2017 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 and its subsidiaries (“Seaboard”) are a diverse global agribusiness and transportation company. In
the United States (“U.S.”), 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 a turkey operation in the U.S.
Table of Contents
Letter to Stockholders
Principal Locations
Division Summaries
Summary of Selected Financial Data
Company Performance Graph
Quarterly Financial Data (unaudited)
Management’s Discussion & Analysis of Financial Condition and Results of Operations
Management’s Responsibility for Consolidated Financial Statements
Management’s Report on Internal Control over Financial Reporting
Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Equity
Notes to Consolidated Financial Statements
Stockholder Information
2
4
5
7
8
9
10
23
23
24
25
26
27
28
29
30
58
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. 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 spot market prices for electricity 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 timetables for Seaboard’s scheduled capital improvements,
acquisitions and dispositions; (xi) the productive capacity of facilities that are planned or under construction, and the
timing of the commencement of operations at such facilities; or (xii) other trends affecting Seaboard’s financial condition
or results of operations, and statements of the assumptions underlying or relating to any of the foregoing statements.
This list of forward-looking statements is not exclusive. Seaboard undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise.
Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and
assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to a
variety of factors. The information contained in this report, including, without limitation, the information under the
captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Letter to
Stockholders” identifies important factors which could cause such differences.
2017 Annual Report 1
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
As we close the books on 2017, we are thankful for another good year and eager for 2018 when we will be celebrating the
100th year anniversary of our founding. In 1918, my grandfather Otto Bresky, together with his two brothers started a flour
brokerage business in Minneapolis and Boston. In 1928 my grandfather and a partner, acquired an abandoned brewery in
Kansas City, equipped it with flour milling equipment from an idled mill and began the journey toward our food and
transportation business today. Over the last 100 years we have celebrated many important events as we branched out
beyond the flour milling business and into a myriad of businesses in agriculture, energy and transportation.
Through these many years, Seaboard has maintained a strategy of growth, both organically and through acquisition. By
2006 when I succeeded my father, Harry Bresky, net sales had reached $2.7 billion. That year I was proud to write my
first letter to stockholders reflecting on my father’s 58 years of dedicated leadership and service to Seaboard. I wrote that
his drive, attitude, philosophy and values helped form the company into a professional, open-minded and customer-driven
organization. I ended that letter with the belief that we had a special company, a workforce of dedicated associates, and a
single minded purpose-to improve and grow our businesses year after year.
It remains important to me that we continue to focus on the things that matter – customer satisfaction, employee fulfillment,
cost competitiveness, a humble but steadfast approach, and a culture of ethical behavior and innovation. We will continue
to re-invest in our divisions and patiently wait for opportunities to invest in complementary businesses. This long term
approach has provided us a degree of consistency in revenue and earnings as we achieved our fourth best year of revenue
at $5.8 billion and our third best year of pre-tax income at $426 million. Over the last ten years, our combined operating
income has greatly exceeded our previous 50 years combined and since 2006, our stockholders equity has more than
doubled and our stock price has appreciated over 200%.
Significantly, in January 2018, we acquired flour and feed milling businesses in Ivory Coast and Senegal and a cereal
trading business in Monaco from the Mimran Group. After our Butterball transaction, this is the largest transaction in
Seaboard’s history. These businesses span three generations of the Mimran family and we are very fortunate to take the
reins from this well managed organization. Added to Seaboard’s commodity trading and milling division, this will mark
the 29th and 30th country in which this division operates. We expect many synergies to emerge from this acquisition which
poises us for further growth in the region.
Operating on six continents, we are heavily reliant on world trade and changing fundamental trade patterns including
fluctuating inputs and outputs, tariffs and the political winds that sometimes drive governmental policy, which will
continue to have a significant impact on our businesses. I have previously cautioned of the growing tendency for
governments to negatively impact our different industries when they move away from free market systems, erect trade
barriers, and enact protectionist measures and regulations with intended and unintended consequences. Though these
threats still exist, I am pleased by the move toward a more territorial tax system in the U.S. with the recent passage of the
Tax Cuts and Jobs Act. The change to a territorial system should help level the playing field when companies are evaluating
decisions about where to locate new investments. Although we are still analyzing the full impact of the tax reform, I view
this as a long term positive change which should allow us to be more flexible and competitive.
I always warn that “past performance is no guarantee of future results” and this can be especially true for a commodity-
based business like Seaboard. However, we have a strong balance sheet with total assets in excess of $5 billion and
stockholder equity of over $3.4 billion. Our strong balance sheet should continue to give us the flexibility to expand and
contract working capital as we see fit, remain acquisitive for the long-term, and enable us to be patient, less impulsive and
more prudent in our business decisions.
At our pork division, we continued to generate strong financial results despite a constantly changing economic and industry
landscape. We began first shift operations in September and expect to ramp up second shift operations later this year at
our new, jointly-owned pork processing plant located in Sioux City, Iowa. Since the end of 2015 we have increased our
hog production operations by about 50% to help meet the supply needs of the Sioux City plant. This year we also began
operating an idled biodiesel facility in St. Joseph and created a renewable natural gas facility in Guymon to generate
commercial grade natural gas from plant waste water lagoons. While pork processing margins have far exceeded producer
margins in recent years, we expect this relationship may reverse with the advent of three new large hog processing
operations. While overall margins should compress in 2018, Seaboard is in a good position to capture margins as both a
hog producer and a pork processor.
As to our turkey division, Butterball, which is our 50% owned joint venture, had disappointing results this year. This was,
in part, due to the difficult decision to close and sell our Illinois further-processing facility. However, we were able to
transfer many of Illinois salaried work force and turkey processing equipment to other facilities, which should lead to
improved operating efficiencies and reduced production costs. This last Thanksgiving season we produced and sold a
2 2017 Annual Report
S E A B O A R D C O R P O R A T I O N
Letter to Stockholders
record volume of fresh and frozen turkey despite the price declines in this category. Butterball’s focus on brand support
and mix optimization continued to drive value-added sales. This year, after an increased focus and investment in
Butterball’s supply chain performance, customer order fill rate improved to over 99%, resulting in “Supplier of the Year
Awards” from both of Butterball’s largest retail and foodservice customers.
Seaboard’s commodity trading and milling division had another solid year, though down from last year. This was due to
compressed milling margins in some of our West and Central Africa markets and a poor performance from our pulse
trading group. We achieved better results from our affiliates compared to last year which had been impacted by large losses
and difficult operating conditions in Brazil and the Democratic Republic of Congo. Our third party grain trading operations
performed exceptionally well on certain trade routes where we leveraged our in-house base cargoes with third party trade
volume. The division operates with a natural long freight position through its long-term charters and ownership of bulk
cargoes carriers, which support our trade in Africa and the Americas. With ocean freight markets generally higher, this
helped earnings. We will continue to identify and pursue investment opportunities that support our supply chain model
both through internal growth and acquisitions in markets where synergies exist. In addition to the purchase of the Group
Mimran mills and trading operations, we also increased our investment in the Moroccan grain, feed and protein industry,
initiated several mill capacity expansion projects, and began operations in Jamaica of a newly constructed flour
mill. Generally speaking, this division operates in many harsh environments and competitive marketplaces, but with a low
cost, service oriented approach, we should remain in good stead over the long term.
2017 also marks the 35th anniversary of Seaboard Marine, who had mixed results despite a 7% growth in volumes.
Container freight rates continued to decline in many of the markets we serve, while certain costs, notably bunker fuel,
stevedoring and trucking expenses increased. While major container lines focus on market share and increased volumes,
our focus remains on customer service and cost reductions through operational efficiencies in our routes, vessel
configurations and port terminal management. Over the last several years, we have upgraded our fleet of dry and
refrigerated containers and port terminal equipment. Of note, we are devoting considerable capital expenditures towards
new state of the art, environmentally friendly, refrigerated containers to accommodate both north and south-bound cargoes.
Despite new entrants into many of our markets, our competitive advantage in the Caribbean Basin and Latin America
remains strong because of our efforts to provide a superior service to our customers. Our intimate knowledge and
understanding of our customers’ needs has been built through long-term relationships and a commitment to personalized
service. Eventually, when container freight rates stabilize and liner services begin to rationalize their routes and pass
through higher operating expenses, Seaboard Marine will be in good position to return to historic earnings.
Our power generation barge, which is the primary asset in our Dominican based power division, outperformed the previous
year in all relevant financial metrics, including kilowatt per hour production. Profitability was aided by higher average
spot energy prices and billing collections from the three main government-owned power distributors whose accounts
remained current as of the end of the year. We continue to explore and work on commercial alliances in the energy sector
with local partners. We are also looking at strategies to participate in other energy businesses, including solar power and
natural gas transportation.
Our Argentine sugar company, Tabacal, began what is hopefully an extended recovery after four years of recession in the
country, and a disappointing 2016 caused in part by prolonged union conflicts. During 2017, we returned to profitability
helped by a very good sugar crop and because of the impact from our recent investments in capital assets, including an
expanded alcohol distillery and new packaging automation.
As we close out another solid year, I would like to thank our customers and partners, many who have been loyal and
supportive of Seaboard for many years. Most of all, I thank our associates who are responsible for making our products
and providing services to our customers throughout the world. I am so grateful to those dedicated employees who take
tremendous pride in their work and treat Seaboard as their own. We may not be unique in this regard, but what may set us
apart are the long term relationships we have established and nurtured over the years. Every year at Seaboard is an
adventure and 2018 will be very interesting and no doubt, eventful. We look forward to it!
Steven J. Bresky
President and
Chief Executive Officer
2017 Annual Report 3
Corporate Office
Seaboard Corporation
Merriam, Kansas
Pork
Seaboard Foods LLC
Pork Division Office
Merriam, Kansas
Processing Plants
Guymon, Oklahoma
Mexico
Biodiesel Operations
Guymon, Oklahoma
St. Joseph, Missouri
Daily’s Premium Meats, LLC*
Missoula, Montana
Salt Lake City, Utah
St. Joseph, Missouri
Seaboard Triumph Foods, LLC*
Sioux City, Iowa
Commodity Trading and Milling
Commodity Trading Operations
Atlanta, Georgia*
Australia*
Canada
Chapel Hill, North Carolina
Colombia
Ecuador
Greece
Isle of Man
Kenya
Monaco
Morocco*
Peru*
South Africa
Africa Poultry Development Limited*
Kenya and Zambia
Bag Yaglari Sanayi ve Ticaret A.S.*
Turkey
Beira Grain Terminal, S.A.
Mozambique
Belarina Alimentos S.A.
Brazil
Bolux Group (Proprietary) Limited*
Botswana
Compania Industrial de Productos
Agropecuarios S.A.*
Colombia
Fill-More Seeds Inc.
Canada
Flour Mills of Ghana Limited
Ghana
S E A B O A R D C O R P O R A T I O N
Principal Locations
Gambia Milling Corporation Limited*
Gambia
Sea Cargo, S.A.
Panama
National Milling Company of Guyana, Inc.
Seaboard de Colombia, S.A.
Guyana
Colombia
Les Grands Moulins de Dakar
Seaboard de Nicaragua, S.A.
Senegal
Nicaragua
Les Moulins d’Haiti S.E.M.*
Seaboard Freight & Shipping Jamaica Limited
Haiti
Jamaica
Lesotho Flour Mills Limited*
Seaboard Honduras, S. de R.L. de C.V.
Lesotho
Life Flour Mill Limited*
Nigeria
Minoterie de Matadi, S.A.*
Democratic Republic of Congo
Minoterie du Congo S.A.
Republic of Congo
Moderna Alimentos, S.A.*
Ecuador
Molinos Champion, S.A.*
Ecuador
National Milling Corporation Limited
Zambia
Paramount Mills (Proprietary) Limited*
South Africa
Rafael del Castillo & Cia. S.A.*
Colombia
Societe Africaine de Developpement
Industriel Alimentaire, S.P.R.L.*
Democratic Republic of Congo
Societe Les Grands Moulins d’Abidjan
Ivory Coast
Unga Holdings Limited*
Kenya
Marine
Seaboard Marine Ltd.
Marine Division Office
Miami, Florida
Port Operations
Brooklyn, New York
Houston, Texas
Miami, Florida
New Orleans, Louisiana
Philadelphia, Pennsylvania
Agencia Maritima del Istmo, S.A.
Costa Rica
Jacintoport International LLC
Houston, Texas
Kingston Wharves Limited*
Jamaica
Lafito Logistics Holding Ltd.*
Bahamas & Haiti
Representaciones Maritimas y Aereas, S.A.
Guatemala
Honduras
Seaboard Marine (Trinidad) Limited
Trinidad
Seaboard Marine of Haiti, S.A.
Haiti
SEADOM, S.A.S.
Dominican Republic
SeaMaritima, S.A. de C.V.
Mexico
Sugar
Alconoa S.R.L.
Argentina
Ingenio y Refineria San Martin del
Tabacal S.R.L.
Argentina
Power
Transcontinental Capital Corp. (Bermuda) Ltd.
Dominican Republic
La Compania de Electricidad de San
Pedro de Macoris*
Dominican Republic
Turkey
Butterball, LLC*
Division Office
Garner, North Carolina
Processing Plants
Carthage, Missouri
Huntsville, Arkansas
Mt. Olive, North Carolina
Ozark, Arkansas
Further Processing Plants
Jonesboro, Arkansas
Raeford, North Carolina
Other
Mount Dora Farms de Honduras, S.R.L.
Honduras
Mount Dora Farms Inc.
Houston, Texas
*Represents a non-controlled, non-consolidated affiliate
4 2017 Annual Report
S E A B O A R D C O R P O R A T I O N
Division Summaries
Pork Division
Seaboard’s Pork division is a vertically integrated pork producer and one of the largest producers and processors in the
U.S. Seaboard is able to efficiently control pork production across the entire life cycle of a hog, beginning with research
and development in nutrition and genetics and extending to the production of high quality meat products at Seaboard’s
and its affiliates’ processing and further processing facilities.
This division’s hog processing plant is located in Guymon, Oklahoma. The plant is a double-shift operation that processes
approximately 20,500 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. 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
U.S., Japan, Mexico, China and numerous other foreign markets.
Seaboard’s hog production facilities consist of genetic and commercial breeding, farrowing, nursery and finishing
buildings located in the Central U.S. These facilities have a capacity to produce over five million hogs annually. Seaboard
owns and operates seven centrally located feed mills to provide formulated feed to these hogs.
Seaboard produces biodiesel at facilities in Guymon, Oklahoma, and St. Joseph, Missouri. The biodiesel is produced from
pork fat supplied by Seaboard’s Guymon pork processing plant and from other animal fat or vegetable oil supplied by non-
Seaboard facilities. The biodiesel is sold to fuel blenders for distribution and in the retail markets.
Seaboard’s Pork division has agreements with Triumph Foods, LLC (“Triumph”), an independent pork processor, and
Seaboard Triumph Foods, LLC (“STF”), a 50% non-consolidated, pork-processing affiliate, to market substantially all of
the pork products produced at Triumph’s plant in St. Joseph, Missouri, and STF’s plant in Sioux City, Iowa. The
agreements enhance the efficiency of Seaboard’s sales and marketing efforts and expand Seaboard’s geographic footprint.
STF’s plant, which began operations in September 2017, is designed to process about three million market hogs annually
when operating a single shift. Seaboard and Triumph each supply hogs to be processed at the STF plant. During 2017, the
Pork division acquired hog inventory and related assets that provided additional sows to further increase its capacity to
fulfill its hog supply commitment for processing at the STF plant, including its hog supply commitment for a second shift
expansion. According to the trade publications Successful Farming and Informa Economics Seaboard was ranked number
three in pork production (based on sows in production) and number four (based on daily processing capacity, including
Triumph’s and STF’s capacities) in processing in the U.S. in 2017.
Seaboard’s Pork division also has a 50% noncontrolling interest in Daily’s Premium Meats, LLC (“Daily’s”). Daily’s
produces and markets raw and pre-cooked bacon and ham primarily for the food service industry and, to a lesser extent,
retail markets. Daily’s has three further processing plants located in Salt Lake City, Utah, Missoula, Montana, and St.
Joseph, Missouri. Seaboard, Triumph and STF each supply raw product to Daily’s.
Commodity Trading and Milling Division
Seaboard’s Commodity Trading and Milling (“CT&M”) division is an integrated agricultural commodity trading,
processing and logistics operation. This division sources, transports and markets approximately ten million metric tons per
year of wheat, corn, soybeans, 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, the
Caribbean and Asia. This division integrates the delivery of commodities to its customers through the use of owned or
chartered bulk vessels.
Seaboard’s CT&M division operates facilities in 28 countries. The commodity trading business has 13 offices in 12
countries, in addition to four non-consolidated affiliates in three other countries. The grain processing businesses operate
facilities at 38 locations in 20 countries, with wheat flour mills in 16 countries, and include 6 consolidated and 18 non-
consolidated affiliates primarily in Africa, South America, the Caribbean and Europe. Seaboard and its affiliates produce
approximately five million metric tons of wheat flour, maize meal, manufactured feed and oilseed crush commodities per
year in addition to other related grain-based products. In addition, on January 5, 2018, the CT&M division acquired five
entities operating as Groupe Mimran (“Mimran”). Mimran operates three flour mills and an associated trading business
located in Senegal, Ivory Coast and Monaco.
2017 Annual Report 5
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 U.S., the Caribbean and Central and South
America. This division’s primary operations, located in Miami, include an off-port warehouse for cargo consolidation and
temporary storage and a terminal at PortMiami. At the Port of Houston, Seaboard’s Marine division 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 Orleans, Philadelphia and various ports in the Caribbean
and Central and South America.
This division’s fleet consists of chartered and, to a lesser extent, owned vessels, and includes dry, refrigerated and
specialized containers and other cargo related equipment. Seaboard’s Marine division is the largest shipper in terms of
cargo volume in PortMiami and provides extensive service between its domestic ports of call and multiple foreign
destinations.
To maximize fleet utilization, Seaboard’s Marine division uses a network of offices and agents throughout the U.S.,
Canada, the Caribbean and Central and South America to sell freight at 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’s Sugar division grows sugarcane, which it uses to produce refined sugar and alcohol. The sugar
is primarily marketed locally, with some exports to the U.S. and other 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 27 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 sugarcane, which
supplies the majority of the raw material processed. Depending on local market conditions, sugar and alcohol may also be
purchased from third parties for resale. In addition, Seaboard’s Sugar 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, which is fueled by the burning of sugarcane by-products,
natural gas and other biomass when available.
Power Division
In the Dominican Republic, Seaboard’s Power division is an unregulated independent power producer generating
electricity for the local power grid from an owned barge with a capacity to generate 108 megawatts. This division primarily
sells power on the spot market and is not directly involved in the transmission or distribution of electricity, and its principal
buyers are government-owned distribution companies.
