Principal Locations
Seaboard Corporation and its subsidiaries together comprise a diverse global agribusiness and transportation company whose
business is described in Item 1. Business.
Corporate Office
Seaboard Corporation
Kansas, U.S.
Pork
Seaboard Foods LLC
Kansas, U.S.
Processing Plants
Iowa, U.S.*
Mexico
Oklahoma, U.S.
Biofuels Operations
Kansas, U.S.
Missouri, U.S.
Oklahoma, U.S.
Daily’s Premium Meats, LLC*
Missouri, Montana and Utah - U.S.
Commodity Trading and Milling
Commodity Trading Operations
Canada
Colombia
Ecuador
Georgia, U.S.*
Greece
Isle of Man
Kenya
Korea
Monaco
Morocco*
North Carolina, U.S.
Peru
South Africa
Zambia
Africa Poultry Development Limited*
Kenya, Tanzania 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
Gambia Milling Corporation Limited*
Gambia
Grand Moulins de Mauritanie S.A.*
Jacintoport International LLC
Mauritania
Texas, U.S.
Jamaica Grains and Cereals Limited*
Kingston Wharves Limited*
Jamaica
Jamaica
Les Grands Moulins d’Abidjan
Lafito Logistics Holding Ltd.*
Ivory Coast
Haiti
Les Grands Moulins de Dakar
Representaciones Maritimas y Aereas, S.A.
Senegal
Les Moulins d’Haiti S.E.M.*
Haiti
Guatemala
Sea Cargo, S.A.
Panama
Lesotho Flour Mills Limited*
Seaboard de Colombia, S.A.
Lesotho
Colombia
Life Flour Mill Limited*
Seaboard de Nicaragua, S.A.
Nigeria
Minoterie de Matadi, S.A.R.L*
Democratic Republic of Congo
Minoterie du Congo S.A.
Republic of Congo
Moderna Alimentos, S.A.*
Ecuador
Nicaragua
Seaboard Freight & Shipping Jamaica Limited.
Jamaica
Seaboard Honduras, S. de R.L. de C.V.
Honduras
Seaboard Marine (Trinidad) Limited
Trinidad
Molinos Champion, S.A.*
Seaboard Marine of Haiti, S.A.
Ecuador
Haiti
National Milling Company of Guyana, Inc.
SEADOM, S.A.S.
Guyana
Dominican Republic
National Milling Corporation Limited
SeaMaritima, S.A. de C.V.
Zambia
Paramount Mills (Proprietary) Limited
South Africa
Rafael del Castillo & Cia. S.A.*
Colombia
RussellStone Protein (Pty) Ltd.*
South Africa
Societe Africaine de Developpement
Industrielle Alimentaire, SARL*
Democratic Republic of Congo
Unga Holdings Limited*
Kenya
Zalar Holding S.A.*
Morocco
Marine
Seaboard Marine Ltd.
Florida, U.S.
Domestic Port Operations
Florida, U.S.
Georgia, U.S.
Louisiana, U.S.
New York, U.S.
Pennsylvania, U.S.
Agencia Maritima del Istmo, S.R.L.
Costa Rica
Cayman Freight Shipping Services, Ltd.
Grand Cayman
Mexico
Sugar and Alcohol
Seaboard Energías Renovables y Alimentos S.R.L.
Argentina
Power
Transcontinental Capital Corp. (Bermuda) Ltd.
Dominican Republic
Turkey
Butterball, LLC*
North Carolina, U.S.
Processing Plants
Arkansas, U.S.
Missouri, U.S.
North Carolina, U.S.
Further Processing Plants
Arkansas, U.S.
North Carolina, U.S.
Other
Mount Dora Farms de Honduras, S. de R.L.
Honduras
Mount Dora Farms Inc.
Texas, U.S.
*Represents a non-controlled, non-consolidated affiliate
Letter to Stockholders
Dear Fellow Stockholders:
Despite a solid year of net earnings, 2019 was a mixed bag with disappointing operating income but excellent
investment income. We began the year with a $34 million first-quarter operating loss, our worst quarterly
operating loss ever. In fact, over the last twenty-five years, there have only been six quarters of operating losses
and two occurred in 2019. After a strong fourth quarter, we finished with $104 million of positive yearly
operating income for 2019 despite the two bad quarters. Although not a key metric for us, we did hit a new all-
time sales record of over $6.8 billion in 2019, a good indication of our growth and retention of market share.
This year we managed through an environment of continued international trade disruptions, unanticipated
foreign and domestic government policy changes, raw material and product oversupply all resulting in
compression in margins. That said, it is encouraging that we have signed the United States-Mexico-Canada
(USMCA) and China Trade agreements. These agreements are important for Seaboard overall, given our global
trade from our main divisions. We are still a long way from the finish line on China, Canada and Mexico,
particularly in this election year, but the hope is that we can play to the strengths of U.S. business and land on
free AND fair trade.
U.S. lawmakers also reached a rare bipartisan five-year agreement through the tax extender package providing
a $1-per-gallon biodiesel subsidy retroactively for 2018 and 2019 and continuing through 2022. This resulted
in Seaboard Foods’ biodiesel plants recognizing approximately $60 million of revenue in December 2019. We
were betting in 2018 and 2019 that good sense would prevail on receiving these blender credits as we operated
our two biodiesel plants in Missouri and Oklahoma at a loss and at the whim of political winds as far as
legislation to address this green initiative is concerned. Now, with the credit extended for three more years, this
certainty will allow us to take a breather and focus solely on commercial operations with a little longer time
horizon.
At Seaboard Foods, our pork division, 2019 was a year marked by uncertainty and volatility. The headlines
certainly were dominated by the trade issues which impacted pork exports to Japan, Mexico, Canada and China:
the top 4 destinations for U.S. pork in recent years. In addition, the emergence of African Swine Fever (ASF)
in many Asian countries, especially China, combined with contentious trade issues made the demand for pork
internationally very unpredictable. While nearly all analysts agree that there is a tremendous shortage of protein
globally driven by decimated hog herds in China as a result of ASF, the timing for a tariff war between the U.S.
and China couldn’t have come at a worse time. For Seaboard, our export business has grown significantly
surpassing both retail and foodservice markets and we believe our export business represents the best area for
growth and opportunity. It is important that the U.S. dollar doesn’t strengthen too much, grain supplies remain
adequate and U.S. hog production and processing costs stay competitive.
For the first time, we had record years in both total and export volumes for the combined operations of our
Guymon plant, the Sioux City, Iowa plant and Triumph Food’s St. Joseph, Missouri plant. In addition, we also
were able to successfully strengthen ties with key U.S. domestic partners by focusing on product quality,
expanding our brand and value-added portfolio, and successfully participating in some emerging alternative
retail/consumer-facing channels. The slaughter plant in Sioux City, Iowa has successfully added a second shift
and we are seeing significant improvements in plant performance. As with all plants in the meat business, we
are all struggling to fully staff our plants which hampers the ability to maximize margins with value-added
products. All in all, despite the increased supply of pork in 2020, we are optimistic that exports will be our “ace
in the hole” and we should see financial improvement year over year.
Our grain milling and trading segment achieved its highest revenue year ever, with sales of almost $3.7 billion,
reflecting the first full year of operations at our Senegal and Ivory Coast flour mills. 2019 was our third best
year ever with operating income of $62 million, helping validate our recent West African expansion. This
expansion allows us to take advantage of our strengths in logistics and opportunistic grain procurement from
multiple origins. In 2019, we acquired 100% of our Peruvian grain trading affiliate, expanded milling capacity
in the Republic of Congo and completed a state-of-the-art greenfield flour mill in Zambia, each supporting our
Letter to Stockholders
integrated model. That said, challenges abound, particularly in Africa where there is considerable money
chasing food industry investments creating excess production capacity and pressuring margins. Further,
subsidized wheat flour, cost disadvantages caused by some of our competition’s unconventional practices, and
on-going international trade disputes are significant obstacles we face. In 2020, we will continue to pursue
opportunities to fortify our supply chain using our in-house flour and feed milling base cargoes to support third-
party commodity trading, expand our milling capacities where it makes sense and continue to vertically
integrate with consumer-focused products.
At Seaboard Marine, our container line operating throughout the Americas surpassed $1 billion in revenues
despite fierce competition for market share by both regional and global carriers. We run multiple routes from
six U.S. ports to 26 countries in the Caribbean, Central and South America. We added Savannah, Georgia to
our U.S. port calls to better accommodate southbound refrigerated cargo and at the same time, expand our
perishable northbound cargoes from selected west coast South American and Central American locations.
Shipments of perishables from Latin America to the U.S. continued to increase and we enhanced our route
structure and refrigerated container capacity within our current footprint. To provide better service to our
customers, we continue to invest in our energy-efficient fleet of refrigerated containers to accommodate current
and future growth. As of January 1, 2020, the International Maritime Organization mandated that ocean-going
vessels burn lower sulfur bunker fuel to lessen the environmental impact worldwide. This comes at a
significantly higher fuel cost (and sometimes availability) for the maritime industry. It will be a challenge to
ensure container lines pass these costs on to the customer and not absorb them and further erode industry
margins. Overall, the shipping industry still suffers from excess capacity and, on a global scale, flat and
unpredictable demand which generally leads to unstable and non-compensatory freight rates. As mentioned
previously, our charge is to focus and manage costs and at the same time, continue to distinguish ourselves by
providing superior service to our customer base.
SERA, our sugar and alcohol business in Argentina, unfortunately, had an awful year. Product prices for
bioethanol and sugar were the lowest in recent memory and this, combined with a poor sugar cane crop and
disappointing yields, generated an operating loss of $16 million. In areas within our control, we did an
outstanding job in factory performance, employee safety and absenteeism and achieved greater efficiency in
logistics and product handling. We received the #1 Sustainability Company award in Argentina from the
Ecumenical Social Forum and exported our first bioethanol to the EU. Despite a harsh business environment
and a new government administration, we have the utmost confidence in our management group there and
should the political and economic landscape change for the better, we are poised to generate positive returns.
In our power division in the Dominican Republic, 2019 was an outstanding year with increased utilization of
our 108 megawatt power barge for the fifth year in a row. Our $27 million of operating income improved 29%
over 2018’s solid year as a result of being fully dispatched at lower fuel costs. In addition, we were able to
reduce overheads and maintenance costs while collecting receivables on a timely basis. During the first quarter
of 2019, we began construction of our new 146 megawatt power barge which should be installed at our
Dominican Republic site by the end of 2020. This new power generation unit will be fueled by natural gas and
should be one of the most cost-efficient power generators on the island. We believe with the increasing demand
for electricity and the current capacity constraints, we will be fully dispatched and running 24/7 in 2021. We
continue to look at several options for our existing 108 megawatt power barge and, as a dual fuel generator,
should command a premium price if we choose to sell it.
In our turkey segment, oversupply coupled with flat domestic consumption and modest export growth generally
kept commodity prices at bay and tempered value-added margins. We believe that the ASF impact helped
elevate dark meat commodity values with demand increasing as a substitute for pork. This trend hopefully
continues into 2020. The end of the year also brought news of open trade with China for turkey meat which had
been closed since the U.S. avian influenza outbreak in 2014. While details are being finalized and no product
has yet shipped, we do expect to resume shipping in 2020. There was a leveling of turkey production in 2019
with the biggest reduction occurring in hens destined for seasonal whole bird sales with a major industry
Letter to Stockholders
supplier’s reduction in processing in this category. The reduction materialized in the form of lower year-end
frozen inventory and higher forecasted prices for 2020. We hope that this supply reduction coupled with record
whole bird share performance for the Butterball brand in 2019 translates to even stronger holiday category
performance in 2020. Our turkey segment’s 2019 capital investments were focused on increasing capacity,
including tray pack ground turkey and turkey burgers. We also completed two major projects adding 60 million
pounds of incremental capacity and have already filled approximately 30% of it. We are also near completion
on a new Arkansas feed mill that will replace two old mills providing for more cost-efficient and higher quality
feed for our turkeys.
In 2020, all of our businesses remain strategically focused on continuous improvement and other important
goals and objectives. We focus on having the right product mix in each of our industries and in the markets we
serve. Seaboard operates in more than 45 countries worldwide and our challenges are many: labor shortages,
trade disruptions, diseases, and politics are among some of the issues we face. Nevertheless, we believe we
have the right people to manage what confronts us and we are confident we can successfully navigate through
any and all situations. On behalf of our stockholders everywhere, I thank all of our employees, customers,
vendors, and business partners who help make us proud every day to be associated with Seaboard.
Steven J. Bresky
President and
Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended December 31, 2019
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to ____________________
Commission file number: 1-3390
SEABOARD CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
9000 West 67th Street, Merriam, Kansas
(Address of Principal Executive Offices)
04-2260388
(I.R.S. Employer Identification No.)
66202
(Zip Code)
Registrant’s telephone number, including area code (913) 676-8800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock $1.00 Par Value
Trading Symbol(s) Name of each exchange on which registered
SEB
NYSE American
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the 255,723 shares of Seaboard common stock held by nonaffiliates was approximately $1,057,859,563,
based on the closing price of $4,136.74 per share on June 29, 2019, the end of Seaboard’s most recently completed second fiscal quarter.
As of January 31, 2020, the number of shares of common stock outstanding was 1,164,718.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference to the registrant’s definitive proxy statement, to be filed with the Securities and Exchange
Commission within 120 days after the close of the fiscal year ended December 31, 2019.
SEABOARD CORPORATION
FORM 10-K
YEAR ENDED DECEMBER 31, 2019
TABLE OF CONTENTS
Part I
Page
Business
Item 1
Item 1A Risk Factors
Item 1B Unresolved Staff Comments
Item 2
Item 3
Item 4 Mine Safety Disclosures
Properties
Legal Proceedings
Part II
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Item 6
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A Quantitative and Qualitative Disclosures About Market Risk
Item 8
Financial Statements and Supplementary Data
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Changes in Equity
Notes to Consolidated Financial Statements
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9
Item 9A Controls and Procedures
Item 9B Other Information
Part III
Item 10 Directors, Executive Officers and Corporate Governance
Item 11 Executive Compensation
Item 12
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Item 13 Certain Relationships and Related Transactions, and Director Independence
Item 14
Principal Accounting Fees and Services
Part IV
Item 15 Exhibits, Financial Statement Schedules
Item 16
Form 10-K Summary
Signatures
2
6
12
12
13
13
14
15
16
25
27
27
29
30
31
32
33
63
63
65
65
65
65
65
65
65
68
69
PART I
Forward-looking Statements
This report, including information included or incorporated by reference in this report, contains certain forward-looking
statements with respect to the financial condition, results of operations, plans, objectives, future performance and business
of Seaboard Corporation and its subsidiaries (“Seaboard”). Forward-looking statements generally may be identified as
statements that are not historical in nature and statements preceded by, followed by or that include the words “believes,”
“expects,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends” or similar expressions.
In more specific terms, forward-looking statements include, without limitation:
statements concerning the projection of revenues, income or loss, capital expenditures, capital structure or other
financial items;
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)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
Seaboard’s ability to obtain adequate financing and liquidity;
the price of feed stocks and other materials used by Seaboard;
the sale price or market conditions for pork, agricultural commodities, sugar, alcohol, turkey and other
products and services;
the recorded tax effects under certain circumstances and changes in tax laws;
the volume of business and working capital requirements associated with the competitive trading
environment for the Commodity Trading and Milling (CT&M) segment;
the charter hire rates and fuel prices for vessels;
the fuel costs and related spot market prices in the Dominican Republic;
the effect of the fluctuation in foreign currency exchange rates;
the profitability or sales volume of any of Seaboard’s segments;
the anticipated costs and completion timetables for Seaboard’s scheduled capital improvements,
acquisitions and dispositions;
the productive capacity of facilities that are planned or under construction, and the timing of the
commencement of operations at such facilities; or
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,
except as required by law. 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 Form 10-K and in other filings Seaboard makes
with the Securities and Exchange Commission (the “SEC”), including without limitation, the information under the items
“Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this
Form 10-K, identifies important factors which could cause such differences.
1
Item 1. Business
General Development of Business
Seaboard Corporation was originally founded in 1918 as a flour brokerage business and was organized as a Delaware
corporation in 1946. Seaboard Corporation and its subsidiaries (collectively, “Seaboard”) together comprise a diverse
global agribusiness and transportation company. In the United States (“U.S.”), Seaboard is primarily engaged in hog
production, pork processing and ocean transportation. Overseas, Seaboard is primarily engaged in commodity
merchandising, grain processing, sugar and alcohol production and electric power generation. Seaboard also has an equity
method investment in Butterball, LLC (“Butterball”), a producer and processor of branded and non-branded turkey
products. See Note 15 to the consolidated financial statements for specific developments for each segment.
Approximately 77% of the outstanding common stock of Seaboard is collectively owned by Seaboard Flour LLC and SFC
Preferred, LLC. Mr. Steven J. Bresky, President and Chief Executive Officer of Seaboard, and other members of the
Bresky family, including trusts created for their benefit, own the equity interests of Seaboard Flour LLC and SFC Preferred,
LLC, which are Delaware limited liability companies.
Description of Business
Principal Products and Services
Pork Segment – Seaboard, through its subsidiary Seaboard Foods LLC, engages in the business of hog production and
pork processing in the U.S. Seaboard’s Pork segment is a vertically integrated pork producer that primarily produces and
sells fresh and frozen pork products to further processors, foodservice operators, distributors and grocery stores. This
segment sells to U.S. customers and exports to Japan, Mexico, China and numerous other foreign markets. Pork products
include fresh pork, such as loins, tenderloins and ribs which are primarily sold to distributors and grocery stores and fresh
and frozen pork products sold in bulk to further processors who produce products, such as lunchmeat, ham, bacon and
sausage.
This segment’s pork processing plant, located in Guymon, Oklahoma, generally operates at a double-shift processing
capacity of approximately six million hogs annually. Seaboard also has a ham boning and processing plant in Mexico. In
2019, Seaboard raised approximately 88% of the hogs processed at its processing plant, with the remaining hog
requirements purchased primarily under contracts from independent producers. 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 capacity to produce approximately eight million hogs annually.
The Pork segment also produces biodiesel at facilities in Oklahoma and Missouri. Biodiesel is produced from pork fat
supplied by the Oklahoma pork processing plant and from other animal fats and vegetable oils purchased from third parties.
The biodiesel is sold to fuel blenders for distribution. In 2019, the Pork segment purchased and began modifying an idle
ethanol plant in Hugoton, Kansas, that it plans to use to produce renewable diesel in the future. The Kansas plant is
expected to produce 85 million gallons of renewable diesel annually when operating at full capacity.
Seaboard has a 50% noncontrolling interest in Seaboard Triumph Foods, LLC (“STF”), which operates a pork processing
plant located in Sioux City, Iowa. STF began single-shift operations in September 2017 and a second shift commenced in
October 2018. STF’s plant is designed to process approximately six million market hogs annually when operating at full
capacity. Seaboard has agreements with STF and Triumph Foods, LLC (“Triumph”), an independent pork processor, to
market substantially all pork products produced at STF’s and Triumph’s pork processing plants. Seaboard and Triumph
supply a portion of the hogs processed at the STF plant. Seaboard’s revenues for its pork products are primarily based on
a margin sharing arrangement that considers the average sales price, standard costs and the mix of products sold from the
Seaboard and Triumph pork processing plants. 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 using pork bellies sourced
from Seaboard, Triumph and STF.
Commodity Trading and Milling Segment – Seaboard’s CT&M segment, which is managed under the name of Seaboard
Overseas and Trading Group, is an integrated agricultural commodity trading, processing and logistics company. Overall,
the CT&M segment has facilities in 29 countries, primarily in Africa, South America and the Caribbean. This segment
sources, transports and markets approximately 13 million metric tons per year of wheat, corn, soybeans, soybean meal and
other commodities. Also, Seaboard and its affiliates produce approximately six million metric tons of wheat flour, maize
meal, manufactured feed and oilseed crush commodities per year in addition to other related grain-based products. This
segment owns three vessels, but the majority of the trading business is transacted with chartered ships.
2
Marine Segment – Seaboard, through its subsidiary, Seaboard Marine Ltd., and various foreign affiliated companies and
third-party agents, provides cargo shipping services in the U.S. and 26 countries in the Caribbean and Central and South
America. The Marine segment’s primary operations are at PortMiami and include a terminal and an off-port warehouse
for cargo consolidation and temporary storage. At the Port of Houston, this segment 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, Savannah and various ports in the Caribbean and Central
and South America. The Marine segment uses a network of offices and agents throughout the U.S., Canada, the Caribbean
and Central and South America to sell freight services. Seaboard’s capabilities allow transport by truck or rail of import
and export cargo to and from various U.S. ports and foreign ports. This segment’s fleet consists of 22 chartered and 3
owned vessels, and includes dry, refrigerated and specialized containers and other cargo related equipment.
Sugar and Alcohol Segment – Seaboard, through its subsidiary, Seaboard Energías Renovables y Alimentos S.R.L.,
operates a vertically integrated sugar and alcohol production facility in Argentina. Sugarcane grown on owned land
supplies most of the raw material processed in its plant. The sugar is primarily marketed locally, with some exports to the
U.S. and other countries. The alcohol is primarily marketed to industrial users or sold as dehydrated alcohol to certain oil
companies under the Argentine governmental bioethanol program, which requires alcohol to be blended with gasoline.
This segment also owns a 51 megawatt cogeneration power plant, which is fueled by the burning of sugarcane by-products,
natural gas and other biomass when available.
Power Segment – Seaboard, through its subsidiary, Transcontinental Capital Corp. (Bermuda) Ltd., is an independent
power producer generating electricity for the Dominican Republic power grid. Seaboard’s Power segment owns and
operates a power generating barge, located on the Ozama River, that contains a system of engines capable of using natural
gas or heavy fuel oil to produce up to 108 megawatts of electricity. Seaboard’s Power segment sells the electricity it
generates primarily on the spot market to government-owned distribution companies. It is not directly involved in the
transmission or distribution of electricity and is exempt from regulations under the Public Utility Holding Company Act
of 1938, as amended. Seaboard’s Power segment is currently constructing a new floating power barge with capacity to
generate approximately 146 megawatts of electricity using gaseous fuels, including natural gas. Operations are anticipated
to begin in mid-2021. Seaboard is exploring strategic alternatives for the existing barge, including selling, relocating or
operating in conjunction with the new barge at the current site. The estimated total cost of the project ranges from
approximately $185 million to $210 million depending upon the alternative selected.
Turkey Segment – Seaboard has a 50% noncontrolling interest in Butterball, LLC (“Butterball”), a vertically integrated
producer and processor of branded and non-branded conventional, antibiotic-free and organic turkey products. Butterball
is a national supplier to retail stores, foodservice outlets and industrial entities, and to a lesser extent, exports products to
Mexico and other foreign markets.
Other Businesses – Seaboard, through its subsidiary, Mount Dora Farms Inc., processes jalapeño peppers at its plant in
Honduras, which are primarily shipped to and sold in the U.S.
The information required by this item with respect to the amount or percentage of total revenue contributed by any class
of similar products or services, which account for 10% or more of consolidated revenue in any of the last three fiscal years,
is set forth in Note 15 to the consolidated financial statements.
Sources and Availability of Raw Materials
The Power segment and Turkey segment utilize material amounts of raw materials that are dependent on purchases from
one supplier or a small group of dominant suppliers. The Power segment has one primary supplier of natural gas, but the
barge can run on other types of fuel. The Turkey segment purchases a significant portion of its feed and grain used in the
manufacturing of feed for its turkeys in North Carolina from Seaboard’s 50% partner in Butterball.
Patents, Trademarks, Licenses, Franchises and Concessions
Seaboard believes there is significant recognition of the trademarks identified below in the various industries Seaboard
serves and by many of its customers. Seaboard uses the trademark of Seaboard™.
