2013 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.
2013 Annual Report
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S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
Although we posted our fifth successive year of record sales, earnings were below expectations this past year. Pre-
tax earnings were off 35% from the prior year and off 14% from our trailing five year average. We posted losses at
Seaboard Marine, our marine transportation division and at Butterball, our integrated turkey business. Margins
narrowed considerably in our Commodity Trading and Milling division and at Tabacal, our sugar and biofuels
business in Argentina. That said, it’s not reasonable to isolate one year’s performance as indicative of the health of
the businesses in which we are invested. As we look historically at their financial performance, they have all
experienced quite volatile year to year fluctuations and we don’t see this pattern changing over time. Assessing
performance over a three to five year horizon is a better indicator of our commodity based businesses’ success.
Looking forward, we expect better results in 2014. Fundamentally, with ample supplies of grain worldwide and
potentially tight meat supplies in the US coupled with stable global demand, our grain and protein based businesses
should perform well in 2014. For our marine business, we expect more stability and potential increases in overall
rates and volumes combined with lower variable costs as a result of route restructurings and vessel sharing
agreements. In Argentina, we expect to recover from a short sugar cane crop last year (weather related) and we are
hopeful that the government will continue to support the national biofuels program and loosen the reins on their state
controlled economy.
Consistent with the last several years, we continue to apply our solid cash flows back into the Company with
investments in capital equipment, acquisitions and share repurchases. Over the last five years, we have spent 147%
of our average annual depreciation expense by reinvesting in and growing our businesses. As long as we see
tangible economic paybacks and value creation through these initiatives, we will continue to support this aggressive
capital spending program. By reducing costs and increasing operating efficiencies, we will be in a good position to
take advantage of extraordinary margins in all of our major businesses when that time arrives (and it will).
Commodity Trading & Milling
The trading and milling group again achieved record volume and sales. Last year we traded more than 8 million tons
of agricultural products into approximately 100 countries. Overall milling and grain trading margins produced mixed
results with South America and the Caribbean outperforming the African locations. During the year we enlarged
our grain milling footprint with investments in flour milling businesses in Brazil, South Africa and Gambia. These
new facilities will add incremental volume, synergies and economies of scale to our business model. At long last, we
are replacing our bulk cargo vessel fleet with larger and more cost efficient vessels, including four eco-design sister
ships currently being built in China. Going forward, our ocean freight costs should decrease significantly and we
will be in a more advantageous position to trade third party cargos with lower operating costs and additional
capacity. The group is actively pursuing additional grain processing businesses in Africa, the Americas, the
Caribbean and elsewhere. Further, we continue to seek opportunities to expand and modernize our existing milling
operations and invest up the value chain in further processed products. That said, our acquisition and expansion
efforts are not about growth at all cost. We’ve seen much M&A activity, particularly in Africa, at values that bear
little relationship to earnings and unless this changes, we will continue to pursue expansion through organic growth
(including greenfield developments) and acquisitions based on sustainable earnings.
We have added a trading office in Canada which will improve our grain origination there and provide additional
merchandising opportunities. With ten trade offices in nine countries, we are well positioned for price discovery and
trade execution on all key continents. We have also consolidated our grain trading operations with our specialty
grains and foods trading operations to maximize the synergies of shared human resources and customers. With the
integrated “one team” approach between our trading operations and industrial affiliates, we believe we offer a
unique service and expertise to our worldwide customer base.
Seaboard Foods
Seaboard Foods’ vertically integrated model positioned the company well in 2013 as operating income improved
approximately 20% over 2012, largely due to higher margins generated from our biodiesel plant and solid pork
processing margins. Seaboard Foods’ biodiesel plant began operations in 2008 as an opportunity to add value to
by-products generated by Seaboard Foods’ pork plant. Daily’s, our raw and cooked bacon processor in the West,
also delivered consistent earnings while the fresh pork operations enjoyed the benefit of higher prices for pork offset
by higher grain prices and costs to acquire third party hogs. The outlook for 2014 is favorable. Pork Industry
experts predict strong producer and processor margins with lower grain prices, higher per capita consumption in the
US and strong product prices worldwide. Although grain prices declined sharply at the end of 2013 and the supply
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2013 Annual Report
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
outlook for 2014 is favorable, the pork industry faces other challenges, including trade issues on export sales, live
production concerns related to PEDV, a virus introduced to the U.S. hog industry in mid-2013 and uncertain
regulatory action.
Despite these issues, we remain optimistic about the prospects for Seaboard Foods both near and long-term and
continue to make significant investments in this division. Enhancements to the pork processing plant and expansion
of live production facilities were recently completed and we continue to invest in alternative fuel programs, rolling
stock and other equipment designed to lower operating costs and overall carbon emissions.
Seaboard Marine
2013 was a disappointing year financially as ocean carriers were competing in difficult markets with capacity
surpluses, flat to declining container rates and stagnant cargo volumes. Our margins, as a consequence, suffered. In
particular, we continue to face strong headwinds in Venezuela due to the economic and political turmoil there which
has resulted in marked cargo and revenue declines. The shipping industry remains weak with slow global trade and
stubbornly high fuel expenses. With less control over unit revenue, our focus remains on cost reductions in the areas
of ship and fuel expense and rationalization of routes. We finished our program of selling our existing vessel fleet
and have replaced such tonnage with more modern and fuel efficient chartered vessels. We are moving towards
larger but fewer container vessels to gain efficiencies while maintaining our premium service.
Despite our disappointing results, we continue to invest in additional port equipment to improve our cargo handling
efficiencies including additional mobile cranes and other cargo transporting equipment. We have recently ordered
over 3,000 dry containers to expand and improve the age profile of our container fleet. We successfully negotiated
for additional land and upgrades to our terminal with the Ports Authority in Miami. These initiatives and
improvements should lower our overall cost structure, increase turnaround times on equipment and maintain our
value to our customers.
Tabacal
In Argentina, Tabacal had a good year in both the sugar and alcohol businesses; however, margins were down
substantially from 2012. On a national level this was due to a large sugar inventory carryover from the 2012 crop
and a challenging economic environment where the peso continued to devalue. Our production costs were up due to
drought and early frost that reduced Tabacal’s cane crop and higher personnel costs which grew at the unofficial
(real) rate of inflation. These macroeconomic and political factors create an environment where it is increasingly
challenging for our management to deliver positive margins but we continue to focus on controlling costs,
optimizing the company’s product mix and finding opportunities in this volatile and harsh environment.
We expect 2014 to be another challenging year, but are hopeful that our integrated model, modern facilities and our
resourceful and loyal employee base will contribute to Seaboard’s bottom line.
TCC
Our power business in the Dominican Republic achieved record sales in its first full year of operations with the new
combined cycle 106 megawatt dual fuel power generation facility. The new power facility continues to perform
very well on both natural gas and heavy fuel oil. We continue to explore options for lower cost supplies of natural
gas. Our management team continues to focus on maximizing plant availability and minimizing operating costs.
We continue to lease, on a short term basis, one of the power barges we sold in 2011 but without additional demand
growth, the leased barge’s margins could decline over time as more efficient generation is introduced on the island.
While we achieved record sales in 2013, cash collections lagged and our receivable balance grew. We expect 2014
will bring positive but lower comparable results due to lower selling prices resulting from additional new generation
in excess of demand growth.
Butterball
The historically high feed grain prices, along with the integration of an acquired further processing facility proved to
be a challenge for Butterball in 2013. Financial performance dropped substantially relative to the prior year,
although our long-term expectation for the business remains very positive. In reality, 2013 could have been much
worse due to difficult market conditions, but sales and operations initiatives implemented over the past few years
more than offset the actual increase in feed grain prices.
2013 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
Although the Butterball brand is closely tied to the Thanksgiving holiday and the seasonal whole bird business, we
believe that the brand has significant untapped potential in the value-added markets. With the acquisition of the
further processing facility, Butterball has strengthened its position to continue the development of its product lines
and further leverage the brand. The continued development of our value-added business and focus on being a low
cost producer are key factors in managing underlying commodity risks going forward, and we feel very good about
the business model that is in place and our position as the markets return to normal in the upcoming year. Despite
the challenges of the past year, our focus is the vast opportunities that lie ahead and therefore we remain confident in
and committed to the future success of this investment.
I would like to thank our customers who value quality and service as much as price, our employees for the energy
and pride in building our businesses and upholding our reputation and our long standing shareholders who have been
rewarded by the increased price of our stock. It is a great source of pride to know that our reputation is solid in each
of our respective businesses. This can only happen through a high level of care, integrity and creativity of our
people. The food, energy and transportation businesses are complex and changing rapidly. It is incumbent on us to
not only stay current with these changes, but be at the forefront in each of our businesses.
Steven J. Bresky
President and
Chief Executive Officer
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2013 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
Kenya
Peru*
Singapore
South Africa
Africa Poultry Development Limited*
Democratic Republic of Congo,
Kenya and Zambia
Belarina Alimentos S.A.*
Brazil
Compania Industrial de Productos
Agreopecuarios SA*
Rafael del Castillo & Cia. S.A*
Colombia
Gambia Milling Corporation*
Gambia
Fairfield Rice Inc.*
National Milling Company
of Guyana, Inc.
SeaRice Caribbean 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
Seaboard de Colombia, S.A.
Colombia
Seaboard de Nicaragua, S.A.
Nicaragua
Seaboard del Peru, S.A.
Peru
Seaboard Freight & Shipping Jamaica
LMM Farine, S.A.
Madagascar
Limited
Jamaica
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
Paramount Mills (Pty) Ltd.*
South Africa
National Milling Corporation Limited
Zambia
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
Representaciones Maritimas y Aereas,
S.A.
Guatemala
Sea Cargo, S.A.
Panama
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
Ozark, Arkansas
Carthage, Missouri
Mt. Olive, North Carolina
Further Processing Plants
Jonesboro, Arkansas
Montgomery, Illinois
Other
Mount Dora Farms de Honduras,
S.R.L.
Honduras
Mount Dora Farms Inc.
Houston, Texas
*Represents a non-controlled, non-consolidated affiliate
2013 Annual Report
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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 20,000 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 five 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 2013, 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 agricultural commodity trading and
processing and logistics operation. This division sources, transports and markets approximately eight 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 23 countries. The commodity trading
business has ten offices in nine countries in addition to two non-consolidated affiliates in two other countries. The
grain processing businesses operate facilities at 32 locations in 16 countries, and include five consolidated and
fourteen non-consolidated affiliates in Africa, South America and the Caribbean. Seaboard and its affiliates produce
approximately four million metric tons of wheat flour, maize meal and manufactured feed per year in addition to
other related grain based products.
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2013 Annual Report
S E A B O A R D C O R P O R A T I O N
Division Summaries
Marine Division
Seaboard’s Marine Division provides cargo shipping services 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,
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 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 primarily
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 governmental bio-ethanol program, which requires alcohol to be blended
with gasoline. This division also owns a 51 megawatt cogeneration power plant. The plant is fueled by the burning
of sugarcane by-products during the harvest season, which is typically 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 owns one
of these facilities with a 106 megawatt capacity. The other facility, with a 72 megawatt capacity, is operated by
Seaboard on a short-term lease agreement that may be canceled by either party. 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.
