attributable to Seaboard
$ 282,311
$ 345,847
$ 283,611
Basic earnings per common share
$ 234.54
$ 284.66
$
231.69
$
$
$
23,723 $ 121,809
92,482 $ 146,919
74.74 $
118.19
Total assets
$3,347,781
$3,006,728
$ 2,734,086
$ 2,337,133 $ 2,331,361
Long-term debt, less current maturities $ 120,825
$ 116,367
$
91,407
$
76,532 $
78,560
Stockholders’ equity
Dividends per common share
$2,308,189
12.00
$
$2,079,467
-
$
$ 1,778,249
9.00
$
$ 1,545,419 $ 1,463,578
3.00
$
3.00 $
In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock. The increased
amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an
annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per
year). Seaboard does not currently intend to declare any further dividends for the years 2013-2016. Seaboard did
not declare a dividend in 2011. In 2010, Seaboard declared and paid dividends of $9.00 per share on the common
stock, which included a prepayment of the annual 2011 and 2012 dividends ($3.00 per share per year). Basic and
diluted earnings per common share are the same for all periods presented.
In 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic resulting
in a gain on sale of assets of $52,923,000, or $43.56 per share, included in operating income. There was no tax
expense on these transactions. See Note 13 to the Consolidated Financial Statements for further discussion.
In 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. As a result, Seaboard Overseas Limited received
$16,787,000, net of expenses, or $13.57 per common share, in 2009 included in other income. There was no tax
expense on this transaction.
8
2012 Annual Report
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 MKT (formerly the NYSE Amex Equities) 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 MKT 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, 2007 and ending December 31, 2012. The
information presented in the performance graph is historical in nature and is not intended to represent or guarantee
future returns.
The comparison of cumulative total returns presented in the above graph was plotted using the following index
values and common stock price values:
12/31/07
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
Seaboard Corporation
NYSE MKT Composite
Peer Group
$100.00
$100.00
$100.00
$ 81.41
$ 62.15
$ 77.46
$ 92.23
$ 82.82
$ 94.43
$ 136.78
$ 104.10
$ 106.43
$ 139.87
$ 122.59
$ 122.41
$ 174.67
$ 121.01
$ 132.20
2012 Annual Report
9
S E A B O A R D C O R P O R A T I O N
Quarterl y Financial Data (unaudited)
1st
(UNAUDITED)
(Thousands of dollars except per share amounts) Quarter
2012
$ 1,471,113
Net sales
93,356
Operating income
$
82,209
Net earnings attributable to Seaboard $
68.00
$
Earnings per common share
-
$
Dividends per common share
Closing market price range per common share:
2nd
Quarter
3rd
Quarter
4th
Quarter
Total for
the Year
$ 1,510,593
60,723
$
50,097
$
41.58
$
-
$
$ 1,479,416
85,057
$
74,422
$
61.92
$
-
$
$ 1,728,011 $ 6,189,133
70,525 $ 309,661
$
75,583 $ 282,311
$
234.54
63.03 $
$
12.00
12.00 $
$
High
Low
$ 2,139.96
$ 1,852.00
$ 2,133.90
$ 1,828.65
$ 2,327.69
$ 1,997.80
$ 2,637.11
$ 2,142.00
2011
$ 1,468,179
Net sales
Operating income
$ 130,276
Net earnings attributable to Seaboard $ 116,864
96.11
Earnings per common share
-
Dividends per common share
$
$
Closing market price range per common share:
$ 1,398,587
$ 136,965
$ 113,486
93.34
$
-
$
$ 1,476,718
66,989
$
36,560
$
30.07
$
-
$
$ 1,403,418 $ 5,746,902
72,974 $ 407,204
$
78,937 $ 345,847
$
284.66
65.12 $
$
-
- $
$
High
Low
$ 2,413.00
$ 1,965.00
$ 2,443.00
$ 2,160.00
$ 2,704.00
$ 1,801.99
$ 2,307.00
$ 1,684.00
In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock. The increased
amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an
annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per
year). Seaboard does not currently intend to declare any further dividends for the years 2013-2016. Seaboard did
not declare a dividend in 2011 as there was a prepayment of the annual 2011 and 2012 dividends in December 2010.
During 2012, Seaboard repurchased 3,250 common shares in the first quarter, 4,875 shares in the second quarter,
1,050 shares in the third quarter and 3,762 shares in the fourth quarter. During 2011, Seaboard repurchased 600
common shares in the third quarter and 4,682 shares in the fourth quarter as authorized by Seaboard’s Board of
Directors. See Note 12 to the Consolidated Financial Statements for further discussion.
In April 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic.
Seaboard recognized a gain on sale of assets of $51,423,000, or $42.29 per share, included in operating income in
the second quarter of 2011. In July 2011, Seaboard received $1,500,000 of the $3,000,000 in escrow for potential
dry dock costs of these facilities. The $1,500,000, or $1.23 per share, was recognized as a gain on sale of assets in
operating income in the third quarter of 2011. There was no tax expense on these transactions. See Note 13 to the
Consolidated Financial Statements for further discussion.
10 2012 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
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Seaboard is a diverse global agribusiness and transportation company, with operations in several industries. Most of
the sales and costs of Seaboard’s segments are significantly influenced by worldwide fluctuations in commodity
prices and 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 distinct 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 numerous other
foreign markets. Revenues from the sale of pork products are primarily generated from a single hog processing plant
in Guymon, Oklahoma, which generally operates at daily double shift processing capacity of 19,700 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 2012, Seaboard raised approximately 80% of the hogs processed at the Guymon
plant, with the remaining hog requirements purchased primarily under contracts from independent producers. This
segment is Seaboard’s most capital intensive segment, representing approximately 45% of Seaboard’s total fixed
assets in addition to material amounts of inventories.
Within the portfolio of Seaboard’s businesses, management believes profitability of the Pork segment is most
susceptible 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 accounts for the largest input costs in raising hogs and is materially affected by price changes
for corn and soybean meal. Market prices for hogs purchased from third parties for processing at the plant also
represent a major cost factor. With the Guymon plant generally operating at capacity, Seaboard is constantly looking
for ways to enhance the facility’s operational efficiency while also looking to increase margins by introducing new,
higher value products.
The Pork segment also produces biodiesel which is sold to third parties. Biodiesel is produced from pork fat from
Seaboard’s pork processing plant and from animal fat purchased from third parties. The processing plant also is
capable of producing biodiesel from vegetable oil. Seaboard is also a majority-owner of a ham-boning and
processing plant in Mexico.
The Pork segment has an agreement with Triumph Foods LLC (Triumph) to market substantially 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. Triumph has processing capacity similar to
that of Seaboard’s Guymon plant and operates with an integrated model similar to 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’s hog processing plants.
Commodity Trading and Milling Segment
The Commodity Trading and Milling segment, which is managed under the name of Seaboard Overseas and Trading
Group, primarily operates overseas and is an integrated grain trading, grain processing and logistics operation with
locations in Africa, South America, the Caribbean and Europe. These foreign operations can be significantly
impacted by changes in local crop production, political instability and local government policies, as well as
fluctuations in 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, to a
lesser degree, various other specialty products. Although this segment owns six ships, the majority of the third party
trading business is transacted with chartered ships. Freight rates, influenced by available charter capacity for
worldwide trade in bulk cargoes, and related fuel costs affect business volumes and margins. The milling businesses,
both consolidated and non-consolidated affiliates, operate in foreign and, in most cases, lesser developed countries.
Subsidized wheat and flour exports of various countries can exacerbate volatile market conditions that may have a
significant impact on both the trading and milling businesses’ sales and operating income. This segment is
Seaboard’s most working capital intensive segment, with approximately 41% of Seaboard’s total working capital at
December 31, 2012, primarily consisting of inventories and receivables.
2012 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
The majority of the Commodity Trading and Milling segment’s sales derive from its commodity trading business in
which grain is sourced from multiple origins and delivered to third party and affiliate customers in various
international locations. 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. Profit
margins are protected, when possible, by using commodity derivatives and other risk management practices.
Effective, January 1, 2012, Seaboard increased its ownership from 50% to 70% in PS International, LLC, a specialty
grain trading business located in Chapel Hill, North Carolina. Effective December 31, 2012, Seaboard increased its
ownership from 70% to 85%. Seaboard invested in several entities in recent years and continues to seek
opportunities to expand its trading and milling businesses.
Marine Segment
The Marine segment provides containerized cargo shipping services primarily between the United States and 26
countries in the Caribbean Basin, Central and South America. Fluctuations in economic conditions and political
instability in the regions or countries in which Seaboard operates each may affect trade volumes and operating
profits. 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.
Seaboard continues to explore ways to increase volumes on existing routes, while seeking opportunities to broaden
its route structure in the regions it serves.
Sugar Segment
Seaboard’s Sugar segment operates a vertically integrated sugar and alcohol production facility in Argentina. This
segment’s sales and operating income are significantly affected by local and worldwide sugar prices. Domestic
sugar production levels in Argentina may affect the local price. Global sugar fluctuations, to a lesser extent, have an
impact in Argentina as well. Depending on local market conditions, this business purchases sugar from third parties
for resale. Over the past several years, Seaboard has taken a number of steps to enhance the efficiency of its
operations and expand its sugar and alcohol production capacity. This segment sells dehydrated alcohol to certain oil
companies under an Argentine government bio-ethanol program, which mandates alcohol to be blended with
gasoline. This segment also owns a 38 megawatt cogeneration power plant which is powered by the burning of
sugarcane by-products during the harvest season, which is between May and November.
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. Following several years of heavy capital investment
in this segment to expand production capacity and to construct a 38 megawatt cogeneration power plant, financing
needs for this segment were minimal in 2012 and should remain minimal in 2013. With the division’s improved
operating results, Seaboard continues to explore various ways to improve and expand this segment.
Power Segment
Seaboard’s Power segment is an independent power producer in the Dominican Republic (DR) generating electricity
from a system of diesel engines mounted on floating barges for the local power grid. Seaboard primarily sells power
on the spot market primarily to government-owned distribution companies and partially government-owned
generation companies. This segment is subject to delays in obtaining timely collections from sales to these
government related entities. In some prior years, operating cash flows have fluctuated from inconsistent customer
collections.
As discussed in Note 13 to the Consolidated Financial Statements, in April 2011, Seaboard sold two power
generating facilities and later signed a short-term lease that allowed Seaboard to resume operations of one of the
facilities (72 megawatts). Seaboard continues to operate this facility under a short-term lease agreement subject to
cancellation by either party. During 2011, Seaboard also completed the construction of a new floating power
generating facility with a rated capacity of 106 megawatts. This facility was delivered in January 2012 and began
operations in March 2012. The total cost of the project was $136.0 million, including capitalized interest, and was
primarily financed with a $114.0 million financing agreement. Additional financing needs for this segment should
be minimal for 2013, but Seaboard may pursue further power industry investments in the future.
Supply of power in the DR is determined by a government body and is subject to fluctuations based on government
budgetary constraints. While fuel is this segment’s largest cost component and is subject to price swings, higher fuel
costs generally have been passed on to customers.
12 2012 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
Turkey Segment
On December 6, 2010, Seaboard purchased a 50 percent non-controlling voting interest in Butterball, LLC
(Butterball). Butterball is a vertically integrated producer, processor and marketer of branded and non-branded
turkeys and other turkey products. Butterball has five processing plants and numerous live production and feed
milling operations located in North Carolina, Arkansas, Missouri and Kansas. Sales prices are directly affected by
both domestic and worldwide supply and demand for turkey products and other proteins. Feed accounts for the
largest input cost in raising turkeys and is materially affected by price changes for corn and soybean meal. The
turkey business is seasonal only on the whole bird side, with Thanksgiving and Christmas holidays driving the
majority of those sales. In addition, on December 31, 2012, this segment purchased the assets of Gusto Packing
Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.
LIQUIDITY AND CAPITAL RESOURCES
Summary of Sources and Uses of Cash
Cash and short-term investments as of December 31, 2012 decreased $33.7 million from December 31, 2011. The
decrease was primarily the result of cash used for capital expenditures of $158.8 million, a loan to Butterball
discussed below of $81.2 million, principal payments of long-term debt of $43.9 million, repurchases of common
stock of $26.8 million, investments in and advances to affiliates discussed below of $24.9 million and dividends
paid of $14.4 million. Partially offsetting the decrease was net cash from operating activities of $261.7 million,
proceeds from issuance of long-term debt of $32.7 million, proceeds from sale of fixed assets of $15.9 million and
an increase in notes payable of $12.6 million. Cash from operating activities for 2012 increased $41.7 million
compared to 2011, primarily as a result of timing of payments related to certain current liabilities in the Commodity
Trading and Milling segment as total current liabilities increased in 2012 while they decreased in 2011.
Cash and short-term investments as of December 31, 2011 increased $21.4 million from December 31, 2010. The
increase was primarily the result of $220.0 million in net cash from operating activities, $65.0 million in proceeds
from issuance of long-term debt and $59.6 million of proceeds received from the sale of power generating facilities.
Partially offsetting the increase was cash used for capital expenditures of $183.7 million, decreases in notes payable
to banks of $62.5 million, notes receivable issued to affiliates, net of $40.3 million, investments in and advances to
affiliates of $18.5 million and repurchases of common stock of $10.0 million. Cash from operating activities for
2011 decreased $119.8 million compared to 2010, primarily as a result of changes in net working capital needs in
the Commodity Trading and Milling segment for increases in receivables and inventories and also timing of
payments for current liabilities.
Capital Expenditures, Acquisitions and Other Investing Activities
During 2012, Seaboard invested $158.8 million in property, plant and equipment, of which $52.3 million was
expended in the Pork segment, $22.8 million in the Commodity Trading and Milling segment, $35.4 million in the
Marine segment, $22.1 million in the Sugar segment and $25.0 million in the Power segment. The Pork segment
expenditures were primarily for additional finishing barns, improvements to existing facilities and related equipment
and construction of a new feed mill. The Commodity Trading and Milling segment expenditures were primarily for
the purchase of a dry bulk vessel and for a down payment of $8.3 million made in July 2012 on four dry bulk vessels
to be built for a total cost of approximately $83.0 million. See Note 11 to the Consolidated Financial Statements for
further discussion. The Marine segment expenditures were primarily for purchases of cargo carrying and handling
equipment and the purchase of a containerized cargo vessel. In the Sugar segment, the capital expenditures were
primarily for expansion of cane growing operations and normal upgrades to existing operations. The Power segment
expenditures were primarily used to complete the construction in the Dominican Republic of a 106 megawatt power
generating facility, which began commercial operations in March 2012. The total cost of the project was $136.0
million, including capitalized interest. All other capital expenditures were of a normal recurring nature and
primarily included replacements of machinery and equipment, and general facility modernizations and upgrades.
The total 2013 capital expenditures budget is $186.4 million. The Pork segment plans to spend $73.5 million
primarily for additional finishing barns, improvements to existing facilities and related equipment and to complete
construction on a new feed mill mentioned above. The Commodity Trading and Milling segment plans to spend
$27.3 million primarily for improvements to existing facilities and related equipment and another payment on four
dry bulk vessels mentioned above. The Marine segment has budgeted $60.0 million primarily for additional cargo
carrying and handling equipment. In addition, management will be evaluating whether to purchase additional dry
bulk vessels for the Commodity Trading and Milling segment and containerized cargo vessels for the Marine
segment during 2013. The Sugar segment plans to spend $23.7 million primarily for normal upgrades to existing
operations, including cane re-planting. Management anticipates paying for these capital expenditures from a
2012 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
combination of available cash, the use of available short-term investments and Seaboard’s available borrowing
capacity.