The Pork segment uses registered trademarks including, but not limited to, Seaboard Foods®, Seaboard Farms®, Seaboard
EnergyTM, Prairie Fresh®, Our Farms, Our Commitment®, St. Joe Pork®, and Cook-in Bag®. Daily’s uses the trademarks
Daily’s®, Daily’s Premium Meats Since 1893®, Belly Up to the Best®, Buffet Brand® and Del Pueblo®. Seaboard
considers the use of these trademarks important to the marketing and promotion of its pork products.
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The CT&M segment uses registered trademarks including, but not limited to, Mothers Pride® and Zambia’s Pride® in
Zambia, Thunderbolt Flour® and Maid Marian® in Guyana, GMA® and Top Pain® in Ivory Coast, and GMD® and
Jarga® in Senegal.
The Marine segment uses the registered trademarks of Seaboard Marine® and Seaboard Solutions®.
The Sugar and Alcohol segment markets sugar under the Chango® brand.
The Turkey segment uses registered trademarks including, but not limited to, Butterball®, Carolina Turkey® and Farm to
Family Butterball®. Seaboard considers the use of these trademarks important to marketing and promotion of its turkey
products.
Seasonal Business
The Turkey business is seasonal for whole birds and related products with the Thanksgiving and Christmas holiday
demands driving the majority of those sales. Seaboard’s other segments are not seasonally dependent to any material
extent.
Dependence on a Single Customer or Few Customers
Seaboard does not have sales to any one customer equal to 10% or more of consolidated revenues. The CT&M segment
derived 11% and 12% of its sales from a former non-consolidated affiliate for the years ended December 31, 2018 and
2017, respectively. Additional equity interests were obtained in 2019 and as a result, this entity became consolidated in
2019. The Sugar and Alcohol segment derived 25%, 29% and 39% of its sales from one customer for the years ended
December 31, 2019, 2018 and 2017, respectively, and another customer represented 23%, 19% and 10% of its sales for
the years ended December 31, 2019, 2018 and 2017, respectively. The Power segment sells power in the Dominican
Republic on the spot market accessed primarily by three wholly government-owned distribution companies. The Turkey
segment had one customer that represented 16%, 15% and 13% of its sales for the years ended December 31, 2019, 2018
and 2017, respectively, and another customer that represented 12%, 11% and 11% of its sales for the years ended
December 31, 2019, 2018 and 2017, respectively. No other segment has sales to a few customers that, if lost, would have
a material adverse effect on any such segment or on Seaboard taken as a whole.
Competitive Conditions
Competition in Seaboard’s Pork segment comes from a variety of regional, national and international producers and
processors and is based primarily on product quality, customer service and price. According to the trade publications
Successful Farming and Informa Economics, Seaboard was ranked number three in hog production (based on sows in
production) and number four in pork processing in the U.S. in 2019 (based on daily processing capacity, including
Triumph’s and STF’s capacity).
Seaboard’s commodity trading business faces competition from numerous traders around the world. Most of the grain
processing and related businesses face competition from either imported products or other local producers in the same
industries.
Seaboard’s Marine segment faces competition based on price, reliable sailing frequencies and customer service. Seaboard
believes it is among the top five ranking ocean liner services for cargoes in the Caribbean and Central America based on
cargo volume.
Seaboard’s Sugar and Alcohol segment owns one of the largest sugar mills in Argentina and faces significant competition
for sugar sales in the local Argentine market. Sugar prices in Argentina can fluctuate compared to world markets due to
Argentine government price controls and protection policies.
Seaboard’s Power segment sells the power it generates to the spot market or to contract customers at prices based on
market conditions and cost-based rates.
Competition for the Turkey segment comes from a variety of regional and national producers and processors and is based
primarily on product quality, customer service and price. Butterball ranks as one of the nation’s top three turkey producers
based on live production.
Environmental Compliance
Seaboard’s Pork segment and Turkey segment are subject to numerous federal, state and local laws and regulations relating
to the environment that require the expenditure of funds in the ordinary course of business. Seaboard’s Pork segment and
Turkey segment do not anticipate making expenditures for these purposes that, in the aggregate, would have a material
effect on Seaboard’s financial condition or results of operations.
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Number of Persons Employed by Registrant
At the time of this report, Seaboard, excluding non-consolidated affiliates, had approximately 13,100 employees, of whom
approximately 6,600 were employed in the U.S.
Available Information
Seaboard electronically files with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act. The SEC maintains
an internet website that contains reports, proxy and information statements, and other information regarding electronic
filers at http://www.sec.gov. Seaboard provides access to its most recent Form 10-K, 10-Q and 8-K reports, and any
amendments to these reports, on its internet website, www.seaboardcorp.com, free of charge, as soon as reasonably
practicable after those reports are electronically filed with the SEC. Please note that any internet addresses provided in this
report are for information purposes only and are not intended to be hyperlinks. Accordingly, no information provided at
such internet addresses is intended or deemed to be incorporated herein by reference.
Executive Officers of the Registrant
The following table lists the executive officers of Seaboard. Generally, executive officers are elected at the annual meeting
of the Board of Directors following the Annual Meeting of Stockholders and hold office until the next such annual meeting
or until their respective successors are duly chosen and qualified. There are no arrangements or understandings pursuant
to which any executive officer was elected.
Name (Age)
Steven J. Bresky (66)
Robert L. Steer (60)
David M. Becker (58)
James L. Gutsch (66)
Ralph L. Moss (74)
David S. Oswalt (52)
David H. Rankin (48)
Michael D. Trollinger (51)
Ty A. Tywater (50)
Ivan J. Winfield, Jr (55)
David M. Dannov (58)
Edward A. Gonzalez (54)
Darwin E. Sand (55)
Positions and Offices with Registrant and Affiliates
President and Chief Executive Officer
Executive Vice President, Chief Financial Officer
Senior Vice President, General Counsel and Secretary
Senior Vice President, Engineering
Senior Vice President, Governmental Affairs
Senior Vice President, Finance and Treasurer
Senior Vice President, Tax and Business Development
Vice President, Corporate Controller and Chief Accounting Officer
Vice President, Audit Services
Vice President, Information Technology
President, Seaboard Overseas and Trading Group
President, Seaboard Marine Ltd.
President, Seaboard Foods LLC
Mr. Bresky has served as President and Chief Executive Officer of Seaboard since July 2006.
Mr. Steer has served as Executive Vice President, Chief Financial Officer of Seaboard since April 2011.
Mr. Becker has served as Senior Vice President, General Counsel and Secretary of Seaboard since April 2011.
Mr. Gutsch has served as Senior Vice President, Engineering of Seaboard since April 2011.
Mr. Moss has served as Senior Vice President, Governmental Affairs of Seaboard since April 2011.
Mr. Oswalt has served as Senior Vice President, Finance and Treasurer since April 2013.
Mr. Rankin has served as Senior Vice President, Taxation and Business Development since April 2015 and previously as
Vice President, Taxation and Business Development since April 2013.
Mr. Trollinger has served as Vice President, Corporate Controller and Chief Accounting Officer of Seaboard since
March 2015. Prior to that, he served as Vice President, Finance and Operational Reporting for Jack Cooper Enterprises,
Inc. from 2011 to 2015.
Mr. Tywater has served as Vice President, Audit Services of Seaboard since November 2008.
Mr. Winfield has served as Vice President, Information Technology since February 2018 and previously as Director of
Information Technology from 2009 to 2018.
Mr. Dannov has served as President of Seaboard Overseas and Trading Group since August 2006.
Mr. Gonzalez has served as President of Seaboard Marine Ltd. since January 2005.
Mr. Sand has served as President of Seaboard Foods LLC since March 2018 and previously as Senior Vice President of
Sales since 2011.
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Item 1A. Risk Factors
Seaboard has identified important risks and uncertainties that could affect the results of operations, financial condition or business
and that could cause them to differ materially from Seaboard’s historical results of operations, financial condition or business,
or those contemplated by forward-looking statements made herein or elsewhere, by, or on behalf of, Seaboard. Factors that could
cause or contribute to such differences include those factors described below.
(a) General
(1) Seaboard’s Operations Are Subject to the General Risks of the Food Industry. The food products manufacturing
industry is subject to the risks posed by:
food spoilage;
food contamination, including contamination caused by disease-producing organisms or pathogens, such as
Listeria monocytogenes, Salmonella, pathogenic E coli and aflatoxin;
food allergens;
evolving consumer preferences and nutritional and health-related concerns;
international, foreign, federal, state and local food processing regulations;
consumer product liability claims;
product recall;
product tampering; and
public perception of food production practices, including handling of production and live animals.
Pathogens which may cause food contamination are found generally in livestock and in the environment and therefore
may be present in Seaboard’s products. These pathogens also can be introduced to its products as a result of improper
handling by customers or consumers. Seaboard does not have control over handling procedures once products have
been shipped for distribution. If one or more of these risks were to materialize, Seaboard’s revenues could decrease,
costs of doing business could increase, and Seaboard’s operating results could be adversely affected.
(2) International Operations Subject Seaboard to Risks That Could Have a Significant Impact on Seaboard’s Business.
Seaboard is a diverse agribusiness and transportation company with global operations in several industries. Most of the
sales and costs of Seaboard’s segments are significantly influenced by worldwide fluctuations in commodity prices or
changes in foreign political and economic conditions. Accordingly, revenues, operating income and cash flows could
fluctuate significantly from year to year. In addition, Seaboard’s international activities pose risks not faced by
companies that limit themselves to U.S. markets. These risks include:
changes in foreign currency exchange rates;
foreign currency exchange controls;
changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets;
hyperinflation;
heightened customer credit and execution risk;
tariffs, other trade protection measures and import or export licensing requirements;
closing of borders by foreign countries to the import of meat products due to animal disease or other perceived
health or safety issues;
potentially negative consequences from changes in tax laws;
legal and regulatory structures and unexpected changes in legal and regulatory requirements and any lawsuits
that may arise;
negative perception within a foreign country of a U.S. company doing business in that foreign country;
compliance with laws and regulations for conducting international business such as Foreign Account Tax
Compliance Act, Foreign Corrupt Practices Act and Office of Foreign Assets Control regulations;
expropriation, civil unrest and government instability; and
inconsistent application or enforcement of local laws, including tax laws.
(3) Deterioration of Economic Conditions Could Negatively Impact Seaboard’s Business. Seaboard’s business may be
adversely affected by changes in national or global economic conditions, including inflation, interest rates, including
LIBOR phase-out risks, availability of capital markets, consumer spending rates, energy availability and costs, and the
effects of governmental initiatives to manage economic conditions. Any such changes could adversely affect the
demand for Seaboard’s meat products, grains, shipping services and other products, or the cost and availability of
needed raw materials and packaging materials, thereby negatively affecting Seaboard’s financial results. The current
national and global economic conditions, could, among other things:
impair the financial condition of some of Seaboard’s customers and suppliers, thereby increasing customer
bad debts or non-performance by customers and suppliers;
6
negatively impact global demand for protein and grain-based products, which could result in a reduction of
revenues, operating income and cash flows;
decrease the value of Seaboard’s investments in equity and debt securities, including pension plan assets,
causing losses that would adversely impact Seaboard’s net earnings; and
impair the financial viability of Seaboard’s insurers.
(4) Decentralization May Present Certain Risks. Seaboard’s operations are relatively decentralized in comparison with its
peers. While Seaboard management believes this practice enables it to remain responsive to risks, opportunities and to
customers’ needs, it necessarily places significant control and decision-making powers in the hands of local
management. This presents various risks, including the risk that management may be slower or less able to identify or
react to problems affecting a key business than in a more centralized environment. In addition, it means that Seaboard
may be slower to detect compliance related problems (e.g., a rogue employee undertaking activities that are prohibited
by applicable law or Seaboard’s internal policies) and that “company-wide” business initiatives, such as the integration
of disparate information technology systems, are often more challenging and costly to implement, and their risk of
failure higher, than they would be in a more centralized environment. Depending on the nature of the problem or
initiative in question, such failure could materially adversely affect Seaboard’s business, financial condition or results
of operations.
(5) Ocean Transportation Has Inherent Risks. Seaboard’s owned and chartered vessels along with related cargoes are at
risk of being damaged or lost because of events such as:
bad weather;
mechanical failures;
war, piracy and terrorism.
grounding, fire, explosions and collisions;
human error; and
Any of these hazards could result in death or injury to persons, loss of property, environmental damages, delays or
rerouting. If one of Seaboard’s vessels were involved in an incident, the resulting negative public perception could have
a material adverse effect on Seaboard’s business, financial condition and results of operations. Also, many aspects of
the shipping industry are subject to extensive governmental regulations. Compliance with applicable laws, regulations
and standards may require installation of costly equipment or operational changes, while the failure to comply may
result in administrative and civil penalties, criminal sanctions, the suspension or termination of Seaboard’s operations
or detention of its vessels.
(6) Fluctuations in Fuel Costs Could Adversely Affect Operating Margins. Fuel expenses are a large expense for the Marine
segment and impacts the CT&M segment’s results. Fuel prices can vary greatly from year to year. While such
fluctuations may be offset through fuel surcharges or other mechanisms, such mechanisms do not act with precision in
terms of timing and amount and may not adjust revenues enough to offset the increase in costs. The reduced global
sulfur emissions cap from 3.5% to 0.5%, effective January 1, 2020, increased fuel costs or required equipment to clean
emissions. Seaboard does not know the long-term effects of this new emissions requirement.
(7) Seaboard’s Common Stock Is Thinly Traded and Subject to Daily Price Fluctuations. The common stock of Seaboard
is closely held and thinly traded on a daily basis on the NYSE American. Seaboard Flour LLC and SFC Preferred, LLC,
which are beneficially owned by Mr. Steven Bresky, President and Chief Executive Officer of Seaboard, and other
members of the Bresky family, hold approximately 77% of Seaboard’s outstanding common stock. Accordingly, the
price of a share of common stock could fluctuate more significantly from day-to-day than that of a share of more widely
held stock that is actively traded on a daily basis.
(8) Seaboard Has Investments in Non-Consolidated Affiliates That Are Managed by Third Parties. Seaboard has several
equity method investments in which it owns 50% or less, with various third-party business partners owning the
remaining equity. Due to the ownership structure of these affiliates, Seaboard does not control all of the decision making
processes and could be exposed to various business risks if the business partners’ business decisions do not align with
Seaboard’s best interests, which could adversely impact the results for Seaboard’s income (loss) from affiliates.
(9) Seaboard Is Increasingly Dependent on Information Technology Systems to Manage and Support a Variety of
Business Processes and Activities. Seaboard may be adversely impacted if it is unable to protect its information
technology systems against, or effectively respond to, cyber-attacks or cybersecurity breaches. Attempted cyber-
attacks and other cyber incidents are occurring more frequently and are being made by groups and individuals
with a wide range of motives and expertise. Any significant penetration, invasion, destruction, or interruption of
these systems could negatively impact operations and there is a risk of business interruption and reputational
damage from the unauthorized disclosure of confidential information and a risk of loss to financial assets related
to manipulated electronic communications. This includes additional costs for increased security, system
remediation and breach detection. If Seaboard is unable to prevent such breaches or failures, its operations could
be disrupted or it could negatively impact its financial condition, results of operations, and the market price of its
7
common stock.
(b) Pork Segment
(1) Fluctuations in Commodity Pork Prices Could Adversely Affect the Results of Operations. Sales prices for this
segment’s products are directly affected by both domestic and worldwide supply and demand for pork products and
other proteins, all of which are determined by constantly changing market forces of supply and demand as well as other
factors over which Seaboard has little to no control. Commodity pork prices demonstrate a cyclical nature over periods
of years, reflecting changes in the supply of fresh pork and competing proteins on the market, especially beef and
chicken. This segment’s results of operations could be adversely affected by fluctuations in pork commodity prices.
(2) Increases in Costs of This Segment’s Feed Components and Third-Party Hog Purchases Could Adversely Affect Costs
and Operating Margins. Feed costs are the most significant single component of the cost of raising hogs and could be
materially affected by commodity price fluctuations for corn and soybean meal. The results of this segment could be
negatively affected by increased costs of its feed components. The continued operation of ethanol plants has elevated
this risk as it has increased the competing demand for feed ingredients, primarily corn. Approximately 12% of this
segment’s slaughtered hogs are purchased from third parties, and commodity price fluctuations for hogs could have an
impact on this segment’s total costs. The cost and supply of feed components and the third-party hogs that this segment
purchases are determined by constantly changing market forces of supply and demand, which are driven by matters
over which Seaboard has no control, including weather, current and projected worldwide grain stocks and prices, grain
export prices and supports, and governmental agricultural policies. This segment attempts to manage certain of these
risks through the use of financial instruments; however, this may also limit its ability to participate in gains from
favorable commodity fluctuations. Unless wholesale pork prices correspondingly increase, increases in the prices of
this segment’s feed components or in the cost of third-party hogs purchased would adversely affect Seaboard’s
operating margins.
(3) Seaboard May Be Unable to Obtain and Retain Appropriate Personnel. The remote locations of the pork processing
plant and live hog operations and a more restrictive national policy on immigration could negatively affect the
availability and cost of labor. This segment is dependent on having a sufficient number of properly trained operations
personnel. Attracting and retaining qualified personnel is important to this segment’s success. The inability to acquire
and retain the services of such personnel could have a material adverse effect on Seaboard’s operations.
(4) The Loss of This Segment’s Oklahoma Pork Processing Plant Could Adversely Affect the Business. This segment is
largely dependent on the continued operation of its Oklahoma pork processing plant. The loss of or damage to this plant
for any reason, including fire, tornado or earthquake, or the occurrence of adverse governmental action could adversely
affect the business of this segment.
(5) Environmental Regulation and Related Litigation Could Have a Material Adverse Effect on the Business. This
segment’s operations and properties are subject to extensive and increasingly stringent laws and regulations pertaining
to, among other things, odors, the discharge of materials into the environment and the handling and disposition of
wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment. Failure to comply
with these laws and regulations and any future changes to them could result in significant consequences to Seaboard,
including civil and criminal penalties, liability for damages and negative publicity. Some requirements applicable to
this segment may also be enforced by citizen groups. Seaboard has incurred, and will continue to incur, operating
expenditures to comply with these laws and regulations.
(6) Health Risk to Livestock Could Adversely Affect Production, the Supply of Raw Materials and the Business. Seaboard
is subject to risks relating to its ability to maintain animal health and control diseases. The general health of the hogs
and the reproductive performance of the sows could have an adverse impact on production and production costs, the
supply of raw material to this segment’s pork processing operations and consumer confidence. If this segment’s hogs
are affected by disease, Seaboard could be required to destroy infected livestock, which could adversely affect this
segment’s production or ability to sell or export its products. Moreover, the herd health of third-party suppliers could
adversely affect the supply and cost of hogs available for purchase. Adverse publicity concerning any disease or health
concern could also cause customers to lose confidence in the safety and quality of this segment’s food products.
(7) International Trade Barriers Could Adversely Affect This Segment’s Operations. This segment realizes revenues from
international markets, particularly Japan, Mexico and China. International sales are subject to risks related to general
economic conditions, imposition of tariffs, quotas, trade barriers and other restrictions, enforcement of remedies in
foreign jurisdictions and compliance with applicable foreign laws, and other economic and political uncertainties. These
and other risks have resulted in, and in the future may result in, border closings or other international trade barriers that
could have an adverse effect on Seaboard’s earnings.
(8) The Operating Profit of the Biodiesel Production Facilities Could Be Adversely Impacted by Various Factors. The
profitability of this segment’s biodiesel plants could be adversely affected by various factors, including the market price
of pork fat, other animal fats and vegetable oils, all of which are utilized to produce biodiesel, and the market price for
biodiesel, which is influenced by world oil prices and U.S. government mandates and incentives to use biofuels.
Unfavorable changes in these prices over extended periods of time or adverse changes in U.S. government mandates
8
and incentives to use biofuels could adversely affect this segment’s results of operations and could result in the potential
impairment of the recorded value of the property, plant and equipment related to these facilities. Also, the federal
blender’s credits are not permanent and may not be renewed beyond 2022.
(9) Difficulties Could Be Experienced in the Conversion of the New Renewable Diesel Production Facility. In
February 2019, the Pork segment purchased an idle ethanol plant in Kansas. Projected costs to convert the existing
plant’s infrastructure to support the new renewable diesel production facility and the costs to construct the new
portions of the renewable diesel plant are variable and could be higher than initially projected by the time the
plant is operational. Also, significant construction delays could delay the expected timing of operations.
(c) Commodity Trading and Milling Segment
(1) This Segment Is Subject to Risks Associated with Foreign Operations. This segment principally operates in Africa,
South America and the Caribbean and, in most cases, in what are generally regarded to be lesser-developed countries.
Many of these foreign operations are subject to risks of doing business in lesser-developed countries, which are subject
to potential civil unrest and government instability, increasing the exposure to potential expropriation, confiscation,
war, insurrection, civil strife and revolution, corruption, currency inconvertibility and devaluation, and currency
exchange controls. In addition, foreign government policies and regulations could restrict the purchase of various
agricultural commodities and commodity products, reducing or limiting this segment’s ability to access materials or to
limit this segment’s sales prices for products sold in local markets.
(2) Fluctuations in Commodity Prices Could Adversely Affect the Business of This Segment. This segment’s sales are
significantly affected by fluctuating worldwide prices for various commodities, such as wheat, corn, soybeans, soybean
meal and, to a lesser degree, various other agricultural commodity products. These prices are determined by constantly
changing market forces of supply and demand, as well as other factors over which Seaboard has little or no control.
European flour exports, donated food aid, flour dumping practices and worldwide and local crop production could
contribute to these fluctuating market conditions and could have a significant impact on the trading and milling
businesses’ sales, value of commodities held in inventory and operating income.
(3) This Segment Uses a Material Amount of Derivative Products to Manage Certain Market Risks. The commodity trading
portion of this segment enters into various commodity derivative and foreign exchange derivative transactions to create
what management believes is an economic hedge for commodity trades it executes or intends to execute with its
customers. This portion of the segment also enters into speculative derivative transactions related to its market risks.
Failure to execute or improper execution of a derivative position or a firmly committed sale or purchase contract or a
speculative transaction that closes without the desired result or exposure to counter party risk could have an adverse
impact on the results of operations and liquidity.
(4) This Segment Is Subject to Higher Than Normal Risks for Attracting and Retaining Key Personnel. In the commodity
trading environment, loss of a key employee such as a commodity trader could have a negative impact resulting from
the loss of revenues as personal customer relationships can be vital to obtaining and retaining business with various
foreign customers. In the milling portion of this segment, employing and retaining qualified expatriate personnel are
key elements to success given the difficult living conditions, the unique operating environments and the reliance on a
relatively small number of executives to manage each individual location.
(5) This Segment Faces Increasing Competition. This segment is experiencing increasing competition in certain foreign
markets by well-capitalized originators, traders of commodities making sales directly to end-use customers and
industrial-asset owners that compete in the same markets as this segment. If various raw-material originators refuse to
sell commodities to Seaboard for sale in these foreign markets, it could be more challenging for this segment to purchase
commodities for sale to its customers at competitive prices. This segment’s sales volume and sale prices for
commodities to customers, as well as results of operations, could be adversely impacted by such increased competition.
(d) Marine Segment
(1) The Demand for This Segment’s Services Are Affected by International Trade and Fluctuating Freight Rates. This
segment provides cargo shipping services primarily from the U.S. to many different countries in the Caribbean and
Central and South America. In addition to the risks of overseas operations, fluctuations in economic conditions and
unstable or hostile local political situations in the countries in which this segment operates could affect trade volumes
and cargo freight rates, as well as adversely affect this segment’s results of operations.
(2) Chartered Ships Are Subject to Fluctuating Rates. Time-charter expenses are one of this segment’s largest expenses.
Certain ships are under charters longer than one year while others are less than one year. These costs can vary greatly
due to a number of factors including the worldwide supply and demand for shipping. It is not possible to determine in
advance whether a charter contract for more or less than one year will be favorable to this segment’s business.
