-----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, U1IpM8Fc+hLA0X5FeC3UEQHNTaMJmGEGdPLkfl5LXmlKEB1TWgwGIU6V8FGl2L3Z coLb6oclPHp2nCAb1psZJQ== 0000088121-98-000003.txt : 19980327 0000088121-98-000003.hdr.sgml : 19980327 ACCESSION NUMBER: 0000088121-98-000003 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980326 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 SEC ACT: SEC FILE NUMBER: 001-03390 FILM NUMBER: 98573981 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 1 SEABOARD CORP. 1997 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 For the fiscal year ended December 31, 1997 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________________ to ____________________ Commission file number 1-3390 Seaboard Corporation - -------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 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 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. $136,365,227 (March 6, 1998). On such date, 332,193 shares were held by non-affiliates, and the stock was sold at $410.50 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 6, 1998. 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 1998 annual meeting of stockholders (the "1998 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 price of feed stocks and other materials used by the Company, (iv) price for the Company's products and services, or (v) 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. 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 pork and poultry 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) (1) (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 hogs and processes pork in the United States and sells fresh pork to further processors, foodservice and retail, primarily in the western half of the United States and foreign markets. Hogs produced at Company owned or leased facilities are processed at the Company's processing plant. Registrant produces and processes poultry in the United States and sells processed chicken and chicken parts, both directly and through commercial distributors, foodservice and institutional markets, to retail, primarily in the eastern half of the United States and foreign markets. 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 pork and poultry production and processing facilities. The Registrant has announced plans to construct a second pork processing plant capable of processing over four million hogs annually. In addition, the Registrant plans to construct facilities to produce an additional two million market hogs per year. This expansion is anticipated to include two feed mills and additional hog farrowing, nursing and finishing buildings. During 1997, the Registrant expanded and converted its largest poultry processing plant, located in Athens, Georgia, from retail tray-pack to food service production and added an additional cooking line at the Elberton, Georgia, facility. The State of Oklahoma has recently enacted a moratorium on the issuance of permits for pork facilities not yet operating. Under the present legislation, the moratorium will remain in effect for one year unless earlier repealed. The effect of the moratorium could be to delay the Company's expansion plans or to increase related development costs. The Registrant's Argentinean affiliate continues to make improvements to existing operations and expand the sugarcane and citrus fields. (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 Bimbo. Patents, trademarks, franchises, licenses and concessions are not material to any of Registrant's other businesses. (v) Seasonal Business Profits from processed pork are generally higher in the fall months. Profitability of the poultry operations is generally higher in the summer 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. (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 October 1997 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. In the January 1998 issue of Broiler Industry, an industry trade publication, the Registrant was ranked as one of the top ten largest poultry processors in the United States based on average weekly production of ready-to-cook chicken. 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's ocean liner service for containerized cargoes faces competition based on price and customer service. Registrant believes it is among the top five ranking ocean liner services for containerized cargoes in the Caribbean Basin. (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, 1997, Registrant, excluding non-controlled, non- consolidated foreign subsidiaries, had 12,031 employees, of whom 10,230 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 Democratic Republic of Congo (formerly Zaire) to the extent deemed appropriate against certain of these risks with the Overseas Private Investment Corporation, an agency of the United States Government. In addition, the Company has purchased commercial insurance to cover certain forms of political risk if physical damage is done to facilities abroad. 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, Democratic Republic of Congo, Dominican Republic, Ecuador, Guatemala, Guyana, Honduras, Mozambique, Nigeria, Panama, Peru, Puerto Rico, Sierra Leone and Venezuela. (1) Food Production and Processing The Registrant owns a hog processing plant in Oklahoma with a double shift capacity of four million hogs per year. The plant reached double shift capacity in the fourth quarter of 1997. Hog production facilities currently consist of a combination of owned and leased farrowing, nursery and finishing units to support 110,000 sows. Registrant owns three feed mills which have a combined capacity to produce 850,000 tons of feed annually to support the hog production. These facilities are located in Oklahoma, Texas, Kansas and Colorado. 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 244 million birds per year. To support these facilities, the Registrant operates four feed mills, four hatcheries and a network of 680 contract growers that supply pullet, breeder and broiler farms. These facilities are located in Alabama, Georgia, Kentucky and Tennessee. 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 Democratic Republic of Congo, Ecuador, Guyana, Mozambique, Nigeria, Puerto Rico and Sierra Leone, and the feed mills located in Democratic Republic of Congo, Ecuador and Nigeria 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 16 years, and a Nigerian flour and feed mill with a remaining lease term of 77 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 eighteen 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 fifteen and eighteen 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. (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 (72) President of Registrant; President and Treasurer of Seaboard Flour Corporation (SFC) Joe E. Rodrigues (61) Executive Vice President and Treasurer Rick J. Hoffman (43) Vice President Steven J. Bresky (44) Vice President Robert L. Steer (38) Vice President - Finance Douglas W. Schult (41) Vice President - Human Resources David M. Becker (36) Assistant Secretary and Director of Legal Affairs 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. 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 Auditors' 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. 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, 1997, 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 1998 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 1998 Proxy Statement. Item 11. Executive Compensation This item has been omitted since Registrant filed a definitive proxy statement within 120 days after December 31, 1997, 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 1998 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, 1997, 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 1998 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, 1997, 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 1998 Proxy Statement. 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. 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. * 10.1 Registrant's Executive Retirement Plan dated January 1, 1997 amending and restating Registrant's Executive Retirement Plan, as amended, dated October 14, 1994 previously filed as incorporated by reference to Exhibit 10.1 of Registrant's Form 10-Q for the quarter ended September 10, 1994. The addenda have been omitted from the filing, but will be provided supplementary upon request of the Commission. * 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. 13 - Sections of Annual Report to security holders incorporated by reference herein. 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. 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 26, 1998 Date: March 26, 1998 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 26, 1998 Date: March 26, 1998 /s/David A. Adamsen /s/Thomas J. Shields - ----------------------------- ------------------------- David A. Adamsen, Director Thomas J. Shields, Director Date: March 26, 1998 Date: March 26, 1998 SEABOARD CORPORATION AND SUBSIDIARIES Consolidated Financial Statements and Schedule (Form 10-K) Securities and Exchange Commission For the year ended December 31, 1997 (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, 1997 and December 31, 1996 37 Consolidated Statements of Earnings for the years ended December 31, 1997, December 31, 1996 and December 31, 1995 35 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1997, December 31, 1996 and December 31, 1995 36 Consolidated Statements of Cash Flows for the years ended December 31, 1997, December 31, 1996 and December 31, 1995 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." 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, 1997, 1996 and 1995 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 6, 1998, we reported on the consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 1997 and 1996, 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, 1997, as contained in the December 31, 1997 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, 1997. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated 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 6, 1998 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, 1997: Allowance for doubtful accounts $ 19,448 3,845 2,635 $ 20,658 =========== ========= ========== ======== 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 =========== ======== ========== ======== (1) Charged to selling, general and administrative expenses. F-4 EX-13 2 1997 ANNUAL REPORT Summary of Selected Financial Data Seaboard Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------- (Thousands of dollars except per share amounts) Years ended December 31, - -------------------------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 - -------------------------------------------------------------------------------------------------- Net sales $ 1,780,333 $ 1,464,362 $ 1,173,977 $ 983,804 $ 1,142,144 ================================================================================================== Net earnings $ 30,574 $ 5,846 $ 20,202 $ 35,201 $ 35,891 ================================================================================================== Earnings per common share $ 20.55 $ 3.93 $ 13.58 $ 23.67 $ 24.13 ================================================================================================== Total assets $ 1,124,385 $ 1,004,685 $ 878,132 $ 675,211 $ 647,332 ================================================================================================== Long-term debt $ 306,666 $ 297,719 $ 297,440 $ 177,666 $ 194,506 ================================================================================================== Stockholders' equity $ 399,015 $ 369,934 $ 365,810 $ 346,080 $ 304,356 ================================================================================================== Dividends per common share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ .75 ================================================================================================== In 1997, the Company retroactively adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share," which revised the calculation and presentation provisions regarding earnings per share. The adoption of this statement had no effect on previously reported earnings per common share. Basic and diluted earnings per share are the same for all periods presented. 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 net 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) 1997 1996 1995 - ------------------------------------------------------------------------------ Current ratio 1.47:1 1.71:1 2.25:1 Working capital $ 168.3 $ 204.2 $ 219.0 Cash from operating activities $ 121.1 $ (72.8) $ 42.2 Capital expenditures $ 85.5 $ 110.5 $ 229.5 Long-term debt, exclusive of current maturities $ 306.7 $ 297.7 $ 297.4 Total capitalization* $ 763.5 $ 715.5 $ 703.4 - ------------------------------------------------------------------------------ * Total capitalization is defined as stockholders' equity and noncurrent liabilities. Cash provided by operating activities increased $193.9 million compared to 1996 primarily as a result of a large increase in current liabilities, smaller increases in accounts receivable and inventories, and an increase in net earnings during 1997 compared to 1996. The increase in current liabilities consists primarily of deferred revenues on incomplete voyages and various increases in other accrued liabilities. The smaller increase in receivables during 1997 was primarily the result of smaller increases in pork and poultry receivables and improved collections in the transportation and power divisions during 1997. The smaller increase in inventory was primarily a result of the pork division experiencing a larger build-up of hog inventories during 1996 than 1997. The decline in cash provided by operating activities of $115.0 million in 1996 compared to 1995 was primarily attributable 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 advances to foreign affiliates. The Company invested $85.5 million in property, plant and equipment during 1997, of which $73.0 million was expended in the food production and processing segment, $9.4 million in the transportation segment and $3.1 million in other areas of the Company's business. During 1997, the Company invested $31.9 million for the completion of previously planned hog farrowing and finishing facilities and improvements to the pork processing plant. The Company has announced plans to construct a second pork processing plant with a double shift capacity in excess of four million hogs annually. In addition, the Company plans to construct additional hog facilities, including two feed mills, to produce an additional two million hogs per year. Construction of live hog production facilities has begun in 1998 and is expected to be completed around the time the second processing plant commences operations, currently planned for 2001. The processing plant is expected to cost approximately $75 million with an additional $270 million for the live hog facilities. During 1998, approximately $64 million is expected to be spent on these expansion plans along with an additional $20 million for existing facilities. Approximately $65 million of the 1998 costs are expected to be financed through operating lease agreements. Management is currently evaluating alternative methods of implementing future expansion, including constructing additional company-owned facilities, utilizing contract growers and adding more leased facilities. Facilities constructed by the Company will be financed with internally generated cash or through the Company's additional borrowing capacity. During 1997, the Company invested $37.2 million primarily to expand and convert the Athens, Georgia, poultry facility from retail tray-pack production to food service production and to add an additional cooking line at the Elberton, Georgia, poultry facility. During 1998, the Company anticipates spending $20 million to complete these expansions and make general upgrades to other poultry facilities. Management anticipates these expenditures will be financed by internally generated cash. Other capital expenditures in the food production and processing segment for 1997 consisted of $3.9 million in general modernization and efficiency upgrades of plant and equipment. Capital expenditures in the transportation segment during 1997 totaled $9.4 million for general replacement and upgrades of property and equipment. 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. 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. Capital expenditures in the transportation segment during 1996 totaled $8.6 million for general replacement and upgrades of property and equipment. In January 1998, the Company invested $2.5 million for a minority interest in a new limited liability company in Maine. The new company acquired the assets of an existing seafood company which processes and distributes prepackaged smoked seafood and related products, more fully integrating the Company's salmon business. The investment is being accounted for using the equity method. During the fourth quarter of 1997, the Company won a bid to acquire up to a 50% interest in a flour mill in Lesotho for approximately $5 million. In addition, the Company, along with two partners in a consortium, won a bid to acquire an interest in a flour mill in Haiti. The Company will acquire a minority interest for approximately $4 million by investing in a joint venture, which will operate the flour mill in Haiti. These transactions are anticipated to close during the first half of 1998. These investments will be accounted for using the equity method. In October 1996, the Company acquired a 50% 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. 