Other Divisions
Seaboard has a 50 percent non-controlling voting interest in Butterball, LLC (Butterball). Butterball is the largest
vertically integrated producer, processor and marketer of branded and non-branded turkey and other products.
Butterball has four processing plants, two further processing plants and numerous live production and feed milling
operations located in North Carolina, Arkansas, Missouri, Illinois 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, which are primarily shipped to and sold in the United
States.
2013 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,
2013
$6,670,414
2012
$6,189,133
2011
2010
2009
$ 5,746,902
$ 4,385,702 $ 3,601,308
$ 204,864
$ 309,661
$ 407,204
$ 321,066 $
23,723
Net earnings attributable to Seaboard
$ 205,236
$ 282,311
$ 345,847
$ 283,611 $
92,482
Basic earnings per common share
$ 171.92
$ 234.54
$
284.66
$
231.69 $
74.74
Total assets
$3,418,048
$3,347,781
$ 3,006,728
$ 2,734,086 $ 2,337,133
Long-term debt, less current maturities $ 80,480
$ 120,825
$ 116,367
$
91,407 $
76,532
Stockholders’ equity
Dividends per common share
$2,479,970
-
$
$2,308,189
12.00
$
$ 2,079,467
-
$
$ 1,778,249 $ 1,545,419
3.00
$
9.00 $
On January 2, 2013, the American Taxpayer Relief Act of 2012 (the Tax Act) was signed into law. 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 were recorded in the first quarter of 2013. The total impact was a one-time tax
benefit of $7,945,000, or $6.66 per common share, recorded in the first quarter of 2013 related to certain 2012
income tax credits. In addition to this amount was a one-time credit of approximately $11,260,000, or $9.43 per
common share, for 2012 Federal blender’s credits that was recognized as revenues in the first quarter of 2013.
There was no tax expense on this transaction. See Note 7 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. 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 2014-2016. Seaboard did
not declare a dividend in 2013 and 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 common share, included in operating income.
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.
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2013 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, 2008 and ending December 31, 2013. 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:
12/31/08
12/31/09
12/31/10
12/31/11
12/31/12
12/31/13
Seaboard Corporation
NYSE MKT Composite
Peer Group
$100.00
$100.00
$100.00
$ 113.29
$ 135.53
$ 119.83
$ 168.01
$ 175.07
$ 137.38
$ 171.81
$ 179.96
$ 157.78
$ 214.55
$ 190.69
$ 170.11
$ 237.03
$ 200.56
$ 228.20
2013 Annual Report
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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
2013
$ 1,582,296
Net sales
63,458
Operating income
$
57,454
Net earnings attributable to Seaboard $
47.98
$
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
$ 1,684,039
53,549
$
39,547
$
33.07
$
-
$
$ 1,648,105
33,770
$
30,969
$
25.99
$
-
$
$ 1,755,974 $ 6,670,414
54,087 $ 204,864
$
77,266 $ 205,236
$
171.92
64.91 $
$
-
- $
$
High
Low
$
$
2,881.94 $ 2,825.92
2,504.00 $ 2,594.78
$ 2,945.00
$ 2,680.00
$ 2,874.99
$ 2,695.70
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:
$ 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
On January 2, 2013, the American Taxpayer Relief Act of 2012 (the Tax Act) was signed into law. 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 were recorded in the first quarter of 2013. The total impact was a one-time tax
benefit of $7,945,000, or $6.63 per common share, recorded in the first quarter of 2013 related to certain 2012
income tax credits. In addition to this amount was a one-time credit of approximately $11,260,000, or $9.40 per
common share, for 2012 Federal blender’s credits that was recognized as revenues in the first quarter of 2013.
There was no tax expense on this transaction. See Note 7 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. 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 2014-2016. In December
2010, Seaboard declared and prepaid the 2012 dividend of $3.00 per share.
During 2013, Seaboard repurchased 147, 4,945, 1,338 and 2,275 common shares in the first, second, third and fourth
quarters, respectively. During 2012, Seaboard repurchased 3,250, 4,875, 1,050 and 3,762 common shares in the
first, second, third and fourth quarters, respectively. See Note 12 to the Consolidated Financial Statements for
further discussion.
10 2013 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 U.S. 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 approximately 20,000
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 2013, 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 49% 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 cost 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.
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 agricultural commodity trading and processing and logistics
operation with locations in Africa, South America, the Caribbean, Europe and Asia. 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 agricultural commodity products. Although this segment owns five 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 grain
processing businesses, both consolidated and non-consolidated affiliates, operate in foreign and, in most cases,
lesser developed countries. 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, representing approximately 40% of Seaboard’s total working
capital at December 31, 2013, and primarily consisted of inventories and receivables.
2013 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 agricultural commodities are sourced from multiple origins and delivered to third party and affiliate
customers in various international locations. The execution of these purchase and delivery transactions have long
cycles of completion which may extend for several months with a high degree of price volatility. As a result, these
factors can significantly affect sales volumes, operating income, working capital and related cash flows from quarter
to quarter. Profit margins are sometimes protected 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 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, most notably Venezuela, may affect trade volumes and operating
profits. In addition, 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
The 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 51 megawatt cogeneration power plant which is fueled by the burning of
sugarcane by-products during the harvest season, which is typically 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 51 megawatt cogeneration power plant, financing
needs for this segment were minimal in 2013 and should remain minimal in 2014. With the division’s improved
operating results, Seaboard continues to explore various ways to improve and expand this segment.
Power Segment
The Power segment is an independent power producer in the Dominican Republic (DR) generating electricity from a
system of diesel engines mounted on two floating power generating facilities 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.
During 2011, Seaboard 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. Seaboard leases the other facility under a short-term lease which may be canceled by either
party. Additional financing needs for this segment should be minimal for 2014, but Seaboard may pursue further
power industry investments in the future. See Note 13 to the Consolidated Financial Statements for discussion of
the sale in 2011 of two previously operated floating power generating facilities.
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 2013 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
turkey and other products. Butterball has four processing plants, two further processing plants and numerous live
production and feed milling operations located in North Carolina, Arkansas, Missouri, Illinois 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. As a result, commodity price fluctuations can significantly affect the profitability and cash
flows of Butterball. The turkey business is seasonal only on the whole bird side, with Thanksgiving and Christmas
holidays driving the majority of those sales. On December 31, 2012, Butterball 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, 2013 decreased $15.3 million from December 31, 2012. The
decrease was primarily the result of cash used for capital expenditures of $149.7 million, principal payments of
long-term debt of $53.8 million, investments in and advances to affiliates discussed below of $39.5 million, and
repurchases of common stock of $23.6 million. Partially offsetting the decrease was net cash from operating
activities of $125.0 million, principal repayments received on notes receivable from affiliate of $81.4 million and an
increase in notes payable of $41.1 million. Cash from operating activities for 2013 decreased $136.7 million
compared to 2012, primarily as a result of timing of payments related to certain current liabilities in the Commodity
Trading and Milling and, to a lesser degree, Power segments as total current liabilities decreased in 2013 while they
increased in 2012.
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.
Capital Expenditures, Acquisitions and Other Investing Activities
During 2013, Seaboard invested $149.7 million in property, plant and equipment, of which $79.6 million was
expended in the Pork segment, $24.2 million in the Commodity Trading and Milling segment, $22.8 million in the
Marine segment, $17.1 million in the Sugar segment and $4.2 million in the Power segment. The Pork segment
expenditures were primarily for additional finishing barns, semi-tractors, 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 two dry bulk vessels 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 normal upgrades to existing
operations, including cane re-planting. 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 2014 capital expenditures budget is $220.1 million. The Pork segment plans to spend $67.5 million
primarily for improvements to existing facilities and related equipment and for compressed natural gas semi-tractors
and related refueling stations. The Commodity Trading and Milling segment plans to spend $79.2 million primarily
for payments of $62.2 million for four dry bulk vessels being built for a total estimated cost of $92.0 million, and
improvements to existing facilities and related equipment. The final payment for the dry bulk vessels is scheduled to
be made in 2015 but Seaboard is currently reviewing options to lease these vessels in 2014 instead of paying cash to
acquire the vessels. The Marine segment has budgeted $47.2 million primarily for additional cargo carrying and
handling equipment. In addition, management will be evaluating whether to purchase additional cargo vessels for
the Marine segment during 2014. The Sugar segment plans to spend $24.5 million primarily for normal upgrades to
existing operations, including cane re-planting. Management anticipates paying for these capital expenditures from a
combination of available cash, the use of available short-term investments and Seaboard’s available borrowing
capacity.
2013 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
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
being built as discussed above. The Marine segment expenditures were primarily for purchases of cargo carrying
and handling equipment and the purchase of a 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.
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.
In September 2013, Seaboard invested $17.0 million in a flour production business in Brazil for a 50% non-
controlling equity interest and provided a $13.0 million long-term loan to this business. See Note 4 to the
Consolidated Financial Statements for further discussion. Also in September 2013, Seaboard invested $7.4 million
in a flour milling business located in South Africa for a 49% non-controlling interest. In July 2013, Seaboard
acquired a 50% non-controlling interest in a flour milling business located in Gambia by making a total investment
in and advances to this affiliate of $9.1 million during 2013.
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, with a final payment of $0.5 million made in 2013 for the
December 2012 transaction upon final verification of certain balance sheet items. During the fourth quarter of 2011,
Seaboard provided advances of $30.1 million 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. On March 28, 2013, Butterball repaid
in full this $81.2 million loan. 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. 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.
Beginning in 2010, Seaboard invested in a bakery built in the Democratic Republic of Congo for a 50 percent
non-controlling interest in this business. During 2013, 2012 and 2011, Seaboard invested $4.5 million, $24.8 million
and $11.4 million, respectively, in equity and long-term advances for a total investment of $50.8 million in this
business. The bakery began operations in the fourth quarter of 2012. See Note 4 to the Consolidated Financial
Statements for further discussion of this investment.
Starting in 2011, Seaboard began 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. During
14 2013 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
2013, 2012 and 2011, Seaboard invested $3.8 million, $8.4 million and $4.7 million, respectively. Additional
investments are required to be made in future years but are not deemed material in total.