Other Division
Seaboard has a 50% noncontrolling voting interest in Butterball, LLC (“Butterball”). Butterball is one of the largest
vertically integrated producers, processors and marketers of branded and non-branded turkey products in the U.S.
Butterball has four processing plants, two further processing plants and numerous live production and feed milling
operations located in North Carolina, Arkansas, Missouri and Kansas. Butterball produces over one billion pounds of
turkey each year. Butterball is a national supplier to retail stores, foodservice outlets and industrial entities, and also exports
products to Mexico and numerous other foreign markets.
6 2017 Annual Report
S E A B O A R D C O R P O R A T I O N
Summary of Selected Financial Data
(Millions of dollars except per share amounts)
Net sales
Operating income
Net earnings attributable to Seaboard (a, c, d)
Basic earnings per common share (a, c, d)
Total assets
Long-term debt, less current maturities
Stockholders’ equity
Dividends declared per common share (b)
Years ended December 31,
2014
2016
2013
126 $
171 $
222 $
312 $
232 $
247 $
2015
2017
$ 5,809 $ 5,379 $ 5,594 $ 6,473 $ 6,670
204
$
212
$
$ 211.01 $ 266.50 $ 146.44 $ 311.44 $ 177.53
$ 5,161 $ 4,755 $ 4,431 $ 3,692 $ 3,431
80
$
$ 3,408 $ 3,175 $ 2,882 $ 2,735 $ 2,493
—
$
424 $
367 $
6.00 $
499 $
518 $
482 $
— $
— $
— $
— $
(a)
(b)
(c)
In 2017, Seaboard recorded $65 million of additional income tax expense, or $55.31 per common share, as a
result of the December 22, 2017 enactment of the Tax Cuts and Job Act (the “2017 Tax Act”). The additional
income tax expense includes a provisional $112 million of additional federal tax, payable over eight years,
associated with the mandatory deemed repatriation of permanently invested foreign profits, offset by an estimated
reduction in deferred taxes resulting from the rate decrease from 35% to 21%. See Note 6 to the consolidated
financial statements for further information on the impacts of the 2017 Tax Act.
In 2017, Seaboard resumed declaring quarterly dividends and paid them in the amount of $1.50 per common
share per quarter. In December 2012, Seaboard declared and paid a dividend of $12.00 per common share. The
amount of the dividend represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per
common share per year). Basic and diluted earnings per common share are the same for all periods presented.
In the fourth quarter of 2015, Seaboard recorded interest income of $23 million, net of taxes ($31 million before
taxes), or $19.49 per common share, for interest recognized on certain outstanding customer receivable balances
in its Power segment. This interest income related to amounts determined to be collectible as of December 31,
2015, but previously had been considered uncollectable in prior years. This amount was fully collected by
Seaboard in January 2016.
(d) On September 27, 2014, Seaboard’s Pork segment sold to Triumph a 50% interest in Daily’s. Included in net
earnings attributable to Seaboard for 2014 is a gain on sale of controlling interest in subsidiary of $40 million,
net of taxes ($66 million gain before taxes), or $34.14 per common share.
2017 Annual Report 7
S E A B O A R D C O R P O R A T I O N
Company Performance Graph
The Securities and Exchange Commission requires a five-year comparison of stock performance for Seaboard with that of
an appropriate broad equity market index and similar industry index. Seaboard’s common stock is traded on the NYSE
American and provides an appropriate comparison for Seaboard’s stock performance. In July 2017, the NYSE MKT
exchange transitioned to the NYSE American exchange. 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 Corporation, the NYSE
American Index and the companies comprising the Dow Jones U.S. Food Products and the Dow Jones U.S. Marine
Transportation indices, weighted by market capitalization for the five fiscal years commencing December 31, 2012 and
ending December 31, 2017. 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:
Seaboard Corporation
NYSE American
Peer Group
12/31/12 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17
$ 100.00 $ 110.48 $ 165.93 $ 114.42 $ 156.21 $ 174.58
$ 100.00 $ 104.47 $ 105.23 $ 75.69 $ 89.97 $ 91.27
$ 100.00 $ 134.50 $ 144.07 $ 157.86 $ 178.61 $ 178.77
8 2017 Annual Report
S E A B O A R D C O R P O R A T I O N
Quarterl y Financial Data (unaudited)
(UNAUDITED)
(Millions of dollars except per share amounts)
2017
Net sales
Operating income
Net earnings attributable to Seaboard
Earnings per common share
Dividends declared per common share
Closing market price range per common share:
High
Low
2016
Net sales
Operating income
Net earnings attributable to Seaboard
Earnings per common share
Dividends declared per common share (b)
Closing market price range per common share:
High
Low
1st
2nd
3rd
4th
Quarter
Quarter Quarter Quarter
Total for
the Year
$
$
$
$
$
1,399 $
66 $
85 $
71.84 $
1.50 $
1,422 $
54 $
58 $
50.51 $
1.50 $
1,402 $
71 $
81 $
69.28 $
1.50 $
41 $
23 (a) $
1,586 $ 5,809
232
247
19.38 (a) $ 211.01
6.00
1.50 $
$ 4,204.00 $ 4,319.80 $ 4,550.00 $ 4,654.08
$ 3,632.45 $ 3,695.00 $ 3,815.00 $ 4,107.05
$
$
$
$
$
1,319 $
36 $
54 $
45.91 $
— $
1,357 $
76 $
80 $
68.34 $
— $
1,330 $
42 $
75 $
64.42 $
— $
68 $
103 $
1,373 $ 5,379
222
312
87.83 $ 266.50
—
— $
$ 3,054.00 $ 3,125.00 $ 3,440.00 $ 4,444.14
$ 2,483.00 $ 2,726.50 $ 2,782.92 $ 3,201.95
(a) During the fourth quarter of 2017, Seaboard recorded $65 million of additional income tax expense, or $55.31
per common share, as a result of the December 22, 2017 enactment of the 2017 Tax Act. The additional income
tax expense includes a provisional $112 million of additional federal tax, payable over eight years, associated
with the mandatory deemed repatriation of permanently invested foreign profits, offset by an estimated reduction
in deferred taxes resulting from the rate decrease from 35% to 21%. See Note 6 to the consolidated financial
statements for further information on the impacts of the 2017 Tax Act.
(b) No dividends were paid during 2016 as they were declared and prepaid in December 2012.
2017 Annual Report 9
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Seaboard is a diverse 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 a distinct industry and a different geographical location,
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 United States (“U.S.”) business with some export sales to Japan, Mexico, China 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 20,500 hogs, and a ham boning and processing plant in Mexico. In 2017, Seaboard raised approximately
87% 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 58%
of Seaboard’s total fixed assets, in addition to 44% of total 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 continually looking for ways to enhance the plant’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 other animal fat or vegetable oil purchased from third parties.
The Pork segment has a 50% noncontrolling interest in Seaboard Triumph Foods, LLC (“STF”), which operates a pork
processing plant in Sioux City, Iowa, that began operations in September 2017. Seaboard has agreements with Triumph
Foods, LLC (“Triumph”) and STF to market substantially all of the pork products produced at Triumph’s plant in St.
Joseph, Missouri and STF’s pork processing plant. The STF plant is designed to process about three million market hogs
annually when operating a single shift. 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 the Seaboard, Triumph and STF hog
processing plants. Seaboard and Triumph each agreed to provide a portion of the hogs to be processed at the STF plant.
During 2017, the Pork segment acquired hog inventory and related assets to further increase its capacity to fulfill the hog
supply commitment for single and double shift processing at the STF plant.
The Pork segment also has a 50% noncontrolling interest in Daily’s Premium Meats, LLC (“Daily’s”). Daily’s produces
and markets raw and pre-cooked bacon and ham primarily for the food service industry and, to a lesser extent, retail
markets. Daily’s has three further processing plants located in Salt Lake City, Utah, Missoula, Montana, and St. Joseph,
Missouri.
Commodity Trading and Milling Segment
The Commodity Trading and Milling (“CT&M”) segment, which is managed under the name of Seaboard Overseas and
Trading Group, primarily operates overseas and is an integrated agricultural commodity trading, processing and logistics
operation with locations in Africa, South America, the Caribbean, Asia and Europe. These foreign operations can be
significantly impacted by changes in local crop production, political instability and local government policies, as well as
fluctuations in economic and industry conditions and foreign currency exchange rates. This segment’s sales are also
significantly affected by fluctuating prices of various commodities, such as wheat, corn, soybeans and soybean meal.
Although this segment owns three vessels, the majority of the 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. Consolidated and non-consolidated affiliates operate the grain processing businesses in foreign
10 2017 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
countries that are in most cases lesser developed. 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 represents approximately 44% of Seaboard’s total inventories at December 31, 2017.
The majority of CT&M segment’s sales are derived 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. Seaboard’s CT&M segment invested in several
entities in recent years and continues to seek opportunities to expand its trading, milling and agro-processing business.
Marine Segment
The Marine segment provides cargo shipping services primarily between the U.S. and 28 countries in the Caribbean and
Central and South America. Fluctuations in economic conditions and political instability in the regions or countries in
which this segment operates may affect trade volumes and operating profits. In addition, cargo rates can fluctuate
depending on local supply and demand for shipping services. The Marine segment time-charters the majority of its ocean
cargo vessels and is therefore affected by fluctuations in charter hire rates as well as fuel costs. This segment 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 and alcohol prices. Domestic sugar
production levels in Argentina affect the local price. Global sugar price fluctuations, to a lesser extent, have an impact in
Argentina as well. Depending on local market conditions, this segment purchases sugar and alcohol from third parties for
resale. The Sugar segment sells dehydrated alcohol to certain oil companies under an Argentine government bio-ethanol
program, which mandates that alcohol be blended with gasoline. This segment also owns a 51 megawatt cogeneration
power plant, which is fueled by the burning of sugarcane by-products, natural gas and other biomass when available. 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. Seaboard continues to explore various ways to improve and expand
this segment, investing in efficiency improvements and production capacity increases.
Power Segment
The Power segment is an unregulated independent power producer in the Dominican Republic generating electricity for
the local power grid from a system of diesel engines mounted on a barge. Seaboard sells power on the spot market primarily
to government-owned distribution companies. This segment is subject to delays in obtaining timely collections from sales
to these government-related entities. Supply of power in the Dominican Republic is determined by a government body and
is subject to fluctuations based on governmental budgetary constraints. While fuel is this segment’s largest cost component
and is subject to price fluctuations, higher fuel costs generally have been passed on to customers.
Turkey Segment
Seaboard has a 50% noncontrolling voting interest in Butterball, LLC (“Butterball”). Butterball is a vertically integrated
producer, processor and marketer of branded and non-branded turkey products. Butterball has four processing plants, two
further processing plants and numerous live production and feed milling operations located in North Carolina, Arkansas,
Missouri and Kansas. During 2017, Butterball closed its Montgomery, Illinois, further processing plant, which was sold
during the first quarter of 2018. 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 the Thanksgiving and
Christmas holidays driving the majority of those sales.
LIQUIDITY AND CAPITAL RESOURCES
Summary of Sources and Uses of Cash
Cash and short-term investments as of December 31, 2017 increased $338 million from December 31, 2016. The increase
was primarily the result of net cash from operating activities of $245 million, repayments of affiliate notes receivable of
$167 million and proceeds from short-term and long-term debt of $83 million. Partially offsetting the increase was cash
2017 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
used for capital expenditures of $173 million. Cash from operating activities decreased $182 million from 2016 primarily
as a result of lower net earnings including adjustments and working capital changes.
Cash and short-term investments as of December 31, 2016 increased $50 million from December 31, 2015. The increase
was primarily the result of net cash from operating activities of $427 million, net proceeds from short-term investments of
$53 million and proceeds from sale of fixed assets of $47 million. Partially offsetting the increase was cash used for
acquisition of businesses of $219 million, capital expenditures of $158 million, investments in affiliates of $71 million
and purchase of long-term investments of $31 million. Cash from operating activities increased $11 million for 2016
primarily as a result of higher net earnings, partially offset by working capital changes.
Capital Expenditures, Acquisitions and Other Investing Activities
During 2017, Seaboard invested $173 million in property, plant and equipment, of which $100 million was in the Pork
segment, $15 million in the CT&M segment, $37 million in the Marine segment and $20 million in the Sugar segment.
The Pork segment expenditures were primarily for improvements to existing facilities and related equipment and additional
hog finishing barns. The Sugar segment expenditures were primarily related to a new bioethanol distillery. All other capital
expenditures were primarily of a normal recurring nature and included replacements of machinery and equipment, and
general facility modernizations and upgrades.
The total 2018 capital expenditures budget is $271 million. The Pork segment budgeted $115 million primarily for
improvements to existing facilities and related equipment and additional hog finishing barns. The CT&M segment
budgeted $48 million primarily for milling assets and other improvements to existing facilities and related equipment. The
Marine segment budgeted $81 million primarily for additional cargo carrying and handling equipment and port
improvements. The Sugar segment budgeted $26 million primarily for increasing the milling capacity and improving
logistics infrastructure. The balance of $1 million is planned to be spent in all other businesses primarily for normal
upgrades to existing operations. 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.
During 2016, Seaboard invested $158 million in property, plant and equipment, of which $69 million was in the Pork
segment, $35 million in the CT&M segment, $19 million in the Marine segment and $34 million in the Sugar segment.
The Pork segment expenditures were primarily for improvements to existing facilities and related equipment, additional
hog finishing barns and the June 2016 purchase and improvement of a biodiesel plant in St. Joseph, Missouri, for $6
million that became operational in the third quarter. Of the CT&M segment expenditures, $29 million was for the
construction of two dry bulk vessels, which were delivered and then sold and leased back by Seaboard at book value of
$44 million during the first quarter of 2016. The Marine segment expenditures were primarily for purchases of cargo
carrying and handling equipment. The Sugar segment expenditures were primarily for milling capacity increase and
fermentation and distillery equipment upgrades. All other capital expenditures were primarily of a normal recurring nature
and included replacements of machinery and equipment, and general facility modernizations and upgrades.
During 2015, Seaboard invested $139 million in property, plant and equipment, of which $40 million was in the Pork
segment, $40 million in the CT&M segment and $43 million in the Marine segment. The Pork segment expenditures were
primarily for improvements to existing facilities and related equipment and additional hog finishing barns. Of the CT&M
segment expenditures, $30 million was for the construction of dry bulk vessels, two of which were delivered and then sold
and leased back by Seaboard at book value of $44 million in 2015. The Marine segment expenditures were primarily for
purchases of cargo carrying and handling equipment and $8 million for the purchase of a containerized cargo vessel. 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 2017, 2016 and 2015, Seaboard contributed $73 million, $51 million and $26 million, respectively, to STF for
construction of a pork processing plant in Sioux City, Iowa, which began operations in September 2017. In addition to
capital contributions, Seaboard also agreed to provide a portion of the hogs to be processed at the plant, including a portion
of those needed for a second shift expansion. During 2016, Seaboard acquired hog inventory and related assets through
acquisitions of existing farm operations for a total investment of $219 million. These assets increased Seaboard’s hog
production capacity to meet the majority of such hog supply commitment for single-shift processing at the new plant.
During 2017, Seaboard acquired additional hog inventory and hog farms to further increase its capacity. See Note 12 to
the consolidated financial statements for further discussion of the significant acquisitions.
Also during 2017, Seaboard’s CT&M segment acquired a pulse and grain elevator in Canada for total cash consideration
of $14 million, and invested an additional $7 million in a grain trading and poultry business in Morocco, increasing its
12 2017 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
ownership interest in this Moroccan business to 19.4%. See Note 12 to the consolidated financial statements for further
information on the elevator purchase and Note 4 to the consolidated financial statements for further discussion of this
investment.
On January 5, 2018, the CT&M segment completed the acquisition of Groupe Mimran (“Mimran”), including three flour
mills in Senegal and Ivory Coast having a combined capacity of approximately 2,750 metric tons a day, and a trading
business located in Monaco that is expected to increase Seaboard’s annual grain trading volume by approximately 900,000
tons. The purchase price was $375 million, plus an earn-out between zero and $48 million, using the exchange rate in
effect at closing.
Seaboard purchased equity interests in two limited liability companies that operate refined coal processing plants, one in
Oklahoma during 2015 and one in Nebraska during 2016. Production of refined coal generates federal income tax credits.
Seaboard’s funding commitment for these companies varies depending on production and, based on current production
estimates, is anticipated to total approximately $14 million per year until 2021, for a total estimate of approximately $52
million as of December 31, 2017. Seaboard invested $10 million, $14 million and $9 million during 2017, 2016 and 2015,
respectively.
In 2016, Seaboard invested $7 million of cash and converted its $8 million note receivable to equity for a 36%
noncontrolling interest in a holding company that owns a Caribbean start-up terminal operation. The investment is
accounted for in the Marine segment using the equity method and reported on a three-month lag.
During 2016 and 2015, Seaboard invested an additional $14 million and $28 million, respectively, in equity and long-term
advances in a flour production business in Brazil, of which Seaboard now holds a 98% controlling interest. See Note 4 to
the consolidated financial statements for further discussion of this investment.
During 2015, the CT&M and Power segments invested in several businesses. Seaboard’s CT&M segment contributed $13
million in cash, a small amount of other assets, certain employees and rights to sell certain agricultural commodities that
Seaboard had previously sold through its subsidiary, PS International, LLC, for a 40% noncontrolling interest in a
commodity trading business in Atlanta, Georgia. Also, Seaboard invested $8 million in a flour milling business in
Botswana for a 49% noncontrolling interest, $10 million for a 45% noncontrolling interest in a commodity trading and
flour milling business in Uruguay, $10 million in an oilseed crushing business in the Republic of Turkey for a 25%
noncontrolling interest, and $18 million for a 12% noncontrolling interest in a grain trading and poultry business in
Morocco, which at the time was accounted for using the cost method. During 2015, the Power segment invested $10
million in a business operating a 300 megawatt electricity generating facility in the Dominican Republic, increasing
Seaboard’s ownership interest to 29.9%. See Note 4 to the consolidated financial statements for further discussion.
Financing Activities, Debt and Related Covenants
The following table presents a summary of Seaboard’s available borrowing capacity as of December 31, 2017. At
December 31, 2017, borrowings under the uncommitted lines of credit totaled $162 million, with $115 million of
borrowings related to foreign subsidiaries. See Note 7 to the consolidated financial statements for further discussion.