Accordingly, entering into either long-term charter hire contracts during periods of decreasing charter hire costs or
short-term charter hire contracts during periods of increasing charter hire costs could have an adverse effect on this
segment’s results of operations. In an effort to improve cargo services on higher frequency routes and use more capacity,
this segment purchases space, also known as slots, on certain third-party operated vessels. It is expected that this
9
segment will continue purchasing slots in the future, but these ship providers may not be reliable and cause shipment
delays, damaged goods or other challenges.
(3) Hurricanes May Disrupt Operations. This segment’s port operations can be subject to disruption due to hurricanes,
especially at this segment’s major ports in Miami, Florida and Houston, Texas, which could have an adverse effect on
this segment’s results of operations.
(4) This Segment Is Subject to Complex Laws and Regulations That May Adversely Affect the Revenues, Costs, Manner
or Feasibility of Doing Business. Federal, state and local laws and domestic and international regulations governing
worker health and safety, environmental protection, port and terminal security, and the operation of vessels, including
fuel regulations, significantly affect this segment’s operations, including rate discussions and other related
arrangements. Many aspects of the shipping industry, including rate agreements and vessel cost sharing agreements,
are subject to extensive governmental regulation by the Federal Maritime Commission, the U.S. Coast Guard, and U.S.
Customs and Border Protection, as well as regulation by private industry organizations. Compliance with applicable
laws, regulations and standards may require installation of costly equipment or operational changes, while the failure
to comply may result in administrative and civil penalties, criminal sanctions, the suspension or termination of
Seaboard’s operations or detention of its vessels. In addition, future changes in laws, regulations and standards,
including allowed freight rate discussions and other related arrangements, may result in additional costs or a reduction
in revenues.
(e) Sugar and Alcohol Segment
(1) The Success of This Segment Depends on the Condition of the Argentine Economy, Currency and Political Climate.
This segment operates a sugar mill, alcohol production and power generation facility in Argentina. Fluctuations in
economic conditions or changes in the Argentine political climate could have an impact on the costs of operations, the
sales prices of products, export opportunities and the exchange rate of the Argentine peso to the U.S. dollar. In this
regard, local sales prices for bioethanol are affected by government price controls and domestic prices for sugar are
affected by import duties imposed by the Argentine government, impacting local volume sold, as well as imported and
exported volumes to and from international markets. If import duties are changed, this could have a negative impact on
the sales prices of this segment’s products. In addition, the majority of this segment’s sales are within Argentina, and
any Argentine government attempts to control inflation through retail price controls on mass consumption products,
including sugar, could adversely impact the local sales prices of this segment’s products and the results of operations
for this segment. In the second quarter of 2018, Argentina was determined to be a highly inflationary economy. A
devaluation of the Argentine peso would have a negative impact on this segment’s financial position and results of
operations.
(2) This Segment Is Subject to the Risks That Are Inherent in any Agricultural Business. Seaboard’s results of operations
for this segment may be adversely affected by numerous factors over which Seaboard has little or no control and that
are inherent in any agricultural business, including reductions in the market prices for this segment’s products, adverse
weather and growing conditions, pest and disease problems, and new government regulations regarding agriculture and
the marketing of agricultural products. Of these risks, weather particularly could adversely affect the amount and quality
of the sugarcane produced by this segment and its competitors located in other regions of Argentina.
(3) The Loss of This Segment’s Sole Processing Facility Would Adversely Affect the Business. This segment is largely
dependent on the continued operation of a single sugar mill. The loss of or damage to this mill for any reason, including
fire, tornado or earthquake, or the occurrence of adverse governmental action or labor unrest resulting in labor strikes
could adversely affect the business of this segment.
(4) Labor Relations Challenges Could Adversely Affect Operations. This segment is dependent on unionized labor at its
single sugar mill in Argentina. The political and economic environment in Argentina makes normal labor relations very
challenging. Contributing to the situation are the historical policies of Argentina’s government and the failure of the
Argentine courts to enforce contractual obligations with unions and basic property rights. Interruptions in production
as a result of labor unrest could adversely impact the quantity of sugarcane harvested and the amount of sugar, alcohol
and power produced and could interfere with the distribution of products stored at the facility.
(5) The Operating Profit of the Alcohol Production Facility Could Be Adversely Impacted by Government Regulations.
The profitability of this segment’s alcohol production facility could be adversely affected by Argentine government
regulations regarding production quotas, fuel blends and sales prices in the bioethanol market. In addition, corn alcohol
producers in Argentina have increased competition in the bioethanol market. Adverse changes in the Argentine
government’s regulations regarding bioethanol production quotas and fuel blends could adversely affect this segment’s
results of operations.
(6) The Operating Profit of the Cogeneration Power Plant Could Be Adversely Impacted by Contract for the Sale of Energy.
The sale price for energy produced and sold by this segment’s cogeneration power plant is based on a biomass
cogeneration contract with the Argentine government. The profitability of the cogeneration power plant could be
adversely affected by this segment’s failure to enforce the terms of the contract, which could adversely affect this
10
segment’s results of operations and could result in the potential impairment of the recorded value of the property, plant
and equipment related to this facility.
(f) Power Segment
(1) The Success of This Segment Depends on the Condition of the Dominican Republic Economy, Currency and Political
Climate. Fluctuations in economic conditions or changes in the Dominican Republic political climate could have an
impact on the costs of operations, the sales prices of products and the exchange rate of the Dominican peso to the U.S.
dollar. In addition to significant currency fluctuations and the other risks of overseas operations, this segment could
experience difficulty in obtaining timely collections of trade receivables from the government owned distribution
companies or other companies that must also collect from the government in order to make payments on their accounts.
Currently, the Dominican Republic does not allow a free market to enable prices to rise with demand, which could limit
this segment’s profitability. The government has the ability to arbitrarily decide which power units will be able to
operate, which can ultimately determine spot market prices for electricity generated and sold into the power grid and,
therefore, could have adverse effects on results of operations.
(2) Supply of Natural Gas Is Limited in the Dominican Republic. Supply of natural gas in the Dominican Republic is
limited to one primary supplier. Although the barge can run on other types of fuel, supply disruptions of natural gas
could have a negative impact on this segment’s operating income.
(3) The Loss of This Segment’s Sole Facility Would Adversely Affect the Business. This segment is dependent on the
continued operation of a single facility. The loss of or damage to this facility for any reason, including fire, hurricane,
tornado or earthquake, or the occurrence of adverse governmental actions or labor unrest resulting in labor strikes would
adversely affect the business of this segment.
(4) Difficulties Could Be Experienced in the Construction and Installation of the New Power Generating Barge. The new
power generating barge is being constructed in Singapore, with delivery to the Dominican Republic expected in late
2020. Installation and commissioning are anticipated to take several months, with commercial operations expected in
mid-2021. Significant operational delays, plans for the existing barge or other difficulties encountered in the start-up
of operations could have adverse effects on results of operations.
(g) Turkey Segment
(1) Fluctuations in Commodity Turkey Prices Could Adversely Affect the Results of Operations. Sales prices for turkey
products are directly affected by both domestic and worldwide supply and demand for turkey products and other
proteins, which are determined by constantly changing market forces of supply and demand as well as other factors
over which Butterball has little or no control. Butterball’s results of operations and the value of Seaboard’s investment
in Butterball could be adversely affected by fluctuations in turkey commodity prices.
(2) Increases in Costs of Butterball’s Feed Components and Turkey Purchases Could Adversely Affect Costs and Operating
Margins. Feed costs are the most significant single component of the cost of raising turkeys and could be materially
affected by commodity price fluctuations for corn, soybean meal and other commodity grain inputs. Butterball’s results
may be negatively affected by increased costs of the feed components. Butterball attempts to manage some of these
risks through the use of financial instruments; however, this may also limit its ability to participate in gains from
favorable commodity fluctuations. Unless wholesale turkey prices correspondingly increase, increases in the prices of
Butterball’s feed components would adversely affect Butterball’s results of operations and the value of Seaboard’s
investment in Butterball.
(3) Adverse Operating Results Could Result in Need for Additional Investment. Butterball has third-party bank loan
facilities that are secured by substantially all of the assets of Butterball. Adverse operating results could cause Butterball
to default on such loan facilities, which could result in a significant adverse impact on Butterball’s financial position
or result in Seaboard needing to increase its investment or provide financing to Butterball.
(4) Decreased Perception of Value in the Butterball Brand and Changes in Consumer Preferences Could Adversely Affect
Sales Quantity and Price of Butterball Products. Butterball is a premium brand name, built on a long history of offering
a quality product that has been differentiated in the market. The value of the Butterball brand allows for sales of a
higher unit price than other turkey products. In order to maintain this advantage, Butterball must continue to support
the brand with successful marketing efforts and develop new products. Consumer product preferences continue to
evolve as a result of, among other things, shifting consumer demographics; changes in consumer lifestyles; digital
shopping patterns; and competitive product and pricing pressures. If Butterball’s products fail to meet consumer
preferences, or Butterball fails to introduce new products or product extensions on a timely basis, the brand value could
diminish significantly. In addition, negative news reports for any reason related to Butterball or the turkey/poultry
industry could negatively impact this brand perception, Butterball’s results of operations and the value of Seaboard’s
investment in Butterball.
11
(5) The Loss of Butterball’s Primary Further Processing Facility Could Adversely Affect Butterball’s Business. Although
Butterball has four processing plants and two further processing plants, Butterball is disproportionately dependent on
the continued operation of the processing plant in Mt. Olive, North Carolina, that handles a significant volume of the
production of further processed turkey products. The loss of or damage to this plant for any reason, including fire,
hurricane, tornado or the occurrence of an adverse governmental action could adversely affect the results of operations
for Butterball and the value of Seaboard’s investment in Butterball.
(6) Health Risk to Poultry Could Adversely Affect Production, the Supply of Raw Materials and Butterball’s Business.
Butterball is subject to risks relating to its ability to maintain animal health and control diseases, such as avian influenza.
The general health of the turkeys and reproductive performance could have an adverse impact on production and
production costs, the supply of raw material to Butterball’s processing operations and consumer confidence. If
Butterball’s turkeys are affected by disease, Butterball may be required to destroy infected birds, which could adversely
affect Butterball’s production or ability to sell or export its products. Adverse publicity concerning any disease or health
concern could also cause customers to lose confidence in the safety and quality of Butterball products, resulting in an
adverse effect on Butterball’s results of operations and the value of Seaboard’s investment in Butterball.
(7) Butterball May Be Unable to Obtain and Retain Appropriate Personnel. The remote locations of some of Butterball’s
processing plants and live turkey operations, along with a more restrictive national policy on immigration, could
negatively affect the availability and cost of labor. Butterball is dependent on having sufficient properly trained
operations personnel. Attracting and retaining qualified personnel is important to Butterball’s success. The inability to
acquire and retain the services of such personnel could have a material adverse effect on Butterball’s operations and
the value of Seaboard’s investment in Butterball.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Management believes that Seaboard’s present facilities are adequate and suitable for its current purposes. Seaboard’s
principal properties by segment are described below:
(1) Pork — Seaboard’s Pork segment owns a pork processing plant in Guymon, Oklahoma. It has a double-shift capacity to
process approximately six million hogs annually and generally operates at capacity with additional weekend shifts depending on
market conditions. Seaboard’s hog production operations consist of the breeding and raising of approximately eight million hogs
annually at facilities it primarily owns or at facilities owned and operated by third parties with whom it has grower contracts.
This segment owns and operates seven centrally located feed mills, which have a combined capacity to produce approximately
three million tons of formulated feed annually. These feed mills are used primarily to support Seaboard’s existing hog production
and have the capability of supporting additional hog production in the future. These facilities are located in Iowa, Oklahoma,
Texas, Kansas and Colorado. The Pork segment also operates a ham-boning and processing plant in Mexico that has the capacity
to process 96 million pounds of ham annually. The Pork segment owns biodiesel plants in Oklahoma and Missouri, with the
capacity to produce 46 million gallons and 30 million gallons, respectively, of biodiesel annually. In 2019, the Pork segment
purchased and began modifying an idle ethanol plant in Hugoton, Kansas, that it plans to use to produce renewable diesel
in the future. The Kansas plant is expected to produce 85 million gallons of renewable diesel annually when operating at
full capacity.
(2) Commodity Trading and Milling — Seaboard’s CT&M grain-processing business, which includes 10 consolidated and
17 non-consolidated affiliates, operates facilities at 41 locations in 23 countries. Seaboard and its affiliates produce
approximately six million metric tons of wheat flour, maize meal, manufactured feed and oilseed crush commodities per year in
addition to other related grain-based products. The grain-processing and related agribusiness operations located in Botswana,
Brazil, Colombia, the Democratic Republic of Congo, Ecuador, Gambia, Ghana, Guyana, Haiti, Jamaica, Kenya, Lesotho,
Mauritania, Morocco, Mozambique, Nigeria, Peru, Republic of Congo, South Africa, Turkey, and Zambia own their facilities;
and in Ivory Coast, Kenya, Lesotho, Morocco, Mozambique, Nigeria, Republic of Congo, Senegal and Zambia, the land on
which certain facilities are located is leased under long-term agreements. Certain foreign milling operations may operate at less
than full capacity due to low demand, poor consumer purchasing power, excess milling capacity in their competitive environment
or imported flour. The commodity trading business has 13 offices in 12 countries, in addition to two non-consolidated affiliates
in two other countries. Seaboard’s CT&M segment owns three 18,900 metric ton deadweight dry bulk vessels and charters
between 30 and 59 bulk vessels with deadweights ranging from 5,000 to 64,000 metric tons under short-term agreements. Also,
the CT&M segment charters four dry bulk vessels, each with a deadweight of 28,000 metric tons, which were originally
purchased and then subsequently sold and leased-back.
(3) Marine — Seaboard’s Marine segment leases approximately 297,000 square feet of off-port warehouse space and
approximately 86 acres of port terminal land and facilities in Miami, Florida, which are used in its containerized cargo
12
operations. Seaboard’s Marine segment also leases an approximately 62-acre cargo handling and terminal facility in
Houston, Texas, which includes several on-dock warehouses totaling approximately 690,000 square feet for cargo storage.
As of December 31, 2019, the Marine segment owned three ocean cargo vessels with deadweights ranging from 7,700 to
11,000 metric tons. In addition, this segment chartered 22 vessels under contracts ranging from less than one year to over
two years with deadweights ranging from approximately 8,500 to 34,700 metric tons but has also entered into some
contracts for longer-term charters that range up to 11 years. Seaboard’s Marine segment owns or leases dry, refrigerated
and specialized containers and other related equipment.
(4) Sugar and Alcohol — Seaboard’s Sugar and Alcohol segment owns nearly 70,000 acres of planted sugarcane and a
sugar mill with an annual capacity to crush approximately three million metric tons of sugar cane. The facility, including
an alcohol distillery, has an annual production capacity of approximately 250,000 metric tons of sugar and approximately
33 million gallons of alcohol. This capacity is sufficient to process all of the cane harvested by this segment and additional
quantities purchased from third-party farmers in the region. The sugarcane fields, processing mill, distillery and
51 megawatt cogeneration power plant are located in northern Argentina in the Salta Province. This area experiences
seasonal rainfalls that may limit the harvest season, which then affects the duration of mill operations and quantities of
sugar and alcohol produced.
(5) Power — Seaboard’s Power segment owns one power generating barge with capacity to generate approximately
108 megawatts of electricity that is secured on the Ozama River in Santo Domingo, Dominican Republic. Seaboard’s
Power segment is currently constructing a new floating power barge with capacity to generate approximately
146 megawatts of electricity using gaseous fuels, including natural gas.
(6) Turkey — Seaboard’s Turkey segment has a total of four processing plants, two further processing plants and
numerous company and third-party live production facilities and feed milling operations, located in North Carolina,
Arkansas, Missouri and Kansas. These facilities produce over one billion pounds of turkey each year. Although capacity
to meet core further processing demand is sufficient, Butterball uses third-party copack arrangements to supplement
portions of its portfolio where it either does not maintain competencies, or to meet demand beyond its internal production
capacity.
Item 3. Legal Proceedings
The information required by this item is included in Note 9 to the consolidated financial statements.
Item 4. Mine Safety Disclosures
Not Applicable.
13
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Seaboard’s common stock is traded on the NYSE American under the symbol SEB. Seaboard had 2,308 stockholders of
record of its common stock as of January 31, 2020.
Stock Performance Chart
The SEC requires a five-year comparison of stock performance for Seaboard with that of an appropriate broad equity
market index and similar industry index. Since there is no single industry index to compare stock performance, the
companies comprising the Dow Jones U.S. Food Products and Dow Jones U.S. 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 Peer Group, weighted by market capitalization for the five fiscal years
commencing December 31, 2014 and ending December 31, 2019.
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
12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 12/31/19
$ 100.00 $ 68.96 $ 94.14 $ 105.21 $ 84.54 $ 101.79
$ 100.00 $ 73.17 $ 87.62 $ 88.68 $ 74.91 $ 85.42
$ 100.00 $ 107.99 $ 121.71 $ 122.82 $ 102.13 $ 126.73
14
In each of the four quarters of 2019, Seaboard declared and paid quarterly dividends of $2.25 per share of common stock.
In each of the four quarters of 2018 and 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. As discussed in
Note 8 to the consolidated financial statements, Seaboard’s ability to declare and pay dividends is subject to limitations
imposed by debt agreements.
Seaboard has not established any equity compensation plans or individual agreements for its employees under which
Seaboard common stock, or options, rights or warrants with respect to Seaboard common stock, may be granted.
As of December 31, 2019, Seaboard may repurchase up to $78 million of its common stock at market value from time to
time in open market or privately negotiated purchases under its share repurchase program. There were no purchases made
by or on behalf of Seaboard or any “affiliated purchaser” (as defined by applicable rules of the SEC) of shares of Seaboard’s
common stock during the fourth quarter of the fiscal year covered by this report. See Note 12 to the consolidated financial
statements for discussion of share repurchase activity during 2019.
Item 6. Selected Financial Data
(Millions of dollars except per share amounts)
Net sales
Operating income
Net earnings (loss) attributable to Seaboard
Basic earnings (loss) per common share
Total assets
Long-term debt, less current maturities
Stockholders’ equity
Dividends declared per common share (e)
Years ended December 31,
2016
2017
2015
209 $
(17)(b) $
104 $
283 (b) $
2019
2018
$ 5,379 $ 5,594
$ 6,840 $ 6,583 $ 5,809
126
240
$
$
171 (d)
247 (b)(c)$
$
$ 242.78 (b) $ (14.61)(b) $ 211.01 (b)(c)$ 266.50 (b) $ 146.44 (d)
$ 4,755 $ 4,431
$ 6,285 (a) $ 5,307 $ 5,161
518
$
$
482
$ 3,175 $ 2,882
$ 3,554 $ 3,329 $ 3,408
—
— $
$
6.00
$ 9.00 $
230 $
312 (b) $
6.00 $
730 $
499 $
739 $
(a) Total assets increased $496 million with the adoption of the new leasing guidance. See Note 1 to the consolidated
financial statements for further information.
(b)
(c)
(d)
(e)
In 2019, net earnings attributable to Seaboard included other investment income of $225 million, which included
$176 million of non-cash unrealized mark-to-market gains on short-term investments. Net earnings (loss)
attributable to Seaboard for 2018, 2017 and 2016 included other investment income (losses) of $(152) million,
$177 million and $69 million, respectively.
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 included 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 14 to the consolidated
financial statements for further information on the 2017 Tax Act.
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.
In 2017, Seaboard resumed declaring quarterly dividends. 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.
15
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
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 geographic location,
management evaluates their operations separately. Seaboard’s reporting segments are based on information used by
Seaboard’s Chief Executive Officer to determine allocation of resources and assess performance, in his capacity as chief
operating decision maker.
Pork Segment
The Pork segment primarily produces hogs to process and sells fresh and frozen pork products to further processors,
foodservice operators, distributors and grocery stores throughout the U.S. and to foreign markets. This segment also
produces biodiesel from pork fats and other animal fat and vegetable oils for sale to third parties. 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. 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. This segment is Seaboard’s most capital-
intensive segment, representing approximately 53% of Seaboard’s total fixed assets, in addition to approximately 41% of
total inventories. With the 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.
CT&M Segment
The CT&M segment provides integrated agricultural commodity trading, processing and logistics services. The majority
of the CT&M segment’s sales are derived from sourcing agricultural commodities from multiple origins which are
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 period to period. This segment represents approximately 52% of Seaboard’s total inventories. This
segment owns three vessels, but the majority of the trading business is transacted with chartered ships. Consolidated and
non-consolidated affiliates operate the grain processing business in foreign countries that are, in most cases, lesser
developed. 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. Exports from various countries can exacerbate volatile market conditions that may have
a significant impact on both the trading and milling businesses’ sales and operating income. Profit margins are sometimes
protected by using commodity derivatives and other risk management practices. The CT&M segment has invested in
several entities in recent years and continues to seek opportunities to expand its trading, milling and agro-processing
businesses.
Marine Segment
The Marine segment provides cargo shipping services in the U.S., 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 regional supply and
demand for shipping services. Since the Marine segment time-charters the majority of its ocean cargo vessels, it is 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 and Alcohol Segment
The Sugar and Alcohol segment produces and processes sugar and alcohol in Argentina, primarily to be marketed locally.
The Sugar and Alcohol 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. Historically, the functional currency of this segment was the Argentine
peso, but during the third quarter of 2018 highly inflationary accounting was adopted and the U.S. dollar became the
functional currency for U.S. generally accepted accounting principles (“GAAP”) purposes. See Note 1 to the consolidated
16
financial statements for discussion on highly inflationary accounting. The currency exchange rate can have an impact on
reported U.S. dollar sales, operating income and cash flows.
Power Segment
The Power segment is an independent power producer in the Dominican Republic operating a power generating barge.
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
The Turkey segment, accounted for using the equity method, produces turkeys to process and sells branded and non-
branded turkey products. 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.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2019, Seaboard had cash and short-term investments of $1.6 billion and additional total working
capital of $602 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 the next twelve months.
As of December 31, 2019, $195 million of the $1.6 billion 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 the majority of these funds outside the U.S. as current plans do not demonstrate a need
to repatriate them to fund Seaboard’s U.S. operations. For any planned repatriation to the U.S., Seaboard would record
applicable deferred taxes for state or foreign withholding taxes. See Note 14 for discussion of repatriation.
Summary of Sources and Uses of Cash
Cash and short-term investments as of December 31, 2019 increased $29 million from December 31, 2018. The increase
was primarily the result of $171 million of net cash from operating activities, $132 million net proceeds from short-term
investments, $42 million net proceeds from long-term debt and lines of credit and $24 million proceeds from sale of a non-
consolidated affiliate. Partially offsetting the increase was cash used for capital expenditures of $349 million. Cash from
operating activities decreased $67 million from 2018, primarily due to lower adjusted earnings for unrealized gains on
short-term investments and significant cash outlays for inventories.
Capital Expenditures, Acquisitions and Other Investing Activities
During 2019, Seaboard invested $349 million in property, plant and equipment, of which $164 million was in the Pork
segment, $23 million in the CT&M segment, $26 million in the Marine segment, $15 million in the Sugar and Alcohol
segment and $121 million in the Power segment. The Pork segment expenditures were primarily for the expansion of the
Oklahoma pork processing plant and the purchase and modifications of an idle ethanol plant and its related assets in
Hugoton, Kansas. The CT&M segment expenditures were primarily for milling assets. The Sugar and Alcohol
expenditures were primarily for alcohol fermentation expansion. The Power segment expenditures were primarily for its
power generating barge under construction. All other capital expenditures were primarily of a normal recurring nature
such as replacements of machinery and equipment and general facility modernizations and upgrades.
The total budget for 2020 capital expenditures is $313 million. The Pork segment budgeted $215 million primarily for the
expansion of the pork processing plant that is expected to be completed in the first half of 2020 and the modifications to
convert the Hugoton, Kansas plant to a renewable diesel production facility, with operations expected to begin in 2022.