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. As of December 31, 1997, net advances and non-voting investments totaled $67.6 million for improvements of existing operations, expanding sugarcane and citrus fields and working capital requirements. During the second quarter of 1997, the Company determined that these advances would not be repaid on a short-term basis and, accordingly, such advances are recorded as long-term investments in and advances to foreign affiliates at December 31, 1997. During the next year, the Company anticipates guaranteeing loans made to Tabacal by third parties and/or making additional advances to and/or non-voting investments in Tabacal of approximately $20 million. During 1997, the Company's one-year revolving credit facilities were increased to $160 million as a result of the extension and increase of existing facilities and the establishment of a new facility. At December 31, 1997, the Company had $142.0 million outstanding under the one-year revolving credit facilities and $15.4 million outstanding under the short- term uncommitted credit lines totaling $114.5 million. Subsequent to year-end, the Company's one-year revolving credit facilities maturing in the first quarter of 1998 were extended for an additional year. In the first quarter of 1997, the Company borrowed the proceeds of $10 million of Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds issued by the Oklahoma Development Finance Authority. These funds were used to finance certain costs associated with hog production facilities. In addition, the existing five-year revolving credit facility was extended and reduced from $50 million to $25 million. 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 totaled $1,780.3 million for the year ended December 31, 1997, an increase of $315.9 million compared to the year ended December 31, 1996. Operating income of $77.1 million for 1997 increased $57.4 million compared to 1996. Net sales totaled $1,464.4 million for the year ended December 31, 1996, an increase of $290.4 million compared to the year ended December 31, 1995. Operating income of $19.7 million for 1996 decreased $11.5 million compared to 1995 Food Production and Processing Segment - --------------------------------------------------------------------------- (Dollars in millions) 1997 1996 1995 - --------------------------------------------------------------------------- Net sales $ 1,117.6 844.5 652.5 Operating income $ 35.4 (3.9) 10.1 - --------------------------------------------------------------------------- In 1997, net sales for the food production and processing segment increased $273.1 million compared to 1996 as a result of increased utilization of the pork processing plant during 1997. Operating income increased $39.3 million in 1997 compared to 1996 primarily as a result of efficiencies created by increased production at the pork processing plant and live hog production facilities and, to a lesser extent, lower grain prices. Management cannot predict whether grain prices will remain at current levels during the next year. Net sales for the pork operations increased $297.3 million to $531.6 million in 1997 compared to 1996. This increase is primarily the result of increased sales of pork at the hog processing plant, which reached full single-shift capacity during the second half of 1996 and commenced double- shift operations during the second quarter of 1997. In addition, pork prices were higher for the majority of 1997 compared to 1996. Management expects continued increases in sales volume during 1998 as the hog processing plant operates for a full year at double-shift capacity. Gross income for the pork operations increased $51.2 million to $54.3 million in 1997 compared to 1996. This increase is primarily the result of increased utilization of the pork processing plant along with increased production and weight per hog at the hog production facilities. The anticipated increase in sales volume and related gross income for 1998 may be partially offset by lower pork prices. During the fourth quarter of 1997, pork prices declined primarily as a result of increased hog production in the United States and the impact of the Asian economic crisis on exports. Management anticipates that these lower pork prices will continue for the first part of 1998 and will have a negative effect on financial results during 1998 compared to 1997. Net sales for the poultry operations decreased $25.1 million to $476.6 million and gross income decreased $7.0 million to $21.5 million in 1997 compared to 1996. These decreases were a result of downtime and start-up costs associated with converting the Company's largest plant, located in Athens, Georgia, from retail tray-pack to food service production. In addition, there was a general decrease in poultry markets, especially leg quarter prices, during 1997 compared to 1996. The decrease in gross income was partially offset by lower finished feed costs, primarily corn, and a reduction in packaging costs, primarily as a result of product mix. Management expects to complete the expansion of its further processing capacity in early 1998, which should increase sales during the next year. Management believes that these lower poultry markets will continue to have a negative effect on financial results during the first half of 1998 compared to 1997. In 1996, net sales for the food production and processing segment increased $192.0 million compared to 1995 as a result of increased poultry and pork sales. Operating income for 1996 decreased $14.0 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. Net sales for the poultry division increased $43.1 million to $501.7 million in 1996 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 from poultry products decreased $26.6 million to $28.5 million in 1996 compared to 1995. The decrease in gross income was primarily related to higher finished feed costs. Net sales within the pork operations increased $142.7 million to $234.3 million in 1996 compared to 1995. 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. Gross income for the pork operations increased $6.7 million to $3.1 million in 1996 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. Commodity Trading and Milling Segment - -------------------------------------------------------------------------- (Dollars in millions) 1997 1996 1995 - -------------------------------------------------------------------------- Net sales $ 313.9 315.6 208.0 Operating income $ 9.3 18.1 8.5 - -------------------------------------------------------------------------- Net sales from commodity trading and milling activities decreased $1.7 million in 1997 compared to 1996. This decrease is primarily the result of a decrease in commodity prices, mainly wheat and corn, sold in foreign markets partially offset by an increase in tonnage shipped. Operating income decreased $8.8 million in 1997 compared to 1996, primarily as a result of lower millfeed prices in foreign markets and increased reserves on certain foreign receivables. 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. Transportation Segment - ---------------------------------------------------------------------------- (Dollars in millions) 1997 1996 1995 - ---------------------------------------------------------------------------- Net sales $ 313.0 266.6 277.1 Operating income $ 30.7 6.5 16.9 - ---------------------------------------------------------------------------- Net sales from containerized cargo operations increased $46.4 million and operating income increased $24.2 million in 1997 compared to 1996. These increases are primarily the result of increased unit cargo volumes shipped in certain markets that the Company serves and, to a lesser extent, modestly higher container rates. During 1996, container rates were under significant competitive pressure but stabilized and began to improve during the fourth quarter of 1996. Management cannot predict whether rates will continue to improve during the next year. 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 was primarily related to lower container 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. Other Operations - -------------------------------------------------------------------------- (Dollars in millions) 1997 1996 1995 - -------------------------------------------------------------------------- Net sales $ 35.8 37.7 36.3 Operating income $ 7.1 5.1 1.0 - -------------------------------------------------------------------------- Net sales from other operations were almost unchanged in 1997 compared to 1996. Operating income increased by $2.0 million compared to 1996 as a result of improved collections on foreign receivables. Net sales from other operations were almost unchanged in 1996 compared to 1995. Operating income increased by $4.1 million compared to 1995 as a result of a reduction in operating expenses resulting from lower maintenance costs in electric power generation and improved receivable collections. Selling, General and Administrative Expenses Selling, general and administrative expenses (SG&A) totaled $142.0 million, $128.8 million and $139.2 million for the years ended December 31, 1997, 1996 and 1995, respectively. As a percent of revenues, SG&A decreased to 8.0% in 1997 compared to 8.8% in 1996 as a result of increased pork production and lower expenses in the transportation segment. The decrease in 1996 compared to 1995 reflects the Company's focus on cost controls, improved receivable collections, and start-up of pork processing operations. Interest Income Interest income totaled $6.1 million, $9.1 million and $11.5 million for the years ended December 31, 1997, 1996 and 1995, respectively. The decreases in 1997 and 1996 are primarily the result of a decrease in average invested funds. Interest Expense Interest expense totaled $31.1 million, $26.9 million and $15.7 million for the years ended December 31, 1997, 1996 and 1995, respectively. The increase during 1997 compared to 1996 was primarily a result of increased short-term borrowings during the year. The increase during 1996 compared to 1995 was primarily the result of increased short-term borrowings and the issuance of long-term debt in June 1995. Income (Loss) from Foreign Affiliates Income (loss) from foreign affiliates totaled $(8.7) million, $(3.0) million and $2.0 million for the years ended December 31, 1997, 1996 and 1995, respectively. The losses in 1997 and 1996 are primarily attributable to the operations of Tabacal, a non-controlling interest in which was acquired by the Company in July 1996. During 1997, losses increased from Tabacal primarily as a result of the costs of upgrading and expanding operations. Management plans for improved results in 1998 but expects continued losses during the next year as upgrading and expansion plans continue. Income Tax Expense The effective tax rate for 1997 decreased compared to 1996. This decrease was a result of increased permanently deferred foreign tax earnings during 1997 and the effect of certain other permanent differences on the increased level of income for 1997 compared to 1996. The difference in the effective tax rate for 1996 compared to 1995 is primarily related to the effect of certain permanent differences on the lower level of income for 1996 compared to 1995. Derivative Financial Information The Company enters into forward purchase and sale 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, 1997, the Company had net contracts to purchase 20.2 million bushels of grain and there were no open contracts for hogs. Realized losses from commodity contracts reported in operating income for the years ended December 31, 1997 and 1996 were $1.6 million and $12.9 million, respectively. 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, 1997, the Company had interest rate exchange agreements in place effectively fixing the interest rate on $200 million of variable rate debt to a fixed weighted average rate of 6.3%. These contracts expire in 2007. The use of these types of contracts did not have a material effect on the 1997 and 1996 results of operations. Other Financial Information 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. Laws and regulations in the states where the Company currently conducts its pork operations are becoming more restrictive. The State of Oklahoma has recently enacted a moratorium on the issuance of any further permits for pork facilities not yet operating. Under the present legislation, the moratorium will remain in effect for one year unless earlier repealed. The effect of the moratorium could be to delay the Company's expansion plans or to increase related development costs. 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 has completed an assessment of the impact of the Year 2000 on its computer systems, both hardware and software, and expects to complete addressing these issues, including all necessary testing, during 1998. The Company currently believes that the remaining costs to complete addressing these issues will not be material to the Company's consolidated financial position, results of operations or cash flows. Such expenditures are being charged to expense as incurred. The Company has not communicated with all of its significant suppliers to determine the extent to which the Company is vulnerable to failure of those third parties to remediate their own Year 2000 issues. The Company does not anticipate the cost of Year 2000 compliance by suppliers to be passed on to the Company. The Company does not believe that failure to address the Year 2000 issue by a third party on whom the Company's systems rely would have a material adverse effect on the Company. In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." These statements, which are effective for periods beginning after December 15, 1997, expand or modify disclosures and, accordingly, will have no impact on the Company's reported financial position, results of operations or cash flows. The Company will adopt SFAS No. 130 during its first quarter of 1998. The Company will adopt SFAS No. 131 for the year ending December 31, 1998. 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 - ------------------------------------------------------------------------------- 1997 - ------------------------------------------------------------------------------- Net sales $ 400,180 449,366 429,610 501,177 1,780,333 Operating income $ 16,120 24,209 23,234 13,512 77,075 Net earnings $ 5,336 10,505 10,508 4,225 30,574 Earnings per common share $ 3.59 7.06 7.06 2.84 20.55 Dividends per common share $ .25 .25 .25 .25 1.00 Market price range per common share: High $ 268 292 316 453 Low $ 230 1/4 247 1/2 264 309 =============================================================================== - ------------------------------------------------------------------------------- 1996 - ------------------------------------------------------------------------------- Net sales $ 297,631 330,503 350,739 485,489 1,464,362 Operating income $ (7,242) (3,668) 9,606 18,083 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 =============================================================================== In 1997, the Company changed its accounting periods to four three-month quarters from three twelve-week periods and one sixteen-week period (fourth quarter of 1996). Accordingly, the quarters for 1997 are not directly comparable to the quarters for 1996. In the fourth quarter of 1997, the Company retroactively adopted SFAS No.128, "Earnings Per Share." The adoption of this statement had no effect on previously reported earnings per common share. Basic and diluted earnings are the same for all periods presented. 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. 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.
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 price of feed stocks and other materials used by the Company, (iv) the price for the Company's products and services, or (v) 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, transactions are executed in accordance with Company policy and are properly recorded, and 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 such evaluations require estimates and judgments. 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 annually 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, 1997 and 1996, 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, 1997. 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 also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Seaboard Corporation and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three- year period ended December 31, 1997, 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 6, 1998 Seaboard Corporation and Subsidiaries Consolidated Statements of Earnings (Thousands of dollars except per share amounts)
Years ended December 31, ------------------------------------------ 1997 1996 1995 ------------------------------------------ Net sales $ 1,780,333 $ 1,464,362 $ 1,173,977 Cost of sales and operating expenses 1,561,265 1,315,782 1,003,604 ------------- ------------ ------------ Gross income 219,068 148,580 170,373 Selling, general and administrative expenses 141,993 128,835 139,169 ------------- ------------ ------------ Operating income 77,075 19,745 31,204 Other income (expense): Interest income 6,127 9,095 11,506 Interest expense (31,108) (26,864) (15,686) Income (loss) from foreign affiliates (8,733) (2,966) 2,035 Miscellaneous 1,221 1,292 (440) ------------- ------------ ------------ Total other income (expense), net (32,493) (19,443) (2,585) ------------- ------------ ------------ Earnings before income taxes and cumulative effect of a change in accounting principle 44,582 302 28,619 Income tax (expense) benefit (14,008) 2,538 (8,417) ------------- ------------ ------------ Earnings before cumulative effect of a change in accounting principle 30,574 2,840 20,202 Cumulative effect of changing the accounting for inventories, net of income tax expense of $1,922 -- 3,006 -- ------------- ------------ ------------ Net earnings $ 30,574 $ 5,846 $ 20,202 ============= ============ ============ Earnings per common share: Earnings before cumulative effect of a change in accounting principle $ 20.55 $ 1.91 $ 13.58 Cumulative effect of changing the accounting for inventories -- 2.02 -- ------------- ------------ ------------ Earnings per common share $ 20.55 $ 3.93 $ 13.58 ============= ============ ============ 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, 1997, 1996 and 1995
Unrealized Gain (Loss) Common Treasury Additional on Debt Retained Stock Stock Capital Securities Earnings ------- -------- ---------- ----------- ---------- Balances, January 1, 1995 $ 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 Net unrealized loss on marketable debt securities, net of income tax benefit of $3 - - - (6) _ Net earnings _ _ _ _ 30,574 Dividends on common stock ($1.00 per share) - - - - (1,487) -------- -------- ---------- --------- ----------- Balances,December 31, 1997 $ 1,790 $ (302) $ 13,214 $ 10 $ 384,303 ======== ======== ========== ========= =========== See accompanying notes to consolidated financial statements.