(Millions of dollars)
Short-term uncommitted and committed lines
Amounts drawn against lines
Letters of credit reducing borrowing availability
Available borrowing capacity at December 31, 2017
Total amount
available
$
$
477
(162)
(3)
312
In 2017, Seaboard renewed its $100 million committed line of credit with Wells Fargo Bank, National Association (“Wells
Fargo”) for another year until September 28, 2018. Interest is computed at LIBOR plus 0.50%, and Seaboard incurs an
unused commitment fee of 0.09% per annum. This line of credit is secured by certain short-term investments and is subject
to standard representations and covenants. There was no outstanding balance as of December 31, 2017.
At December 31, 2017, Seaboard had an unsecured term loan, which matures in 2022, with a balance of $484 million and
$52 million of foreign subsidiary debt, primarily denominated in Argentine pesos. Seaboard was in compliance with all
restrictive covenants related to these loans and facilities as of December 31, 2017. Seaboard has capacity under existing
loan covenants to undertake additional debt financings of approximately $1,533 million at December 31, 2017. See Note
7 to the consolidated financial statements for further discussion of notes payable and long-term debt.
2017 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
As of December 31, 2017, Seaboard had cash and short-term investments of $1,692 million and additional total working
capital of $618 million. 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 2018. 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, 2017, $380 million of the $1,692 million of cash and short-term investments were held by Seaboard’s
foreign subsidiaries. Historically, Seaboard has considered substantially all foreign profits as being permanently invested
in its foreign operations, including all cash and short-term investments held by foreign subsidiaries. Seaboard intends to
continue permanently reinvesting these funds outside the U.S. as current plans do not demonstrate a need to repatriate
them to fund Seaboard’s U.S. operations and therefore, Seaboard has not recorded deferred taxes for state or foreign
withholding taxes that would result upon repatriation to the U.S. However, with the December 22, 2017 enactment of the
Tax Cuts and Job Act (the “2017 Tax Act”), Seaboard accrued a provisional $112 million of federal tax in its consolidated
financial statements as of December 31, 2017 associated with the mandatory deemed repatriation of these balances. See
Note 6 to the consolidated financial statements for further discussion on the tax reform.
No shares of common stock were repurchased by Seaboard in 2017, 2016 or 2015. In each of the four quarters of 2017,
Seaboard declared and paid quarterly dividends of $1.50 per share of common stock. Seaboard’s Board of Directors intends
that Seaboard will continue to pay quarterly dividends for the reasonably foreseeable future, with the amount of any
dividends being dependent upon such factors as Seaboard’s financial condition, results of operations and current and
anticipated cash needs, including capital requirements. There were no dividends paid in 2016 or 2015. See Note 11 to the
consolidated financial statements for further discussion on stockholders’ equity.
Contractual Obligations and Off-Balance Sheet Arrangements
The following table provides a summary of Seaboard’s contractual obligations as of December 31, 2017.
Payments due by period
(Millions of dollars)
Vessel, time and voyage-charter commitments
Contract grower agreements
Other operating lease payments
Total lease obligations
Short-term notes payable
Long-term debt
Interest payments (a)
Retirement benefit payments (b)
Mandatory deemed repatriation tax (c)
Investment in affiliates (d)
Other purchase commitments
Total contractual cash obligations and commitments
$
1 year
years
years
Total
166 $
189
286
641
162
536
76
90
112
54
1,062
Less than 1-3 3-5 More than
5 years
33
44
151
228
—
1
—
41
75
—
80
425
39 $ 55 $ 39 $
42
29
110
162
53
20
6
1
16
678
62
55
172
—
77
32
20
18
28
160
41
51
131
—
405
24
23
18
10
144
$ 2,733 $ 1,046 $ 507 $ 755 $
(a) Interest payments in the table above include cash payments for interest on variable rate long-term debt based on
interest rates as of December 31, 2017.
(b) Retirement benefit payments in the table above represent expected benefit payments for various non-qualified
pension plans and supplemental retirement arrangements as discussed in Note 9 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 qualified pension plan.
(c) U.S. federal income tax on mandatory deemed repatriation is payable over eight years pursuant to the 2017 Tax
Act.
(d) Investment in affiliates represents obligations made to equity method investments, primarily for expected funding
commitments to two limited liability companies that operate refined coal processing plants.
14 2017 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
Several of Seaboard’s segments have long-term contractual obligations, including non-cancelable operating lease
agreements for facilities and equipment. The Marine and CT&M segments enter into contracts to time-charter vessels for
use in operations. The Pork segment has contract grower agreements in place with farmers to raise a portion of Seaboard’s
hogs to support its operations. The Pork segment has also entered into grain and feed ingredient purchase contracts to
support the segment’s live hog operations, and has contracted for the purchase of additional hogs from third parties. The
CT&M segment enters into commodity purchase contracts, primarily to support sales commitments. See Note 10 to the
consolidated financial statements for further discussion on Seaboard’s contractual obligations and for a more detailed
listing of other purchase commitments.
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 because they do not represent contractual obligations.
RESULTS OF OPERATIONS
Net sales for the years ended December 31, 2017, 2016 and 2015 were $5,809 million, $5,379 million and $5,594 million,
respectively. The increase for 2017 compared to 2016 primarily reflected higher sales prices and volumes for certain
commodities in the CT&M segment, higher overall prices for pork products sold, higher sales volume of market hogs and
higher biodiesel revenue in the Pork segment, higher cargo volumes in the Marine segment and higher selling prices and
volumes for alcohol in the Sugar segment. The decrease for 2016 compared to 2015 primarily reflected lower commodity
prices and the mix of products sold for the CT&M segment, lower volumes of sugar sold in the Sugar segment, and lower
cargo rates in the Marine segment, partially offset by higher sales volume of market hogs from 2016 acquisitions of live
operations and higher biodiesel volumes from the acquisition of a second biodiesel plant in the Pork segment.
Operating income for the years ended December 31, 2017, 2016 and 2015 were $232 million, $222 million and $126
million, respectively. The increase for 2017 compared to 2016 primarily reflected higher margins from sugar in the Sugar
segment and higher margins from meat prices in the Pork segment, partially offset by lower margins on biodiesel in the
Pork segment, lower margins on commodities in the CT&M segment and lower cargo rates and higher fuel costs in the
Marine segment. The increase for 2016 compared to 2015 primarily reflected lower feed costs for hogs internally grown
in the Pork segment and higher margins on commodity trades to third parties in the CT&M segment, partially offset by
higher production costs for sugar in the Sugar segment.
Pork Segment
(Millions of dollars)
Net sales
Operating income
Income (loss) from affiliates
2017
2016
2015
$ 1,609 $ 1,443 $ 1,332
116
$
11
$
175 $
11 $
188 $
(10) $
Net sales for the Pork segment increased $166 million for the year ended December 31, 2017 compared to 2016. The
increase was primarily the result of higher overall prices for pork products sold, higher sales volume of market hogs related
to the August 2017 acquisition, higher biodiesel revenue and, to a lesser extent, a higher volume of pork products sold
internationally.
Operating income for the Pork segment increased $13 million for the year ended December 31, 2017 compared to 2016.
The increase was primarily the result of improved overall margins from higher meat prices and market hog sales, partially
offset by lower biodiesel margins because the Federal blender’s credits were not renewed during 2017. In February 2018,
Congress retroactively extended the Federal blender’s credits for 2017 which will cause Seaboard to recognize
approximately $42 million of revenue in the first quarter of 2018. Management is unable to predict future market prices
for pork products, the cost of feed or third-party hogs or the government’s intentions with the Federal blenders’ credits;
however, management anticipates positive operating income for this segment in 2018.
Income from affiliates decreased $21 million for the year ended December 31, 2017 compared to 2016, primarily due to
the start-up of STF operations, which began in September 2017, partially offset by earnings from its other non-consolidated
affiliate, Daily’s.
Net sales for the Pork segment increased $111 million for the year ended December 31, 2016 compared to 2015. The
increase was primarily the result of higher sales volume of market hogs related to 2016 acquisitions, higher prices for pork
products sold and increased volume and sales prices for biodiesel resulting from increased output from the Guymon plant
2017 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
and the acquisition of a second biodiesel plant in St. Joseph, Missouri, during 2016. The increase was partially offset by
lower volume of pork products sold.
Operating income for the Pork segment increased $59 million for the year ended December 31, 2016 compared to 2015.
The increase was primarily the result of lower feed costs for hogs internally grown and improved overall margins from
higher meat prices.
Income from affiliates for the Pork segment in 2016 and 2015 was solely from Seaboard’s 50% ownership interest in
Daily’s, accounted for using the equity method.
Commodity Trading and Milling Segment
(Millions of dollars)
Net sales
Operating income as reported
Mark-to-market adjustments
Operating income (loss) excluding mark-to-market adjustments
Income (loss) from affiliates
2017
2016
2015
$ 2,945 $ 2,778 $ 3,022
2
$
(5)
(3)
(50)
38 $
—
38 $
(10) $
25 $
(4)
21 $
7 $
$
$
Net sales for the CT&M segment increased $167 million for the year ended December 31, 2017 compared to 2016. The
increase primarily reflected higher sales prices for wheat sales to third parties and higher volumes of sales to affiliates and
third parties, partially offset by lower corn and soybean meal sales prices and volumes to third parties.
Operating income for the CT&M segment decreased $13 million for the year ended December 31, 2017 compared to 2016.
The decrease primarily reflected lower margins on commodities and higher selling, general and administrative expense,
partially offset by higher gains of $4 million on mark-to-market derivative contracts as further discussed below. Excluding
the effects of the mark-to-market adjustments for derivatives contracts, operating income decreased $17 million primarily
due to a decrease in commodity prices in the pulse market.
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 2018,
excluding the effects of marking to market derivative contracts.
Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this segment
would have been lower by $4 million in 2017, remained the same in 2016 and been lower by $5 million in 2015. While
management believes its commodity futures, 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 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 therefore, these mark-to-market adjustments could reverse in
fiscal 2018. Management believes eliminating these mark-to-market adjustments provides a more reasonable presentation
to compare and evaluate period-to-period financial results for this segment.
Income from affiliates for the CT&M segment increased by $17 million for the year ended December 31, 2017 compared
to 2016. The increase primarily reflected consolidation of an equity method investment that incurred $10 million of losses
during 2016. See Note 4 to the consolidated financial statements for further discussion of this affiliate. Based on the
uncertainty of local political and economic environments in the countries in which Seaboard’s affiliates operate,
management cannot predict future results.
Net sales for the CT&M segment decreased $244 million for the year ended December 31, 2016 compared to 2015. The
decrease primarily reflected lower sales prices, resulting from lower commodity prices and the mix of products sold,
partially offset by higher volumes in corn and soybeans.
Operating income for the CT&M segment increased $36 million for the year ended December 31, 2016 compared to 2015.
The increase primarily reflected higher margins on commodity trades to third parties and affiliates and fluctuations of $5
million of mark-to-market derivative contracts. Excluding the effects of mark-to-market adjustments for derivatives
contracts, operating income increased $41 million.
16 2017 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
Loss from affiliates for the CT&M segment decreased $40 million for the year ended December 31, 2016 compared to
2015. The decrease primarily reflected lower operating and currency losses recorded against the investment and lower
reserves for notes receivable and advances from an affiliate in Brazil. Seaboard’s loss from this Brazilian affiliate totaled
$60 million in 2015 compared to $10 million in 2016. This Brazilian affiliate was consolidated in the fourth quarter of
2016.
Marine Segment
(Millions of dollars)
Net sales
Operating income
Income (loss) from affiliate
940
19
2
Net sales for the Marine segment increased $40 million for the year ended December 31, 2017 compared to 2016. The
increase was primarily the result of higher volumes in certain markets during 2017 compared to 2016, partially offset by
lower cargo rates.
916 $
33 $
1 $
956 $
21 $
(7) $
$
$
$
2017
2016
2015
Operating income for the Marine segment decreased $12 million for the year ended December 31, 2017 compared to 2016.
The decrease was primarily the result of lower cargo rates and higher fuel costs, partially offset by lower other voyage
costs. Management cannot predict changes in future cargo volumes, cargo rates and fuel costs, or to what extent changes
in economic conditions in markets served will affect net sales or operating income during 2018. However, management
anticipates this segment will have positive operating income for 2018.
Income from affiliates decreased $8 million for the year ended December 31, 2017 compared to 2016 primarily due to an
other-than-temporary impairment charge of $6 million related to Seaboard’s equity-method investment in a holding
company that owns a start-up terminal operation. See Note 4 to the consolidated financial statements for further
information on this affiliate.
Net sales for the Marine segment decreased $24 million for the year ended December 31, 2016 compared to 2015. The
decrease was primarily the result of lower cargo rates in certain markets during 2016 compared to 2015, partially offset
by higher volumes.
Operating income for the Marine segment increased $14 million for the year ended December 31, 2016 compared to 2015.
The increase was primarily the result of lower voyage costs, principally fuel costs, on a per unit shipped basis, partially
offset by lower cargo rates.
Sugar Segment
2017
2016
2015
(Millions of dollars)
Net sales
Operating income (loss)
Income from affiliates
188
2
1
Net sales for the Sugar segment increased $39 million for the year ended December 31, 2017 compared to 2016. The
increase primarily reflected higher volumes and selling prices of alcohol and higher selling prices for sugar, partially offset
by lower volumes of sugar sold. Sugar and alcohol sales are denominated in Argentine pesos, and an increase in local sales
prices in terms of U.S. dollars was partially offset by exchange rate changes as the Argentine peso continued to weaken
against the U.S. dollar in 2017. Management cannot predict local sugar and alcohol prices for 2018, but management
anticipates that the Argentine peso will continue to weaken against the U.S. dollar.
147 $
(12) $
2 $
186 $
21 $
1 $
$
$
$
Operating income for the Sugar segment increased $33 million for the year ended December 31, 2017 compared to 2016.
The increase primarily reflected higher margins from sugar, alcohol and cogeneration primarily related to increased selling
prices, partially offset by higher selling, general and administrative costs. During 2016, labor strikes and inclement weather
negatively impacted volumes and resulted in a $12 million inventory charge. Based on recent market conditions,
management currently cannot predict if this segment will be profitable in 2018.
Net sales for the Sugar segment decreased $41 million for the year ended December 31, 2016 compared to 2015. The
decrease primarily reflected lower volumes and lower selling prices of sugar sold. During the third and fourth quarters of
2016, labor strikes and inclement weather negatively impacted volumes and resulted in a $12 million inventory charge to
cost of sales for fixed manufacturing costs associated with the revised production forecasts. Sugar and alcohol sales are
2017 Annual Report 17
S E A B O A R D C O R P O R A T I O N
Management’s Discussion & Anal ysis
denominated in Argentine pesos, and an increase in local sales prices in terms of U.S. dollars was principally offset by
exchange rate changes as the Argentine peso continued to weaken against the U.S. dollar in 2016.
Operating income for the Sugar segment decreased $14 million for the year ended December 31, 2016 compared to 2015.
The decrease primarily reflected lower sales prices, lower volumes and the $12 million inventory charge, partially offset
by reduced selling, general and administrative expenses from decreased personnel-related costs.
Power Segment
(Millions of dollars)
Net sales
Operating income
Income from affiliate
97
7
3
Net sales for the Power segment increased $18 million for the year ended December 31, 2017 compared to 2016. The
increase primarily reflected higher spot market rates.
79 $
7 $
4 $
$
$
$
2017 2016
97 $
9 $
6 $
2015
Operating income for the Power segment increased $2 million for the year ended December 31, 2017 compared to 2016
primarily due to higher spot market rates, partially offset by higher fuel costs. 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 in 2018.
Net sales for the Power segment decreased $18 million for the year ended December 31, 2016 compared to 2015. The
decrease primarily reflected lower spot market rates, which were attributable primarily to lower fuel costs, a component
of pricing.
Operating income for the Power segment was flat for the year ended December 31, 2016 compared to 2015 primarily due
to the lower spot market rates being offset by lower fuel costs per kilowatt hour generated and other lower production
costs.
Turkey Segment
(Millions of dollars)
Income (loss) from affiliate
103
The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball. The decrease
in income from affiliate for 2017 compared to 2016 was primarily the result of lower prices for turkey products sold,
pricing pressure from competing proteins and higher live growing costs. Also, the decrease included the 2017 closure of a
further processing plant located in Montgomery, Illinois. Butterball’s closure and subsequent sale in 2018 of the plant,
resulted in charges primarily related to impaired fixed assets and accrued severance. Seaboard’s proportionate share of
these charges, recognized in income (loss) from affiliates, was $18 million, all of which was recorded in 2017. Management
is unable to predict future market prices for turkey products or the cost of feed; however, management anticipates positive
income for this segment in 2018.
(4) $
$
2017
2016 2015
73 $
The decrease in income from affiliate for 2016 compared to 2015 was primarily the result of lower volume and prices for
turkey products sold.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2017 increased $42 million over
2016 to $317 million. The increase was primarily the result of increased personnel-related costs, including costs related to
Seaboard’s deferred compensation program, which were offset by the effect of the mark-to-market on investments
recorded in other investment income. As a percentage of revenues, SG&A was 5% for 2017 and 2016.
SG&A expenses for the year ended December 31, 2016 increased $5 million over 2015 to $275 million. The increase was
primarily the result of increased costs related to Seaboard’s deferred compensation program, which were offset by the
effect of the mark-to-market on investments recorded in other investment income. As a percentage of revenues, SG&A
was 5% for 2016 and 2015.
Interest Expense
Interest expense totaled $29 million, $29 million and $18 million for the years ended December 31, 2017, 2016 and 2015,
respectively. The increase in 2016 compared to 2015 primarily related to long-term debt issued in December 2015.
18 2017 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
Interest income totaled $15 million, $15 million and $40 million for the years ended December 31, 2017, 2016 and 2015,
respectively. The decrease for 2016 compared to 2015 primarily reflected lower interest recognized on customer receivable
balances in the Power segment. In December 2015, the Power segment recognized $31 million of interest income related
to aged receivable balances. See Note 13 to the consolidated financial statements for further discussion.
Interest Income from Affiliates
Interest income from affiliates totaled $22 million, $24 million and $29 million for the years ended December 31, 2017,
2016 and 2015, respectively, and primarily relates to a Butterball note receivable, which was repaid in December 2017.
The decrease for 2016 compared to 2015 primarily reflected the modification of a Butterball note receivable. See Note 4
to the consolidated financial statements for further discussion of the modification.
Other Investment Income (Loss), Net
Other investment income (loss), net totaled $177 million, $69 million and $(5) million for the years ended
December 31, 2017, 2016 and 2015, respectively. The increase for 2017 compared to 2016 primarily reflects higher
income on short-term investments related to mark-to-market fluctuation and dividends. The increase for 2016 compared
to 2015 primarily reflects higher income on short-term investments related to mark-to-market fluctuation and dividends,
partially offset by higher losses associated with its investments in refined coal processing plants, of which a portion is
offset by tax credits in income tax expense.