The estimated cost of the conversion is expected to be between approximately $220 million and $270 million, depending
upon finalization of construction contracts. The CT&M segment budgeted $25 million primarily for milling assets,
including a new mixing plant, and other improvements to existing facilities and related equipment. The Marine segment
budgeted $37 million primarily for additional cargo carrying and handling equipment. The Sugar and Alcohol segment
budgeted $14 million primarily for general plant improvements and production process updates. The Power segment
budgeted $22 million for further capital expenditures associated with the new power barge. Seaboard’s Power segment
continues to explore strategic alternatives for the existing barge, including selling, relocating or operating in conjunction
with the new barge at the current site. The estimated total cost of the project is expected to be between approximately
$185 million to $210 million, depending upon the alternative selected. Management anticipates paying for these capital
17
expenditures from a combination of available cash, the use of available short-term investments and Seaboard’s available
borrowing capacity.
Seaboard has acquired businesses in 2019, 2018 and 2017, and intends to continue to look for opportunities to further grow
and diversify its operations. Also, from time to time, Seaboard may fund capital calls and borrowings for its equity method
investments based on the specific facts and circumstances. During 2019, Seaboard contributed $20 million to STF, a non-
consolidated affiliate of the Pork segment, for working capital needs.
Financing Activities
The following table presents a summary of Seaboard’s available borrowing capacity:
(Millions of dollars)
Short-term uncommitted and committed lines
Amounts drawn against lines
Letters of credit reducing borrowing availability
Available borrowing capacity as of December 31, 2019
Total amount
available
$
$
688
(246)
(18)
424
Seaboard has long-term debt of $793 million, which includes a term loan of $691 million and foreign subsidiary obligations
of $102 million. Seaboard has capacity under existing Term Loan Credit Agreement debt covenants to undertake additional
debt financings of approximately $1,326 million as of December 31, 2019. See Note 8 to the consolidated financial
statements for discussion of lines of credit and long-term debt.
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. The terms and availability of such
financing may be impacted by economic and financial market conditions, as well as Seaboard's financial condition and
results of operations at the time Seaboard seeks such financing, and there can be no assurances that Seaboard will be able
to obtain such financing on terms that will be acceptable or advantageous.
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. Also, Seaboard may
repurchase shares of its common stock from time to time.
Contractual Obligations and Off-Balance Sheet Arrangements
Several of Seaboard’s segments have long-term contractual obligations, including purchase commitments and
non-cancelable lease agreements. See Notes 9 and 6 to the consolidated financial statements for discussion on purchase
commitments and leases, respectively.
The following table provides a summary of Seaboard’s long-term contractual obligations as of December 31, 2019:
Payments due by period
(Millions of dollars)
Purchase commitments
Operating lease obligations
Finance lease obligations
Long-term debt
Interest payments on long-term debt (a)
Retirement benefit payments (b)
Mandatory deemed repatriation tax (c)
Total contractual cash obligations
Total
1 year
$ 1,801 $ 1,025 $ 283 $ 180 $
Less than 1-3 3-5 More than
years years 5 years
313
164
26
656
83
32
36
1,310
130
7
62
26
13
—
$ 3,611 $ 1,263 $ 638 $ 400 $
106
14
14
45
23
18
197
14
61
48
27
8
597
61
793
202
95
62
(a) Interest payments in the table above include expected cash payments for interest on variable and fixed rate long-
term debt. Variable interest rates are based on interest rates as of December 31, 2019.
(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 10 to the consolidated financial
18
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 pursuant to the 2017 Tax Act.
Deferred income taxes and certain other long-term liabilities in 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.
RESULTS OF OPERATIONS
Net sales for the years ended December 31, 2019, 2018 and 2017 were $6.8 billion, $6.6 billion and $5.8 billion,
respectively. The increase for 2019 compared to 2018 primarily reflected higher volumes of certain commodities in the
CT&M segment and higher prices for pork products sold in the Pork segment, partially offset by lower biodiesel revenue
in the Pork segment and lower volumes and prices of sugar and alcohol sold in the Sugar and Alcohol segment. The
increase for 2018 compared to 2017 primarily reflected higher volumes and sales prices for certain commodities in the
CT&M segment, higher biodiesel revenue and higher volumes of market hogs and pork products sold in the Pork segment
and higher cargo volumes and rates in the Marine segment.
Operating income for the years ended December 31, 2019, 2018 and 2017 was $104 million, $209 million and
$240 million, respectively. The decrease for 2019 compared to 2018 primarily reflected derivative contract losses and
lower margins on biodiesel sales in the Pork segment, lower alcohol margins in the Sugar and Alcohol segment and higher
voyage costs in the Marine segment. The decrease for 2018 compared to 2017 primarily reflected lower prices on pork
products sold and higher feed costs in the Pork segment, partially offset by higher margins from biodiesel sales in the Pork
segment, higher margins on third-party sales in the CT&M segment and higher spot market rates in the Power segment.
Pork Segment
(Millions of dollars)
Net sales
Operating income
Loss from affiliates
2019
2018
2017
$ 1,851 $ 1,774 $ 1,609
193
$
(10)
$
117 $
(30) $
54 $
(22) $
Net sales for the Pork segment increased $77 million for the year ended December 31, 2019 compared to 2018. The
increase was primarily the result of higher volumes and prices of market hogs sold, higher prices and volumes for pork
products sold and the recognition of the federal blender’s credits of $60 million in December 2019 for biodiesel production
in tax years 2018 and 2019, partially offset by lower biodiesel prices and volumes. In the first quarter of 2018, the Pork
segment received $42 million of revenue related to 2017 biodiesel production.
Operating income for the Pork segment decreased $63 million for the year ended December 31, 2019 compared to 2018.
The decrease was primarily due to derivative contract losses, lower margins on biodiesel sales and a $14 million expense
related to the withdrawal liability from a multi-employer pension fund as discussed in Note 10 to the consolidated financial
statements, partially offset by higher margins on pork product sales and the increase in federal blender’s credits received.
Margins on pork product sales increased as higher sales prices were only partially offset by higher production and
processing costs. Seaboard sells pork to international customers located in China, among other countries, and incremental
tariffs, the duration of which is uncertain, continue to have a negative impact on earnings. Management is unable to predict
future market prices for pork products, the cost of feed or third-party hogs; however, management anticipates positive
operating income for this segment in 2020.
Loss from affiliates decreased $8 million for the year ended December 31, 2019 compared to 2018, primarily due to the
commencement of a second shift in October 2018 at the STF plant.
Net sales for the Pork segment increased $165 million for the year ended December 31, 2018 compared to 2017. The
increase was primarily the result of higher overall increased volumes of pork products sold, increased volumes and prices
of biodiesel sales, the recognition of the federal blender’s credits of $42 million and higher sales of market hogs to third
parties and affiliates. The increase was partially offset by lower prices for both pork products and market hogs sold.
Operating income for the Pork segment decreased $76 million for the year ended December 31, 2018 compared to 2017.
The decrease was primarily the result of lower prices for pork products along with higher feed costs, partially offset by
higher volumes of pork products sold and the federal blender’s credits of $42 million.
Loss from affiliates increased $20 million for the year ended December 31, 2018 compared to 2017, primarily due to the
start-up of STF operations, which began in September 2017.
19
Commodity Trading and Milling Segment
(Millions of dollars)
Net sales
Operating income as reported
Mark-to-market adjustments
Operating income excluding mark-to-market adjustments
Income (loss) from affiliates
2019
2018
2017
$ 3,672 $ 3,428 $ 2,945
25
$
(4)
21
7
46 $
3
49 $
(11) $
62 $
5
67 $
(5) $
$
$
Net sales for the CT&M segment increased $244 million for the year ended December 31, 2019 compared to 2018. The
increase primarily reflected higher volumes of certain commodities for third-party customers, including sales for a business
acquired in January 2018 with certain entities on a three-month lag and another business acquired in October 2019, and
higher wheat, corn and other commodity prices, partially offset by lower affiliate volumes and sales prices.
Operating income for the CT&M segment increased $16 million for the year ended December 31, 2019 compared to 2018.
The increase primarily reflected higher margins on third-party sales, partially offset by higher selling, general and
administrative costs related to the business acquired. Due to worldwide commodity price fluctuations, the uncertain
political and economic conditions in the countries in which this segment operates, and the 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 2020, 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 higher by $5 and $3 million in 2019 and 2018, respectively, and lower by $4 million in 2017. 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 2020. 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.
Loss from affiliates for the CT&M segment decreased by $6 million for the year ended December 31, 2019 compared to
2018. 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 increased $483 million for the year ended December 31, 2018 compared to 2017. The
increase primarily reflected higher volumes of third-party sales, including sales for a business acquired in January
2018, and higher affiliate sales prices, partially offset by lower third-party sales prices.
Operating income for the CT&M segment increased $21 million for the year ended December 31, 2018 compared to 2017.
The increase primarily reflected higher margins on third-party sales, predominantly related to the business acquired,
partially offset by higher selling, general and administrative costs related to the business acquired. Excluding the effects
of the mark-to-market adjustments for derivative contracts, operating income increased $28 million.
Income from affiliates for the CT&M segment decreased $18 million for the year ended December 31, 2018 compared to
2017. The decrease primarily reflected price and volume volatility in local markets of certain Seaboard affiliates, including
losses at an equity method investment located in the Democratic Republic of Congo.
20
Marine Segment
(Millions of dollars)
Net sales
Operating income
Income (loss) from affiliate
2019
2018
2017
$ 1,061 $ 1,057 $
25 $
$
2 $
$
4 $
3 $
956
21
(7)
Net sales for the Marine segment increased $4 million for the year ended December 31, 2019 compared to 2018. The
increase was primarily the result of a change in cargo mix, with more reefer containers that generally have a higher rate,
partially offset by lower cargo volumes.
Operating income for the Marine segment decreased $21 million for the year ended December 31, 2019 compared to 2018.
The decrease was primarily the result of higher voyage costs related to charter hire rates, terminal costs and fuel costs. The
reduced global sulfur emissions cap from 3.5% to 0.5% became effective on January 1, 2020 and resulted in higher fuel
costs as purchases of low-sulfur fuel began in late 2019. 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. Based on market conditions, management currently cannot predict if this segment will be profitable in
2020.
Net sales for the Marine segment increased $101 million for the year ended December 31, 2018 compared to 2017. The
increase was primarily the result of higher volumes and rates in certain markets during 2018 compared to 2017.
Operating income for the Marine segment increased $4 million for the year ended December 31, 2018 compared to 2017.
The increase was primarily the result of higher revenues, partially offset by higher voyage costs related to fuel price
increases and other expenses.
Income from affiliates increased $9 million for the year ended December 31, 2018 compared to 2017, primarily due to an
other-than-temporary impairment charge of $6 million incurred in 2017.
Sugar and Alcohol Segment
(Millions of dollars)
Net sales
Operating income (loss)
Income from affiliates
2019
2018
2017
$
$
$
121 $
(16) $
1 $
184 $
9 $
1 $
186
21
1
Net sales for the Sugar and Alcohol segment decreased $63 million for the year ended December 31, 2019 compared to
2018. The decrease primarily reflected lower volumes and prices of sugar and alcohol sold. Sugar and alcohol sales are
denominated in Argentine pesos, and an increase in local sales prices was offset by exchange rate changes as the Argentine
peso continued to weaken against the U.S. dollar. Management cannot predict local sugar and alcohol prices or the
volatility in the currency exchange rate. Argentina was determined by management to be a highly inflationary economy in
the second quarter of 2018, and as a result, this segment’s functional currency is the U.S. dollar effective in the third
quarter of 2018 until the economic environment stabilizes.
Operating income for the Sugar and Alcohol decreased $25 million for the year ended December 31, 2019 compared to
2018. The decrease primarily reflected lower margins on alcohol, partially offset by lower selling, general and
administrative expenses. Based on market conditions, management cannot predict if this segment will be profitable in
2020.
Net sales for the Sugar and Alcohol segment decreased $2 million for the year ended December 31, 2018 compared to
2017. The decrease primarily reflected lower prices of sugar and alcohol sold, partially offset by higher volumes of sugar
and alcohol sold.
Operating income for the Sugar and Alcohol segment decreased $12 million for the year ended December 31, 2018
compared to 2017. The decrease primarily reflected lower margins on sugar, alcohol and cogeneration, partially offset by
lower selling, general and administrative expenses related to salaries and benefits.
21
Power Segment
(Millions of dollars)
Net sales
Operating income
Income from affiliate
2019 2018
2017
$ 117 $
27 $
$
3 $
$
122 $
21 $
10 $
97
9
6
Net sales for the Power segment decreased $5 million for the year ended December 31, 2019 compared to 2018. The
decrease primarily reflected lower spot market rates as a result of lower fuel prices.
Operating income for the Power segment increased $6 million for the year ended December 31, 2019 compared to 2018
primarily due to lower fuel costs, partially offset by lower revenues. 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 2020.
Net sales for the Power segment increased $25 million for the year ended December 31, 2018 compared to 2017. The
increase primarily reflected higher spot market rates.
Operating income for the Power segment increased $12 million for the year ended December 31, 2018 compared to 2017
primarily due to higher spot market rates, partially offset by higher fuel costs.
Turkey Segment
(Millions of dollars)
Loss from affiliate
2019
2018 2017
$
(21) $ (16) $
(4)
The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball. The increase
in loss from affiliate for 2019 compared to 2018 was primarily the result of higher production and other costs, including
interest, partially offset by higher prices for turkey products sold. Management is unable to predict future market prices
for turkey products or the cost of feed. Based on market conditions, management currently cannot predict if this segment
will be profitable in 2020.
The increase in income from affiliate for 2018 compared to 2017 was primarily the result of higher logistics and production
costs and lower volumes of turkey products sold in 2018, partially offset by Seaboard’s proportionate share of the
Illinois plant closure during 2017. Butterball closed a further processing plant located in Illinois and recognized fixed asset
impairment charges and accrued severance. Seaboard’s proportionate share of these charges, recognized in income (loss)
from affiliates, was $18 million, all recorded in 2017.
Selling, General and Administrative Expenses
Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2019 increased $22 million
compared to 2018. The increase was primarily the result of increased personnel-related costs, including higher costs related
to Seaboard’s deferred compensation program and the businesses acquired. The deferred compensation program costs are
offset by the effect of the mark-to-market on investments recorded in other investment income (loss). SG&A expenses for
the year ended December 31, 2018 increased $5 million compared to 2017. The increase was primarily the result of
increased personnel-related costs in the CT&M segment, related to the business acquired in January 2018, partially offset
by lower costs related to Seaboard’s deferred compensation program. As a percentage of revenues, SG&A was 5% for
2019, 2018 and 2017.
Interest Expense
Interest expense totaled $36 million, $44 million and $29 million for the years ended December 31, 2019, 2018 and 2017,
respectively. The decrease in interest expense for 2019 compared to 2018 primarily related to lower interest rates on
outstanding debt for the Sugar and Alcohol segment and more capitalized interest related to capital expenditure
investments, partially offset by higher debt outstanding related to the Term Loan due 2028 amended in September 2018.
The increase in interest expense for 2018 compared to 2017 primarily related to more debt outstanding, an increase in
interest rates and less capitalized interest.
Interest Income
Interest income totaled $28 million, $11 million and $15 million for the years ended December 31, 2019, 2018 and 2017,
respectively. The increase for 2019 compared to 2018 was primarily due to increased investments in debt securities.
22
Interest Income from Affiliates
Interest income from affiliates totaled $2 million, $3 million and $22 million for the years ended December 31, 2019, 2018
and 2017, respectively. The decrease for 2018 compared 2017 primarily related to the Butterball note receivable, which
was repaid in December 2017.
Other Investment Income (Loss), Net
Other investment income (loss), net totaled $225 million, $(152) million and $177 million for the years ended
December 31, 2019, 2018 and 2017, respectively. The changes primarily reflect mark-to-market fluctuations on short-term
investments.
Foreign Currency Gains, Net
Foreign currency gains, net totaled $0 million, $4 million and $14 million for the years ended December 31, 2019, 2018
and 2017, respectively. The decrease in foreign currency gains for 2019 compared to 2018 primarily reflected losses in the
Argentine peso, partially offset by fluctuations of other currency exchange rates in several foreign countries. The decrease
in foreign currency gains for 2018 compared to 2017 primarily reflected losses in the euro and British pound on Seaboard’s
short-term investments and the Zambian kwacha, partially offset by gains in the Argentine peso, among fluctuations of
other currency exchange rates in several foreign countries. The Sugar and Alcohol segment’s functional currency became
the U.S. dollar in mid-2018 due to highly inflationary accounting and any translation gains or losses are recorded in the
income statement rather than other comprehensive income.
Income Tax Expense
The 2019 effective tax rate was lower than the 2018 effective tax rate primarily due to increased federal investment tax
credits and more tax-exempt income from the retroactive extension of the federal blender’s credits in December 2019 for
both 2018 and 2019. Also, the 2018 rate was impacted by the change in tax classification of a wholly owned subsidiary
from a partnership to a corporation and an adjustment to the Tax Cuts and Jobs Act (“2017 Tax Act”) income tax liability.
The 2018 effective tax rate was lower than 2017 primarily due to a current year loss versus prior year earnings, tax exempt
income from the retroactive extension of the 2017 federal blender’s credits during the first quarter of 2018 and the lower
statutory U.S. federal income tax rate per the 2017 Tax Act. The decrease was partially offset by a tax classification entity
change, additional tax related to the 2017 Tax Act and a change in mix of domestic and foreign earnings from the prior
year. See Note 14 to the consolidated financial statements for further information on Seaboard’s income taxes.
OTHER FINANCIAL INFORMATION
See Note 1 to the consolidated financial statements for a discussion of recently issued accounting standards.
CRITICAL ACCOUNTING ESTIMATES
This discussion and analysis of financial condition and results of operations is based upon Seaboard’s consolidated
financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements
requires Seaboard to make estimates, judgments, and assumptions that can have a meaningful effect on the reporting of
consolidated financial statements. See Note 1 for a discussion of significant accounting policies. 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 effect on future evaluations. Furthermore, Seaboard’s total gross
current receivables are weighted toward foreign receivables ($390 million or 59% as of December 31, 2019), including
foreign receivables due from affiliates ($81 million as of December 31, 2019), 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, 2019, 2018 and 2017
was $5 million, $7 million and $12 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
23
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 the value of inventory
or decreased future margins on the sale of inventory.
Impairment of Long-Lived Assets – The recoverability of long-lived assets, primarily property, plant and equipment and
definite-lived intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Some of the key assumptions utilized in determining future projected cash flows
include estimated growth rates, expected future sales prices, estimated costs, royalty rates and terminal values. 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 or definite-lived intangibles, resulting in a
material charge to earnings.
Lease liabilities and right of use assets – For leases other than short-term leases, Seaboard recognizes right of use assets
and lease liabilities based primarily on the present value of future minimum lease payments over the lease term at lease
commencement. As Seaboard’s leases do not have readily determinable implicit discount rates, Seaboard adjusts its
incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate
represents an estimate of the interest rate that would be required to borrow on a collateralized basis over a similar term an
amount equal to the lease payments in a similar economic environment. Seaboard determines the incremental borrowing
rates for its leases by adjusting the local risk-free interest rate on its Term Loan due 2028 with a credit risk premium
corresponding to Seaboard’s unreported credit rating. Estimation of the incremental borrowing rate requires judgment by
management and reflects an assessment of Seaboard’s credit standing to derive an implied secured credit rating and
corresponding yield curve. The discount rate is further impacted by Seaboard’s global footprint, operating in more than
45 countries with diverse economies, and related foreign currency rates. Changes in management’s estimates of discount
rate assumptions could result in a significant overstatement or understatement of right of use assets or lease liabilities,
resulting in an adverse impact to Seaboard’s financial position.
Equity Method Investments – Seaboard has numerous investments in and advances to various businesses that it owns
50% or less 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.
In addition, Seaboard may need to write down any affiliate or notes receivables to estimated realizable value. Information
and events creating uncertainty about the realization of recorded amounts for notes include, but are not limited to, the
estimated cash flows to be 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.
Income Taxes – Income taxes are determined by management based on current tax regulations in the various worldwide
taxing jurisdictions in which Seaboard conducts its business. In various situations, accruals have been made for estimates
of the tax effects for certain transactions, business structures, the estimated reversal of timing differences and future
projected profitability of Seaboard’s various business units based on management’s interpretation of existing facts,
circumstances and tax regulations. Should new evidence come to management’s attention that could alter previous
24
conclusions or if taxing authorities disagree with the positions taken by Seaboard, the change in estimate could result in a
material adverse or favorable impact on the financial statements.
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, 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 a decrease in pension expense
of approximately $1 million per year. The effects of actual results differing from the assumptions (i.e. gains or losses) are
primarily accumulated in accrued pension liability and amortized over future periods if it exceeds the 10% corridor and,
therefore, could affect Seaboard’s recognized pension expense in such future periods, as permitted under GAAP. See Note
10 to the consolidated financial statements for discussion of the pension rates and assumptions.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
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 these overall market risks; however, Seaboard does not perform the extensive record-
keeping required to account for derivative transactions as hedges. Management believes it uses derivatives primarily as
economic hedges, although they do not qualify as hedges for accounting purposes. Since these derivatives are not
accounted for as hedges, fluctuations in the related prices could have a material impact on earnings in any given year.
From time to time, Seaboard also enters into speculative derivative transactions related to its market risks.
Commodity price changes 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 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 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 as December 31, 2019 and 2018, are presented in Note 4 to the
consolidated financial statements.
The political and economic conditions of the countries in which Seaboard 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. Since 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 agreements. Also, since 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.
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, 2019 and 2018, the fair value of Seaboard’s
marketable equity securities was approximately $910 million and $878 million, respectively. Seaboard enters into equity
futures contracts to manage the equity price risk with respect to certain short-term investments.
25
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,
foreign exchange rates and interest rates as of December 31, 2019 and 2018. 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
Vegetable oils
Energy related resources
Hogs
Equity prices
Foreign currencies
December 31, 2019 December 31, 2018
23
12 $
$
—
4
1
2
2
—
88
91
10
11
The table below provides information about Seaboard’s long-term debt that is sensitive to changes in interest rates as of
December 31, 2019. For this variable rate debt, the table presents principal cash flows and related weighted average interest
rates by expected maturity dates.
(Millions of dollars)
Long-term debt:
$
Variable rate
Weighted average interest rate
2020
2021
2022
2023
2024
Thereafter Total
62 $
3.35%
9 $
4.59%
8 $
4.35%
7 $
7 $
656 $
3.70%
3.42%
3.42%
749
3.44%
Long-term debt sensitive to changes in interest rates as of December 31, 2018 totaled $735 million with a weighted average
interest rate of 4.16%.
26
Item 8. Financial Statements and Supplementary Data
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, 2019 and 2018, 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, 2019, 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, 2019 and 2018, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31, 2019, 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, 2019, 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 19, 2020 expressed an unqualified opinion on the effectiveness
of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for
leases as of January 1, 2019 due to the adoption of Accounting Standards Update 2016-02 – Leases (Topic 842).
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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate
to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Evaluation of lease liabilities
As discussed in Notes 1 and 6 to the consolidated financial statements, the Company’s lease liabilities as of
December 31, 2019 were $528 million. The lease liability represents the obligation to make the lease payments
arising from leases, measured on a discounted basis, using an estimated incremental borrowing rate.
We identified the evaluation of the Company’s lease liability recorded as of January 1, 2019, the transition date
for the adoption of Accounting Standards Update 2016-02 – Leases (Topic 842), to be a critical audit matter.
27
Specialized skills were required to evaluate the Company’s assumptions used to determine the lease liability,
specifically the incremental borrowing rates.
The primary procedures we performed to address this critical audit matter included the following. We tested
certain internal controls over the Company’s lease liability determination process including controls to evaluate
the incremental borrowing rates used to calculate the lease liability. We involved a valuation professional with
specialized skills and knowledge, who assisted in understanding the Company’s methodology and assumptions
used to determine the incremental borrowing rates. The valuation professional also assisted us in developing an
independent estimate of the incremental borrowing rates. We compared the independent estimate of the
incremental borrowing rates to those utilized by the Company, and we performed sensitivity analyses over the
incremental borrowing rates to assess the impact on the Company’s calculation of the lease liability.