Seaboard Corporation and Subsidiaries Consolidated Balance Sheets (Thousands of dollars)
December 31, ---------------------------- 1997 1996 Assets ------------ ------------ Current assets: Cash and cash equivalents $ 8,552 $ 11,467 Short-term investments 108,744 90,373 Receivables: Trade 169,990 151,380 Due from foreign affiliates 16,041 37,995 Other 10,267 14,357 ------------ ------------ 196,298 203,732 Allowance for doubtful receivables (20,658) (19,448) ------------ ------------ Net receivables 175,640 184,284 Inventories 211,024 185,701 Deferred income taxes 9,730 7,224 Prepaid expenses and deposits 15,545 14,330 ------------ ------------ Total current assets 529,235 493,379 Investments in and advances to foreign affiliates 93,668 32,212 Net property, plant and equipment 486,373 466,161 Other assets 15,109 12,933 ------------ ------------ Total Assets $ 1,124,385 $ 1,004,685 ============ ============ See accompanying notes to consolidated financial statements. Seaboard Corporation and Subsidiaries Consolidated Balance Sheets (Thousands of dollars) December 31, ---------------------------- Liabilities and Stockholders' Equity 1997 1996 ------------ ------------ Current liabilities: Notes payable to banks $ 157,445 $ 150,157 Current maturities of long-term debt 6,843 6,900 Accounts payable 78,805 72,398 Accrued liabilities 55,520 34,586 Deferred revenues 42,958 9,001 Accrued payroll 19,331 16,100 ------------ ------------ Total current liabilities 360,902 289,142 ------------ ------------ Long-term debt, less current maturities 306,666 297,719 Deferred income taxes 27,943 22,721 Other liabilities 29,859 25,169 ------------ ------------ Total non-current and deferred liabilities 364,468 345,609 ------------ ------------ 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 (302) (302) ------------ ------------ 1,488 1,488 Additional capital 13,214 13,214 Unrealized gain on debt securities, net of income tax expense of $5 and $8 in 1997 and 1996, respectively 10 16 Retained earnings 384,303 355,216 ------------ ------------ Total stockholders' equity 399,015 369,934 ------------ ------------ Total Liabilities and Stockholders' Equity $ 1,124,385 $ 1,004,685 ============ ============ See accompanying notes to consolidated financial statements.
Seaboard Corporation and Subsidiaries Consolidated Statements of Cash Flows (Thousands of dollars)
Years ended December 31, ------------------------------------------ 1997 1996 1995 ------------ ------------ ------------ Cash flows from operating activities: Net earnings $ 30,574 $ 5,846 $ 20,202 Adjustments to reconcile net earnings to cash from operating activities: Depreciation and amortization 56,896 50,914 44,944 Equity in (earnings) losses of foreign affiliates 8,733 2,966 (2,035) Deferred income taxes 2,719 9,301 (6,175) Changes in current assets and liabilities (net of businesses acquired): Receivables, net of allowance (19,711) (66,575) (13,014) Inventories (25,323) (72,858) (39,600) Prepaid expenses and deposits (1,215) (79) (6,546) Current liabilities exclusive of debt 64,529 (1,825) 46,889 Other, net 3,908 (452) (2,420) ------------ ------------ ------------ Net cash from operating activities 121,110 (72,762) 42,245 ------------ ------------ ------------ Cash flows from investing activities: Purchase of investments (277,437) (327,020) (691,590) Proceeds from the sale of investments 193,303 300,265 423,358 Proceeds from maturity of investments 65,754 71,202 309,331 Capital expenditures (85,482) (110,491) (229,499) Investments and advances to foreign affiliates (41,834) (6,476) 6,349 Proceeds from the sale of equipment 7,872 31,831 4,711 Notes receivable 163 719 1,300 Acquisition of businesses -- -- (3,500) ------------ ------------ ------------- Net cash from investing activities (137,661) (39,970) (179,540) ------------ ------------ ------------- Cash flows from financing activities: Notes payable to banks, net 7,288 116,342 13,239 Proceeds from issuance of long-term debt 10,213 10,000 142,471 Principal payments of long-term debt (1,323) (12,394) (19,094) Deferred grant revenue -- 350 3,927 Dividends paid (1,487) (1,487) (1,487) Bond construction fund (1,055) 5,859 (1,005) ------------ ------------ ------------- Net cash from financing activities 13,636 118,670 138,051 ------------ ------------ ------------- Net increase (decrease) in cash and cash equivalents (2,915) 5,938 756 Cash and cash equivalents at beginning of year 11,467 5,529 4,773 ------------ ------------ ------------- Cash and cash equivalents at end of year $ 8,552 $ 11,467 $ 5,529 ============ ============ ============= See accompanying notes to consolidated financial statements.
Seaboard Corporation and Subsidiaries Notes to Consolidated Financial Statements December 31, 1997, 1996 and 1995 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 pork and poultry 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 Investments 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 affiliates 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, and 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 improvements are capitalized. Deferred Grant Revenue - ---------------------- Included in other liabilities at December 31, 1997 and 1996 is $11,550,000 and $11,974,000, respectively, of deferred grant revenue. Deferred grant revenue represents economic development funds contributed to the Company by government entities that were 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. Income Taxes - ------------ Deferred income taxes are recognized for the tax consequences of "temporary differences" by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Revenue Recognition - ------------------- 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. Impairment of Long-Lived Assets - ------------------------------- Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. 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, 1997, 1996 and 1995, respectively. In the fourth quarter of the year ended December 31, 1997, the Company retroactively adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share," which revised the calculation and presentation provisions of Accounting Principles Board Opinion No. 15 and related interpretations. The adoption of this statement had no effect on the previously reported earnings per share. Basic and diluted earnings per share are the same for all periods presented. Cash and Cash Equivalents - ------------------------- For purposes of the consolidated statements of cash flows, 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 $22,487,000 and $20,820,000 at December 31, 1997 and 1996, respectively. The amounts paid (received) for income taxes and interest are as follows:
Years ended December 31, - --------------------------------------------------------------------------- (Thousands of dollars) 1997 1996 1995 - --------------------------------------------------------------------------- Interest (net of amounts capitalized) $ 30,284 $ 27,120 $ 14,598 ========= ========= ========= Income taxes $ (6,817) $ (10,362) $ 25,384 ========= ========= =========
See Note 6 for non-cash financing for an investment in foreign affiliates. Foreign Currency - ---------------- The Company has operations in and transactions with customers in a number of foreign countries. The currencies of the countries fluctuate in relation to the U.S. dollar. Most of the Company's major contracts and transactions, however, are denominated in U.S. dollars. In addition, the value of the U.S. dollar fluctuates in relation to the currencies of countries where the Company's foreign subsidiaries and affiliates conduct business. These fluctuations result in exchange gains and losses. The activities of these foreign subsidiaries and affiliates 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, 1997, 1996 and 1995. Foreign currency exchange restrictions imposed upon the Company's wholly owned foreign subsidiaries and certain minority-owned foreign affiliates 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 specifically identified, 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, 1997 and 1996, 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). See Note 9 for a description of outstanding interest exchange rate agreements. Commodity Contracts - ------------------- The Company enters into forward purchase and sale 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, 1997, the Company had net contracts to purchase 20.2 million bushels of grain and there were no open contracts for 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. When a qualifying hedge is terminated or ceases to meet the specific criteria for use of hedge accounting, any deferred gains or losses through that date continue to be deferred. 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 earnings. At December 31, 1997 and 1996, the net deferred loss on commodity instruments was $689,000 and $6,402,000, respectively, and is included in deferred revenues 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. Reclassifications - ----------------- Certain 1996 and 1995 amounts have been reclassified to conform with the 1997 presentations. 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. The acquisition did not significantly affect 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, 1997 and 1996, the Company had a net receivable balance from the Parent Company of $270,000 and $53,000, respectively. Interest on receivables is charged at the prime rate and for the years ended December 31, 1997, 1996 and 1995, amounted to $7,100, $37,000, and $275,000, respectively. Note 4 Short-Term Investments - -----------------------------------------------------------------------------
The following is a summary of available-for-sale securities at December 31, 1997: 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 $ 27,309 12 -- $ 27,321 Obligations of states and political subdivisions 50,587 -- -- 50,587 Other debt securities 30,833 3 -- 30,836 - ----------------------------------------------------------------------------- Total debt securities $ 108,729 15 -- $ 108,744 =============================================================================
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 ============================================================================= 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, 1997 and 1996 are $1,371,000 and $315,000, 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 $3,000, $143,000 and $296,000 and the gross realized losses totaled $14,000, $45,000 and $174,000 for the years ended December 31, 1997, 1996 and 1995, 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 are 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 earnings by $3,006,000 or $2.02 per common share. The net effect of this accounting change was to increase earnings 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 year ended December 31, 1995.
A summary of inventories at the end of each year is as follows: December 31, - ------------------------------------------------------------------------------ (Thousands of dollars) 1997 1996 - ------------------------------------------------------------------------------ At lower of LIFO cost or market: Live poultry $ 27,116 $ 27,610 Dressed poultry 32,496 29,295 Feed and baking ingredients, packaging supplies and other 6,970 7,353 - ------------------------------------------------------------------------------ 66,582 64,258 LIFO allowance (4,744) (6,000) - ------------------------------------------------------------------------------ Total inventories at lower of LIFO cost or market 61,838 58,258 - ------------------------------------------------------------------------------ At lower of FIFO cost or market: Live hogs 76,484 68,409 Grain, flour and feed 37,575 30,461 Crops in production, fertilizers and pesticides 11,166 10,097 Dressed pork 8,388 4,709 Other 15,573 13,767 - ------------------------------------------------------------------------------ Total inventories at lower of FIFO cost or market 149,186 127,443 - ------------------------------------------------------------------------------ Total inventories $ 211,024 $ 185,701 ============================================================================== The use of the LIFO method increased net earnings in 1997 and 1996 by $766,000 ($.52 per share) and $589,000 ($.40 per share), respectively, and decreased net earnings in 1995 by $3,401,000 ($2.29 per share). The increases in net earnings during 1997 and 1996 were primarily the result of declining purchase prices. If the FIFO method had been used, inventories would have been $4,744,000 and $6,000,000 higher than those reported at December 31, 1997 and 1996, respectively.
Note 6 Investments in and Advances to Foreign Affiliates - ------------------------------------------------------------------------------- The Company has made investments in and advances to minority-owned, non-controlled foreign flour milling, feed milling, sugar refining, polypropylene bag manufacturing, and shrimp farming affiliates. The affiliates are located in Democratic Republic of Congo, Mozambique, Nigeria and Sierra Leone in Africa, Argentina and Ecuador in South America and are accounted for by the equity method. The Company's investments in foreign affiliates are primarily carried at the Company's equity in the underlying net assets of each subsidiary. Certain of these foreign affiliates 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 1995. 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. At December 31, 1997, the Company has made net advances to and non-voting investments in Tabacal of $67,598,000 for improvements of existing operations, expanding sugarcane and citrus fields and working capital. During the second quarter of 1997, it was determined that these advances, including $28,355,000 at December 31, 1996, would not be repaid on a short-term basis and, accordingly, such advances are recorded as long-term investments in and advances to foreign affiliates at December 31, 1997. In October 1996, the Company acquired for $4,600,000 a non-controlling interest in a flour mill located in Mozambique. The Company paid $1,000,000 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 affiliates are included in consolidated net sales for the years ended December 31, 1997, 1996 and 1995, and amounted to $79,946,000, $83,007,000 and $29,585,000 respectively. Combined condensed financial information of the minority-owned, non- controlled, non-consolidated foreign affiliates for their fiscal periods ended within each of the Company's years ended are as follows:
December 31, - ----------------------------------------------------------------------------- (Thousands of dollars) 1997 1996 1995 - ----------------------------------------------------------------------------- Net sales $ 208,340 $ 191,600 $ 139,209 Net earnings (loss) (13,831) (6,089) 3,776 Total assets 240,511 215,512 83,771 Total liabilities 193,094 157,484 37,359 Total equity $ 47,417 $ 58,028 $ 46,412 =============================================================================
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) 1997 1996 - ----------------------------------------------------------------------------- Land and improvements $ 49,031 $ 47,022 Buildings and improvements 173,031 163,153 Machinery and equipment 411,037 398,887 Transportation equipment 84,614 82,808 Office furniture and fixtures 13,604 11,807 Construction in progress 39,971 9,606 - ----------------------------------------------------------------------------- 771,288 713,283 Accumulated depreciation and amortization (284,915) (247,122) - ----------------------------------------------------------------------------- Net property, plant and equipment $ 486,373 $ 466,161 ============================================================================= Approximately $184,000, $855,000 and $3,414,000 of interest costs were capitalized as part of property, plant and equipment in the years ended December 31, 1997, 1996 and 1995, respectively.