Foreign Currency Gains, Net
Foreign currency gains, net totaled $14 million, $2 million and $1 million for the years ended December 31, 2017, 2016
and 2015, respectively. The increase in foreign currency gains, net in 2017 compared to 2016 primarily reflected gains in
the euro and British pound on Seaboard’s short-term investments and the Zambian kwacha on Seaboard’s operations,
partially offset by losses in the South African rand, among fluctuations of other currency exchange rates in several foreign
countries. The increase in foreign currency gains, net in 2016 compared to 2015 primarily reflected gains in the South
African rand, partially offset by losses in the Zambian kwacha, among fluctuations of other currency exchange rates in
several foreign countries. The political and economic conditions of the countries in which Seaboard operates and does
business, 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 that cannot be predicted by Seaboard. Although Seaboard does
not utilize hedge accounting, Seaboard does utilize foreign currency exchange contracts to manage its risks and exposure
to foreign currency fluctuations. Management believes gains and losses on commodity transactions, including the mark-
to-market effects, of such foreign currency exchange contracts relate to the underlying commodity transactions and
classifies such gains and losses in cost of sales. All other gains and losses on foreign currency exchange contracts are
included in foreign currency gains (losses), net.
Income Tax Expense
On December 22, 2017, the President of the U.S. signed into law the Tax Cuts and Job Act (the “2017 Tax Act”). The
2017 Tax Act changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial
tax system and imposing a repatriation tax on mandatory deemed repatriated earnings of foreign subsidiaries. The 2017
Tax Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective
January 1, 2018. The effective tax rate for 2017 was higher than 2016 primarily due to the enactment of the 2017 Tax Act,
partially offset by the expiration of the U.S. biodiesel tax provisions on December 31, 2016 and lower tax credits in 2017.
The effective tax rate reflects an increase in Seaboard’s taxes payable resulting from the one-time mandatory deemed
repatriation charge and a decrease in value of Seaboard’s deferred tax assets due to the corporate rate decrease from 35%
to 21%. This change was partially offset by reduced tax expense resulting from the rate decrease impact on the deferred
tax liabilities.
OTHER FINANCIAL INFORMATION
Management does not believe its businesses have been materially adversely affected by inflation. See Note 1 to the
consolidated financial statements for a discussion of recently issued accounting standards.
CRITICAL ACCOUNTING ESTIMATES
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in
the U.S. (“GAAP”) 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.
2017 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
Management has identified the accounting estimates believed to be the most important to the portrayal of Seaboard’s
financial condition and results, and that 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.
Allowance for Doubtful Accounts – Seaboard primarily uses a specific identification approach to evaluate the adequacy of
this reserve for estimated uncollectible receivables at the consolidated balance sheet date. Changes in estimates, developing
trends and other new information can have a material affect on future evaluations. Furthermore, Seaboard’s total current
receivables are heavily weighted toward foreign receivables ($343 million or 75% at December 31, 2017), including
foreign receivables due from affiliates ($104 million at December 31, 2017), 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 less developed than the U.S. that can experience conditions causing sudden changes to
their ability to pay such receivables on a timely basis or in full. Based on various historical experiences, 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, 2017, 2016 and 2015
was $12 million, $15 million and $13 million, respectively.
Valuation of Inventories – Inventories are generally valued at the lower of cost and net realizable value. In determining
net realizable value, management makes assumptions regarding estimated sales prices, estimated costs to complete and
estimated disposal costs. 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 or facts and circumstances could result in a material write down in value of inventory or
decreased future margins on the sale of inventory.
Impairment of Long-Lived Assets – At each balance sheet date, long-lived assets, primarily property, plant and equipment,
are reviewed for impairment when events or changes in circumstances indicate that the carrying amount 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
property, plant and equipment, resulting in a material charge to earnings.
Investments in and Advances to Affiliates and Notes Receivable From Affiliates – Seaboard has numerous investments in
and advances to various businesses that it owns 50% or less for a noncontrolling interest and are accounted for using the
equity method. In addition, for some of these investments, Seaboard also has notes receivable for loans it provided to these
businesses. For the CT&M segment, these investments are primarily in foreign countries, which are less developed than
the U.S., and therefore, expose Seaboard to greater financial risks. At certain times when there are ongoing operating
losses, local economies are depressed, commodity-based markets are less stable, or foreign governments cause challenging
business conditions, the fair value of the equity method investment is evaluated by management. The fair value of these
investments is not readily determinable as almost all of these investments are not publicly traded. Management will use
other methods to determine fair value such as estimated future cash flows, including assumptions on growth rates, for the
business and consideration of other local business conditions as applicable. If the fair value of the investment is determined
to be less than the carrying value and the decline in value is considered to be other than temporary, an appropriate write
down is recorded to income (loss) from affiliates based on the excess of the carrying value over the best estimate of fair
20 2017 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
value of the investment. In addition, if based on current information and events it is probable that Seaboard will be unable
to collect all amounts due according to the contractual terms of the notes receivable from affiliates and an amount can be
reasonably estimated, Seaboard will write down the amounts to estimated realizable value. Information and events creating
uncertainty about the realization of recorded amounts for notes from affiliates include, but are not limited to, the estimated
cash flows generated by the affiliate’s business, the sufficiency of collateral securing the amounts, the creditworthiness of
the counterparties involved, and the consideration of other local business conditions as applicable. Changes in facts,
circumstances and management’s estimates and judgment could result in a material charge to earnings. See Note 4 to the
consolidated financial statements for further discussion on Seaboard’s affiliates.
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. The Securities and Exchange Commission staff issued Staff Accounting Bulletin No.
118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information
available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain
income tax effects of the 2017 Tax Act. Seaboard has recognized provisional tax impacts related to the mandatory deemed
repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated
financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional
amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions
Seaboard has made, additional regulatory guidance that may be issued, and actions Seaboard may take as a result of the
2017 Tax Act. The accounting is expected to be complete when the 2017 U.S. corporate income tax return is filed in 2018.
See Note 6 to the consolidated financial statements for further discussion on income taxes.
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 $3 million per year. The effects of actual results differing from the assumptions (i.e.
gains or losses) are primarily accumulated in accrued pension liability and amortized over future periods if it exceeds the
10% corridor and, therefore, could affect Seaboard’s recognized pension expense in such future periods, as permitted under
GAAP. Accordingly, accumulated gains or losses in excess of the 10% corridor are amortized over the average future
service of active participants. See Note 9 to the consolidated financial statements for further discussion.
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, interest rates and equity prices. Occasionally
derivatives are used to manage all of 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. Because 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. Inventories that are
sensitive to changes in commodity prices, including carrying amounts at December 31, 2017 and 2016, 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 exchange
2017 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
agreements. Because changes in interest rates affect the cash required to service variable-rate debt, Seaboard sometimes
uses interest rate exchange agreements to manage risks of increasing interest rates. During 2010, Seaboard entered into
three ten-year interest rate exchange agreements, which involved the exchange of fixed-rate and variable-rate interest
payments over the life of the agreements without the exchange of the underlying notional amounts to mitigate the effects
of fluctuations in interest rates on variable-rate debt. Seaboard paid a fixed rate and received a variable rate of interest on
the three notional amounts of $25 million each. Seaboard terminated these agreements in December 2017. None of these
interest rate exchange agreements qualified as hedges for accounting purposes and, accordingly, the changes in fair value
of these agreements were recorded in miscellaneous, net in the consolidated statements of comprehensive income.
Equity price risk is the risk that Seaboard may incur losses due to adverse changes in the market prices of the equity
securities it holds in its short-term investment portfolio. Market prices for equity securities are subject to fluctuation and
may result from perceived changes in the underlying economic characteristics of the investee, the relative price of
alternative investments and general market conditions. As of December 31, 2017 and 2016, the fair value of Seaboard’s
marketable equity securities was approximately $1 billion and $700 million, respectively.
The following table presents the sensitivity of the fair value of Seaboard’s open net commodity future and option contracts,
foreign currency exchange agreements and marketable equity securities to a hypothetical 10% change in market prices,
and foreign exchange rates as of December 31, 2017 and December 31, 2016. 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.
(Millions of dollars)
Grains and oilseeds
Energy related resources
Hogs
Vegetable oils
Equity prices
Foreign currencies
December 31, 2017 December 31, 2016
8
18 $
$
1
2
1
1
1
—
71
110
17
14
The table below provides information about Seaboard’s non-trading financial instruments sensitive to changes in interest
rates at December 31, 2017. For debt obligations, the table presents principal cash flows and related weighted average
interest rates by expected maturity dates. Long-term variable debt included foreign subsidiary obligations payable in
Argentine pesos of $13 million and $16 million at December 31, 2017 and 2016, respectively.
(Millions of dollars)
Long-term debt:
Variable rate
Average interest rate
$
2018
2019
2020
2021
2022
Thereafter Total
21 $
7.40%
34 $
6.15%
43 $
5.75%
39 $
3.47%
366 $
3.22%
1 $
15.81%
504
3.84%
Non-trading financial instruments sensitive to changes in interest rates at December 31, 2016 consisted of variable rate
long-term debt totaling $517 million with an average interest rate of 3.09%.
22 2017 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 the Securities Exchange Act
of 1934 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 (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on its evaluation under the framework in Internal Control
- Integrated Framework (2013), management concluded that Seaboard’s internal control over financial reporting was
effective as of December 31, 2017.
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.
2017 Annual Report 23
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
To the Stockholders and Board of Directors
Seaboard Corporation:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Seaboard Corporation and subsidiaries
(“the Company”) as of December 31, 2017 and 2016, 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, 2017, and the related
notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of
its operations and its cash flows for each of the years in the three-year period ended December 31, 2017, 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) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria
established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission, and our report dated February 21, 2018 expressed an unqualified opinion on the effectiveness
of the Company’s internal control over financial reporting.
Basis for Opinion
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 are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 1959.
Kansas City, Missouri
February 21, 2018
24 2017 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
To the Stockholders and Board of Directors
Seaboard Corporation:
Opinion on Internal Control Over Financial Reporting
We have audited Seaboard Corporation and subsidiaries’ (the “Company”) internal control over financial reporting as of
December 31, 2017, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established
in Internal Control – Integrated Framework (2013) 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) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, 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, 2017, and the related notes (collectively, the “consolidated financial statements”), and
our report dated February 21, 2018 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’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 are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Kansas City, Missouri
February 21, 2018
2017 Annual Report 25
S E A B O A R D C O R P O R A T I O N
Consolidated Statements of Comprehensive Income
(Millions of dollars except share and per share amounts)
Net sales:
Products (includes sales to affiliates of $1,123, $993 and $831)
Services revenues (includes sales to affiliates of $7, $8 and $4)
Other
Total net sales
Cost of sales and operating expenses:
Products
Services
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 (loss), 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
Years ended December 31,
2016
2015
2017
$
4,693 $
1,009
107
5,809
4,334 $
961
84
5,379
4,298
879
83
5,260
549
317
232
(29)
15
22
(7)
177
14
3
195
427
(181)
246 $
1
247 $
3,992
822
68
4,882
497
275
222
(29)
15
24
81
69
2
—
162
384
(70)
314 $
(2)
312 $
$
$
4,515
973
106
5,594
4,244
866
88
5,198
396
270
126
(18)
40
29
70
(5)
1
(2)
115
241
(69)
172
(1)
171
Earnings per common share
$
211.01 $
266.50 $
146.44
Other comprehensive income (loss), net of income tax benefit of $3, $12 and
$0:
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pension cost
Other comprehensive loss, net of tax
Comprehensive income
Less: Comprehensive loss (income) attributable to noncontrolling interests
Comprehensive income attributable to Seaboard
(6)
5
(4)
(5) $
241
1
242 $
(26)
1
(1)
(26) $
288
(2)
286 $
(34)
—
9
(25)
147
(1)
146
$
$
Average number of shares outstanding
1,170,550
1,170,550
1,170,550
Dividends declared per common share
$
6.00 $
— $
—
See accompanying notes to consolidated financial statements.
26 2017 Annual Report
S E A B O A R D C O R P O R A T I O N
Consolidated Balance Sheets
(Millions of dollars except share and per share amounts)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Receivables:
Trade
Due from affiliates
Notes receivable from affiliates
Other
Total receivables
Allowance for doubtful accounts
Net receivables
Inventories
Prepaid expenses
Other current assets
Total current assets
Net property, plant and equipment
Investments in and advances to affiliates
Goodwill
Other non-current assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable to banks
Current maturities of long-term debt
Accounts payable
Payables due to affiliates
Accrued compensation and benefits
Deferred revenue
Deferred revenue from affiliates
Accrued voyage costs
Accrued commodity inventory
Other current liabilities
Total current liabilities
Long-term debt, less current maturities
Accrued pension liability
Deferred income taxes
Long-term income tax liability
Other liabilities and deferred credits
Total non-current liabilities
Commitments and contingent liabilities
Stockholders’ equity:
Common stock of $1 par value. Authorized 1,250,000 shares; issued and outstanding
1,170,550 shares
Accumulated other comprehensive loss
Retained earnings
Total Seaboard stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements.
December 31,
2017
2016
$
116 $
1,576
$
$
299
113
7
92
511
(29)
482
780
94
80
3,128
1,077
851
22
83
5,161 $
162 $
53
256
16
118
47
34
35
6
91
818
482
128
112
111
102
935
77
1,277
269
110
163
99
641
(14)
627
762
44
61
2,848
1,006
773
19
109
4,755
121
17
194
22
118
66
48
52
35
112
785
499
121
77
—
98
795
1
(354)
3,750
3,397
11
3,408
5,161 $
1
(304)
3,465
3,162
13
3,175
4,755
$
2017 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 Cash Flows
(Millions of dollars)
Cash flows from operating activities:
Net earnings
Adjustments to reconcile net earnings to cash from operating activities:
Depreciation and amortization
Deferred income taxes
Mandatory deemed repatriation tax
Pay-in-kind interest and accretion on notes receivable from affiliates
Reserve on notes receivable from affiliates
Loss (income) from affiliates
Dividends received from affiliates
Other investment loss (income), net
Other, net
Changes in assets and liabilities, net of acquisitions:
Receivables, net of allowance
Inventories
Prepaid expenses
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 sale of short-term investments
Proceeds from maturity of short-term investments
Capital expenditures
Proceeds from sale of fixed assets
Acquisition of businesses
Investments in and advances to affiliates, net
Notes receivable issued to affiliates
Principal payments received on notes receivable from affiliates
Purchase of long-term investments
Other, net
Net cash from investing activities
Cash flows from financing activities:
Notes payable to banks, net
Proceeds from long-term debt
Principal payments of long-term debt
Dividends paid
Other, net
Net cash from financing activities
Effect of exchange rate changes on cash and cash equivalents
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,
2016
2017
2015
$
246 $
314 $
172
118
39
112
(3)
—
7
24
(177)
(6)
(12)
(21)
(51)
(14)
(25)
8
245
(767)
606
59
(173)
5
(54)
(87)
(2)
167
(12)
(8)
(266)
102
47
—
(3)
16
(81)
53
(69)
12
18
6
(4)
12
23
(19)
427
(691)
710
34
(158)
47
(219)
(71)
(13)
12
(31)
6
(374)
91
(10)
—
(17)
—
(70)
69
5
5
119
(35)
3
(6)
75
15
416
(1,320)
526
29
(139)
48
—
(119)
—
—
(28)
(1)
(1,004)
45
38
(17)
(7)
(1)
58
2
39
77
116 $
(25)
3
(5)
—
—
(27)
1
27
50
77 $
83
522
—
—
—
605
(3)
14
36
50
$
See accompanying notes to consolidated financial statements.
28 2017 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
(Millions of dollars)
Balances, January 1, 2015
Comprehensive income:
Common Comprehensive Retained Noncontrolling
Stock
$
Earnings
(253) $ 2,982
Interests
Loss
1
$
$
Total
5 $ 2,735
Net earnings
Other comprehensive loss, net of tax
Balances, December 31, 2015
Comprehensive income:
Net earnings
Other comprehensive loss, net of tax
Addition to noncontrolling interests
Balances, December 31, 2016
Adoption of accounting guidance (see Note 11)
Comprehensive income:
Net earnings (loss)
Other comprehensive loss, net of tax
1
1
Reduction to noncontrolling interests
Dividends on common stock
Balances, December 31, 2017
(25)
(278)
(26)
(304)
(45)
(5)
171
3,153
312
3,465
45
247
(7)
1
6
2
5
13
172
(25)
2,882
314
(26)
5
3,175
—
(1)
(1)
246
(5)
(1)
(7)
11 $ 3,408
$
1 $
(354) $ 3,750 $
See accompanying notes to consolidated financial statements.
2017 Annual Report 29
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”) are a diverse global agribusiness and transportation company. In
the United States (“U.S.”), 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 a turkey operation. Seaboard Flour LLC and SFC Preferred, LLC,
entities owned by the chief executive officer and his family, hold approximately 76% of Seaboard’s outstanding common
stock.
Principles of Consolidation and Investments in Affiliates
The consolidated financial statements include the accounts of Seaboard Corporation and its domestic and foreign
subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Investments
in non-controlled affiliates where we have significant influence 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. 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 (loss), net on the consolidated statements of comprehensive income. Purchases and sales are recorded on a
settlement date basis. 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 (“CT&M”) 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 and net realizable value. All other inventories are valued at the lower of first-in, first-out (“FIFO”)
cost and net realizable value.
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 that 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 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. If based on current information and events it is probable that Seaboard will be unable to collect all amounts due
30 2017 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
according to the contractual terms of the notes receivable from affiliates and an amount can be reasonably estimated,
Seaboard will write down the notes receivable to estimated realizable value.
Goodwill and Other Intangible Assets
Goodwill is 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. Goodwill is primarily related to the repurchase in 2007 of a
noncontrolling interest of Seaboard Foods LLC (“Seaboard Foods”) in the Pork segment for a total of $12 million. Due to
acquisitions during 2016 in the Pork segment and CT&M segment, goodwill increased $6 million and $1 million,
respectively. Also, the $3 million change in goodwill during 2017 is related to an acquisition in the CT&M segment. Based
on the annual assessment conducted by these reporting units during 2017, there were no impairment charges recorded for
the year ended December 31, 2017.
Accrued Self-Insurance
Seaboard is self-insured for certain levels of workers’ compensation, health care coverage, property damage, vehicle,
product recall and general 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.
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 asset retirement obligation costs, Seaboard 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 2017 and 2016:
(Millions of dollars)
Beginning balance
Accretion expense
Liability for additional lagoons placed in service
Ending balance
Years ended December 31,
2017
2016
$
$
19
2
1
22
$
$
18
1
—
19
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.