During 2011, Seaboard invested $183.7 million in property, plant and equipment, of which $39.9 million was
expended in the Pork segment, $31.2 million in the Marine segment, $22.6 million in the Sugar segment and $84.0
million in the Power segment. The Pork segment expenditures were primarily for additional finishing barns, tractor-
trailers and improvements to existing facilities and related equipment. The Marine segment expenditures were
primarily for purchases of cargo carrying and handling equipment. In the Sugar segment, the capital expenditures
were primarily for the completion of the cogeneration plant with the remaining amount for normal upgrades to
existing operations. The cogeneration plant became fully operational in October 2011. The Power segment
expenditures were primarily used for the construction of a 106 megawatt power generating facility discussed above.
All other capital expenditures were of a normal recurring nature and primarily included replacements of machinery
and equipment, and general facility modernizations and upgrades.
During 2010, Seaboard invested $103.3 million in property, plant and equipment, of which $9.6 million was
expended in the Pork segment, $28.4 million in the Marine segment, $30.6 million in the Sugar segment, $31.7
million in the Power segment and $3.0 million in the remaining businesses. The capital expenditures for the Pork
segment were primarily for improvements to existing facilities and related equipment. Capital expenditures for the
Marine segment included $23.5 million spent to purchase cargo carrying and handling equipment. The capital
expenditures for the Sugar segment were primarily for construction of the cogeneration power plant with the
remaining capital expenditures for normal upgrades to existing operations. Capital expenditures for the Power
segment were primarily used for the construction of the power generation facility discussed above. 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.
Effective, January 1, 2012, Seaboard increased its ownership interest in PS International, LLC (PSI), a specialty
grain trading business located in Chapel Hill, North Carolina, from 50% to 70%. Accordingly, Seaboard began
consolidation accounting and discontinued the equity method of accounting for this entity. On December 31, 2012,
Seaboard increased its ownership from 70% to 85%. Total cash paid in 2012 for these two transactions, net of cash
acquired, was $3.2 million and $3.0 million, respectively. Seaboard initially acquired a 50% non-controlling interest
in PSI in late March 2010 for $7.7 million. During the fourth quarter of 2011, Seaboard provided a $35.0 million
line of credit to this then 50% owned, non-consolidated affiliate. See Note 4 to the Consolidated Financial
Statements for further discussion of these transactions.
On December 31, 2012, Seaboard provided a loan of $81.2 million to its non-consolidated affiliate, Butterball, LLC
(Butterball) to fund its purchase of assets from Gusto Packing Company, Inc. During the third quarter of 2011,
Seaboard provided a term loan of $13.0 million to Butterball. Also during the third quarter of 2011, Seaboard made
an additional capital contribution of $5.6 million in Butterball. On December 6, 2010, Seaboard acquired its 50
percent non-controlling voting interest in Butterball for a cash purchase price of $177.5 million. In connection with
this investment, Seaboard provided to Butterball $100.0 million of subordinated financing. See Note 4 to the
Consolidated Financial Statements for further discussion of these transactions.
In December 2011, Seaboard made an $8.5 million advance capital lease payment to begin operations in 2012 of a
flour mill in Ghana. In April, 2011, Seaboard closed the sale of its two power generating facilities in the Dominican
Republic for $73.1 million. See Note 13 to the Consolidated Financial Statements for further discussion.
During the fourth quarter of 2010, Seaboard acquired a 25 percent non-controlling interest in a commodity trading
business in Australia for $5.0 million. Also during the fourth quarter of 2010, Seaboard invested $10.5 million in a
newly-combined poultry business in Africa for a 50 percent non-controlling interest.
During the third quarter of 2010, Seaboard acquired a majority interest in a commodity origination, storage and
processing business in Canada for approximately $6.7 million. The assets acquired included cash of $1.2 million.
Also during the third quarter of 2010, Seaboard finalized an agreement to invest in a bakery to be built in the
Democratic Republic of Congo for a 50 percent non-controlling interest in this business. During 2012, 2011 and
2010, Seaboard invested $24.8 million, $11.4 million and $10.1 million, respectively, in equity and long-term
advances for a total of $46.3 million as of December 31, 2012 in this project. The bakery began operations in the
fourth quarter of 2012.
During 2010, Seaboard agreed to invest in various limited partnerships as a limited partner that are expected to
enable Seaboard to obtain certain low income housing tax credits over a period of approximately ten years. The
14 2012 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
total commitment is approximately $17.5 million. As of December 31, 2012, Seaboard had invested a total of $13.2
million in these partnerships with the remaining investment anticipated to be made in 2013.
Financing Activities, Debt and Related Covenants
The following table presents a summary of Seaboard’s available borrowing capacity as of December 31, 2012. At
December 31, 2012, there were no borrowings outstanding under the committed line of credit and borrowings under
the uncommitted lines of credit totaled $28.8 million, all related to foreign subsidiaries. Letters of credit reduced
Seaboard’s borrowing capacity under its committed and uncommitted credit lines by $40.0 million and $4.0 million,
respectively, primarily representing $18.4 million for Seaboard’s outstanding Industrial Development Revenue
Bonds (IDRBs) and $21.8 million related to various insurance coverage. In February 2013, Seaboard refinanced its
long-term committed credit facility for the same available amount and a maturity date of February 20, 2018. See
Note 8 to the Consolidated Financial Statements for further discussion.
(Thousands of dollars)
Long-term credit facility – committed
Short-term uncommitted demand notes
Total borrowing capacity
Amounts drawn against lines
Letters of credit reducing borrowing availability
Available borrowing capacity at December 31, 2012
Total amount
available
$
200,000
199,208
399,208
(28,786)
(43,948)
$
326,474
In December 2012, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective
January 14, 2013. As a result, $13.0 million of IDRBs were reclassified from long-term debt to current maturities of
long-term debt as of December 31, 2012. In June 2012, Seaboard’s committed line of credit was reduced from
$300.0 million to $200.0 million. On September 17, 2010, Seaboard entered into a credit agreement for $114.0
million at a fixed rate of 5.34% for the financing of the construction of the new power generating facility in the
Dominican Republic completed in 2012, as discussed above. The credit agreement will mature in December 2021
and is secured by the power generating facility. During 2012, 2011 and 2010, Seaboard borrowed $32.7 million,
$65.0 million, and $16.3 million respectively, from this credit agreement. See Note 8 to the Consolidated Financial
Statements for further discussion.
Seaboard has capacity under existing loan covenants to undertake additional debt financings of approximately
$1,533.4 million. As of December 31, 2012, Seaboard was in compliance with all restrictive covenants related to
these loans and facilities. 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 are $25.1 million, $11.6 million and $11.4 million over the three years ending
December 31, 2015. As of December 31, 2012, Seaboard had cash and short-term investments of $361.0 million,
additional total working capital of $745.2 million and a $200.0 million committed line of credit recently extended to
February 2018. 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 2013. Management does, however,
periodically review various alternatives for future financing to provide additional liquidity for future operating plans.
Management intends to continue seeking opportunities for expansion in the industries in which Seaboard operates,
utilizing existing liquidity, available borrowing capacity and other financing alternatives.
As of December 31, 2012, $160.1 million of the $361.0 million of cash and short-term investments were held by
Seaboard’s foreign subsidiaries and Seaboard could be required to accrue and pay taxes to repatriate these funds if
needed for Seaboard’s operations in the U.S. However, Seaboard’s intent is to permanently reinvest these funds
outside the U.S. and current plans do not demonstrate a need to repatriate them to fund Seaboard’s U.S. operations.
As of December 31, 2012, Seaboard believes its exposure to the current potential European sovereign debt problems
is not material. Seaboard monitors these exposures and currently does not believe there is a significant risk.
On October 19, 2012, the Board of Directors extended through October 31, 2015 the share repurchase program
initially approved on November 6, 2009. Seaboard used cash to repurchase 12,937, 5,282 and 20,879 shares of
2012 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
common stock at a total price of $26.8 million, $10.0 million and $30.0 million in 2012, 2011 and 2010,
respectively. See Note 12 to the Consolidated Financial Statements for further discussion.
In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock which
represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per year). Seaboard
does not currently intend to declare any further dividends for the years 2013-2016. Seaboard did not declare or pay
any dividends in 2011. In 2010, Seaboard declared and paid dividends of $9.00 per share on the common stock,
which included a prepayment of the annual 2011 and 2012 dividends ($3.00 per share per year).
Contractual Obligations and Off-Balance Sheet Arrangements
The following table provides a summary of Seaboard’s contractual cash obligations as of December 31, 2012.
(Thousands of dollars)
Vessel time and voyage-charter commitments
Contract grower finishing agreements
Other operating lease payments
Total lease obligations
Long-term debt
Other long-term liabilities
Short-term notes payable
Other purchase commitments
Total contractual cash obligations
Total
1-3
years
Less than
1 year
$ 264,569 $ 77,846 $ 66,840
20,845
31,092
118,777
22,953
7,907
-
302,201
Payments due by period
3-5
years
$ 38,014
19,828
28,749
86,591
22,800
11,928
-
156,883
61,797
251,933
578,299
145,963
83,625
28,786
1,592,392
11,883
19,583
109,312
25,138
3,597
28,786
1,128,819
More than
5 years
$ 81,869
9,241
172,509
263,619
75,072
60,193
-
4,489
and commitments
$ 2,429,065 $1,295,652 $ 451,838
$ 278,202
$ 403,373
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 non-cancelable
operating lease agreements. Seaboard guarantees to third parties were not material as of December 31, 2012. See
Note 11 to the Consolidated Financial Statements for a further discussion and for a more detailed listing of other
purchase commitments.
Other long-term liabilities in the table above represent expected benefit payments for various non-qualified pension
plans and supplemental retirement arrangements as discussed in Note 10 to the Consolidated Financial Statements,
which are unfunded obligations that are deemed to be employer contributions. No contributions are planned at this
time to the two qualified pension plans. Non-current deferred income taxes and certain other long-term liabilities on
the Consolidated Balance Sheets are not included in the table above as management is unable to reliably estimate the
timing of the payments for these items. In addition, deferred revenues and other deferred credits included in other
long-term liabilities on the Consolidated Balance Sheets have been excluded from the table above since they do not
represent contractual obligations.
RESULTS OF OPERATIONS
Net sales for the years ended December 31, 2012, 2011 and 2010 were $6,189.1 million, $5,746.9 million and
$4,385.7 million, respectively. The increase in net sales for 2012 compared to 2011 primarily reflected higher sales
for commodity trading and increased sales volume from the start-up of the new power generating facility in March
2012. Partially offsetting the increase was lower domestic sales prices for pork products sold. The increase in net
sales for 2011 compared to 2010 primarily reflected increased prices for and volumes of commodities traded and
also an increase in overall sale prices for pork products.
Operating income for the years ended December 31, 2012, 2011 and 2010 were $309.7 million, $407.2 million and
$321.1 million, respectively. The decrease for 2012 compared to 2011 primarily reflects lower domestic sales prices
for pork products sold and, to a lesser extent, higher feed costs and a one-time gain on sale of power generating
16 2012 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
facilities of $52.9 million recognized in 2011. Partially offsetting the decrease was higher operating income from
the start-up of the new power generating facility in March 2012 and lower costs along with higher rates for the
Marine segment. The increase for 2011 compared to 2010 reflects a one-time gain on sale of power generating
facilities of $52.9 million recognized in 2011. The increase also reflected $33.8 million fluctuation of marking to
market Commodity Trading and Milling derivative contracts, as discussed below, higher sugar prices and higher
pork prices. The increases were partially offset by write-downs of $15.4 million in 2011 for certain grain
inventories for customer contract performance issues as discussed below and declining performance in the Marine
segment from higher operating costs.
Pork Segment
(Dollars in millions)
Net sales
Operating income
2012
$ 1,638.4
122.6
$
2011
$ 1,744.6
259.3
$
2010
$ 1,388.3
213.3
$
Net sales for the Pork segment decreased $106.2 million for the year ended December 31, 2012 compared to 2011.
The decrease primarily reflected lower domestic sales prices for pork products and, to a lesser extent, lower export
sales volume for pork products sold.
Operating income decreased $136.7 million for the year ended December 31, 2012 compared to 2011. The decrease
was primarily a result of lower prices for domestic pork products sold as noted above and, to a lesser extent, higher
feed costs. Partially offsetting the decrease was a $5.6 million impairment charge incurred during the third quarter
of 2011 related to the ham boning plant in Mexico, which resulted in a decrease in operating income for 2011as
noted below.
Management is unable to predict future market prices for pork products or the cost of feed. However, management
anticipates positive operating income for this segment in 2013. Also, see Note 13 to the Consolidated Financial
Statements for discussion of a one-time credit of approximately $11.3 million for Federal blender’s credits that will
be recognized as revenues in the first quarter of 2013.
Net sales for the Pork segment increased $356.3 million for the year ended December 31, 2011 compared to 2010.
The increase primarily reflected an increase in overall sales prices for pork products and, to a lesser extent, increased
sales prices for and volume of biodiesel, and also higher volume of pork products sold.
Operating income for the Pork segment increased $46.0 million for the year ended December 31, 2011 compared to
2010. The increase was primarily a result of higher sales prices and, to a lesser extent, higher volumes of pork
products sold and an increase in payments received from the U.S. Government for biodiesel production in 2011
compared to 2010. Partially offsetting the increase was higher feed costs primarily from higher corn prices and, to a
lesser degree, higher costs for hogs purchased from third parties and the impact of using the LIFO method for
determining certain inventory costs. LIFO decreased operating income $33.7 million in 2011 compared to $1.3
million in 2010 primarily as a result of higher costs to purchase corn during 2011. Also, during the third quarter of
2011, a $5.6 million impairment charge was incurred related to the ham boning plant in Mexico. See Note 13 to the
Consolidated Financial Statements for further discussion of the impairment charge.
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 affiliates
2012
$ 3,023.5
2011
$ 2,689.8
2010
$ 1,808.9
$
$
$
71.9
0.9
72.8
10.5
$
$
$
43.2
(16.6)
26.6
13.4
$
$
$
34.4
17.2
51.6
21.0
Net sales for the Commodity Trading and Milling segment increased $333.7 million for the year ended December
31, 2012 compared to 2011. The increase was primarily the result of the consolidation of PSI discussed above,
partially offset by lower sales volumes to non-consolidated affiliates. Also in 2011, $101.1 million in net sales were
recognized related to previously deferred costs and deferred revenues under contracts for which the final sale prices
were not fixed and determinable until the first quarter of 2011.
2012 Annual Report 17
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
Operating income increased $28.7 million for the year ended December 31, 2012, compared to 2011. The increase
primarily reflected higher margins on commodity sales to third parties and net-write-downs of $15.4 million in 2011
for certain grain inventories for customer contract performance issues. Partially offsetting the increase was the
$17.5 million fluctuation of marking to market the derivative contracts in 2012, as discussed below. Excluding the
effects of these derivative contracts, operating income increased $46.2 million for 2012 compared to 2011.
As worldwide commodity price fluctuations cannot be predicted, management is unable to predict the level of future
sales. 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 for
this segment. However, management anticipates positive operating income for this segment in 2013, excluding the
potential effects of marking to market derivative contracts, although lower than 2012.
Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this
segment in 2012 would have been higher by $0.9 million and $17.2 million in 2010, respectively, and in 2011 would
have been lower by $16.6 million. While management believes its commodity futures and options and foreign
exchange contracts 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. As
products are delivered to customers, these existing mark-to-market adjustments should be primarily offset by
realized margins or losses as revenue is recognized over time and thus, these mark-to-market adjustments could
reverse in fiscal 2013. Management believes eliminating these adjustments, as noted in the table above, provides a
more reasonable presentation to compare and evaluate period-to-period financial results for this segment.
Income from affiliates for the year ended December 31, 2012 decreased by $2.9 million from 2011. Based on the
uncertainty of local political and economic environments in the countries in which the flour and feed mills operate,
management cannot predict future results.