Note 8 Income Taxes - ------------------------------------------------------------------------------ Total income taxes for the years ended December 31, 1997, 1996 and 1995 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) 1997 1996 1995 - ------------------------------------------------------------------------------ Computed tax expense on earnings before income taxes and cumulative effect of a change in accounting principle $ 15,604 $ 105 $ 10,017 Adjustments to tax expense attributable to: Foreign tax differences 705 (3,789) (1,066) Tax-exempt investment income (621) (603) (1,122) State income taxes, net of Federal benefit 700 820 475 Other (2,380) 929 113 - ------------------------------------------------------------------------------ $ 14,008 $ (2,538) $ 8,417 ============================================================================== The components of total income taxes are as follows: Years Ended December 31, - ------------------------------------------------------------------------------ (Thousands of dollars) 1997 1996 1995 - ------------------------------------------------------------------------------ Current: Federal $ 10,810 $ (12,450) $ 13,498 State and local 479 611 1,094 Deferred 2,719 9,301 (6,175) - ------------------------------------------------------------------------------ Income tax expense (benefit) 14,008 (2,538) 8,417 Cumulative effect of changing the accounting for inventories -- 1,922 -- Stockholders' equity, for unrealized change in debt securities (3) (142) 616 - ------------------------------------------------------------------------------ Total income taxes $ 14,005 $ (758) $ 9,033 ============================================================================== Components of the net deferred income tax liability at the end of each year are as follows : December 31, - ----------------------------------------------------------------------------- (Thousands of dollars) 1997 1996 - ----------------------------------------------------------------------------- Deferred income tax liabilities: Cash basis farming adjustment $ 19,036 $ 19,036 Deferred earnings of foreign subsidiaries 1,688 2,218 Depreciation 39,840 25,111 Other 581 1,774 - ----------------------------------------------------------------------------- 61,145 48,139 - ----------------------------------------------------------------------------- Deferred income tax assets: Reserves/accruals 29,492 19,032 Foreign losses 3,606 4,651 Other 11,984 11,530 - ----------------------------------------------------------------------------- 45,082 35,213 Valuation allowance 2,150 2,571 - ----------------------------------------------------------------------------- Net deferred income tax liability $ 18,213 $ 15,497 =============================================================================
The Company believes that its future taxable income will be sufficient for full realization of the net deferred tax asset. 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, 1997 current income taxes payable totaled $7,422,000 and at December 31, 1996, current income taxes receivable totaled $4,000,000. At December 31, 1997 and 1996, 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 $36,000,000. Note 9 Notes Payable and Long-Term Debt - ------------------------------------------------------------------------------- Notes payable amounting to $157,445,000 and $150,157,000 at December 31, 1997 and 1996, respectively, consisted of obligations due banks within one year. At December 31, 1996, these funds were outstanding under the Company's one-year revolving credit facilities totaling $90 million and short-term uncommitted credit lines from banks totaling $115 million. During 1997, the Company's one-year revolving credit facilities were increased to $160 million as a result of the extension of existing facilities and the establishment of a new facility. As of December 31, 1997, the Company's short-term uncommitted credit lines from banks totaled $114.5 million, less outstanding letters of credit commitments totaling $1.2 million. Subsequent to year-end, the Company's one-year revolving credit facilities maturing in the first quarter of 1998 were extended for an additional year. Weighted average interest rates on the notes payable were 6.63% and 6.11% at December 31, 1997 and 1996, respectively. During 1996, the Company entered into a five-year $50 million revolving credit facility. During 1997, the revolving credit facility was extended and reduced to $25 million. Also during 1997, the Company borrowed proceeds of $10 million of Adjustable Rate, Seven-Day Demand Exempt Facility Revenue Bonds. Notes payable, the revolving credit facilities and uncommitted credit lines from banks are unsecured and do not require compensating balances. Facility fees on these agreements are not material. A summary of long-term debt at the end of each year is as follows:
December 31, - ----------------------------------------------------------------------------- (Thousands of dollars) 1997 1996 - ----------------------------------------------------------------------------- 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 (4.25% -4.73% at December 31, 1997) due through 2027 62,900 52,900 Revolving credit facility, floating rate (6.14% at December 31, 1997) due 2002 10,000 10,000 Term loan, 3.92%, due 1998 5,700 5,700 Capital lease obligations and other 9,909 11,019 - ----------------------------------------------------------------------------- 313,509 304,619 Current maturities of long-term debt (6,843) (6,900) - ----------------------------------------------------------------------------- Long-term debt, less current maturities $ 306,666 $ 297,719 =============================================================================
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 2027, the bonds are deemed to mature between 1999 and 2001, the years in which the bank letters of credit and committed extensions thereto expire. Poultry processing facilities, having a depreciated cost of $20,449,000 at December 31, 1997, secure certain bond issues. The terms of the note agreements pursuant to which the Senior Notes, IDRB's, Term Loan and revolving credit facilities 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 these agreements as of December 31, 1997. At December 31, 1997, the Company had interest rate exchange agreements in place effectively fixing the interest rate on $200 million of variable rate debt to a fixed, weighted-average rate of 6.33%. These contracts expire in 2007. The Company monitors the risk of default by the counterparty and does not anticipate nonperformance. At December 31, 1996, the Company had no interest rate exchange agreements outstanding. Annual maturities of long-term debt at December 31, 1997 are as follows: $6,843,000 in 1998, $22,717,000 in 1999, $17,046,000 in 2000, $55,661,000 in 2001, $20,873,000 in 2002, and $190,369,000 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, 1997 and 1996 the fair value of the Company's short-term investments was $108,744,000 and $90,373,000, respectively, with an amortized cost of $108,729,000 and $90,349,000 at December 31, 1997 and 1996, respectively. The fair value of long-term debt is determined by comparing interest rates for debt with similar terms and maturities. At December 31, 1997 and 1996 the fair value of the Company's long-term debt was $316,746,000 and $300,075,000, respectively, with a carrying value of $313,509,000 and $304,619,000 at December 31, 1997 and 1996, respectively. The fair values of interest rate exchange agreements are obtained from dealer quotes. These values represent the estimated amount the Company would receive or pay to terminate the agreements. The Company would be required to pay an estimated $1,700,000 to terminate the exchange agreements at December 31, 1997. 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 Company also sponsors non- qualified, unfunded supplemental executive plans. 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) 1997 1996 1995 - ------------------------------------------------------------------------------- Service cost-benefits earned during the period $ 2,670 $ 1,874 $ 1,303 Interest cost on projected benefit obligation 2,403 2,204 2,233 Actual return on assets (4,121) (3,498) (3,964) Net amortization and deferral 1,491 1,291 1,916 - ------------------------------------------------------------------------------- Net periodic pension cost $ 2,443 $ 1,871 $ 1,488 ===============================================================================
Assumptions used in determining pension information were:
Years ended December 31, - ------------------------------------------------------------------------------- 1997 1996 1995 - ------------------------------------------------------------------------------- Expected long-term rate of return on assets 8.75% 8.50-9.00% 8.50-9.00% Discount rate 7.50% 7.75% 7.00% Long-term rate of increase in compensation levels 4.25-4.50% 4.25-4.50% 4.25-4.50% - ------------------------------------------------------------------------------- The funded status and accrued pension cost at December 31, 1997 and 1996 for all defined benefit plans is shown below: December 31, - ------------------------------------------------------------------------------------------------- (Thousands of dollars) 1997 1996 - ------------------------------------------------------------------------------------------------- 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 $ 22,336 $ 8,666 $ 19,978 $ 6,728 Nonvested benefit obligation 1,942 439 1,460 62 - ------------------------------------------------------------------------------------------------- Accumulated benefit obligation 24,278 9,105 21,438 6,790 Effects of projected future compensation levels 2,671 1,618 1,767 1,111 - ------------------------------------------------------------------------------------------------- Projected benefit obligation 26,949 10,723 23,205 7,901 Plan assets at fair value 26,514 5,877 24,224 5,584 - ------------------------------------------------------------------------------------------------- Projected benefit obligation greater than (less than) plan assets 435 4,846 (1,019) 2,317 Recognized minimum liability -- 931 -- 387 Unrecognized net liability at transition (1,151) (249) (1,298) (39) Unrecognized prior service cost 2,411 (479) 2,634 (544) Unrecognized net gain (loss) 3,780 (1,620) 4,356 (915) - ------------------------------------------------------------------------------------------------- Accrued pension cost $ 5,475 $ 3,429 $ 4,673 $ 1,206 - -------------------------------------------------------------------------------------------------
During 1997, a new non-qualified, unfunded supplemental executive retirement plan was adopted amending and restating a previous plan. For disclosure purposes, the new plan is included in the 1997 section of the defined benefit table above while expenses and liabilities related to the prior plan are included in the 1996 and 1995 supplemental discussion below. The Company has certain individual, non-qualified, unfunded supplemental retirement agreements for certain executive employees. Pension expense for these plans was $574,000, $3,128,000, and $3,073,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Included in other liabilities at December 31, 1997 and 1996 is $8,903,000 and $10,347,000, 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 $1,466,000, $1,294,000 and $1,265,000 for the years ended December 31, 1997, 1996 and 1995, respectively. Note 12 Commitments and Contingencies - ------------------------------------------------------------------------------- The Company leases various ships, facilities and equipment under noncancelable operating lease agreements. In addition, the Company is a party to a master lease program with a limited partnership which owns certain of the facilities used by the Company in connection with its hog production. This arrangement is accounted for as an operating lease. Under this arrangement, the Company has certain rights to acquire any or all of the leased properties at the conclusion of their respective lease terms at a price based on estimated fair market value of the property. In the event the Company does not acquire any property which it has ceased to lease, the Company has a limited obligation to the lessor for any deficiency between the amortized cost of the property and the price for which it is sold up to a specific amount. Rental expense for operating leases amounted to $50,436,000, $45,591,000, and $40,521,000 in 1997, 1996 and 1995, respectively. Minimum lease commitments under noncancelable leases with initial terms greater than one year at December 31, 1997, were $26,621,000 for 1998, $11,951,000 for 1999, $7,659,000 for 2000, $6,129,000 for 2001, $5,839,000 for 2002 and $9,420,000 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 $47,600,000 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, 1997, 1996 and 1995 is as follows:
- ----------------------------------------------------------------------------------------------------------------------- (Thousands of dollars) 1997 - ----------------------------------------------------------------------------------------------------------------------- Food Commodity Unallocated Production Trading Corporate and and Items and Processing Milling Transportation Other Eliminations Total - ----------------------------------------------------------------------------------------------------------------------- Sales to unaffiliated customers $1,117,598 313,901 313,005 35,829 -- $ 1,780,333 Intersegment sales -- -- 4,794 -- (4,794) -- - ----------------------------------------------------------------------------------------------------------------------- Net sales $1,117,598 313,901 317,799 35,829 (4,794) $ 1,780,333 ======================================================================================================================= Operating income (loss) $ 35,367 9,254 30,672 7,144 (5,362) 77,075 ==================================================================================================== Loss from foreign affiliates (8,733) Interest income 6,127 Interest expense (31,108) Other corporate income 1,221 - ----------------------------------------------------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of changing the accounting for inventories $ 44,582 ======================================================================================================================= Identifiable assets $ 668,419 113,511 107,402 42,832 -- 932,164 ==================================================================================================== Corporate assets 192,221 - ----------------------------------------------------------------------------------------------------------------------- Total assets $ 1,124,385 ======================================================================================================================= Depreciation and amortization $ 41,475 3,037 9,574 1,637 1,173 $ 56,896 ======================================================================================================================= Capital expenditures $ 72,950 1,464 9,430 1,409 229 $ 85,482 ======================================================================================================================= - ----------------------------------------------------------------------------------------------------------------------- (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 affiliates (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 affiliates 2,035 Interest income 11,506 Interest expense (15,686) Other corporate expense (440) - ----------------------------------------------------------------------------------------------------------------------- Earnings before income taxes and cumulative effect of changing the accounting for inventories $ 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 ======================================================================================================================
Export sales by geographic area are as follows:
