-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Do6OZ3gC1m7OsDOOjH60fU9UamWf7+l6TSVSbZ1jT1/kbS9Q6CL5KZH9pqv/6epa PDmjpFcSi542LoI/J70EeQ== 0000088121-97-000005.txt : 19970410 0000088121-97-000005.hdr.sgml : 19970410 ACCESSION NUMBER: 0000088121-97-000005 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970409 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEABOARD CORP /DE/ CENTRAL INDEX KEY: 0000088121 STANDARD INDUSTRIAL CLASSIFICATION: POULTRY SLAUGHTERING AND PROCESSING [2015] IRS NUMBER: 042260388 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 001-03390 FILM NUMBER: 97576748 BUSINESS ADDRESS: STREET 1: 9000 W. 67TH STREET CITY: SHAWNEE MISSION STATE: KS ZIP: 66201 BUSINESS PHONE: 913-676-8939 MAIL ADDRESS: STREET 1: 9000 W. 67TH STREET CITY: SHAWNEE MISSION STATE: KS ZIP: 66202 FORMER COMPANY: FORMER CONFORMED NAME: SEABOARD ALLIED MILLING CORP DATE OF NAME CHANGE: 19820328 FORMER COMPANY: FORMER CONFORMED NAME: HATHAWAY BAKERIES INC DATE OF NAME CHANGE: 19710315 10-K405/A 1 SEABOARD CORP. 1996 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1996 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from ___________________ to ____________________ Commission file number 1-3390 Seaboard Corporation - -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-2260388 - -------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 9000 W. 67th Street, Shawnee Mission, Kansas 66202 - -------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (913) 676-8800 ----------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock American Stock Exchange $1.00 Par Value Securities registered pursuant of Section 12(g) of the Act: None - -------------------------------------------------------------------------- (Title of class) 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 X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X (Continued) FORM 10-K SEABOARD CORPORATION State the aggregate market value of the voting stock held by non-affiliates of the Registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. $84,044,829 (March 14, 1997). On such date, 332,193 shares were held by non-affiliates, and the stock was sold at $253.00 per share. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 1,487,519.75 shares of Common Stock as of March 14, 1997. DOCUMENTS INCORPORATED BY REFERENCE Part I, item 1(b), a part of item 1(c)(1) and the financial information required by item 1(d) and Part II, items 5, 6, 7 and 8 are incorporated by reference to the Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b). Part III, a part of item 10 and items 11, 12 and 13 are incorporated by reference to the Registrant's definitive proxy statement filed pursuant to Regulation 14A for the 1997 annual meeting of stockholders (the "1997 Proxy Statement"). This Form 10-K and its Exhibits (Form 10-K) contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which may include statements concerning 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 of the assumptions underlying or relating to any of the foregoing statements and other statements which are other than statements of historical fact. These statements appear in a number of places in this Form 10-K and include statements regarding the intent, belief or current expectations of the Company and its management with respect to (i) the cost and timing of the completion of new or expanded facilities, (ii) the Company's financing plans, (iii) the Company's competitive position, (iv) the supply and price of feed stocks and other materials used by the Company, (v) the demand and price for the Company's products and services, or (vi) other trends affecting the Company's financial condition or results of operations. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially as a result of various factors. The accompanying information contained in this Form 10-K, including without limitation, the information under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations", identifies important factors which could cause such differences. 2 FORM 10-K SEABOARD CORPORATION PART I Item 1. Business (a) General Development of Business Seaboard Corporation, a Delaware corporation, the successor corporation to a company first incorporated in 1928, and subsidiaries ("Registrant"), is a diversified international agribusiness and transportation company which is primarily engaged in domestic poultry and pork production and processing, commodity merchandising, baking, flour milling and shipping. Overseas, the Company is primarily engaged in flour and feed milling, shrimp and produce farming and electric power generation. See Item 1 (c) (i) (ii) below for a discussion of developments in specific segments. (b) Financial Information about Industry Segments The information required by Item 1 relating to Industry Segments is hereby incorporated by reference to note 13 of Registrant's Consolidated Financial Statements appearing on pages 45, 46 and 47 of the Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report. (c) Narrative Description of Business (1) Business Done and Intended to be Done by the Registrant (i) Principal Products and Services Registrant produces and processes poultry in the United States and sells processed chicken and chicken parts, both directly and through commercial distributors, to retail, food service and institutional markets, primarily in the eastern half of the United States and foreign markets. Registrant produces hogs and processes pork in the United States and sells fresh pork to domestic and foreign markets. Hogs produced by Company owned or leased facilities are processed at the Company's processing plant. 3 FORM 10-K SEABOARD CORPORATION Registrant operates an ocean liner service for containerized cargo between Florida and ports in the Caribbean Basin and South America. Registrant also operates bulk carriers primarily in the Atlantic Basin. Registrant is engaged in Puerto Rico in the milling of flour and the production and distribution of a full line of baked goods. These goods are distributed directly within Puerto Rico and neighboring islands to food service and retail outlets. Registrant trades commodities, such as bulk grains and oil seeds, primarily in the Eastern Mediterranean and the Atlantic Basin. Registrant, by itself or through non-controlled subsidiaries, produces and processes produce and shrimp in Central and South America, primarily for export to the U.S. and Europe. Registrant also brokers fruits, vegetables and shrimp for independent growers. The majority of these products are transported using the Registrant's shipping line and distribution facility in Miami, Florida. Registrant, by itself or through non-controlled subsidiaries, also produces polypropylene bags, operates power generating facilities, operates flour and animal feed mills, produces and refines sugarcane and citrus and produces salmon. The information required by Item 1 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 hereby incorporated by reference to note 13 of Registrant's Consolidated Financial Statements appearing on pages 45, 46 and 47 of the Registrant's Annual Report to Stockholders furnished to the Commission pursuant to rule 14a-3(b) and attached as Exhibit 13 to this report. (ii) Status of Product or Segment Registrant continues to expand its food production and processing segment by further investing in poultry and pork production and processing facilities. During 1996, the Registrant completed construction of an integrated hog production and processing operation in Oklahoma, Kansas, Texas and Colorado. These facilities include hog farrowing, nursing and finishing buildings, feed mills and a processing plant. The processing plant, which began operating in December, 1995, produces fresh and processed pork marketed primarily in the Southwest United States and for export. During 1996, the Registrant purchased a non-controlling interest in an Argentinean company which produces and refines sugarcane and citrus. Improvements are being made to existing operations and the sugarcane and citrus fields are being expanded. 4 FORM 10-K SEABOARD CORPORATION (iii) Sources and Availability of Raw Materials None of Registrant's businesses utilize material amounts of raw materials that are dependent on purchases from one supplier or a small group of dominant suppliers. (iv) Patents, Trademarks, Licenses, Franchises and Concessions Registrant uses two trademarks; Gold-n-Fresh and Easy Entrees for retail sales of poultry products. Registrant uses three trademarks, Season Sweet , Chestnut Hill Farms , and Cumars Best in marketing fresh fruits, vegetables and shrimp in the United States. Registrant's Puerto Rican Baking business uses three registered trademarks: Holsum , Country Hearth and Olympic Kids. Patents, trademarks, franchises, licenses and concessions are not material to any of Registrant's other businesses. (v) Seasonal Business Profitability of the poultry operations is generally higher in the summer months. Profits from processed pork are generally higher in the fall months. Produce operations are seasonal, depending on the crop being grown. Generally, crops which are exported to the United States are only in production from November through May. The Registrant's other businesses are not seasonally dependent. (vi) Practices Relating to Working Capital Items There are no unusual industry practices or practices of Registrant relating to working capital items. 5 FORM 10-K SEABOARD CORPORATION (vii) Depending on a Single Customer or Few Customers Registrant does not have sales to any one customer equal to 10% or more of Registrant's consolidated revenues, nor sales to a few customers which, if lost, would have a material adverse effect on any such segment or on Registrant taken as a whole. (viii) Backlog Backlog is not material to Registrant's businesses. (ix) Government Contracts No material portion of Registrant's business involved government contracts. (x) Competitive Conditions Competition in Registrant's food production and processing segment comes from a variety of national and regional producers and is based primarily on product performance, customer service and price. In the January 1997 issue of Broiler Industry, an industry trade publication, the Registrant was ranked as the ninth largest poultry processor in the United States based on average weekly production of ready-to-cook chicken. In the October 1996 issue of Successful Farming, an industry trade publication, the Registrant was ranked in the top ten pork producers in the United States based on sows in production. Registrant's Puerto Rican baking business is the largest bakery in Puerto Rico. Competition, based on price and product performance, comes primarily from imported baked goods in the cookie and donut lines, and from one Puerto Rican sliced bread baker. Registrant believes it is among the top five ranking ocean liner services for containerized cargoes in the Caribbean Basin. During the fourth quarter of 1995, competition based on price and consumer service increased significantly in certain markets served by the Registrant. During the fourth quarter of 1996, container rates began to increase modestly. 6 FORM 10-K SEABOARD CORPORATION (xi) Research and Development Activities Registrant does not engage in material research and development activities. (xii) Environmental Compliance Registrant believes that it is in substantial compliance with applicable Federal, state and local provisions relating to environmental protection, and no significant capital expenditures are contemplated in this area. (xiii) Number of Persons Employed by Registrant As of December 31, 1996, Registrant, excluding non-controlled, non-consolidated foreign subsidiaries, had 10,788 employees, of whom 9,089 were employed in the United States (including Puerto Rico). (d) Financial Information about Foreign and Domestic Operations and Export Sales The financial information required by Item 1 relating to export sales is hereby incorporated by reference to note 13 of Registrant's Consolidated Financial Statements appearing on pages 45, 46 and 47 of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this report. Foreign sales, including sales to non-consolidated foreign subsidiaries, represent less than 10% of Registrant's consolidated revenue. Registrant did not have a material amount of sales or transfers between geographic areas for the periods reported on herein. Registrant considers its relations with the governments of the countries in which its foreign subsidiaries are located to be satisfactory, but these foreign operations are subject to the normal risks of doing business abroad, including expropriation, confiscation, war, insurrection, civil strife and revolution, currency inconvertibility and devaluation, and currency exchange controls. To minimize these risks, Registrant has insured certain investments in and loans to its flour mill and shrimp farm in Ecuador and its flour mill in Zaire to the extent deemed appropriate against certain of these risks with the Overseas Private Investment Corporation, an agency of the United States Government. 7 FORM 10-K SEABOARD CORPORATION Item 2. Properties The Registrant currently has production and distribution facilities in the following states: Alabama, Colorado, Florida, Georgia, Kansas, Kentucky, Maine, Oklahoma, Pennsylvania, New Jersey, North Carolina, Tennessee and Texas. Additionally, the Registrant has wholly or partially owned facilities in Argentina, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Guyana, Honduras, Mozambique, Nigeria, Panama, Peru, Puerto Rico, Sierra Leone, Venezuela and Zaire. (1) Food Production and Processing The principal poultry operations of the Registrant consists of five owned and one leased processing plants. These plants are devoted to various phases of slaughtering, dressing, cutting, packing, deboning or further- processing chickens. The total slaughter capacity is approximately 232.4 million birds per year. To support these facilities, the Registrant operates four feed mills, four hatcheries and a network of 670 contract growers that supply pullet, breeder and broiler farms. These facilities are located in Alabama, Georgia, Kentucky and Tennessee. The construction in Oklahoma of a hog processing plant with a double shift capacity of four million hogs per year was completed in December, 1995. Registrant reached single shift capacity in the third quarter of 1996. Hog production facilities currently consist of a combination of owned and leased farrowing, nursery and finishing units to support 102,500 sows. Registrant owns three feed mills which have a combined capacity to produce 850 thousand tons of feed annually to support the hog production. These facilities are located in Oklahoma, Texas, Kansas and Colorado. The Registrant owns in whole or in part seven flour mills with capacity to produce 49,400 cwts of bakery flour and mill feed per day. In addition, Registrant has feed mill capacity of 35 tons per hour to produce formula animal feed. The flour mills, located in Puerto Rico, Guyana, Ecuador, Sierra Leone, Mozambique, Nigeria and Zaire, and the feed mills located in Ecuador, Nigeria and Zaire are owned except for a flour mill in Sierra Leone which is located on land which the Government of Sierra Leone has agreed to lease for a remaining term of 17 years, and a Nigerian flour and feed mill with a remaining lease term of 78 years and renewal option of 75 years. The Registrant owns two bakeries in Puerto Rico. The Registrant, by itself or through non-controlled subsidiaries, operates approximately 3,100 acres of shrimp ponds in Honduras and Ecuador. Approximately 2,400 acres are leased for a nineteen year term and the rest are owned. The Registrant owns a non-controlling interest in an Argentinean company which owns approximately 37,000 acres of planted sugarcane and approximately 4,200 acres of planted citrus. In addition, this company owns a sugar mill with a capacity to process 140,000 tons of sugar per year. (2) Transportation Registrant leases a 166,400 square foot warehouse, office space and port terminal land and facilities in Florida which are used in its containerized cargo operations. The Registrant owns six 9,000 metric-ton deadweight dry bulk carriers and three containerized ocean cargo vessels with deadweights ranging from 6,818 to 12,648 metric-tons. In addition, Registrant timecharters, under short-term agreements, between twelve and fifteen containerized ocean cargo vessels with deadweights ranging from 2,488 to 9,200 metric-tons. Registrant also bare boat charters, under long-term lease agreements, three containerized ocean cargo vessels with deadweights ranging from 12,169 to 12,648 metric tons. 8 FORM 10-K SEABOARD CORPORATION (3) Other Registrant owns a floating power generating facility, capable of producing 40 megawatts of power, located in the Port of Rio Haino in Santo Domingo, Dominican Republic. Registrant manages a second power generating facility capable of producing 17.5 megawatts of power also located in the Dominican Republic. Management believes that the Registrant's present facilities are generally adequate and suitable for its current purposes. In general, facilities are fully utilized; however, seasonal fluctuations in inventories and production may occur as a reaction to market demands for certain products. Certain foreign flour mills may operate at less than full capacity due to unavailability of foreign exchange to pay for imported raw materials. Item 3. Legal Proceedings The Company is subject to legal proceedings related to the normal conduct of its business. Although in the opinion of management, none of these actions are expected to result in a final judgement having a materially adverse effect on the consolidated financial statements of the Company, the Company is a defendant in a maritime arbitration claim more fully described in Note 12 of the consolidated financial statements. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted during the last quarter of the fiscal year covered by this report to a vote of security holders. Executive Officers of Registrant The following table lists the executive officers and certain significant employees of Registrant. Generally, each executive officer is elected at the Annual Meeting of the Board of Directors following the Annual Meeting of Stockholders and holds his office until the next such annual meeting or until his successor is duly chosen and qualified. There are no arrangements or understandings pursuant to which any executive officer was elected. Name (Age) Positions and Offices with Registrant and Affiliates H. Harry Bresky (71) President of Registrant; President and Treasurer of Seaboard Flour Corporation (SFC) Joe E. Rodrigues (60) Executive Vice President and Treasurer Rick J. Hoffman (42) Vice President Steven J. Bresky (43) Vice President Robert L. Steer (37) Vice President - Finance Douglas W. Schult (40) Vice President - Human Resources David M. Becker (35) Assistant Secretary and Director of Legal Affairs 9 FORM 10-K SEABOARD CORPORATION Mr. H. Harry Bresky has served as President of Registrant since 1967 and as President of SFC since 1987, and as Treasurer of SFC since 1973. Mr. Bresky is the father of Steven J. Bresky. Mr. Rodrigues has served as Executive Vice President and Treasurer of Registrant since December 1986. Mr. Hoffman has served as Vice President of Registrant since April 1989. Mr. Steven J. Bresky has served as Vice President of Registrant since April 1989. Mr. Steer has served as Vice President - Finance of Registrant since April 1996. He has been employed with the Registrant since 1984. Mr. Schult has served as Vice President - Human Resources of Registrant since April 1996. He has been employed with the Registrant since February 1995, by M.G. Waldbaum from January 1993 to January 1995 and prior to that by IBP, Inc. Mr. Becker has served as Assistant Secretary of Registrant since May 1994. He has been employed with the Registrant since 1993 and prior to that was employed by the law firm Stinson Mag and Fizzell PC. 10 FORM 10-K SEABOARD CORPORATION PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information required by Item 5 is hereby incorporated by reference to "Stock Listing" and "Quarterly Financial Data" appearing on pages 48 and 28, respectively, of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report. Item 6. Selected Financial Data The information required by Item 6 is hereby incorporated by reference to the "Summary of Selected Financial Data" appearing on page 4 of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 of this Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required by Item 7 is hereby incorporated by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing on pages 22 through 27 of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report. Item 8. Financial Statements and Supplementary Data The information required by Item 8 is hereby incorporated by reference to Registrant's "Quarterly Financial Data," "Independent Auditor's Report," "Consolidated Statements of Earnings," "Consolidated Statements of Stockholders' Equity," " Consolidated Balance Sheets," " Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements" appearing on pages 28 through 47 of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. 11 FORM 10-K SEABOARD CORPORATION PART III Item 10. Directors and Executive Officers of Registrant Refer to "Executive Officers of Registrant" in Part I. Information required by this item relating to directors of Registrant has been omitted since Registrant filed a definitive proxy statement within 120 days after December 31, 1996, the close of its fiscal year. The information required by this item relating to directors is incorporated by reference to "Item 1" appearing on pages 3 and 4 of the 1997 Proxy statement. The information required by this item relating to late filings of reports required under Section 16(a) of the Securities Exchange Act of 1934 is incorporated by reference to the last paragraph on page 2 of the Registrant's 1997 Proxy Statement. Item 11. Executive Compensation This item has been omitted since Registrant filed a definitive proxy statement within 120 days after December 31, 1996, the close of its fiscal year. The information required by this item is incorporated by reference to "Executive Compensation and Other Information," "Retirement Plans" and "Compensation Committee Interlocks and Insider Participation" appearing on pages 5, 6, 7 and 9 of the 1997 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management This item has been omitted since Registrant filed a definitive proxy statement within 120 days after December 31, 1996, the close of its fiscal year. The information required by this item is incorporated by reference to "Principal Stockholders" appearing on page 2 and "Election of Directors" on page 3 of the 1997 Proxy Statement. Item 13. Certain Relationships and Related Transactions This item has been omitted since Registrant filed a definitive proxy statement within 120 days after December 31, 1996, the close of its fiscal year. The information required by this item is incorporated by reference to "Compensation Committee Interlocks and Insider Participation" appearing on page 9 of the 1997 Proxy Statement. 12 FORM 10-K SEABOARD CORPORATION PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Consolidated financial statements. See Index to Consolidated Financial Statements on page F-1. 2. Consolidated financial statement schedules. See Index to Consolidated Financial Statements on page F-2. 3. Exhibits. 3.1 - Registrant's Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 3.2 - Registrant's By-laws, as amended - incorporated by reference to Exhibit 3.2 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 4.1 - Note Purchase Agreement dated December 1, 1993 between the Registrant and various purchasers as listed in the exhibit. The Annexes and Exhibits to the Note Purchase Agreement have been omitted from the filing, but will be provided supplementally upon request of the Commission. Incorporated by reference to Exhibit 4.1 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 4.2 Seaboard Corporation 6.49% Senior Note Due December 1, 2005 issued pursuant to the Note Purchase Agreement described above. Incorporated by reference to Exhibit 4.2 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1993. 4.3 Note Purchase Agreement dated June 1, 1995 between the registrant and various purchasers as listed in the exhibit. The Annexes and Exhibits to the Note Purchase Agreement have been omitted from the filing, but will be provided supplementally upon request of the Commission. Incorporated by reference to Exhibit 4.3 of Registrant's Form 10-Q for the quarter ended September 9, 1995. 4.4 Seaboard Corporation 7.88% Senior Note Due June 1, 2007 issued pursuant to the Note Purchase Agreement described above. Incorporated by reference to Exhibit 4.4 of Registrant's Form 10-Q for the quarter ended September 9, 1995. 4.5 - Seaboard Corporation Note Agreement dated as of December 1, 1993 ($100,000,000 Senior Notes due December 1, 2005). First Amendment to Note Agreement. Incorporated by reference to Exhibit 4.7 of Registrant's Form 10-Q for the quarter ended March 23, 1996. 4.6 - Seaboard Corporation Note Agreement dates as of June 1, 1995 ($125,000,000 Senior Notes due June 1, 2007). First Amendment to Note Agreement. Incorporated by reference to Exhibit 4.8 of Registrant's Form 10-Q for the quarter ended March 23, 1996. 13 FORM 10-K SEABOARD CORPORATION * 10.1 Registrant's Executive Retirement Plan dated October 18, 1994. Incorporated by reference to Exhibit 10.1 of Registrant's Form 10-Q for the quarter ended September 10, 1994. * 10.2 Registrant's Summary of Benefits for Excess 401(k) Contributions (Supplemental Executive Retirement Plan). Incorporated by reference to Exhibit 10.2 of Registrant's Form 10-Q for the quarter ended September 10, 1994. * 10.3 Registrant's Supplemental Executive Retirement Plan for H. Harry Bresky dated March 21, 1995. Incorporated by reference to Exhibit 10.3 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. * 10.4 Employment Agreement for Joe E. Rodrigues dated July 9, 1986 and amended August 10, 1990. Incorporated by reference to Exhibit 10.5 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. * 10.5 First Amendment to Registrant's Executive Retirement Plan dated December 31, 1995. Incorporated by reference to Exhibit 10.6 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. 13 - Sections of Annual Report to security holders incorporated by reference herein. 18 - Letter regarding change in accounting principles. 21 - List of subsidiaries. 27 - Financial Data Schedule (included in electronic copy only). * Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K No reports on Form 8-K were filed by Registrant during the last quarter of the fiscal year covered by this report. (c) Exhibits Exhibits begin on page 16. 14 FORM 10-K SEABOARD CORPORATION SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SEABOARD CORPORATION By /s/H. Harry Bresky By /s/Robert L. Steer - --------------------------- --------------------------- H. Harry Bresky, President R.L. Steer, Vice President - (principal executive officer) Finance (principal financial and accounting officer) Date: March 27, 1997 Date: March 27, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated. /s/H. Harry Bresky /s/J. E. Rodrigues - ---------------------------- ------------------------- H. Harry Bresky, Director J. E. Rodrigues, Director Date: March 27, 1997 Date: March 27, 1997 /s/David A. Adamsen /s/Thomas J. Shields - ----------------------------- ------------------------- David A. Adamsen, Director Thomas J. Shields, Director Date: March 27, 1997 Date: March 27, 1997 15 SEABOARD CORPORATION AND SUBSIDIARIES Consolidated Financial Statements and Schedule (Form 10-K) Securities and Exchange Commission For the year ended December 31, 1996 (With Independent Auditors' Report Thereon) SEABOARD CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule Financial Statements -------------------- Stockholders' Annual Report Page ------------------ Independent Auditors' Report 34 Consolidated Balance Sheets as of December 31, 1996 and December 31, 1995 37 Consolidated Statements of Earnings for the years ended December 31, 1996, December 31, 1995 and December 31, 1994 35 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, December 31, 1995 and December 31, 1994 36 Consolidated Statements of Cash Flows for the years ended December 31, 1996, December 31, 1995 and December 31, 1994 39 Notes to Consolidated Financial Statements 40 The foregoing are incorporated by reference. The individual financial statements of the minority-owned nonconsolidated foreign subsidiaries which would be required if each such foreign subsidiary were a Registrant are omitted, because (a) the Registrant's and its other subsidiaries' investments in and advances to such foreign subsidiaries do not exceed 20% of the total assets as shown by the most recent consolidated balance sheet; (b) the Registrant's and its other subsidiaries' proportionate share of the total assets (after intercompany eliminations) of such foreign subsidiaries do not exceed 20% of the total assets as shown by the most recent consolidated balance sheet; and (c) the Registrant's and its other subsidiaries' equity in the earnings before income taxes and extraordinary items of the foreign subsidiaries does not exceed 20% of such income of the Registrant and consolidated subsidiaries compared to the average income for the last five fiscal years. Combined condensed financial information as to assets, liabilities and results of operations have been presented for minority-owned nonconsolidated foreign subsidiaries in note 6 of "Notes to the Consolidated Financial Statements." (Continued) F-1 SEABOARD CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule Schedule -------- Page ---- II - Valuation and Qualifying Accounts for the years ended December 31, 1996, 1995 and 1994 F-4 All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related consolidated notes. F-2 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Seaboard Corporation: Under date of March 3, 1997, we reported on the consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 1996 and 1995 and the consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996 as contained in the December 31, 1996 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year ended December 31, 1996. In connection with our audits of the aforementioned consolidated financial statements, we also audited the financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. As discussed in note 5 to the consolidated financial statements, the Company changed its method of accounting for spare parts and supplies inventories in 1996. KPMG Peat Marwick LLP Kansas City, Missouri March 3, 1997 F-3 Schedule II SEABOARD CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts (In Thousands)
Balance at Write-offs Balance beginning Provision net of at end of year (1) recoveries of year ----------- --------- ---------- -------- Year ended December 31, 1996: Allowance for doubtful accounts $ 17,088 4,122 1,762 $ 19,448 =========== ========= ========== ========= Year ended December 31, 1995: Allowance for doubtful accounts $ 9,196 10,554 2,662 $ 17,088 =========== ======== ========== ========= Year ended December 31, 1994: Allowance for doubtful accounts $ 6,556 2,910 270 $ 9,196 =========== ======== ========== ========= (1) Charged to selling, general and administrative expenses.