Financing Activities, Debt and Related Covenants
The following table presents a summary of Seaboard’s available borrowing capacity as of December 31, 2013. At
December 31, 2013, there were no borrowings outstanding under the committed line of credit and borrowings under
the uncommitted lines of credit totaled $67.7 million, all related to foreign subsidiaries. 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, 2013
Total amount
available
$
200,000
209,501
409,501
(67,699)
(4,793)
$
337,009
In November 2013, Seaboard provided notice of call for early redemption to holders of certain Industrial
Development Revenue Bonds (IDRBs) effective December 20, 2013 and paid $18.0 million in the fourth quarter of
2013. In April 2013, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective
May 13, 2013 and paid $10.8 million in the second quarter of 2013. In December 2012, Seaboard provided notice
of call for early redemption to holders of certain IDRBs effective January 14, 2013 and paid $13.0 million in the
first quarter of 2013. In 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 matures in December 2021 and is secured by the power generating
facility. During 2012 and 2011, Seaboard borrowed $32.7 million and $65.0 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
$1,179.0 million. As of December 31, 2013, 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 $11.7 million, $11.4 million and $11.4 million for the three years ending
December 31, 2014, 2015 and 2016, respectively. As of December 31, 2013, Seaboard had cash and short-term
investments of $345.7 million, additional total working capital of $892.9 million and a $200.0 million committed
line with a maturity date of 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
2014. 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, 2013, $93.5 million of the $345.7 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, 2013, 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 November 1, 2013, Seaboard’s Board of Directors authorized an additional $75.0 million for use in purchasing
Seaboard’s Common Stock pursuant to Seaboard’s share repurchase program. Seaboard used cash to repurchase
8,705, 12,937 and 5,282 shares of common stock at a total price of $23.6 million, $26.8 million and $10.0 million in
2013 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
2013, 2012 and 2011, 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 2014-2016. Seaboard did not declare or pay
any dividends in 2011. In December 2010, Seaboard declared and prepaid the 2012 and 2011 dividends of $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, 2013.
(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
Interest payments
Other purchase commitments
Total contractual cash obligations
Total
1-3
years
Less than
1 year
$ 232,732 $ 67,108 $ 65,081
20,329
42,102
127,512
22,800
9,348
-
4,295
226,646
Payments due by period
3-5
years
$ 38,150
17,584
44,809
100,543
22,800
15,045
-
1,218
75,302
52,123
339,056
623,911
92,177
74,888
67,699
10,239
1,261,880
11,507
19,726
98,341
11,697
5,756
67,699
2,787
959,829
More than
5 years
$ 62,393
2,703
232,419
297,515
34,880
44,739
-
1,939
103
and commitments
$ 2,130,794 $1,146,109 $390,601
$ 214,908
$ 379,176
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, 2013. 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.
Interest payments in the table above include the net payments for interest rate exchange agreements based on the
fixed amounts paid and the variable amount received, which is estimated using the projected yield as of December
31, 2013. Interest payments also include the expected cash payments for interest on fixed rate long-term debt.
RESULTS OF OPERATIONS
Net sales for the years ended December 31, 2013, 2012 and 2011 were $6,670.4 million, $6,189.1 million and
$5,746.9 million, respectively. The increase in net sales for 2013 compared to 2012 primarily reflected higher sales
for commodity trading from increased volumes to third parties and, to a lesser extent, increased sale prices as
discussed below. 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.
16 2013 Annual Report
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
Operating income for the years ended December 31, 2013, 2012 and 2011 were $204.9 million, $309.7 million and
$407.2 million, respectively. The decrease for 2013 compared to 2012 primarily reflected increased operating costs
and lower cargo rates for the Marine segment, lower sale prices and increased production costs for the sugar
segment, and lower margins on wheat sales to a non-consolidated affiliate in Africa and, to a lesser extent, to third
parties for the Commodity Trading and Milling segment. Partially offsetting the decrease was higher biodiesel
margins primarily from increased government payments, as discussed below, for the Pork segment. 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 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.
Pork Segment
(Dollars in millions)
Net sales
Operating income
2013
$ 1,713.1
147.7
$
2012
$ 1,638.4
122.6
$
2011
$ 1,744.6
259.3
$
Net sales for the Pork segment increased $74.7 million for the year ended December 31, 2013 compared to 2012.
The increase primarily reflected higher prices for pork products sold in the domestic market and increased payments
received from the U.S. government for biodiesel production in 2013 compared to 2012. Partially offsetting the
increase were lower sales volume of pork products in the domestic market and lower prices for biodiesel sold in
2013 compared to 2012. U.S. Government payments included a one-time credit of $11.3 million recorded as
revenues in the first quarter of 2013 related to the Tax Act, which renewed and extended the Federal blender’s credit
that Seaboard is entitled to receive for biodiesel it blends. See Note 13 to the Consolidated Financial Statements for
further discussion of the Federal blender’s credit.
Operating income increased $25.1 million for the year ended December 31, 2013 compared to 2012. The increase
was the result of higher biodiesel margins primarily from increased government payments, including the one-time
credit of $11.3 million, discussed above. Higher prices for pork products were offset by increased costs, principally
for hogs internally grown and, to a lesser extent, for third party hogs. However, higher feed costs were offset by
positive changes from using the LIFO method for determining certain inventory costs.
Management is unable to predict future market prices for pork products and biodiesel, the cost of feed or the impact
to Seaboard from the porcine epidemic diarrhea virus currently being experienced by the pork industry. In addition,
the Federal blender’s credit expired December 31, 2013 and recently proposed Federal regulations, if approved,
decrease U.S. government mandates to use biofuels in 2014. However, management anticipates positive operating
income for this segment in 2014.
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 2011. 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
Mark-to-market adjustments
Operating income excluding mark-to-market adjustments
Income (loss) from affiliates
2013
$ 3,501.5
$
$
$
38.3
3.7
42.0
(0.6)
2012
$ 3,023.5
2011
$ 2,689.8
$
$
$
71.9
0.9
72.8
10.5
$
$
$
43.2
(16.6)
26.6
13.4
Net sales for the Commodity Trading and Milling segment increased $478.0 million for the year ended December
2013 Annual Report 17
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Management’s Discussion & Anal ysis
31, 2013 compared to 2012. The increase primarily reflected higher sales for commodity trading from increased
volumes to third parties for wheat, soybean meal and various agricultural commodities and, to a lesser extent,
increased sale prices for soybean meal and soybeans.
Operating income decreased $33.6 million for the year ended December 31, 2013, compared to 2012. The decrease
primarily reflected certain unfavorable market conditions which resulted in lower margins on wheat sales to a non-
consolidated affiliate in Africa and, to a lesser extent, to third parties. Partially offsetting the decrease were
recoveries of $5.2 million in 2013 of the inventory write-downs for customer contract performance issues
recognized in prior years. Excluding the effects of the mark-to-market adjustments for derivative contracts as
discussed below, operating income decreased $30.8 million for 2013 compared to 2012.
Due to worldwide commodity price fluctuations, 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 2014, excluding the potential effects of marking to market derivative contracts.
Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this
segment in 2013 and 2012 would have been higher by $3.7 million and $0.9 million, 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 2014. 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, 2013 decreased by $11.1 million from 2012. The decrease
was primarily the result of certain unfavorable market conditions for an affiliate in Africa. 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 $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.
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 above. Excluding the
effects of these derivative contracts, operating income increased $46.2 million for 2012 compared to 2011.
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.
Marine Segment
(Dollars in millions)
Net sales
Operating income (loss)
2013
$ 913.8
(25.8)
$
2012
969.6
26.1
$
$
2011
$ 928.5
(3.9)
$
Net sales for the Marine segment decreased $55.8 million for the year ended December 31, 2013, compared to 2012.
The decrease was primarily the result of lower volumes in certain markets, most notably Venezuela, and, to a lesser
extent, decreased cargo rates in certain markets served during 2013 compared to 2012.
Operating income decreased by $51.9 million for the year ended December 31, 2013, compared to 2012. The
decrease was primarily the result of increased trucking costs and certain terminal operating costs on a per unit
18 2013 Annual Report
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Management’s Discussion & Anal ysis
shipped basis impacted by the decreased volumes and, to a lesser extent, decreased cargo rates noted above.
Management cannot predict changes in future cargo volumes and cargo rates or to what extent changes in economic
conditions in markets served, most notably Venezuela, will affect net sales or operating income during 2014. As a
result, management currently cannot predict if this segment will be profitable in 2014.
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.
Sugar Segment
(Dollars in millions)
Net sales
Operating income
Income from affiliates
2013
$ 245.5
24.5
$
0.6
$
2012
288.3
60.2
0.1
$
$
$
2011
$ 259.8
65.1
$
0.4
$
Net sales for the Sugar segment decreased $42.8 million for the year ended December 31, 2013 compared to 2012.
The decrease primarily reflects lower sales prices for sugar and, to a lesser extent, lower volumes of sugar sold.
Sugar sales are denominated in Argentine pesos and the lower sales prices for sugar in terms of U.S. dollars were
primarily the result of the exchange rate differences as the Argentine peso continued to weaken against the U.S,
dollar in 2013. Partially offsetting the decrease in net sales was increased sales volume of alcohol. Management
cannot predict sugar and alcohol prices for 2014, but management anticipates that the Argentine peso will continue
to weaken against the U.S. dollar based on the devaluation of the Argentine peso in January and February of 2014,
which could result in lower sales prices in terms of U.S. dollars. Also, see Note 12 to the Consolidated Financial
Statements for discussion of this devaluation’s impact on stockholders’ equity in the first quarter of 2014.
Operating income decreased $35.7 million for the year ended December 31, 2013 compared to 2012. The decrease
primarily represents lower income from sugar sales as a result of lower sale prices as noted above and, to a lesser
extent, increased costs of production. Partially offsetting this decrease was higher income from alcohol sales from
increased sales volume as noted above. Management anticipates positive operating income for this segment in 2014,
although lower than 2013.
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.
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.
Power Segment
(Dollars in millions)
Net sales
Operating income
2013
$ 283.8
42.9
$
2012
$ 255.4
55.0
$
2011
$ 111.4
$ 60.8
Net sales for the Power segment increased $28.4 million for the year ended December 31, 2013 compared to 2012.
The increase primarily reflected increased volumes from operating the new power generating facility the entire first
quarter in 2013. The new power generating facility started operating in March 2012. Although management cannot
predict future spot market rates, sales volumes for 2014 are anticipated to be fairly comparable to 2013 as long as
the short-term leasing of one power generating facility continues.
Operating income decreased $12.1 million for the year ended December 31, 2013 compared to 2012. The decrease
primarily reflected higher operating costs and higher fuel costs per kilowatt hour generated, partially offset by higher
2013 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
production volumes noted above. Management cannot predict future fuel costs or the extent that spot market rates
will fluctuate compared to fuel costs. However, management anticipates positive operating income for this segment
for 2014, although lower than 2013.
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.
Turkey Segment
(Dollars in millions)
Income (loss) from affiliate
2013
$ (10.3)
2012
$ 20.2
2011
$ 12.7
The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball. On
December 31, 2012, Butterball purchased the assets of Gusto Packing Company, Inc. (Gusto), a pork and turkey
further processor located in Montgomery, Illinois. The decrease in income from affiliate for 2013 compared to 2012
was primarily the result of higher feed costs and, to a lesser extent, various production inefficiencies experienced
especially during the fourth quarter of 2013 related to the Gusto operations. In addition, Butterball incurred
additional charges in 2013 for impairment of fixed assets related to the planned sale of its Longmont, Colorado
facility. Seaboard’s proportionate share represented $3.7 million recognized in loss from affiliate for 2013.