Revenue Recognition
As a result of a marketing agreement with Triumph Foods, LLC (“Triumph”) and Seaboard Triumph Foods, LLC (“STF”),
Seaboard’s sales prices for its pork products included in product revenues are primarily based on a margin sharing
arrangement that considers the average sales price and mix of products sold from Seaboard’s, Triumph’s and STF’s hog
processing plants. Seaboard earns a fee for marketing the pork products of Triumph and STF, and recognizes this fee as
service revenue. Revenues for the CT&M segment 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 in the Marine
segment 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
(“GAAP”) 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
2017 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
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, potential write down related to investments in and advances to affiliates and notes receivable from affiliates, 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, overnight
investments and other investments with original maturities less than three months as cash equivalents. The following table
shows the cash paid for interest and income taxes:
(Millions of dollars)
Interest, net of interest capitalized
Income taxes, net of refunds
Years ended December 31,
2016
2017
2015
$
$
30
32
$
29
31
17
60
Supplemental Non-Cash Transactions
Seaboard had notes receivable from affiliates that accrued pay-in-kind interest income, primarily from one affiliate. On
January 4, 2016, the interest on this note receivable was modified to eliminate future pay-in-kind interest as discussed in
Note 4. Non-cash, pay-in-kind interest income and accretion of discount recognized on these notes receivable for the years
ended December 31, 2017, 2016 and 2015 was $3 million, $3 million and $17 million, respectively.
On October 28, 2016, Seaboard obtained control of Belarina Alimentos S.A., a flour production business in Brazil
(“Belarina”). No cash or other consideration was transferred to the other shareholder whose ownership was diluted through
revision of the shareholders agreement to restructure the affiliate debt and equity of Belarina. See Note 12 for the purchase
price allocation table and other details.
Foreign Currency Transactions and Translation
Seaboard has operations in several foreign countries, and the currencies of the countries fluctuate in relation to the U.S.
dollar. Certain of the major contracts and transactions, however, are denominated in U.S. dollars. In addition, the value of
the U.S. dollar fluctuates in relation to the currencies of countries where certain of Seaboard’s foreign subsidiaries and
affiliates primarily conduct business. These fluctuations result in exchange gains and losses. The activities of these foreign
subsidiaries and affiliates are primarily conducted with U.S. subsidiaries or operate in hyper-inflationary environments.
As a result, the financial statements of certain foreign subsidiaries and affiliates are re-measured using the U.S. dollar as
the functional currency.
Seaboard’s Sugar segment, four consolidated subsidiaries (CT&M segment businesses in Brazil, Canada, Guyana and
Zambia) and eleven non-controlled, non-consolidated affiliates (a Marine segment business in Jamaica and CT&M
segment businesses in Australia, Botswana, Colombia, Jamaica, Kenya, Lesotho, Morocco, South Africa, Turkey 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 expenses are translated at average rates. Translation gains and losses
are recorded as components of other comprehensive income (loss). For the consolidated subsidiaries and non-consolidated
affiliates, 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 affects current period net earnings.
Seaboard uses derivative instruments to manage various types of market risks, primarily including commodity futures and
option contracts, foreign currency exchange agreements, interest rate exchange agreements and equity future contracts.
32 2017 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
While management believes each of these instruments primarily are entered into in order to effectively manage various
market risks, as of December 31, 2017, none of the derivatives were designated and accounted for as hedges, primarily as
a result of the extensive record-keeping requirements. From time to time, Seaboard also enters into speculative derivative
transactions not directly related to its raw material requirements.
Recently Issued Accounting Standards Adopted
On December 31, 2017, Seaboard early adopted guidance to simplify the test for goodwill impairment by eliminating Step
2 from the goodwill impairment test. Under Step 2, an entity had to perform procedures to determine the fair value at the
impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure
that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination.
Instead, under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing
the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which
the carrying amount exceeds the reporting unit’s fair value. The adoption of this new guidance did not have a material
impact on Seaboard’s financial position or net earnings.
On January 1, 2017, Seaboard adopted guidance to simplify the subsequent measurement of inventory, excluding inventory
measured using LIFO or the retail inventory method. Under the new standard, inventory is valued at the lower of cost and
net realizable value. The adoption of this new guidance did not have a material impact on Seaboard’s financial position or
net earnings.
Recently Issued Accounting Standards Not Yet Adopted
In March 2017, the Financial Accounting Standards Board (“FASB”) issued guidance that will require the service cost
component of net periodic benefit cost to be presented in the same income statement line item as other employee
compensation costs arising from services rendered during the period. Only the service cost component will be eligible for
capitalization in inventory. The other components of net periodic benefit cost will be presented outside of operating income
and will not be capitalizable. Seaboard will adopt this guidance on January 1, 2018, and believes the adoption of this
guidance will not have a material impact on its financial position or net earnings.
In February 2016, the FASB issued guidance that a lessee should record a right-of-use (“ROU”) asset and a lease liability
on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating,
with classification affecting the pattern of expense recognition in the income statement. The recognition, measurement,
and presentation of expenses and cash flows arising from a financing lease have not significantly changed from the
previous guidance. For operating leases, a lessee is required to: (1) recognize a ROU asset and a lease liability, initially
measured at the present value of the lease payments, in the balance sheet, (2) recognize a single lease cost, calculated so
that the cost of the lease is allocated over the lease term on a generally straight-line basis and (3) classify all cash payments
within operating activities in the statement of cash flows. Seaboard will adopt this guidance on January 1, 2019, for all
consolidated subsidiaries. In transition, lessees are required to recognize and measure leases at the beginning of the earliest
period presented using a modified retrospective approach, which includes a number of optional practical expedients that
entities may elect to apply. Seaboard is in the preliminary stages of its assessment of the effect the guidance will have on
its existing accounting policies and the consolidated financial statements, but expects there will be an increase in assets
and liabilities on the consolidated balance sheets at adoption due to the recording of ROU assets and corresponding lease
liabilities, which will likely be material. See Note 10 for information about Seaboard’s lease obligations.
In January 2016, the FASB issued guidance that requires entities to measure equity investments, other than those accounted
for using the equity method of accounting, at fair value and recognize any changes in fair value in net income if a readily
determinable fair value exists. For investments without readily determinable fair values, the cost method of accounting is
eliminated. An entity may elect to record these equity investments at cost, less impairment, and plus or minus subsequent
adjustments for observable price changes. The new guidance is effective for interim and annual periods beginning after
December 15, 2017. Seaboard believes the adoption of this guidance will not have a material impact on its financial
position or net earnings.
In May 2014, the FASB issued guidance to develop a single, comprehensive revenue recognition model for all contracts
with customers. This guidance requires an entity to recognize revenues when promised goods or services are transferred
to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods and
services. This guidance supersedes nearly all existing revenue recognition guidance under GAAP. Seaboard will adopt
this guidance on January 1, 2018, using the cumulative effect transition method, where any cumulative effect of initially
adopting the guidance is recognized at the date of adoption. Based on management’s current assessment, the majority of
2017 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
Seaboard’s revenue arrangements generally consist of a single performance obligation to transfer promised goods or
services. Seaboard believes the adoption of this guidance will not have a material impact on its financial position or net
earnings, although it anticipates expansion of consolidated financial statement disclosures in order to comply with the
guidance.
Note 2 - Investments
The following is a summary of the amortized cost and estimated fair value of short-term investments categorized as trading
securities at the end of each year:
(Millions of dollars)
Domestic equity securities
Domestic debt securities held in mutual funds/ETFs/U.S. Treasuries
Foreign equity securities
Collateralized loan obligations
High yield securities
Money market funds held in trading accounts
Other trading securities
Total trading short-term investments
$
Cost
December 31, 2017
Amortized Fair
Value
752
$
439
319
29
21
10
6
$ 1,576
619
438
266
29
20
10
5
1,387
$
December 31, 2016
Amortized Fair
Cost
444
437
198
25
114
13
5
1,236
Value
482
$
437
199
26
115
13
5
$ 1,277
$
$
The change in unrealized gains (losses) related to trading securities still held at the end of the respective reporting period
was $146 million, $49 million and $(12) million for the years ended December 31, 2017, 2016 and 2015, respectively.
Seaboard had $114 million of equity securities denominated in foreign currencies at December 31, 2017, with $48 million
in euros, $25 million in Japanese yen, $20 million in the British pound, $6 million in the Swiss franc and the remaining
$15 million in various other currencies. Seaboard had $91 million of equity securities denominated in foreign currencies
at December 31, 2016, with $35 million in euros, $20 million in Japanese yen, $16 million in the British pound, $6 million
in the Swiss franc and the remaining $14 million in various other currencies. Also, money market funds included less than
$1 million and $1 million denominated in various foreign currencies at December 31, 2017 and 2016, respectively.
Subsequent to year-end, Seaboard sold $314 million of its domestic debt securities to fund an acquisition in January 2018.
See Note 12 for further information on this acquisition.
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 8 for information on the types of
trading securities held related to the deferred compensation plans. See Note 9 for a discussion of assets held in conjunction
with investments related to Seaboard’s defined benefit pension plan.
Seaboard had $6 million and $28 million of cost method investments classified in other non-current assets on the
consolidated balance sheets as of December 31, 2017 and 2016, respectively. During 2017, Seaboard increased its
ownership interest in a grain trading and poultry business in Morocco to 19.4%, which resulted in the original $18 million
being reclassified as an equity method investment.
34 2017 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:
(Millions 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 and net realizable value:
Grains, oilseeds and other commodities
Sugar produced and in process
Other
Total inventories at lower of FIFO cost and net realizable value
Grain, flour and feed at lower of weighted average cost and net realizable value
Total inventories
December 31,
2017
2016
$
$
313 $
28
341
(31)
310
253
38
90
381
89
780 $
273
34
307
(21)
286
279
30
62
371
105
762
The use of the LIFO method decreased 2017 net earnings $6 million ($5.40 per common share) and increased 2016 and
2015 net earnings $5 million ($3.92 per common share), and $5 million ($4.39 per common share), respectively. If the
FIFO method had been used for certain inventories of the Pork segment, inventories would have been higher $31 million
and $21 million as of December 31, 2017 and 2016, respectively.
Note 4 - Investments in and Advances to Affiliates and Notes Receivable from Affiliates
Seaboard has several investments in and advances to non-controlled, non-consolidated affiliates that are all accounted for
using the equity method of accounting. Financial information from certain foreign affiliates is reported on a one- to three-
month lag, depending on the specific entity.
The Turkey segment represents Seaboard’s 50% noncontrolling voting interest in Butterball, LLC (“Butterball”).
Butterball is a vertically integrated producer, processor and marketer of branded and non-branded turkey products. As of
December 31, 2017, Butterball had intangible assets of $111 million for trade name and $74 million for goodwill.
In connection with its initial investment in Butterball in December 2010, Seaboard provided Butterball with a $100 million
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
accumulated and was paid at maturity. Also in connection with providing the subordinated loan, Seaboard received
detachable warrants, which upon exercise for a nominal price, would enable Seaboard to acquire an additional 5% equity
interest in Butterball. In January 2016, the interest on the subordinated loan was modified to 10% per annum, payable in
cash semi-annually and the warrants were also modified, whereby Seaboard can exercise these warrants at any time after
December 31, 2018 or prior to December 31, 2025 after which time the warrants expire. 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 records 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 were exercised, unless Seaboard already owned 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 $11 million, classified as investments in and advances to affiliates on the consolidated
balance sheets, and the subordinated loan was allocated a discounted value of $89 million, classified as notes receivable
from affiliates on the consolidated balance sheets, of the total $100 million subordinated financing discussed above. The
discount on the subordinated loan was being accreted monthly in interest income from affiliates through the maturity date
of December 6, 2017. In December 2017, Butterball fully repaid the outstanding note receivable balance of $164 million
and accrued pay-in-kind interest of $6 million to Seaboard. At December 31, 2016, the recorded balance of this note
receivable was $161 million.
2017 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
During 2011, Seaboard provided a term loan of $13 million to Butterball to pay off capital leases for certain fixed assets
that originally were financed with third parties. The effective interest rate on this term loan is approximately 12% and
originally matured on January 31, 2018. Due to a pending property sale, Seaboard granted a six-month extension on the
maturity of this note to July 31, 2018. As of December 31, 2017 and 2016, the balance of the term loan included in notes
receivable from affiliates was $4 million and $8 million, respectively.
In 2017, Butterball closed its further processing plant in Montgomery, Illinois, resulting in charges primarily related to
impaired fixed assets and accrued severance. Seaboard’s proportionate share of these charges, recognized in income (loss)
from affiliates, was $18 million in 2017, of which $6 million was during the fourth quarter related to further impaired fixed
assets on the pending sale of the plant that occurred in January 2018.
Butterball had operating income in 2017, 2016 and 2015 of $15 million, $162 million and $231 million, respectively, and
other condensed financial information for each of Seaboard’s years ended was as follows:
Turkey Segment
(Millions of dollars)
Net sales
Net income (loss)
Total assets
Total liabilities
Total equity
$
$
$
$
$
2017
1,670 $
(8) $
999 $
400 $
599 $
December 31,
2016
2015
1,813 $
139 $
1,154 $
529 $
625 $
1,902
195
1,087
541
546
The Pork segment has a 50% noncontrolling interest in Daily’s Premium Meats, LLC (“Daily’s”) and STF. Daily’s
produces and markets raw and pre-cooked bacon and ham at its three further processing plants located in Utah, Montana
and Missouri. Seaboard, STF and Triumph, the other partner, each supply raw product to Daily’s. STF operates a new
pork processing plant in Iowa, which began operations in September 2017. Seaboard and Triumph formed STF in May
2015 with equal ownership of 50%. In connection with the development and operation of the plant, Seaboard contributed
$73 million, $51 million and $26 million during 2017, 2016 and 2015, respectively. Also, Seaboard agreed to provide a
portion of the hogs to be processed at the plant. The Pork segment currently has a business relationship with Triumph
under which Seaboard markets substantially all of the pork products produced at Triumph’s plant in Missouri and STF’s
plant in Iowa. In addition to supplying raw materials and providing marketing services to these affiliates, the Pork segment
also transferred fixed assets and other costs totaling $14 million in 2017 related to an enterprise resource planning system
that is used by Seaboard, Triumph, Daily’s and STF.
Combined condensed financial information of these entities for each of Seaboard’s years ended was as follows:
Pork Segment
(Millions of dollars)
Net sales
Net income (loss)
Total assets
Total liabilities
Total equity
December 31,
2016
2017
2015
$
$
$
$
$
441 $
(21) $
596 $
138 $
458 $
319 $
22 $
364 $
14 $
350 $
295
22
247
17
230
The CT&M segment has noncontrolling interests in foreign businesses conducting flour, maize and feed milling, baking
operations, poultry production and processing, and agricultural commodity trading businesses. As of December 31, 2017,
the location and percentage ownership of CT&M’s affiliates were as follows: Botswana (49%), Democratic Republic of
Congo (“DRC”) (50%), Gambia (50%), Kenya (35%-49%), Lesotho (50%), Morocco (17.7%-19.4%), Nigeria (25%-
48.33%), South Africa (30%-50%), Tanzania (49%) and Zambia (49%) in Africa, Colombia (40%-42%), Ecuador (25%-
50%), Guyana (50%), and Peru (50%) in South America, Jamaica (50%) and Haiti (23.33%) in the Caribbean, Turkey
(25%) in Europe, Australia (22.5%-25%), Canada (45%), and United States (35.42%). 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.
During 2017, the CT&M segment invested an additional $7 million in a grain trading and poultry business in Morocco.
This investment increased Seaboard’s ownership interest in that business to 19.4% and, as a result, Seaboard changed its
36 2017 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
accounting method from the cost method to equity method effective on the date of the additional investment. This
investment is reported on a three-month lag basis, and therefore Seaboard’s first proportionate share of earnings from this
investment was recognized in the third quarter of 2017.
The CT&M segment has a 50% noncontrolling interest in a bakery located in the DRC. Seaboard’s investment balance is
zero. As part of its original investment, Seaboard has an interest bearing long-term note receivable from this affiliate that
had a principal and interest balance of approximately $15 million and $19 million, net of reserves, at December 31, 2017
and 2016, respectively, all classified as long-term in other non-current assets given uncertainty of the timing of payments
in the future. The note receivable is 50% guaranteed by the other shareholder in the entity. Based on continued operating
losses and revised cash flow forecasts, Seaboard reserved $16 million in bad debt expense within selling, general and
administrative expenses in the consolidated statement of comprehensive income for the year ended December 31, 2016.
There was no tax benefit from this transaction. Beginning with the third quarter of 2017, Seaboard recorded this entity’s
current period losses of $4 million against the note receivable. In September 2017, Seaboard reached an agreement to
amend the note to further extend the term and match payments to cash flow estimates. If the future long-term cash flows
of this bakery do not improve, more of the recorded value of the note receivable from affiliate could be deemed
uncollectible in the future, which could result in a further charge to earnings.
The CT&M segment had a 50% noncontrolling interest in Belarina, a flour production business in Brazil, which it
accounted for using the equity method of accounting prior to October 28, 2016, the date Seaboard obtained 98% of the
equity ownership and control of Belarina. Seaboard accounted for this transaction as a business combination achieved in
stages as discussed further in Note 12 to the consolidated financial statements. As an equity method affiliate, Seaboard
had contributed a total of $63 million in investments and advances and a $13 million long-term loan, including investment
and advances and pay-in-kind interest accretion totaling $14 million and $29 million for the years ended December 31,
2016 and 2015, respectively. Seaboard recorded total losses from affiliate, which included reserves, of $10 million and
$60 million related to this investment in 2016 and 2015, respectively, and currency translation adjustment gains (losses)
included in other comprehensive income (loss) of $(4) million and $5 million, respectively. Due to the extent of these
losses, Seaboard had previously fully reserved all advances and long-term receivable, and as such, Seaboard’s investment,
advances and long-term note receivable were zero as of December 31, 2015. Seaboard also had a gross trade receivable
due from Belarina related to sales of grain and supplies of $17 million as of December 31, 2015, net of a reserve of $9
million based on an analysis of collectability and working capital. The net trade receivable balance was effectively settled
as the entity is now consolidated.
During the first quarter of 2016, the CT&M segment provided a $12 million loan to a Peruvian affiliate. The Peruvian
affiliate repaid the loan in the third quarter of 2016. Interest was payable monthly and the principal due on August 31,
2017, with no prepayment penalty.
During the fourth quarter of 2015, Seaboard contributed $13 million in cash, a small amount of other assets, certain
employees and rights to sell certain agricultural commodities that Seaboard had previously sold through its subsidiary, PS
International, LLC, for a 40% noncontrolling interest in a commodity trading business in Atlanta, Georgia. Also in 2015,
Seaboard invested $10 million in an oilseed crushing business in the Republic of Turkey for a 25% noncontrolling interest,
$8 million in a flour milling business in Botswana for a 49% noncontrolling interest, and $10 million for a 45%
noncontrolling interest in a commodity trading and flour milling business in Uruguay.