F-4 EX-13 2 1996 ANNUAL REPORT Summary of Selected Financial Data Seaboard Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------- (Thousands of dollars except per share amounts) Years ended December 31, - -------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 - -------------------------------------------------------------------------------------------------- Net sales $ 1,464,362 $ 1,173,977 $ 983,804 $ 1,142,144 $ 1,053,655 ================================================================================================== Net earnings $ 5,846 $ 20,202 $ 35,201 $ 35,891 $ 31,075 ================================================================================================== Earnings per common share $ 3.93 $ 13.58 $ 23.67 $ 24.13 $ 20.89 ================================================================================================== Total assets $ 1,004,685 $ 878,132 $ 675,211 $ 647,332 $ 485,121 ================================================================================================== Long-term debt $ 297,719 $ 297,440 $ 177,666 $ 194,506 $ 78,123 ================================================================================================== Stockholders' equity $ 369,934 $ 365,810 $ 346,080 $ 304,356 $ 269,581 ================================================================================================== Dividends per common share $ 1.00 $ 1.00 $ 1.00 $ .75 $ .50 ================================================================================================== As described in Note 5 to the consolidated financial statements, the Company changed its method of accounting for spare parts and supplies inventories in 1996. The cumulative effect of this change at January 1, 1996 was to increase net earnings by $3,006,000 or $2.02 per common share. In addition, the effect of this change in 1996, exclusive of the cumulative effect, was to increase net earnings by $788,000 or $.53 per common share. Included in Net Earnings and Earnings Per Common Share for the year ended December 31, 1993 is the cumulative effect of changing the method of accounting for income taxes. Net Earnings was increased by $11,000,000 and Earnings Per Common Share increased by $7.40 to reflect this change. Net Earnings and Earnings Per Common Share for the year ended December 31, 1993 also include the reversal of deferred taxes on undistributed earnings of certain foreign subsidiaries that management believes are permanently invested. Net Earnings increased by $9,074,000 and Earnings Per Common Share increased by $6.10 as a result of this reversal of deferred taxes.
(Graphs omitted from this page, see appendix.) Seaboard Corporation and Subsidiaries Financial Summary (Graphs omitted from this page, see appendix.) Management's Discussion and Analysis Liquidity and Capital Resources
- ----------------------------------------------------------------------------- (Dollars in millions) 1996 1995 1994 - ----------------------------------------------------------------------------- Current ratio 1.71:1 2.25:1 3.31:1 Working capital $ 204.2 $ 219.0 $ 259.5 Cash from operating activities $ (72.8) $ 42.2 $ 50.3 Capital expenditures $ 110.5 $ 229.5 $ 87.6 Long-term debt, exclusive of current maturities $ 297.7 $ 297.4 $ 177.7 Total capitalization* $ 715.5 $ 703.4 $ 562.7 - ----------------------------------------------------------------------------- * Total capitalization is defined as stockholders' equity and noncurrent liabilities.
Cash provided by operating activities declined $115.0 million compared to 1995 due to lower earnings and increased inventories and receivables. Inventories increased primarily as a result of the expansion of the live hog herd and finished product at the pork processing plant which began operating in December, 1995 and higher priced feed raw materials. Inventories of dressed poultry also increased due to the timing of export sales. Inventories also increased $6.2 million as a result of the Company changing its method of accounting for spare parts and supplies used in its poultry and pork processing operations (see Note 5 to consolidated financial statements for further discussion). The increase in receivables was primarily related to increased sales of pork and poultry products and short-term advances to a nonconsolidated foreign subsidiary. The decline in cash provided by operating activities of $8.1 million in 1995 compared to 1994 was primarily attributable to increased inventories and receivables. Inventories increased as a result of the expansion of the live hog herd and the timing of export sales of dressed poultry and commodity grains. Receivables increased in the transportation segment mostly due to increased sales. Partially offsetting the increase in inventories and receivables were increases in accounts payable and accrued liabilities. Accounts payable increased primarily as a result of higher inventory levels. Accrued liabilities increased due to advance payments on export sales, deferred hedging gains and revenues on incomplete voyages. The Company invested $110.5 million in property, plant and equipment during 1996, of which $99.1 million was expended in the food production and processing segment, $8.6 million in the transportation segment and $2.8 million in other areas of the Company's business. During 1996, capital expenditures for hog farrowing and finishing facilities, two feed mills and a pork processing plant amounted to $83 million. Cumulative capital expenditures on these facilities since 1992 total $306.2 million. The Company expects additional expenditures for these initial facilities to total approximately $7.2 million during the next year. Management anticipates these expenditures will be financed by internally generated cash and through the issuance of exempt facility revenue bonds. Other capital expenditures in the food production and processing segment for 1996 consisted of $16.1 million in expanding processing capacity, general modernization and efficiency upgrades of plant and equipment. The Company anticipates spending $37.3 million to upgrade and expand its poultry facilities during the next year. Management anticipates these expenditures will be financed by internally generated cash. Capital expenditures in the transportation segment during 1996 totaled $8.6 million for general replacement and upgrades of property and equipment. Capital expenditures totaled $229.5 million in property, plant and equipment during 1995, of which $192.2 million was expended in the food production and processing segment and $34.1 million in the transportation segment and $3.2 million in other areas of the Company's business. During 1995, capital expenditures for hog farrowing and finishing facilities, two feed mills and a pork processing plant amounted to $159.7 million. Capital expenditures of $8.5 million were made at the Company's poultry processing plant in Athens, Georgia to expand processing capacity. Other capital expenditures in the food production and processing segment for 1995 included $24.0 million in general modernization and efficiency upgrades of plant and equipment. Capital expenditures in the transportation segment during 1995 totaled $34.1 million. The Company purchased two cargo vessels for $14.7 million for use in the ocean liner service, and other capital expenditures of $19.4 million were for general replacement and upgrades of property and equipment. In August 1996, the Company sold three vessels used in the transportation segment to a third party for $28.5 million. The vessels have been chartered from the third party for terms ranging from seven to ten years. The Company realized a $5.9 million gain on the sale of the vessels which was deferred and will be recognized over the term of the charter agreements. The charters are accounted for as operating leases. In July 1996, the Company purchased for $8.8 million a non-controlling interest in Ingenio y Refineria San Martin del Tabacal S.A. (Tabacal). Tabacal is an Argentinean company primarily engaged in growing and refining sugarcane and citrus production for consumption in Argentina and for export. The investment is being accounted for using the equity method of accounting. As of December 31, 1996, the Company had advanced $27.6 million to Tabacal for improvements of existing operations, expanding sugarcane and citrus fields and working capital requirements. The Company anticipates making additional loans or guaranteeing loans made to Tabacal by third parties in amounts not expected to exceed $20 million. In October 1996, the Company acquired a 50 percent interest in a flour mill located in Mozambique for $4.6 million with $1 million paid at closing and the balance to be paid in installments over the next six years. The investment is being accounted for using the equity method of accounting. During 1996, the Company entered into one-year revolving credit facilities totaling $90 million and a five-year $50 million revolving credit facility and reduced certain uncommitted credit lines. At December 31, 1996, the Company had $75 million outstanding under the one-year revolving credit facilities and $75.2 million outstanding under the remaining short-term uncommitted credit lines totaling $115 million. The Company borrowed $10 million of the five-year revolving credit facility, the proceeds of which were used to retire $10 million in existing term loans. As of December 31, 1996, economic incentive grants totaling $12.4 million had been used to fund construction projects. Use of these funds, contributed by government entities, was limited to construction of a pork processing facility. For accounting purposes, these grants have been recorded in other liabilities and are being amortized over the life of the assets constructed with the funds. In February 1995, the Company borrowed the proceeds of $3.3 million in Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds issued by the Guymon Utilities Authority. The funds were used to finance certain costs associated with the construction of a pork processing plant. In June 1995, the Company issued $125 million in unsecured Senior Notes to various lenders, the proceeds of which are being used to finance the construction of hog production facilities, a pork processing plant and for general corporate purposes. The notes bear interest at 7.88% and mature in equal installments of $25 million on June 1, 2003, 2004, 2005, 2006 and 2007. In December 1995, the Company borrowed the proceeds of $9.6 million in Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds issued by the Kansas Development Finance Authority. The funds were used to finance certain costs associated with hog production facilities. Long-term debt of $17.4 million was repaid in 1995 in advance of its scheduled maturity. Subsequent to year-end, the Company's one year revolving credit facilities were increased to $160 million as a result of the extension of an existing facility and the establishment of a new facility. In addition, the existing five-year revolving credit facility was also extended and reduced to $25 million. The Company also expects to borrow approximately $10 million of Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds to be issued by the Oklahoma Development Finance Authority. The funds will be used to finance certain costs associated with hog production facilities. Management intends to continue seeking opportunities for expansion in the industries in which it operates and believes that the Company's liquidity, capital resources and borrowing capabilities are adequate for its current and intended operations. Results of Operations - --------------------- Net sales of $1,464.4 million for the year ended December 31, 1996, increased by $290.4 million compared to the year ended December 31, 1995. Operating income in 1996 decreased by $11.5 million compared to 1995 to total $19.7 million. Net sales increased by $190.2 million compared to 1994 to total $1,174 million for the year ended December 31, 1995. Operating income of $31.2 million in 1995 decreased by $15.9 million compared to 1994. Food Production And Processing Segment
- ----------------------------------------------------------------------------- (Dollars in millions) 1996 1995 1994 - ----------------------------------------------------------------------------- Net sales $ 844.5 652.5 638.3 Operating income $ (3.9) 10.1 10.7 - -----------------------------------------------------------------------------
In 1996, net sales for the food production and processing segment increased $192 million compared to 1995 as a result of increased poultry and pork sales. Operating income for 1996 decreased $14 million compared to 1995 as a result of significantly higher grain prices during most of 1996. As described in Note 5 to the consolidated financial statements, the Company changed its method of accounting for spare parts and supplies inventories in 1996. The effect of this change was to decrease the operating loss in the food production and processing segment in 1996 by $1.3 million. In the fourth quarter of 1996, grain prices decreased substantially. Grain commodities are a significant component of the Company's costs. Management expects this decrease in grain prices to have a positive effect on the Company's operating income in the first half of 1997. Net sales of poultry products totaled $501.7 million in 1996 an increase of $43.1 million compared to 1995. The increase was primarily related to increased production resulting from expanded processing capacity and an increase in the average selling price of poultry products. The increased sales prices were partially attributable to higher poultry markets and changes in product mix. Gross income on poultry products decreased by $26.6 million compared to 1995 to total $28.5 million. The decrease in gross income was primarily related to higher finished feed costs. Net sales within the pork operations increased $142.7 million in 1996 to total $234.3 million. The increase is related to sales of pork as a result of the new hog processing plant reaching full single-shift capacity during 1996. The market hogs produced at the Company's live hog operations are slaughtered at the pork processing plant. The increase in sales was partially offset by a $56.1 million decrease in sales resulting from discontinuing the operations at the Albert Lea, Minnesota pork processing plant in December 1995. The pork operations reported gross income of $3 million in 1996, an increase of $6.6 million compared to 1995. The increase in gross income is primarily related to large increases in hog production and reaching full single-shift capacity at the new hog processing plant in 1996 along with the discontinuation of unprofitable operations at the Albert Lea plant in December 1995. The increase was partially offset by higher finished feed costs and start-up costs associated with the processing plant. Net sales for the food production and processing segment in 1995 increased $14.2 million compared to 1994 as a result of increased poultry sales. In 1995, operating income decreased by $.6 million compared to 1994. The decrease in operating income was primarily related to higher general and administrative expenses at the Company's pork operations. Net sales of poultry products totaled $458.6 million in 1995, an increase of $32.5 million compared to 1994. The increase was primarily due to higher sales prices attributable to higher demand for export product. Gross income on poultry products increased by $4.4 million compared to 1994 to total $55.1 million. The increase in gross income was primarily related to higher selling prices partially offset by higher finished feed costs. Net sales of live hogs and pork products totaled $91.6 million in 1995 compared to $98.3 million in 1994. The 1994 net sales included the last three months of slaughter operations at the Company's Minnesota plant. After discontinuing the slaughter, the remaining operations at this plant consisted of processing hams and bacon until December 1995 when it was leased to a third party. Live hog sales increased during 1995 as the Company's herd grew in anticipation of opening its new processing plant. The pork operations reported negative gross income of $3.6 million in 1995 compared to negative gross income of $2 million in 1994. The decrease was primarily related to higher cost of raw product used in processing hams and bacon. The Company enters into forward purchase contracts, futures and options to manage its exposure to price fluctuations in the commodity markets. These commodity instruments generally involve the anticipated purchase of feed grains and the sale of hogs. At December 31, 1996, the Company had net contracts to purchase 5.1 million bushels of grain and sell 146.5 million pounds of hogs. Gains and losses on commodity instruments designated as hedges and for which there is high correlation between changes in the value of the instrument and changes in the value of the hedged commodity are deferred and ultimately recognized in operations as part of the cost of the commodity. Gains and losses on qualifying hedges of firm commitments or probable anticipated transactions are also deferred and recognized as adjustments of the carrying amounts of the commodities when the hedged transaction occurs. Realized gains and losses on qualifying commodity instruments which were designated as hedges are deferred and are ultimately recognized as part of the measurement of the hedged transactions. Commodity instruments not qualifying as hedges for financial reporting purposes are marked to market and included in cost of sales and operating expenses in the consolidated statements of operations. Realized gains and (losses) from commodity contracts reported in operating income for the years ended December 31, 1996 and 1995 were $(12.9) million and $1.9 million, respectively. Commodity Trading and Milling