Management anticipates positive income for this segment in 2014, excluding the potential effects of marking to
market commodity derivative contracts and interest rate exchange agreements.
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.
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.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the year ended December 31, 2013 increased by $12.6
million over 2012 to $264.0 million. The increase was primarily the result of increased administrative expenses and
personnel costs in most segments. As a percentage of revenues, SG&A decreased to 4.0% for 2013 compared to
4.1% for 2012.
SG&A expenses for the year ended December 31, 2012 increased by $30.7 million over 2011 to $251.4 million.
The 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.
Interest Expense
Interest expense totaled $11.4 million, $11.0 million and $6.9 million for the years ended December 31, 2013, 2012
and 2011, 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 Income
Interest income totaled $17.6 million, $11.1 million and $10.0 million for the years ended December 31, 2013, 2012
and 2011, respectively. The increase for 2013 compared to 2012 primarily reflected an increase in interest received
on outstanding customer receivable balances in the Power division.
20 2013 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
Interest Income from Affiliates
Interest income from affiliates totaled $24.7 million, $20.6 million and $17.8 million for the years ended December
31, 2013, 2012 and 2011, respectively. The increases primarily represented increased interest income from notes
receivable from Butterball.
Other Investment Income, Net
Other investment income, net totaled $7.8 million, $8.5 million and $0.2 million for the years ended December 31,
2013, 2012 and 2011, respectively. The increase for 2012 compared to 2011 primarily reflected a gain of $4.1
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.
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 $5.9 million, $(3.0) million and $(13.1) million for the years ended December 31, 2013,
2012 and 2011, respectively. Miscellaneous, net primarily reflected mark-to-market fluctuations on interest rate
exchange agreements.
Income Tax Expense
The effective tax rate for 2013 was lower than 2012 primarily from tax-exempt income related to biodiesel
production recognized in 2013 and a one-time tax benefit of $7.9 million recorded in 2013 related to certain 2012
income tax credits as further discussed in Note 7 to the Consolidated Financial Statements. Excluding these tax
benefits, the effective tax rate for 2013 was higher than 2012 as the mix of domestic and foreign earnings fluctuated.
See Note 7 to the Consolidated Financial Statements for further discussion of the 2013 effective tax rate. The
effective tax rate for 2012 is comparable to 2011 even though the mix of domestic and foreign earnings fluctuated.
This was 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. Certain U.S. income tax provisions expired on December 31, 2013.
Seaboard’s effective tax rate could increase in 2014 compared to 2013 related to domestic earnings if the expired
U.S. income tax provisions are not retroactively extended.
OTHER FINANCIAL INFORMATION
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 receivables are heavily weighted toward foreign
receivables ($482.3 million or 80.0% at December 31, 2013), including foreign receivables due from affiliates
2013 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
($141.5 million at December 31, 2013), 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
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, 2013, 2012 and 2011 was $3.4 million, $3.1 million
and $4.4 million, respectively.
Valuation of Inventories – Inventories are generally valued at the lower of cost or market. In determining market,
management makes assumptions regarding replacement costs, estimated sales prices, estimated costs to complete,
estimated disposal costs and normal profit margins. For commodity trading inventories, when contract performance
by a customer becomes a concern, management must also evaluate available options to dispose of the inventory,
including assumptions about potential negotiated changes to sales contracts, sales prices in alternative markets in
various foreign countries and potentially additional transportation costs. At times, management must consider
probability weighting various viable alternatives in its determination of the net realizable value of the inventories.
These assumptions and probabilities are subjective in nature, and are based on management’s best estimates and
judgments existing at the time of preparation. Changes in future market prices of grains or facts and circumstances
could result in a material write-down in value of inventory or 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 undiscounted 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 13 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-lived 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-lived intangible 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
22 2013 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
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-lived intangible assets that may include, but are not limited to, a
change in the business climate, a negative change in relationships with significant customers and changes to
strategic decisions, including decisions to expand made in response to economic and competitive conditions.
Changes in these facts, circumstances and management’s estimates and judgment could result in an impairment of
goodwill and/or other intangible assets resulting in a material charge to earnings. At December 31, 2013, 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, 2013, Seaboard has deferred tax assets of $95.8 million, net of the valuation allowance of $17.9
million, and deferred tax liabilities of $145.7 million. For the years ended December 31, 2013, 2012 and 2011,
income tax expense included $35.0 million, $(22.4) million and $(1.9) 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 $2.1 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 commodity 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, 2013 and 2012, 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
2013 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
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
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. 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, 2013 and December 31, 2012. 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
Vegetable oils
Dry dairy products
Energy related resources
Foreign currencies
Interest rates
December 31, 2013
December 31, 2012
$
14,281
3,275
994
453
102
-
19,629
830
$
8,296
1,955
639
-
22
165
28,457
892
The table below provides information about Seaboard's non-trading financial instruments sensitive to changes in
interest rates at December 31, 2013. For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates. At December 31, 2013 and 2012, long-term debt
included foreign subsidiary obligations payable in U.S. dollars of $91.2 million and $102.6 million, respectively.
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.
(Thousands of dollars)
2014
2015
2016
2017
2018
Thereafter
Total
Long-term debt:
Fixed rate
Average interest rate
$11,697
5.50%
$11,400
5.34%
$11,400
5.34%
$11,400
5.34%
$11,400 $34,880 $ 92,177
5.56% 5.44%
5.34%
Non-trading financial instruments sensitive to changes in interest rates at December 31, 2012 consisted of fixed rate
long-term debt totaling $104.0 million, with an average interest rate of 5.48 percent and variable rate long-term debt
totaling $42.0 million, with an average interest rate of 1.50 percent. Weighted average variable rates were based on
rates in place at December 31, 2012.
24 2013 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 (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on its evaluation under the framework in Internal
Control - Integrated Framework (1992), management concluded that Seaboard’s internal control over financial
reporting was effective as of December 31, 2013.
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.
2013 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, 2013 and 2012 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, 2013. 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, 2013 and 2012, and the results of
their operations and their cash flows for each of the years in the three-year period ended December 31, 2013, 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, 2013, based on criteria
established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), and our report dated February 26, 2014 expressed an
unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Kansas City, Missouri
February 26, 2014
26 2013 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, 2013, based
on criteria established in Internal Control - Integrated Framework (1992) 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, 2013, based on criteria established in Internal Control - Integrated Framework (1992)
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, 2013 and
2012, 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, 2013, and our report dated February 26, 2014 expressed an
unqualified opinion on those consolidated financial statements.
Kansas City, Missouri
February 26, 2014
2013 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 $744,965, $747,064 and $808,834)
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 (loss) 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
2013
Years ended December 31,
2012
2011
$
5,431,402
$
4,916,322
$
4,666,172
952,596
286,416
6,670,414
5,089,959
877,848
-
233,758
6,201,565
468,849
263,985
204,864
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
(11,422)
17,580
24,695
(10,292)
7,846
77
5,867
34,351
239,215
(32,450)
206,765
(1,529)
205,236
$
$
(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
$
$
Earnings per common share
$
171.92
$
234.54
$
284.66
Other comprehensive income (loss), net
of income tax benefit (expense) of $(10,318), $9,197 and $12,604:
Foreign currency translation adjustment
Unrealized gain (loss) 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
(45,956)
(1,751)
-
37,454
$
(10,253)
196,512
(1,561)
194,951
$
1,193,801
(15,788)
2,543
(113)
(2,121)
$
(15,479)
267,109
(279)
266,830
$
1,203,698
(12,389)
(756)
-
(19,013)
$
(32,158)
311,399
2,351
313,750
$
1,214,934
See accompanying notes to consolidated financial statements.
28 2013 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 affiliates
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
Accrued voyage costs
Deferred revenue
Payables due to affiliates
Deferred revenue from affiliates
Accrued commodity inventory
Other accrued liabilities
Total current liabilities
Long-term debt, less current maturities
Accrued pension liability
Deferred income taxes
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 1,188,955 and 1,197,660 shares
Accumulated other comprehensive loss
Retained earnings
Total Seaboard stockholders' equity
Noncontrolling interests
Total equity
Total Liabilities and Stockholders' Equity
December 31,
2013
2012
$
55,055
290,649
$
47,651
313,379
419,598
145,041
99,597
664,236
(12,832)
651,404
698,998
23,449
134,394
1,853,949
863,573
406,900
180,386
43,218
18,997
51,025
3,418,048
$
$
67,699
11,697
175,916
127,212
49,621
43,953
24,326
2,239
29,248
83,416
615,327
80,480
80,918
73,336
88,017
322,751
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
205,122
127,141
47,674
53,811
11,919
24,131
46,509
106,344
676,575
120,825
127,837
33,929
80,426
363,017
1,189
(181,797)
2,655,857
2,475,249
4,721
2,479,970
3,418,048
$
1,198
(171,544)
2,474,896
2,304,550
3,639
2,308,189
3,347,781
$
See accompanying notes to consolidated financial statements.
2013 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 notes receivable from affiliates
Loss (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
Principal payments received on notes receivable
Capital expenditures
Proceeds from the sale of fixed assets
Proceeds from the sale of power generating facilities
Advance payment on capital lease
Investments in and advances to affiliates, net
Long-term notes receivable issued to affiliate
Principal payments received on long-term notes receivable from affiliates
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,
2012
2011
2013
$
206,765
$
282,588
$
343,557
93,077
-
(4,433)
-
30,233
(13,642)
10,292
11,340
(7,846)
(222)
1,585
(154,036)
35,600
(12,642)
(73,210)
2,137
124,998
(611,737)
625,414
5,612
-
18,079
(149,652)
14,538
-
-
(39,485)
(17,531)
81,397
(4,357)
-
(291)
(78,013)
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
-
-
(158,755)
15,906
-
-
(24,927)
(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)
-
(183,748)
4,882
59,603
(8,493)
(18,533)
(13,037)
2,827
(4,696)
-
1,394
(183,250)
41,092
-
(53,756)
(23,578)
-
(515)
(225)
(676)
(37,658)
(1,923)
7,404
47,651
55,055
$
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
$
See accompanying notes to consolidated financial statements.
30 2013 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
Interests
$
1,216
$
(123,907)
$
1,897,897
$
3,043
Total
1,778,249
$
(Thousands of dollars except per share amounts)
Balances, January 1, 2011
Comprehensive income:
Net earnings
Other comprehensive loss, net of tax
Repurchase of common stock
Dividends paid to noncontrolling interests
Balances, December 31, 2011
Comprehensive income:
Net earnings
Other comprehensive loss, net of tax
Repurchase of common stock
Dividends on common stock
Addition of noncontrolling interests
Dividends paid to noncontrolling interests
Balances, December 31, 2012
Comprehensive income:
Net earnings
Other comprehensive loss, net of tax
Repurchase of common stock
Reduction to noncontrolling interests
Dividends paid to noncontrolling interests
Balances, December 31, 2013
(32,158)
(5)
345,847
(9,966)
1,211
(156,065)
2,233,778
(15,479)
(13)
282,311
(26,817)
(14,376)
1,198
(171,544)
2,474,896
(10,253)
(9)
205,236
(23,569)
(706)
$
See accompanying notes to consolidated financial statements.