Net sales for the Commodity Trading and Milling segment increased $880.9 million for the year ended December
31, 2011 compared to 2010. The increase was primarily the result of increased prices for wheat and corn, and
increased volumes of commodities sold to both third parties and non-consolidated affiliates. In addition, $101.1
million in net sales were recognized in the first quarter of 2011 related to previously deferred costs and deferred
revenues under contracts for which the final sale prices were not fixed and determinable until the first quarter of
2011.
Operating income increased $8.8 million for the year ended December 31, 2011, compared to 2010. The increase
primarily reflects the $33.8 million fluctuation of marking to market the derivative contracts in 2011, as discussed
above. Excluding the effects of these derivative contracts, operating income decreased $25.0 million for 2011
compared to 2010. The decrease was primarily the result of certain grain inventory write-downs of $15.4 million in
2011 for various customer contract performance issues. The decrease was also the result of, but to a lesser extent,
higher selling, general and administrative expenses primarily from higher personnel costs and bad debt expense.
Income from affiliates for the year ended December 31, 2011 decreased by $7.6 million from 2010. The decrease
primarily represents unfavorable market conditions for certain affiliates. Partially offsetting this decrease was a $5.1
million gain (Seaboard’s proportionate share) recognized in the fourth quarter of 2011 as a result of Seaboard’s non-
consolidated affiliate in Haiti’s final insurance settlement for the 2010 earthquake.
Marine Segment
(Dollars in millions)
Net sales
Operating income (loss)
2012
$ 969.6
26.1
$
2011
928.5
(3.9)
$
$
2010
$ 853.6
47.6
$
Net sales for the Marine segment increased $41.1 million for the year ended December 31, 2012, compared to 2011.
The increase was primarily the result of higher volumes and, to a lesser extent, increased rates in certain markets
served during 2012 compared to 2011.
Operating income increased by $30.0 million for the year ended December 31, 2012, compared to 2011. The
increase was primarily the result of lower cost on a per unit shipped basis particularly for charter hire and trucking.
Also, but to a lesser extent, the increases were the result of higher rates as noted above. Management cannot predict
18 2012 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
changes in future cargo volumes and cargo rates or to what extent changes in economic conditions in markets served
will affect net sales or operating income during 2013. However, management anticipates positive operating income
for this segment in 2013.
Net sales of the Marine segment increased $74.9 million for the year ended December 31, 2011, compared to 2010
primarily as the result of increased rates in most markets served during 2011 and, to a lesser extent, higher cargo
volumes as economic activity generally increased in 2011 compared to 2010.
Operating income decreased by $51.5 million for the year ended December 31, 2011, compared to 2010. The
decrease was primarily the result of cost increases for fuel, trucking and charter hire on a per unit shipped basis.
Partially offsetting the decrease was higher cargo rates as discussed above.
Sugar Segment
(Dollars in millions)
Net sales
Operating income
Income from affiliates
2012
$ 288.3
60.2
$
0.1
$
2011
259.8
65.1
0.4
$
$
$
2010
$ 196.0
31.7
$
1.0
$
Net sales for the Sugar segment increased $28.5 million for the year ended December 31, 2012 compared to 2011.
The increase primarily reflects increased volumes of sugar produced and sold and, to a lesser extent, higher sales
prices for alcohol and increased sales volumes of alcohol. Partially offsetting the increase was lower sales prices for
sugar. Management cannot predict sugar and alcohol prices for 2013.
Operating income decreased $4.9 million for the year ended December 31, 2012 compared to 2011. The decrease
primarily represents lower income from sugar sales as a result of lower sale prices for sugar purchased from third
parties for resale and, to a lesser extent, higher selling and administrative personnel costs. Partially offsetting this
decrease was higher sales prices for alcohol as noted above. Management anticipates positive operating income for
this segment in 2013, although lower than 2012.
Net sales of the Sugar segment increased $63.8 million for the year ended December 31, 2011 compared to 2010.
The increase primarily reflects increased domestic sugar prices partially offset by lower volumes.
Operating income increased $33.4 million for the year ended December 31, 2011 compared to 2010. The increase
primarily represents higher margins resulting from the increase in sugar prices discussed above.
Power Segment
(Dollars in millions)
Net sales
Operating income
2012
$ 255.4
55.0
$
2011
$ 111.4
60.8
$
2010
$ 124.0
$ 13.4
Net sales for the Power segment increased $144.0 million for the year ended December 31, 2012 compared to 2011.
The increase primarily reflected increased volumes from the start-up of the new power generating facility in March
2012.
Operating income decreased $5.8 million for the year ended December 31, 2012 compared to 2011. The decrease
primarily reflected the one-time gain on sale of power generating facilities of $52.9 million recognized in operating
income during 2011 as referenced below. Partially offsetting this decrease was increased volumes discussed above
and, to a lesser extent, lower fuel cost per kilowatt hour generated as a result of using natural gas for a portion of
production at the new power generating facility. See Note 13 to the Consolidated Financial Statements for the sale
of certain assets of this business in April 2011, subsequent leasing of one power generating facility and the
construction of a new replacement power generating facility.
Management anticipates that sales volumes will be higher for 2013 as a result of the start-up of the new power
generating facility in March 2012. Management cannot predict future fuel costs or the extent to which rates will
fluctuate compared to fuel costs. However, management anticipates positive operating income for this segment in
2013, although lower than 2012.
Net sales of the Power segment decreased $12.6 million for the year ended December 31, 2011 compared to 2010
primarily reflected lower production levels, partially offset by higher rates. The lower production levels are the
2012 Annual Report 19
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
result of the sale of the power generating facilities as noted below which eliminated production for part of April
2011 and also because only one of the two facilities was subsequently leased and operated. The higher rates were
attributable primarily to higher fuel costs, a component of pricing.
Operating income increased $47.4 million for the year ended December 31, 2011 compared to 2010. This increase
was primarily a result of the gain on sale of power generating facilities of $52.9 million, partially offset by lower
production levels discussed above.
Turkey Segment
(Dollars in millions)
Income (loss) from affiliate
2012
$ 20.2
2011
$ 12.7
2010
$ (1.0)
The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball. The
increase in income from affiliate for 2012 compared to 2011 was primarily the result of higher sale prices for certain
products and, to a lesser extent, higher volumes. Partially offsetting the increase was higher feed cost. See Note 4
to the Consolidated Financial Statements for discussion of Seaboard’s investment in Butterball, which occurred on
December 6, 2010. Accordingly, the loss from affiliate for 2010 above represents the period from December 6,
2010 to December 31, 2010. During the third quarter of 2011, management of Butterball announced the closing of
its Longmont, Colorado facilities by December 31, 2011, resulting in an impairment of fixed assets charge and
accrued severance charges. Seaboard’s proportionate share of these charges in the second half of 2011 was $3.0
million recognized in income from affiliate for 2011. As management is still attempting to sell this facility,
additional impairment charges to earnings are possible in the future. On December 31, 2012, Butterball purchased
the assets of Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.
Management anticipates positive income for this segment in 2013, excluding the potential effects of marking to
market commodity derivative contracts and interest rate exchange agreements, although lower than 2012.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the year ended December 31, 2012 increased by $30.7
million over 2011 to $251.4 million. This increase was primarily the result of increased personnel costs in most
segments, the consolidation of PSI on January 1, 2012 discussed above and, to a lesser extent, higher costs related to
Seaboard’s deferred compensation programs (which are offset by the mark-to-market investments recorded in Other
Investment Income, Net discussed below). As a percentage of revenues, SG&A increased to 4.1% for 2012
compared to 3.8% for 2011.
Selling, general and administrative (SG&A) expenses for the year ended December 31, 2011 increased by $15.8
million over 2010 to $220.7 million. This increase was primarily the result of increased personnel costs in most
segments partially offset by lower costs related to Seaboard’s deferred compensation programs (which are offset by
the mark-to-market investments recorded in Other Investment Income, Net discussed below). As a percentage of
revenues, SG&A decreased to 3.8% for 2011 compared to 4.7% for 2010 primarily as a result of increased sales in
the Commodity Trading and Milling and Pork segments.
Interest Expense
Interest expense totaled $11.0 million, $6.9 million and $5.6 million for the years ended December 31, 2012, 2011
and 2010, respectively. Interest expense increased for 2012 compared to 2011, which primarily reflected lower
capitalized interest during 2012 compared to the same periods in 2011 related to the construction of the cogeneration
plant completed in the fourth quarter of 2011 and the new power generating facility completed in March 2012.
Interest expense increased for 2011 compared to 2010, primarily from higher average interest rates on total
borrowings outstanding.
Interest Income from Affiliates
Interest income from affiliates totaled $20.6 million, $17.8 million and $1.5 million for the years ended December
31, 2012, 2011 and 2010, respectively. The increase for 2012 compared to 2011 primarily represented increased
interest from notes receivable from Butterball in 2012 compared to 2011. The increase for 2011 compared to 2010
primarily represented interest from notes receivable from Butterball. Seaboard invested in Butterball in December
2010, as noted above.
Other Investment Income, Net
Other investment income, net totaled $8.5 million, $0.2 million and $14.1 million for the years ended December 31,
2012, 2011 and 2010, respectively. The increase for 2012 compared to 2011 primarily reflected a gain of $4.1
20 2012 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
million in 2012 compared to a loss of $1.6 million in 2011 from the mark-to-market value of Seaboard’s investments
related to the deferred compensation programs. The decrease for 2011 compared to 2010 primarily reflected a loss
of $1.6 million in 2011 compared to a gain of $4.2 million in 2010 from the mark-to-market value of Seaboard’s
investments related to the deferred compensation programs and realized gains of $0.7 million on short-term
investments in 2011 compared to $6.6 million of realized gains for 2010. Other investment income for 2010 also
included $2.2 million in syndication fees recognized from the Butterball investment transaction.
Foreign Currency Gains, Net
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. 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 primarily related to the South African rand and the
Euro Zone euro. Management believes these 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.
Miscellaneous, Net
Miscellaneous, net totaled $(3.0) million, $(13.1) million and $(0.4) million for the years ended December 31, 2012,
2011 and 2010, respectively. Miscellaneous, net included losses on interest rate exchange agreements of $5.1
million, $14.5 million and $1.3 million in 2012, 2011 and 2010, respectively.
Income Tax Expense
The effective tax rate for 2012 is comparable to prior years even though the mix of domestic and foreign earnings
has fluctuated. This is primarily the result of lower domestic taxable earnings offset by the Power segment being
taxable for the majority of 2012 compared to being non-taxable in prior years, including the gain on sale of power
generating facilities in the second quarter of 2011. See Note 7 to the Consolidated Financial Statements for
discussion of a one-time tax benefit from the American Taxpayer Relief Act of 2012 on income taxes in the first
quarter of 2013.
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.
Management does not believe its businesses have been materially adversely affected by 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 estimates 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 ($417.9 million or 57% at December 31, 2012), including foreign receivables due from affiliates
($120.9 million at December 31, 2012), which generally represent more of a collection risk than its domestic
receivables. Receivables due from affiliates are generally associated with entities located in foreign countries
considered lesser developed than the U.S., which can experience conditions causing sudden changes to their ability
2012 Annual Report 21
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
to repay such receivables on a timely basis or in full. 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, 2012, 2011 and 2010 was $3.1 million, $4.4 million
and $2.8 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 decreased future margins on the sale of inventory. See
Note 13 to the Consolidated Financial Statements for further discussion on the Commodity Trading and Milling
segment and its $15.4 million write-down of inventories in 2011.
Impairment of Long-Lived Assets – At each balance sheet date, long-lived assets, primarily property, plant and
equipment, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount
may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of the asset to future net cash flows expected to be generated by the asset group. If such assets are
considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Some of the key assumptions utilized in determining future
projected cash flows include estimated growth rates, expected future sales prices and estimated costs. In some cases,
judgment is also required in assigning probability weighting to the various future cash flow scenarios. The
probability weighting percentages used and the various future projected cash flow models prepared by management
are based on facts and circumstances existing at the time of preparation and management’s best estimates and
judgment of future operating results. Seaboard cannot predict the occurrence of certain future events that might
adversely affect the reported value of long-lived assets, which include, but are not limited to, a change in the
business climate, government incentives, a negative change in relationships with significant customers, and changes
to strategic decisions made in response to economic and competitive conditions. Changes in these facts,
circumstances and management’s estimates and judgment could result in an impairment of fixed assets resulting in a
material charge to earnings. See Note 5 to the Consolidated Financial Statements for further discussion on the Pork
Segment and its $5.6 million impairment charge recorded in cost of sales in 2011 related to its ham-boning and
processing plant in Mexico.
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 possible. In performing its annual
evaluation, management first performs a qualitative assessment to determine if it is more likely than not that the fair
value of the reporting unit is less than its carrying value. If management cannot reasonably conclude it is more
likely that fair value exceeds carrying value, then a two-step quantitative test for impairment is performed for the
reporting unit. Otherwise, Seaboard concludes that no impairment is indicated and does not perform the two-step
test. The qualitative assessment requires management to make judgments in identifying the key drivers used in the
fair value measurement for each indefinite-live asset. Management then has to assess the current potential impact of
the factors identified on the fair value and consider any events that impact the carrying amount of the asset. In those
situations where it is determined to perform a two-step quantitative test for impairment, management then has 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
22 2012 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
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. At December 31, 2012, Seaboard had goodwill of $43.2
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, 2012, Seaboard has deferred tax assets of $119.9 million, net of the valuation allowance of
$11.8 million, and deferred tax liabilities of $129.3 million. For the years ended December 31, 2012, 2011 and 2010,
income tax expense included $(22.4) million, $(1.9) million and $13.4 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
assets by 50 basis points would be an increase in pension expense of approximately $2.5 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 percent corridor and, therefore, could affect
Seaboard’s recognized pension expense in such future periods, as permitted under U.S. GAAP. Accordingly,
accumulated gains or losses in excess of the 10 percent corridor are amortized over the average future service of
active participants. See Note 10 to the Consolidated Financial Statements for further discussion of management’s
assumptions.
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, foreign currency exchange rates and interest rates. Derivatives are used to
manage these overall market risks; however, 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. Seaboard
also enters 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, oilseed and other commodities 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 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 bio-energy margins. Inventories
that are sensitive to changes in commodity prices, including carrying amounts at December 31, 2012 and 2011, are
presented in Note 3 to the Consolidated Financial Statements. Raw material requirements, finished product sales and
firm sales commitments are also sensitive to changes in commodity prices.
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.
During 2010, Seaboard entered into four ten-year interest rate exchange agreements which involve the exchange of
2012 Annual Report 23
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
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. In September 2012,
Seaboard terminated one interest rate exchange agreement with a notional value of $25.0 million. Seaboard pays a
fixed rate and receives a variable rate of interest on three notional amounts of $25.0 million each. While Seaboard
has certain variable rate debt, these interest rate exchange agreements do not qualify as hedges for accounting
purposes. Accordingly, the changes in fair value of these agreements are recorded in Miscellaneous, net in the
Consolidated Statements of Comprehensive Income.
The following table presents the sensitivity of the fair value of Seaboard’s open net commodity future and option
contracts, foreign currency contracts and interest rate exchange agreements to a hypothetical 10 percent change in
market prices or in foreign exchange rates and interest rates as of December 31, 2012 and December 31, 2011. 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
Sugar
Energy related resources
Dry dairy products
Foreign currencies
Interest rates
December 31, 2012
December 31, 2011
$
8,296
1,955
639
165
22
28,457
892
$
6,628
201
-
478
-
17,885
1,393
The table below provides information about Seaboard's non-trading financial instruments sensitive to changes in
interest rates at December 31, 2012. For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates. At December 31, 2012, long-term debt included foreign
subsidiary obligations of $102.6 million payable in U.S. dollars and $0.2 million payable in Argentine pesos. At
December 31, 2011, long-term debt included foreign subsidiary obligations of $81.3 million payable in U.S. dollars
and $0.2 million payable in Argentine pesos. 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)
2013
2014
2015
2016
2017
Thereafter
Total
Long-term debt:
Fixed rate
Average interest rate
Variable rate
Average interest rate
$11,956
5.83%
$13,182
1.56%
$11,553
5.48%
$
-
-
$11,400
5.34%
-
$
-
$11,400
5.34%
-
$
-
$11,400 $46,272 $ 103,981
5.50%
5.34%
5.48%
$28,800 $ 41,982
-
$
1.50%
1.47%
-
Non-trading financial instruments sensitive to changes in interest rates at December 31, 2011 consisted of fixed rate
long-term debt totaling $115.2 million, with an average interest rate of 5.95 percent and variable rate long-term debt
totaling $42.0 million, with an average interest rate of 1.61 percent.