Years ended December 31, - -------------------------------------------------------------------------------- (Thousands of dollars) 1997 1996 1995 - -------------------------------------------------------------------------------- Africa $ 82,997 $ 145,486 $ 85,915 Caribbean and South America 129,014 63,853 43,494 Europe 54,070 41,811 20,628 Eastern Mediterranean 43,145 33,502 37,405 Pacific Basin and Far East 98,071 33,069 7,155 Other 29,294 24,923 28,449 - -------------------------------------------------------------------------------- Total export sales $ 436,591 $ 342,644 $ 223,046 ================================================================================ At December 31, 1997 and 1996 the Company had approximately $77,472,000 and $70,044,000 of foreign receivables, excluding receivables due from foreign affiliates, 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, 1993 1994 1995 1996 1997 - ------------------------------------------------------------------------------------------------- Summary of Selected Financial Data: TOTAL ASSETS (THOUSANDS OF DOLLARS) $ 647,332 675,211 878,132 1,004,685 1,124,385 STOCKHOLDERS' EQUITY (THOUSANDS OF DOLLARS) $ 304,356 346,080 365,810 369,934 399,015 EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 16.73 23.67 13.58 1.91 20.55 CUMULATIVE EFFECT OF ACCOUNTING CHANGE 7.40 2.02 ------------------------------------------------------------ EARNINGS PER COMMON SHARE (DOLLARS) $ 24.13 23.67 13.58 3.93 20.55 Financial Summary: CURRENT RATIO 3.29:1 3.31:1 2.25:1 1.71:1 1.47:1 CAPITAL EXPENDITURES (THOUSANDS OF DOLLARS) $ 87,328 87,583 229,499 110,491 85,482 NET SALES (THOUSANDS OF DOLLARS) $1,142,144 983,804 1,173,977 1,464,362 1,780,333 WORKING CAPITAL (THOUSANDS OF DOLLARS) $ 280,466 259,521 219,024 204,237 168,333 DEPRECIATION AND AMORTIZATION (THOUSANDS OF DOLLARS) 34,429 33,403 44,944 50,914 56,896 NET EARNINGS(THOUSANDS OF DOLLARS) 35,891 35,201 20,202 5,846 30,574
EX-21 3 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 Democratic Republic of Congo African Dahlia Shipping Ltd. Same Liberia African Evergreen Shipping Ltd. Same Liberia African Fern Shipping Ltd. Same Liberia African Gardenia 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. 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.* 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. Frutas de Rancho Nuevo Litonil, S.A. Same Costa Rica Globe International Holdings, S.A.* Same Nigeria 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 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 Democratic Republic of Congo 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 Representaciones Maritimas y Remarsa Guatemala Aereas, S.A. SASCO Engineering Co./ Same Bermuda Seaboard Sales Corporation 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 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 4 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FISCAL 1997 ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR DEC-31-1997 DEC-31-1997 8552 108744 196298 20658 211024 529235 771288 284915 1124385 360902 306666 0 0 1488 397527 1124385 1780333 1780333 1561265 1561265 141993 3845 31108 44582 14008 30574 0 0 0 30574 20.55 20.55
EX-3.2 5 REGISTRANT'S BY-LAWS, AS AMENDED SEABOARD CORPORATION BY-LAWS OFFICES 1. The principal office shall be in the City of Wilmington, County of New Castle, State of Delaware, and the name of the resident agent in charge thereof is The Corporation Trust Company. 2. The corporation may also have an office in Chestnut Hill, Massachusetts, and also offices at such other places as the board of directors may from time to time determine or the business of the corporation may require. STOCKHOLDERS' MEETINGS 3. All meetings of the stockholders for the election of directors shall be held in the City of Boston, Commonwealth of Massachusetts, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or a duly executed waiver of notice thereof. 4. An annual meeting of stockholders, commencing with the year 1989, shall be held on the fourth Monday of April in each year, if not a legal holiday, and if a legal holiday then on the next secular day following, at 10 o'clock A.M., at which they shall elect, by a plurality vote, a Board of Directors, and transact such other business as may properly be brought before the meeting. 5. Written notice of the annual meeting shall be served upon or mailed to each stockholder entitled to vote thereat at such address as appears on the books of the corporation, at least ten days prior to the meeting. 6. At least ten days before every election of directors, a complete list of the stockholders entitled to vote at said election, arranged in alphabetical order, with the residence of each and the number of voting shares held by each, shall be prepared by the secretary. Such list shall be open at the place where the election is to be held for said ten days, to the examination of any stockholder, and shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder who may be present. 7. Special meetings of the stockholders for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of three or more stockholders owning in amount one tenth of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. 8. Written notice of a special meeting of stockholders, stating the time and place and object thereof, shall be served upon or mailed to each stockholder entitled to vote thereat at such address as appears on the books of the corporation, at least ten days before such meeting. 9. Business transacted at all special meetings shall be confined to the objects stated in the call. 10. The holders of a majority in amount of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute, by the certificate of incorporation or by these by-laws. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders, entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. 11. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation or of these by-laws, a different vote is required in which case such express provision shall govern and control the decision of such question. 12. At any meeting of the stockholders every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder and bearing a date not more than six months prior to said meeting, unless said instrument provides for a longer period. Each stockholder shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation, and except where the transfer books of the corporation shall have been closed or a date shall have been fixed as a record date for the determination of its stockholders entitled to vote, no share of stock shall be voted on at any election of directors which shall have been transferred on the books of the corporation within twenty days next preceding such election of directors. 13. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provisions of the statutes or of the certificate of incorporation or of these by-laws, the meeting and vote of stockholders may be dispensed with, if all the stockholders who would have been entitled to vote upon the action if such meeting were held, shall consent in writing to such corporate action being taken. DIRECTORS 14. The number of directors of the corporation constituting the full board of directors shall be no less than three (3) and no more than fifteen (15), the exact number to be determined by the Board of Directors from time to time. Within the foregoing limits, between elections by stockholders the board of directors may change the number of directors constituting the full board of directors. Directors need not be stockholders of the corporation. Each director, including a director elected to fill a vacancy, shall hold office until his successor has been duly elected and qualified unless he sooner shall have resigned or been removed from office. 15. The directors may hold their meetings and keep the books of the corporation, except the original or duplicate stock ledger, outside of Delaware, at the office of the corporation in Chestnut Hill, Massachusetts or at such other places as they may from time to time determine. 16. A vacancy or newly created directorship, as the case may be, shall be deemed to exist in the Board of Directors in case of the death, resignation, disqualification, or removal of any director, or if the authorized number of directors is increased, or if the stockholders fail at any meeting of stockholders at which directors are to be elected to elect the full authorized number of directors to be elected at that meeting. Vacancies and newly created directorships in the board of directors may be filled by a majority of the remaining directors, though fewer than a quorum, or by a sole remaining director. Upon the resignation of one or more directors from the board of directors to be effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations become effective. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office; provided, however, that such director, or the entire board of directors, may be removed from office, with or without cause, by the holders of a majority of shares then entitled to vote at an election of directors. 17. The property and business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. COMMITTEES OF DIRECTORS 18. The board of directors may, by vote of a majority of their entire number, elect from their own number an executive committee of not less than three nor more than five members, which committee may be vested with the management of the current and ordinary business of the corporation, including the declaration of dividends, the fixing and altering of the powers and duties of the several officers and agents of the corporation, the election of additional officers and agents, and the filling of vacancies other than in the board of directors, and with power to authorize purchases, sales, contracts, offers, conveyances, transfers and negotiable instruments. A majority of the executive committee shall constitute a quorum for the transaction of business but a less number may adjourn any meeting from time to time, and the meeting may be held as adjourned without further notice. The executive committee may make rules not inconsistent herewith for the holding and conduct of its meetings. 19. The board of directors may, by resolution or resolutions passed by a majority of the whole board, designate other committees, each committee to consist of three or more of the directors of the corporation, which to the extent provided in said resolution or resolutions, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. 20. All committees shall keep their regular minutes of their proceedings and report the same to the board, who shall have power to rescind any vote or resolution passed by any committee but no such rescission shall have retroactive effect. COMPENSATION OF DIRECTORS 21. Directors, as such, shall not receive any stated salary for their services, but, by resolution of the board a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the board; provided that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 22. Members of Executive or other committees may be allowed like compensation for attending committee meetings. MEETINGS OF THE BOARD 23. The first meeting of each newly elected board shall be held at such time and place either within or without the State of Delaware as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting provided a quorum shall be present, or they may meet at such place and time as shall be fixed by the consent in writing of all the directors. 24. Regular meetings of the board may be held without notice at such time and place either within or without the State of Delaware as shall from time to time be determined by the board. 25. Special meetings of the board may be called by the president on two days' notice to each director, either personally or by mail or bv telegram; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors. 26. At all meetings of the board a majority of the entire board shall be necessary and sufficient to constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation or by these by-laws. If a quorum shall not be present at any meeting of directors the directors present thereat may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum shall be present. 27. No notice of directors' meeting shall be necessary if all directors are present or waive notice of the meeting. NOTICES 28. Whenever under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, by depositing the same in a post office or letter box, in a post-paid sealed wrapper, addressed to such director or stockholder at such address as appears on the books of the corporation, or, in default of other address, to such director or stockholder at the General Post Office in the City of Wilmington, Delaware, and such notice shall be deemed to be given at the time when the same shall be thus mailed. 29. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation, or of these by-laws, a waiver thereof in writing signed by the Person or Persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. OFFICERS 30. The officers of the corporation shall be chosen by the directors and shall be a president, a secretary and a treasurer. Two or more offices may be held by the same person, except that where the offices of president and secretary are held by the same person, such person shall not hold any other office. 31. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president from its members, a secretary and a treasurer, none of whom need be a member of the board. 32. The board of directors or Executive Committee may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board or Executive Committee. 33. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. 34. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the whole board of directors. If the office of any officer becomes vacant for any reason, the vacancy shall be filled by the board of directors. THE PRESIDENT 35. The president shall be the chief executive officer of the corporation; he shall preside at all meetings of the stockholders and directors, shall be ex oficio a member of all standing committees, shall have general and active management of the business of the corporation, and shall see that all orders and resolutions of the board are carried into effect. 36. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. VICE-PRESIDENTS 37. Any vice-presidents in the order of their seniority shall, in the absence or disability of the president, perform the duties and exercise the powers of the president, and shall perform such other duties as the board of directors or Executive Committee shall prescribe. THE SECRETARY AND ASSISTANT SECRETARIES 38. The secretary shall attend all sessions of the board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and, when authorized by the board, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary. 39. Any assistant secretaries in order of their seniority shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties as the board of directors or Executive Committee shall prescribe. THE TREASURER AND ASSISTANT TREASURERS 40. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. 41. He shall disburse the funds of the corporation as may be ordered by the board, or Executive Committee, taking proper vouchers for such disbursements, and shall render to the president and directors, at the regular meetings of the board, or whenever they may require it, an account of all his transactions as treasurer and of the financial condition of the corporation. 42. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement, or removal from office, of all books, papers, vouchers, money other property of whatever kind in his possession or under control belonging to the corporation. 43. Any assistant treasurers in the order of their seniority shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer and shall perform such other duties as the board of directors or Executive Committee shall prescribe. CERTIFICATES OF STOCK 44. The certificates of stock of the corporation shall be numbered and shall be entered in the books of the corporation as they are issued. They shall exhibit the holder's name and number of shares and shall be signed by the president and the treasurer. If any stock certificate is signed (1) by a transfer agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf of the corporation and a registrar, the signature of any such officer may be facsimile. TRANSFERS OF STOCK 45. Upon surrender to the corporation or any transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. CLOSING OF TRANSFER BOOKS 46. The board of directors shall have power to close the stock transfer books of the corporation for a period not exceeding fifty days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date for the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect or for a period of not exceeding fifty days in connection with obtaining the consent of stockholders for any purpose; provided, however, that in lieu of closing the stock transfer books as aforesaid, the board of directors may fix in advance a date, not exceeding fifty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date when any change or conversion or exchange of capital stock shall go into effect, or a date in connection with obtaining such consent, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, and any adjournment thereof, or entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, or to give such consent, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such.record date fixed as aforesaid. REGISTERED STOCKHOLDERS 47. The corporation shall be entitled to treat the holder of record of any share or shares of stock as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. LOST CERTIFICATE 48. The board of directors or Executive Committee may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors or Executive Committee may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. DIVIDENDS 49. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. 50. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. DIRECTORS' ANNUAL STATEMENT 51. The board of directors shall present at each annual meeting and when called for by vote of the stockholders at any special meeting of the stockholders, a full and clear statement of the business and condition of the corporation. CHECKS 52. All checks or demands for money and notes the corporation shall be signed by such officer or officers such other person or persons as the board of directors or Executive Committee may from time to time designate. FISCAL YEAR 53. The fiscal year shall be the calendar year, beginning with the calendar year ending December 31, 1986. SEAL 54. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. AMENDMENTS 55. These by-laws may be altered or repealed at any regular meeting of the stockholders or at any special meeting of the stockholders at which a quorum is present or represented, provided notice of the proposed alteration or repeal be contained in the notice of such special meeting, by the affirmative vote of a majority of the stock entitled to vote at such meeting and present or represented thereat, or by the affirmative vote of a majority of the board of directors at any regular meeting of the board or at any special meeting of the board if notice of the proposed alteration or repeal be contained in the notice of such special meeting; provided, however, that no change of the time or place of the meeting for the election of directors shall be made within sixty days next before the day on which such meeting is to be held, and that in case of any change of such time or place, notice thereof shall be given to each stockholder in person or by letter mailed to his last known post office address at least twenty days before the meeting is held. INDEMNIFICATION 56. Mandatory Indemnification of Officers and Directors. The Corporation shall indemnify and reimburse each director and officer of the Corporation, and each director and officer of a subsidiary whose election or appointment it has voted for or expressly approved, who is elected, appointed or continued in office after February 22, 1993, for and against all liabilities and expenses imposed upon or reasonably incurred by him in connection with any action, suit or proceeding in which he may be involved or with which he may be threatened by reason of his being or having been a director or officer of the Corporation or of a subsidiary or his acts and omissions as such officer or director of the Corporation or of a subsidiary. The right of indemnity and reimbursement of each such person shall continue whether or not he continues to be such director or officer at the time such liabilities or expense are imposed upon or incurred by him and shall include, without being limited to, attorney's fees, court costs, judgments and compromise settlements. The right of reimbursement for liabilities and expenses so imposed or incurred shall include the right to receive such reimbursement in advance of the final disposition of any such action, suit or proceeding upon the Corporation's receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall be ultimately determined that he is not entitled to be indemnified by the Corporation pursuant to law or this paragraph. In no case shall such indemnification and reimbursement cover (a) liabilities or expenses imposed or incurred in connection with any matter as to which such director or officer shall be finally determined in such action, suit or proceeding to be liable by reason of his having been derelict in the performance of his duty as such director or officer, or (b) amounts paid to the Corporation or to a subsidiary and expenses incurred in connection with the proceeding or claim on account of which such payment is made, unless such reimbursement is provided for in compromise settlement approved in a manner described in clause (c) next following, or (c) liabilities or expenses imposed or incurred in connection with any matter which shall be settled by compromise (including settlement by consent decree or judgment) if under such compromise such director or officer is required to make any payment, unless such compromise shall, after notice that it involves such reimbursement, be approved as in the best interest of the Corporation by vote of the board of directors of the Corporation at a meeting in which no director against whom any action, suit or proceeding on the same or similar grounds is then pending participates, or by vote or written approval of the holders of a majority of the shares of stock of the Corporation then outstanding and entitled to vote, for this purpose not counting as outstanding any shares of stock held or controlled by any such director or officer of the Corporation against whom any action, suit or proceeding on the same or similar grounds is then pending; provided, however, that no indemnification shall be made in respect of any claim, issue or matter as to which such a person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. The rights of indemnification and reimbursement hereby provided shall not be exclusive of other rights to which any director or officer may be entitled. As used in this paragraph the terms "director" and "officer" shall include their respective heirs, executors and administrators. 57. Discretionary Indemnification. (1) Actions By Third Parties. The Corporation shall have the right, but not the obligation, to indemnify, up to and including the full extent set forth in this paragraph, any person who was or is a party, or is threatened to be made a party to, or is otherwise involved in, any pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was an employee or agent of the Corporation, or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise (whether or not for profit) including serving as Trustee of an employee benefit plan of the Corporation or other entity described in this subparagraph, (whether or not such employee benefit plan is governed by ERISA), against all liability, losses, expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding against any such person by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that he or she did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interest of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. (2) Actions by or on Behalf of the Corporation. The Corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or entity (whether or not for profit) against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such a person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which the Court of Chancery of the State of Delaware or such other court shall deem proper. (3) Indemnification for Expenses of Successful Defense. To the extent that (i) in the case of actions, suits or proceedings relating to acts or omissions occurring prior to July 1, 1997, any director, officer, employee or agent of the Corporation, or (ii) in the case of actions, suits or proceedings relating to acts or omissions occurring on or after such date, any present or former director or officer of this Corporation or of a subsidiary has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in paragraphs 56 or 57(b) of these Bylaws, or in defense of any claim, issue or matter therein, he or she shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with such defense. The Corporation shall have the right, but not the obligation, to indemnify any person described in paragraphs 57(a) or (b) who has been successful on the merits or otherwise in defense of any action, suit or proceeding for which indemnification has been provided under paragraphs 57(a) or (b), or in defense of any claim, issue or matter therein, against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with such defense. (4) Authorization. Any indemnification under paragraphs 56 or 57 of these Bylaws (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, partner, member, trustee, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in paragraphs 56 or 57, as the case may be. Such determination shall be made, with respect to a person who is a director or officer of the Corporation at the time of such determination: (i) by a majority vote of the directors who were not parties to such action, suit or proceeding, even though less than a quorum, (ii) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (iii) if there are no such directors, or if such directors so direct, by independent legal counsel in written opinion, or (iv) by the stockholders. (5) Expense Advance. Expenses (including attorney's fees) incurred by present or former officers or directors of the Corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized in one of the manners provided in paragraph 57(d) of these Bylaws upon receipt of an undertaking by or on behalf of such person to repay such amount, if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation as authorized in these Bylaws. Such expenses (including attorneys' fees) incurred by other employees or agents of the Corporation may be so paid upon such terms and conditions, if any, as the Corporation deems appropriate. (6) Nonexclusivity. The indemnification and advancement of expenses provided by, or granted pursuant to, these Bylaws shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, partner, member, trustee, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (7) Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity against any liability asserted against, and incurred by, him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of these Bylaws or Section 145 of the Delaware General Corporation Law. (8) "The Corporation". For the purposes of paragraphs 56 or 57 of these Bylaws references to "the Corporation" shall include, in addition to the resulting corporation and, to the extent that the Board of Directors of the resulting corporation so decides, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers and employees or agents, so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity, shall stand in the same position under the provisions of these Bylaws with respect to the resulting or surviving corporation as he or she would have had with respect to such constituent corporation if its separate existence had continued. (9) Other Indemnification. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, partner, member, trustee, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification from such other corporation, partnership, joint venture, limited liability company, trust or other enterprise or non-profit entity or from insurance. (10) Other Definitions. For purposes of paragraphs 56 or 57 of these Bylaws references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, partner, member, trustee, employee or agent of the Corporation which imposes duties on, or involves services by, such director, officer, partner, member, trustee, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he or she reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in these Bylaws. (11) Continuation of Indemnification. The indemnification and advancement of expenses provided by, or granted pursuant to, these Bylaws shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, officer, partner, member, trustee, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (12) Amendment or Repeal. Neither the amendment nor repeal of paragraphs 56 or 57 of these Bylaws nor the adoption of any provision of the Corporation's Certificate of Incorporation inconsistent with paragraphs 56 or 57 of these Bylaws shall reduce, eliminate or adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the effectiveness of such amendment, repeal or adoption. EX-10.1 6 EXECUTIVE RETIREMENT PLAN, AMENDED AND RESTATED SEABOARD CORPORATION EXECUTIVE RETIREMENT PLAN AMENDED AND RESTATED JANUARY 1, 1997 SEABOARD CORPORATION EXECUTIVE RETIREMENT PLAN TABLE OF CONTENTS PURPOSE AND BACKGROUND...............................................1 DEFINITIONS..........................................................2 2.1 Actuarial Equivalent.........................................2 2.2 Actuarial Value..............................................2 2.3 Beneficiary..................................................2 2.4 Benefit Accrual Service......................................2 2.5 Benefit Commencement Date....................................2 2.6 Board........................................................2 2.7 Committee....................................................2 2.8 Company......................................................2 2.9 Disability Retirement Date...................................2 2.10 Early Retirement Date........................................2 2.11 Earnings.....................................................3 2.12 Eligible Spouse..............................................3 2.13 ERISA........................................................3 2.14 Final Average Earnings.......................................3 2.15 Internal Revenue Code........................................3 2.16 Late Retirement Date.........................................3 2.17 Normal Retirement Date.......................................3 2.18 Participant..................................................3 2.19 Plan Administrator...........................................3 2.20 Plan Year....................................................3 2.21 Termination Date.............................................3 2.22 Vesting Service..............................................3 PARTICIPATION........................................................5 3.1 Eligibility for Participation................................5 3.2 Participation not Contract of Employment.....................5 RETIREMENT BENEFITS..................................................6 4.1 Accrued Benefit..............................................6 4.2 Early Retirement Benefit.....................................7 PAYMENT OF BENEFITS..................................................8 5.1 Fully Vested Benefits........................................8 5.2 Forfeitures..................................................8 5.3 Form of Payment..............................................8 5.4 Designation of Beneficiaries................................10 WITHHOLDING OF TAXES................................................12 6.1 Tax Withholding.............................................12 PLAN ADMINISTRATOR..................................................13 7.1 Membership and Authority....................................13 7.2 Delegation..................................................13 7.3 Information to be Furnished.................................13 7.4 Plan Administrator's Decision Final.........................13 7.5 Remuneration and Expenses...................................13 7.6 Indemnification of Committee Member.........................14 7.7 Resignation or Removal of Committee Member..................14 7.8 Appointment of Successor Committee Members..................14 7.9 Interested Committee Member.................................14 CLAIMS PROCEDURE....................................................15 8.1 Claim.......................................................15 8.2 Denial of Claim.............................................15 8.3 Review of Claim.............................................15 8.4 Final Decision..............................................15 AMENDMENTS OF THE PLAN..............................................16 9.1 Board.......................................................16 PERMANENCY OF THE PLAN..............................................17 10.1 Termination of Plan.........................................17 MISCELLANEOUS.......................................................18 11.1 Captions....................................................18 11.2 Company Action..............................................18 11.3 Company Records.............................................18 11.4 Evidence....................................................18 11.5 Gender and Number...........................................18 11.6 Governing Law...............................................18 11.7 Nonassignability............................................18 11.8 Participant Cooperation.....................................18 11.9 Successors..................................................18 11.10 Unfunded Plan...............................................19 11.11 Unsecured General Creditor..................................19 11.12 Validity....................................................19 11.13 Waiver of Notice............................................19 ADDENDUM A - PARTICIPATING EMPLOYERS................................20 ADDENDUM B - PARTICIPANTS...........................................21 ADDENDUM C - SEABOARD FARMS CHANGES.................................23 ADDENDUM D - PRE-1997 FROZEN BENEFITS...............................24 ADDENDUM E - PRE-1997 NONVESTED BENEFITS............................25 SEABOARD CORPORATION EXECUTIVE RETIREMENT PLAN ARTICLE I PURPOSE AND BACKGROUND Seaboard Corporation adopted the Seaboard Corporation Executive Retirement Plan (the "Plan") effective January 1, 1994. Seaboard Farms ("Seaboard Farms") adopted the Seaboard Farms Executive Retirement Plan (the "Seaboard Farms Plan") effective January 1, 1994. Effective January 1, 1997, the Seaboard Farms Plan merged into the Plan. Also effective January 1, 1997, the Plan is hereby restated and amended in its entirety. The purpose of the Plan is to provide a certain level of retirement income for a select group of management or highly compensated employees (and their beneficiaries) of Seaboard Corporation and certain affiliated companies. It is intended that the Plan will aid in retaining and attracting employees by providing such individuals with these benefits. ARTICLE II DEFINITIONS For the purpose of this Plan, the following words and phrases shall have the meaning indicated, unless the context clearly indicates otherwise: 2.1 Actuarial Equivalent shall have the same meaning as such term has in the Seaboard Corporation Pension Plan. 2.2 Actuarial Value shall have the same meaning as such term has in the Seaboard Corporation Pension Plan. 2.3 Beneficiary means the person, persons, or entity designated by the Participant as provided in Section 5.4 of the Plan, to receive any Accrued Benefit after the Participant's death. 