2,655,857
(181,797)
$
1,189
$
(2,290)
(61)
(149)
543
277
2
2,853
(36)
3,639
1,529
32
(254)
(225)
4,721
$
343,557
(32,219)
(9,971)
(149)
2,079,467
282,588
(15,477)
(26,830)
(14,376)
2,853
(36)
2,308,189
206,765
(10,221)
(23,578)
(960)
(225)
2,479,970
$
2013 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 75.2 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 high yield debt securities and, on a limited
basis, 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 (loss). 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, net 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 2013 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 Affiliates
Seaboard monitors the credit quality of notes receivable from its affiliates by obtaining and reviewing financial
information for these affiliates on a monthly basis and by having Seaboard representatives serve on the Board of
Directors of these affiliates.
Goodwill and Other Intangible Assets
Goodwill and other indefinite-lived 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 2013, there were no
impairment charges recorded for the year ended December 31, 2013.
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, 2013 and 2012 was $4,831,000 and $5,231,000, 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 2013 and 2012:
(Thousands of dollars)
Beginning balance
Accretion expense
Liability for additional lagoons placed in service
Ending balance
Years ended December 31,
2012
$ 13,109
1,090
116
$ 14,315
2013
$ 14,315
1,177
86
$ 15,578
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. generally accepted accounting principles (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
2013 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. Revenues for the commodity trading business are recognized when
the commodity is delivered to the customer, collection is reasonably assured and the sales price is fixed or
determinable. Revenues for cargo services are recognized ratably over the transit time for each voyage, with
expenses associated with cargo services recognized as incurred. Revenues for 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,
2013
$ 11,119
59,899
2012
$ 11,674
69,760
2011
$
6,786
126,730
Included in property, plant and equipment is capitalized interest in the amount of $221,000, $1,125,000 and
$6,723,000 for 2013, 2012 and 2011, respectively.
Supplemental Non-Cash Transactions
As discussed in Note 4, as of December 31, 2013 and 2012, Seaboard has notes receivable from affiliates which
accrue pay-in-kind interest income. Non-cash, pay-in-kind interest income and accretion of discount recognized on
these notes receivable for the years ended December 31, 2013, 2012 and 2011 was $13,642,000, $11,936,000 and
$10,584,000, respectively.
During the third quarter of 2013, Seaboard finalized the details of its investment in and long-term loan to a bakery
business in the Democratic Republic of Congo in which Seaboard has a 50% non-controlling interest, resulting in
decreasing investments in and advances to affiliates and increasing long-term notes receivable from affiliates by
$26,290,000 for amounts previously advanced prior to 2013. See Note 4 for further discussion.
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. A final payment of $515,000 was made in 2013,
which increased intangible assets.
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
34 2013 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
denominated in U.S. dollars. In addition, the value of the U.S. dollar fluctuates in relation to the currencies of
countries where certain of Seaboard’s foreign subsidiaries and affiliates primarily conduct business. These
fluctuations result in exchange gains and losses. The activities of these foreign subsidiaries and affiliates are
primarily conducted with U.S. subsidiaries or operate in hyper-inflationary environments. As a result, the financial
statements of certain foreign subsidiaries and affiliates are re-measured using the U.S. dollar as the functional
currency.
Seaboard’s Sugar segment, two consolidated subsidiaries (Commodity Trading and Milling segment businesses in
Canada and Zambia) and nine non-controlled, non-consolidated affiliates (Commodity Trading and Milling segment
businesses in Australia, Brazil, Colombia, Guyana, Kenya, Lesotho, South Africa 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. Additionally, 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 uses various 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, 2013, 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 not directly related to its raw material
requirements.
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, 2013 and 2012, amortized cost and
estimated fair market value were not materially different for these investments. At December 31, 2013 and 2012,
money market funds included $16,144,000 and $2,441,000 denominated in Canadian dollars, respectively, and
$11,715,000 and $6,437,000 denominated in Euros, 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, 2013 and 2012:
2013 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
(Thousands of dollars)
Money market funds
Corporate bonds
U.S. Government agency securities
Emerging markets debt mutual fund
Asset backed debt securities
Collateralized mortgage obligations
U.S. Treasury securities
Total available-for-sale short-term investments
High yield trading debt securities
Money market funds held in trading accounts
Emerging markets trading debt mutual fund
Emerging markets trading debt securities
Other trading investments
Total short-term investments
2013
2012
Amortized
Cost
$ 88,430
69,591
27,299
17,693
8,446
7,597
5,258
224,314
49,352
11,033
3,202
1,300
841
$ 290,042
Fair
Value
$ 88,430
70,258
27,147
16,941
8,477
7,600
5,223
224,076
50,428
11,033
2,858
1,336
918
$ 290,649
Amortized
Cost
$ 126,537
67,275
23,647
17,693
12,180
15,059
17,165
279,556
21,839
-
3,046
2,361
1,262
$ 308,064
Fair
Value
$ 126,537
69,214
23,775
18,734
12,238
15,162
17,169
282,829
23,406
-
3,237
2,600
1,307
$ 313,379
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, 2013:
(Thousands of dollars)
Due within one year
Due after one year through three years
Due after three years
Total fixed rate securities
2013
$ 4,605
37,111
58,768
$100,484
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 2013 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,
2013
2012
$
207,310
33,485
240,795
(62,236)
178,559
299,229
53,325
74,289
426,843
93,596
698,998
$
$
258,638
31,495
290,133
(90,730)
199,403
317,573
65,986
73,606
457,165
100,296
756,864
$
The use of the LIFO method increased 2013 net earnings by $17,381,000 ($14.56 per common share) and decreased
2012 and 2011 net earnings by $20,098,000 ($16.70 per common share) and $20,556,000 ($16.92 per common
share), respectively. If the FIFO method had been used for certain inventories of the Pork segment, inventories
would have been higher by $62,236,000 and $90,730,000 as of December 31, 2013 and 2012, respectively.
Note 4
Investments in and Advances to Affiliates and Notes Receivable from Affiliates
Seaboard’s investments in and advances to non-controlled, non-consolidated affiliates are primarily related to
Butterball, LLC (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, 2013, the location and percentage ownership of these affiliates excluding Butterball are as follows: Democratic
Republic of Congo (50%), Gambia (50%), Kenya (35%-49%), Lesotho (50%), Nigeria (25%-48%), South Africa
(49%) and Zambia (49%) in Africa; Brazil (50%), Colombia (40%-42%) and Ecuador (25%-50%) in South
America, and Haiti (23%) in the Caribbean. Also, Seaboard has investments in agricultural commodity 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 agricultural 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.
Seaboard Corporation also has a 50% non-controlling voting interest in Butterball. Butterball is a vertically
integrated producer, processor and marketer of branded and non-branded turkey and other products. As of December
31, 2013, Butterball had intangible assets of $111,000,000 for trade name and $73,667,000 for goodwill. The equity
method is used to account for this investment.
In connection with its initial investment in Butterball in December 2010, 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
2013 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
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 its partner in Butterball 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 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 Affiliates 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 Affiliates 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, 2013 and 2012, the recorded balance of this Note Receivable from Affiliates was
$126,082,000 and $112,629,000, respectively.
On December 31, 2012, Seaboard provided a loan of $81,231,000 to Butterball and was included in Notes
Receivable from Affiliates. 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. In late March 2013, Butterball
renegotiated its third party financing and on March 28, 2013 repaid in full this loan from Seaboard.
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, 2013
and 2012, the balance of the term loan included in Notes Receivable from Affiliates was $8,905,000 and $9,071,000,
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. Seaboard’s partner in Butterball
made an equal capital contribution.
Beginning in 2010, Seaboard invested in a bakery built in the Democratic Republic of Congo for a 50%
non-controlling interest in this business. During 2013, 2012 and 2011, Seaboard invested $4,531,000, $24,814,000,
and $11,397,000, respectively, in equity and long-term advances for a total investment of $50,822,000 in this
business. The bakery began operations in the fourth quarter of 2012. During 2013, Seaboard finalized details of this
investment resulting in decreasing investments in and advances to affiliates and increasing long-term notes
receivable from affiliates by $26,290,000 for amounts previously advanced as noted above prior to 2013. This
interest bearing long-term note receivable from this affiliate has a decreasing balance with the first payment due in
June 2015 and a final maturity date of December 2020. As of December 31, 2013, the recorded balance of this Note
Receivable from Affiliates was $30,821,000. Including this investment, as of December 31, 2013 Seaboard had a
total of $74,911,000 of investments in, advances to and notes receivable from various affiliates in the Democratic
Republic of Congo, which represents the single largest foreign country risk exposure for Seaboard’s equity method
investments.
In 2010, Seaboard acquired a 50% non-controlling interest in an international specialty grain trading business, PSI,
located in North Carolina. In the fourth quarter of 2011, Seaboard provided a 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. A final payment in the amount of $515,000 was
made in 2013 for the December 2012 transaction upon final verification of certain balance sheet items. Pro forma
results of operations are not presented, as the effects of consolidation are not material to Seaboard’s results of
operations.
38 2013 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
In September 2013, Seaboard invested $17,000,000 in a flour production business in Brazil for a 50% non-
controlling equity interest and provided a $13,000,000 long-term loan to this business. Half of the interest on this
long-term note receivable from affiliate is paid currently in cash and the other half accrues as pay-in-kind interest.
This note receivable matures in September 2020 but can be repaid after one year with Seaboard having the option to
convert the note receivable to equity after one year and the other equity holders having the option to match such
conversion with a purchase of new shares to avoid dilution. As of December 31, 2013, the recorded balance of this
Note Receivable from Affiliates was $13,190,000.
Also in September 2013, Seaboard invested $7,351,000 in a flour milling business located in South Africa for a 49%
non-controlling interest. In July 2013, Seaboard acquired a 50% non-controlling interest in a flour milling business
located in Gambia by making a total investment in and advances to this affiliate of $9,099,000 during 2013.
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:
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
2013
$ 1,907,647
$
7,857
$ 1,038,978
$ 614,623
$ 424,355
2013
12,073
1,349
9,271
3,158
6,113
$
$
$
$
$
December 31,
2012
1,510,101
24,686
862,992
469,265
393,727
December 31,
2012
12,107
194
8,865
2,839
6,026
2011
1,750,714
33,058
864,802
480,328
384,474
2011
12,880
950
10,743
3,851
6,892
2013
December 31,
2012
$ 1,729,568
$
(19,556)
$ 907,004
$ 504,581
$ 402,423
1,437,376
38,384
871,945
443,291
428,654
2011
1,375,751
24,250
819,618
428,361
391,257
At December 31, 2013, Seaboard’s carrying value of certain of these investments in affiliates in the Commodity
Trading and Milling segment was $12,885,000 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 income (loss) from affiliates over the remaining life of the assets.