24 2012 Annual Report
S E A B O A R D C O R P O R A T I O N
Management’s Reports
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 independent registered
public accounting firm have unrestricted access to the audit committee, with or without the presence of
management.
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, 2012.
Seaboard’s independent registered 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.
2012 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
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, 2012 and 2011 and the related consolidated statements of comprehensive income,
changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2012. 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, 2012 and 2011, and the results of
their operations and their cash flows for each of the years in the three-year period ended December 31, 2012, 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, 2012, based on criteria
established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO), and our report dated February 27, 2013 expressed an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting.
Kansas City, Missouri
February 27, 2013
26 2012 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
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, 2012, 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 (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) 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 (iii) 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, 2012, 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, 2012 and
2011, and the related consolidated statements of comprehensive income, changes in equity and cash flows for each
of the years in the three-year period ended December 31, 2012, and our report dated February 27, 2013 expressed an
unqualified opinion on those consolidated financial statements.
Kansas City, Missouri
February 27, 2013
2012 Annual Report 27
S E A B O A R D C O R P O R A T I O N
Consolidated Statements of Comprehensive Income
(Thousands of dollars except per share amounts)
Net sales:
Products (includes sales to affiliates
of $747,064, $808,834 and $500,265)
Service revenues
Other
Total net sales
Cost of sales and operating expenses:
Products
Services
Gain on sale of power generating facilities
Other
Total cost of sales and operating expenses
Gross income
Selling, general and administrative expenses
Operating income
Other income (expense):
Interest expense
Interest income
Interest income from affiliates
Income from affiliates
Other investment income, net
Foreign currency gains, net
Miscellaneous, net
Total other income, net
Earnings before income taxes
Income tax expense
Net earnings
Less: Net loss (income) attributable to noncontrolling interests
Net earnings attributable to Seaboard
2012
Years ended December 31,
2011
2010
$
4,916,322
$
4,666,172
$
3,354,348
1,015,481
257,330
6,189,133
4,536,582
896,062
-
195,431
5,628,075
561,058
251,397
309,661
969,339
111,391
5,746,902
4,196,360
879,199
(52,923)
96,383
5,119,019
627,883
220,679
407,204
907,320
124,034
4,385,702
2,980,606
775,637
-
103,465
3,859,708
525,994
204,928
321,066
(11,049)
11,050
20,570
30,707
8,461
352
(2,974)
57,117
366,778
(84,190)
282,588
(277)
282,311
$
$
(6,868)
10,004
17,826
26,621
249
651
(13,079)
35,404
442,608
(99,051)
343,557
2,290
345,847
$
$
(5,632)
11,088
1,543
20,965
14,145
1,254
(384)
42,979
364,045
(81,033)
283,012
599
283,611
$
$
Earnings per common share
$
234.54
$
284.66
$
231.69
Other comprehensive income (loss), net
of income tax benefit of $9,197, $12,604 and $5,443:
Foreign currency translation adjustment
Unrealized gain on investments
Unrealized loss on cash flow hedges
Unrecognized pension cost
Other comprehensive loss, net of tax
Comprehensive income
Less: Comprehensive loss (income) attributable to
the noncontrolling interest
Comprehensive income attributable to Seaboard
Average number of shares outstanding
Dividends declared per common share
(15,788)
2,543
(113)
(2,121)
$
(15,479)
267,109
(279)
266,830
$
1,203,698
$
12.00
(12,389)
(756)
-
(19,013)
$
(32,158)
311,399
2,351
313,750
$
1,214,934
$
-
(3,704)
(2,134)
-
(3,283)
$
(9,121)
273,891
599
274,490
$
1,224,092
$
9.00
See accompanying notes to consolidated financial statements.
28 2012 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 affiliates
Other
Allowance for doubtful accounts
Net receivables
Inventories
Deferred income taxes
Other current assets
Total current assets
Net property, plant and equipment
Investments in and advances to affiliates
Notes receivable from affiliate
Goodwill
Other intangible assets, net
Other assets
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
Deferred revenue from affiliates
Accrued voyage costs
Accrued commodity inventory
Other accrued liabilities
Total current liabilities
Long-term debt, less current maturities
Deferred income taxes
Accrued pension liability
Other liabilities and deferred credits
Total non-current liabilities
Commitments and contingent liabilities
Stockholders' equity:
Common stock of $1 par value. Authorized 1,250,000 shares;
issued and outstanding 1,197,660 and 1,210,597 shares
Accumulated other comprehensive loss
Retained earnings
Total Seaboard stockholders' equity
Noncontrolling interests
Total equity
Total Liabilities and Stockholders' Equity
December 31,
2012
2011
$
47,651
313,379
$
71,510
323,256
367,321
124,006
42,696
534,023
(12,131)
521,892
756,864
24,586
118,391
1,782,763
843,879
410,542
202,931
43,218
19,843
44,605
3,347,781
$
$
28,786
25,138
217,041
127,141
53,811
24,131
47,674
46,509
106,344
676,575
120,825
33,929
127,837
80,426
363,017
280,279
126,616
81,255
488,150
(10,941)
477,209
644,930
23,203
91,934
1,632,042
796,822
364,840
110,903
40,628
19,496
41,997
3,006,728
$
$
16,219
40,885
151,869
114,323
29,147
27,806
46,399
54,357
80,404
561,409
116,367
66,300
106,673
76,512
365,852
1,198
(171,544)
2,474,896
2,304,550
3,639
2,308,189
3,347,781
$
1,211
(156,065)
2,233,778
2,078,924
543
2,079,467
3,006,728
$
See accompanying notes to consolidated financial statements.
2012 Annual Report 29
S E A B O A R D C O R P O R A T I O N
Consolidated Statements of Cash Flows
(Thousands of dollars)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to cash
from operating activities:
Depreciation and amortization
Gain on sale of power generating facilities
Gain from sale of fixed assets
Fixed asset impairment charge
Deferred income taxes
Pay-in-kind interest and accretion on note receivable from affiliate
Income from affiliates
Dividends received from affiliates
Other investment income, net
Foreign currency exchange gain
Other
Changes in assets and liabilities, net of 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 sale of short-term investments
Proceeds from the maturity of short-term investments
Short-term note receivable issued to affiliate, net
Investments in and advances to affiliates, net
Capital expenditures
Proceeds from the sale of fixed assets
Proceeds from the sale of power generating facilities
Advance payment on capital lease
Long-term notes receivable issued to affiliate
Principal payments received on long-term notes receivable from affiliate
Proceeds from syndication and subordinated loan fees
Sale (purchase) of long-term investments
Acquisition of business, net of cash acquired
Other, net
Net cash from investing activities
Cash flows from financing activities:
Notes payable to banks, net
Proceeds from the issuance of long-term debt
Principal payments of long-term debt
Repurchase of common stock
Dividends paid
Partial purchase of noncontrolling interest in a consolidated subsidiary
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
Cash and cash equivalents at end of year
Years ended December 31,
2011
2010
2012
$
282,588
$
343,557
$
283,012
90,216
-
(8,710)
-
(24,560)
(11,936)
(30,707)
785
(8,461)
(244)
3,614
(66,583)
(64,943)
(18,167)
93,246
25,565
261,703
(773,111)
755,141
36,693
-
(24,927)
(158,755)
15,906
-
-
(81,231)
1,139
-
(9,789)
(3,186)
849
(241,271)
81,223
(52,923)
(1,566)
5,600
(1,558)
(10,584)
(26,621)
1,813
(249)
(336)
829
(88,434)
(118,731)
85,856
(36,875)
38,995
219,996
(233,431)
220,823
19,255
(30,096)
(18,533)
(183,748)
4,882
59,603
(8,493)
(13,037)
2,827
-
(4,696)
-
1,394
(183,250)
86,802
-
(2,555)
-
12,506
(695)
(20,965)
1,843
(14,145)
(140)
1,005
(86,205)
(40,053)
(2,570)
107,482
14,490
339,812
(687,335)
695,384
69,534
-
(217,578)
(103,336)
7,655
-
-
(100,000)
-
6,525
552
(5,578)
1,140
(333,037)
12,592
32,682
(43,947)
(26,830)
(14,376)
(3,045)
(36)
492
(42,468)
(1,823)
(23,859)
71,510
47,651
$
(62,510)
64,967
(1,476)
(9,971)
-
-
(148)
452
(8,686)
2,326
30,386
41,124
71,510
$
(2,535)
16,352
(2,179)
(29,994)
(10,963)
-
(36)
370
(28,985)
1,477
(20,733)
61,857
41,124
$
See accompanying notes to consolidated financial statements.
30 2012 Annual Report
S E A B O A R D C O R P O R A T I O N
Consolidated Statements of Changes in Equity
Accumulated
Other
Common Comprehensive
Stock
Loss
Retained
Earnings
Noncontrolling
Interest
$
1,237
$
(114,786)
$
1,655,222
$
3,746
Total
1,545,419
$
(Thousands of dollars except per share amounts)
Balances, January 1, 2010
Comprehensive income:
Net earnings
Other comprehensive loss, net of tax
Addition of noncontrolling interests
Dividends paid to noncontrolling interests
Repurchase of common stock
Dividends on common stock
Balances, December 31, 2010
Comprehensive income:
Net earnings
Other comprehensive loss, net of tax
Dividends paid to noncontrolling interests
Repurchase of common stock
Balances, December 31, 2011
Comprehensive income:
Net earnings
Other comprehensive loss, net of tax
Addition of noncontrolling interests
Dividends paid to noncontrolling interests
Repurchase of common stock
Dividends on common stock
Balances, December 31, 2012
283,611
(9,121)
(21)
1,216
(123,907)
(32,158)
(156,065)
(15,479)
(5)
1,211
(13)
(29,973)
(10,963)
1,897,897
345,847
(9,966)
2,233,778
282,311
(26,817)
(14,376)
2,474,896
$
See accompanying notes to consolidated financial statements.
(171,544)
$
$
1,198
(599)
(68)
(36)
3,043
(2,290)
(61)
(149)
543
277
2
2,853
(36)
$
3,639
283,012
(9,121)
(68)
(36)
(29,994)
(10,963)
1,778,249
343,557
(32,219)
(149)
(9,971)
2,079,467
282,588
(15,477)
2,853
(36)
(26,830)
(14,376)
2,308,189
$
2012 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 diverse global 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 also has an interest in turkey operations in the United States. Seaboard Flour
LLC and SFC Preferred LLC (Parent Companies) are the owners of 74.6 percent 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 inter-company balances and transactions have been eliminated in consolidation.
Investments in non-controlled affiliates are accounted for by the equity method. Financial information from certain
foreign subsidiaries and affiliates is reported on a one- to three-month lag, depending on the specific entity.
Short-Term Investments
Short-term investments are retained for future use in the business and may include money market funds, corporate
bonds, U.S. government obligations, mutual funds, mortgage-backed and municipal debt securities and, on a limited
basis, high yield bonds, domestic equity securities and foreign government bonds. 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 Statements of Comprehensive Income. 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 in certain countries due to local market 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.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and are being depreciated on the straight-line method over useful
lives, ranging from 3 to 30 years. Property, plant and equipment leases which are deemed to be installment purchase
obligations have been capitalized and included in the property, plant and equipment accounts. Routine and planned
major maintenance, repairs and minor renewals are expensed as incurred, while major renewals and improvements
are capitalized.
Impairment of Long-Lived Assets
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
32 2012 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
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.
Notes Receivable from Affiliate
Seaboard monitors the credit quality of notes receivable from its affiliate, Butterball, LLC (Butterball), by obtaining
and reviewing financial information for this affiliate on a monthly basis and by having Seaboard representatives
serve on the Board of Directors of Butterball.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-life intangible assets are assessed annually for impairment by each reporting unit 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. Based on the annual assessments conducted by each reporting unit during 2012, there were no
impairment charges recorded for the year ended December 31, 2012.
Accrued Self-Insurance
Seaboard is self-insured for certain levels of workers’ compensation, health care coverage, property damage and
general, vehicle and product recall liability. 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, 2012 and 2011 was $5,231,000 and $5,631,000, 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 Sheets, with the retirement
asset depreciated over the economic life of the related asset. The following table shows the changes in the asset
retirement obligation during 2012 and 2011:
(Thousands of dollars)
Beginning balance
Accretion expense
Liability for additional lagoons placed in service
Ending balance
Years ended December 31,
2011
$ 12,028
1,007
74
$ 13,109
2012
$ 13,109
1,090
116
$ 14,315
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 U.S. GAAP, Seaboard will recognize the benefit or cost of this change in the
future.
Revenue Recognition
As a result of a marketing agreement with Triumph Foods LLC (Triumph), Seaboard’s sales prices for its pork
products included in product revenues are primarily based on a margin sharing arrangement that considers the
2012 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
average sales price and mix of products sold from both Seaboard’s and Triumph’s hog processing plants. Seaboard
earns a fee for marketing the pork products of Triumph, and recognizes this fee as service revenue primarily based
on the number of head processed by Triumph. 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.
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. 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.
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. Significant items subject to such
estimates and assumptions include those related to allowance for doubtful accounts, valuation of inventories,
impairment of long-lived assets, goodwill and other intangible assets, income taxes and accrued pension liability.
Actual results could differ from those estimates.
Earnings Per Common Share
Earnings per common share are based upon the weighted average shares outstanding during the period. Basic and
diluted earnings per share are the same for all periods presented.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, management considers all demand deposits and overnight
investments as cash equivalents. The following table shows the amounts paid for interest and income taxes:
(Thousands of dollars)
Interest (net of amounts capitalized)
Income taxes (net of refunds)
Years ended December 31,
2012
$ 11,674
69,760
2011
2010
$
6,786
126,730
$
8,377
69,626
Included in property, plant and equipment is capitalized interest in the amount of $1,125,000, $6,723,000 and
$3,350,000 for 2012, 2011 and 2010, respectively.
Supplemental Non-Cash Transactions
As discussed in Note 4, as of December 31, 2012 and 2011, Seaboard had a note receivable from an affiliate which
accrues pay-in-kind interest income. Non-cash, pay-in-kind interest income and accretion of discount recognized on
this note receivable for the years ended December 31, 2012 and 2011 was $11,936,000 and $10,584,000,
respectively.
As discussed in Note 4, effective January 1, 2012, Seaboard began consolidation accounting and discontinued the
equity method of accounting for their investment in PS International, LLC (PSI) with Seaboard’s ownership interest
increasing from 50% to 70%. On December 31, 2012, Seaboard further increased its ownership from 70% to 85%.
Total cash paid during 2012 for these two transactions, net of cash acquired was $3,186,000 and $3,045,000,
respectively, and increased working capital by $14,209,000, fixed assets by $163,000, goodwill by $2,590,000,
intangible assets by $1,441,000, other long-term assets by $96,000, non-controlling interest by $2,853,000 and
decreased investment in and advances to affiliates by $9,415,000.
As discussed in Note 13, during the third quarter of 2010, Seaboard acquired a majority interest in a commodity
origination, storage and processing business in Canada. Total cash paid, net of cash acquired, was $5,578,000, and
increased working capital by $1,254,000, fixed assets by $4,637,000, other long-term assets in the amount of
$833,000, deferred tax liabilities by $896,000 and non-controlling interest by $250,000.