2.4 Benefit Accrual Service shall be equal to Years of Accrual Service as provided in the Seaboard Corporation Pension Plan, except that: (a) one full year of Benefit Accrual Service shall be earned in the Plan Year in which the Participant begins participation in the Plan (or began Participation in the Seaboard Farms Plan) regardless of the number of hours of service such Participant is credited with during such Plan Year; and (b) no Benefit Accrual Service shall be taken into account prior to the later of: (i) the Participant's entry into the Plan; or (ii) January 1, 1997 2.5 Benefit Commencement Date shall mean the first day of the month on or next following the Participant's Normal Retirement Date, Late Retirement Date, Disability Retirement Date, Early Retirement Date or the Participant's date of death, whichever is applicable. 2.6 Board means the Board of Directors of the Seaboard Corporation. 2.7 Committee means the committee appointed to administer this Plan pursuant to Article VII. 2.8 Company shall refer to Seaboard Corporation, a Delaware corporation, or any of its subsidiaries or affiliates set forth on Addendum A attached hereto or any successors to the business thereof. 2.9 Disability Retirement Date means the date the Participant is retired from the employ of the Company because of disability, irrespective of his or her age. A Participant will be considered disabled for purposes of the Plan if the Participant is entitled to a Disability Retirement Pension under the Seaboard Corporation Pension Plan. 2.10 Early Retirement Date shall have the same meaning as such term has in the Seaboard Corporation Pension Plan. 2.11 Earnings shall mean the total salary and bonus received by the Participant from the Company for the Participant's services during the Plan Year. Earnings shall include the amount of any elective deferrals made by the Participant in such Plan Year pursuant to any plan if such amount is not includable in gross income under Code Section 125 or 401(k). 2.12 Eligible Spouse means the spouse of a Participant to whom the Participant was married at the time of the annuity starting date or the date of the Participant's death. The length of the marriage prior to either of such dates shall not be taken into consideration. 2.13 ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. This Plan, a non-qualified deferred compensation plan, is not intended to be subject to ERISA except for the limited reporting and disclosure requirements established by the Department of Labor. 2.14 Final Average Earnings shall have the same meaning as such term has in the Seaboard Corporation Pension Plan. 2.15 Internal Revenue Code or Code shall mean the Internal Revenue Code of 1986, as amended from time to time. References to any Section of the Internal Revenue Code shall include any successor provision thereto. 2.16 Late Retirement Date means the first day of the calendar month coinciding with or next following the date the Participant actually retires after his Normal Retirement Date. 2.17 Normal Retirement Date means the first day of the calendar month coinciding with or next following the date the Participant attains age sixty-two (62). 2.18 Participant shall mean any individual who is participating in the Plan as provided in Article III. 2.19 Plan Administrator shall mean the Company. The Company has the right to designate a Committee to serve in this capacity. 2.20 Plan Year shall be the 12 month period beginning January 1 and ending December 31. 2.21 Termination Date means the Participant's date of Normal Retirement, Late Retirement, Early Retirement, Disability Retirement, termination or death, as applicable to such Participant. Solely for purposes herein, it shall also refer to any date upon which this Plan is terminated or Participation hereunder is terminated, regardless of whether the Participant actually leaves the employ of the Company. 2.22 Vesting Service shall mean the following: (a) For those Participants who entered the Plan prior to January 1, 1997, each whole or partial Plan Year during which a Participant is employed by the Company and during which the Participant completes at least 1,000 hours of service with the Company. However, one full year of Vesting Service shall be earned during the Plan Year in which the Participant begins employment with the Company regardless of the number of hours of service such Participant is credited with during such Plan Year; or (b) For those Participants who entered the Plan on January 1, 1997 or later, each whole or partial Plan Year during which a Participant is participating in the Plan and during which the Participant completes at least 1,000 hours of service with the Company. However, one full year of Vesting Service shall be earned during the Plan Year in which the Participant begins participation in the Plan regardless of the number of hours of service such Participant is credited with during such Plan Year. ARTICLE III PARTICIPATION 3.1 Eligibility for Participation. All employees participating in the Plan or the Seaboard Farms Plan, prior to January 1, 1997 shall continue to participate in the Plan. For all employees who were not Participants in the Plan or the Seaboard Farms Plan prior to January 1, 1997, eligibility to participate in the Plan is designated by the President or Executive Vice President of the Company or Seaboard Corporation effective as of the date specified by the President or Executive Vice President. Eligibility does not guarantee any Participant the right to receive any benefit hereunder or to continued participation hereunder. (See Addendum B for employees that are eligible to participate in the Plan.) 3.2 Participation not Contract of Employment. The Plan does not constitute a contract of employment, and participation in the Plan will not give any Participant the right to continue in the employ of the Company or to provide services thereto or shall interfere in any way with the right of the Company to terminate the employment of the Participant or give any right or claim to any benefit under the terms of the Plan unless such right or claim is specifically vested under the terms of the Plan. ARTICLE IV RETIREMENT BENEFITS 4.1 Accrued Benefit. (a) Participants in the Plan Prior to 1997. For those Participants who entered the Plan prior to January 1, 1997, their Accrued Benefit shall be equal to 2.5% times Final Average Earnings times Benefit Accrual Service, reduced by the Seaboard Corporation Pension Plan offset (see 4.1(c) below). For those Participants who entered the Plan prior to January 1, 1997 and who are employed with Seaboard Farms, their Accrued Benefit shall be equal to 1.55% times Final Average Earnings times Benefit Accrual Service reduced by the Seaboard Corporation Pension Plan offset (see 4.1(c) below). However, effective January 1, 1997, the following Seaboard Farms participants stated in Addendum C will have their percentage changed in the benefit formula from 1.55% to 2.5%. This Section 4.1(a) shall only be applicable to the Accrued Benefit these Participants earn after December 31, 1996. The Accrued Benefit these Participants earned prior to January 1, 1997, shall continue to be determined by the provisions of the Plan prior to its restatement or the Seaboard Farms Plan, respectively. The Participants stated in Addendum D, shall have their Accrued Benefit earned prior to January 1, 1997 frozen. The benefits determined in this Section 4.1(a) will be added to the December 31, 1996 frozen accrued benefits as stated in Addendum D. Upon becoming vested, the Participants stated in Addendum E shall have the benefits they earned from 1994 through 1996 paid to them as stated in Section 5.3(h). (b) Participants Entering the Plan in 1997 and Later. For those Participants who enter the Plan on or after January 1, 1997, the following is their Accrued Benefit: (1) For Participants with less than 10 years of Vesting Service at their Early Retirement Date, Disability Retirement Date, termination, or death, their Accrued Benefit shall be equal to 2.0% times Final Average Earnings times Benefit Accrual Service, reduced by the Seaboard Corporation Pension Plan offset (see 4.1(c) below). (2) For Participants with at least 10 years of Vesting Service at their Early Retirement Date, Disability Retirement Date, termination, or death, or who have reached their Normal Retirement Date, their Accrued Benefit shall be equal to 2.5% times Final Average Earnings times Benefit Accrual Service, reduced by their Accrued Benefit under the Seaboard Corporation Pension Plan offset (see 4.1(c) below). (c) Seaboard Corporation Pension Plan Offset. For purposes of Section 4.1 of the Plan, the Seaboard Corporation Pension Plan offset shall be equal to the Participant's Accrued Benefit under the Seaboard Corporation Pension Plan, with the exception that in determining the Accrued Benefit under the Seaboard Corporation Pension Plan, Years of Accrual Service, as that term is defined in the Seaboard Corporation Pension Plan, shall be calculated beginning with the later of the Participant's entry into the Plan or January 1, 1997 and without taking into account the 35 year service limit. 4.2 Early Retirement Benefit. Participants may be eligible for an Early Retirement Benefit which shall equal the Participant's Accrued Benefit as determined under Section 4.1 of this Plan, reduced by 4% for each year by which the Participant's Early Retirement Date precedes the Participant's Normal Retirement Date. ARTICLE V PAYMENT OF BENEFITS 5.1 Fully Vested Benefits. Participants shall be fully vested in their Accrued Benefit at the earlier of the: (a) Attainment of their Normal Retirement Date, Disability Retirement Date or death if the Participant has a surviving Eligible Spouse; or (b) Completion of five years of Vesting Service; or (c) Upon a partial plan termination in the Seaboard Corporation Pension Plan. 5.2 Forfeitures Upon termination of employment, except for terminations under Section 5.1, all non-vested benefits shall be forfeited. 5.3. Form of Payment. (a) Automatic Form for Married Participants: If a Participant is married on the date his Pension payments commence, then subject to the provisions of this Section 5.3(d), his Pension shall be paid in the form of a 50 percent joint and survivor pension. Under this joint and survivor pension, a monthly annuity shall be paid to the Participant for his lifetime, and his Eligible Spouse, if surviving at the Participant's death, shall be entitled to receive thereafter a lifetime annuity in a monthly amount equal to 50 percent of the monthly amount which had been payable to the Participant. The amount payable to the Participant shall be determined so that the aggregate of the Pension payments expected to be made to the Participant and his Eligible Spouse shall be the Actuarial Equivalent of the Accrued Benefit determined under Section 4.1. (b) Automatic Form for Unmarried Participants: If a Participant is not married on the date his Pension payments commence, then unless he elects an optional form of benefit under Section 5.3(c) his Accrued Benefit will be paid in the form of a single life annuity which shall be the Actuarial Equivalent of the Accrued Benefit determined under Section 4.1. (c) Optional Forms of Benefit: Subject to the requirements of Section 5.3(d), a Participant can elect that his Pension be paid in one of the following forms in lieu of the form otherwise specified in Section 5.3(a) or Section 5.3(b) (whichever applicable): (1) A married Participant may elect to receive his Accrued Benefit in the form of a joint and survivor pension, with a life annuity payable for the life of the Participant and with a survivor annuity payable for the remaining life of the Participant's Eligible Spouse, which survivor annuity is either 75 percent or 100 percent of the annuity payable during the Participant's life. (2) A married or unmarried Participant may elect to receive his Accrued Benefit in the form of a single life annuity. (3) A married or unmarried Participant may elect to receive his Accrued Benefit in the form a single life annuity, with a term certain of 10 years guaranteed. (4) A married or unmarried Participant may elect to receive his Accrued Benefit in the form of a lump sum if the monthly benefit the Participant would otherwise receive under Section 5.3(a) or Section 5.3(b) (whichever is applicable) would be less than $75.00. Any lump sum distribution shall be paid as soon as administratively feasible after the Participant terminates employment. Benefits paid under any of the foregoing options will be the Actuarial Equivalent of the Participant's Accrued Benefit determined under Section 4.1. (d) Election Not to Take the 50 Percent Joint and Survivor Pension: A Participant may make an election to waive payment in the form of a 50 percent joint and survivor pension under Section 5.3(a) at any time during the election period. In the case of an election to waive the 50 percent joint and survivor pension, the applicable election period shall be the 90-day period ending on the Benefit Commencement Date. A Participant may revoke any election under this Section 5.3(d) and thereafter may make a new election at any time within the election period. Not earlier than 90 days, but not later than 30 days, before a married Participant's annuity starting date, the Committee shall furnish to the Participant a written general description of the 50 percent joint and survivor pension, the circumstances under which the Plan will provide the 50 percent joint and survivor pension, the material features of and the relative values of the optional forms of benefit, the availability of the election to waive the 50 percent joint and survivor pension, the rights of the Participant's Eligible Spouse, the right to revoke such an election and the effect of such revocation. A Participant's waiver election is not valid unless the Participant makes the waiver election within the election period and the Participant's Eligible Spouse has consented in writing to the waiver election, such election designates a beneficiary or a form of benefits which may not be changed without the consent of the Eligible Spouse (or the consent of the Eligible Spouse expressly permits designations by the Participant without any requirement of further consent by the Eligible Spouse), the Eligible Spouse's consent acknowledges the effect of the election, and a notary public or a member of the Committee witnesses the Eligible Spouse's consent. The Participant's Eligible Spouse's consent to a waiver of the joint and survivor pension shall be irrevocable. The Committee may accept as valid a waiver election which does not satisfy the spousal consent