2013 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
Net 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,
2013
$ 194,237
395,598
990,553
126,502
30,102
40,317
1,777,309
(913,736)
$ 863,573
2012
$ 186,971
384,535
942,631
157,368
29,972
42,879
1,744,356
(900,477)
$ 843,879
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, 2013. As of December 31, 2013, the
Commodity Trading and Milling segment had goodwill of $2,590,000 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,
2013
2012
$
3,745
(1,748)
-
-
1,997
$
9,045
(6,798)
1,441
(845)
2,843
17,000
18,997
$
17,000
19,843
$
The amortization expense of other amortizable intangible assets for the years ended December 31, 2013, 2012 and
2011 was $1,181,000, $1,095,000 and $250,000, respectively. Amortization expense for the next five years is
$250,000 each year.
Note 7
Income Taxes
Income taxes attributable to continuing operations for the years ended December 31, 2013, 2012 and 2011 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:
40 2013 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)
Computed “expected” tax expense excluding non-controlling interest $
Adjustments to tax expense attributable to:
Foreign tax differences
Tax-exempt income
State income taxes, net of federal benefit
Change in valuation allowance
Federal tax credits
Change in pension deferred tax
Domestic manufacturing deduction
Other
Years ended December 31,
2013
2012
2011
83,190
$ 128,275
$
155,714
1,808
(33,183)
3,139
-
(21,095)
(397)
(1,488)
476
(36,139)
(62)
658
-
(1,693)
(1,252)
(5,643)
46
(40,733)
(116)
3,849
(754)
(5,153)
(199)
(8,012)
(5,545)
Total income tax expense
$ 32,450
$
84,190
$
99,051
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. During 2013, losses and lower earnings from certain foreign operations conducting business in these
jurisdictions impacted the mix of earnings. However, this impact was offset by tax exempt income related to
biodiesel production and additional tax credits as discussed below. The treatment as tax-exempt income was
clarified by the U.S. Internal Revenue Service (IRS) in 2013 for current and prior years and thus the amount of
benefit recognized in 2013 above includes $16,523,000 for related refund claims for prior years not previously
treated as tax-exempt.
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
2013
$ 164,285
73,401
237,686
(1,529)
$ 239,215
Years ended December 31,
2012
$ 178,821
187,680
366,501
(277)
$ 366,778
2011
$ 300,992
143,906
444,898
2,290
$ 442,608
Years ended December 31,
2012
2011
2013
$ (33,679)
28,048
3,093
$ 68,928
31,149
6,507
$
79,069
15,318
6,549
24,698
5,575
4,715
32,450
10,318
(16,818)
(935)
(4,641)
84,190
(9,197)
(1,761)
(232)
108
99,051
(12,604)
Total income taxes
$ 42,768
$ 74,993
$
86,447
2013 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, 2013 and 2012, Seaboard had income taxes receivable of $60,456,000 and $8,046,000,
respectively, primarily related to domestic tax jurisdictions, and had income taxes payable of $2,974,000 and
$14,381,000, 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,
2013
2012
$
9,983
114,519
17,212
3,970
$ 145,684
$ 53,207
14,933
24,266
17,725
3,535
113,666
17,869
$
10,413
108,083
7,012
3,770
$ 129,278
$
87,836
12,813
17,851
11,756
1,442
131,698
11,758
Net deferred income tax liability
$ 49,887
$
9,338
Seaboard recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. For
the years ended December 31, 2013, 2012 and 2011, such interest and penalties were not material. The Company
had approximately $2,120,000 and $926,000 accrued for the payment of interest and penalties on uncertain tax
positions at December 31, 2013, and 2012, respectively.
As of December 31, 2013 and 2012, Seaboard had $7,301,000 and $5,053,000, 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
$
2013
5,053
2,300
(238)
422
(236)
$
2012
7,898
929
(2,715)
1,165
(2,224)
$
7,301
$
5,053
Seaboard’s tax returns are regularly audited by federal, state and foreign tax authorities, which may result in material
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. The jurisdictions that most significantly impact Seaboard’s effective tax
rate are the United States, the Dominican Republic and Argentina.
As of December 31 2013, Seaboard had not provided for U.S. Federal Income and foreign withholding taxes on
$1,019,122,000 of undistributed earnings from foreign operations, as Seaboard intends to reinvest such earnings
42 2013 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
indefinitely outside of the United States. Determination of the tax that might be paid on these undistributed earnings
if eventually remitted is not practical.
Seaboard had a tax holiday in the Dominican Republic for the Power segment in 2012 and 2011, which resulted in
tax savings of approximately $2,063,000 and $16,275,000, or $1.71 and $13.40 per diluted earnings per common
share for the years ended December 31, 2012 and 2011, 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, 2013, Seaboard had foreign net operating loss carry-forwards of approximately
$50,523,000 a portion of which expire in varying amounts between 2014 and 2019, while others have indefinite
expiration periods.
At December 31, 2013, Seaboard had state tax credit carry-forwards of approximately $21,503,000, net of valuation
allowance, all of which carry-forward indefinitely.
Seaboard has certain investments 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. In January
2014, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2014-01, “Accounting
for Investments in Qualified Affordable Housing Projects.” Early adoption of this ASU was permitted, which
Seaboard adopted as of December 31, 2013. Although this ASU required retrospective basis adoption, the change in
accounting method was not deemed material for the years ended December 31, 2013, 2012 and 2011. This ASU
allowed Seaboard to elect to use the proportional amortization method of accounting for all of its qualified
affordable housing project investments by amortizing the initial cost of the investment in proportion to the income
tax credits received and to recognize the net investment performance in the Comprehensive Statements of Income as
a component of income tax expense. Previously, Seaboard used the equity method of accounting for these long-term
investments and recognized the investment losses as a component of other investment income, net, while the income
tax benefits were recognized as a reduction of income tax expense. Seaboard believes using the proportional
amortization method of accounting will better align the financial reporting of the affordable housing investments
with the economic reality of the transactions. The amounts of affordable housing tax credits and other tax benefits
and related amortization expense recognized as components of income tax expense were not material for the years
ended December 31, 2013, 2012 and 2011. The balance of these investments recognized on the Consolidated
Balance Sheets as of December 31, 2013 and 2012 was $13,189,000 and $11,426,000, respectively.
On January 2, 2013, the American Taxpayer Relief Act of 2012 (the Tax Act) was signed into law. The Tax Act
extended 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
were recorded in the first quarter of 2013. The total impact was a one-time tax benefit of $7,945,000 recorded in the
first quarter of 2013 related to certain 2012 income tax credits. In addition to this amount was a one-time credit of
approximately $11,260,000 for 2012 Federal blender’s credits that was recognized as revenues in the first quarter of
2013. Certain of these tax provisions, including the Federal bender’s credits, have not been extended past December
31, 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 $67,699,000 and $28,786,000 at December 31, 2013 and 2012, respectively, consisted
of obligations due to banks on demand or based on Seaboard’s ability and intent to repay within one year. At
December 31, 2013, Seaboard had a committed bank line totaling $200,000,000 and uncommitted bank lines
totaling approximately $209,501,000, of which $159,501,000 of the uncommitted lines relate to foreign subsidiaries.
At December 31, 2013, there were no borrowings outstanding under the committed line, and borrowings outstanding
under the uncommitted lines totaled $67,699,000, all related to foreign subsidiaries. The uncommitted borrowings
outstanding at December 31, 2013 primarily represented $26,981,000 denominated in South African rand and
2013 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
$24,348,000 denominated in Argentine pesos. The weighted average interest rates for outstanding notes payable
were 13.10% and 7.45% at December 31, 2013 and 2012, respectively. In February 2013, Seaboard refinanced its
committed bank line for $200,000,000 with similar credit terms and also extended the maturity date to February 20,
2018. At December 31, 2013, Seaboard’s borrowing capacity under its committed and uncommitted lines was
reduced by letters of credit (LCs) totaling $813,000 and $3,980,000, respectively. The notes payable to banks under
the credit lines are unsecured. The lines of credit do not require compensating balances. Facility fees on these
agreements are not material.
In November 2013, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective
December 20, 2013 and paid $18,000,000 in the fourth quarter of 2013. In April 2013, Seaboard provided notice of
call for early redemption to holders of certain IDRBs effective May 13, 2013 and paid $10,800,000 in the second
quarter of 2013. In December 2012, Seaboard provided notice of call for early redemption to holders of certain
IDRBs effective January 14, 2013 and paid $13,000,000 in the first quarter of 2013.
The following table is a summary of long-term debt at the end of each year:
(Thousands of dollars)
December 31,
2013
2012
Industrial Development Revenue Bonds, floating rates
$
Foreign subsidiary obligation payable in U.S. dollars, 5.34%, due 2014 through 2021
Capital lease obligations and other
-
91,200
977
Current maturities of long-term debt
92,177
(11,697)
$
41,800
102,600
1,563
145,963
(25,138)
Long-term debt, less current maturities
$ 80,480
$ 120,825
The terms of the note agreements pursuant to which the 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 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 $1,870,445,000, plus 25% of cumulative consolidated net income beginning after December 31, 2012;
limits aggregate dividend payments to $25,000,000 per year under certain circumstances; limits the sum of
subsidiary indebtedness and priority indebtedness to 20% 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, 2013.
Annual maturities of long-term debt at December 31, 2013 are as follows: $11,697,000 in 2014, $11,400,000 in
2015, $11,400,000 in 2016, $11,400,000 in 2017, $11,400,000 in 2018 and $34,880,000 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.
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.
44 2013 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 3: Significant Unobservable Inputs - Unobservable inputs that reflect the reporting entity’s own assumptions.
The following tables show assets and liabilities measured at fair value (derivatives exclude margin accounts) on a
recurring basis as of December 31, 2013 and 2012, 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 2013 and 2012.
(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
Asset backed debt securities
Collateralized mortgage obligations
U.S. Treasury securities
Trading securities- short term investments:
High yield debt securities
Money market funds
Emerging markets trading debt mutual fund
Emerging markets trading debt securities
Other trading investments
Trading securities – other current assets:
Domestic equity securities
Foreign equity securities
Fixed income mutual funds
Money market funds
Other
Derivatives
Commodities (1)
Foreign currencies
Total Assets
Liabilities:
Derivatives:
Commodities (1)
Interest rate swaps
Foreign currencies
Balance
December 31,
2013
Level 1
Level 2
Level 3
$
88,430
70,258
27,147
16,941
8,477
7,600
5,223
50,428
11,033
2,858
1,336
918
26,672
9,570
3,974
1,931
3,203
2,331
2,763
$ 341,093
$ 88,430
-
-
16,941
-
-
-
-
11,033
2,858
-
-
26,672
7,317
3,974
1,931
1,628
2,331
-
$ 163,115
$
-
70,258
27,147
-
8,477
7,600
5,223
50,428
-
-
1,336
918
-
2,253
-
-
1,575
-
2,763
$ 177,978
$
16,014
4,103
101
20,218
$ 15,422
-
-
$ 15,422
$
592
4,103
101
4,796
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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, 2013, the
commodity derivatives had a margin account balance of $29,822,000 resulting in a net other current asset on the
Consolidated Balance Sheets of $16,731,000 and an other accrued liability of $592,000.