- -------------------------------------------------------------------------- (Dollars in millions) 1996 1995 1994 - -------------------------------------------------------------------------- Net sales $ 315.6 208.0 107.4 Operating income $ 18.1 8.5 8.6 - --------------------------------------------------------------------------
Net sales from commodity trading and milling increased by $107.6 million in 1996 compared to 1995. The increase is primarily related to increased sales of wheat and other grains in foreign markets. Operating income from commodity trading increased by $9.6 million compared to 1995, primarily as a result of improved margins due to lower unit freight costs. Net sales from commodity trading activity increased by $100.6 million in 1995 compared to 1994. The increase is primarily related to expanded trading of wheat, soybeans, corn and other grains in foreign markets. Operating income was adversely affected by higher ship operating expenses. Transportation Segment
- -------------------------------------------------------------------------- (Dollars in millions) 1996 1995 1994 - -------------------------------------------------------------------------- Net sales $ 266.6 277.1 210.6 Operating income $ 6.5 16.9 29.2 - --------------------------------------------------------------------------
Net sales and operating income from containerized cargo operations decreased by $10.5 million and $10.4 million respectively, in 1996 compared to 1995. The decrease in sales and operating income was primarily related to lower freight rates resulting from increased competition in certain markets serviced by the Company compared to the same period one year earlier. The decrease in sales was partially offset by the increase in unit cargo volumes shipped. The decrease in operating income was partially offset by lower overhead expenses as a result of improving efficiency levels. During the fourth quarter of 1996, container rates began to increase moderately. Management cannot predict whether rates will continue to improve. Net sales from containerized cargo operations increased by $66.5 million in 1995 compared to 1994. The increase resulted primarily from new services to South America and the Carribean Basin and increased volume within existing services in Central America. Net sales from other transportation services were not material. Operating income from the containerized cargo operations decreased by $12.3 million in 1995 compared to 1994. The decrease was primarily related to lower freight rates in 1995 compared to 1994 in certain markets in which the Company operates. Through the third quarter of 1995, freight rates on revenue producing units remained almost unchanged compared to the same period in 1994. In the fourth quarter of 1995, rates declined sharply due to competitive pressures. Operating income was further impacted by costs associated with expanding services, including higher rates on vessels the Company has on charter. Other Operations
- -------------------------------------------------------------------------- (Dollars in millions) 1996 1995 1994 - -------------------------------------------------------------------------- Net sales $ 37.7 36.3 27.5 Operating income $ 5.1 1.0 2.9 - --------------------------------------------------------------------------
Net sales from other operations was almost unchanged in 1996 compared to 1995. Operating income increased by $4.1 million compared to 1995 due primarily to a reduction in operating expenses resulting from lower maintenance costs in electric power generation and improved receivables collections. Net sales from other operations increased $8.8 million in 1995 compared to 1994. The increase is primarily related to expanded electric power generation service within the Dominican Republic. Operating income decreased during the year as a result of increased reserves on certain foreign receivables. Selling, General and Administrative Expenses - -------------------------------------------- Selling, general and administrative (SG&A) totaled $128.8 million, $139.2 million and $112.3 million for the years ended December 31, 1996, 1995 and 1994, respectively. The 1996 decrease reflects the Company's focus on cost controls, improved receivable collections and start-up of pork processing operations. The increase in SG&A for 1995 is primarily related to general and administrative costs associated with the staffing and expenditures of the pork operations, increased reserves for potential uncollectible receivables primarily with foreign customers, and expenses related to expanded shipping routes and product lines. Interest Income - --------------- Interest income totaled $9.1 million, $11.5 million and $9.7 million for the years ended December 31, 1996, 1995 and 1994, respectively. The decrease in 1996 of $2.4 million resulted primarily from a decline in invested funds. The increase in 1995 of $1.8 million resulted primarily from investing the proceeds of $125 million of long-term debt issued in June 1995. Interest Expense - ---------------- Interest expense, net of capitalized interest, totaled $26.9 million, $15.7 million and $13.1 million for the years ended December 31, 1996, 1995 and 1994, respectively. Interest expense increased during 1996 compared to 1995 as a result of increased short-term borrowings and the issuance of long-term debt in June 1995. Interest expense increased in 1995 compared to 1994 as a result of the issuance of long-term debt and increased short-term borrowings. From time to time, the Company enters into interest rate exchange agreements in the management of interest rate risk. These agreements effectively convert specifically identified variable rate debt into fixed-rate debt. At December 31, 1996, there were no outstanding agreements. Other Financial Information - --------------------------- Results from foreign subsidiaries not consolidated for 1996 reflect the upgrading and expansion of operations of Tabacal. The Company anticipates incurring additional losses during 1997 as Tabacal continues its upgrading and expansion activities. Miscellaneous income in 1994 included a $2.9 million gain from liquidating an interest rate exchange agreement during the second quarter. The Company entered into this interest rate exchange agreement as an anticipatory hedge against interest rate risk associated with anticipated variable rate financing. The anticipated liability to be hedged was not incurred. The Company has operations in and transactions with customers in a number of foreign countries. The currencies of these countries fluctuate in relation to the U.S. dollar. Most of the Company's major contracts and transactions, however, are denominated in U.S. dollars. The Company had no material foreign currency transaction gains or losses during the years ended December 31, 1996, 1995 and 1994. The activities of foreign subsidiaries are primarily conducted with U.S. affiliates, or they operate in hyper-inflationary environments. As a result, the Company translates, for consolidation purposes, using the U.S. dollar as the functional currency. The gains and losses that result from remeasurement are reported in earnings. Foreign currency losses for the years ended December 31, 1996, 1995 and 1994, were not material. Foreign currency exchange restrictions imposed upon the Company's wholly owned foreign subsidiaries and certain minority-owned foreign subsidiaries do not have a significant effect on the consolidated financial position of the Company. The Company is subject to various federal and state regulations regarding environmental protection and land use. Among other things, these regulations affect the disposal of livestock waste and corporate farming matters in general. Management believes it is in compliance with all such regulations. Future changes in environmental or corporate farming laws could affect the manner in which the Company operates its business and its cost structure. The Company does not believe its businesses have been materially adversely affected by general inflation. Quarterly Financial Data (Unaudited) Seaboard Corporation and Subsidiaries
- ------------------------------------------------------------------------------- (Thousands of dollars 1st 2nd 3rd 4th Total for except per share amounts) Quarter Quarter Quarter Quarter the Year - ------------------------------------------------------------------------------- 1996 - ------------------------------------------------------------------------------- Net sales $ 297,631 330,503 350,739 485,489 1,464,362 Operating income $ (12,170) (3,668) 9,606 23,011 16,779 Net earnings $ (7,706) (4,149) 3,316 14,385 5,846 Earnings per common share $ (5.18) (2.79) 2.23 9.67 3.93 Dividends per common share $ .25 .25 .25 .25 1.00 Market price range per common share: High $ 270 246 3/4 221 266 Low $ 233 203 196 210 =============================================================================== - ------------------------------------------------------------------------------- 1995 - ------------------------------------------------------------------------------- Net sales $ 235,923 255,402 288,263 394,389 1,173,977 Operating income $ 13,689 9,112 9,496 (1,093) 31,204 Net earnings $ 8,040 6,764 7,080 (1,682) 20,202 Earnings per common share $ 5.40 4.55 4.76 (1.13) 13.58 Dividends per common share $ .25 .25 .25 .25 1.00 Market price range per common share: High $ 230 304 295 270 Low $ 159 233 241 243 3/8 =============================================================================== The Company's first three quarters of each fiscal year consist of three four-week periods. The fourth quarter has four four-week periods.
As described in Note 5 to the consolidated financial statements, the Company changed its method of accounting for spare parts and supplies inventories during the fourth quarter of 1996. This change has been applied retroactively to January 1, 1996 and, accordingly, the first three quarters of 1996 have been restated. The cumulative effect of this change at January 1, 1996 was to increase net earnings by $3,006,000 or $2.02 per common share for the first quarter of 1996. In addition, the effect of this change in 1996, exclusive of the cumulative effect, was to increase net earnings and earnings per common share by $403,000 ($.27 per share), $190,000 ($.13 per share), and $195,000 ($.13 per share), respectively, for the first, second and third quarters of 1996. There was no effect on the fourth quarter of 1996. The pro forma effect of retroactive application of this new method would not materially affect the results of operations for any of the 1995 quarters. This Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which may include statements concerning 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 of the assumptions underlying or relating to any of the foregoing statements and other statements which are other than statements of historical fact. These statements appear in a number of places in this Report and include statements regarding the intent, belief or current expectations of the Company and its management with respect to (i) the cost and timing of the completion of new or expanded facilities, (ii) the Company's financing plans, (iii) the Company's competitive position, (iv) the supply and price of feed stocks and other materials used by the Company, (v) the demand and price for the Company's products and services, or (vi) other trends affecting the Company's financial condition or results of operations. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially as a result of various factors. The accompanying information contained in this report including without limitation the information under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Letter to Stockholders" identifies important factors which could cause such differences. Responsibility For Financial Statements The consolidated financial statements appearing in this annual report have been prepared by the Company in conformity with generally accepted accounting principles and necessarily include amounts based upon judgments with due consideration given to materiality. The Company relies on a system of internal accounting controls that is designed to provide reasonable assurance that assets are safeguarded, that transactions are executed in accordance with Company policy and are properly recorded, and that accounting records are adequate for preparation of financial statements and other information. The concept of reasonable assurance is based on recognition that the cost of a control system should not exceed the benefits expected to be derived and that such evaluations require estimates and judgements. The design and effectiveness of the system are monitored by a professional staff of internal auditors. The consolidated financial statements have been audited by the independent accounting firm of KPMG Peat Marwick LLP, whose responsibility is to examine records and transactions and to gain an understanding of the system of internal accounting controls to the extent required by generally accepted auditing standards and render an opinion as to the fair presentation of the consolidated financial statements. The board of directors pursues its review of auditing, internal controls and financial statements through its audit committee, consisting of a majority of directors who are not employed by the Company. In the exercise of its responsibilities, the audit committee meets periodically with management, with the internal auditors and with the independent accountants to review the scope and results of examinations. Both the internal auditors and independent accountants have free access to the committee with or without the presence of management. Independent Auditors' Report We have audited the accompanying consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 1996 and 1995, and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Seaboard Corporation and subsidiaries at December 31, 1996 and 1995 and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996 in conformity with generally accepted accounting principles. As discussed in Note 5 to the consolidated financial statements, the Company changed its method of accounting for spare parts and supplies inventories in 1996. KPMG Peat Marwick LLP Kansas City, Missouri March 3, 1997 Seaboard Corporation and Subsidiaries Consolidated Statements of Earnings (Thousands of dollars except per share amounts)
Years ended December 31, ------------------------------------- 1996 1995 1994 ------------------------------------- Net sales $ 1,464,362 $ 1,173,977 $ 983,804 Cost of sales and operating expenses 1,315,782 1,003,604 824,411 ------------ ----------- ---------- Gross income 148,580 170,373 159,393 ------------ ----------- ---------- Selling, general and administrative expenses 128,835 139,169 112,295 ------------ ----------- ---------- Operating income 19,745 31,204 47,098 Income(loss) from foreign subsidiaries not consolidated (2,966) 2,035 3,113 ------------ ----------- ---------- 16,779 33,239 50,211 ------------ ----------- ---------- Other income (expense): Interest income 9,095 11,506 9,704 Interest expense (26,864) (15,686) (13,136) Miscellaneous 1,292 (440) 2,352 ------------ ----------- ---------- Total other income (expense), net (16,477) (4,620) (1,080) ------------ ----------- ---------- Earnings before income taxes and cumulative effect of a change in accounting principle 302 28,619 49,131 Income tax (expense) benefit 2,538 (8,417) (13,930) ------------ ----------- ---------- Earnings before cumulative effect of a change in accounting principle 2,840 20,202 35,201 Cumulative effect of changing the accounting for inventories, net of income tax expense of $1,922 3,006 -- -- ------------ ----------- ---------- Net earnings $ 5,846 $ 20,202 $ 35,201 ============ =========== ========== Earnings per common share: Earnings before cumulative effect of a change in accounting principle $ 1.91 $ 13.58 $ 23.67 Cumulative effect of changing the accounting for inventories 2.02 -- -- ------------ ----------- ---------- Earnings per common share $ 3.93 $ 13.58 $ 23.67 ============ =========== ========== See accompanying notes to consolidated financial statements.