Evaluation of the sufficiency of audit evidence over revenue
As described in Note 13 to the consolidated financial statements, the Company earned $6.8 billion of revenue in
2019. The revenue was primarily generated by the Pork, Commodity, Trading and Milling, Marine, Sugar and
Alcohol, and Power reporting segments. Within these reporting segments, the Company has operating locations
associated with consolidated entities in over 45 countries. Revenue generated based on the location of the
operations sourcing the product or service primarily resides within the United States, Colombia, and South Africa,
and comprised 42% of revenue. The remaining 58% of revenue was sourced from other countries throughout the
Caribbean, Central, and South America, Africa, Pacific Basin and Far East, Canada/Mexico, Europe, and other
countries.
We identified the evaluation of the sufficiency of audit evidence over revenue as a critical audit matter. The
geographical dispersion of revenue required especially subjective auditor judgment in determining which
locations to perform procedures and evaluating the sufficiency of audit evidence. Furthermore, given the time
zone, language and business composition differences between countries, our audit team consisted of auditors
located in multiple countries around the world.
The primary procedures we performed to address this critical audit matter included the following. We evaluated
the nature and amounts of the Company’s revenue at its various locations and applied auditor judgment to
determine the locations at which procedures were to be performed. We tested certain internal controls over the
Company’s revenue process, including controls related to the recognition and consolidation of global revenue
amounts. We tested a sample of individual revenue transactions by comparing the amounts recognized by the
Company to relevant underlying documentation such as contracts. In addition, we evaluated the overall
sufficiency of audit evidence obtained over revenue.
We have served as the Company’s auditor since 1959.
Kansas City, Missouri
February 19, 2020
28
SEABOARD CORPORATION
Consolidated Statements of Comprehensive Income
(Millions of dollars except share and per share amounts)
Net sales:
Products (includes sales to affiliates of $1,346, $1,282 and $1,123)
Services revenues (includes sales to affiliates of $18, $12 and $7)
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
Loss from affiliates
Other investment income (loss), net
Foreign currency gains, net
Miscellaneous, net
Total other income (loss), net
Earnings (loss) before income taxes
Income tax expense
Net earnings (loss)
Less: Net loss attributable to noncontrolling interests
Net earnings (loss) attributable to Seaboard
Earnings (loss) per common share
Average number of shares outstanding
Years ended December 31,
2018
2019
2017
$
5,610 $
1,104
126
6,840
5,334 $
1,116
133
6,583
5,322
989
89
6,400
440
336
104
(36)
28
2
(41)
225
—
2
180
284
(1)
283 $
—
283 $
4,990
971
99
6,060
523
314
209
(44)
11
3
(44)
(152)
4
(3)
(225)
(16)
(1)
(17) $
—
(17) $
$
$
4,693
1,009
107
5,809
4,298
879
83
5,260
549
309
240
(29)
15
22
(7)
177
14
(5)
187
427
(181)
246
1
247
242.78 $
$
1,165,758
(14.61) $
211.01
1,170,550
1,170,501
Other comprehensive income (loss), net of income tax benefit (expense) of
$4, $(2) and $3:
Foreign currency translation adjustment
Unrealized gain on investments
Unrecognized pension cost
Other comprehensive loss, net of tax
Comprehensive income (loss)
Less: Comprehensive loss attributable to noncontrolling interests
Comprehensive income (loss) attributable to Seaboard
(20)
—
(10)
(30) $
253
—
253 $
(53)
—
3
(50) $
(67)
1
(66) $
(6)
5
(4)
(5)
241
1
242
$
$
See accompanying notes to consolidated financial statements.
29
SEABOARD CORPORATION
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
Other
Total receivables
Allowance for doubtful accounts
Net receivables
Inventories
Prepaid expenses
Other current assets
Total current assets
Net property, plant and equipment
Operating lease right of use assets, net
Investments in and advances to affiliates
Goodwill
Other intangible assets, net
Other non-current assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Lines of credit
Current maturities of long-term debt
Accounts payable (includes $14 and $20 to affiliates)
Accrued compensation and benefits
Deferred revenue (includes $32 and $31 to affiliates)
Operating lease liabilities
Accrued voyage costs
Other current liabilities
Total current liabilities
Long-term debt, less current maturities
Long-term operating lease liabilities
Accrued pension liability
Deferred income taxes
Long-term income tax liability
Other liabilities
Total non-current liabilities
Commitments and contingent liabilities
Stockholders’ equity:
December 31,
2019
2018
$
125 $
1,434
370
109
195
674
(28)
646
1,022
48
75
3,350
1,431
446
735
164
58
101
6,285 $
246 $
62
368
131
80
104
68
130
1,189
730
379
159
76
62
136
1,542
$
$
194
1,336
392
111
81
584
(33)
551
815
55
76
3,027
1,160
—
804
167
69
80
5,307
148
39
238
123
70
—
58
108
784
739
—
136
127
73
119
1,194
Common stock of $1 par value. Authorized 1,250,000 shares; issued and outstanding
1,164,848 shares in 2019 and 1,169,217 shares in 2018
Accumulated other comprehensive loss
Retained earnings
Total Seaboard stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and stockholders’ equity
1
(440)
3,983
3,544
10
3,554
6,285 $
1
(410)
3,727
3,318
11
3,329
5,307
$
See accompanying notes to consolidated financial statements.
30
SEABOARD CORPORATION
Consolidated Statements of Cash Flows
(Millions of dollars)
Cash flows from operating activities:
Years ended December 31,
2018
2017
2019
Net earnings (loss)
Adjustments to reconcile net earnings (loss) to cash from operating activities:
$
283 $
(17) $
246
Depreciation and amortization
Deferred income taxes
Mandatory deemed repatriation tax
Loss 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 assets
Other liabilities, exclusive of debt
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 non-consolidated affiliate
Acquisition of businesses
Investments in and advances to affiliates, net
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:
Lines of credit, net
Proceeds from long-term debt
Principal payments of long-term debt
Repurchase of common stock
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
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of interest capitalized
Income taxes, net of refunds
138
(55)
(11)
41
10
(225)
7
(84)
(152)
5
22
192
171
(1,026)
973
185
(349)
24
(7)
(21)
8
(38)
(2)
(253)
134
(20)
14
44
23
152
5
(58)
(34)
31
13
(49)
238
(1,130)
1,191
53
(162)
—
(264)
(26)
4
(21)
6
(349)
34
43
(35)
(17)
(10)
(4)
11
2
(69)
194
125 $
—
251
(46)
(5)
(7)
(3)
190
(1)
78
116
194 $
118
39
112
7
24
(177)
(9)
(12)
(21)
(51)
(8)
(23)
245
(767)
606
59
(173)
—
(54)
(87)
167
(12)
(5)
(266)
45
38
(17)
—
(7)
(1)
58
2
39
77
116
$
36
31
$
43
35
30
32
$
$
See accompanying notes to consolidated financial statements.
31
SEABOARD CORPORATION
Consolidated Statements of Changes in Equity
Accumulated
Other
Common Comprehensive Retained Noncontrolling
Stock
$
(304) $ 3,465 $
Earnings
Interests
Loss
(Millions of dollars)
Balances, January 1, 2017
Adoption of accounting guidance (See Note 1)
Comprehensive income:
Net earnings (loss)
Other comprehensive loss, net of tax
Reduction to noncontrolling interests
Dividends on common stock, $6.00/share
Balances, December 31, 2017
Adoption of accounting guidance (See Note 1)
Comprehensive loss:
Net loss
Other comprehensive loss, net of tax
Repurchase of common stock
Additions to noncontrolling interests
Reduction to noncontrolling interests
Dividends on common stock, $6.00/share
Balances, December 31, 2018
Comprehensive income:
Net earnings
Other comprehensive loss, net of tax
Repurchase of common stock
Reduction to noncontrolling interests
Dividends on common stock, $9.00/share
Balances, December 31, 2019
1 $
—
—
—
—
—
1
—
—
—
—
—
—
—
1
—
—
—
—
—
1 $
$
(45)
45
—
(5)
—
—
(354)
(7)
—
(49)
—
—
—
—
(410)
—
(30)
—
—
—
247
—
—
(7)
3,750
7
(17)
—
(5)
—
(1)
(7)
3,727
283
—
(17)
—
(10)
(440) $ 3,983 $
Total
13 $ 3,175
—
—
(1)
—
(1)
—
11
—
—
(1)
—
4
(3)
—
11
246
(5)
(1)
(7)
3,408
—
(17)
(50)
(5)
4
(4)
(7)
3,329
283
—
(30)
—
(17)
—
(1)
(1)
(10)
—
10 $ 3,554
See accompanying notes to consolidated financial statements.
32
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Note 1 - Summary of Significant Accounting Policies
Operations of Seaboard Corporation and its Subsidiaries
Seaboard Corporation and its subsidiaries (collectively, “Seaboard”) together comprise a diverse global agribusiness and
transportation company. In the United States (“U.S.”), Seaboard is primarily engaged in hog production and pork
processing and ocean transportation. Overseas, Seaboard is primarily engaged in commodity merchandising, grain
processing, sugar and alcohol production and electric power generation. Seaboard also has an equity method investment
in Butterball, LLC (“Butterball”), a producer and processor of branded and non-branded turkey products. Approximately
77% of the outstanding common stock of Seaboard is collectively owned by Seaboard Flour LLC and SFC Preferred, LLC.
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. 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.
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
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, lease liabilities and right of use (“ROU”) assets and accrued pension liability. Actual results could differ from those
estimates.
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. Certain CT&M segment consolidated subsidiaries located in Brazil, Canada, Guyana, Ivory Coast,
Senegal, South Africa and Zambia use local currency as their functional currency. Also, certain non-controlled, non-
consolidated affiliates of the CT&M and Sugar and Alcohol segments 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.
GAAP requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds
100%. In the second quarter of 2018, the Argentine peso rapidly devalued relative to the U.S. dollar, which along with
increased inflation, indicated that the three-year cumulative inflation in that country exceeded 100%. As a result, Seaboard
adopted highly inflationary accounting as of July 1, 2018 for Seaboard’s Sugar and Alcohol segment. Under highly
inflationary accounting, the Sugar and Alcohol segment’s functional currency became the U.S. dollar, and its income
statement and balance sheet are measured in U.S. dollars using both current and historical rates of exchange. The effect of
changes in exchange rates on peso-denominated monetary assets and liabilities are reflected in foreign currency gains
(losses), net. For the years ended December 31, 2019 and 2018, Seaboard recognized $(3) million and $9 million in foreign
currency gains (losses) related to the adoption of highly inflationary accounting as a result of its net monetary liability
position.
33
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
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.
Supplemental Cash Flow Information
For the year ended December 31, 2019, cash paid for amounts included in the measurement of operating lease liabilities
was $137 million, all included in net cash from operating activities. Cash paid for amounts included in the measurement
of finance lease liabilities was $3 million, with principal payments of $2 million included in financing activities and interest
of $1 million included in operating activities. Seaboard reports the amortization of ROU assets and the change in operating
lease liabilities in other liabilities, exclusive of debt in the consolidated statement of cash flows. Right of use assets
obtained in exchange for new and modified operating and finance lease liabilities were $95 million and $46 million,
respectively, for the year ended December 31, 2019. Other non-cash activities were related to the non-cash consideration
paid in the acquisitions discussed further in Note 2, including incurrence of debt and contingent consideration.
Short-Term Investments
Short-term investments are categorized as trading securities and reported at their estimated fair value with any unrealized
gains and losses included in other investment income (loss), net in the consolidated statements of comprehensive income.
Purchases and sales are recorded on a settlement date basis, and gains and losses on investment sales are generally based
on the specific identification method. Short-term investments are retained for future use in the business.
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. Management believes its allowance for doubtful accounts is adequate and reduces receivables
recorded to their expected net realizable value. As of December 31, 2019 and 2018, Seaboard had gross non-affiliate
foreign receivables of approximately $309 million and $327 million, respectively, which generally represent more of a
collection risk than the domestic receivables, although as of December 31, 2019 no individual material amounts were
deemed to have a heightened risk of collectability. Account balances are charged off against the allowance after all means
of collection have been exhausted and the potential for recovery is considered remote. The activity within the allowance
for doubtful accounts was as follows:
(Millions of dollars)
Allowance for Doubtful Accounts:
Year Ended December 31, 2019
Year Ended December 31, 2018
Year Ended December 31, 2017
Balance at
Balance at
beginning of year Provision(a) Net deductions(b) end of year
$
$
$
33
29
14
5
7
16
(10) $
(3) $
(1) $
28
33
29
(a)
(b)
During 2019 and 2018, $5 million and $7 million, respectively, of the provision was charged to selling, general
and administrative expenses. During 2017, $12 million of the provision was charged to selling, general and
administrative expenses, $2 million to income from affiliates related to reserves on convertible notes and
$2 million to cost of sales related to a rebate reserve.
Includes write-offs net of recoveries, foreign currency translation adjustments and other adjustments.
Notes Receivable
Seaboard monitors the credit quality of notes receivable, the majority of which are from its affiliates. For notes receivable
from affiliates, Seaboard obtains and reviews financial information on a monthly basis and Seaboard representatives serve
on their Board of Directors. If it is indicated 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 and an amount can be
reasonably estimated, Seaboard reduces the notes receivable to estimated realizable value.
34
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
The activity within the allowance for notes receivable was as follows:
(Millions of dollars)
Allowance for Notes Receivable:
Year Ended December 31, 2019
Year Ended December 31, 2018
Year Ended December 31, 2017
Balance at
Balance at
beginning of year Provision Net deductions end of year
$
$
$
17
16
16
—
1
—
— $
— $
— $
17
17
16
Inventories
Seaboard uses the lower of last-in, first-out (“LIFO”) cost or market for determining inventory cost of hogs, fresh pork
products 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 under finance leases are stated at the present value of minimum
lease payments and subsequently amortized using the straight-line method over the earlier of the end of its useful life or
the end of the lease term. Routine and planned major maintenance, repairs and minor renewals are expensed as incurred,
while major renewals and improvements are capitalized. Property, plant and equipment and other long-lived assets 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.
Right of Use Assets and Lease Liabilities
ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease
payments over the lease term. The present value of lease payments is determined primarily using the incremental
borrowing rate based on the information available at the lease commencement date. Seaboard has elected not to recognize
ROU assets and lease liabilities for short-term leases for all classes of underlying assets. Short-term leases are leases with
terms greater than 1 month, but less than 12 months. Also, Seaboard elected to account for lease and nonlease maintenance
components as a single lease component for all classes of underlying assets.
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. 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. If qualitative factors indicate more likely than not an
impairment is possible, Seaboard performs its annual, or interim, goodwill impairment test by comparing the fair value of
a reporting unit with its carrying amount and would recognize an impairment charge for the amount by which the carrying
amount exceeds the reporting unit’s fair value. Based on the annual assessment conducted by these reporting units, there
were no impairment charges recorded for the year ended December 31, 2019.
The changes in the carrying amount of goodwill were as follows:
(Millions of dollars)
Balance as of December 31, 2017
Acquisition
Foreign currency translation
Balance as of December 31, 2018
Acquisition
Foreign currency translation
Balance as of December 31, 2019
Pork
CT&M
Segment Segment
$
$
Total
18
—
—
18
—
—
18
4 $
148
(3)
149
1
(4)
146 $
$
22
148
(3)
167
1
(4)
164
$
35
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Separable intangible assets with finite lives are amortized over their estimated useful lives and evaluated for impairment
similar to property, plant and equipment discussed above. The gross carrying amount and accumulated amortization for
finite-lived intangible were as follows:
December 31, 2019
December 31, 2018
Customer Trade
relationships names Total
(Millions of dollars)
Gross carrying amount
$
Accumulated amortization and currency translation
$
Net carrying amount
50 $
(13)
37 $
28 $
(7)
21 $
78 $
(20)
58 $
Customer Trade
relationships names Total
78
(9)
69
28 $
(3)
25 $
50 $
(6)
44 $
Amortization of intangible assets was $8 million and $6 million for the years ended December 31, 2019 and 2018,
respectively. Using the exchange rates in effect at year-end, estimated amortization of intangible assets as of
December 31, 2019 was as follows: $8 million in 2020, $8 million in 2021, $8 million in 2022, $8 million in 2023,
$8 million in 2024 and $18 million thereafter.
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 in 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:
(Millions of dollars)
Beginning balance
Accretion expense
Ending balance
Years ended December 31,
2019
2018
$
$
23
2
25
$
$
22
1
23
Revenue Recognition
Seaboard recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount
that reflects the consideration it expects to receive in exchange for those goods or services. A performance obligation is a
promise in a contract to transfer a distinct good or service to the customer. The majority of Seaboard’s revenue
arrangements consist of a single performance obligation as the promise to transfer the individual product or service is not
separately identifiable from other promises in the contracts, including shipping and handling and customary storage, and,
therefore, not distinct. Seaboard’s transaction prices are mostly fixed, but occasionally include minimal variable
consideration for early payment, volume and other similar discounts, which are highly probable based on the history with
the respective customers. Taxes assessed by a governmental authority that are collected by Seaboard from a customer are
excluded from sales.
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.
36
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Seaboard uses derivative instruments to manage various types of market risks, including primarily commodity futures and
option contracts, foreign currency exchange agreements, interest rate exchange agreements and equity future contracts.
While management believes each of these instruments are primarily entered into in order to effectively manage various
market risks, as of December 31, 2019, 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 materials requirements.
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.
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.
Recently Issued Accounting Standards Adopted
On January 1, 2019, Seaboard adopted guidance which requires the recognition of ROU assets and lease liabilities for
most leases. As a result of this adoption, Seaboard recorded operating lease ROU assets of $460 million, adjusted for the
deferred rent liability balance as of December 31, 2018, and lease liabilities of $498 million. The adoption of the new
guidance did not have a material impact on the consolidated statement of comprehensive income and the consolidated
statement of cash flows. The accounting for finance leases, formerly called capital leases, remained substantially
unchanged. Seaboard adopted the new guidance using the effective date method and, therefore, prior period financials
were not revised. Seaboard elected the package of practical expedients available upon transition, which permitted Seaboard
to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. See Note
6 for additional details on the impact of adopting this new accounting standard.
On January 1, 2018, Seaboard adopted guidance that eliminated cost method accounting and requires measuring equity
investments, other than those accounted for using the equity method of accounting, at fair value and recognizing fair value
changes in net income if a readily determinable fair value exists. On January 1, 2018, $7 million of accumulated other
comprehensive loss was reclassified to retained earnings by means of a cumulative effect adjustment, and all future
gains/losses on these equity investments is reflected in other investment income (loss), net.
Seaboard early adopted guidance that permitted companies to reclassify stranded tax effects resulting from the Tax Cuts
and Job Act from accumulated other comprehensive income (“AOCI”) to retained earnings. Seaboard reclassified
$45 million of tax effects from AOCI to retained earnings for the year ended December 31, 2017.
Recently Issued Accounting Standards Not Yet Adopted
In June 2016, the Financial Accounting Standards Board (“FASB”) issued guidance on the measurement of financial
instrument credit losses that requires, among other things, the use of a new current expected credit loss ("CECL") model
in order to determine the allowance for doubtful accounts with respect to accounts receivable and notes receivable. The
CECL model requires estimation of lifetime expected credit loss based on historical experience, current conditions and
reasonable supportable forecasts. The new guidance replaces the existing incurred loss model and will be effective for
Seaboard on January 1, 2020. Seaboard expects the cumulative-effect adjustment to retained earnings will be less than
$5 million.
In December 2019, the FASB issued guidance which simplifies the accounting for income taxes by removing certain
exceptions to the general principles and improves consistent application of GAAP for other areas by clarifying and
amending existing guidance. This guidance is effective for Seaboard on January 1, 2021. Seaboard is evaluating the effect
of adopting this new accounting guidance but does not expect adoption will have a material impact on its disclosures.
Note 2 - Acquisitions
On October 28, 2019, Seaboard’s CT&M segment increased its ownership percentage from 50% to 100% to obtain control
of ContiLatin del Peru S.A., an importer and trader of grains in Peru (“CLDP”). Seaboard accounted for this transaction
as a business combination achieved in stages. Total consideration for the purchase price included $7 million of cash paid,
net of $2 million cash acquired, Seaboard’s previously held equity interest in CLDP remeasured at its acquisition-date fair
value of $9 million and pre-existing affiliate trade receivables fair valued at the acquisition date of $13 million.
37
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Seaboard is currently completing the fair value assessment of the acquired assets and liabilities and any adjustments
identified in the measurement period, which will not exceed one year from the acquisition date, will be accounted for
prospectively. The following table summarizes the preliminary purchase price allocation resulting from this consolidation:
(Millions of dollars)
Receivables
Inventories
Other current assets
Property, plant and equipment
Goodwill
Total fair value of assets acquired
Lines of credit
Current maturities of long-term debt
Other current liabilities
Long-term debt, less current maturities
Total fair value of liabilities assumed
Net fair value of assets acquired
$
$
33
55
7
12
1
108
(65)
(2)
(6)
(6)
(79)
29
Goodwill represents CLDP’s market presence and its experienced workforce. For the year ended December 31, 2019, net
sales of $87 million and net loss of $2 million were recognized 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. Seaboard incurred no acquisition costs.
On January 5, 2018, Seaboard’s CT&M segment acquired substantially all of the outstanding common shares of Borisniak
Corp., Les Grands Moulins d’Abidjan, Les Grands Moulins de Dakar, Eurafrique, and Societe Mediterraneenne de
Transport, collectively operating as Groupe Mimran (“Mimran”). Mimran operates three flour mills and an associated
grain trading business located in Senegal, Ivory Coast and Monaco. This acquisition increased Seaboard’s flour and feed
milling capacity and annual grain trading volume.
The total purchase price for this acquisition based on the acquisition date fair values and using the exchange rate in effect
at the time of acquisition, was $324 million consisting of:
(Millions of dollars)
Cash payment, net of $64 million of cash acquired
Euro-denominated note payable due 2021, 3.25% interest
Contingent consideration
Total fair value of consideration at acquisition date
$
$
264
46
14
324
See Note 8 for further description of the note payable. The fair value of the contingent consideration, classified in other
non-current liabilities in the consolidated balance sheet, is dependent on the probability of Mimran achieving certain
financial performance targets using earnings before interest, taxes, depreciation and amortization (“EBITDA”) as a metric.
The contingent consideration ranges between zero and $48 million payable between five and eight years following the
closing, at the discretion of the sellers. The note payable and the contingent consideration are noncash transactions that
were excluded from the consolidated statement of cash flows for the year ended December 31, 2018.
38
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
The following table summarizes the purchase price allocation resulting from this acquisition:
(Millions of dollars)
Current assets
Property, plant and equipment
Intangible assets
Goodwill
Other long-term assets
Total fair value of assets acquired
Current liabilities
Other long-term liabilities
Total fair value of liabilities assumed
Less: Noncontrolling interest
Net fair value of assets acquired
$
$
83
91
78
148
4
404
(38)
(38)
(76)
(4)
324
The intangible assets include $28 million allocated to trade names, amortizable over 9 years, and $50 million allocated to
customer relationships, amortizable over 9 years. Goodwill represents Mimran’s market presence and its experienced
workforce. The intangible assets and goodwill are not deductible for income tax purposes.
Certain Mimran entities acquired are accounted for on a three-month lag and use local currency as their functional
currency. Translation gains and losses are recorded as components of other comprehensive income (loss). For the year
ended December 31, 2018, net sales of $247 million and net earnings of $17 million were recognized in Seaboard’s
consolidated financial statements from the date of acquisition. Acquisition costs incurred primarily in 2017, of $2 million
were expensed in selling, general and administrative expenses.