$
$
$
2013 Annual Report 45
Level 1
Level 2
Level 3
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)
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 trading investments
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
Other
Derivatives
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
299
$ 126,537
-
-
18,734
-
-
-
-
3,237
-
822
15,864
7,153
4,218
3,157
-
-
187
$
-
69,214
23,775
-
17,169
15,162
12,238
23,406
-
2,600
485
-
-
2,613
-
2,117
1,567
112
Commodities (1)
Total Assets
Liabilities:
Derivatives:
Commodities (1)
Interest rate swaps
Foreign currencies
6,916
$ 357,283
6,699
$ 186,608
217
$ 170,675
$
7,112
9,810
4,157
$
7,112
-
-
$
-
9,810
4,157
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.
21,079
13,967
7,112
$
$
$
$
-
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, 2013 and 2012, are presented below:
46 2013 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,
(Thousands of dollars)
2013
Amortized Cost Fair Value
Short-term investments, available-for-sale
Short-term investments, trading debt securities
Long-term debt
$ 224,314
65,728
92,177
$ 224,076
66,573
94,578
2012
Amortized Cost
Fair Value
$ 279,556
28,508
145,963
$ 282,829
30,550
149,333
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, 2012. 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, 2013, Seaboard had open net derivative contracts to purchase 51,184,000 pounds of sugar,
32,440,000 pounds of hogs, 6,540,000 bushels of grain, 440,000 pounds of cheese and 308,000 pounds of dry whey
powder and open net derivative contracts to sell 12,125,000 pounds of palm oil and 76,000 tons of soybean meal.
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. For the years ended December 31, 2013 and 2012, Seaboard recognized net realized and unrealized losses of
$17,016,000 and $6,098,000, respectively, and for the year ended December 31, 2011, Seaboard recognized net
realized and unrealized gains of $20,279,000, 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 gains, net 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, 2013 and 2012, Seaboard had trading foreign exchange contracts to cover its firm sales and
purchase commitments and related trade receivables and payables, with notional amounts of $127,389,000 and
$243,563,000, 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. 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, 2013
and 2012, Seaboard had three agreements outstanding with a total notional value of $75,000,000.
2013 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
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, 2013 and
2012:
(Thousands of dollars)
Commodities
Foreign currencies
Foreign currencies
Interest rate
Cost of sales-products
Cost of sales-products
Foreign currency gains, net
Miscellaneous, net
2013
2012
$(17,016)
15,801
6,532
3,535
$
(6,098)
3,027
(3,919)
(5,132)
The following table provides the fair value of each type of derivative held as of December 31, 2013 and 2012 and
where each derivative is included on the Consolidated Balance Sheets:
(Thousands of dollars)
Asset Derivatives
Liability Derivatives
2013
$2,331
2,763
-
Commodities(1)
Other current assets
Foreign currencies Other current assets
Other current assets
Interest rate
2012
2012
$ 7,112
$6,916
4,157
-
9,810
-
(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, 2013 and
2012, the commodity derivatives had a margin account balance of $29,822,000 and $14,063,000, respectively,
resulting in a net other current asset on the Consolidated Balance Sheets of $16,731,000 and $13,867,000,
respectively, and an other accrued liability of $592,000 as of December 31, 2013.
Other current assets
Other accrued liabilities
Other accrued liabilities
2013
$ 16,014
101
4,103
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, 2013, Seaboard had $2,763,000 of credit risk to seven counterparties related to its foreign currency
exchange agreements and no credit risk related to its 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.
Effective January 1, 2014, newly hired employees do not qualify for participation. 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 (PBGC) variable rate premiums established by the Employee Retirement Income Security Act
(ERISA) of 1974. During the third quarter of 2013, Seaboard completed future funding analyses for these plans and
in September 2013 made a deductible contribution of $10,000,000 for the 2012 plan year, principally to avoid future
PBGC variable rate premiums established pursuant to the ERISA. Management did not make any contributions in
2012 and 2011 and currently does not plan on making any contributions to the Plans in 2014.
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. In July 2013, Seaboard modified its investment
policy for each plan by decreasing the percentage of fixed income investments of the total for its allocation targets
and actual investment composition within each plan. Assets are invested in the Plans to achieve a diversified target
allocation of approximately 40-50% in domestic equities, 20-25% in international equities, 10-25% in fixed income
securities and 10-15% in alternative investments. The investment strategy provides investment managers’ discretion,
and is periodically reviewed by management for adherence to policy and performance against benchmarks.
48 2013 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
As 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, 2013 and 2012, respectively, and also
the level within the fair value hierarchy used to measure each category of assets:
(Thousands of dollars)
Assets:
Domestic equity securities
Foreign equity securities
Real estate mutual fund
Commodity mutual funds
International fixed income mutual funds
Money market funds
Fixed income mutual funds
Corporate bonds
Other
Total 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
Balance
December 31,
2013
$
65,998
30,348
8,866
2,756
2,485
1,938
1,786
1,528
3,850
$ 119,555
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
Level 1
Level 2
Level 3
$ 65,998
30,348
8,866
2,756
2,485
1,938
1,786
-
-
$114,177
$
-
-
-
-
-
-
-
1,528
3,850
$ 5,378
$
$
-
-
-
-
-
-
-
-
-
-
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
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
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 these
plans. 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,
2012
2011
2013
3.55-5.20%
2.50-4.15%
6.50-7.25%
4.00%
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%
2013 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
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 and the funded status were as follows:
(Thousands of dollars)
Reconciliation of benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial losses (gains)
Benefits paid
Plan curtailments
Plan settlement
Agreement termination gain
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
December 31,
2013
2012
$
$
$
$
$
226,725
9,427
8,199
(30,968)
(6,916)
-
-
(3,204)
-
203,263
97,586
15,494
13,391
(6,916)
-
119,555
(83,708)
$ 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)
The net funded status of the Plans was $(8,820,000) and $(45,515,000) at December 31, 2013 and 2012,
respectively. The benefit obligation decreased primarily due to an increase in discount rates for all plans. The plan
assets increased due to asset gains and a $10,000,000 contribution as discussed above. The accumulated benefit
obligation for the Plans was $110,653,000 and $120,573,000, and for all the other plans was $61,462,000 and
$68,194,000 at December 31, 2013 and 2012, 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:
$9,800,000, $8,101,000, $10,214,000, $11,650,000, $13,776,000, and $ 82,275,000, respectively.
In late April 2013, Mr. Joseph E. Rodrigues, Seaboard’s board member and retired former Executive Vice President
and Treasurer of Seaboard Corporation, passed away. During retirement, Mr. Rodrigues received retirement
payments under an individual, non-qualified, unfunded supplemental retirement agreement. Upon his death, this
agreement terminated which eliminated the remaining accrued pension liability. This resulted in a one-time
agreement termination gain of $3,204,000, or $1,954,000 net of tax, which was recognized in net earnings in
addition to a gain of $2,148,000, or $1,310,000 net of tax, from the elimination of unrecognized pension cost in
other comprehensive income in 2013.
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
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.
50 2013 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The 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
Agreement termination gain
Settlement
Curtailment
Net periodic benefit cost
Years ended December 31,
2012
2013
2011
$
9,427
8,199
(6,458)
6,303
(3,204)
-
-
$ 14,267
$ 8,843
8,918
(6,431)
6,748
-
1,796
1,134
$ 21,008
$
7,550
8,997
(6,598)
4,027
-
-
-
$ 13,976
The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive loss
(AOCL) before taxes at December 31, 2013 and 2012 were as follows:
(Thousands of dollars)
Accumulated loss, net of gain
Prior service cost, net of credit
Total accumulated other comprehensive loss
2013
$ (38,475)
(96)
$ (38,571)
2012
$ (91,611)
(72)
$ (91,683)
The amounts in AOCL expected to be recognized as components of net periodic benefit cost in 2014 are $1,900,000.
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, 2013, 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 $594,000, $584,000 and $545,000 for the years ended December 31,
2013, 2012 and 2011, 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
2013, 2012 and 2011, 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
$2,142,000, $2,063,000 and $1,956,000 for the years ended December 31, 2013, 2012 and 2011, 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 $777,000,
$546,000 and $577,000 for the years ended December 31, 2013, 2012 and 2011, 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
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 $5,942,000, $4,148,000 and $(1,505,000) for the years ended December 31,
2013, 2012 and 2011, respectively. Included in other liabilities at December 31, 2013 and 2012 are $41,144,000 and
$32,774,000, 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
2013 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
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, 2013 and
2012, $45,350,000 and $36,988,000, 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 2013, 2012, and 2011
totaled $5,863,000, $4,076,000 and $(1,584,000), 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 recipients, 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 material fines, penalties or liabilities in connection with this matter.
Seaboard is subject to various administrative and judicial proceedings and other legal matters related to the normal
conduct of its business. In the opinion of management, the ultimate resolutions of these items are not expected to
have a material 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, 2013, 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, 2013 Seaboard had various firm non-cancelable purchase commitments and commitments
under other agreements, arrangements and operating leases, as described in the table below:
2014
$ 169,691
69,280
536,367
65,678
Purchase commitments
(Thousands of dollars)
Hog procurement contracts
Grain and feed ingredients
Grain purchase contracts for resale
Fuel supply contract
Equipment purchases
42,312
and facility improvements
62,233
Construction of new dry bulk vessels
14,268
Other purchase commitments
959,829
Total firm purchase commitments
67,108
Vessel, time and voyage-charters
11,507
Contract grower finishing agreements
19,726
Other operating lease payments
Total unrecognized firm commitments $1,058,170
2015
$ 113,004
3,659
-
-
Years ended December 31,
2017
2016
$ 90,424 $ 70,651 $
-
-
-
-
-
-
2018 Thereafter
-
4,582 $
-
-
-
-
-
-
-
14,681
3,413
134,757
44,244
10,060
21,277
$ 210,338
-
-
-
-
103
1,465
103
91,889
62,393
20,837
2,703
10,269
22,615 232,419
20,825
$ 143,820 $ 122,059 $ 53,786 $ 297,618
-
-
35
4,617
19,157
7,397
-
-
34
70,685
18,993
10,187
22,194
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, 2013. During 2013, 2012
and 2011, this segment paid $190,519,000, $190,471,000 and $181,383,000, respectively, for live hogs purchased
under committed contracts.
52 2013 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The 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, 2013. 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 2014 for a significant portion 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, 2013.