Seaboard Corporation and Subsidiaries Consolidated Statements of Stockholders' Equity (Thousands of dollars except per share amounts) Years ended December 31, 1996, 1995 and 1994
Unrealized Gain (Loss) Common Treasury Additional on Debt Retained Stock Stock Capital Securities Earnings ------- -------- ---------- ---------- --------- Balances, January 1, 1994 $ 1,790 $ (302) $ 4,440 $ - $298,428 Capital contribution - - 8,774 - - Net unrealized loss on marketable debt securities, net of income tax benefit of $466 - - - (764) - Net earnings - - - - 35,201 Dividends on common stock ($1.00 per share) - - - - (1,487) ------- -------- ---------- ---------- --------- Balances,December 31, 1994 1,790 (302) 13,214 (764) 332,142 Net unrealized gain on marketable debt securities, net of income tax expense of $616 _ _ _ 1,015 - Net earnings - - - - 20,202 Dividends on common stock ($1.00 per share) - - - - (1,487) ------- -------- ---------- ---------- --------- Balances,December 31, 1995 1,790 (302) 13,214 251 350,857 Net unrealized loss on marketable debt securities, net of income tax benefit of $142 - - - (235) _ Net earnings _ _ _ _ 5,846 Dividends on common stock ($1.00 per share) - - - - (1,487) -------- -------- ---------- --------- --------- Balances,December 31, 1996 $ 1,790 $ (302) $ 13,214 $ 16 $355,216 ======== ======== ========== ========= ========= See accompanying notes to consolidated financial statements.
Seaboard Corporation and Subsidiaries Consolidated Balance Sheets (Thousands of dollars)
December 31, ---------------------------- 1996 1995 Assets ------------ ------------ Current assets: Cash and cash equivalents $ 11,467 $ 5,529 Short-term investments 90,373 135,197 Receivables: Trade 151,380 112,038 Due from foreign subsidiaries not consolidated 37,995 7,317 Other 14,357 15,442 ------------ ------------ 203,732 134,797 Allowance for doubtful receivables (19,448) (17,088) ------------ ------------ Net receivables 184,284 117,709 Inventories 185,701 112,843 Deferred income taxes 7,224 8,231 Prepaid expenses and deposits 14,330 14,251 ------------ ------------ Total current assets 493,379 393,760 Investments in and advances to foreign subsidiaries not consolidated 32,212 26,140 Net property, plant and equipment 466,161 438,415 Other assets 12,933 19,817 ------------ ------------ Total Assets $ 1,004,685 $ 878,132 ============ ============ See accompanying notes to consolidated financial statements. Seaboard Corporation and Subsidiaries (Thousands of dollars) December 31, ---------------------------- Liabilities and Stockholders' Equity 1996 1995 ------------ ------------ Current liabilities: Notes payable $ 150,157 $ 33,815 Current maturities of long-term debt 6,900 7,011 Accounts payable 72,398 75,749 Accrued liabilities 43,587 44,745 Accrued payroll 16,100 13,416 ------------ ------------ Total current liabilities 289,142 174,736 ------------ ------------ Long-term debt, less current maturities 297,719 297,440 Deferred income taxes 22,721 14,569 Other liabilities 25,169 25,577 ------------ ------------ Total non-current and deferred liabilities 345,609 337,586 ------------ ------------ Commitments and contingent liabilities Stockholders' equity: Common stock of $1 par value. Authorized 4,000,000 shares; issued 1,789,599 shares including 302,079 shares of treasury stock 1,790 1,790 Shares held in treasury, at par value (302) (302) ------------ ------------ 1,488 1,488 Additional capital 13,214 13,214 Unrealized gain on debt securities, net of income tax expense of $8 and $150 in 1996 and 1995, respectively 16 251 Retained earnings 355,216 350,857 ------------ ------------ Total stockholders' equity 369,934 365,810 ------------ ------------ Total Liabilities and Stockholders' Equity $ 1,004,685 $ 878,132 ============ ============ See accompanying notes to consolidated financial statements.
Seaboard Corporation and Subsidiaries Consolidated Statements of Cash Flows (Thousands of dollars)
Years ended December 31, ------------------------------------------ 1996 1995 1994 ------------ ------------ ------------ Cash flows from operating activities: Net earnings $ 5,846 $ 20,202 $ 35,201 Adjustments to reconcile net earnings to cash from operating activities: Depreciation and amortization 50,914 44,944 33,403 Equity in (earnings) losses of non- consolidated foreign subsidiaries 2,966 (2,035) (3,113) Deferred income taxes 9,159 (5,558) (873) Changes in current assets and liabilities (net of businesses acquired): Receivables, net of allowance (66,575) (13,014) (11,981) Inventories (72,858) (39,600) (2,282) Prepaid expenses and deposits (79) (6,546) 669 Current liabilities exclusive of debt (1,825) 46,889 (2,160) Other, net (310) (3,037) 1,420 ------------ ------------ ------------ Net cash from operating activities (72,762) 42,245 50,284 ------------ ------------ ------------ Cash flows from investing activities: Purchase of investments (327,020) (691,590) (814,399) Proceeds from the sale of investments 300,265 423,358 602,580 Proceeds from maturity of investments 71,202 309,331 251,826 Capital expenditures (110,491) (229,499) (87,583) Investments and advances to foreign subsidiaries not consolidated (6,476) 6,349 1,180 Proceeds from the sale of equipment 31,831 4,711 4,547 Notes receivable 719 1,300 (2,655) Acquisition of businesses -- (3,500) (180) ------------ ------------ ------------- Net cash from investing activities (39,970) (179,540) (44,684) ------------ ------------ ------------- Cash flows from financing activities: Notes payable to banks, net 116,342 13,239 4,521 Proceeds from issuance of long-term debt 10,000 142,471 12,202 Principal payments of long-term debt (12,394) (19,094) (34,851) Deferred grant revenue 350 3,927 8,073 Dividends paid (1,487) (1,487) (1,487) Capital contribution -- -- 8,774 Bond construction fund 5,859 (1,005) (5,169) ------------ ------------ ------------- Net cash from financing activities 118,670 138,051 (7,937) ------------ ------------ ------------- Net increase (decrease) in cash and cash equivalents 5,938 756 (2,337) Cash and cash equivalents at beginning of year 5,529 4,773 7,110 ------------ ------------ ------------- Cash and cash equivalents at end of year $ 11,467 $ 5,529 $ 4,773 ============ ============ ============= See accompanying notes to consolidated financial statements.