The following unaudited pro forma information presents the combined consolidated financial results for Seaboard as if the
acquisition had been completed at January 1, 2017:
(Unaudited)
(Millions of dollars except per share amounts)
Net sales
Net earnings (loss)
Earnings (loss) per common share
Year ended
December 31,
2018
2017
6,643 $
(13) $
(10.90) $
6,095
272
233.45
$
$
$
Note 3 - Investments
The following is a summary of the estimated fair value of short-term investments classified as trading securities:
(Millions of dollars)
Domestic equity securities
Domestic debt securities
Foreign equity securities
High yield securities
Foreign debt securities
Collateralized loan obligations
Money market funds held in trading accounts
Other trading securities
Total trading short-term investments
December 31,
2019
2018
706
409
189
56
43
15
12
4
1,434
$
$
632
268
218
19
16
28
146
9
1,336
$
$
The change in unrealized gains (losses) related to trading securities still held at the end of the respective reporting period
was $176 million, $(110) million and $146 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Seaboard had $62 million of equity securities denominated in foreign currencies as of December 31, 2019, with $32 million
in euros, $12 million in Japanese yen, $8 million in the British pound and the remaining $10 million in various other
currencies. Seaboard had $66 million of equity securities denominated in foreign currencies as of December 31, 2018,
with $25 million in euros, $20 million in Japanese yen, $9 million in the British pound and the remaining $12 million in
39
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
various other currencies. Seaboard had $13 million of debt securities denominated in euros as of December 31, 2019. Also,
money market funds included less than $1 million and $10 million denominated in various foreign currencies as of
December 31, 2019 and 2018, respectively.
In addition to its short-term investments, Seaboard also has trading securities related to Seaboard’s deferred compensation
plans classified in other current assets in the consolidated balance sheets. See Note 11 for information on the types of
trading securities held related to the deferred compensation plans. See Note 10 for a discussion of assets held in conjunction
with investments related to Seaboard’s defined benefit pension plan.
Note 4 - Inventories
The following table is a summary of inventories:
(Millions of dollars)
At lower of LIFO cost or market:
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,
2019
2018
$
$
387 $
46
(64)
369
353
17
109
479
174
1,022 $
361
36
(58)
339
229
17
81
327
149
815
The use of the LIFO method for certain inventories of the Pork segment decreased net earnings $5 million ($4.10 per
common share), $20 million ($16.87 per common share) and $6 million ($5.40 per common share) for the years ended
December 31, 2019, 2018 and 2017, respectively, after taxes were considered. If the FIFO method had been used for all
inventories of the Pork segment, inventories would have been higher by $64 million and $58 million as of
December 31, 2019 and 2018, respectively. The LIFO valuation reserve activity for 2019, 2018 and 2017 was as follows:
(Millions of dollars)
Reserve for LIFO Valuation:
Year Ended December 31, 2019
Year Ended December 31, 2018
Year Ended December 31, 2017
Balance at
Increase Balance at
beginning of year (decrease) end of year
$
$
$
58
31
21
6 $
27 $
10 $
64
58
31
Note 5 - Net Property, Plant and Equipment
The following table is a summary of property, plant and equipment:
(Millions of dollars)
Land and improvements
Buildings and improvements
Machinery and equipment
Vessels and vehicles
Office furniture and fixtures
Contract growers
Construction in progress
Accumulated depreciation and amortization
Net property, plant and equipment
40
Useful
Lives
3 - 15 years $
30 years
3 - 20 years
3 - 18 years
5 years
5 - 15 years
$
December 31,
2019
2018
238
250 $
591
646
1,298
1,360
147
147
36
42
—
44
96
287
2,406
2,776
(1,345)
(1,246)
1,431 $ 1,160
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Finance lease ROU assets of $50 million, net of $3 million in accumulated amortization, are included in property, plant
and equipment and comprise all of the contract growers asset category, with the remaining balance in buildings, machinery
and equipment and land.
Seaboard’s capitalized interest on construction in progress was $7 million and less than $1 million for the years ended
December 31, 2019 and 2018, respectively.
Note 6 – Leases
Seaboard’s operating leases are primarily for ports, vessels, contract grower assets, and to a lesser extent, land, buildings
and machinery and equipment. Seaboard’s finance leases are primarily for contract grower assets. Seaboard’s Marine
segment leases its PortMiami terminal, among other ports. The Marine and CT&M segments lease vessels for use in
operations. The Pork segment has contract grower agreements in place with farmers to raise a portion of Seaboard’s hogs
using the farmer’s buildings, land and equipment. Seaboard’s nonlease components are primarily for services related to
labor associated with caring for hogs in its contract grower agreements and crew services on vessel charter arrangements.
As of December 31, 2019, the weighted average remaining lease term for Seaboard’s operating and finance leases was
approximately six years and nine years, respectively. Seaboard’s lease terms vary depending upon the class of asset and
some leases include options to extend or terminate. Since Seaboard is not reasonably certain to exercise these renewal or
termination options, the options are not considered in determining the lease term and associated potential option payments
or penalties are excluded from lease payments.
Seaboard’s operating lease assets and liabilities are reported separately in the consolidated balance sheet. The classification
of Seaboard’s finance leases in the consolidated balance sheet as of December 31, 2019 was as follows:
(Millions of dollars)
Finance lease right of use assets, net
Finance lease liabilities
Non-current finance lease liabilities
Property, plant and equipment, net
Other current liabilities
Other liabilities
The components of lease cost for 2019 were as follows:
(Millions of dollars)
Operating lease cost
Finance lease cost:
Amortization of right of use assets
Interest on lease liabilities
Variable lease cost
Short-term lease cost
Total lease cost
$
$
$
50
5
40
138
3
1
7
48
197
Operating lease cost and short-term lease cost are recognized on a straight-line basis over the lease term. Finance lease
cost is recognized based on the effective interest method for the lease liability and straight-line amortization of the ROU
asset. Variable lease payments are recognized when the circumstance in the lease agreement on which those payments are
assessed occurs. Variable lease payments are primarily for payments in excess of minimums with regards to throughput
of shipping containers. Short-term leases are primarily for containers and vessels at Seaboard’s Marine segment. Lease
cost is included in various line items in the consolidated statements of comprehensive income or capitalized to inventory.
Rental expense for leases with terms of a month or less are excluded from the total lease cost above.
Rental expense for facility and equipment operating leases for all segments was $46 million and $44 million in 2018 and
2017, respectively. The Marine and CT&M segments’ vessel charter hire expenses during 2018 and 2017 totaled
$111 million and $96 million, respectively. The Pork segment paid $48 million and $37 million for contract grower
agreements in 2018 and 2017, respectively.
41
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Maturities of lease liabilities as of December 31, 2019 were as follows:
(Millions of dollars)
2020
2021
2022
2023
2024
Thereafter
Total undiscounted lease payments
Less imputed interest
Total lease liability
Operating Finance
Leases
$
Leases
130 $
113
84
58
48
164
597
(114)
483 $
7
7
7
7
7
26
61
(16)
45
$
Seaboard’s weighted average discount rate for operating and finances leases was 6.58% and 6.31%, respectively, as of
December 31, 2019. There were estimates and judgments made in determining Seaboard’s multiple discount rates based
on term, country and currency, including developing a secured credit rating and spreading market yield data across
maturities and country risk-free rates.
Below is Seaboard’s commitments table as of December 31, 2018 that disclosed operating lease payments for the next five
years and thereafter. Seaboard had no material capital leases as of December 31, 2018.
Years ended December 31,
(Millions of dollars)
Ports
Vessel, time and voyage-charters
Contract grower agreements
Other operating lease payments
Total unrecognized non-cancelable commitments
2019 2020 2021 2022 2023 Thereafter
109
$ 18 $ 18 $ 19 $ 19 $ 20 $
25
26
61
37
15
9
210
$ 141 $ 99 $ 91 $ 67 $ 52 $
27
41
13
58
47
18
8
18
6
13
27
8
Note 7 – Equity Method Investments
Seaboard has several investments in and advances to non-controlled, non-consolidated affiliates that are all accounted for
using the equity method of accounting. See Note 15 for detail of the investments in and advances to affiliates by segment.
Financial information from certain foreign affiliates is reported on a one- to three-month lag, depending on the specific
entity.
Pork Segment
(Millions of dollars)
Net sales
Net income (loss)
Total assets
Total liabilities
Total equity
2019
December 31,
2018
2017
$
$
$
$
$
1,453 $
(43) $
639 $
277 $
362 $
927 $
(60) $
623 $
243 $
380 $
441
(21)
596
138
458
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. STF operates a pork processing plant, which began operations in
September 2017. Seaboard’s Pork segment supplies raw materials to both of these facilities for processing and provides
marketing services to STF for its pork products. Combined condensed financial information of these entities for each of
Seaboard’s years ended is included in the table above.
Seaboard and Triumph Foods, LLC (“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 during 2017. 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.
42
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Commodity Trading and Milling Segment
(Millions of dollars)
Net sales
Net income (loss)
Total assets
Total liabilities
Total equity
$
$
$
$
$
December 31,
2018
2019
3,129 $
(12) $
1,697 $
1,075 $
622 $
2017
2,907
23
1,793
1,150
643
3,238 $
(13) $
1,914 $
1,242 $
672 $
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. Combined condensed financial
information of these entities for each of Seaboard’s years ended is included in the table above. As of December 31, 2019,
the location and percentage ownership of CT&M’s affiliates were as follows: Botswana (50%), Democratic Republic of
Congo (50%), Gambia (50%), Kenya (46.64%-49%), Lesotho (50%), Mauritania (50%), Morocco (11.44%-17.08%),
Nigeria (25%-48.33%), Senegal (49%), 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%); and Canada (45%) and the U.S. (40%) in North
America. As of December 31, 2019, the CT&M segment’s carrying value of certain investments in affiliates was more
than its share of the affiliates’ book value by $56 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.
During 2018, Seaboard’s CT&M segment acquired a 50% noncontrolling interest in a grain trading and flour milling
business in Mauritania for total consideration of $16 million.
Marine Segment
(Millions of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
2019
December 31,
2018
2017
$
$
$
$
$
70 $
12 $
269 $
107 $
162 $
66 $
11 $
272 $
133 $
139 $
58
5
229
114
115
The Marine segment has a 21% noncontrolling interest in a cargo terminal business in Jamaica and a 18% noncontrolling
interest in a holding company that owns a Caribbean terminal operation. Combined condensed financial information of
these entities for each of Seaboard’s years ended is included in the table above. As of December 31, 2018, the Marine
segment’s carrying value of certain investments in affiliates was less than its share of the affiliates’ book value by
$29 million. The difference is attributable primarily to the valuation of property, plant and equipment and impairments
taken by Seaboard, but not the respective entity. Certain basis adjustments are being amortized to income (loss) from
affiliates over the remaining life of the assets.
Sugar and Alcohol Segment
(Millions of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
December 31,
2018
2019
$
$
$
$
$
10 $
3 $
13 $
2 $
11 $
2017
10
2
10
2
8
5 $
3 $
10 $
2 $
8 $
The Sugar and Alcohol segment has noncontrolling interests in two sugar-related businesses in Argentina (46% and 50%).
Combined condensed financial information of these entities for each of Seaboard’s years ended is included in the table
above.
43
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Power Segment
(Millions of dollars)
Net sales
Net income
Total assets
Total liabilities
Total equity
December 31,
2018
2019
$
$
$
$
$
143 $
10 $
11 $
4 $
7 $
2017
105
23
265
145
120
138 $
33 $
247 $
139 $
108 $
The Power segment has noncontrolling interests in two energy-related businesses in the Dominican Republic (45% and
50%). In September 2019, Seaboard’s Power segment sold its 29.9% noncontrolling interest in a Dominican Republic
electricity generation facility for $23 million cash, net of $1 million in selling expenses and taxes and recorded a $6 million
note receivable in other non-current assets in the consolidated balance sheet. There was no gain or loss recognized in the
consolidated statements of comprehensive income upon the sale. Combined condensed financial information of these
entities for each of Seaboard’s years ended is included in the table above.
Turkey Segment
(Millions of dollars)
Net sales
Operating income (loss)
Net loss
Total assets
Total liabilities
Total equity
$
$
$
$
$
$
2019
1,612 $
(20) $
(40) $
1,038 $
507 $
531 $
December 31,
2018
2017
1,591 $
(16) $
(30) $
1,072 $
502 $
570 $
1,670
15
(8)
999
400
599
The Turkey segment represents Seaboard’s 50% noncontrolling interest in Butterball, LLC (“Butterball”), a vertically
integrated producer and processor of branded and non-branded turkey products. Butterball’s condensed financial
information for each of Seaboard’s years ended is included in the table above. Within total assets, Butterball had trade
name intangible assets of $111 million and goodwill of $66 million as of December 31, 2019.
In connection with its initial investment in Butterball in December 2010, Seaboard provided Butterball with a $100 million
unsecured subordinated loan that had a cash and compounded pay-in-kind interest component. In December 2017,
Butterball fully repaid the loan that accumulated to $164 million and accrued interest of $6 million. Seaboard holds
warrants, which upon exercise for a nominal price, would enable Seaboard to acquire an additional 5% equity interest in
Butterball. The warrants qualify for equity treatment under accounting standards and are classified as investments in and
advances to affiliates in the consolidated balance sheets. 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 (loss) 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.
44
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Note 8 – Lines of Credit and Long-Term Debt
The outstanding balance under uncommitted lines of credit was $246 million and $148 million as of December 31, 2019
and 2018, respectively. Of the $246 million outstanding as of December 31, 2019, $189 million was denominated in
foreign currencies, with $91 million denominated in the South African rand, $53 million in the Peruvian sol, $24 million
denominated in the Canadian dollar, $19 million denominated in the Zambian kwacha and the remaining in various other
currencies. The weighted average interest rate for outstanding uncommitted lines of credit was 5.79% and 7.76% as of
December 31, 2019 and 2018, respectively. The uncommitted lines of credit 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 that had no outstanding
balance as of December 31, 2019 and 2018, respectively. During 2019, Seaboard renewed this credit line through
September 25, 2020, with no other changes to the agreement. 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. As of December 31, 2019, Seaboard’s borrowing capacity under
its uncommitted and committed lines of credit was reduced by the $246 million drawn and $18 million of letters of credit.
Long-term Debt
Long-term debt includes borrowings under term loans and other contractual obligations for payment, including notes
payable. The following table is a summary of long-term debt:
(Millions of dollars)
Term Loan due 2028
Foreign subsidiary obligations
Total long-term debt at face value
$
Current maturities of long-term debt and unamortized discount and costs
Long-term debt, less current maturities and unamortized discount and costs $
December 31,
2019
2018
691 $
102
793
(63)
730 $
698
81
779
(40)
739
On September 25, 2018, Seaboard Foods LLC entered into an Amended and Restated Term Loan Credit Agreement
(“Credit Agreement”) with CoBank, ACB, Farm Credit Services of America, PCA, and the lenders party thereto. This
Credit Agreement replaced Seaboard Foods LLC’s $500 million unsecured term loan with a $700 million unsecured term
loan (“Term Loan”) and extended the maturity from December 4, 2022 to September 25, 2028. Seaboard Foods LLC
received proceeds of $220 million, net of certain costs. The Term Loan provides for quarterly payments of the principal
balance pursuant to the revised amortization schedule set forth in the Credit Agreement, with the balance due on the
maturity date. The Term Loan bears interest at fluctuating rates based on various margins over a Base Rate, LIBOR or a
Quoted Rate, at the option of the borrower. The interest rate was 3.42% and 4.15% as of December 31, 2019 and 2018,
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 $2.5 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 $100 million per year under certain circumstances. Seaboard Corporation has guaranteed all obligations of Seaboard
Foods LLC under the Term Loan.
Foreign subsidiary long-term debt is primarily denominated in euros and U.S. dollars. In conjunction with the acquisition
discussed in Note 2, Seaboard incurred a euro-denominated note payable due to the sellers with a balance of $44 million
as of December 31, 2019. The change in value from the date of acquisition to the current reporting period reflects foreign
currency fluctuations and the accretion of the discount to the note payable face value over the term that is recorded as
additional interest expense. This foreign subsidiary obligation bears interest at an annual rate of 3.25%, with interest due
annually on the anniversary date, until maturity on January 5, 2021. Seaboard’s Sugar and Alcohol segment, which is on
a one-month lag, has notes payable outstanding of $54 million and $29 million as of December 31, 2019 and 2018,
respectively with maturity dates that range from December 9, 2019 to December 30, 2019. The interest rate on the Sugar
and Alcohol segment’s notes payable was 3.20% and 3.10% as of December 31, 2019 and 2018, respectively. The weighted
average interest rate of all foreign subsidiary debt was 3.50% and 3.80% as of December 31, 2019 and 2018, respectively.
All of the foreign subsidiary debt is guaranteed by Seaboard, except $1 million is secured by property, plant and equipment.
45
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Seaboard was in compliance with all restrictive debt covenants relating to these agreements as of December 31, 2019. The
aggregate minimum principal payments required on long-term debt as of December 31, 2019 were as follows: $62 million
in 2020, $53 million in 2021, $8 million in 2022, $7 million in 2023, $7 million in 2024 and $656 million thereafter.
Note 9 - Commitments and Contingencies
Legal Proceedings
On June 28, 2018, Wanda Duryea and eleven other indirect purchasers of pork products, acting on behalf of themselves
and a putative class of indirect purchasers of pork products, filed a class action complaint in the U.S. District Court for the
District of Minnesota (the “District Court”) against several pork processors, including Seaboard Foods LLC and Agri Stats,
Inc., a company described in the complaint as a data sharing service. Subsequent to the filing of this initial complaint,
additional class action complaints making similar claims on behalf of putative classes of direct and indirect purchasers
were filed in the District Court. The complaints were amended and consolidated for pre-trial purposes, into three
consolidated putative class actions brought on behalf of (a) direct purchasers, (b) consumer indirect purchasers and
(c) commercial and institutional indirect purchasers. The amended complaints named Seaboard Corporation as an
additional defendant. The consolidated actions are styled In re Pork Antitrust Litigation. Subsequent to the original filings,
two additional actions making similar claims, including one by the Commonwealth of Puerto Rico, were brought in or
transferred to the District Court. The complaints alleged, among other things, that beginning in January 2009, the
defendants conspired and combined to fix, raise, maintain, and stabilize the price of pork products in violation of U.S.
antitrust laws by coordinating their output and limiting production, allegedly facilitated by the exchange of non-public
information about prices, capacity, sales volume and demand through Agri Stats, Inc. The complaints on behalf of the
putative classes of indirect purchasers also included causes of action under various state laws, including state antitrust
laws, unfair competition laws, consumer protection statutes and state common law claims for unjust enrichment. The
complaints also alleged that the defendants concealed this conduct from the plaintiffs and the members of the putative
classes. The relief sought in the respective complaints includes treble damages, injunctive relief, pre- and post-judgment
interest, costs and attorneys’ fees on behalf of the putative classes. On August 8, 2019, the District Court granted
defendants’ motion to dismiss the class action cases while giving the plaintiffs leave to amend. The classes and the other
two plaintiffs filed amended complaints in November and December 2019. In addition to amending the original claims,
the consumer indirect purchasers have asserted a new claim alleging that the exchange of information by defendants
through Agri Stats Inc. unreasonably restrained trade. On January 15, 2020, the defendants, including Seaboard, moved to
dismiss the amended complaints. Seaboard intends to defend these cases vigorously. It is impossible at this stage either to
determine the probability of a favorable or unfavorable outcome resulting from these suits, or to reasonably estimate the
amount of potential loss or range of potential loss, if any, resulting from the suits.
On March 20, 2018, the bankruptcy trustee (the “Trustee”) for Cereoil Uruguay S.A. (“Cereoil”) filed a suit in the
Bankruptcy Court of First Instance in Uruguay that was served during the second quarter of 2018 naming as parties
Seaboard and Seaboard’s subsidiaries, Seaboard Overseas Limited (“SOL”) and Seaboard Uruguay Holdings Ltd.
(“Seaboard Uruguay”). Seaboard has a 45% indirect ownership of Cereoil. The suit seeks an order requiring Seaboard,
SOL and Seaboard Uruguay to reimburse Cereoil the amount of $22 million, contending that deliveries of soybeans to
SOL pursuant to purchase agreements should be set aside as fraudulent conveyances. Seaboard intends to defend this case
vigorously. It is impossible at this stage to determine the probability of a favorable or unfavorable outcome resulting from
this suit. In the event of an adverse ruling, Seaboard and its two subsidiaries could be ordered to pay the amount of
$22 million. Any award in this case would offset against any award in the additional case described below filed by the
Trustee on April 27, 2018.
On April 27, 2018, the Trustee for Cereoil filed another suit in the Bankruptcy Court of First Instance in Uruguay that was
served during the second quarter of 2018 naming as parties Seaboard, SOL, Seaboard Uruguay, all directors of Cereoil,
including two individuals employed by Seaboard who served as directors at the behest of Seaboard, and the Chief Financial
Officer of Cereoil, an employee of Seaboard who also served at the behest of Seaboard (collectively, the “Cereoil
Defendants”). The Trustee contends that the Cereoil Defendants acted with willful misconduct to cause Cereoil’s
insolvency, and thus should be ordered to pay all liabilities of Cereoil, net of assets. The bankruptcy filing lists total
liabilities of $53 million and assets of $30 million. Seaboard intends to defend this case vigorously. It is impossible at this
stage to determine the probability of a favorable or unfavorable outcome resulting from this suit. In the event of an adverse
ruling, Seaboard and the other Cereoil Defendants could be ordered to pay the amount of the net indebtedness of Cereoil,
which based on the bankruptcy schedules would total $23 million. It is possible that the net indebtedness could be higher
than this amount if Cereoil’s liabilities are greater than $53 million and/or Cereoil’s assets are worth less than $30 million.
46
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
In addition, in the event of an adverse ruling, the Bankruptcy Court of First Instance could order payment of the Trustee’s
professional fees, interest, and other expenses. Any award in this case would offset against any award in the case described
above filed on March 20, 2018.
A creditor of Cereoil which has a claim in the bankruptcy proceeding pending in Uruguay of approximately $10 million,
plus accrued interest, has threatened to bring legal action in the U.S. against Seaboard alleging on various legal theories
that Seaboard is responsible for this same indebtedness. Seaboard will vigorously defend this action should it be brought.
On May 15, 2018, the Trustee for Nolston S.A. (“Nolston”) filed a suit in the Bankruptcy Court of First Instance in Uruguay
that was served during the second quarter of 2018 naming as parties Seaboard and the other Cereoil Defendants. Seaboard
has a 45% indirect ownership of Nolston. The Trustee contends that the Cereoil Defendants acted with willful misconduct
to cause Nolston’s insolvency, and thus should be ordered to pay all liabilities of Nolston, net of assets. The bankruptcy
filing lists total liabilities of $29 million and assets of $15 million. Seaboard intends to defend this case vigorously. It is
impossible at this stage to determine the probability of a favorable or unfavorable outcome resulting from this suit. In the
event of an adverse ruling, Seaboard and the other Cereoil Defendants could be ordered to pay the amount of the net
indebtedness of Nolston, which based on the bankruptcy schedules would total $14 million. It is possible that the net
indebtedness could be higher than this amount if Nolston’s liabilities are greater than $29 million and/or Nolston’s assets
are worth less than $15 million. In addition, in the event of an adverse ruling, the Bankruptcy Court of First Instance could
order payment of the Trustee’s professional fees, interest, and other expenses.
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 Democratic Republic
of Congo and other African countries and requests to interview certain Seaboard employees and to obtain testimony before
a grand jury. Seaboard retained outside counsel and cooperated with the government’s investigation. There has been no
further communication from AFMLS for more than 18 months and to the knowledge of Seaboard, there has been no further
action taken by AFMLS. As such, unless further communication is received from AFMLS or action is taken by AFMLS,
disclosure of the matter described in this paragraph will not appear in Seaboard’s future SEC periodic reports.
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.