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 an estimated total cost of $92,000,000. A down payment of $8,300,000 was made in
July 2012. A payment of $62,233,000 is due in 2014 and the final payment is scheduled to be made in 2015 but
Seaboard is currently reviewing options to lease these vessels in 2014 instead of paying cash to acquire the vessels.
The Marine segment enters into contracts to time-charter vessels for use in its operations which include short-term
time charters for a few months and long-term commitments ranging from one to ten years. This segment’s charter
hire expenses during 2013, 2012 and 2011 totaled $90,784,000, $88,110,000 and $87,895,000, 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 2013, 2012 and 2011, Seaboard paid $13,194,000, $13,641,000 and $13,037,000, respectively, under contract
grower finishing agreements.
In July 2013, Seaboard Marine, Ltd. (“Seaboard Marine”) amended its Terminal Agreement with Miami-Dade
County primarily to provide increased acreage, minimum usage of port cranes and add one additional five-year
renewal option. Under this amended terminal agreement, Seaboard Marine’s total minimum payments over the
initial term of the agreement through September 30, 2028, increased by approximately $75,600,000 and now
includes three five-year renewal options. This minimum amount could increase if certain conditions are met.
Seaboard also leases various facilities and equipment under non-cancelable operating lease agreements. Rental
expense for operating leases for all segments amounted to $33,995,000, $29,224,000 and $25,916,000 in 2013, 2012
and 2011, respectively.
Note 12
Stockholders’ Equity and Accumulated Other Comprehensive Loss
On November 1, 2013, Seaboard’s Board of Directors authorized an additional $75,000,000 for use in purchasing
Seaboard’s Common Stock pursuant to Seaboard’s share repurchase program initially approved in November 2009,
and which previously had $100,000,000 of authority. As of December 31, 2013, $84,627,000 remained available for
repurchases under this program. Seaboard used cash to repurchase, 8,705, 12,937 and 5,282 shares of common
stock at a total price of $23,578,000, $26,830,000 and $9,971,000 in 2013, 2012 and 2011, respectively. The share
repurchase program is in effect through October 31, 2015. Under this share repurchase program, Seaboard is
authorized to repurchase its Common Stock from time to time 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 Seaboard to acquire a specific amount
of common stock and the stock repurchase program may be suspended at any time at Seaboard’s discretion.
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 2014-2016. Seaboard did
2013 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
not declare or pay a dividend in 2013 and 2011. In 2010, Seaboard declared and prepaid the 2012 and 2011
dividends of $3.00 per share per year.
In February 2013, the Financial Accounting Standards Board issued guidance clarifying disclosures related to
amounts reclassified out of accumulated other comprehensive loss by component. Seaboard adopted this guidance
on January 1, 2013 and applied this guidance prospectively. The adoption of this guidance required additional
disclosures shown in the table below. The components of accumulated other comprehensive loss, net of related
taxes, for 2011, 2012 and 2013 are as follows:
Cumulative
Foreign
Currency
Translation
Adjustment
Unrealized
Gain (Loss)
on
Investments
Unrealized
Loss on
Cash Flow
Hedges
Unrecognized
Pension
Cost
Total
(93,669) $ (311) $ - $ (62,085) $(156,065)
(64,206) $(171,544)
(109,457) $
2,232
(113)
$
$
(Thousands of dollars)
Balance December 31, 2011
Balance December 31, 2012
Other comprehensive income (loss)
$
$
before reclassifications
(45,956) (1,124)
- 32,938 (14,142)
Amounts reclassified from
accumulated other
comprehensive income (loss)
Net current-period other
comprehensive income (loss)
-
(627)(1)
- 4,516(2) 3,889
(45,956) (1,751)
- 37,454 (10,253)
Balance December 31, 2013
(26,752) $(181,797)
(1) This represents realized gains on the sale of available-for-sale securities and was recorded in other investment
(155,413) $
481
(113)
$
$
$
income, net.
(2) This primarily represents the amortization of actuarial losses that were included in net periodic pension cost
and was recorded in operating income. See Note 10 for further discussion.
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. In 2013, Seaboard recognized a one-time retirement agreement termination
gain of $1,310,000 net of tax, in unrecognized pension cost in other comprehensive income. 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, 2013, the Sugar segment had $151,769,000 in
net assets denominated in Argentine pesos and $2,957,000 in net assets denominated in U.S. dollars in Argentina.
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. Based on the devaluation of the Argentina peso in
January and February of 2014, management anticipates that the Argentine peso will continue to weaken against the
U.S. dollar and thus it is anticipated that Seaboard will incur additional material foreign currency translation
adjustment losses in other comprehensive loss in 2014. Using the prevailing official exchange rate compared to the
net assets denominated in Argentine pesos at February 22, 2014, Seaboard would recognize an additional
$25,265,000 of other comprehensive loss, net of related taxes, during the first quarter of 2014. Impacts of further
fluctuations in the currency exchange rate will be recorded in future periods.
Income taxes for cumulative foreign currency translation adjustments were recorded using a 35% effective tax rate
except for $41,380,000 and $3,412,000 in 2013 and 2012, respectively, related to certain subsidiaries for which no
tax benefit was recorded. Income taxes for all other components of accumulated other comprehensive loss were
recorded using a 39% effective rate except for unrecognized pension cost of $8,663,000 and $21,129,000 in 2013
and 2012, respectively, related to employees at certain subsidiaries for which no tax benefit was recorded.
54 2013 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 13
Segment Information
Seaboard Corporation had six reportable segments through December 31, 2013: 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
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. This segment also produces biodiesel primarily from pork fat for sale to third parties. The Commodity
Trading and Milling segment is an integrated agricultural commodity trading and processing and logistics operation
that internationally markets wheat, corn, soybean meal and other agricultural 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 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.
Substantially all of its hourly employees at its Guymon processing plant are covered by a collective bargaining
agreement. 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 recognized 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.
In 2011, Seaboard performed an impairment evaluation of its ham boning and processing plant in Mexico 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 in 2011 to write down the recorded value of these assets to the estimated fair
value. As this plant was not wholly-owned by Seaboard in 2011, this impairment charge was 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, 2013 was $3,519,000.
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 common 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
in Africa 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.
2013 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
On April 8, 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic
(DR), 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
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. As of December 31,
2013, $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 DR, which began commercial operations in March 2012.
The Turkey segment accounted for using the equity method, had operating income in 2013, 2012 and 2011 of
$4,892,000, $65,694,000 and $55,120,000, respectively. 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 2011. In
2013, Butterball incurred additional charges for impairment of fixed assets related to the planned sale of its
Longmont plant of which Seaboard’s proportionate share of these charges represented $(3,662,000) recognized in
loss from affiliates.
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.
Years ended December 31,
2012
2013
2011
$
$
$
1,713,077
3,501,498
913,776
245,541
283,796
12,726
6,670,414
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
$
$
$
Sales to External Customers:
(Thousands of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment/Consolidated Totals
56 2013 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
Operating Income (Loss):
(Thousands of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Income (Loss) 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
Years ended December 31,
2012
2013
2011
$
$
$
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
147,695
38,339
(25,783)
24,453
42,939
745
228,388
(23,524)
204,864
(639)
614
(10,267)
(10,292)
43,306
5,553
25,136
10,726
7,395
363
92,479
598
93,077
$
$
$
Years ended December 31,
2012
2013
2011
$
$
$
$
$
$
Years ended December 31,
2012
2013
2011
$
$
$
10,467
88
20,152
30,707
43,014
6,330
23,490
11,222
5,467
366
89,889
327
90,216
13,450
440
12,731
26,621
43,866
5,567
22,675
8,289
192
403
80,992
231
81,223
$
$
$
December 31,
2013
2012
$
$
773,641
1,056,930
271,012
226,245
267,431
342,083
6,428
2,943,770
474,278
3,418,048
740,245
992,507
281,215
254,445
235,377
423,825
5,288
2,932,902
414,879
3,347,781
$
$
2013 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
Investments in and Advances to Affiliates:
(Thousands of dollars)
Commodity Trading and Milling
Sugar
Turkey
Segment/Consolidated Totals
Capital Expenditures:
(Thousands of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Years ended December 31,
2012
2013
2011
$
$
$
December 31,
2013
2012
$
$
$
$
197,036
2,768
207,096
406,900
52,333
22,817
35,365
22,066
25,022
112
157,715
1,040
158,755
186,873
2,775
220,894
410,542
39,890
5,192
31,210
22,626
84,041
60
183,019
729
183,748
79,637
24,213
22,817
17,117
4,207
247
148,238
1,414
149,652
$
$
$
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 $561,236,000, $563,088,000 and $622,354,000 for the years ended
December 31, 2013, 2012 and 2011, respectively, representing approximately 8%, 9% and 11% 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
Eastern Mediterranean
Europe
Totals
Years ended December 31,
2012
2013
$ 2,571,970
1,578,341
1,389,784
393,502
383,105
186,127
167,585
$ 6,670,414
$ 2,566,056
1,471,574
1,303,533
351,505
334,215
74,509
87,741
$ 6,189,133
$
$
2011
2,225,829
1,489,409
1,328,116
407,593
238,116
49,472
8,367
5,746,902
The following table provides a geographic summary of Seaboard’s long-lived assets according to their physical
location and primary port for the vessels:
58 2013 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)
United States
Dominican Republic
Argentina
All other
Totals
December 31,
2013
$ 555,882
140,536
90,367
83,015
$ 869,800
2012
530,169
140,195
108,492
66,371
845,227
$
$
At December 31, 2013 and 2012, Seaboard had approximately $340,748,000 and $296,990,000, 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.
2013 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
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
James L. Gutsch
Senior Vice President, Engineering
Ralph L. Moss
Senior Vice President, Governmental Affairs
David S. Oswalt
Senior Vice President, Finance and Treasurer
Douglas W. Baena
Director and Audit Committee Chair
Self-employed, engaging in facilitation of equipment
leasing financings and consulting
Edward I. Shifman, Jr.
Director and Audit Committee Member
Retired, former Managing Director and Executive
Vice President of Wachovia Capital Finance
John A. Virgo
Senior Vice President, Corporate Controller and Chief
Accounting Officer
David H. Rankin
Vice President, Taxation and Business Development
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
Wells Fargo
P.O. Box 64874
St. Paul, MN 55164-0874
(800) 468-9716
www.shareowneronline.com
Independent Registered Public Accounting Firm
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 127 shareholders
of record of its common stock as of January 24, 2014.
Seaboard files its Annual Report on Form 10-K with
the Securities and Exchange Commission. Copies of
the Form 10-K for fiscal 2013 are available without
charge by writing Seaboard Corporation, 9000 West
67th Street, Merriam, Kansas 66202, Attention:
Shareholder Relations or via
Internet at
the
http://www.seaboardcorp.com/investors
Seaboard provides access to its most recent Form 10-K,
Form 10-Q and Form 8-K reports on its Internet
website, free of charge, as soon as reasonably
practicable after those reports are electronically filed
with the Securities and Exchange Commission.
60 2013 Annual Report