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
34 2012 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
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.
Seaboard’s Sugar segment, a consolidated subsidiary in Canada (Commodity Trading and Milling segment) and
seven non-controlled, non-consolidated affiliates (Commodity Trading and Milling segment businesses in Australia,
Colombia, Guyana, Kenya, Lesotho and Zambia), 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. For these entities, 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, interest rate exchange agreements. While management believes each of these instruments
primarily are entered into in order to effectively manage various market risks, as of December 31, 2012, none of the
derivatives are designated and accounted for as hedges, primarily as a result of the extensive record-keeping
requirements. Seaboard also enters into speculative derivative transactions related to its market risks.
Recently Adopted Accounting Standards
In May 2011, the Financial Accounting Standards Board (FASB) issued guidance to amend the requirements related
to fair value measurement which changed the wording used to describe many requirements in GAAP for measuring
fair value and for disclosing information about fair value measurements. Additionally, the amendments clarify the
FASB’s intent about the application of existing fair value measurement requirements. Seaboard adopted this
guidance on January 1, 2012. The adoption of this guidance did not have a material impact on Seaboard’s financial
position or net earnings.
In June 2011, the FASB issued guidance to revise the manner in which entities present comprehensive income in the
financial statements. The new guidance removed the footnote presentation option used by Seaboard in the past and
required entities to report components of comprehensive income in either a continuous statement of comprehensive
income or two separate but consecutive statements. Seaboard adopted this guidance in the first quarter of 2012. The
adoption of this guidance did not have an impact on Seaboard's financial position or net earnings.
In September 2011, the FASB issued guidance to allow entities the option of performing a qualitative assessment to
test goodwill for impairment. This guidance permits an entity to first perform a qualitative assessment to determine
whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If it is
concluded that this is the case, it is necessary to perform the currently prescribed two-step goodwill impairment test.
Otherwise, the two-step goodwill impairment test is not required. Seaboard adopted this guidance on January 1,
2012. The adoption of this guidance did not have an impact on Seaboard's financial position or net earnings.
In July 2012, the FASB issued guidance to allow entities the option of performing a qualitative assessment to test
indefinite-lived intangible assets for impairment. This guidance permits an entity to first perform a qualitative
assessment to determine whether it is more likely than not that the fair value of the intangible asset is less than its
carrying value. If it is concluded that this is the case, it is necessary to calculate the fair value of the intangible
asset. Otherwise, calculating the fair value of the intangible asset is not required. Early adoption is permitted and
2012 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
Seaboard adopted this guidance on June 30, 2012. The adoption of this guidance did not have an impact on
Seaboard's financial position or net earnings.
Note 2
Investments
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. At December 31, 2012 and 2011, amortized cost and
estimated fair market value were not materially different for these investments. At December 31, 2012 and 2011,
money market funds included $6,437,000 and $25,755,000 denominated in Euros, respectively, and at December 31,
2012 also included $2,620,000 denominated in British Pounds and $2,441,000 denominated in Canadian dollars. As
of December 31, 2012 and 2011, the trading securities primarily consisted of high yield debt securities. As of
December 31, 2012 and 2011, unrealized gains related to trading securities were $2,042,000 and $376,000,
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, 2012 and 2011:
(Thousands of dollars)
Money market funds
Corporate bonds
U.S. Government agency securities
Emerging markets debt mutual fund
U.S. Treasury securities
Collateralized mortgage obligations
Asset backed debt securities
Fixed rate municipal notes and bonds
Other
Total available-for-sale short-term investments
High yield trading debt securities
Emerging markets trading debt mutual funds
Emerging markets trading debt securities
Other trading investments
Total short-term investments
2012
Amortized
Cost
$ 126,537
67,275
23,647
17,693
17,165
15,059
12,180
Fair
Value
$ 126,537
69,214
23,775
18,734
17,169
15,162
12,238
-
-
279,556
21,839
3,046
2,361
1,262
$ 308,064
-
-
282,829
23,406
3,237
2,600
1,307
$ 313,379
Amortized
Cost
$ 139,420
88,589
9,720
17,693
4,848
14,915
3,533
17,718
1,480
297,916
20,155
2,620
2,444
218
$ 323,353
2011
Fair
Value
$ 139,420
89,146
9,757
16,399
4,905
15,011
3,533
17,788
1,484
297,443
20,750
2,487
2,355
221
$ 323,256
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, 2012:
(Thousands of dollars)
Due within one year
Due after one year through three years
Due after three years
Total fixed rate securities
2012
$ 2,587
52,411
60,721
$115,719
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 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.
36 2012 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 3
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, oilseeds and other commodities
Sugar produced and in process
Other
Total inventories at lower of FIFO cost or market
Grain, flour and feed at lower of weighted average cost or market
Total inventories
December 31,
2012
2011
$
258,638
31,495
290,133
(90,730)
199,403
317,573
65,986
73,606
457,165
100,296
756,864
$
$
228,624
29,426
258,050
(57,783)
200,267
251,839
78,730
63,449
394,018
50,645
644,930
$
The use of the LIFO method decreased 2012, 2011 and 2010 earnings by $20,098,000 ($16.70 per common share),
$20,556,000 ($16.92 per common share) and $780,000 ($0.64 per common share), respectively. If the FIFO method
had been used for certain inventories of the Pork segment, inventories would have been higher by $90,730,000 and
$57,783,000 as of December 31, 2012 and 2011, respectively.
Note 4
Investments in and Advances to Affiliates and Notes Receivable from Affiliate
Seaboard’s investments in and advances to non-controlled, non-consolidated affiliates are primarily related to
Butterball, as discussed below, and Commodity Trading and Milling segment businesses conducting flour, maize
and feed milling, baking operations and poultry production and processing. As of December 31, 2012, the location
and percentage ownership of these affiliates excluding Butterball are as follows: Democratic Republic of Congo
(50%), Lesotho (50%), Kenya (35%-49%), Nigeria (25%-48%), and Zambia (49%) in Africa; Colombia (40%) and
Ecuador (25%-50%) in South America, and Haiti (23%) in the Caribbean. Also, Seaboard has investments in grain
trading businesses in Australia (25%) and Peru (50%). Seaboard generally is the primary provider of choice for
grains, feed and supplies purchased by these non-controlled affiliates. As Seaboard conducts its commodity trading
business with third parties, consolidated subsidiaries and affiliates on an interrelated basis, cost of sales on 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.
On December 6, 2010, Seaboard Corporation acquired a 50% non-controlling voting interest in Butterball from
Maxwell Farms, LLC, Goldsboro Milling Company and GM Acquisition LLC (collectively, the Maxwell Group) for
a cash purchase price of $177,500,000. Butterball is a vertically integrated producer, processor and marketer of
branded and non-branded turkeys and other turkey products. Seaboard purchased its interest in Butterball from the
Maxwell Group after the Maxwell Group had reacquired a 49% interest held by Murphy-Brown, LLC
(Murphy-Brown), a subsidiary of Smithfield Foods, Inc. The other 50% ownership interest in Butterball continues
to be owned by the Maxwell Group. In connection with the purchase, Butterball also acquired the live turkey
growing and related assets of the Maxwell Group and of Murphy-Brown. As of December 31, 2012, Butterball had
intangible assets of $111,000,000 for trade name and $60,265,000 for goodwill. The equity method is used to
account for this investment.
2012 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
In connection with this transaction, Seaboard provided Butterball with a $100,000,000 unsecured subordinated loan
(the subordinated loan) with a seven-year maturity and interest of 15% per annum, comprised of 5% payable in cash
semi-annually, plus 10% pay-in-kind interest, compounded semi-annually which accumulates and is paid at
maturity. In connection with providing the subordinated loan, Seaboard received detachable warrants, which upon
exercise for a nominal price, would enable Seaboard to acquire an additional 5% equity interest in Butterball.
Seaboard can exercise these warrants at any time before December 6, 2020. Butterball has the right to repurchase the
warrants for fair market value. The warrant agreement essentially provides Seaboard with a 52.5% economic
interest, as these warrants are in substance an additional equity interest. Therefore, Seaboard recorded 52.5% of
Butterball’s earnings as Income from Affiliates in the Consolidated Statements of Comprehensive Income.
However, all significant corporate governance matters would continue to be shared equally between Seaboard and
Maxwell even if the warrants are exercised, unless Seaboard already owns a majority of the voting rights at the time
of exercise. The warrants qualify for equity treatment under accounting standards. Accordingly, as of December 6,
2010, the warrants were allocated a value of $10,586,000, classified as Investments in and Advances to Affiliates on
the Consolidated Balance Sheets, and the subordinated loan was allocated a discounted value of $89,414,000,
classified as Notes Receivable from Affiliate on the Consolidated Balance Sheets, of the total $100,000,000
subordinated financing discussed above. The discount on the subordinated loan is being accreted monthly in Interest
Income From Affiliate through the maturity date of December 6, 2017. Also as part of issuing the subordinated
loan, Seaboard received a $2,000,000 cash fee from Butterball as consideration for providing this financing that is
being amortized over the term of the subordinated loan. At December 31, 2012 and 2011, the recorded balance of
this Note Receivable from Affiliate was $112,629,000 and $100,693,000, respectively.
In addition, in connection with this transaction Seaboard arranged financing to refinance the existing Butterball debt
with third party lenders. For these services, in December 2010, Seaboard received a cash syndication fee from
Butterball of $4,525,000, net of arrangement fees paid to several banks who assisted with the third party financing.
Since Seaboard has a 52.5% economic interest in Butterball, Seaboard only recognized 47.5% of this net syndication
fee in December 2010 in Other Investment Income in the Consolidated Statements of Comprehensive Income. The
remaining net syndication fee is being amortized over the five year term of the related Butterball debt through
December 2015.
On December 31, 2012, Seaboard provided a loan of $81,231,000 to Butterball and is included in Notes Receivable
from Affiliate. This loan was made to fund Butterball’s purchase of assets from Gusto Packing Company, Inc., a
pork and turkey further processor located in Montgomery, Illinois. The interest rate on this loan is prime rate plus
2%. Although this loan currently cannot be paid off without the consent of Butterball’s third party lenders, it is
anticipated this loan could be repaid during 2013 as Butterball currently plans to renegotiate its third party financing
in 2013.
During the third quarter of 2011, Seaboard provided a term loan of $13,037,000 to Butterball to pay off capital
leases for certain fixed assets which originally were financed with third parties. The effective interest rate on this
term loan is approximately 12%. Although the term loan expires on January 31, 2018, Seaboard anticipates that
Butterball will pay off the term loan prior to such expiration date as Butterball is expected to sell all of the related
assets and is required to remit the proceeds from such sale to Seaboard to repay the loan. As of December 31, 2012
and 2011, the balance of the term loan included in Notes Receivable from Affiliate was $9,071,000 and
$10,210,000, respectively. Also, during the third quarter of 2011, Seaboard made an additional capital contribution
of $5,598,000 in Butterball to assist Butterball in its acquisition of certain live growing facilities. Maxwell Farms,
LLC, made an equal capital contribution.
In October 2010, Seaboard acquired for $5,000,000 a 25% non-controlling interest in a commodity trading business
in Australia. Also in October 2010, Seaboard combined its existing investment in poultry operations in Africa with
another existing African based poultry business. Seaboard invested an additional $10,500,000 in this
newly-combined poultry business, for a total investment of $16,988,000, which represents a 50% non-controlling
interest. This newly-combined business has operations primarily in Kenya and Zambia, and began operating in the
Democratic Republic of Congo in the first quarter of 2012. In the second quarter of 2011, Seaboard’s interest in this
business was reduced from 50% to 49%.
In 2010, Seaboard finalized an agreement to invest in a bakery to be built in the Democratic Republic of Congo for a
50% non-controlling interest in this business. During 2012, 2011 and 2010, Seaboard invested $24,814,000,
$11,397,000 and $10,080,000, respectively, in equity and long-term advances for a total of $46,291,000 as of
38 2012 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, 2012 in this project. The bakery began operations in the fourth quarter of 2012. Including this
investment, as of December 31, 2012 Seaboard had a total of $82,257,000 of investments in and advances to various
equity interests in the Democratic Republic of Congo, which represents the single largest foreign country risk
exposure for Seaboard’s equity method investments.
In March 2010, Seaboard acquired a 50% non-controlling interest in an international specialty grain trading
business, PSI, located in North Carolina for approximately $7,650,000. There was an initial payment of $6,000,000
made in March 2010, an additional payment of $990,000 in the fourth quarter of 2010, with the remaining $660,000
paid in the first half of 2011 upon verification of the balance sheet as of the date of closing and collection of certain
receivables outstanding. In the fourth quarter of 2011, Seaboard provided a $35,000,000 line of credit to PSI to pay
off a credit facility with third party banks used for working capital needs. As of December 31, 2011, Seaboard had a
due from affiliates receivable balance of $30,096,000 for amounts advanced under this line of credit. Effective
January 1, 2012, Seaboard began consolidation accounting and discontinued the equity method of accounting for
this investment in PSI with Seaboard’s ownership interest increasing from 50% to 70%. On December 31, 2012,
Seaboard further increased its ownership from 70% to 85%. Total cash paid for these two transactions in 2012, net
of cash acquired was $3,186,000 and $3,045,000, respectively. Pro forma results of operations are not presented, as
the effects of consolidation are not material to Seaboard’s results of operations.
Combined condensed financial information of the non-controlled, non-consolidated affiliates for their fiscal periods
ended within each of Seaboard’s years ended were as follows (the 2010 net sales and 2010 net income for the
Turkey segment below represent the period from December 6, 2010 to December 31, 2010):
Commodity Trading and Milling Segment
(Thousands of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
Sugar Segment
(Thousands of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
Turkey Segment
(Thousands of dollars)
Net sales
Net income (loss)
Total assets
Total liabilities
Total equity
2012
$1,510,101
$ 24,686
$ 862,992
$ 469,265
$ 393,727
2012
$ 12,107
194
$
8,865
$
2,839
$
6,026
$
2012
$1,437,376
$ 38,384
$ 871,945
$ 443,291
$ 428,654
December 31,
2011
1,750,714
33,058
864,802
480,328
384,474
December 31,
2011
12,880
950
10,743
3,851
6,892
2010
1,117,440
47,594
581,755
250,076
331,679
2010
20,132
2,064
10,248
3,791
6,457
December 31,
2011
1,375,751
24,250
819,618
428,361
391,257
2010
83,409
(1,901)
725,464
360,673
364,791
At December 31, 2012, Seaboard’s carrying value of certain of these investments in affiliates in the Commodity
Trading and Milling segment was $8,995,000 more than its share of the affiliate’s book value. The excess is
attributable primarily to the valuation of property, plant and equipment and intangible assets. The amortizable assets
are being amortized to earnings from affiliates over the remaining life of the assets.
2012 Annual Report 39
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Note 5
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
Net property, plant and equipment
Useful
Lives
0-15 years
30 years
3-20 years
3-18 years
5 years
December 31,
2012
$ 186,971
384,535
942,631
157,368
29,972
42,879
1,744,356
(900,477)
$ 843,879
2011
$ 173,517
376,659
794,435
147,125
28,376
136,396
1,656,508
(859,686)
$ 796,822
During the second quarter of 2009, Seaboard started operations at its ham boning and processing plant in Mexico.
Despite being in operation for over two years, overall results had been below expectations with inconsistencies in
margins and volumes. In the third quarter of 2011, Seaboard performed an impairment evaluation of this plant and
determined there was an impairment loss based on management’s current cash flow assumptions and probabilities of
outcomes. This analysis resulted in a $5,600,000 impairment charge recorded in cost of sales on the Consolidated
Statements of Comprehensive Income during the third quarter of 2011 to write down the recorded value of these
assets to the estimated fair value. As this plant is not wholly-owned by Seaboard, this impairment charge is partially
offset by a reduction (loss attributable) to noncontrolling interest of $1,830,000. Accordingly, the total impact on
net earnings attributable to Seaboard, net of taxes, was $2,300,000. The remaining net book value of these assets as
of December 31, 2012 was $3,666,000.