Seaboard Corporation and Subsidiaries Notes to Consolidated Financial Statements December 31, 1996, 1995 and 1994 Note 1 Summary of Significant Accounting Policies - -------------------------------------------------------------------------- Operations of Seaboard Corporation and its Subsidiaries - ------------------------------------------------------- Seaboard Corporation and its subsidiaries (the Company) is a diversified international agribusiness and transportation company which is primarily engaged in domestic poultry and pork production and processing, commodity merchandising, baking, flour milling and shipping. Overseas, the Company is primarily engaged in flour and feed milling, shrimp and produce farming and electric power generation. Principles of Consolidation and Investment in Affiliates - -------------------------------------------------------- The consolidated financial statements include the accounts of Seaboard Corporation and its wholly owned domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company's investments in minority-owned, non-controlled foreign subsidiaries are accounted for by the equity method. Short-Term Investments - --------------------- The short-term investments are retained for future use in the business and include time deposits, commercial paper, tax exempt bonds, corporate bonds and U.S. government obligations. All short-term investments held by the Company are categorized as available-for-sale and are reported at fair value with unrealized gains and losses reported, net of tax, as a separate component of stockholders' equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Inventories - ----------- The Company uses the lower of last-in, first-out (LIFO) or market for determining cost for poultry and baking product inventories. Live hogs, dressed pork, produce, grain inventories held in milling operations, seafood, parts and supplies inventories are valued at the lower of first-in, first-out (FIFO) cost or market. Property, Plant and Equipment - ----------------------------- Property, plant and equipment are carried at cost and are being depreciated generally on the straight-line method over useful lives ranging from 3 to 45 years. Property, plant and equipment leases which are deemed to be installment purchase obligations have been capitalized and included in the property, plant and equipment accounts. Maintenance, repairs and minor renewals are charged to operations while major renewals and betterments are capitalized. Deferred Grant Revenue - ---------------------- Included in other liabilities at December 31, 1996 and 1995 is $11,974,000 and $12,000,000, respectively, of deferred grant revenue. Deferred grant revenue represents economic development funds contributed to the Company by government entities that are limited to construction of a hog processing facility in Guymon, Oklahoma. Deferred grants are being amortized to income over the life of the assets acquired with the funds. Revenue Recognition - ------------------- The Company recognizes revenue on commercial exchanges at the time title to the goods transfers to the buyer. Revenue of the Company's ocean freight service is recognized ratably over the transit time for each voyage. Use of Estimates - ---------------- The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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 average shares outstanding during the period. Average shares outstanding were 1,487,520 for each of the three years ended December 31, 1996, 1995 and 1994, respectively. Cash and Cash Equivalents - ------------------------- For purposes of the consolidated statements of cash flows, the Company considers all demand deposits and overnight investments as cash equivalents. Included in accounts payable are outstanding checks in excess of cash balances of $20,820,000 and $28,117,000 at December 31, 1996 and 1995, respectively. The amounts paid for income taxes and interest are as follows:
Years ended December 31, - --------------------------------------------------------------------------- (Thousands of dollars) 1996 1995 1994 - --------------------------------------------------------------------------- Interest (net of amounts capitalized) $ 27,120 $ 14,598 $ 13,415 ========= ========= ========= Income taxes $ (10,362) $ 25,384 $ 14,464 ========= ========= =========
See Note 6 for non-cash financing for an investment in foreign subsidiary not consolidated. Foreign Currency - ---------------- The value of the U.S. dollar fluctuates in relation to the currencies of countries where the Company's foreign subsidiaries conduct business. These fluctuations result in exchange gains and losses. The activities of these foreign subsidiaries are primarily conducted with U.S. affiliates or they operate in hyper-inflationary environments. As a result, the Company translates the financial statements of foreign subsidiaries using the U.S. dollar as the functional currency. The gains and losses that result from remeasurement are reported in earnings and are not material for the years ended December 31, 1996, 1995 and 1994. Foreign currency exchange restrictions imposed upon the Company's wholly owned foreign subsidiaries and certain minority-owned foreign subsidiaries do not have a significant effect on the consolidated financial position of the Company. Financial Instruments - --------------------- The Company enters into interest rate exchange agreements which involve the exchange of fixed-rate and variable-rate interest payments over the life of the agreements without the exchange of the underlying notional amounts to hedge the effects of fluctuations in interest rates. The difference to be paid or received is accrued as interest rates change and is recognized as an adjustment to interest expense. These agreements effectively convert variable- rate debt into fixed-rate debt. Gains and losses on termination of interest rate exchange agreements are deferred and recognized over the term of the underlying debt instrument as an adjustment to interest expense. At December 31, 1996 and 1995, net deferred gains on terminated interest rate exchange agreements were not material. In cases where there is no remaining underlying debt instrument, gains and losses on termination are recognized currently in miscellaneous income (expense). At December 31, 1996, the Company had no interest rate exchange agreements outstanding. During 1994, the Company terminated an interest rate exchange agreement with a notional principal amount of $30,000,000 that was initially considered to be an anticipatory hedge. The anticipated liability to be hedged was not incurred and, accordingly, deferral accounting was discontinued in the second quarter of 1994. Included in miscellaneous income for 1994 is a $2,911,000 gain related to settling this agreement. Commodity Contracts - ------------------- The Company enters into forward purchase contracts, futures and options to manage its exposure to price fluctuations in the commodity markets. These commodity instruments generally involve the anticipated purchase of feed grains and the sale of hogs. At December 31, 1996, the Company had net contracts to purchase 5.1 million bushels of grain and sell 146.5 million pounds of hogs. Gains and losses on commodity instruments designated as hedges and for which there is high correlation between changes in the value of the instrument and changes in the value of the hedged commodity are deferred and ultimately recognized in operations as part of the cost of the commodity. Gains and losses on qualifying hedges of firm commitments or probable anticipated transactions are also deferred and recognized as adjustments of the carrying amounts of the commodities when the hedged transaction occurs. Realized gains and losses on qualifying commodity instruments which were designated as hedges are deferred and are ultimately recognized as part of the measurement of the hedged transactions. Commodity instruments not qualifying as hedges for financial reporting purposes are marked to market and included in cost of sales and operating expenses in the consolidated statements of operations. At December 31, 1996 and 1995, the net deferred gain (loss) on commodity instruments was $(6,402,000) and $4,701,000, respectively, and is included in accrued liabilities in the consolidated balance sheets. Cash flows from commodity instruments are classified in the same category as cash flows from the hedged commodities in the consolidated statements of cash flows. Note 2 Acquisitions - -------------------------------------------------------------------------- In January 1995, the Company acquired for $3,500,000 all the outstanding common stock of a hatchery company which previously sold day old chicks to the Company's poultry operations. In January 1994, the Company acquired an additional 15% of the outstanding common stock of Atlantic Salmon (Maine), Limited Liability Company, for $180,000, bringing the total investment in the entity to 40%. The Company accounts for this investment using the equity method. None of these acquisitions would have significantly affected net earnings or earnings per share on a pro forma basis. Note 3 Transactions with Parent Company - -------------------------------- Seaboard Flour Corporation (the Parent Company) is the owner of 75.3% of the Company's outstanding common stock. At December 31, 1996 and 1995, the Company had a net receivable balance from the Parent Company of $53,000 and $2,207,000, respectively. Interest on receivables was charged at the prime rate during 1996, 1995 and 1994. For the years ended December 31, 1996, 1995 and 1994 net interest income amounted to $37,000, $275,000, and $217,000, respectively. During 1994 the Delaware Chancery Court approved the settlement of a stockholders' derivative action brought in 1990 against the Company and certain subsidiaries, the Parent Company and the directors of the Company at that time. Under the settlement, the Company received $10,800,000 from the Parent Company and the directors of which $2,026,000 was paid to the plaintiff's counsel. The settlement proceeds to the Company of $8,774,000 have been recorded as Contributed Capital in Stockholders' Equity. Note 4 Short-Term Investments - ----------------------
The following is a summary of available-for-sale securities at December 31, 1996: Gross Gross Unrealized Unrealized Amortized Holding Holding Estimated (Thousands of dollars) Cost Gains Losses Fair Value - ----------------------------------------------------------------------------- U.S. Treasury securities and obligations of U.S. government agencies $ 20,353 -- 4 $ 20,349 Obligations of states and political subdivisions 41,506 -- -- 41,506 Other debt securities 28,490 28 -- 28,518 - ----------------------------------------------------------------------------- Total debt securities $ 90,349 28 4 $ 90,373 =============================================================================
The following is a summary of available-for-sale securities at December 31, 1995: Gross Gross Unrealized Unrealized Amortized Holding Holding Estimated (Thousands of dollars) Cost Gains Losses Fair Value - ----------------------------------------------------------------------------- U.S. Treasury securities and obligations of U.S. government agencies $ 48,299 313 -- $ 48,612 Obligations of states and political subdivisions 55,975 -- -- 55,975 Other debt securities 30,522 88 -- 30,610 - ----------------------------------------------------------------------------- Total debt securities $ 134,796 401 -- $ 135,197 ============================================================================= Substantially all available-for-sale securities have contractual maturities within two years and are available to meet current operating needs. Included in other assets at December 31, 1996 and 1995 are $315,000 and $6,174,000, respectively, of unexpended bond proceeds held in trust that are invested in accordance with the bond issuance agreement. The cost of these investments approximates fair value. The gross realized gains on sales of available-for-sale securities totaled $143,000, $296,000 and $32,000 and the gross realized losses totaled $45,000, $174,000 and $404,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
Note 5 Inventories - ----------- During the fourth quarter of 1996, the Company changed its method of accounting for spare parts and supplies used in its poultry and pork processing operations, retroactively effective as of January 1, 1996. Previously, these spare parts and supplies were expensed when purchased. Under the new method, such purchases will be recorded as inventory and charged to operations when used. Due to the growth of these inventories, primarily as a result of completion of the new pork processing plant in Oklahoma, the Company believes the new method is preferable as it provides a better matching of revenues and expenses. The cumulative effect of this accounting change at January 1, 1996 was to increase net income by $3,006,000 or $2.02 per common share. The effect of this accounting change was to increase income before cumulative effect of change in accounting principle by $788,000 or $.53 per common share for the year ended December 31, 1996. The pro forma effect of retroactive application of this new method of accounting would not materially affect the results of operations for the years ended December 31, 1995 and 1994.
A summary of inventories at the end of each year is as follows: December 31, - ------------------------------------------------------------------------------ (Thousands of dollars) 1996 1995 - ------------------------------------------------------------------------------ At lower of LIFO cost or market: Live poultry $ 27,610 $ 26,442 Dressed poultry 29,295 21,219 Feed and baking ingredients, packaging supplies and other 7,353 8,772 - ------------------------------------------------------------------------------ 64,258 56,433 LIFO allowance (6,000) (6,965) - ------------------------------------------------------------------------------ Total inventories at lower of LIFO cost or market 58,258 49,468 At lower of FIFO cost or market: Live hogs 68,409 28,626 Grain, flour and feed 30,461 19,551 Crops in production, fertilizers and pesticides 10,097 7,639 Dressed pork 4,709 166 Other 13,767 7,393 - ------------------------------------------------------------------------------ Total inventories at lower of FIFO cost or market 127,443 63,375 - ------------------------------------------------------------------------------ Total inventories $ 185,701 $ 112,843 ============================================================================== The use of the LIFO method increased net earnings in 1996 by $589,000 ($.40 per share), decreased net earnings in 1995 by $3,401,000 ($2.29 per share) and increased net earnings in 1994 by $1,515,000 ($1.02 per share). The increases in net earnings during 1996 and 1994 were primarily the result of declining purchase prices. If the FIFO method had been used, inventories would have been $6,000,000 and $6,965,000 higher than those reported at December 31, 1996 and 1995, respectively.
Note 6 Investments in and Advances to Foreign Subsidiaries Not Consolidated - -------------------------------------------------------------------- The Company has made investments in and advances to minority-owned, non-controlled foreign flour milling, feed milling, sugar refining, polypropylene bag manufacturing, prefabricated residential and commercial construction and shrimp farming subsidiaries. The subsidiaries are located in Sierra Leone, Nigeria, Mozambique and Zaire in Africa and Argentina and Ecuador in South America, and are accounted for by the equity method. Certain of these subsidiaries operate under restrictions imposed by local governments which limit the Company's ability to have significant influence on their operations. These restrictions have resulted in a loss in value of these investments and advances that is other than temporary. The Company suspended the use of the equity method for these investments and recognized the impairment in value by a charge to earnings in years prior to 1994. In July 1996, the Company purchased for $8,800,000 a non-controlling interest in Ingenio y Refineria San Martin del Tabacal S.A. (Tabacal). Tabacal is an Argentinean company primarily engaged in growing and refining sugarcane and citrus production. The Company accounts for this investment using the equity method. In October 1996, the Company acquired for $4,600,000 a 50% interest in a flour mill located in Mozambique. The Company paid $1 million at closing with the balance to be paid in installments over the next six years. The Company accounts for this investment using the equity method. Sales of grain and supplies to non-consolidated foreign subsidiaries are included in consolidated net sales for the years ended December 31, 1996, 1995 and 1994, and amounted to $93,117,000, $29,585,000 and $16,255,000 respectively. Combined condensed financial information of the minority-owned, non-controlled, non-consolidated foreign subsidiaries for their fiscal periods ended within each of the Company's years ended are as follows:
December 31, - ----------------------------------------------------------------------------- (Thousands of dollars) 1996 1995 1994 - ----------------------------------------------------------------------------- Net sales $ 191,600 $ 139,209 $ 102,000 Net earnings (6,089) 3,776 9,220 Total assets 291,979 160,238 150,313 Total liabilities 211,333 91,208 82,522 Total equity $ 80,646 $ 69,030 $ 67,791 =============================================================================
Note 7
Property, Plant and Equipment - ----------------------------- A summary of property, plant and equipment at the end of each year is as follows: December 31, - ----------------------------------------------------------------------------- (Thousands of dollars) 1996 1995 - ----------------------------------------------------------------------------- Land and improvements $ 47,022 $ 36,799 Buildings and improvements 163,153 127,405 Machinery and equipment 398,887 315,564 Transportation equipment 82,808 112,493 Office furniture and fixtures 11,807 10,547 Construction in progress 9,606 47,594 - ----------------------------------------------------------------------------- 713,283 650,402 Accumulated depreciation and amortization (247,122) (211,987) - ----------------------------------------------------------------------------- Net property, plant and equipment $ 466,161 $ 438,415 ============================================================================= Approximately $855,000, $3,414,000 and $335,000 of interest costs were capitalized as part of property, plant and equipment in the years ended December 31, 1996, 1995 and 1994, respectively.