Guarantees
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
Seaboard’s business objectives. Seaboard does not issue guarantees for compensation. As of December 31, 2019,
guarantees outstanding were not material. Seaboard has not accrued a liability for any of the guarantees as management
considers the likelihood of loss to be remote. See discussion of bank letters of credit in Note 8.
47
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Commitments
As of December 31, 2019, Seaboard had various non-cancelable commitments under contractual agreements:
Years ended December 31,
(Millions of dollars)
Hog procurement contracts (a)
Grain commitments (b)
Grain purchase contracts for resale (c)
Fuel supply contracts (d)
Construction commitments (e)
Equipment and other commitments
2020 2021 2022 2023 2024 Thereafter Totals
305
$
94
611
485
143
163
313 $ 1,801
(a) The Pork segment has contracted with third parties for the purchase of hogs to support its operations. The amounts
are based on projected market prices as of December 31, 2019. During 2019, 2018 and 2017, the Pork segment
paid $121 million, $77 million and $99 million, respectively, for hogs purchased under committed contracts.
(b) The Pork segment enters into grain purchase contracts to support its hog operations. The amounts are based on
78 $ 82 $ 64 $ 47 $ 34 $
—
—
93
—
—
611
48
47
7
—
—
114
2
4
122
$ 1,025 $ 168 $ 115 $ 96 $ 84 $
— $
—
—
289
—
24
Total unrecognized non-cancelable commitments
—
—
47
—
2
1
—
47
29
9
projected commodity prices as of December 31, 2019.
(c) The CT&M segment enters into grain purchase contracts, primarily to support firm sales commitments. The
amounts are based on projected commodity prices as of December 31, 2019.
(d) The Power segment has a natural gas supply contract for a significant portion of the fuel required for the barge
under construction. The commitment has both fixed and variable price components and the amount included is
partially based on market prices as of December 31, 2019. The Marine segment also has fuel purchase contracts.
(e) The Power segment’s commitments to the contractor for its new power generating barge, anticipated to begin
operations in mid-2021, were approximately $26 million. Contractual costs to complete the Pork segment’s
Oklahoma pork processing plant expansion in 2020 totaled approximately $21 million. The Pork segment’s
renewable diesel production facility, expected to be operational in early 2022, has commitments of approximately
$86 million. Expected payments may vary based on timing of milestones achieved.
Note 10 - Employee Benefits
Seaboard has a qualified defined benefit pension plan (the “Plan”) for its domestic salaried and clerical employees that
were hired before January 1, 2014. 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 2019 and 2018 and currently does not plan
on making any contributions in 2020.
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. The following tables show the Plan’s assets measured at estimated fair value as of December 31, 2019 and
2018, respectively, and 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
Foreign fixed income mutual funds
Money market funds
Total assets
December 31,
2019
Level 1 Level 2 Level 3
$
$
84 $
57
30
12
2
185 $
84 $
57
30
12
2
185 $
— $
—
—
—
—
— $
—
—
—
—
—
—
48
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
(Millions of dollars)
Assets:
Domestic equity securities
Foreign equity securities
Domestic fixed income mutual funds
Foreign fixed income mutual funds
Money market funds
Total assets
December 31,
2018
Level 1 Level 2 Level 3
$
$
69 $
47
27
11
2
156 $
69 $
47
27
11
2
156 $
— $
—
—
—
—
— $
—
—
—
—
—
—
Seaboard also sponsors non-qualified, unfunded supplemental executive plans, and has certain individual, non-qualified,
unfunded supplemental retirement agreements for certain retired employees. 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,
2018
2017
2019
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
2.15- 3.50% 3.50- 4.50% 2.75-3.80%
3.50- 4.50% 2.75- 3.80% 2.90-4.60%
6.50%
4.00%
6.25%
4.00%
6.25%
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 of return 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 aggregate changes in the benefit obligation 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 (gains)
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
December 31,
2019
2018
$
$
$
$
$
293
8
12
50
(9)
(9)
3
348
156
35
9
(9)
(6)
185
(163)
$
$
$
$
$
300
10
11
(22)
—
(6)
—
293
171
(11)
2
—
(6)
156
(137)
The net funded status of the Plan was $(53) million and $(35) million as of December 31, 2019 and 2018, respectively.
The benefit obligation increased primarily due to a decrease in discount rates for all plans. The accumulated benefit
obligation for the Plan was $205 million and $165 million and for all the other plans was $104 million and $95 million as
of December 31, 2019 and 2018, respectively. Expected future net benefit payments for all plans during each of the next
49
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
five years and thereafter were as follows: $19 million, $11 million, $29 million, $23 million, $16 million and $82 million,
respectively.
The net periodic benefit cost 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
Settlement loss recognized
Net periodic benefit cost
Years ended December 31,
2019
2018
2017
$
$
8 $
12
(10)
5
2
17 $
10 $
11
(11)
6
—
16 $
9
11
(10)
5
2
17
The service cost component is recorded in either cost of sales or selling, general and administrative expenses depending
upon the employee, and the other components of net periodic benefit cost are recorded in miscellaneous, net in the
consolidated statements of comprehensive income. The amounts not reflected in net periodic benefit cost and included in
accumulated other comprehensive loss before taxes as of December 31, 2019 and 2018 were $88 million and $72 million,
respectively. Such amounts primarily represent the unrecognized net actuarial losses that are generally amortized over the
average remaining working lifetime of the active participants for all of these plans. The settlements recognized during
2019 and 2017 were primarily due to certain participants who received lump sum payments that exceeded the service cost
plus interest cost for the respective plan.
Seaboard participated in a multi-employer pension fund, the United Food and Commercial Workers International Union-
Industry Pension Fund (the “Fund”), which covered certain union employees under a collective bargaining agreement.
Contribution expense for this Fund was $1 million for each of the years ended December 31, 2019, 2018 and 2017.
Effective July 22, 2019, after ratification of a renewed collective bargaining agreement, Seaboard ceased contributing to
the Fund, which subsequently terminated Seaboard’s participation in the Fund. Seaboard recorded a $14 million
withdrawal liability in 2019, that is payable in quarterly installments over 20 years.
Seaboard maintains a defined contribution plan covering most of its domestic salaried and clerical employees. In 2019,
2018 and 2017, 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 each of
the years ended December 31, 2019 and 2018 and 2017. In addition, Seaboard maintains a defined contribution plan
covering most of its hourly, non-union employees. Contribution expense for this plan was less than $1 million for
December 31, 2019 and $1 million for the years ended December 31, 2018 and 2017.
Seaboard has a deferred compensation plan that allows certain employees to reduce their compensation in exchange for
values in various investments. Seaboard contributes 3% of the employees’ reduced compensation. 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. Contributions are no longer permitted 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. Seaboard’s income (expense) for these two plans, which primarily includes amounts
related to the change in fair value of the underlying investment accounts, was $(11) million, $2 million and $(10) million
for the years ended December 31, 2019, 2018 and 2017, respectively. Included in other liabilities as of December 31, 2019
and 2018 were $45 million and $38 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, 2019 and 2018, $51 million and $45 million, respectively, were included in other current assets in the
consolidated balance sheets. Investment income (loss) related to the mark-to-market of these investments for 2019, 2018
and 2017 totaled $11 million, $(2) million and $9 million, respectively.
50
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Note 11 - Derivatives and Fair Value of Financial Instruments
The fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value into three broad levels:
Level 1 — Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 — Inputs other than quoted prices in active markets that are observable either directly or indirectly, including:
quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities
in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market data and require the reporting entity to develop its
own assumptions.
The following tables show assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and
2018, respectively, and the level within the fair value hierarchy used to measure each category of assets and liabilities. 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
Foreign equity securities
High yield securities
Foreign debt securities
Collateralized loan obligations
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
Total assets
Liabilities:
Contingent consideration
Derivatives:
Commodities
Foreign currencies
Total liabilities
December 31,
2019
Level 1 Level 2 Level 3
$
$
$
$
706 $
409
189
56
43
15
12
4
706 $
117
189
10
—
—
12
4
— $
292
—
46
43
15
—
—
40
6
3
2
40
6
3
2
—
—
—
—
6
6
1,491 $ 1,095 $
—
396 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13 $
— $
— $
13
4
3
20 $
4
—
4 $
—
3
3 $
—
—
13
51
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
(Millions of dollars)
Assets:
Trading securities – short-term investments:
Domestic equity securities
Domestic debt securities
Foreign equity securities
Money market funds held in trading accounts
Collateralized loan obligations
High yield securities
Foreign debt securities
Other trading securities
Trading securities – other current assets:
Domestic equity securities
Money market funds held in trading accounts
Foreign equity securities
Fixed income securities
Other
Derivatives:
Commodities
Foreign currencies
Total assets
Liabilities:
Trading securities – short-term investments:
Other trading securities
Contingent consideration
Derivatives:
Commodities
Total liabilities
December 31,
2018
Level 1 Level 2 Level 3
$
$
$
$
632 $
268
218
146
28
19
16
14
632 $
215
218
146
—
7
2
14
32
5
3
3
1
32
5
3
3
1
— $
53
—
—
28
12
14
—
—
—
—
—
—
6
2
4
—
1,393 $ 1,282 $
2
2
111 $
5 $
13
— $
—
5 $
—
4
22 $
4
4 $
—
5 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
13
—
13
Financial instruments consisting of cash and cash equivalents, net receivables, lines of credit and accounts payable are
carried at cost, which approximates fair value, as a result of the short-term nature of the instruments.
Domestic debt securities categorized as level 1 in the fair value hierarchy include debt securities held in mutual funds and
ETFs. Domestic debt securities categorized as level 2 include corporate bonds, mortgage-backed securities, asset-backed
securities and U.S. Treasuries. Foreign debt securities categorized as level 1 in the fair value hierarchy included debt
securities held in mutual funds and ETFs with a country of origin concentration outside the U.S. Foreign debt securities
categorized as level 2 include foreign government or government related securities, corporate bonds and asset-backed
securities with a country of origin concentration outside the U.S. High yield securities categorized as level 1 in the fair
value hierarchy include high yield securities held in mutual funds and ETFs, and level 2 includes primarily corporate bonds
and bank loans.
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 mostly 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. See Note 8 for a discussion of Seaboard’s long-term debt. The fair value of Seaboard’s contingent consideration
related to a 2018 acquisition was classified as a level 3 in the fair value hierarchy since the calculation is dependent upon
projected company specific inputs using a Monte Carlo simulation. Seaboard remeasures the estimated fair value of the
contingent consideration liability until settled.
While management believes its derivatives are primarily economic hedges, Seaboard does not perform the extensive
record-keeping required to account for these types of transactions as hedges for accounting purposes. As the derivatives
discussed below are not accounted for as hedges, fluctuations in the related commodity prices, foreign currency exchange
rates and equity prices could have a material impact on earnings in any given reporting period.
52
SEABOARD CORPORATION
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. Occasionally, Seaboard also enters into speculative
derivative transactions not directly related to its raw material requirements. Commodity derivatives are recorded at fair
value, with any changes in fair value being marked-to-market as a component of cost of sales in the consolidated statements
of comprehensive income.
As of December 31, 2019, Seaboard had open net derivative contracts to purchase 17 million bushels of grain and open
net derivative contracts to sell 132 million pounds of soybean oil and 12 million gallons of heating oil. As of
December 31, 2018, Seaboard had open net derivative contracts to purchase 33 million bushels of grain and 8 million
pounds of soybean oil and open net derivative contracts to sell 26 million pounds of hogs and 7 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 in 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 in the consolidated statements of comprehensive income. As of
December 31, 2019 and 2018, Seaboard had foreign currency exchange agreements with notional amounts of $78 million
and $82 million, respectively, primarily related to the South African rand, euro and the Canadian dollar. 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, 2019, Seaboard had a maximum
aggregate amount of loss due to credit risk of less than $1 million of credit risk with three counterparties related to its
foreign currency exchange agreements. Seaboard does not hold any collateral related to these agreements.
Equity Futures Contracts
Seaboard enters into equity futures contracts to manage the equity price risk with respect to certain short-term investments.
Equity futures contracts are recorded at fair value with changes in value marked-to-market as a component of other
investment income (loss), net in the consolidated statements of comprehensive income. The notional amounts of these
equity futures contracts were $0 million and $97 million as of December 31, 2019 and 2018, respectively.
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 years ended December 31, 2019 and 2018:
(Millions of dollars)
Commodities
Foreign currencies
Foreign currencies
Equity
Cost of sales
Cost of sales
Foreign currency gains (losses), net
Other investment income (loss), net
$
2019
2018
(52) $
1
(1)
(4)
(12)
2
1
(6)
The following table provides the fair value of each type of derivative held as of December 31, 2019 and 2018 and where
each derivative is included in the consolidated balance sheets:
Asset Derivatives
December 31, December 31,
December 31, December 31,
Liability Derivatives
(a)
2019
2018
2019
2018
(Millions of dollars)
Commodities(a)
Other current assets
Foreign currencies Other current assets
Equity(a)
$
Short-term investments
4
—
5
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, 2019 and 2018, the commodity
derivatives had a margin account balance of $13 million and $15 million, respectively, resulting in a net other current
asset in the consolidated balance sheets of $15 million and $17 million, respectively. Seaboard’s equity derivatives
are also presented on a net basis, including netting the derivatives within short-term investments.
6 Other current liabilities $
2 Other current liabilities
— Short-term investments
4 $
3
—
6 $
—
—
53
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Note 12 - Stockholders’ Equity and Accumulated Other Comprehensive Loss
In October 2019, the Board of Directors extended through October 31, 2020 Seaboard’s share repurchase program. 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. As of December 31, 2019,
$78 million remained available for repurchases under this program. Seaboard repurchased 4,369 and 1,333 shares of
common stock during 2019 and 2018 at a total price of $17 million and $5 million, respectively. Shares repurchased were
retired and became authorized and unissued shares. Seaboard did not repurchase any shares of common stock during 2017.
In each of the four quarters of 2019, Seaboard declared and paid a quarterly dividend of $2.25 per share on the common
stock. In each of the four quarters of 2018 and 2017, Seaboard declared and paid a quarterly dividend of $1.50 per share
on the common stock.
The components of accumulated other comprehensive loss, net of related taxes, were as follows:
(Millions of dollars)
Balance December 31, 2017
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive
loss to net loss
Other comprehensive income (loss), net of tax
Amounts reclassified from accumulated other comprehensive
loss to retained earnings
Balance December 31, 2018
$
Other comprehensive loss before reclassifications
Amounts reclassified from accumulated other comprehensive
loss to net earnings
Cumulative
Foreign
Currency
Translation
Adjustment Investments
$
Unrealized
Gain
on
(297) $
(52)
7 $
—
Unrecognized
Pension
Cost
Total
(64) $ (354)
(53)
(1)
—
(52)
—
(349) $
(20)
—
—
(7)(b)
— $
—
4 (a)
3
4
(49)
—
(7)
(61) $ (410)
(34)
(14)
Other comprehensive loss, net of tax
Balance December 31, 2019
(a)
4
(10)
(30)
(71) $ (440)
This primarily represents the amortization of actuarial losses that was included in net periodic pension cost and
recorded in operating income. See Note 10 for further discussion.
—
(20)
(369) $
—
—
— $
4 (a)
$
(b)
Effective January 1, 2018, upon adoption of new guidance, all unrealized gains (losses) on investments were included
in the consolidated statement of comprehensive income. The AOCI balance as of December 31, 2017, was reclassified
to retained earnings on January 1, 2018.
The cumulative foreign currency translation adjustment primarily represents the effect of the Argentine peso currency
exchange fluctuation on the net assets of the Sugar and Alcohol segment. Effective in the third quarter of 2018, the Sugar
and Alcohol segment’s functional currency changed from the Argentine peso to the U.S. dollar due to highly inflationary
accounting. See Note 1 for discussion of the functional currency change. During 2019, the foreign currency translation
adjustment primarily related to CT&M entities with a functional currency of the West African franc.
Income taxes for the unrecognized pension cost component of accumulated other comprehensive loss was recorded using
a 26% effective tax rate in the fourth quarter of 2017 and all of 2018 and 2019 and a 39% effective tax rate for other
periods of 2017, except for unrecognized pension cost of $21 million, $23 million and $22 million in 2019, 2018 and 2017,
respectively, related to employees at certain subsidiaries for which no tax benefit was recorded.
54
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Note 13 – Revenue Recognition
Seaboard has multiple segments with diverse revenue streams. For additional information on Seaboard’s segments, see
Note 15. The following tables presents Seaboard’s sales disaggregated by revenue source and segment:
(Millions of dollars)
Major Products/Services Lines:
Products
Transportation
Energy
Other
Segment/Consolidated Totals
(Millions of dollars)
Major Products/Services Lines:
Products
Transportation
Energy
Other
Segment/Consolidated Totals
Year Ended December 31, 2019
Pork
CT&M Marine
Alcohol Power
Sugar
and
All
Other
Consolidated
Totals
$ 1,599 $ 3,654 $
—
—
18
10
210
32
— $
1,061
—
—
$ 1,851 $ 3,672 $ 1,061 $
112 $
—
9
—
121 $
— $
—
117
—
117 $
17 $
1
—
—
18 $
5,382
1,072
336
50
6,840
Year Ended December 31, 2018
Pork
CT&M Marine
Alcohol Power
Sugar
and
All
Other
Consolidated
Totals
$ 1,451 $ 3,410 $
—
—
18
9
282
32
— $
1,057
—
—
$ 1,774 $ 3,428 $ 1,057 $
173 $
—
11
—
184 $
— $
—
122
—
122 $
18 $
—
—
—
18 $
5,052
1,066
415
50
6,583
Revenue from goods and services transferred to customers at a single point in time accounted for approximately 85% of
Seaboard’s net sales for the years ended December 31, 2019. Substantially all of the sales in Seaboard’s Marine segment
are recognized ratably over the transit time for each voyage as Seaboard believes this is a faithful depiction of the
performance obligation to its customers.
Almost all of Seaboard’s contracts with its customers are short-term, defined as less than one year. Seaboard elected to
use all practical expedients and therefore will not disclose the value of unsatisfied performance obligations for: (i) contracts
with an original expected length of one year or less; and (ii) contracts for which revenue is recognized at the amount to
which it has the right to invoice for services performed. Also, Seaboard will recognize a financing component only on
obligations that extend longer than one year.
Deferred revenue represents cash payments received in advance of Seaboard’s performance or revenue billed that is
unearned. The CT&M segment requires certain customers to pay in advance or upon delivery to avoid collection risk. The
Marine segment’s deferred revenue balance primarily relates to the unearned portion of billed revenue when a ship is on
the water and has not arrived at the designated port. Deferred revenue balances are reduced when revenue is recognized.
The deferred revenue balance as of December 31, 2018 was recognized as revenue during the first quarter of 2019.
55
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Note 14 - Income Taxes
Earnings before income taxes were as follows:
(Millions of dollars)
United States
Foreign
Total earnings (loss) excluding noncontrolling interests
Net loss attributable to noncontrolling interests
Total earnings (loss) 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 income (loss)
Total income taxes
Years ended December 31,
2019
2018
2017
$
$
174 $
110
284
—
284 $
(109) $
93
(16)
—
(16) $
273
155
428
1
427
Years ended December 31,
2019
2018
2017
$
$
12 $
39
(1)
(41)
(1)
(7)
1
(4)
(3) $
(20) $
32
—
5
(5)
(11)
1
2
3 $
118
19
2
20
10
12
181
(3)
178
Income taxes for the years ended December 31, 2019, 2018 and 2017 differed from the amounts computed by applying
the statutory U.S. federal income tax rate of 21% for 2019 and 2018 and 35% for 2017 to earnings (loss) before income
taxes excluding noncontrolling interests for the following reasons:
Years ended December 31,
(Millions of dollars)
Computed “expected” tax expense (benefit) excluding noncontrolling interests
Adjustments to tax expense (benefit) attributable to:
2019
$
60 $
2018
2017
Foreign tax differences
Tax-exempt income
State income taxes, net of federal benefit
Repatriation tax
Effect on deferreds of federal rate reduction
Foreign entity tax status change
Federal tax credits
Federal rate reduction effect on capital loss carryback
Domestic manufacturing deduction
Other
Total income tax expense
14
(29)
(4)
—
—
—
(47)
—
—
7
1 $
$
(3) $
150
12
(13)
(8)
14
—
22
(23)
(3)
—
3
1 $
(22)
—
9
112
(47)
—
(18)
—
(2)
(1)
181
In December 2019, the President of the U.S. signed into law the Further Consolidated Appropriations Act (the “2019 Tax
Act”) that extended the federal blender’s credits through 2022, with retroactive recognition for 2018 and 2019. As a result,
in the fourth quarter of 2019, Seaboard recognized non-taxable revenue of $136 million related to the 2018 and 2019
federal blender’s credits on the biodiesel the Pork segment blends. In February 2018, Congress retroactively extended the
federal blender’s credits for 2017 and Seaboard recognized a one-time tax benefit of $4 million and non-taxable revenue
of $61 million in the first quarter of 2018. There was no federal blender credit revenue recognized in 2017. In accordance
56
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
with GAAP, the effects of changes in tax laws, including retroactive changes, are recognized in the financial statements
in the period that the changes are enacted.
Seaboard has certain investments in various entities that are expected to enable Seaboard to obtain certain investment tax
credits. Seaboard has invested in three limited liability companies that operate refined coal processing plants that generate
federal income tax credits based on production levels. Seaboard’s total contributions to these long-term investments were
$15 million, $17 million and $10 million during 2019, 2018 and 2017, respectively. Additionally, Seaboard invested
$20 million during 2019 in two limited liability companies involved in a biogas fueled power project that will generate
federal income tax credits. These alternative long-term investments, accounted for using the equity method of accounting,
generated in aggregate $34 million of investment tax credits for 2019.
During 2018, Seaboard elected to change the tax status of a wholly owned subsidiary from a partnership to a corporation.
This change in tax status resulted in an estimated $22 million of additional tax expense and deferred tax liabilities.
On December 22, 2017, the President of the U.S. signed into law the Tax Cuts and Job Act (“2017 Tax Act”). Among
other things, the 2017 Tax Act lowered corporate income tax rates from a maximum of 35% to a flat 21% rate effective
January 1, 2018, imposed a tax on mandatory deemed repatriated earnings of foreign subsidiaries and implemented a
territorial tax system. Seaboard recognized $112 million of tax expense related to mandatory deemed repatriated earnings
and a $47 million benefit from the revaluation of deferred tax assets and liabilities in its consolidated financial statements
for the year ended December 31, 2017. Seaboard recorded additional tax expense of $16 million related primarily to
repatriation and, to a lesser extent, executive compensation items for the year ended December 31, 2018. The 2017 Tax
Act also imposed 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 effective January 1, 2018. Seaboard accounts for the GILTI
and BEAT taxes in the period incurred.
As of December 31, 2019 and 2018, Seaboard had income taxes receivable of $14 million and $39 million, respectively,
primarily related to domestic tax jurisdictions, and had income taxes payable of $16 million and $14 million, respectively,
primarily related to foreign tax jurisdictions. As of December 31, 2019, Seaboard has $62 million of long-term income tax
liability related to the 2017 Tax Act mandatory deemed repatriated earnings. Expected future payments on this liability
were as follows: $2 million in 2021, $6 million in 2022, $6 million in 2023, $12 million in 2024 and $36 million thereafter.
The 2017 Tax Act permitted the tax on mandatory deemed repatriated earnings to be paid over eight years.
Seaboard provided for U.S. federal income tax on $1.3 billion 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 the majority of 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 to repatriate these
permanently reinvested earnings to the U.S., Seaboard would be required to provide for the net tax effects on these
amounts.