Note 6
Goodwill and Other Intangible Assets, Net
Goodwill and other intangible assets primarily relate to the 2005 acquisition of Daily’s, a bacon processor located in
the western United States, and the related subsequent repurchase of a non-controlling interest of Seaboard Foods
LLC in the Pork segment for total goodwill of $40,628,000 as of December 31, 2012. As of December 31, 2012, the
Commodity Trading and Milling segment had goodwill of $2,590,000 and other intangible assets subject to
amortization of $596,000, related to its investment in PSI.
The following table is a summary of other intangible assets at the end of each year:
(Thousands of dollars)
Other intangible assets subject to amortization:
Gross carrying amount customer relationships
Accumulated amortization customer relationships
Gross carrying amount other intangible assets
Accumulated amortization other intangible assets
Other intangible assets subject to amortization, net
Other intangible assets not subject to amortization:
Carrying amount-trade names and registered trademarks
Total other intangible assets, net
December 31,
2012
2011
$
9,045
(6,798)
1,441
(845)
2,843
$
9,045
(6,549)
-
-
2,496
17,000
19,843
$
17,000
19,496
$
The amortization expense of other amortizable intangible assets for the years ended December 31, 2012, 2011 and
2010 was $1,095,000, $250,000 and $930,000, respectively. Amortization expense for the five succeeding years is
$810,000 for the next year, $267,000 each for the second and third year, $252,000 in the fourth year and $250,000 in
the fifth year.
40 2012 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 7
Income Taxes
Income taxes attributable to continuing operations for the years ended December 31, 2012, 2011 and 2010 differed
from the amounts computed by applying the statutory U.S. Federal income tax rate of 35% to earnings before
income taxes excluding non-controlling interest for the following reasons:
(Thousands of dollars)
Years ended December 31,
2012
2011
Computed “expected” tax expense excluding non-controlling interest $ 128,275
Adjustments to tax expense attributable to:
Foreign tax differences
Tax-exempt investment income
State income taxes, net of federal benefit
Change in valuation allowance
Federal tax credits
Change in pension deferred tax
Domestic manufacturing deduction
Other
(36,139)
(62)
658
-
(1,693)
(1,252)
(5,643)
46
$ 155,714
$
(40,733)
(116)
3,849
(754)
(5,153)
(199)
(8,012)
(5,545)
2010
127,625
(33,322)
(974)
1,803
(6,189)
(3,351)
(329)
(4,837)
607
Total income tax expense
$ 84,190
$
99,051
$
81,033
Most of Seaboard's foreign tax differences are attributable to a significant portion of the earnings from Seaboard's
foreign operations being subject to no income tax or a tax rate which is considerably lower than the U.S. corporate
tax rate.
Earnings before income taxes consisted of the following:
(Thousands of dollars)
United States
Foreign
Total earnings excluding non-controlling interest
Less: net loss (income) attributable to non-controlling interest
Total earnings before income taxes
The components of total income taxes were as follows:
(Thousands of dollars)
Current:
Federal
Foreign
State and local
Deferred:
Federal
Foreign
State and local
Income tax expense
Unrealized changes in other comprehensive income
Total income taxes
2012
$ 178,821
187,680
366,501
(277)
$ 366,778
Years ended December 31,
2011
$ 300,992
143,906
444,898
2,290
$ 442,608
2010
$ 223,401
141,243
364,644
599
$ 364,045
Years ended December 31,
2011
2010
2012
$ 68,928
31,149
6,507
$ 79,069
15,318
6,549
$ 48,814
15,855
2,924
(16,818)
(935)
(4,641)
(1,761)
(232)
108
13,204
15
221
84,190
(9,197)
$ 74,993
99,051
(12,604)
$ 86,447
81,033
(5,443)
$ 75,590
2012 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
As of December 31, 2012 and 2011, Seaboard had income taxes receivable of $8,046,000 and $33,539,000,
respectively, primarily related to domestic tax jurisdictions, and had income taxes payable of $14,381,000 and
$2,604,000, respectively, primarily related to foreign tax jurisdictions.
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
Depreciation
LIFO
Other
Deferred income tax assets:
Reserves/accruals
Tax credit carry-forwards
Deferred earnings of foreign subsidiaries
Net operating and capital loss carry-forwards
Other
Valuation allowance
December 31,
2012
2011
$ 10,413
108,083
7,012
3,770
$ 10,581
109,409
27,927
4,406
$ 129,278
$ 152,323
$ 87,836
12,813
17,851
11,756
1,442
131,698
11,758
$ 83,816
11,217
12,672
15,800
2,041
125,546
16,320
Net deferred income tax liability
$
9,338
$ 43,097
Seaboard recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. For
the years ended December 31, 2012, 2011 and 2010, such interest and penalties were not material. The Company
had approximately $926,000 and $1,377,000 accrued for the payment of interest and penalties on uncertain tax
positions at December 31, 2012, and 2011, respectively.
As of December 31, 2012 and 2011, Seaboard had $5,053,000 and $7,898,000, 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
Lapse of statute of limitations
Ending balance at December 31
2012
7,898
929
(2,715)
1,165
(2,224)
5,053
$
$
2011
3,548
66
(109)
4,791
(398)
7,898
$
$
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 years’ are closed through 2009. Seaboard’s 2010 U.S. income tax
return is currently under IRS examination.
As of December 31 2012, Seaboard had not provided for U.S. Federal Income and foreign withholding taxes on
$985,402,000 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 practical.
42 2012 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Seaboard had a tax holiday in the Dominican Republic for the Power segment in 2012, 2011 and 2010, which
resulted in tax savings of approximately $2,063,000, $16,275,000 and $3,434,000, or $1.71, $13.40 and $2.80 per
diluted earnings per common share for the years ended December 31, 2012, 2011 and 2010, respectively. The tax
holiday ceased on April 1, 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. Management does not
believe these benefits are more likely than not to be realized due to limitations imposed on the deduction of these
losses. At December 31, 2012, Seaboard had foreign net operating loss carry-forwards (NOLs) of approximately
$39,241,000 a portion of which expire in varying amounts between 2013 and 2019, while others have indefinite
expiration periods.
At December 31, 2012, Seaboard had state tax credit carry-forwards of approximately $19,712,000, net of valuation
allowance, all of which carry-forward indefinitely.
On January 2, 2013, the American Taxpayer Relief Act of 2012 (the Tax Act) was signed into law. The Tax Act
extends many expired corporate income tax provisions that impact current and deferred taxes for financial reporting
purposes. In accordance with U.S. GAAP, the determination of current and deferred taxes is based on the provisions
of the enacted law as of the balance sheet date; the effects of future changes in tax law are not anticipated. The
effects of changes in tax laws, including retroactive changes, are recognized in the financial statements in the period
that the changes are enacted. Accordingly, as the Tax Act was signed into law in 2013, the effects of the retroactive
provisions in the new law on current and deferred taxes assets and liabilities for Seaboard will be recorded in the
first quarter of 2013. Although management is currently still evaluating the impacts of the Tax Act on its 2012
income tax liability, it is anticipated the total impact will be a one-time tax benefit of approximately $7,500,000 to
$15,000,000 recorded in the first quarter of 2013. In addition to this amount is a one-time credit of approximately
$11,260,000 for 2012 Federal blender’s credits that will be recognized as revenues in the first quarter of 2013. See
Note 13 for further discussion of this Federal blender’s credit.
Note 8
Notes Payable and Long-Term Debt
Notes payable amounting to $28,786,000 and $16,219,000 at December 31, 2012 and 2011, respectively, consisted
of obligations due banks on demand or based on Seaboard’s ability and intent to repay within one year. In June
2012, the committed line of credit was reduced from $300,000,000 to $200,000,000. At December 31, 2012,
Seaboard had a committed bank line totaling $200,000,000, maturing July 10, 2013, and uncommitted bank lines
totaling approximately $199,208,000, of which $149,208,000 of the uncommitted lines relate to foreign subsidiaries.
At December 31, 2012, there were no borrowings outstanding under the committed line, and borrowings outstanding
under the uncommitted lines totaled $28,786,000, all related to foreign subsidiaries. The uncommitted borrowings
outstanding at December 31, 2012 primarily represented $23,732,000 denominated in South African rand. The
weighted average interest rates for outstanding notes payable were 7.45% and 9.34% at December 31, 2012 and
2011, respectively. In February 2013, Seaboard refinanced its committed bank line for $200,000,000 with similar
credit terms as noted below, and also extended the maturity date to February 20, 2018.
At December 31, 2012, Seaboard’s borrowing capacity under its committed and uncommitted lines was reduced by
letters of credit (LCs) totaling $39,960,000 and $3,988,000, respectively, primarily including $18,397,000 of LCs
for Seaboard’s outstanding Industrial Development Revenue Bonds (IDRBs) and $21,801,000 related to various
insurance coverage.
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.
In December 2012, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective
January 14, 2013. As a result, $13,000,000 of IDRBs were reclassified from long-term debt to current maturities of
long-term debt as of December 31, 2012. In 2010, Seaboard entered into a credit agreement for $114,000,000 at a
fixed rate of 5.34% for the financing of the new power generating facility in the Dominican Republic, as discussed
in Note 13. The credit facility will mature in December 2021 and is secured by the power generating facility.
2012 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
The following table is a summary of long-term debt at the end of each year:
(Thousands of dollars)
Private placements:
6.21% senior notes, repaid in 2012
6.92% senior notes, repaid in 2012
Industrial Development Revenue Bonds, floating rates
(1.30% -1.76% at December 31, 2012) due 2013 through 2027
Foreign subsidiary obligation, 5.34%, due 2013 through 2021
Foreign subsidiary obligation, floating rate
Capital lease obligations and other
Current maturities of long-term debt
Long-term debt, less current maturities
December 31,
2012
2011
$
-
-
$
1,072
31,000
41,800
102,600
182
1,381
145,963
(25,138)
41,800
81,318
206
1,856
157,252
(40,885)
$ 120,825
$ 116,367
Of the 2012 foreign subsidiary obligations, $102,600,000 was payable in U.S. dollars and $182,000 was payable in
Argentine pesos. Of the 2011 foreign subsidiary obligations, $81,318,000 was payable in U.S. dollars and $206,000
was payable in Argentine pesos.
The terms of the note agreements pursuant to which the 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 $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, 2012. The refinancing of the committed bank line in
February 2013 noted above revised the above terms by increasing the tangible net worth to $1,870,445,000, plus
25% of cumulative consolidated net income beginning after December 31, 2012, increasing the dividend payment
limit to $25,000,000, increasing the subsidiary and priority indebtedness to 20% and eliminates the required
consolidated funded debt to consolidated total capitalization ratio.
Annual maturities of long-term debt at December 31, 2012 are as follows: $25,138,000 in 2013, $11,553,000 in
2014, $11,400,000 in 2015, $11,400,000 in 2016, $11,400,000 in 2017 and $75,072,000 thereafter.
Note 9
Derivatives and Fair Value of Financial Instruments
U.S. GAAP discusses several 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). U.S. GAAP utilizes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The
following is a brief description of those three levels:
Level 1: Quoted Prices in Active Markets for Identical Assets - Observable inputs such as unadjusted quoted prices
in active markets for identical assets or liabilities that the Company has the ability to access at the measurement
date.
44 2012 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
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.
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.
If Seaboard’s debt was measured at fair value on its Consolidated Balance Sheets, it would have been classified as
level 2 in the fair value hierarchy. The amortized cost and estimated fair values of investments and long-term debt at
December 31, 2012 and 2011, are presented below:
December 31,
(Thousands of dollars)
2012
Amortized Cost Fair Value
Short-term investments, available-for-sale
Short-term investments, trading debt securities
Long-term debt
$ 279,556
28,508
145,963
$ 282,829
30,550
149,333
2011
Amortized Cost
Fair Value
$ 297,916
25,437
157,252
$ 297,443
25,813
161,636
The following tables show assets and liabilities measured at fair value (derivatives exclude margin accounts) on a
recurring basis as of December 31, 2012 and 2011, respectively, and also the level within the fair value hierarchy
used to measure each category of assets. Seaboard uses the end of the reporting period to determine if there were
any transfers between levels. There were no transfers between levels that occurred in 2012 and 2011.
2012 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
Balance
December 31,
2012
$ 126,537
69,214
23,775
18,734
17,169
15,162
12,238
23,406
3,237
2,600
1,307
15,864
7,153
6,831
3,157
2,117
1,567
60
239
6,916
-
$ 357,283
(Thousands of dollars)
Assets:
Available-for-sale securities – short-term
investments:
Money market funds
Corporate bonds
U.S. Government agency securities
Emerging markets debt mutual fund
U.S. Treasury securities
Collateralized mortgage obligations
Asset backed debt securities
Trading securities- short term investments:
High yield debt securities
Emerging markets trading debt mutual fund
Emerging markets trading debt securities
Other debt securities
Trading securities – other current assets:
Domestic equity securities
Fixed income mutual funds
Foreign equity securities
Money market funds
U.S. Government agency securities
U.S. Treasury securities
Corporate bonds
Other
Derivatives
Commodities (1)
Foreign currencies
Total Assets
Liabilities:
Derivatives:
Commodities (1)
Interest rate swaps
Foreign currencies
Level 1
Level 2
Level 3
$ 126,537
-
-
18,734
-
-
-
-
3,237
-
822
15,864
7,153
4,218
3,157
-
-
-
187
6,699
-
$ 186,608
$
-
69,214
23,775
-
17,169
15,162
12,238
23,406
-
2,600
485
-
-
2,613
-
2,117
1,567
60
52
217
-
$ 170,675
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
$
7,112
9,810
4,157
21,079
7,112
-
-
7,112
$
-
9,810
4,157
$ 13,967
Total Liabilities
(1) Seaboard’s commodities derivative assets and liabilities are presented in the Consolidated Balance Sheets on
a net basis, including netting the derivatives with the related margin accounts. As of December 31, 2012, the
commodity derivatives had a margin account balance of $14,063,000 resulting in a net other current asset on the
Consolidated Balance Sheets of $13,867,000.
$
$
$
46 2012 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
Balance
December 31,
2011
Level 1
Level 2
Level 3
(Thousands of dollars)
Assets:
Available-for-sale securities – short-term
investments:
Money market funds
Corporate bonds
Fixed rate municipal notes and bonds
Emerging markets debt mutual fund
Collateralized mortgage obligations
U.S. Government agency securities
U.S. Treasury securities
Asset backed debt securities
Other
Trading securities- short term investments:
High yield debt securities
Emerging markets trading debt mutual fund
Emerging markets trading debt securities
Other debt securities
Trading securities – other current assets:
Domestic equity securities
Foreign equity securities
Money market funds
Fixed income mutual funds
U.S. Government agency securities
U.S. Treasury securities
Corporate bonds
Other
Derivatives
Commodities (1)
Foreign currencies
Total Assets
Liabilities:
Derivatives:
Commodities (1)
Interest rate swaps
Foreign currencies
$ 139,420
89,146
17,788
16,399
15,011
9,757
4,905
3,533
1,484
20,750
2,487
2,355
221
13,563
7,490
4,521
4,483
2,085
1,474
72
236
5,144
2,247
$ 364,571
$ 139,420
-
-
16,399
-
-
-
-
-
-
2,487
-
-
13,563
3,991
4,521
4,483
-
-
-
159
5,144
-
$ 190,167
$
-
89,146
17,788
-
15,011
9,757
4,905
3,533
1,484
20,750
-
2,355
221
-
3,499
-
-
2,085
1,474
72
77
-
2,247
$ 174,404
$
5,529
11,268
3,380
$ 20,177
$
5,529
-
-
5,529
$
-
11,268
3,380
$ 14,648
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total Liabilities
(1) Seaboard’s commodities derivative assets and liabilities are presented in the Consolidated Balance Sheets on
a net basis, including netting the derivatives with the related margin accounts. As of December 31, 2011, the
commodity derivatives had a margin account balance of $8,619,000 resulting in a net other current asset on the
Consolidated Balance Sheets of $8,234,000.