Note 8 Income Taxes - ------------ Total income taxes for the years ended December 31, 1996, 1995 and 1994 differ from the amounts computed by applying the statutory U.S. Federal income tax rate to earnings before income taxes and cumulative effect of a change in accounting principle for the following reasons:
Years ended December 31, - ------------------------------------------------------------------------------ (Thousands of dollars) 1996 1995 1994 - ------------------------------------------------------------------------------ Computed tax expense on earnings before income taxes and cumulative effect of a change in accounting principle $ 105 $ 10,017 $ 17,196 Adjustments to tax expense attributable to: Foreign tax differences (3,789) (1,066) (2,527) Tax-exempt investment income (603) (1,122) (845) State income taxes, net of Federal benefit 820 475 1,134 Other 929 113 (1,028) - ------------------------------------------------------------------------------ $ (2,538) $ 8,417 $ 13,930 ============================================================================== The components of total income taxes are as follows: Years Ended December 31, - ------------------------------------------------------------------------------ (Thousands of dollars) 1996 1995 1994 - ------------------------------------------------------------------------------ Current: Federal $ (12,450) $ 13,498 $ 12,654 State and local 611 1,094 1,683 Deferred 9,301 (6,175) (407) - ------------------------------------------------------------------------------ Income tax expense (benefit) (2,538) 8,417 13,930 Cumulative effect of changing the accounting for inventories 1,922 -- -- Stockholders' equity, for unrealized change in debt securities (142) 616 (466) - ------------------------------------------------------------------------------ Total income taxes $ (758) $ 9,033 $ 13,464 ============================================================================== Components of the net deferred income tax liability at the end of each year are as follows : December 31, - ----------------------------------------------------------------------------- (Thousands of dollars) 1996 1995 - ----------------------------------------------------------------------------- Deferred income tax liabilities: Cash basis farming adjustment $ 19,036 $ 19,036 Deferred earnings of foreign subsidiaries 2,218 4,133 Depreciation 25,111 8,711 Other 1,774 3,182 - ----------------------------------------------------------------------------- 48,139 35,062 - ----------------------------------------------------------------------------- Deferred income tax assets: Reserves/accruals 19,032 22,816 Foreign losses 4,651 4,089 Other 11,530 4,154 - ----------------------------------------------------------------------------- 35,213 31,059 Valuation allowance 2,571 2,335 - ----------------------------------------------------------------------------- Net deferred income tax liability $ 15,497 $ 6,338 =============================================================================
The valuation allowance represents accumulated losses on certain foreign subsidiaries that will not be recognized without future liquidation or sale of these subsidiaries. At December 31, 1996 and 1995, no provision has been made in the accounts for Federal income taxes which would be payable if the undistributed earnings of certain foreign subsidiaries were distributed to the Company since management has determined that the earnings are permanently invested in these foreign operations. Should such accumulated earnings be distributed, the resulting Federal income taxes would amount to approximately $28,000,000. Note 9 Notes Payable and Long-Term Debt - -------------------------------- Notes payable amounting to $150.2 million and $33.8 million at December 31, 1996 and 1995, respectively, consisted of obligations due banks within one year. At December 31, 1995, these funds were outstanding under the Company's short-term uncommitted credit lines from banks totaling $122 million. During 1996 the Company entered into new agreements and accordingly, at December 31, 1996 these funds are outstanding under the Company's one-year revolving credit facilities totaling $90 million and short-term uncommitted credit lines from banks totaling $115 million. Subsequent to year-end, the Company's one-year revolving credit facilities were increased to $160 million as a result of the extension of an existing facility and the establishment of a new facility. Weighted average interest rates on the notes payable were 6.11% and 6.22% at December 31, 1996 and 1995, respectively. These notes are unsecured and do not require compensating balances or fees. During 1996, the Company entered into a five-year $50 million revolving credit facility. Subsequent to year-end, the revolving credit facility was extended and reduced to $25 million. The Company is in the process of obtaining approximately $10 million of Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds. A summary of long-term debt at the end of each year is as follows:
December 31, - ----------------------------------------------------------------------------- (Thousands of dollars) 1996 1995 - ----------------------------------------------------------------------------- Private placements: 6.49% senior notes, due 2001 through 2005 $ 100,000 $ 100,000 7.88% senior notes, due 2003 through 2007 125,000 125,000 Industrial Development Revenue Bonds (IDRB's), floating rates (4.60% -4.88% at December 31, 1996) due through 2025 52,900 52,900 Revolving credit facility, floating rate (5.95% at December 31, 1996) due 2001 10,000 -- Bank notes, 6.43% floating, paid in 1996 -- 10,000 Term loan, 3.92%, due 1997 5,700 6,000 Capital lease obligations and other 11,019 10,551 - ----------------------------------------------------------------------------- 304,619 304,451 Current maturities of long-term debt (6,900) (7,011) - ----------------------------------------------------------------------------- Long-term debt, less current maturities $ 297,719 $ 297,440 =============================================================================
Redemption of the IDRB's is assured under irrevocable bank letters of credit issued by major banks. Although those IDRB's mature between 2004 and 2025, the bonds are deemed to mature between 1998 and 2001, the years in which the bank letters of credit and committed extensions thereto expire. Poultry processing facilities, having a depreciated cost of $21,546,000 at December 31, 1996, secure certain bond issues. The terms of the note agreements pursuant to which the Senior Notes and the IDRB's were issued require, among other terms, the maintenance of certain ratios and minimum net worth, the most restrictive of which requires the ratio of consolidated funded debt to consolidated shareholders' equity, as defined, not to exceed .90 to 1, and the maintenance of consolidated tangible net worth, as defined, of not less than $250,000,000. The Company is in compliance with all restrictive debt covenants relating to the Senior Notes and IDRB's as of December 31, 1996. Annual maturities of long-term debt at December 31, 1996 are as follows: $6,900,000 in 1997, $19,768,000 in 1998, $22,446,000 in 1999, $6,446,000 in 2000, $26,164,000 in 2001, and $222,895,000 thereafter. Note 10 Fair Value of Financial Instruments - ----------------------------------- The fair value of the Company's short-term investments is based on quoted market prices at the reporting date for these or similar investments. At December 31, 1996 and 1995 the fair value of the Company's short-term investments was $90,373,000 and $135,197,000, respectively, with an amortized cost of $90,349,000 and $134,796,000 at December 31, 1996 and 1995, respectively. The fair value of long-term debt is determined by comparing interest rates for debt with similar terms and maturities. At December 31, 1996 and 1995 the fair value of the Company's long-term debt was $300,075,000 and $310,499,000, respectively, with a carrying value of $304,619,000 and $304,451,000 at December 31, 1996 and 1995, respectively. Other financial instruments consisting of cash and cash equivalents, net receivables, notes payable, and accounts payable are carried at cost, which approximates fair value, as a result of the short-term nature of the instruments. Note 11 Employee Benefits - ----------------- The Company maintains defined benefit pension plans for its domestic salaried, clerical and poultry employees. The plans generally provide for normal retirement at age 65 and eligibility for participation after one year's service upon attaining the age of 21. The Company bases pension contributions on funding standards established by the Employee Retirement Income Security Act of 1974. Benefits are generally based upon the number of years of service and a percentage of final average pay. Plan assets are invested in equity securities, fixed income bonds and short-term cash equivalents. The net periodic pension cost of these plans was as follows:
Years ended December 31, - ------------------------------------------------------------------------------- (Thousands of dollars) 1996 1995 1994 - ------------------------------------------------------------------------------- Service cost-benefits earned during the period $ 1,874 $ 1,303 $ 1,532 Interest cost on projected benefit obligation 2,204 2,233 2,132 Actual return on assets (3,498) (3,964) (667) Net amortization and deferral 1,291 1,916 (1,281) - ------------------------------------------------------------------------------- Net periodic pension cost $ 1,871 $ 1,488 $ 1,716 ===============================================================================
Assumptions used in determining pension information were:
Years ended December 31, - ------------------------------------------------------------------------------- 1996 1995 1994 - ------------------------------------------------------------------------------- Expected long-term rate of return on assets 8.50-9.00% 8.50-9.00% 7.50-9.00% Discount rate 7.75% 7.00% 8.75% Long-term rate of increase in compensation levels 4.25-4.50% 4.25-4.50% 5.00% - ------------------------------------------------------------------------------- The funded status and accrued pension cost at December 31, 1996 and 1995 for all defined benefit plans is shown below: December 31, - ------------------------------------------------------------------------------------------------- (Thousands of dollars) 1996 1995 - ------------------------------------------------------------------------------------------------- Assets exceed Accumulated Assets exceed Accumulated accumulated benefits exceed accumulated benefits exceed benefits assets benefits assets - ------------------------------------------------------------------------------------------------- Actuarial present value of value of benefit obligations: Vested benefit obligation $ 19,978 $ 6,728 $ 965 $ 26,932 Nonvested benefit obligation 1,460 62 49 1,493 - ------------------------------------------------------------------------------------------------- Accumulated benefit obligation 21,438 6,790 1,014 28,425 Effects of projected future compensation levels 1,767 1,111 579 3,599 - ------------------------------------------------------------------------------------------------- Projected benefit obligation 23,205 7,901 1,593 32,024 Plan assets at fair value 24,224 5,584 1,163 24,682 - ------------------------------------------------------------------------------------------------- Projected benefit obligation greater than (less than) plan assets (1,019) 2,317 430 7,342 Recognized minimum liability -- 387 -- 1,184 Unrecognized net liability at transition (1,298) (39) (8) (1,534) Unrecognized prior service cost 2,634 (544) -- 2,329 Unrecognized net gain (loss) 4,356 (915) 76 (2,992) - ------------------------------------------------------------------------------------------------- Accrued pension cost $ 4,673 $ 1,206 $ 498 $ 6,329 - -------------------------------------------------------------------------------------------------
The Company has non-qualified unfunded supplemental retirement plans for certain executive employees. Pension expense for these plans was $3,128,000, $3,073,000, and $2,760,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Included in other liabilities at December 31, 1996 and 1995 is $10,347,000 and $9,064,000, respectively, representing the accrued benefit obligation for these plans. The Company maintains a defined contribution plan covering most of its domestic salaried and clerical employees. The Company contributes to the plan an amount equal to 100% of employee contributions up to a maximum of 3% of employee compensation. Employee vesting is based upon years of service with 20% vested after one year of service and an additional 20% vesting with each additional complete year of service. Contribution expense was $1,294,000, $1,265,000 and $1,051,000 for the years ended December 31, 1996, 1995 and 1994, respectively. Note 12 Commitments and Contingencies - ----------------------------- The Company leases various ships, facilities and equipment under noncancelable operating lease agreements. Rental expense for the operating leases amounted to $45,591,000, $40,521,000, and $34,457,000 in 1996, 1995 and 1994, respectively. Minimum lease commitments under noncancelable leases with initial terms greater than one year at December 31, 1996, were $38,563,000 for 1997, $25,001,000 for 1998, $14,888,000 for 1999, $14,296,000 for 2000, $9,067,000 for 2001 and $16,395,000 thereafter. It is expected that, in the ordinary course of business, leases will be renewed or replaced. The Company is a defendant in a pending arbitration proceeding and related litigation in Puerto Rico brought by the owner of a chartered barge and tug which were damaged by fire after delivery of the cargo. Damages of $47.6 million are alleged. The Company is vigorously defending the action and believes that it has no responsibility for the loss. The Company also believes that it would have a claim for indemnity if it were held liable for any loss. The Company is subject to various other legal proceedings related to the normal conduct of its business. In the opinion of management, none of these actions is expected to result in a judgment having a materially adverse effect on the consolidated financial statements of the Company. Note 13 Segment Information - ------------------- The Company principally operates in three business segments: food production and processing, commodity trading and milling and transportation. Corporate assets include cash, short-term investments, notes receivable, corporate equipment and other miscellaneous assets which are not related to a specific business segment. As described in Note 5, the Company changed its method of accounting for spare parts and supplies inventories in 1996. The effect of this change was to decrease the operating loss in the food production and processing segment in 1996 by $1,293,000. Business segment information for the years ended December 31, 1996, 1995 and 1994 is as follows:
- ----------------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 1996 - ----------------------------------------------------------------------------------------------------------------------- Food Commodity Unallocated Production Trading Corporate and and Items and Processing Milling Transportation Other Eliminations Total - ----------------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $ 844,460 315,609 266,571 37,722 -- $ 1,464,362 Intersegment sales -- -- 3,717 -- (3,717) -- - ----------------------------------------------------------------------------------------------------------------------- Net sales $ 844,460 315,609 270,288 37,722 (3,717) $ 1,464,362 ======================================================================================================================= Operating income (loss) $ (3,920) 18,119 6,475 5,124 (6,053) 19,745 ==================================================================================================== Loss from foreign subsidiaries not consolidated (2,966) Interest income 9,095 Interest expense (26,864) Other corporate income 1,292 - ----------------------------------------------------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of changing the accounting for inventories $ 302 ======================================================================================================================= Identifiable assets $ 610,486 119,722 98,756 30,208 -- 859,172 ==================================================================================================== Corporate assets 145,513 - ----------------------------------------------------------------------------------------------------------------------- Total assets $ 1,004,685 ======================================================================================================================= Depreciation and amortization $ 33,222 3,196 11,850 1,583 1,063 $ 50,914 ======================================================================================================================= Capital expenditures $ 99,143 1,935 8,598 25 790 $ 110,491 ======================================================================================================================= - ----------------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 1995 - ----------------------------------------------------------------------------------------------------------------------- Food Commodity Unallocated Production Trading Corporate and and Items and Processing Milling Transportation Other Eliminations Total - ----------------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $ 652,537 207,987 277,130 36,323 -- $ 1,173,977 Intersegment sales -- -- 4,676 -- (4,676) -- - ----------------------------------------------------------------------------------------------------------------------- Net sales $ 652,537 207,987 281,806 36,323 (4,676) $ 1,173,977 ======================================================================================================================= Operating income (loss) $ 10,121 8,462 16,936 980 (5,295) 31,204 ==================================================================================================== Income from foreign subsidiaries not consolidated 2,035 Interest income 11,506 Interest expense (15,686) Other corporate expense (440) - ----------------------------------------------------------------------------------------------------------------------- Earnings before income taxes $ 28,619 ======================================================================================================================= Identifiable assets $ 471,120 59,460 120,435 25,153 -- 676,168 ==================================================================================================== Corporate assets 201,964 - ----------------------------------------------------------------------------------------------------------------------- Total assets $ 878,132 ======================================================================================================================= Depreciation and amortization $ 25,746 2,941 13,711 1,521 1,025 $ 44,944 ======================================================================================================================= Capital expenditures (excluding acquisitions) $ 192,246 1,228 34,136 965 924 $ 229,499 ====================================================================================================================== - ----------------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 1994 - ----------------------------------------------------------------------------------------------------------------------- Food Commodity Unallocated Production Trading Corporate and and Items and Processing Milling Transportation Other Eliminations Total - ----------------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $ 638,251 107,399 210,632 27,522 -- $ 983,804 Intersegment sales -- -- 6,372 -- (6,372) -- - ----------------------------------------------------------------------------------------------------------------------- Net sales $ 638,251 107,399 217,004 27,522 (6,372) $ 983,804 ======================================================================================================================= Operating income (loss) $ 10,663 8,620 29,195 2,895 (4,275) 47,098 ==================================================================================================== Income from foreign subsidiaries not consolidated 3,113 Interest income 9,704 Interest expense (13,136) Other corporate income 2,352 - ----------------------------------------------------------------------------------------------------------------------- Earnings before income taxes $ 49,131 ======================================================================================================================= Identifiable assets $ 274,673 42,634 86,928 28,580 432,815 =================================================================================================== Corporate assets 242,396 - ----------------------------------------------------------------------------------------------------------------------- Total assets $ 675,211 ======================================================================================================================= Depreciation and amortization $ 20,200 2,923 7,925 1,466 889 $ 33,403 ======================================================================================================================= Capital expenditures (excluding acquisitions) $ 61,917 688 23,107 635 1,236 $ 87,583 =======================================================================================================================
Export sales by geographic area are as follows:
Years ended December 31, - -------------------------------------------------------------------------------- (Thousands of dollars) 1996 1995 1994 - -------------------------------------------------------------------------------- Africa $ 145,486 $ 85,915 $ 50,900 Caribbean and South America 63,853 43,494 36,525 Europe 41,811 20,628 -- Eastern Mediterranean 33,502 37,405 -- Pacific Basin and Far East 33,069 7,155 2,525 Other 24,923 28,449 17,779 - -------------------------------------------------------------------------------- Total export sales $ 342,644 $ 223,046 $ 107,729 ================================================================================ At December 31, 1996 and 1995 the Company had approximately $51.0 million and $47.1 million of foreign receivables which represents more of a collection risk than the Company's domestic receivables. The Company believes that its allowance for doubtful receivables is adequate.