At December 31, 2017, Seaboard’s carrying value of certain of CT&M segment’s investments in affiliates was more than
its share of the affiliates’ book value by $49 million. 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. Combined condensed financial information of these entities for each of Seaboard’s years ended
was as follows:
Commodity Trading and Milling Segment
(Millions of dollars)
Net sales
Net income (loss)
Total assets
Total liabilities
Total equity
2017
$
$
$
$
$
2,907 $
23 $
1,793 $
1,150 $
643 $
December 31,
2016
2015
2,871 $
(6) $
1,201 $
734 $
467 $
2,321
(52)
1,265
809
456
2017 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
The Marine segment has a 21% noncontrolling interest in a cargo terminal business in Jamaica and a 36% noncontrolling
interest in a holding company that owns a Caribbean start-up terminal operation after investing $7 million of cash and
converting an $8 million note receivable to equity during 2016. During 2017, the holding company’s terminal operations
encountered the loss of a customer and defaulted on certain third-party debt obligations. In addition, third-party
engineering studies identified significant unexpected construction modifications needed for the terminal operation. As a
result, Seaboard evaluated its investment in affiliate and receivables for impairment and recorded a $5 million charge on
its investment, a $1 million charge on its convertible note receivable and a $3 million allowance on its affiliate receivables.
The holding company is investigating various strategic alternatives, such as additional capital calls, restructuring of the
third-party debt and restructuring of the affiliate equity and receivables, which includes the deferral of all affiliated
receivable payments until such future time as cash flow is sufficient to pay all third-party debt. If future long-term cash
flows do not improve, there is a possibility that there could be additional charges. Both investments are reported on a three-
month lag. At December 31, 2017, Seaboard’s carrying value of certain of Marine segment’s investments in affiliates was
less than its share of the affiliates’ book value by $26 million. The difference is attributable primarily to the valuation of
property, plant and equipment and impairments taken by Seaboard, but not the respective entity. Combined condensed
financial information of these entities for each of Seaboard’s years ended was as follows:
Marine Segment
(Millions of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
December 31,
2016
2017
2015
$
$
$
$
$
58 $
5 $
229 $
114 $
115 $
47 $
7 $
277 $
109 $
168 $
38
11
148
30
118
The Sugar segment has two noncontrolling interests in sugar-related businesses in Argentina (46% and 50%, respectively).
Combined condensed financial information of these entities for each of Seaboard’s years ended was as follows:
Sugar Segment
(Millions of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
December 31,
2016
2015
2017
$
$
$
$
$
10 $
2 $
10 $
2 $
8 $
10 $
3 $
10 $
2 $
8 $
9
2
9
2
7
The Power segment has a 29.9% noncontrolling interest in an electricity generating facility and two smaller energy-related
businesses (45% and 50%, respectively), all in the Dominican Republic. During the second quarter of 2015, Seaboard
invested an additional $10 million in a business operating a 300 megawatt electricity generating facility in the Dominican
Republic that increased Seaboard's ownership interest to 29.9% from less than 20% and changed its method of accounting
from a cost method investment to an equity method investment. This change in accounting required Seaboard at the time
to present its prior period financial results to reflect the equity method of accounting from the date of the initial investment.
Combined condensed financial information of these entities for each of Seaboard’s years ended was as follows:
December 31,
2016
2015
2017
$
$
$
$
$
105 $
23 $
265 $
145 $
120 $
146 $
14 $
261 $
175 $
86 $
141
12
327
219
108
Power Segment
(Millions of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
38 2017 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 5 - Net Property, Plant and Equipment
The following table is a summary of property, plant and equipment at the end of each year:
(Millions 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
3 - 15 years $
30 years
3 - 20 years
3 - 18 years
5 years
$
December 31,
2017
2016
224 $
525
1,253
136
34
56
2,228
(1,151)
1,077 $
214
486
1,142
140
32
58
2,072
(1,066)
1,006
Seaboard’s capitalized interest on construction in progress projects was $4 million and $4 million for the years ended
December 31, 2017 and 2016, respectively.
Note 6 - Income Taxes
On December 22, 2017, the President of the U.S. signed into law the Tax Cuts and Job Act (the “2017 Tax Act”). The
2017 Tax Act changes U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial
tax system and imposing a repatriation tax on mandatory deemed repatriated earnings of foreign subsidiaries. The 2017
Tax Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective
January 1, 2018. In December 2017, the Securities and Exchange Commission (“SEC”) issued guidance that permits the
use of provisional amounts when the necessary information is not available, prepared or analyzed in reasonable detail to
complete the accounting for certain income tax effects of the 2017 Tax Act. Seaboard has recognized the provisional tax
impacts related to mandatory deemed repatriated earnings and the revaluation of deferred tax assets and liabilities in its
consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ, possibly
materially, from these provisional amounts due to, among other things, additional analysis, changes in interpretations and
assumptions Seaboard has made, additional regulatory guidance that may be issued, and actions Seaboard may take as a
result of the 2017 Tax Act. The accounting is expected to be complete during the fourth quarter of 2018 when the 2017
U.S. corporate income tax return is filed.
Beginning in 2018, the 2017 Tax Act also imposes two new U.S. tax base erosion provisions, the global intangible low-
taxed income (“GILTI”) provision and the base-erosion and anti-abuse tax (“BEAT”) provision. Seaboard will account
for the GILTI and BEAT taxes in the period incurred, and therefore has not provided any deferred tax impacts in its
consolidated financial statements for the year ended December 31, 2017.
Income taxes attributable to continuing operations for the years ended December 31, 2017, 2016 and 2015 differed from
the amounts computed by applying the statutory U.S. Federal income tax rate of 35% to earnings before income taxes
excluding noncontrolling interests for the following reasons:
(Millions of dollars)
Computed “expected” tax expense excluding noncontrolling interests
Adjustments to tax expense attributable to:
Foreign tax differences
Tax-exempt income
State income taxes, net of federal benefit
Repatriation tax
Effect on deferreds of federal rate reduction
Federal tax credits
Domestic manufacturing deduction
Other
Total income tax expense
Years ended December 31,
2016
2015
150 $
134 $
84
2017
$
(22)
—
9
112
(47)
(18)
(2)
(1)
181 $
(14)
(15)
5
—
—
(31)
(5)
(4)
70 $
22
(11)
1
—
—
(16)
(8)
(3)
69
$
2017 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
Certain of Seaboard's foreign operations are subject to no income tax or a tax rate that is lower than the U.S. corporate tax
rate. Fluctuation of earnings or losses incurred from certain foreign operations conducting business in these jurisdictions
impact the mix of taxable earnings for each fiscal year.
Earnings before income taxes consisted of the following:
(Millions of dollars)
United States
Foreign
Total earnings excluding noncontrolling interests
Net loss (income) attributable to noncontrolling interests
Total earnings before income taxes
The components of total income taxes were as follows:
(Millions of dollars)
Current:
Federal
Foreign
State and local
Deferred:
Federal
Foreign
State and local
Income tax expense
Unrealized changes in other comprehensive loss
Total income taxes
2017
$
Years ended December 31,
2016
2015
273 $
155
428
1
427 $
272 $
110
382
(2)
384 $
196
44
240
(1)
241
$
$
$
Years ended December 31,
2016
2015
2017
118 $
19
2
20
10
12
181
(3)
178 $
(1) $
21
7
36
4
3
70
(12)
58 $
52
20
6
(14)
8
(3)
69
—
69
At December 31, 2017, Seaboard recorded its estimated tax on mandatory deemed repatriated earnings consisting of $111
million of long-term income tax liability, payable over eight years, and $1 million of income taxes payable. As of
December 31, 2017 and 2016, Seaboard had income taxes receivable of $51 million and $48 million, respectively,
primarily related to domestic tax jurisdictions, and had income taxes payable of $3 million and $6 million, respectively,
primarily related to foreign tax jurisdictions.
Components of the net deferred income tax liability at the end of each year were as follows:
(Millions of dollars)
Deferred income tax liabilities:
Depreciation
Domestic partnerships
LIFO
Cash basis farming adjustment
Other
Deferred income tax assets:
Reserves/accruals
Deferred earnings of foreign subsidiaries
Net operating and capital loss carry-forwards
Tax credit carry-forwards
Other
Valuation allowance
Net deferred income tax liability
40 2017 Annual Report
December 31,
2017
2016
$
$
$
$
92 $
92
3
5
17
209 $
61 $
24
51
14
6
156
59
112 $
112
69
10
9
18
218
83
45
50
13
8
199
58
77
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, 2017 and 2016, Seaboard had $18 million and $13 million, 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:
(Millions of dollars)
Beginning balance at January 1
Additions 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
2017
2016
$
$
13 $
3
3
(1)
18 $
7
6
2
(2)
13
Seaboard accrues interest related to unrecognized tax benefits and penalties in income tax expense and had approximately
$3 million and $2 million accrued for the payment of interest and penalties at December 31, 2017 and 2016, respectively.
Seaboard’s tax returns are regularly audited by federal, state and foreign tax authorities, which may result in material
adjustments. Seaboard’s 2013 through 2015 U.S. income tax returns are currently under Internal Revenue Service
examination. Tax years prior to 2013 are generally no longer subject to U.S. tax assessment. In Seaboard’s major non-U.S.
jurisdictions, including Argentina and the Dominican Republic, tax years are typically subject to examination
for three to six years.
As of December 31, 2017, Seaboard provisionally provided for U.S. Federal income tax on $1,279 million of undistributed
earnings from foreign operations in conjunction with the 2017 Tax Act. Historically, Seaboard has considered substantially
all foreign profits as being permanently invested in its foreign operations, including all cash and short-term investments
held by foreign subsidiaries. Seaboard intends to continue permanently reinvesting these funds outside the U.S. as current
plans do not demonstrate a need to repatriate them to fund Seaboard’s U.S. operations and therefore, Seaboard has not
recorded deferred taxes for state or foreign withholding taxes that would result upon repatriation to the U.S. Determination
of the tax that might be paid on unremitted earnings if eventually remitted is not practical. If Seaboard decided at a later
date to repatriate these permanently reinvested earnings to the U.S., Seaboard would be required to provide for the net tax
effects on these amounts.
Management believes Seaboard’s future taxable income will be sufficient for full realization of the net deferred tax assets.
The valuation allowance relates to the tax benefits from foreign net operating losses and tax credits. Management does not
believe these benefits are more likely than not to be realized due to limitations imposed on the utilization of these losses
and credits. At December 31, 2017, Seaboard had foreign net operating loss carry-forwards of approximately $160 million,
a portion of which expire in varying amounts between 2018 and 2033, while others have indefinite expiration periods. At
December 31, 2017, Seaboard had state and foreign tax credit carry-forwards of approximately $16 million, net of
valuation allowance, all of which carry-forward indefinitely.
Subsequent to December 31, 2017, Seaboard elected to change the tax status of a wholly owned subsidiary from a
partnership to a corporation. This change in tax status will result in an estimated $39 million of additional tax expense and
additional deferred tax liabilities that Seaboard will recognize in its first quarter 2018 consolidated financial statements.
Seaboard has certain investments in various limited partnerships as a limited partner that are expected to enable Seaboard
to obtain certain tax credits. The balance of the low income housing investments recognized on the consolidated balance
sheets as of December 31, 2017 and 2016 was $7 million and $8 million, respectively. Seaboard uses 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 recognizing as a component of income tax
expense. Seaboard also has invested in two limited liability companies that operate refined coal processing plants that
generate federal income tax credits based on production levels. Seaboard began investing in the Oklahoma plant in
February 2015 and the Nebraska plant in January 2016 for total contributions of $10 million, $14 million and $9 million
during 2017, 2016 and 2015, respectively. Seaboard’s funding commitments vary depending on production. See Note 10
for Seaboard’s estimate of its funding commitment for both plants. Additionally, Seaboard invested $10 million during
2016 in two limited liability companies that operate solar energy production facilities that generate investment tax credits.
These other alternative investments are accounted for using the equity method of accounting.
On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 (the “2015 Tax Act”) was signed into law.
The 2015 Tax Act reinstated and made permanent certain expired corporate income tax provisions that impact current and
2017 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
deferred taxes for financial reporting purposes. The annual effects of the provisions in this law on current and deferred tax
assets and liabilities for Seaboard were recorded in the fourth quarter of 2015. The impact was a tax benefit of $13 million,
or $10.92 per common share, primarily related to certain income tax credits. In addition to this amount was a credit of $17
million, or $14.88 per common share, for the 2015 Federal blender’s credits (extended by the 2015 Tax Act through
December 31, 2016) that was recognized as revenues in the fourth quarter of 2015. There was no tax expense on these
transactions. Since the 2015 Tax Act extended the provisions through December 31, 2016, revenue was recognized ratably
throughout 2016. The Federal blender’s credits were not renewed during 2017, but in February 2018 were retroactively
extended by Congress for 2017. Seaboard will recognize approximately $42 million of Federal blender’s credits as revenue
in the first quarter of 2018.
Note 7 - Notes Payable and Long-Term Debt
Notes payable under uncommitted credit lines was $162 million and $121 million at December 31, 2017 and 2016,
respectively. Of the $162 million outstanding at December 31, 2017, $115 million related to foreign subsidiaries, with $72
million denominated in South African rand, $30 million denominated in Argentine pesos and $5 million denominated in
Zambian kwacha. The weighted average interest rate for outstanding notes payable was 10.48% and 14.88% at
December 31, 2017 and 2016, respectively. As of December 31, 2017, Seaboard had uncommitted lines of credit totaling
$377 million, of which $327 million related to foreign subsidiaries. The notes payable under the credit lines are unsecured
and do not require compensating balances. Facility fees on these agreements are not material.
Seaboard has a $100 million committed line of credit with Wells Fargo Bank, National Association (“Wells Fargo”) that
matures on September 28, 2018. Interest is computed at LIBOR plus 0.50%, and Seaboard incurs an unused commitment
fee of 0.09% per annum. This line of credit is secured by certain short-term investments. The line of credit is subject to
standard representations and covenants. There was no outstanding balance as of December 31, 2017. At December 31,
2017, Seaboard’s borrowing capacity under its uncommitted and committed lines of credit was reduced by $162 million
drawn and $3 million of letters of credit.
The following table is a summary of long-term debt at the end of each year:
(Millions of dollars)
Term Loan due 2022
Foreign subsidiary obligations due 2018 through 2023
Total long-term debt at face value
$
Current maturities of long-term debt and unamortized discount
Long-term debt, less current maturities and unamortized discount
$
December 31,
2017
2016
484 $
52
536
(54)
482 $
497
20
517
(18)
499
Seaboard entered into a Term Loan Credit Agreement dated December 4, 2015 (“Credit Agreement”) with CoBank, ACB,
Farm Credit Services of America, PCA, and the lenders party thereto, pursuant to which Seaboard Foods obtained a $500
million unsecured term loan (“Term Loan”). Seaboard received proceeds of $499 million, net of a $1 million discount,
which will be amortized to interest expense using the effective interest method. Seaboard has guaranteed all obligations
of Seaboard Foods under the Term Loan. The Term Loan provides for quarterly payments of the principal balance pursuant
to the amortization schedule included in the Credit Agreement, with the balance due on the maturity date, December 4,
2022. The Term Loan bears interest at fluctuating rates based on various margins over a base rate (defined as the highest
of (a) the prime rate, (b) the federal funds effective rate plus 0.50% per annum, or (c) an adjusted LIBOR rate for an
interest period of one month on such day plus 1.00% per annum) or LIBOR, at the option of Seaboard Foods. The interest
rate was 3.20% and 2.40% at December 31, 2017 and 2016, respectively.
The Term Loan requires, among other terms, the maintenance of certain ratios involving a maximum debt to capitalization
ratio, which shall not exceed 50% at the end of any fiscal quarter, and minimum tangible net worth, as defined, of not less
than $2 billion plus 25% of cumulative consolidated net income. The Term Loan also includes restrictions of certain
subsidiaries to grant liens on assets, incur indebtedness over 15% of consolidated tangible net worth, make certain
acquisitions, investments and asset dispositions in excess of specified amounts, and limits aggregate dividend payments
to $25 million per year under certain circumstances. Seaboard was in compliance with all restrictive debt covenants relating
to this agreement as of December 31, 2017.
Foreign subsidiary debt is primarily denominated in Argentine pesos, and most interest rates on such obligations are
variable. The weighted average interest rate was 21.80% and 22.39% at December 31, 2017 and 2016, respectively. All of
the foreign subsidiary debt is guaranteed by Seaboard, except $5 million is secured by property, plant and equipment.
42 2017 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
During the third quarter of 2017, Seaboard’s Sugar segment refinanced certain notes payable with a short-term loan
denominated in Argentine pesos valued at approximately $32 million as of December 31, 2017. The short-term loan incurs
a fixed rate of interest of 23% until its maturity on February 7, 2018.
The aggregate minimum principal payments required on long-term debt at December 31, 2017 are as follows: $53 million
in 2018, $34 million in 2019, $43 million in 2020, $39 million in 2021, $366 million in 2022 and $1 million thereafter.
Note 8 - Derivatives and Fair Value of Financial Instruments
Seaboard uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the
following three broad levels:
Level 1: Quoted Prices in Active Markets for Identical Assets or Liabilities - Observable inputs such as unadjusted quoted
prices in active markets for identical assets or liabilities that Seaboard has the ability to access at the measurement date.
Level 2: Significant Other Observable Inputs - Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active
markets, and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Significant Unobservable Inputs - Unobservable inputs that reflect the reporting entity’s own assumptions.
The following tables show assets and liabilities measured at fair value (derivatives exclude margin accounts) on a recurring
basis as of December 31, 2017 and 2016, respectively, and also the level within the fair value hierarchy used to measure
each category of assets and liabilities. Seaboard determines if there are any transfers between levels at the end of a reporting
period. There were no transfers between levels that occurred in 2017 and 2016. The trading securities classified as other
current assets below are assets held for Seaboard’s deferred compensation plans.
(Millions of dollars)
Assets:
Trading securities – short-term investments:
Domestic equity securities
Domestic debt securities held in mutual funds/ETFs/U.S.