$
$
2012 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
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 derivative futures and options to manage its risk to price fluctuations for raw materials and
other inventories, finished product sales and firm sales commitments. Seaboard also enters 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, 2011. 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 Comprehensive Income. 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 period.
At December 31, 2012, Seaboard had open net derivative contracts to purchase 28,896,000 pounds of sugar,
15,403,000 bushels of grain and 120,000 pounds of cheese and open net derivative contracts to sell 21,080,000
pounds of hogs, 546,000 gallons of heating oil, 220,000 pounds of dry whey powder and 53,000 tons of soybean
meal. At December 31, 2011, Seaboard had open net derivative contracts to purchase 23,300 tons of soybean meal,
2,580,000 pounds of soybean oil and 2,280,000 pounds of hogs and open net derivative contracts to sell 10,599,000
bushels of grain and 1,176,000 gallons of heating oil. For the year ended December 31, 2012, Seaboard recognized
net realized and unrealized losses of $6,098,000 and for the years ended December 31, 2011 and 2010, Seaboard
recognized net realized and unrealized gains of $20,279,000 and $8,047,000, respectively, related to commodity
contracts, primarily included in cost of sales on the Consolidated Statements of Comprehensive Income.
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. Foreign exchange agreements that were primarily
related to the underlying commodity transaction were recorded at fair value, with changes in value marked to market
as a component of cost of sales on the Consolidated Statements of Comprehensive Income. Foreign exchange
agreements that were not related to an underlying commodity transaction were recorded at fair value, with changes
in value marked to market as a component of foreign currency gain on the Consolidated Statements of
Comprehensive Income. Since these agreements are not accounted for as hedges, fluctuations in the related currency
exchange rates could have a material impact on earnings in any given year.
At December 31, 2012 and 2011, Seaboard had trading foreign exchange contracts to cover its firm sales and
purchase commitments and related trade receivables and payables, with notional amounts of $243,563,000 and
$158,266,000, respectively, primarily related to the South African rand.
Interest Rate Exchange Agreements
In May 2010, Seaboard entered into three ten-year interest rate exchange agreements which involve the exchange of
fixed-rate and variable-rate interest payments over the life of the agreements without the exchange of the underlying
notional amounts to mitigate the effects of fluctuations in interest rates on variable rate debt. Seaboard pays a fixed
rate and receives a variable rate of interest on three notional amounts of $25,000,000 each. In August 2010,
Seaboard entered into another ten-year interest rate exchange agreement, with a notional amount of $25,000,000 that
has terms similar to those for the other three interest rate exchange agreements referred to above. In September
2012, Seaboard terminated one interest rate exchange agreement with a notional value of $25,000,000. Seaboard
made a payment in the amount of $3,861,000 to unwind this agreement. While Seaboard has certain variable rate
debt, these interest rate exchange agreements do not qualify as hedges for accounting purposes. Accordingly, the
changes in fair value of these agreements are recorded in Miscellaneous, net in the Consolidated Statements of
Comprehensive Income. At December 31, 2012, Seaboard had three interest rate exchange agreements outstanding
with a total notional value of $75,000,000 compared to four interest rate exchange agreements outstanding with a
total notional value of $100,000,000 at December 31, 2011.
The following table provides the amount of gain or (loss) recognized for each type of derivative and where it was
recognized in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2012 and
2011:
48 2012 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)
Commodities
Foreign currencies
Foreign currencies
Interest rate
Location of Gain or (Loss)
Recognized in Income on
Derivatives
Cost of sales-products
Cost of sales-products
Foreign currency
Miscellaneous, net
2012
2011
Amount of Gain or (Loss)
Recognized in Income on
Derivatives
$ (6,098)
3,027
(3,919)
(5,132)
$ 20,279
25,692
(1,957)
(14,467)
The following table provides the fair value of each type of derivative held as of December 31, 2012 and 2011 and
where each derivative is included on the Consolidated Balance Sheets:
(Thousands of dollars)
Asset Derivatives
Liability Derivatives
2012
2011
Fair
Value
2012
2011
Fair
Value
Balance Sheet
Location
Commodities(1)
Other current assets
Foreign currencies Other current assets
Other current assets
Interest rate
$6,916
-
-
$ 5,529
$5,144
3,380
2,247
11,268
-
(1) Seaboard’s commodities derivative assets and liabilities are presented in the Consolidated Balance Sheets on
a net basis, including netting the derivatives with the related margin accounts. As of December 31, 2012 and
2011, the commodity derivatives had a margin account balance of $14,063,000 and $8,619,000, respectively,
resulting in a net other current asset on the Consolidated Balance Sheets of $13,867,000 and $8,234,000,
respectively.
7,112
4,157
9,810
Balance Sheet
Location
Other current assets
$
Other accrued liabilities
Other accrued liabilities
Counterparty Credit Risk
From time to time Seaboard is subject to counterparty credit risk related to its foreign currency exchange agreements
and interest rate swaps, should the counterparties fail to perform according to the terms of the contracts. As of
December 31, 2012, Seaboard did not have any credit risk related to its foreign currency exchange agreements and
interest rate swaps. Seaboard does not hold any collateral related to these agreements.
Note 10
Employee Benefits
Seaboard maintains two defined benefit pension plans (“the Plans”) for its domestic salaried and clerical employees.
The Plans generally provide 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.
Management did not make any contributions in 2012, 2011 and 2010 and currently does not plan on making any
contributions to the Plans in 2013.
Seaboard has separate investment policies for each Plan. The difference in target allocation percentages are based on
one plan having more current retirees and thus a more conservative portfolio versus the other plan, which can
assume greater risk as it will have a longer investment time horizon. Assets are invested in the Plans 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 portfolios are evaluated relative to customized benchmarks. The investment strategy
provides investment managers’ discretion, and is periodically reviewed by management for adherence to policy and
performance against benchmarks. Seaboard’s asset allocation targets and actual investment composition within the
Plans were as follows:
2012 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
International equity
Fixed income
Alternative investments
Cash and cash equivalents
Target Allocations
29-40%
7-10%
11-16%
25-42%
6-8%
1-5%
Actual Composition of Plans at December 31,
2012
31-42%
9-12%
11-13%
20-37%
8-10%
3-4%
2011
29-40%
11-13%
10-15%
23-40%
6-7%
2-4%
As described in Note 9 to the Consolidated Financial Statements, U.S. GAAP utilizes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following tables
shows the Plans’ assets measured at estimated fair value as of December 31, 2012 and 2011, respectively, and also
the level within the fair value hierarchy used to measure each category of assets:
(Thousands of dollars)
Assets:
Domestic equity securities
Fixed income mutual funds
Foreign equity securities
Corporate bonds
Money market funds
U.S. Government agency securities
U.S. Government bonds
Emerging markets-equity
Real estate mutual fund
Mutual funds-equities
Treasury inflation indexed bonds
Other
Total Assets
(Thousands of dollars)
Assets:
Domestic equity securities
Corporate bonds
Foreign equity securities
Fixed income mutual funds
Money market funds
U.S. Treasury STRIPS
Emerging markets-equity
Mutual funds-equities
Real estate mutual fund
Exchange traded funds-fixed income
Municipal bonds
Other
Total Assets
Balance
December 31,
2012
$ 36,346
12,533
7,475
6,387
6,285
6,218
5,680
5,607
5,453
2,701
2,083
818
$ 97,586
Balance
December 31,
2011
$ 34,770
18,526
7,107
6,400
6,513
3,587
3,349
3,485
2,909
1,788
2,048
1,030
$ 91,512
Level 1
Level 2
Level 3
$ 36,346
12,533
7,475
-
6,285
-
-
5,607
5,453
2,701
-
-
$ 76,400
$
-
-
-
6,387
-
6,218
5,680
-
-
-
2,083
818
$ 21,186
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
Level 1
Level 2
Level 3
$ 34,770
-
7,107
6,400
6,513
-
3,349
3,485
2,909
1,788
-
-
$ 66,321
-
$
18,526
-
-
-
3,587
-
-
-
-
2,048
1,030
$ 25,191
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
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.
50 2012 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
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 all of the above plans were:
Weighted-average assumptions
Discount rate used to determine obligations
Discount rate used to determine net periodic benefit cost
Expected return on plan assets
Long-term rate of increase in compensation levels
Years ended December 31,
2011
2010
2012
2.50-4.15%
3.75-4.70%
6.50-7.25%
4.00%
3.75-4.70%
4.45-5.65%
7.00-7.50%
4.00-5.00%
4.45-5.65%
5.25-6.25%
7.25-7.75%
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 returns on the Plans’ assets assumption are 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 Plans’ 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 all of these plans.
The changes in the plans’ benefit obligations and fair value of assets for the Plans, supplemental executive plans and
retirement agreements for the years ended December 31, 2012 and 2011, and a statement of the funded status as of
December 31, 2011 and 2010 were as follows:
December 31,
(Thousands of dollars)
Reconciliation of benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial losses
Benefits paid
Plan curtailments
Plan settlement
Plan amendments
Benefit obligation at end of year
Reconciliation of fair value of plan assets:
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Plan settlement
Fair value of plan assets at end of year
Funded status
2012
Accumulated
benefits
exceed assets
$
$
204,540
8,843
8,918
25,749
(5,872)
(6,136)
(5,532)
(3,785)
226,725
$
91,512
9,426
8,052
(5,872)
(5,532)
$
97,586
$ (129,139)
2011
Accumulated
benefits
exceed assets
$ 173,023
7,523
9,025
19,637
(4,668)
-
-
-
$ 204,540
$
93,638
807
1,735
(4,668)
-
$
91,512
$ (113,028)
The net funded status of the Plans was $(45,515,000) and $(26,819,000) at December 31, 2012 and 2011,
respectively. The accumulated benefit obligation for the Plans was $120,573,000 and $102,165,000, and for the
other plans was $68,194,000 and $59,229,000 at December 31, 2012 and 2011, 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: $7,344,000, $7,708,000, $8,416,000, $10,354,000, $10,993,000, and $76,635,000,
respectively.
During June 2012 when the actual pension costs for 2012 were finalized, it was determined that a settlement
payment made in March 2012 was greater than the actual service cost and interest cost components of 2012’s net
2012 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
periodic pension cost for a non-qualified, unfunded supplemental executive plan. As a result, during the second
quarter of 2012, a settlement loss of $1,796,000 was recorded in the Pork division’s results of operations. In
December 2012, certain non-qualified, unfunded supplemental executive plans were amended primarily to limit
years of service and final average earnings. As a result, in December 2012, curtailment losses of $1,134,000 were
recorded for these plans from the reduction in the amortization period of prior service cost.
The net periodic cost of benefits of these plans was as follows:
(Thousands of dollars)
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization and other
Settlement
Curtailment
Net periodic benefit cost
Years ended December 31,
2011
2012
2010
$
8,843
8,918
(6,431)
6,748
1,796
1,134
$ 21,008
$ 7,550
8,997
(6,598)
4,027
-
-
$ 13,976
$
6,367
8,712
(6,218)
4,046
-
-
$ 12,907
The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive loss
(AOCL) before taxes at December 31, 2012 and 2011 were as follows:
(Thousands of dollars)
Accumulated loss, net of gain
Prior service cost, net of credit
Total accumulated other comprehensive loss
2012
$ (91,611)
(72)
$ (91,683)
2011
$ (81,708)
(6,351)
$ (88,059)
The amounts in AOCL expected to be recognized as components of net periodic benefit cost in 2013 are as follows:
(Thousands of dollars)
Accumulated loss, net of gain
Prior service cost, net of credit
Estimated net periodic benefit cost
2013
(6,588)
24
(6,564)
$
$
Seaboard participates in a multi-employer pension fund, the United Food & Commercial Workers International
Union-Industry Pension Fund, which covers certain union employees under a collective bargaining agreement. This
fund’s employer identification plan is 51-6055922 and this plan’s number is 001. For the plan year beginning July
1, 2012, this plan’s “zone status” is green and is not subject to a funding improvement plan. Seaboard is required to
make contributions to this plan in amounts established under the collective bargaining agreement that expires in July
2014. Contribution expense for this plan was $584,000, $545,000 and $528,000 for the years ended December 31,
2012, 2011 and 2010, respectively, which represents less than five percent of total contributions to this plan. The
applicable portion of the total plan benefits and net assets of this plan is not separately identifiable, although
Seaboard has received notice that, under certain circumstances, it could 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. In
2012, 2011 and 2010, Seaboard contributed to this plan an amount equal to 50% of the first 6% of each employee’s
contributions to the plan. 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
$2,063,000, $1,956,000 and $1,826,000 for the years ended December 31, 2012, 2011 and 2010, 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 $546,000,
$577,000 and $1,455,000 for the years ended December 31, 2012, 2011 and 2010, respectively.
Seaboard has 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
52 2012 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
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 $4,148,000, $(1,505,000) and $4,267,000 for the years ended December 31,
2012, 2011 and 2010, respectively. Included in other liabilities at December 31, 2012 and 2011 are $32,774,000 and
$29,647,000, 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, 2012 and
2011, $36,988,000 and $33,924,000, 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 2012, 2011, and 2010
totaled $4,076,000, $(1,584,000) and $4,203,000, respectively.
Note 11
Commitments and Contingencies
On September 19, 2012, the United States Immigration and Customs Enforcement (“ICE”) executed three search
warrants authorizing the seizure of certain records from Seaboard’s offices in Merriam, Kansas and at the Seaboard
Foods employment office and the human resources department in Guymon, Oklahoma. The warrants generally
called for the seizure of employment-related files, certain e-mails and other electronic records relating to Medicaid
and Medicaid recipient, certain health care providers in the Guymon area, and Seaboard’s health plan and certain
personnel issues. This investigation is being handled by the United States Attorney’s Office for the Western District
of Oklahoma (“USAO”). Seaboard is cooperating with the USAO in connection with this investigation. No civil or
criminal proceedings or charges have been filed or brought. It is not possible at this time to determine whether
Seaboard will incur any fines, penalties or liabilities in connection with this matter.
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, 2012, guarantees outstanding to
third parties were not material. 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. See Note 8 for discussion of letters of credit.
Commitments
As of December 31, 2012 Seaboard had various firm non-cancelable purchase commitments and commitments
under other agreements, arrangements and operating leases, as described in the table below:
2012 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
2013
$ 187,555
120,308
665,192
85,279
Purchase commitments
(Thousands of dollars)
Hog procurement contracts
Grain and feed ingredients
Grain purchase contracts for resale
Fuel supply contract
Equipment purchases
48,814
and facility improvements
4,150
Construction of new dry bulk vessels
17,521
Other purchase commitments
1,128,819
Total firm purchase commitments
77,846
Vessel, time and voyage-charters
11,883
Contract grower finishing agreements
Other operating lease payments
19,583
Total unrecognized firm commitments $ 1,238,131
Years ended December 31,
2016
2015
2014
$ 118,035
4,317
-
-
$ 105,410 $ 87,767 $ 69,047
-
-
-
3,700
-
-
-
-
-
2017 Thereafter
$4,358
-
-
-
-
70,550
144
193,046
36,558
11,156
16,498
$ 257,258
-
-
-
-
131
45
4,489
109,155
81,869
30,282
9,241
9,689
14,594
14,468 172,509
$ 163,720 $ 131,100 $ 112,374 $268,108
-
-
35
69,082
18,993
9,831
-
-
34
87,801
19,021
9,997
14,281
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, 2012. During 2012, 2011
and 2010, this segment paid $190,471,000, $181,383,000 and $183,982,000, 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, 2012. This segment also has short-term voyage-charters in place for delivery of future grain sales.