APPENDIX SEABOARD CORPORATION AND SUBSIDIARIES
Graph data Years ended December 31, 1992 1993 1994 1995 1996 - ------------------------------------------------------------------------------------------------- Summary of Selected Financial Data: TOTAL ASSETS (THOUSANDS OF DOLLARS) $ 485,121 647,332 675,211 878,132 1,004,685 STOCKHOLDERS' EQUITY (THOUSANDS OF DOLLARS) $ 269,581 304,356 346,080 365,810 369,934 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 20.89 16.73 23.67 13.58 1.91 CUMULATIVE EFFECT OF ACCOUNTING CHANGE 7.40 2.02 ------------------------------------------------------------ EARNINGS PER COMMON SHARE (DOLLARS) $ 20.89 24.13 23.67 13.58 3.93 Financial Summary: CURRENT RATIO 3.22:1 3.29:1 3.31:1 2.25:1 1.71:1 CAPITAL EXPENDITURES (THOUSANDS OF DOLLARS) $ 35,286 87,328 87,583 229,499 110,491 NET SALES (THOUSANDS OF DOLLARS) $1,053,655 1,142,144 983,804 1,173,977 1,464,362 WORKING CAPITAL (THOUSANDS OF DOLLARS) $ 209,811 280,466 259,521 219,024 204,237 DEPRECIATION AND AMORTIZATION (THOUSANDS OF DOLLARS) 29,601 34,429 33,403 44,944 50,914 NET EARNINGS(THOUSANDS OF DOLLARS) 31,075 35,891 35,201 20,202 5,846
EX-18 3 LETTER REGARDING CHANGE IN ACCOUNTING PRINCIPLE EXHIBIT 18 The Board of Directors Seaboard Corporation We have audited the consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 1996 and 1995 and the related consolidated statements of earnings, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1996 and have reported thereon under date of March 3, 1997. The aforementioned consolidated financial statements and our audit report theron are incorporated by reference in the Company's annual report on Form 10-K for the year ended December 31, 1996. As stated in Note 5, the Company changed its method of accounting for spare parts and supplies used in its poultry and pork processing operations and states that due to the growth of these inventories, primarily as a result of the new pork processing plant in Oklahoma, the newly adopted accounting principle is preferable in the circumstances because it provides a better matching of revenues and costs. In accordance with your request, we have reviewed and discussed with Company officials the circumstances and business judgment and planning upon which the decision to make this change in the method of accounting was based. With regard to the aforementioned accounting change, authoritative criteria have not been established for evaluating the preferability of one acceptable method of accounting over another acceptable method. However, for purposes of Seaboard Corporation's compliance with the requirements of the Securities and Exchange Commission, we are furnishing this letter. Based on our review and discussion, with reliance on management's business judgment and planning, we concur that the newly adopted method of accounting is preferable in the Company's circumstances. KPMG Peat Marwick LLP Kansas City, Missouri March 3, 1997 EX-21 4 LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES NAMES UNDER STATE OR OTHER OF THE WHICH SUBSIDIARIES JURISDICTION REGISTRANT DO BUSINESS OF INCORPORATION A & W Interlining American Interlining Maryland Services Corp. Company Western Coat Pad Company Acuacultura y Tecnologia Acuatecsa Ecuador Acuatecsa S.A.* African Camellia Shipping Ltd. Same Liberia African Coffee Company, S.P.R.L.* ACC Zaire African Dahlia Shipping Ltd. Same Liberia African Evergreen Shipping Ltd. Same Liberia African Fern Shipping Ltd. Same Liberia African Gardenia Shipping Ltd. Same Liberia African Hyacinth Shipping Ltd. Same Liberia Agencia Maritima del Istmo, S.A. Same Costa Rica Agencias Generales Conaven, C.A. Conaven Venezuela Agro Internacional de Honduras, Same Honduras S.A. de C.V. Almacenadora Conaven, S.A. Same Venezuela Atlantic Salmon (Maine) Limited Same Maine Liability Company* Buttercup Shipping Limited Same Liberia Cape Fear Railways, Inc. Same North Carolina Cayman Freight Shipping Same Cayman Islands Services, Ltd.* Chestnut Hill Farms, Inc. Same Florida Chestnut Hill Farms Honduras, Same Honduras S.A. de C.V. Chestnut Hill Farms de Same Venezuela Venezuela, S.A. Citrus Export S.A. de C.V. CITREX Honduras Consorcio Naviero de Conaven Venezuela Occidente, C.A. Continental de Ventas y Contiventas, S.A. Ecuador Mercadeo S.A.* EXHIBIT 21 (continued) Cultivos Marinos, S.A. de C.V. CUMAR Honduras Delta Packaging Company Ltd. Same Nigeria Desarrollo Industrial DIBSA Ecuador Bioacuatico, S.A.* Empacadora Litoral, S.A. Same Honduras de C.V. Energy System Management, Ltd. Same British Virgin Islands Frutas de Rancho Nuevo Litonil, S.A. Same Costa Rica Granjas Porcinas del Ecuador (Granporsa) S.A.* Granporsa Ecuador Guymon Housing Partners Limited Same Oklahoma Partnership* Guymon Development Company Same Oklahoma L.L.C.* H& O Shipping Limited Same Liberia H.F.P. Engineering (Nigeria) Limited Same Nigeria Harinas de Puerto Rico, Inc. Same Delaware Holsum Bakers of Puerto Rico Same Division of Seaboard Corporation Ingenio Y Refineria San Martin del Tabacal* Tabacal Argentina Interamericana de Tejidos, C.A.* Interama Ecuador Inversiones y Servicios Diversos, S.A. Inversa Guatemala Life Flour Mill Ltd.* Same Nigeria Life Shipping Company Limited* Same Nigeria Minoterie De Matadi, S.A.R.L.* Same Zaire Mobeira, S.A.* Same Mozambique Molinos Champion, S.A.* Mochasa Ecuador Molinos Equarivort, C.A.* Same Ecuador Molinos del Ecuador, C.A.* Molidor Ecuador National Milling Company of Same Guyana Guyana, Ltd. Port of Miami Cold Storage, Inc. Same Florida EXHIBIT 21 (continued) Representaciones Maritimas y Remarsa Guatemala Aereas, S.A. SASCO Engineering Co./ Same U.S. Virgin Seaboard Sales Corporation Islands Sandy Isle Food Imports, N.V. Same St. Maarten, Netherlands, Antilles Sea Cargo, S.A. Same Panama Seaboard Bakeries, Inc. Same Delaware Seaboard Export Corporation Same Delaware Seaboard Express Ltd. Same Bermuda Seaboard de Colombia, S.A. Same Colombia Seaboard de Honduras, S.A. de C.V. Same Honduras Seaboard del Peru, S.A. Same Peru Seaboard Farms of Seaboard Farms of Georgia Athens, Inc. Athens, Inc. Jordan Hatchery Seaboard Farms of Same Tennessee Chattanooga, Inc. Seaboard Farms of Seaboard Farms of Georgia Elberton, Inc. Elberton, Inc. Seaboard Farms of Canton Seaboard Farms of Same Kentucky Kentucky, Inc. Seaboard Farms of Same Minnesota Minnesota, Inc. Seaboard Farms of Same Florida Orlando, Inc. Seaboard Farms, Inc. Same Oklahoma Seaboard Florida Ltd. Same Bermuda Seaboard Guyana, Ltd. Same Bermuda Seaboard Holdings Ltd. Same British Virgin Islands Seaboard Intrepid, Ltd. Same Bermuda Seaboard Marine Bahamas, Ltd. Same Bahamas Seaboard Marine Ltd. Same Liberia EXHIBIT 21 (continued) Seaboard Marine of Florida, Inc. Same Florida Seaboard (Nigeria) Limited Same Nigeria Seaboard Overseas Limited Same Bahamas S.B.D., Inc. Same Delaware Seaboard Ship Management Inc. Same Florida Seaboard Shipping Services (PTY) Ltd. Same South Africa Seaboard Trading and Shipping Ltd. Same Minnesota Seaboard Trading de Mexico, S.A. de C.V. Same Mexico Seaboard Transport Inc. Same Oklahoma Seaboard Voyager Ltd. Same Bermuda Seaboard West Africa Limited Same Sierra Leone Seadom, S.A.* Same Dominican Republic Secuador Limited Same Bermuda Shilton Limited Same Cayman Islands Top Feeds Limited* Same Nigeria Transcontinental Capital Corp. Same Bermuda (Bermuda) Ltd. Zenith Investments, Ltd.* Same Nigeria *Represents a minority-owned, non-controlled, non-consolidated subsidiary. EX-27 5 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FISCAL 1996 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 YEAR DEC-31-1996 JAN-01-1996 DEC-31-1996 11467 90373 184284 19448 185701 493379 713283 247122 1004685 289142 297719 0 0 1488 368446 1004685 1464362 1464362 1315782 1315782 128835 4122 26864 302 (2538) 2840 0 0 3006 5846 3.93 3.93
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