Treasuries
Foreign equity securities
Collateralized loan obligations
High yield securities
Money market funds held in trading accounts
Other trading securities
Trading securities – other current assets:
Domestic equity securities
Money market funds held in trading accounts
Foreign equity securities
Fixed income securities
Derivatives:
Commodities (1)
Foreign currencies
Total Assets
Liabilities:
Derivatives:
Balance
December 31,
2017
Level 1 Level 2 Level 3
$
752 $
752 $
— $
—
439
319
29
21
10
6
35
5
4
2
4
3
438
319
—
21
10
6
35
5
4
2
4
—
$
1,629 $ 1,596 $
1
—
29
—
—
—
—
—
—
—
—
3
33 $
—
—
—
—
—
—
—
—
—
—
—
—
—
Commodities (1)
Foreign currencies
Total Liabilities
—
—
—
Seaboard’s commodity 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, 2017, the
commodity derivatives had a margin account balance of $20 million resulting in a net other current asset on the
consolidated balance sheet of $18 million.
— $
6
6 $
6 $
6
12 $
6 $
6 $
—
$
$
(1)
2017 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
(Millions of dollars)
Assets:
Trading securities – short-term investments:
Domestic equity securities
Domestic debt securities held in mutual funds/ETFs/U.S.
Treasuries
Foreign equity securities
High yield securities
Collateralized loan obligations
Money market funds held in trading accounts
Other trading securities
Trading securities – other current assets:
Domestic equity securities
Foreign equity securities
Fixed income mutual funds
Other
Derivatives:
Commodities (1)
Foreign currencies
Total Assets
Liabilities:
Balance
December 31,
2016
Level 1 Level 2 Level 3
$
482 $
482 $
— $
—
437
199
115
26
13
5
30
3
3
4
437
199
15
—
13
5
30
3
3
4
—
—
100
26
—
—
—
—
—
—
3
1
3
—
1,321 $ 1,194 $ 127 $
—
1
$
—
—
—
—
—
—
—
—
—
—
—
—
—
Derivatives:
Commodities (1)
Interest rate swaps
Foreign currencies
Total Liabilities
—
—
—
—
Seaboard’s commodity 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, 2016, the
commodity derivatives had a margin account balance of $10 million resulting in a net other current asset on the
consolidated balance sheet of $12 million.
1 $
4
4
9 $
4
4
8 $
—
—
— $
1 $
1 $
$
$
(1)
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. As Seaboard’s long-
term debt is variable-rate, its carrying amount approximates fair value. If Seaboard’s long-term 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 short-term investments and long-term debt at December 31, 2017 and 2016, are presented
below:
December 31,
(Millions of dollars)
Short-term investments, trading securities
Long-term debt
2017
2016
Amortized Cost Fair Value Amortized Cost Fair Value
1,277
$
516
1,576 $
535
1,236 $
516
1,387 $
535
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.
44 2017 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
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, 2016. 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. For the years ended December 31, 2017, 2016 and 2015, Seaboard recognized net
realized and unrealized gains (losses) of $(9) million, $21 million and $(45) million, respectively, related to commodity
contracts, primarily included in cost of sales on the consolidated statements of comprehensive income.
At December 31, 2017, Seaboard had open net derivative contracts to purchase 29 million bushels of grain and 1 million
pounds of soybean oil and open net derivative contracts to sell 13 million pounds of hogs and 7 million gallons of heating
oil. At December 31, 2016, Seaboard had open net derivative contracts to purchase 22 million bushels of grain, 14 million
pounds of hogs and open net derivative contracts to sell 35 million pounds of soybean oil and 4 million gallons of heating
oil.
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 currency exchange agreements that primarily relate to
an underlying commodity transaction are 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 currency exchange agreements that are
not related to an underlying commodity transaction are recorded at fair value with changes in value marked-to-market as
a component of foreign currency gains (losses), net on the consolidated statements of comprehensive income. Since these
agreements are not accounted for as hedges, fluctuations in the related foreign currency exchange rates could have a
material impact on earnings in any given year. At December 31, 2017 and 2016, Seaboard had foreign currency exchange
agreements to cover its firm sales and purchase commitments and related trade receivables and payables, with notional
amounts of $20 million and $81 million, respectively, primarily related to the South African rand, euro and Canadian
dollar.
Interest Rate Exchange Agreements
During 2010, Seaboard entered into three ten-year interest rate exchange agreements, which involved the exchange of
fixed-rate and variable-rate interest payments over the life of the agreements without the exchange of the underlying
notional amounts to mitigate the effects of fluctuations in interest rates on variable-rate debt. Seaboard paid a fixed rate
and received a variable rate of interest on the notional amounts of $25 million each. In December 2017, all three agreements
were terminated. Payments to unwind these agreements totaled $2 million. At December 31, 2016, Seaboard had three
agreements outstanding with a total notional value of $75 million.
During 2014 and 2015, Seaboard entered into four, approximately eight-year interest rate exchange agreements with
termination dates which coincided with the anticipated delivery dates of dry bulk vessels to be leased. These interest rate
exchange agreements involved the exchange of fixed-rate and variable-rate interest payments without the exchange of the
underlying notional amounts to mitigate the potential effects of fluctuations in interest rates on the anticipated dry bulk
vessel leases. Seaboard paid a fixed rate and received a variable rate of interest on the notional amounts. In 2015, two
agreements were terminated and not renewed with the delivery of two bulk vessels. In the first quarter of 2016, the final
two agreements with an aggregate notional amount of $44 million were terminated and not renewed with the delivery of
the last two bulk vessels. Payments to unwind these agreements totaled $2 million.
These interest rate exchange agreements did not qualify as hedges for accounting purposes. Accordingly, the changes in
fair value of these agreements were recorded in miscellaneous, net in the consolidated statements of comprehensive
income.
2017 Annual Report 45
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
The following table provides the amount of gain (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, 2017 and 2016:
(Millions of dollars)
Commodities
Foreign currencies
Foreign currencies
Interest rate
Cost of sales
Cost of sales
Foreign currency
Miscellaneous, net
$
2017
2016
(9) $
(7)
(1)
—
21
(27)
1
(2)
The following table provides the fair value of each type of derivative held as of December 31, 2017 and 2016 and where
each derivative is included on the consolidated balance sheets:
Asset Derivatives
December 31, December 31,
2017
2016
Liability Derivatives
December 31, December 31,
2017
2016
(Millions of dollars)
Commodities(1)
Foreign currencies
Interest rate
(1)
Other current assets $
Other current assets
Other current assets
1
4
4
Seaboard’s commodity 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, 2017 and 2016, the commodity
derivatives had a margin account balance of $20 million and $10 million, respectively, resulting in a net other current
asset on the consolidated balance sheets of $18 million and $12 million, respectively.
3 Other current liabilities $
1 Other current liabilities
— Other current liabilities
6 $
6
—
4 $
3
—
Counterparty Credit Risk
From time to time Seaboard is subject to counterparty credit risk related to its foreign currency exchange agreements
should the counterparties fail to perform according to the terms of the contracts. As of December 31, 2017, Seaboard had
$3 million of credit risk to six counterparties related to its foreign currency exchange agreements. Seaboard does not hold
any collateral related to these agreements.
Note 9 - Employee Benefits
Effective January 1, 2017, Seaboard merged the assets and liabilities of its two defined benefit pension plans for its
domestic salaried and clerical employees resulting in one qualified defined benefit pension plan (the “Plan”) as of
December 31, 2017. Employees hired before January 1, 2014 were eligible to participate in the Plan after one year of
service upon attaining the age of 21. Benefits are generally based upon the number of years of service and a percentage of
final average pay. Seaboard has historically based pension contributions on minimum funding standards to avoid the
Pension Benefit Guaranty Corporation (“PBGC”) variable rate premiums established by the Employee Retirement Income
Security Act (“ERISA”) of 1974. Seaboard did not make any contributions in 2017 and 2015 and currently does not plan
on making any contributions in 2018. During 2016, Seaboard made a deductible contribution of $39 million for the 2015
plan year. Pursuant to Seaboard’s investment policy, assets are invested in the Plan to achieve a diversified target allocation
of approximately 50% in domestic equities, 25% in international equities, 20% in fixed income securities and 5% in
alternative investments. The investment strategy is periodically reviewed by management for adherence to policy and
performance.
As described in Note 8 to the consolidated financial statements, Seaboard utilizes a fair value hierarchy that prioritizes the
inputs to valuation techniques used to measure fair value into three broad levels. The following tables show the Plan’s
46 2017 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
assets measured at estimated fair value as of December 31, 2017 and 2016, respectively, and also the level within the fair
value hierarchy used to measure each category of assets:
(Millions of dollars)
Assets:
Domestic equity securities
Foreign equity securities
Domestic fixed income mutual funds
Money market funds
Foreign fixed income mutual funds
Total Assets
(Millions of dollars)
Assets:
Domestic equity securities
Foreign equity securities
Domestic fixed income mutual funds
Real estate mutual fund
Commodity mutual funds
Money market funds
Foreign fixed income mutual funds
Other
Total Assets
Balance
December 31,
2017
Level 1 Level 2 Level 3
$
$
80 $
53
25
2
11
171 $ 171 $
80 $
53
25
2
11
— $
—
—
—
—
— $
—
—
—
—
—
—
Balance
December 31,
2016
Level 1 Level 2 Level 3
$
76 $
35
17
8
4
4
2
5
76 $
35
17
8
4
4
2
—
$
151 $ 146 $
— $
—
—
—
—
—
—
5
5 $
—
—
—
—
—
—
—
—
—
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:
Years ended December 31,
2016
2015
2017
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
2.75-3.80% 2.90-4.65% 3.20-4.80%
2.90-4.60% 3.20-4.80% 2.70-4.40%
6.50% 6.75-7.00% 6.75-7.50%
4.00%
4.00%
4.00%
Management selected the discount rate based on a model-based result where the timing and amount of cash flows
approximates the estimated payouts. The expected returns on the Plan’s 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 Plan’s asset allocation and related long-term projected returns. The measurement date
for all plans is December 31. The unrecognized net actuarial losses are generally amortized over the average remaining
working lifetime of the active participants for all of these plans.
2017 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 changes in the Plan’s benefit obligations and fair value of assets for the Plan, supplemental executive plans and
retirement agreements and the funded status were as follows:
(Millions of dollars)
Reconciliation of benefit obligation:
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial losses
Plan settlements
Benefits paid
Other
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
Plan settlements
Benefits paid
Fair value of plan assets at end of year
Funded status
2017
Accumulated
benefits
exceed
assets
December 31,
2016
Assets
exceed
accumulated
benefits
Accumulated
benefits
exceed
assets
Total
$
$
$
$
$
262
9
11
29
(9)
(3)
1
300
151
25
10
(9)
(6)
171
(129)
$
$
$
$
$
70 $
4
3
—
—
(4)
—
73 $
46 $
6
39
—
(4)
87 $
14 $
179 $ 249
9
11
6
—
(13)
—
189 $ 262
5
8
6
—
(9)
—
68 $ 114
10
4
40
1
—
—
(9)
(13)
64 $ 151
(125) $ (111)
The net funded status of the Plan was $(29) million and $(15) million at December 31, 2017 and 2016, respectively. The
benefit obligation increased primarily due to a decrease in discount rates for all plans and the new lump sum mortality
table. The accumulated benefit obligation for the Plan was $171 million and $142 million and for all the other plans was
$90 million and $84 million at December 31, 2017 and 2016, 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: $12 million, $14 million, $17 million, $13 million, $23 million and $78 million, respectively.
The settlements recognized during 2017 were primarily due to three participants who received lump sum payments in
aggregate of $8 million that exceeded the service cost plus interest cost for the respective plan.
The net periodic cost of benefits of these plans was as follows:
(Millions of dollars)
Components of net periodic benefit cost:
Service cost
Interest cost
Expected return on plan assets
Amortization and other
Settlement loss recognized
Agreement termination gain
Net periodic benefit cost
Years ended December 31,
2016
2015
2017
$
$
9 $
11
(10)
5
2
—
17 $
9 $
11
(8)
5
—
—
17 $
10
10
(8)
5
—
(1)
16
The amounts not reflected in net periodic benefit cost and included in accumulated other comprehensive loss before taxes
at December 31, 2017 and 2016 were $78 million and $72 million, respectively. Such amounts primarily represent
accumulated losses, net of gain. The amount in accumulated other comprehensive loss expected to be recognized as a
component of net periodic benefit cost in 2018 is $5 million.
Seaboard participates in a multi-employer pension fund, the United Food and Commercial Workers International Union-
Industry Pension Fund, which covers certain union employees under a collective bargaining agreement. This fund’s
employer identification number is 51-6055922, and this plan’s number is 001. For the plan year beginning July 1, 2017,
48 2017 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
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 2019.
Contribution expense for this plan was $1 million for each of the years ended December 31, 2017, 2016 and 2015, 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 2017,
2016 and 2015, 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 $3 million for the year
ended December 31, 2017 and $2 million for each of the years ended December 31, 2016 and 2015. In addition, Seaboard
maintains a defined contribution plan covering most of its hourly, non-union employees. Contribution expense for this
plan was $1 million for each of the years ended December 31, 2017, 2016 and 2015.
Seaboard has a deferred compensation plan that allows certain employees to reduce their compensation in exchange for
values in various investments. Seaboard also has an Investment Option Plan that 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 for these two deferred compensation plans, which primarily includes amounts
related to the change in fair value of the underlying investment accounts, was $10 million, $4 million and $0 million for
the years ended December 31, 2017, 2016 and 2015, respectively. Included in other liabilities at December 31, 2017 and
2016 were $40 million and $36 million, respectively, representing the market value of the payable to the employees upon
distribution or exercise for each plan. In conjunction with these plans, Seaboard purchased the specified number of units
of the employee-designated investment, plus the applicable option price for the Investment Option Plan. These investments
are treated as trading securities and are stated at their fair market values. Accordingly, as of December 31, 2017 and 2016,
$46 million and $40 million, respectively, were included in other current assets on the consolidated balance sheets.
Investment income related to the mark-to-market of these investments for 2017, 2016 and 2015 totaled $9 million, $4
million and $0 million, respectively.
Note 10 - Commitments and Contingencies
On September 18, 2014, and subsequently in 2015 and 2016, Seaboard received a number of grand jury subpoenas and
informal requests for information from the Department of Justice, Asset Forfeiture and Money Laundering Section
(“AFMLS”), seeking records related to specified foreign companies and individuals. The companies and individuals as to
which the requested records relate were not affiliated with Seaboard, although Seaboard has also received subpoenas and
requests for additional information relating to an affiliate of Seaboard. During 2017, Seaboard received grand jury
subpoenas requesting documents and information related to money transfers and bank accounts in the DRC and other
African countries and requests to interview certain Seaboard employees and to obtain testimony before a grand jury.
Seaboard has retained outside counsel and is cooperating with the government’s investigation. It is impossible at this stage
either to determine the probability of a favorable or unfavorable outcome or to estimate the amount of potential loss, if
any, resulting from the government’s inquiry.
On September 19, 2012, the U.S. 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. The
U.S. Attorney’s Office for the Western District of Oklahoma (“USAO”), which has been leading the investigation,
previously advised Seaboard that it intended to close its investigation and that no charges would be brought against
Seaboard. However, discussions continue with the USAO, ICE and the Oklahoma Attorney General's office regarding the
matter, including the possibility of a settlement. No proceedings have been filed or brought as of the date of this report. It
is not possible at this time to determine whether a settlement will be reached or whether Seaboard will incur any material
fines, penalties or liabilities in connection with this matter.
2017 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
On February 16, 2016, Seaboard Foods received an information request from the U.S. Environmental Protection Agency
(“EPA”) seeking information under the Clean Air Act with regard to various ammonia releases at Seaboard Foods’ pork
processing plant in Guymon, Oklahoma. In December 2017, Seaboard settled this matter, agreeing to pay a civil penalty
and to implement a supplemental environmental project, the aggregate amount of both totaling less than $1 million.
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 resolution of these items is 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 in order to further
business objectives. Seaboard does not issue guarantees of third parties for compensation. As of December 31, 2017,
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 7 for discussion of letters of
credit.
Commitments
As of December 31, 2017 Seaboard had various non-cancelable purchase commitments and commitments under other
agreements, arrangements and operating leases, as described in the table below:
Years ended December 31,
(Millions of dollars)
Hog procurement contracts
Grain and feed ingredients
Grain purchase contracts for resale
Fuel supply contracts
Equipment purchases and facility improvements
Other purchase commitments
Total firm purchase commitments
Vessel, time and voyage-charters
Contract grower agreements
Other operating lease payments
Investment in affiliates
Total unrecognized non-cancelable commitments
81 $ 78 $ 78 $ 81 $
2018 2019 2020 2021 2022 Thereafter
80
$
—
—
—
—
—
80
33
44
151
—
308
63 $
—
—
—
—
—
63
13
16
26
—
107
367
44
37
42
678
39
42
29
16
—
—
—
—
—
78
26
29
26
14
—
—
—
—
—
81
26
25
25
10
3
—
—
—
1
82
29
33
29
14
804 $ 187 $ 173 $ 167 $ 118 $
$
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, 2017. During 2017, 2016 and 2015, the Pork
segment paid $99 million, $133 million and $171 million, respectively, for live hogs purchased under committed contracts.
The CT&M segment enters into grain purchase contracts, primarily to support firm sales commitments. These contracts
are valued based on projected commodity prices as of December 31, 2017.
The Power segment has a natural gas supply contract for a significant portion of the fuel required for the operation of its
dual fuel power generating facility. The commitment has both fixed and variable price components, and the amount
included in the table above is partially based on market prices as of December 31, 2017. The Marine segment also has fuel
purchase contracts.
The Marine and CT&M segments enter into contracts to charter vessels for use in their operations, which include short-
term time charters for a few months and long-term commitments ranging from one to eleven years. These segments’ charter
hire expenses during 2017, 2016 and 2015 totaled $96 million, $95 million and $99 million, respectively.
To support the operations of the Pork segment, Seaboard has contract grower agreements in place with farmers to raise a
portion of Seaboard’s hogs according to Seaboard’s specifications under long-term service agreements. 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
2017, 2016 and 2015, Seaboard paid $37 million, $26 million and $12 million, respectively, under contract grower
agreements.
50 2017 Annual Report
S E A B O A R D C O R P O R A T I O N
Notes to Consolidated Financial Statements
Seaboard also leases various facilities and equipment under non-cancelable operating lease agreements including a
terminal operations agreement at PortMiami, which runs through 2028. Rental expense for operating leases for all
segments amounted to $44 million, $43 million and $42 million in 2017, 2016 and 2015, respectively.
Investment in affiliates represents obligations made to equity method investments, primarily for expected funding
commitments to two limited liability companies that operate refined coal processing plants.
Note 11 - Stockholders’ Equity and Accumulated Other Comprehensive Loss
In October 2017, the Board of Directors extended through October 31, 2019 the share repurchase program initially
approved in November 2009. As of December 31, 2017, $100 million remained available for repurchases under this
program. Seaboard did not repurchase any shares of common stock during 2017, 2016 and 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. All stock repurchased will be made in compliance with applicable legal
requirements and funded by cash on hand. The timing of the repurchases and the number of shares repurchased at any
given time will depend upon market conditions, compliance with SEC regulations, and other factors. The Board of
Directors’ 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. Shares repurchased will be retired
and resume the status of authorized and unissued shares.