requirements hereunder if the Committee establishes that the Participant does not have an Eligible Spouse, the Committee is not able to locate the Participant's Eligible Spouse, or other circumstances exist under which the Secretary of the Treasury will excuse the consent requirement. (d) Other Death Benefit: Upon the death after the Benefit Commencement Date of a Participant who has a nonforfeitable Accrued Benefit, his beneficiary, if any, under the applicable benefit payment form shall receive the benefits under such form. (e) Death Before Benefit Commencement Date: A Participant who dies before the Benefit Commencement Date and who is survived by an Eligible Spouse shall have his death benefit paid to his surviving Eligible Spouse in the form of a pre-retirement survivor annuity. In the case of a Participant who dies after the earliest retirement date under the Plan, the annuity payments paid to the Eligible Spouse shall be equal to the amount which would be payable to the Eligible Spouse had the Participant retired on the day before the Participant's date of death and elected to receive his Pension in the form of a 100 percent joint and survivor annuity. In the case of a Participant who dies on or before the earliest retirement date under the Plan, the annuity payments paid to the Eligible Spouse shall be the amount which would be payable to the Eligible Spouse had the Participant separated from service on the date of his death, survived to the earliest retirement date under the Plan, elected to receive his Accrued Benefit in the form of a 100 percent joint and survivor annuity at his earliest retirement date, and died on the day after the day on which the Participant would have attained the earliest retirement date under the Plan. The "earliest retirement date under the Plan" is the earliest date on which the Plan permits the Participant to elect to receive his Accrued Benefit. The Participant's Eligible Spouse may direct that payment of the pre-retirement survivor annuity commence in the month in which the Participant would have attained the earliest retirement date under the Plan. If the Eligible Spouse does not so direct, payment of such benefit will commence at the time the Participant would have attained his Normal Retirement Age. If commencement of payment of the pre-retirement survivor annuity is on a date other than the later of the day after the Participant's earliest retirement date under the Plan or the date of the Participant's death, then the annuity amount payable to the Eligible Spouse shall be the amount which would be payable to the Eligible Spouse had the Participant separated from service on the date of his death, survived to this date, elected to receive his Accrued Benefit in the form of a 100 percent joint and survivor annuity, and died on the day after this date. (g) Mandatory Lump Sum Payment: If the Actuarial Value of a Participant's nonforfeitable Accrued Benefit or a Participant's Eligible Spouse pre-retirement survivor annuity is $5,000 or less at the time of the termination of the Participant's employment, the Committee shall direct that as soon as administratively feasible after the Participant terminates employment such Accrued Benefit be paid in the form of a lump sum cash payment; provided, however, that no lump sum cash payment shall be made hereunder after the Benefit Commencement Date unless the Participant and the Participant's Eligible Spouse, if any, consent thereto in writing. For purposes of this Section 5.3(g), if the Actuarial Value of a Participant's nonforfeitable Accrued Benefit exceeds $5,000 at the time of any distribution, the Actuarial Value of such nonforfeitable Accrued Benefit at any subsequent time shall be deemed to exceed $5,000. For purposes of Section 5.3(g), Actuarial Value has the same meaning such term has in the Seaboard Corporation Pension Plan. (h) Participants Entering the Plan Prior to 1997: This Section 5.3 shall only be applicable to the Accrued Benefit these Participants earn after December 31, 1996. The form of payment for the Accrued Benefit these Participants earned prior to January 1, 1997, shall be determined by the provisions of the Plan prior to its restatement or the Seaboard Farms Plan, respectively. 5.4 Designation of Beneficiaries. Each Participant from time to time, by signing a form furnished by the Plan Administrator, may designate any person or persons (who may be designated concurrently, contingently or successively) to whom his or her benefits under the Plan are to be paid if he or she dies before the Participant receives all such benefits. A Beneficiary designation form will be effective only when the form is filed in writing with the Plan Administrator while the Participant is alive and will cancel all Beneficiary designation forms previously signed and filed by the Participant. A designation of a beneficiary other than the Eligible Spouse must be consented to in writing by the Eligible Spouse. If a Participant fails to designate a Beneficiary before his or her death as provided above, or if the Beneficiary designated by a deceased Participant dies before the Participant, the Plan Administrator, in its discretion, may direct the Trustee to make distribution of the Participant's benefits as follows: (a) First, to the Participant's Eligible Spouse, (b) Then, if there is no Eligible Spouse, (i) To or for the benefit of any one or more of his or her relatives by adoption, blood or marriage, and in such proportions as the Plan Administrator determines; or (ii) To the legal representative or representatives of the estate of the last to die of the Participant and his or her designated beneficiary. ARTICLE VI WITHHOLDING OF TAXES 6.1 Tax Withholding. The Company shall have the right to retain and withhold from payment of the vested portion of any distribution, the amount of taxes required by any government to be withheld or otherwise be deducted and paid with respect to such payment. ARTICLE VII PLAN ADMINISTRATOR 7.1 Membership and Authority. The Committee shall consist of the Vice President of Human Resources and others as he may appoint. Except as otherwise specifically provided for in this Article VII, in controlling and managing the operation and administration of the Plan, the Committee shall act by a majority of its then members, by meeting or by writing filed without meeting, and the Plan Administrator, or the Committee, whichever is applicable, shall have the following powers, rights and duties in addition to those vested in it elsewhere in the Plan: (a) To adopt such rules of procedure and regulations as, in its opinion, may be necessary for the proper and efficient administration of the Plan and as are consistent with the provisions of the Plan. (b) To enforce the Plan in accordance with its terms and with such applicable rules and regulations as may be adopted. (c) To determine all questions arising under the Plan, including the power to determine the rights or eligibility of employees or Participants and their Beneficiaries and their respective benefits, and to remedy ambiguities, inconsistencies or omissions. (d) To maintain and keep adequate records concerning the Plan and concerning its proceedings and acts in such form and detail as the Plan Administrator may decide. (e) To direct all payments of benefits under the Plan. The certificate of a majority of the members of the Committee, if any, that the Committee has taken or authorized any action shall be conclusive in favor of any person relying on the certificate. 7.2 Delegation. In exercising its authority to control and manage the operation and administration of the Plan, the Plan Administrator may employ agents and counsel (who may also be employed by the Company) and to delegate to them such powers as the Plan Administrator deems desirable. 7.3 Information to be Furnished. The Company shall furnish the Plan Administrator such data and information as may be required. The records of the Company as to an employee's or Participant's period of employment, termination of employment and the reason therefore, leave of absence and compensation will be conclusive on all persons unless determined to be incorrect. 7.4 Plan Administrator's Decision Final. To the extent permitted by law, any interpretation of the Plan and any decision on any matter within the discretion of the Plan Administrator made in good faith is binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known, and the Plan Administrator shall make such adjustment on account thereof as it considers equitable and practicable. 7.5 Remuneration and Expenses. No remuneration shall be paid to the Plan Administrator (or any Committee member) as such. However, the reasonable expenses of the Plan Administrator (or a Committee member) incurred in the performance of the administration of the Plan shall be reimbursed by the Company. 7.6 Indemnification of Committee Member. The Committee and the individual members thereof shall be indemnified by the Company against any and all liabilities, losses, costs, and expenses (including fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or the members by reason of the performance of a Committee function if the Committee or such members did not act dishonestly or in willful or negligent violation of the law or regulations under which such liability, loss, cost or expense arises. 7.7 Resignation or Removal of Committee Member. A Committee member may resign at any time by giving ten (10) days advance written notice to the Company and the other Committee members. The Company may remove a Committee member by giving advance written notice to him or her, and the other Committee members. 7.8 Appointment of Successor Committee Members. The Company may fill any vacancy in the membership of the Committee and shall give prompt written notice thereof to the other Committee members. While there is a vacancy in the membership of the Committee, the remaining Committee members shall have the same powers as the full Committee until the vacancy is filled. 7.9 Interested Committee Member. A member of the Committee may not decide or determine any matter or question concerning his or her own benefits under the Plan or as to how he or she is to be paid unless such decision could be made by him or her under the Plan if he were not a member of the Committee. ARTICLE VIII CLAIMS PROCEDURE 8.1 Claim. Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Committee which shall respond in writing as soon as practicable. 8.2 Denial of Claim. If the claim or request is denied, the written notice of denial shall be made within ninety (90) days of the date of receipt of such claim or request by the Committee and shall state: (a) The reason for denial, with specific reference to the Plan provisions on which the denial is based. (b) A description of any additional material or information required and an explanation of why it is necessary. (c) An explanation of the Plan's claim review procedure. 8.3 Review of Claim. Any person whose claim or request is denied or who has not received a response within ninety (90) days may request review by notice given in writing to the Committee within sixty (60) days of receiving a response or one hundred fifty (150) days from the date the claim was received by the Committee. The claim or request shall be reviewed by the Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing. 8.4 Final Decision. The decision on review shall normally be made within sixty (60) days after the Committee's receipt of a request for review. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be one hundred twenty (120) days after the Committee's receipt of a request for review. The decision shall be in writing and shall state the reasons and relevant plan provisions. All decisions on review shall be final and bind all parties concerned. ARTICLE IX AMENDMENTS OF THE PLAN 9.1 Board. The Board may, at any time, amend the Plan, in whole or in part, pursuant to written resolutions adopted by such Board provided, however, that no amendment shall be effective to decrease or restrict any Participant's Accrued Benefit which, at the time of the amendment, was nonforfeitable in accordance with the vesting schedule under Section 5.1 of the Plan. ARTICLE X PERMANENCY OF THE PLAN 10.1 Termination of Plan. The Company contemplates that the Plan shall be permanent. Nevertheless, in recognition of the fact that future conditions and circumstances cannot now be entirely foreseen, the Company reserves the right to terminate the Plan by action of the Board. If the Plan is terminated by action of the Board, all Participants shall become fully vested in their then Accrued Benefit at which time all benefit accruals shall cease. Payment of benefits upon Plan termination shall be at the sole discretion of the Board but no later than the Benefit Commencement Date. ARTICLE XI MISCELLANEOUS 11.1 Captions. The captions of articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions. 11.2 Company Action. Except as may be specifically provided herein, any action required or permitted to be taken by the Company may be taken on behalf of the Company by any officer of the Company. 11.3 Company Records. Records of the Company as to an employee's or Participant's period of employment, termination of employment and the reason therefore, leaves of absence, reemployment and compensation will be conclusive on all persons, unless determined to be incorrect. 11.4 Evidence. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and may be signed, made or presented by the proper party or parties. 11.5 Gender and Number. Where the context permits, words in the masculine gender shall include the feminine and neuter genders, the plural shall include the singular, and the singular shall include the plural. 11.6 Governing Law. The provisions of this Plan shall be construed and interpreted according to the laws of the state of Delaware. 11.7 Nonassignability. Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are, expressly declared to be unassignable and nontransferable. No part of the amounts payable shall, prior to actual payment, be subject to seizure or separation for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant's or another person's bankruptcy or insolvency. 11.8 Participant Cooperation. A Participant will cooperate with the Company by furnishing any and all information requested by the Company in order to facilitate the payment of benefits hereunder and such other action as may be requested by the Company. 11.9 Successors. The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Company, and successors of any such corporation or other business entity. If the Plan is terminated by action of the board of any successor company, all Participants shall become fully vested in their then Accrued Benefit at which time all benefit accruals shall cease. Payment of benefits upon Plan termination shall be at the sole discretion of the board but no later than the Benefit Commencement Date. 11.10 Unfunded Plan. This Plan is intended to be an unfunded plan maintained primarily to provide benefits for a select group of management employees or highly compensated employees. Eligible individuals are select members of management who, by virtue of their position with the Company, are uniquely informed as to the Company's operations and have the ability to materially affect the Company's profitability and operations. 11.11 Unsecured General Creditor. Participants and their Beneficiaries, heirs, successors, and assigns shall have no secured interest or claim in any property or assets of the Company. The assets of the Company may be held under a grantor trust established by the Company under which the Company is the grantor trust for the benefit of Participants, their Beneficiaries, heirs, successors, or assigns. However, the Company assets may not be held in any way as collateral security for the fulfilling of the obligations of the Company under this Plan. Any and all of the Company's assets shall be, and remain, the general, unpledged, unrestricted assets of the Company. The Company's obligation under the Plan shall be merely that of an unfunded and unsecured promise of the Company to pay money in the future. No Company shall have any obligation under this Plan with respect to individuals other than that Company's employees, directors or consultants. 11.12 Validity. In case any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein. 11.13 Waiver of Notice. Any notice required under the Plan may be waived by the person entitled to notice. The Company hereby agrees to the provisions of this Plan, and, in Witness Thereof, the Company causes this Agreement to be executed on this 28th day of December, 1997. SEABOARD CORPORATION By: /s/ J.E. Rodrigues -----END PRIVACY-ENHANCED MESSAGE-----