57
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Components of the net deferred income tax liability were as follows:
(Millions of dollars)
Deferred income tax liabilities:
Depreciation
Domestic partnerships
Unrealized gain on investments
Other
Deferred income tax assets:
Reserves/accruals
Net operating and capital loss carry-forwards
LIFO
Tax credit carry-forwards
Other
Valuation allowance
Net deferred income tax liability
The activity within the valuation allowance account was as follows:
(Millions of dollars)
Allowance for Deferred Tax Assets:
Year Ended December 31, 2019
Year Ended December 31, 2018
Year Ended December 31, 2017
December 31,
2019
2018
$
$
$
$
119 $
65
36
4
224 $
73 $
63
2
75
4
217
68
75 $
140
78
—
8
226
70
56
7
21
4
158
59
127
Balance at
beginning of year
Charge (credit) Balance at
end of year
to expense
$
$
$
59
59
58
9 $
— $
1 $
68
59
59
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 state net operating losses and 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. As of December 31, 2019, Seaboard had state net operating loss carry-forwards
of approximately $179 million and foreign net operating loss carry-forwards of approximately $171 million, a portion of
which expire in varying amounts between 2020 and 2039, while others have indefinite expiration periods. As of
December 31, 2019, Seaboard had state tax credit carry-forwards of approximately $22 million, net of valuation allowance,
all of which carry-forward indefinitely.
Seaboard’s tax returns are regularly audited by federal, state and foreign tax authorities, which may result in material
adjustments. Seaboard’s 2013, 2014, 2015 and 2016 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, the Dominican Republic, Ivory Coast and Senegal, tax years are typically subject to
examination for three to six years.
As of December 31, 2019 and 2018, Seaboard had $31 million and $25 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.
58
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
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
Decreases for uncertain tax positions of prior years
Additions for uncertain tax positions of current year
Lapse of statute of limitations
Ending balance as of December 31
2019
2018
$
$
25 $
4
(3)
6
(1)
31 $
18
2
—
6
(1)
25
Seaboard accrues interest related to unrecognized tax benefits and penalties in income tax expense and had approximately
$8 million and $6 million accrued for the payment of interest and penalties as of December 31, 2019 and 2018,
respectively.
Note 15 - Segment Information
Seaboard has six reportable segments: Pork, CT&M, Marine, Sugar and Alcohol, 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 primarily produces hogs to process and sells fresh and frozen pork products to further processors,
foodservice operators, distributors and grocery stores throughout the U.S. and to foreign markets. This segment also
produces biodiesel from pork fat and other animal fats and vegetable oils for sale to third parties. Substantially all of
Seaboard’s Pork segment’s hourly employees at its processing plant are covered by a collective bargaining agreement that
expires in 2024. 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 and bakery operations in
numerous foreign countries. The Marine segment provides cargo shipping services in the U.S., the Caribbean and Central
and South America. The Sugar and Alcohol segment produces and processes sugar and alcohol in Argentina, primarily to
be marketed locally. The Power segment is an independent power producer in the Dominican Republic operating a power
generating barge. The Turkey segment, accounted for using the equity method, produces turkeys to process and sells
branded and non-branded turkey products. Total assets for the Turkey segment represent Seaboard’s investment in
Butterball. 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.
In February 2019, the Pork segment entered into an asset purchase agreement to buy an idle ethanol plant in Hugoton,
Kansas for approximately $40 million. Seaboard accounted for this transaction as an asset acquisition as no workforce or
substantive processes were acquired. The purchase price was allocated to property, plant and equipment based on a relative
fair value basis. The Pork segment is converting the Hugoton, Kansas plant to a renewable diesel production facility, with
operations expected to begin in 2022. The Pork segment’s biodiesel plants have historically received federal blender’s
credits for the biodiesel they blend. As a result of the 2019 Tax Law, Seaboard recognized $60 million of net revenue
related to the 2018 and 2019 federal blender’s credits. Revenue will be recognized ratably during the years 2020 through
2022 based on biodiesel production.
In October 2019, the CT&M segment obtained control of a former non-consolidated affiliate that operates a grain trading
business in Peru. On January 5, 2018, the CT&M segment acquired flour milling and associated businesses in Senegal,
Ivory Coast and Monaco. See Note 2 for further details of these acquisitions.
The Power segment is currently constructing a power barge for use in the Dominican Republic that is anticipated to begin
operations in 2021. Seaboard’s Power segment continues to explore strategic alternatives for the existing barge, including
selling, relocating or operating in conjunction with the new barge at the current site. During 2019, the Power segment sold
its 29.9% interest in an electricity generation facility. See Note 7 for discussion of the non-consolidated affiliate.
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 7. 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
59
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
basis. 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
compensation programs, which are offset by the effect of the mark-to-market adjustments on these investments recorded
in other investment income (loss), net.
Sales to External Customers:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar and Alcohol
Power
All Other
Segment/Consolidated Totals
Operating Income (Loss):
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar and Alcohol
Power
All Other
Segment Totals
Corporate
Consolidated Totals
Income (Loss) from Affiliates:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar and Alcohol
Power
Turkey
Segment/Consolidated Totals
Depreciation and Amortization:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar and Alcohol
Power
Segment Totals
Corporate
Consolidated Totals
Years ended December 31,
2017
2018
2019
$ 1,851 $ 1,774 $ 1,609
2,945
3,428
956
1,057
186
184
97
122
16
18
$ 6,840 $ 6,583 $ 5,809
3,672
1,061
121
117
18
Years ended December 31,
2017
2018
2019
$
$
54 $
62
4
(16)
27
2
133
(29)
104 $
117 $
46
25
9
21
2
220
(11)
209 $
193
25
21
21
9
2
271
(31)
240
Years ended December 31,
2017
2018
2019
$
(22) $
(5)
3
1
3
(21)
(41) $
(30) $
(11)
2
1
10
(16)
(44) $
(10)
7
(7)
1
6
(4)
(7)
$
Years ended December 31,
2017
2018
2019
$
75 $
25
23
6
8
137
1
138 $
73 $
22
24
6
8
133
1
134 $
69
10
24
7
8
118
—
118
$
60
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
Total Assets:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar and Alcohol
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 and Alcohol
Power
Turkey
Segment/Consolidated Totals
Capital Expenditures:
(Millions of dollars)
Pork
Commodity Trading and Milling
Marine
Sugar and Alcohol
Power
Segment Totals
Corporate
Consolidated Totals
December 31,
2019
2018
$ 1,802 $ 1,304
1,423
345
138
203
295
8
3,716
1,591
$ 6,285 $ 5,307
1,621
554
139
283
275
10
4,684
1,601
December 31,
2019
$
2018
$
183
237
32
5
3
275
735 $
192
255
28
4
30
295
804
$
Years ended December 31,
2017
2018
2019
$
164 $
23
26
15
121
349
—
$
349 $
86 $
29
18
5
23
161
1
162 $
100
15
37
20
1
173
—
173
Geographic Information
Seaboard had sales in Colombia totaling $778 million, $757 million and $495 million for the years ended
December 31, 2019, 2018 and 2017, respectively, representing approximately 11%, 11% and 9% of total sales for each
respective year. Seaboard had sales in South Africa totaling $668 million, $589 million and $581 million for the years
ended December 31, 2019, 2018 and 2017, respectively, representing approximately 10%, 9% and 10% of total sales for
each respective year. No other individual foreign country accounted for 10% or more of sales to external customers.
61
SEABOARD CORPORATION
Notes to Consolidated Financial Statements
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
Years ended December 31,
2017
2018
2019
$ 2,792 $ 2,753 $ 2,295
1,483
1,271
393
238
99
30
$ 6,840 $ 6,583 $ 5,809
1,859
1,447
370
308
52
12
1,668
1,408
381
255
100
18
The following table provides a geographic summary of Seaboard’s property, plant and equipment according to their
physical location and primary port for the vessels:
(Millions of dollars)
United States
Singapore
Dominican Republic
Argentina
Senegal
Zambia
Ivory Coast
All other
Totals
Note 16 - Quarterly Financial Data (unaudited)
(Millions of dollars except per share amounts)
2019
Net sales
Operating income (loss)
Net earnings (loss) attributable to Seaboard
Earnings (loss) per common share
2018
Net sales
Operating income
Net earnings (loss) attributable to Seaboard
Earnings (loss) per common share
December 31,
2019
2018
899 $
139
103
59
43
38
33
117
1,431 $
775
21
109
50
48
20
36
101
1,160
$
$
1st
Total for
3rd
Quarter Quarter Quarter Quarter the Year
2nd
4th
$ 1,543 $ 1,822 $ 1,663 $ 1,812 (a) $ 6,840
104
$ (34) $
283
$
57 $
$ 48.79 $ 50.13 $ (6.00) $ 149.91 (a) $ 242.78
91 (a) $
175 (a) $
53 $
58 $
(6) $
(7) $
$ 1,579 $ 1,691 $ 1,651 $ 1,662 $ 6,583
209
$
(17)
$
$ 26.75 $ 6.28 $ 29.93 $ (77.58)(b) $ (14.61)
43 $
(91)(b) $
32 $
7 $
97 $
32 $
37 $
35 $
(a) During the fourth quarter of 2019, Seaboard recognized $60 million of net sales and operating income, or
$51.14 per common share, as a result of the federal blender’s credits being extended retroactively for 2019 and
2018. See Note 14 for discussion on the federal blender’s credits.
(b) During the fourth quarter of 2018, Seaboard recorded other investment losses of $167 million primarily related
to mark-to-market losses on short-term investments. As a comparison, other investment income of $73 million
was recorded in the fourth quarter of 2019.
62
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
As of December 31, 2019, Seaboard’s management has evaluated, under the direction of its chief executive and chief
financial officers, the effectiveness of Seaboard’s disclosure controls and procedures, as defined under the Securities
Exchange Act of 1934 (the “Exchange Act”) Rule 13a-15(e). Based upon and as of the date of that evaluation, Seaboard’s
chief executive and chief financial officers concluded that Seaboard’s disclosure controls and procedures were effective
to provide reasonable assurance that information required to be disclosed in the reports it files and submits under the
Exchange Act is recorded, processed, summarized and reported as and when required. It should be noted that any system
of disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute,
assurance that the objectives of the system are met. In addition, the design of any system of disclosure controls and
procedures is based in part upon assumptions about the likelihood of future events. Due to these and other inherent
limitations of any such system, there can be no assurance that any design will always succeed in achieving its stated goals
under all potential future conditions.
Management’s Report on Internal Control Over Financial Reporting
The management of 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, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by KPMG,
an independent registered public accounting firm, as stated in their report which appears on page 64.
Change in Internal Control Over Financial Reporting –There have been no changes in Seaboard’s internal control over
financial reporting that occurred during the fiscal quarter ended December 31, 2019 that has materially affected, or is
reasonably likely to materially affect, Seaboard’s internal control over financial reporting.
63
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, 2019, 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, 2019, 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, 2019 and 2018, 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, 2019, and the related notes (collectively, the consolidated financial statements), and our
report dated February 19, 2020 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 19, 2020
64
Item 9B. Other Information
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information about the executive officers of Seaboard is included under the caption “Executive Officers of the
Registrant” in Item 1 of this annual report on Form 10-K.
Seaboard has a Code of Conduct and Ethics Policy for Senior Financial Officers applicable to its senior financial officers
(including the chief executive officer, chief financial officer, chief accounting officer and controller and persons
performing similar functions) and a Code of Ethics Policy applicable to its directors, officers and other employees (together
the “Codes”). Seaboard has posted the Codes on its internet website, www.seaboardcorp.com, and intends to satisfy the
disclosure requirement under Item 10 of Form 10-K regarding any future changes and waivers to the Codes by posting
such information on that website.
In addition to the information provided above, the information required by this item is incorporated herein by reference to
the information under the captions “Item 1: Election of Directors,” “Board of Directors Information – Committees of the
Board – Audit Committee,” “Board of Directors Information – Director Nominations” and “Section 16(a) Beneficial
Ownership Reporting Compliance” of Seaboard’s definitive proxy statement for the 2020 annual meeting of stockholders,
which will be filed no later than 120 days after December 31, 2019 (“Proxy Statement”).
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the information under the captions “Board of
Directors Information – Compensation of Directors,” “Executive Compensation and Other Information,” “Employment
Arrangements with Named Executive Officers,” “Benefit Plans,” “Compensation Committee Interlocks and Insider
Participation,” “Compensation Committee Report,” and “Compensation Discussion and Analysis” included in the Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Seaboard has not established any equity compensation plans or individual agreements for its employees under which
Seaboard common stock, or options, rights or warrants with respect to Seaboard common stock may be granted.
In addition to the information provided above, the information required by this item is incorporated herein by reference to
the information under the captions “Principal Stockholders” and “Share Ownership of Management and Directors”
included in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the information under the captions
“Compensation Committee Interlocks and Insider Participation,” “Board of Directors Information – Controlled
Corporation” and “Board of Directors Information – Committees of the Board” included in the Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated herein by reference to the information under the captions
“Item 2: Selection of Independent Auditors” included in the Proxy Statement.
Item 15. Exhibits, Financial Statement Schedules
(a) List the following documents filed as a part of the report:
PART IV
1. Financial statements.
The financial statements are included in Item 8 of this Form 10-K.
2. Financial statement schedules.
All schedules are omitted as the required information is not applicable or the information is presented in the
consolidated financial statements or related consolidated notes.
65
3. Exhibits.
Exhibit
No.
3.1
3.2
4+
10.1*
10.2*
10.3*
10.4*
10.5*
10.6*
10.7*
10.8*
10.9*
10.10*
10.11*
10.12*
10.13*
Description
Seaboard Corporation Restated Certificate of Incorporation. Incorporated herein by reference to Exhibit 3.1 of
Seaboard’s Form 10-Q for the quarter ended April 4, 2009.
Seaboard Corporation By-laws, as amended. Incorporated herein by reference to Exhibit 3.2 of Seaboard’s
Form 10-K for the fiscal year ended December 31, 2005.
Description of common stock
Seaboard Corporation Retiree Medical Benefit Plan as Amended and Restated effective January 1, 2009 and
dated December 22, 2008, amending and restating the Seaboard Corporation Retiree Medical Benefit Plan
dated March 4, 2005. Incorporated herein by reference to Exhibit 10.6 of Seaboard’s Form 10-K for the fiscal
year ended December 31, 2008.
First Amendment to the Seaboard Corporation Retiree Medical Benefit Plan effective March 25, 2015 and
dated March 31, 2015. Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 10-Q for the
quarter ended April 4, 2015.
Seaboard Corporation Non-Qualified Deferred Compensation Plan effective January 1, 2009 and dated
December 22, 2008, amending and restating the Seaboard Corporation Non-Qualified Deferred Compensation
Plan dated December 29, 2005. Incorporated herein by reference to Exhibit 10.12 of Seaboard’s Form 10-K
for the fiscal year ended December 31, 2008.
Amendment No. 1 to the Seaboard Corporation Non-Qualified Deferred Compensation Plan effective
January 1, 2009 and dated December 17, 2009. Incorporated herein by reference to Exhibit 10.25 of
Seaboard’s Form 10-K for the fiscal year ended December 31, 2009.
Amendment No. 2 to the Seaboard Corporation Non-Qualified Deferred Compensation Plan effective
January 1, 2019 and dated January 2, 2019. Incorporated herein by reference to Exhibit 10.7 of Seaboard’s
Form 10-K for the fiscal year ended December 31, 2018.
Seaboard Corporation Post-2018 Non-Qualified Deferred Compensation Plan effective January 1, 2019 and
dated December 28, 2018. Incorporated herein by reference to Exhibit 10.8 of Seaboard’s Form 10-K for the
fiscal year ended December 31, 2018.
Seaboard Corporation 409A Executive Retirement Plan Amended and Restated effective January 1, 2013 and
dated December 21, 2012, amending and restating the Seaboard Corporation Executive Retirement Plan,
Amendment and Restatement dated December 22, 2008. Incorporated herein by reference to Exhibit 10.14 of
Seaboard’s Form 10-K for the fiscal year ended December 31, 2012.
First Amendment to the Seaboard Corporation 409A Executive Retirement Plan effective as of January 1, 2015
and dated January 14, 2016. Incorporated herein by reference to Exhibit 10.8 of Seaboard’s Form 10-K for the
fiscal year ended December 31, 2015.
Seaboard Corporation Cash Balance Executive Retirement Plan Amendment and Restatement effective
January 1, 2013 and dated December 21, 2012, amending and restating the Seaboard Corporation Cash Balance
Executive Retirement Plan dated December 18, 2009. Incorporated herein by reference to Exhibit 10.15 of
Seaboard’s Form 10-K for the fiscal year ended December 31, 2012.
Seaboard Corporation Pension Plan as restated and amended effective as of January 1, 2017. Incorporated
herein by reference to Exhibit 10.10 of Seaboard’s Form 10-K for the fiscal year ended December 31, 2016.
Seaboard Marine Ltd. 401(k) Excess Plan effective January 1, 2009 and dated December 18, 2009.
Incorporated herein by reference to Exhibit 10.24 of Seaboard’s Form 10-K for the fiscal year ended
December 31, 2009.
Seaboard Corporation Investment Option Plan dated December 18, 2000. Incorporated herein by reference to
Exhibit 10.7 of Seaboard’s Form 10-K for the fiscal year ended December 31, 2000.
Seaboard Corporation Executive Officers’ Bonus Policy (effective for 2017). Incorporated herein by reference
to Exhibit 10.14 of Seaboard’s Form 10-K for the fiscal year ended December 31, 2016.
66
10.14*
10.15*
10.16*
10.17*
10.18*
10.19*
10.20*
10.21*
10.22*
10.23
10.24
10.25
10.26
10.27
10.28
21+
31.1+
Seaboard Corporation Executive Officers’ Bonus Policy (effective for 2018 and supersedes all policies).
Incorporated herein by reference to Exhibit 10.17 of Seaboard’s Form 10-K for the fiscal year ended
December 31, 2018.
Seaboard Corporation Executive Incentive Plan (effective for 2017 and 2018). Incorporated herein by reference
to Exhibit 10.15 of Seaboard’s Form 10-K for the fiscal year ended December 31, 2016.
Employment Agreement between Seaboard Corporation and Steven J. Bresky dated December 21, 2012.
Incorporated herein by reference to Exhibit 10.16 of Seaboard’s Form 10-K for the fiscal year ended
December 31, 2012.
Amendment to Employment Agreement between Seaboard Corporation and Steven J. Bresky dated
March 22, 2017. Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 10-Q for the quarter
ended April 1, 2017.
Employment Agreement between Seaboard Corporation and Robert L. Steer dated December 21, 2012.
Incorporated herein by reference to Exhibit 10.17 of Seaboard’s Form 10-K for the fiscal year ended
December 31, 2012.
Employment Agreement between Seaboard Foods LLC and Darwin E. Sand dated December 31, 2018.
Incorporated herein by reference to Exhibit 10.24 of Seaboard’s Form 10-K for the fiscal year ended
December 31, 2018.
Employment Agreement between Seaboard Overseas and Trading Group and David M. Dannov dated
December 21, 2012. Incorporated herein by reference to Exhibit 10.19 of Seaboard’s Form 10-K for the fiscal
year ended December 31, 2012.
Amendment to Employment Agreement between Seaboard Overseas and Trading Group and David M. Dannov
dated March 22, 2017. Incorporated herein by reference to Exhibit 10.3 of Seaboard’s Form 10-Q for the
quarter ended April 1, 2017.
Employment Agreement between Seaboard Marine Ltd. and Edward A. Gonzalez dated December 21, 2012.
Incorporated herein by reference to Exhibit 10.20 of Seaboard’s Form 10-K for the fiscal year ended
December 31, 2012.
Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard Marine Ltd. for
Marine Terminal Operations dated May 30, 2008. Incorporated herein by reference to Exhibit 10.1 of
Seaboard’s Form 8-K dated May 30, 2008.
Amendment No. 1 to Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard
Marine Ltd. for Marine Terminal Operations dated March 30, 2009. Incorporated herein by reference to Exhibit
10.1 of Seaboard’s Form 10-Q for the quarter ended June 29, 2013.
Amendment No. 2 to Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard
Marine Ltd. for Marine Terminal Operations dated July 31, 2013. Incorporated herein by reference to Exhibit
10.2 of Seaboard’s Form 10-Q for the quarter ended June 29, 2013.
Marketing Agreement dated February 2, 2004 by and among Seaboard Corporation, Seaboard Farms, Inc.,
Triumph Foods, LLC, and for certain limited purposes only, the members of Triumph Foods, LLC.
Incorporated herein by reference to Exhibit 10.2 of Seaboard’s Form 8-K dated February 3, 2004.
Term Loan Credit Agreement dated December 4, 2015 by and among Seaboard Corporation, Seaboard Foods
LLC, CoBank, ACB, Farm Credit Services of America, PCA and other lenders. Incorporated herein by
reference to Exhibit 10.1 of Seaboard’s Form 8-K dated December 9, 2015.
Amended and Restated Term Loan Credit Agreement dated September 25, 2018 by and among Seaboard
Corporation, Seaboard Foods LLC, CoBank, ACB, Farm Credit Services of America, PCA and other lenders.
Incorporated herein by reference to Exhibit 10.1 of Seaboard’s Form 8-K filed September 27, 2018.
List of subsidiaries.
Certification of the Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
67
31.2+
32.1+
32.2+
Certification of the Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
101.INS+ Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because
its XBRL tags are embedded within the Inline XBRL document)
101.SCH+ Inline XBRL Taxonomy Extension Schema Document
101.CAL+ Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+ Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+ Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE+ Inline XBRL Taxonomy Extension Presentation Linkbase Document
104+
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
* Management contract or compensatory plan or arrangement.
+ Filed electronically with this annual report on Form 10-K with the SEC and transmitted via EDGAR.
(b) Exhibits.
See exhibits identified above under Item 15(a)(3).
(c) Financial Statement Schedules.
None.
Item 16. Form 10-K Summary
None.
68
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
SEABOARD CORPORATION
(Registrant)
By:
/s/ Steven J. Bresky
Steven J. Bresky, Chairman of the Board,
President and Chief Executive Officer
Date: February 19, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Name
Date
Title
/s/ Steven J. Bresky
Steven J. Bresky
February 19, 2020
Chairman of the Board, President,
Chief Executive Officer and
Director (principal executive
officer)
/s/ Robert L. Steer
Robert L. Steer
February 19, 2020
Executive Vice President,
Chief Financial Officer
(principal financial officer)
/s/ Michael D. Trollinger
Michael D. Trollinger
February 19, 2020
Vice President, Corporate
Controller and Chief Accounting
Officer (principal accounting
officer)
/s/ David A. Adamsen
David A. Adamsen
/s/ Douglas W. Baena
Douglas W. Baena
/s/ Edward I. Shifman, Jr.
Edward I. Shifman, Jr.
/s/ Paul M. Squires
Paul M. Squires
February 19, 2020
Director
February 19, 2020
Director
February 19, 2020
Director
February 19, 2020
Director
69
SEABOARD CORPORATION
Stockholder Information
Board of Directors
Steven J. Bresky
Director and Chairman of the Board
President and Chief Executive Officer of Seaboard
David A. Adamsen
Director and Audit Committee Member
Former Vice President – Wholesale Sales 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
Douglas W. Baena
Director and Audit Committee Chair
Self-employed, engaging in facilitation of equipment leasing
financings and consulting
Edward I. Shifman, Jr.
Director and Audit Committee Member
Retired, former Managing Director and Executive
Vice President of Wachovia Capital Finance
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
Ivan J. Winfield Jr.
Vice President, Information Technology
Zachery J. Holden
Assistant Secretary
James T. Hubler
Assistant Secretary
Adriana N. Hoskins
Assistant Treasurer
Chief Executive Officers of Principal Seaboard Operations
Darwin E. Sand
Pork
Hugo D. Rossi
Sugar and Alcohol
David M. Dannov
Commodity Trading and Milling
Edward A. Gonzalez
Marine
Armando G. Rodriguez
Power
Stock Transfer Agent and Registrar of Stock
Availability of Form 10-K Report
EQ 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 2,308 stockholders of
record of its common stock as of January 31, 2020.
Seaboard files its annual report on Form 10-K with the Securities
and Exchange Commission. Copies of the Form 10-K for fiscal 2019
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.