In each of the four quarters of 2017, Seaboard declared and paid a quarterly dividend of $1.50 per share on the common
stock. 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
did not declare or pay a dividend in 2016 or 2015.
The components of accumulated other comprehensive loss, net of related taxes, for 2015, 2016 and 2017 are as follows:
(Millions of dollars)
Balance December 31, 2015
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
loss to net earnings
Other comprehensive income (loss), net of tax
Balance December 31, 2016
Other comprehensive income (loss) before reclassifications
Amounts reclassified from accumulated other comprehensive
loss to net earnings
Other comprehensive income (loss), net of tax
(26)
—
(26)
$
(254) $
(6)
—
(6)
Cumulative
Foreign
Currency
Translation
Adjustment Investments
$
Unrealized
Gain
on
(228) $
Unrecognized
Pension
Cost
1 $
1
Total
(51) $ (278)
(29)
(4)
—
1
2 $
5
—
5
3 (1)
(1)
3
(26)
(52) $ (304)
(9)
(8)
4 (1)
(4)
4
(5)
Amounts reclassified from accumulated other comprehensive
loss to retained earnings
Balance December 31, 2017
(1)
(8)(2)
(45)
(64) $ (354)
This primarily represents the amortization of actuarial losses that were included in net periodic pension cost and
recorded in operating income. See Note 9 for further discussion.
(37)(2)
(297) $
7 $
—
$
(2)
This represents the adoption of accounting guidance to reclassify $45 million of tax effects from accumulated other
comprehensive loss to retained earnings in the consolidated financial statements for the year ended December 31, 2017.
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, 2017, the Sugar segment had $74 million in net assets
denominated in Argentine pesos and less than $1 million in net liabilities denominated in U.S. dollars in Argentina. At
2017 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
December 31, 2016, the Sugar segment had $84 million in net assets denominated in Argentine pesos and $3 million in
net liabilities denominated in U.S. dollars in Argentina. Seaboard accounts for its Sugar segment on a one-month lag basis.
Income taxes for cumulative foreign currency translation adjustments were recorded using a 21% effective tax rate in the
fourth quarter of 2017 and a 35% effective tax rate for all other periods, except for $91 million and $87 million in 2017
and 2016, 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 26% effective tax rate in the fourth quarter
of 2017 and a 39% effective tax rate for all other periods, except for unrecognized pension cost of $22 million and $20
million in 2017 and 2016, respectively, related to employees at certain subsidiaries for which no tax benefit was recorded.
Note 12 - Acquisitions
On August 30, 2017, Seaboard’s Pork segment acquired hog inventory and hog farms in the Central U.S. from New Fashion
Pork, LLP for total cash consideration of $40 million. This acquisition provides additional sows to further increase Seaboard’s
capacity to fulfill its hog supply commitment for processing at the STF processing plant located in Sioux City, Iowa, which
began operations in September 2017. See Note 4 for further information on STF.
The purchase was recorded at fair value in Seaboard’s Pork segment, and the allocation of the purchase price is below. No
material intangible assets were identified.
(Millions of dollars)
Inventories
Property, plant and equipment
Total consideration transferred
$
$
6
34
40
Operating results have been included in Seaboard’s consolidated financial statements from the date of acquisition. There
was no material impact to Seaboard’s sales and net earnings as a result of the purchase. Pro forma results of operations are
not presented as the effects are not material to Seaboard’s results of operations. Acquisition costs were less than $1 million.
During the first quarter of 2017, Seaboard’s CT&M segment acquired a pulse and grain elevator in Canada for total cash
consideration of $14 million. This business, which complements an existing CT&M business in Canada, is expected to
increase the trade volumes of pulses, which include commodities of beans, peas and lentils. The purchase was recorded at
fair value with $11 million allocated to property, plant and equipment and $3 million allocated to goodwill. Goodwill
represents the assembled workforce, cost savings of buying rather than developing a greenfield operation and the close
proximity of this elevator to the producers in the region. The goodwill is deductible for income tax purposes. Operating
results have been included in Seaboard’s consolidated financial statements from the date of acquisition. Pro forma results
of operations are not presented as the effects are not material to Seaboard’s results of operations. Acquisition costs were
less than $1 million.
On September 1, 2016, Seaboard’s Pork segment acquired certain assets of Texas Farm, LLC for total cash consideration of $59
million. Texas Farm, LLC was a hog growing operation with hog inventory, hog farms and a feed mill located in Texas. The
additional hog production allows Seaboard to expand and realign its hog production in other states to supply the Guymon,
Oklahoma, pork processing plant and the STF processing plant.
The purchase was recorded at fair value in Seaboard’s Pork segment, and the allocation of the purchase price is below. Goodwill
is primarily attributable to workforce and the benefits of acquiring an existing operation rather than incurring the costs and time
to begin a new hog operation.
(Millions of dollars)
Inventories
Property, plant and equipment
Goodwill
Accounts payable
Total consideration transferred
$
$
16
42
3
(2)
59
Operating results have been included in Seaboard’s consolidated financial statements from the date of acquisition. Net sales of
$4 million and a $2 million net loss were recognized during 2016. Acquisition costs were less than $1 million.
On February 7, 2016, Seaboard’s Pork segment acquired hog inventory, a feed mill, truck washes and certain hog farms in
the Central U.S. from Christensen Farms & Feedlots, Inc. and Christensen Farms Midwest, LLC (“Christensen Farms”)
52 2017 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
for total cash consideration of $148 million. Seaboard had previously agreed to provide a portion of the hogs to be
processed at the STF pork processing plant.
The purchase was recorded at fair value in Seaboard’s Pork segment, and the allocation of the purchase price is below. Intangible
assets include customer relationships that have a weighted-average useful life of 1.6 years. Goodwill represents the farms’
established processes, workforce and close proximity to the Sioux City, Iowa, processing plant.
(Millions of dollars)
Inventories
Property, plant and equipment
Intangible assets
Goodwill
Total consideration transferred
$
$
33
111
1
3
148
Operating results have been included in Seaboard’s consolidated financial statements from the date of acquisition. Net sales of
$119 million and a $5 million net loss were recognized during 2016. Acquisition costs were less than $1 million.
During the last half of 2016, Seaboard’s Pork segment acquired additional hog inventory and sow farms through three
additional acquisitions for total cash consideration of $12 million. The purchases were recorded at fair value, and $1
million and $11 million were allocated to inventories and property, plant and equipment, respectively. No material
intangible assets were identified, and acquisition costs were less than $1 million. With these purchases, Seaboard increased
its sow herd to meet the majority of its hog supply commitment for single-shift processing at the STF plant.
On October 28, 2016, Seaboard’s CT&M segment increased its ownership percentage from 50% to 98% to obtain control
of Belarina Alimentos S.A., a flour production business in Brazil (“Belarina”). No cash or other consideration was
transferred to the other shareholder whose ownership was diluted through revision of the shareholders agreement to
restructure the affiliate debt and equity of Belarina. Seaboard accounted for the transaction as a business combination
achieved in stages and included the financial results of Belarina in its consolidated financial statements since the date of
acquisition. See Note 4 for a discussion of the previous equity method of accounting for Belarina. As Belarina is recorded
on a three-month lag, there was no impact to Seaboard’s sales and net earnings from Belarina’s operations as a result of
the consolidation. Since no consideration was transferred to the other owner, Seaboard substituted the acquisition-date fair
value of its 50% pre-existing interest in Belarina and the acquisition-date fair value of its pre-existing affiliate trade and
note receivable for the acquisition-date fair value of the consideration transferred to measure goodwill.
The following table summarizes the purchase price allocation resulting from this consolidation:
(Millions of dollars)
Accounts receivable
Inventories
Property, plant and equipment
Other assets
Goodwill
Third-party debt
Other liabilities
Total business valuation
Fair value of pre-existing interest
$
$
$
7
6
25
4
1
(14)
(11)
18
18
The valuation of the noncontrolling interest was immaterial. Goodwill primarily represents the assembled workforce.
Seaboard recorded a gain of $4 million in bad debt expense within selling, general and administrative expenses on the
consolidated statement of comprehensive income, related to recognizing the fair value of its pre-existing affiliate
receivables.
On January 5, 2018, Seaboard’s CT&M segment completed the acquisition of Borisniak Corp., Societe Les Grands
Moulins d’Abidjan, Les Grands Moulins de Dakar, Eurafrique, and Societe Mediterraneenne de Transport, collectively
operating as Groupe Mimran (“Mimran”) for a cash purchase price of $375 million, plus an earn-out between zero and
$48 million payable between five and eight years following the closing, using the exchange rate in effect at closing. The
potential additional payment per the earn-out is based on performance of the business, including earnings before interest,
taxes, depreciation and amortization (“EBITDA”) as a metric, for the first five years after closing of the transaction.
Mimran operates three flour mills and an associated trading business located in Senegal, Ivory Coast and Monaco. This
2017 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
acquisition is expected to increase Seaboard’s flour and feed milling capacity and annual grain trading volume. Due to the
timing of the purchase, the initial accounting is not complete. Seaboard is currently in the process of obtaining an initial
valuation related to the acquired assets and liabilities.
Note 13 - Segment Information
Seaboard has six reportable segments: Pork, CT&M, 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
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 U.S., and to foreign markets. This segment also produces biodiesel from pork fat and
other animal fat or vegetable oil for sale to third parties. Substantially all of Seaboard’s Pork segment’s hourly employees
at its Guymon, Oklahoma, processing plant are covered by a collective bargaining agreement. The CT&M segment is an
integrated agricultural commodity trading, 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 U.S., the
Caribbean 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 a power generating barge. The Turkey segment, accounted for using the equity method, produces and
sells branded and non-branded turkeys products. Total assets for the Turkey segment represents Seaboard’s investment in
Butterball and primarily a note receivable from this affiliate that was repaid in December 2017. Revenues for the All Other
segment are primarily derived from a jalapeño pepper processing operation. Below are significant segment events that
impact financial results for the periods covered by this report.
During 2017 and 2016, the Pork segment acquired hog growing operations for total cash consideration of $40 million and
$219 million, respectively. These hog operations’ results have been included in Seaboard’s consolidated financial
statements from the dates of acquisition. See Note 12 for further information on these acquisitions. The Pork segment’s
biodiesel plants have historically received Federal blender’s credits for the biodiesel they blend. The 2015 Tax Act signed
into law in December 2015, as discussed in Note 6, renewed the Federal blender’s credit, which had previously expired
on December 31, 2014, retroactively to January 1, 2015 with an expiration of December 31, 2016. As a result, in the fourth
quarter of 2015 the Pork segment recognized as revenue the 2015 Federal blender’s credits of $17 million. The Federal
blender’s credits were not renewed in 2017, but in February 2018 Congress retroactively extended the Federal blender’s
credits for 2017. Seaboard will recognize approximately $42 million of revenue in the first quarter of 2018.
During 2017, the CT&M segment acquired an elevator in Canada for total cash consideration of $14 million. Subsequent
to December 31, 2017, the CT&M segment acquired flour milling and associated businesses in Senegal, Ivory Coast and
Monaco for $375 million, plus an earn-out between zero and $48 million, using the exchange rate in effect at closing. See
Note 12 for further information on these transactions.
On October 28, 2016, the CT&M segment obtained control of Belarina, its non-consolidated affiliate with a flour
production business in Brazil, and began including its financial results in its consolidated financial statements from the
date of acquisition. See Note 12 for further details of the consolidation. In 2016, the CT&M segment reserved $16 million
related to a note receivable to an affiliate that operates in the DRC. The CT&M segment historically derived a significant
portion of its operating income from wheat sales to another non-consolidated affiliate in the DRC. See Note 4 for further
discussion of the affiliates in the DRC.
During 2017, the Marine segment recorded a $6 million impairment on an equity method investment and related affiliate
receivables. See Note 4 for further discussion of this investment.
In March 2017, the Power segment was notified by the Ministry of Environment and Natural Resources (the “Ministry”),
a division within the Dominican Republic government, that it would not renew the environmental license for Seaboard’s
power plant on a barge located in the Ozama River. If the license is not renewed, Seaboard would be required to find a
new location by the third quarter of 2018. Seaboard’s management is in discussions with the Ministry and will vigorously
defend its rights to continue to operate the barge, which is under a special dispensation from the President of the Dominican
54 2017 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
Republic, in its current location. It is not possible at this time to determine whether a favorable outcome will be reached
or to estimate the charge to earnings if Seaboard has to relocate the barge.
During 2015, the Power segment recorded a receivable and interest income of $31 million for interest recognized on certain
outstanding customer receivable balances. This interest income related to amounts determined to be collectible as of
December 31, 2015, but previously had been considered uncollectable in prior years. This amount was fully collected by
Seaboard in early January 2016.
In 2017, the Turkey segment closed its further processing plant in Montgomery, Illinois. Seaboard’s proportionate share
of the restructuring charges, recognized in income (loss) from affiliates, was $18 million in 2017. See Note 4 for further
discussion.
The following tables set forth specific financial information about each segment as reviewed by Seaboard’s 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 (loss) from affiliates for the Pork, CT&M and Turkey segments, are used as the
measures of evaluating segment performance because management does not consider interest, other investment income
(loss) and income tax expense on a segment basis.
Sales to External Customers:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment/Consolidated Totals
Operating Income (Loss):
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Income (Loss) from Affiliates:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
Turkey
Segment/Consolidated Totals
Years ended December 31,
2015
2016
2017
$ 1,609 $ 1,443 $ 1,332
3,022
2,778
940
916
188
147
97
79
15
16
$ 5,809 $ 5,379 $ 5,594
2,945
956
186
97
16
Years ended December 31,
2015
2016
2017
$
$
188 $
25
21
21
9
2
266
(34)
232 $
175 $
38
33
(12)
7
2
243
(21)
222 $
116
2
19
2
7
2
148
(22)
126
2017
$
$
Years ended December 31,
2016
2015
11
(10)
1
2
4
73
81 $
(10) $
7
(7)
1
6
(4)
(7) $
11
(50)
2
1
3
103
70
$
2017 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
Depreciation and Amortization:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
Segment Totals
Corporate
Consolidated Totals
Total Assets:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
Turkey
All Other
Segment Totals
Corporate
Consolidated Totals
Investments in and Advances to Affiliates:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
Turkey
Segment/Consolidated Totals
Capital Expenditures:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar
Power
Segment Totals
Corporate
Consolidated Totals
Years ended December 31,
2015
2016
2017
$
69 $
10
24
7
8
118
—
118 $
56 $
6
26
6
8
102
—
102 $
44
5
26
8
8
91
—
91
$
December 31,
2017
2016
$ 1,309 $ 1,157
989
314
166
196
493
6
3,321
1,434
$ 5,161 $ 4,755
964
376
197
188
315
4
3,353
1,808
December 31,
2017
$
2016
$
231
240
28
4
38
310
851 $
175
207
33
4
30
324
773
$
Years ended December 31,
2015
2016
2017
$
100 $
15
37
20
1
173
—
$
173 $
69 $
35
19
33
1
157
1
158 $
40
40
43
15
1
139
—
139
Administrative services provided by the corporate office are allocated to the individual segments and 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, and other miscellaneous items. Corporate operating losses represent certain
operating costs not specifically allocated to individual segments and include costs related to Seaboard’s deferred
56 2017 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
compensation programs, which are offset by the effect of the mark-to-market adjustments on these investments recorded
in other investment income (loss), net.
Geographic Information
Seaboard had sales in South Africa totaling $581 million, $650 million and $646 million for the years ended
December 31, 2017, 2016 and 2015, respectively, representing approximately 10%, 12% and 12% 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:
(Millions of dollars)
Caribbean, Central and South America
Africa
United States
Pacific Basin and Far East
Canada/Mexico
Europe
All other
Totals
2016
Years ended December 31,
2015
2017
$ 2,295 $ 1,990 $ 2,112
1,606
1,135
357
242
71
71
$ 5,809 $ 5,379 $ 5,594
1,572
1,161
309
236
40
71
1,483
1,271
393
238
99
30
The following table provides a geographic summary of Seaboard’s long-lived assets according to their physical location
and primary port for the vessels:
(Millions of dollars)
United States
Dominican Republic
Argentina
All other
Totals
December 31,
2017
2016
$
$
784 $
114
73
115
1,086 $
713
122
67
106
1,008
Management believes its allowance for doubtful accounts is adequate and reduces receivables recorded to their expected
net realizable value. At December 31, 2017 and 2016, Seaboard had approximately $242 million and $214 million,
respectively, of foreign receivables, excluding receivables due from affiliates, which generally represent more of a
collection risk than the domestic receivables, although as of December 31, 2017 no individual material amounts were
deemed to have a heightened risk of collectability.
2017 Annual Report 57
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, Audit Committee Member and Incentive Compensation
Committee Member
Former Vice President – Wholesale Sales of
C&S Wholesale Grocers
Paul M. Squires
Director
Chief Operating Officer of Seaboard Flour LLC
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
Chief Executive Officers of Principal Seaboard Operations
Terry J. Holton
Pork
David M. Dannov
Commodity Trading and Milling
Edward A. Gonzalez
Marine
Douglas W. Baena
Director, Audit Committee Chair and Incentive Compensation
Committee Member
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
David H. Rankin
Senior Vice President, Taxation and Business Development
Michael D. Trollinger
Vice President, Corporate Controller and Chief Accounting
Officer
Ty A. Tywater
Vice President, Audit Services
Zachery J. Holden
Assistant Secretary
Catherine M. Verschelden
Assistant Secretary
Adriana N. Hoskins
Assistant Treasurer
Hugo D. Rossi
Sugar
Armando G. Rodriguez
Power
Stock Transfer Agent and Registrar of Stock
Availability of Form 10-K Report
Seaboard files its annual report on Form 10-K with the Securities
and Exchange Commission. Copies of the Form 10-K for fiscal 2017
are available without charge by writing Seaboard Corporation, 9000
West 67th Street, Merriam, Kansas 66202, Attention: Shareholder
Relations or via the Internet at https://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 as soon as reasonably
practicable after those reports are electronically filed with the
Securities and Exchange Commission.
Shareowner Services
P.O. Box 64874
St. Paul, MN 55164-0874
(800) 468-9716
www.shareowneronline.com
Independent Registered Public Accounting Firm
KPMG LLP
1000 Walnut Street, Suite 1100
Kansas City, Missouri 64106
Stock Listing
Seaboard’s common stock is traded on the NYSE American
under the symbol SEB. Seaboard had 2,465 stockholders of
record of its common stock as of January 31, 2018.
58 2017 Annual Report