The Power segment has a natural gas supply contract for 2013 which will supply the majority of the fuel required for
the operation of the dual fuel power generating facility. The commitment has both fixed and variable price
components and thus the amount included in the table above is partially based on market prices as of December 31,
2012.
In June 2012, Seaboard entered into an agreement to build four dry bulk vessels to be used by the Commodity
Trading and Milling segment at a total cost of approximately $83,000,000. A down payment of $8,300,000 was
made in July 2012. These vessels are expected to be completed in 2014 with the majority of the amount due in
2014.
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 twelve years. This
segment’s charter hire expenses during 2012, 2011 and 2010 totaled $88,110,000, $87,895,000 and $57,606,000,
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 2012, 2011 and 2010, Seaboard paid $13,641,000, $13,037,000 and $13,752,000, respectively, under contract
grower finishing agreements.
Seaboard also leases various facilities and equipment under non-cancelable operating lease agreements, including a
terminal operations agreement at the Port of Miami which runs through 2028. Rental expense for operating leases
amounted to $29,224,000, $25,916,000 and $24,835,000 in 2012, 2011 and 2010, respectively.
54 2012 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Note 12
Stockholders’ Equity and Accumulated Other Comprehensive Loss
On October 19, 2012, the Board of Directors extended through October 31, 2015, the share repurchase program
initially approved on November 6, 2009. Under this share repurchase program, Seaboard was originally authorized
to repurchase from time to time up to $100,000,000 market value of its Common Stock in open market or privately
negotiated purchases which may be above or below the traded market price. During the period that the share
repurchase program remains in effect, from time to time, Seaboard may 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. Shares
repurchased will be retired and resume the status of authorized and unissued shares. All stock repurchased will be
made in compliance with applicable legal requirements and the timing of the repurchases and the number of shares
repurchased at any given time will depend upon market conditions, compliance with Securities and Exchange
Commission regulations and other factors. The Board’s stock repurchase authorization does not obligate a specific
amount of common stock and the stock repurchase program may be suspended at any time at Seaboard’s discretion.
As of December 31, 2012, $33,204,000 remains available for repurchase under this program. Seaboard used cash to
repurchase, 12,937, 5,282 and 20,879 shares of common stock at a total price of $26,830,000, $9,971,000 and
$29,994,000 in 2012, 2011 and 2010, respectively.
In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock. The increased
amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an
annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per
year). Seaboard does not currently intend to declare any further dividends for the years 2013-2016. Seaboard did
not declare or pay a dividend in 2011. In 2010, Seaboard declared and paid dividends of $9.00 per share on the
common stock, which included a prepayment of the annual 2011 and 2012 dividends ($3.00 per share per year).
The components of accumulated other comprehensive loss, net of related taxes, are summarized as follows:
(Thousands of dollars)
2012
December 31,
2011
2010
Cumulative foreign currency translation adjustment
Unrealized gain (loss) on investments
Unrealized loss on cash flow hedges
Unrecognized pension cost
$
(109,457)
2,232
(113)
(64,206)
$
(93,669)
(311)
-
(62,085)
$
(81,280)
445
-
(43,072)
Accumulated other comprehensive loss
$
(171,544)
$
(156,065)
$
(123,907)
In 2012, a pension settlement loss of $1,796,000 and a pension curtailment loss of $1,134,000 were incurred. This
resulted in a combined $2,930,000 reclassified out of accumulated other comprehensive loss for unrecognized
pension cost to net earnings in 2012. See Note 10 for further discussion.
The foreign currency translation adjustment primarily represents the effect of the Argentine peso currency exchange
fluctuation on the net assets of the Sugar segment. At December 31, 2012, the Sugar segment had $193,380,000 in
net assets denominated in Argentine pesos and $5,843,000 in net assets denominated in U.S. dollars in Argentina.
At December 31, 2011, the Sugar segment had $215,921,000 in net assets denominated in Argentine pesos and
$4,608,000 in net assets 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 2012 and 2011, the unrecognized pension cost includes $21,129,000
and $20,362,000, respectively, related to employees at certain subsidiaries for which no tax benefit has been
recorded.
Note 13
Segment Information
Seaboard Corporation had six reportable segments through December 31, 2012: Pork, Commodity Trading and
Milling, Marine, Sugar, Power and Turkey, 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
2012 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
decision maker to determine allocation of resources and assess performance. Each of the six 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 numerous other foreign
markets. The Commodity Trading and Milling segment is an integrated grain trading, grain processing and logistics
operations that internationally markets wheat, corn, soybean meal and other commodities in bulk to third party
customers and to non-consolidated affiliates. This segment also operates flour, maize and feed mills, baking
operations, and poultry production and processing in numerous 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 is an unregulated independent power producer in the Dominican Republic
operating two floating power generating facilities. The Turkey segment, accounted for using the equity method,
produces and sells branded and non-branded turkeys and other turkey products. Total assets for the Turkey segment
represents Seaboard’s investment in and notes receivable from this affiliate. Revenues for the All Other segment are
primarily derived from a jalapeño pepper processing operation.
The Pork segment derives approximately 10% 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 $5,600,000 recorded in cost of sales on the
Consolidated Statements of Comprehensive Income related to its ham boning and processing plant in Mexico in the
third quarter of 2011. See Note 5 for further discussion. Also, the Tax Act signed into law in January 2013 as
discussed in Note 7, renews and extends the Federal blender’s credits that Seaboard is entitled to receive for
biodiesel it blends which had previously expired on December 31, 2011 and renewed retroactively to January 1,
2012 with an expiration of December 31, 2013. As a result, in the first quarter of 2013 the Pork segment will
recognize a one-time credit of approximately $11,260,000 as revenues related to this Federal blender’s tax incentive
for gallons produced and sold in fiscal 2012. The impact for the remainder of 2013 is not expected to be as
significant as market prices for biodiesel are anticipated to adjust downward as a result of the renewed credit.
In the first quarter of 2011, the Commodity Trading and Milling (CT&M) segment recognized $101,080,000 in net
sales related to previously deferred costs and deferred revenues under contracts for which the final sale prices were
not fixed and determinable until 2011. In 2011, the CT&M segment incurred certain grain inventory write-downs of
$15,374,000 (with no tax benefit recognized), or $12.65 per share, for various customer contract performance issues.
In the fourth quarter of 2011, the CT&M segment recognized a $5,080,000 gain (Seaboard’s proportionate share) in
income from affiliates as a result of its non-consolidated affiliate in Haiti’s final insurance settlement related to the
2010 earthquake. The insurance settlement related to property damages and business interruption. The rebuilt mill
was completed in December 2011. The CT&M segment derives a significant portion of its operating income from
sales to a non-consolidated affiliate and also historically derived a significant portion of its income from affiliates
from this same affiliate.
As discussed in Note 4, effective January 1, 2012, Seaboard began consolidation accounting and discontinued the
equity method of accounting for its investment in PSI. In December 2011, the CT&M segment made an $8,493,000
advance capital lease payment to begin operations in 2012 of a flour mill in Ghana. The initial lease term is for 33
years with an option to renew for additional years. This lease was accounted for as a capital lease and increased
fixed assets by $9,763,000 and liabilities by $1,270,000 as of December 31, 2011. During the third quarter of 2010,
Seaboard acquired a majority interest in a commodity origination, storage and processing business in Canada for
approximately $6,747,000, including $1,169,000 of cash acquired. This transaction was accounted for using the
purchase method, and would not have significantly affected net earnings or earnings per share on a pro forma basis.
On April 8, 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic,
for $73,102,000 (net of $3,000,000 placed in escrow for potential dry dock costs). In the second quarter of 2011, the
previously escrowed balance of $55,000,000, less $3,000,000 to remain in escrow for potential dry dock costs, plus
$2,796,000 of escrow earnings and $3,306,000 for various inventory items related to one of the facilities, was paid
to Seaboard. Seaboard received $1,500,000 of the $3,000,000 in escrow in the third quarter of 2011. The
$1,500,000 was recognized as a gain on sale of assets in operating income in the third quarter of 2011. The net book
value of the two power generating facilities and certain inventory items was $21,679,000 at the sale close date.
Seaboard recognized a gain on sale of assets of $51,423,000 in operating income in the second quarter of 2011. In
56 2012 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
late March 2011, the purchaser entered into discussions with Seaboard to lease one of the facilities to Seaboard for a
short period of time. On April 20, 2011, Seaboard signed a short-term lease agreement that allowed Seaboard to
resume operations of one of the facilities (72 megawatts). Seaboard and the purchaser also agreed to defer the sale
to the purchaser of the inventory related to the leased facility until the end of the lease term. Seaboard continues to
operate this facility under a short-term lease agreement that may be canceled by either party. Also, as of December
31, 2012, $1,500,000 of the original sale price for this power generating facility remained in escrow for potential dry
dock costs. Seaboard retained all other physical properties of this business and constructed a new 106 megawatt
floating power generating facility for use in the Dominican Republic, which began commercial operations in March
2012. The total project cost capitalized was $136,000,000.
The Turkey segment, acquired on December 6, 2010 and accounted for using the equity method, had operating
income in 2012 and 2011 of $65,694,000 and $55,120,000, respectively, and operating loss of $169,000 in 2010.
On December 31, 2011, Butterball closed its Longmont, Colorado processing plant, resulting in an impairment of
fixed assets charge and accrued severance charges. Seaboard’s proportionate share of these charges was
$(3,005,000) recognized in income from affiliates in the second half of 2011. As management is still attempting to
sell this facility, additional impairment charges to earnings are possible in the future. The Turkey segment derives
approximately 10% of its revenues from one customer. On December 31, 2012, Butterball purchased the assets of
Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois.
The following tables set forth specific financial information about each segment as reviewed by management, except
for the Turkey segment information previously disclosed in Note 4 to the Consolidated Financial Statements.
Operating income for segment reporting is prepared on the same basis as that used for consolidated operating
income. Operating income, along with income from affiliates for the Commodity Trading and Milling and Turkey
segment, is used as the measure of evaluating segment performance because management does not consider interest
and income tax expense on a segment basis.
Sales to External Customers:
(Thousands of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment/Consolidated Totals
Operating Income:
(Thousands of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Years ended December 31,
2011
2012
2010
$
$
$
1,638,404
3,023,531
969,575
288,315
255,390
13,918
6,189,133
1,744,630
2,689,786
928,548
259,786
111,391
12,761
5,746,902
1,388,265
1,808,948
853,565
195,993
124,034
14,897
4,385,702
$
$
$
Years ended December 31,
2011
2012
2010
$
$
$
122,556
71,852
26,111
60,180
55,042
607
336,348
(26,687)
309,661
259,271
43,225
(3,904)
65,101
60,845
(1,191)
423,347
(16,143)
407,204
213,325
34,432
47,612
31,741
13,424
832
341,366
(20,300)
321,066
$
$
$
2012 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
Years ended December 31,
2011
2012
2010
$
$
$
$
$
$
Years ended December 31,
2011
2012
2010
$
$
$
13,450
440
12,731
26,621
43,866
5,567
22,675
8,289
192
403
80,992
231
81,223
20,983
980
(998)
20,965
50,813
5,165
22,743
7,180
204
428
86,533
269
86,802
10,467
88
20,152
30,707
43,014
6,330
23,490
11,222
5,467
366
89,889
327
90,216
$
$
$
December 31,
2012
2011
$
$
740,245
992,507
281,215
254,445
235,377
423,825
5,288
2,932,902
414,879
3,347,781
738,574
755,903
261,781
269,564
165,118
312,164
6,257
2,509,361
497,367
3,006,728
$
$
December 31,
2012
2011
$
$
186,873
2,775
220,894
410,542
160,402
3,177
201,261
364,840
$
$
Income from Affiliates:
(Thousands of dollars)
Commodity Trading and Milling
Sugar
Turkey
Segment/Consolidated Totals
Depreciation and Amortization:
(Thousands of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Total Assets:
(Thousands of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
Turkey
All Other
Segment Totals
Corporate
Consolidated Totals
Investment in and Advances to Affiliates:
(Thousands of dollars)
Commodity Trading and Milling
Sugar
Turkey
Segment/Consolidated Totals
58 2012 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
Capital Expenditures:
(Thousands of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Years ended December 31,
2011
2012
$
$
2010
$
52,333
22,817
35,365
22,066
25,022
112
157,715
1,040
158,755
39,890
5,192
31,210
22,626
84,041
60
183,019
729
183,748
9,568
2,390
28,411
30,620
31,709
362
103,060
276
103,336
$
$
$
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 and includes all
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, Net).
Geographic Information
Seaboard had sales in South Africa totaling $563,088,000, $622,354,000 and $420,277,000 for the years ended
December 31, 2012, 2011 and 2010, respectively, representing approximately 9%, 11% and 10% of total sales for
each respective year. No other individual foreign country accounted for 10% or more of sales to external customers.
The following table provides a geographic summary of net sales based on the location of product delivery:
(Thousands of dollars)
Caribbean, Central and South America
Africa
United States
Canada/Mexico
Pacific Basin and Far East
Europe
Eastern Mediterranean
Totals
Years ended December 31,
2011
2012
2010
$ 2,566,056
1,471,574
1,303,533
351,505
334,215
87,741
74,509
$ 6,189,133
$ 2,225,829
1,489,409
1,328,116
407,593
238,116
8,367
49,472
$ 5,746,902
$
$
1,702,823
1,061,221
1,079,316
245,935
198,100
19,927
78,380
4,385,702
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
Dominican Republic
Argentina
All other
Totals
December 31,
2012
$ 530,169
140,195
108,492
66,371
$ 845,227
2011
515,375
120,707
111,726
50,419
798,227
$
$
At December 31, 2012 and 2011, Seaboard had approximately $296,990,000 and $221,584,000, respectively, of
foreign receivables, excluding receivables due from affiliates, which generally represent more of a collection risk
than the domestic receivables. Management believes its allowance for doubtful accounts is adequate and reduces
receivables recorded to their expected net realizable value.
2012 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
Former 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
Steven J. Bresky
President and Chief Executive Officer
Robert L. Steer
Executive Vice President, Chief Financial Officer
David M. Becker
Senior Vice President, General Counsel and Secretary
Barry E. Gum
Senior Vice President, Finance and Treasurer
James L. Gutsch
Senior Vice President, Engineering
Ralph L. Moss
Senior Vice President, Governmental Affairs
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
David S. Oswalt
Senior Vice President, Taxation and Business Development
John A. Virgo
Senior Vice President, Corporate Controller and Chief
Accounting Officer
David H. Rankin
Vice President
Ty A. Tywater
Vice President, Audit Services
Zachery J. Holden
Assistant Secretary
Adriana N. Hoskins
Assistant Treasurer
Chief Executive Officers of Principal Seaboard Operations
Terry J. Holton
Pork
David M. Dannov
Commodity Trading and Milling
Edward A. Gonzalez
Marine
Hugo D. Rossi
Sugar
Armando G. Rodriguez
Power
Stock Transfer Agent and Registrar of Stock
Availability of Form 10-K Report
Computershare
P.O. Box 43006
Providence, RI 02940-3006
(866) 351-3330
www.computershare.com/investor
Auditors
KPMG LLP
1000 Walnut, Suite 1000
Kansas City, Missouri 64106
Stock Listing
Seaboard’s common stock is traded on the NYSE MKT
under the symbol SEB. Seaboard had 143 shareholders
of record of its common stock as of January 25, 2013.
60 2012 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 2012 are available without
charge by writing Seaboard Corporation, 9000 West
67th Street, Merriam, Kansas 66202, Attention:
Shareholder Relations or via
Internet at
http://www.seaboardcorp.com/investor-sec.aspx.
the
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.