-----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, LlITUCyyn5mtQJ5uiYgbAiIE1pL7oB55YCIQAULLj0VfUb3ZSoL8xUrO1jTcSfN8 QXuhnoD8XM6P3kLnVtZuxA== /in/edgar/work/20000828/0000088121-00-500005/0000088121-00-500005.txt : 20000922 0000088121-00-500005.hdr.sgml : 20000922 ACCESSION NUMBER: 0000088121-00-500005 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000828 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEABOARD CORP /DE/ CENTRAL INDEX KEY: 0000088121 STANDARD INDUSTRIAL CLASSIFICATION: [2011 ] IRS NUMBER: 042260388 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-03390 FILM NUMBER: 710896 BUSINESS ADDRESS: STREET 1: 9000 W. 67TH STREET CITY: SHAWNEE MISSION STATE: KS ZIP: 66202 BUSINESS PHONE: 9136768800 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-K/A 1 res10k99.txt SEABOARD CORPORATION 1999 10-K/A FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (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, 1999 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 Identification No.) incorporation or organization) 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 10K/A or any amendment to this Form 10K/A. X (Continued) 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. $61,089,875 (March 3, 2000). On such date, 349,085 shares were held by non-affiliates, and the closing price of the stock was $175.00 per share. (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date: 1,487,519.75 shares of Common Stock as of March 3, 2000. 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 7, 7A and parts of item 8 are incorporated by reference to sections of the Registrant's Consolidated Financial Statements. 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 2000 annual meeting of stockholders (the "2000 Proxy Statement"). This Form 10-K/A and its Exhibits (Form 10-K/A) 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/A 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 cost to purchase third-party hogs for slaughter at the Company's hog processing facility and the sale price for pork products from such operations, (v) the price for the Company's products and services, (vi) the effect of Tabacal on the consolidated financial statements of the Company, or (vii) 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/A, 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" or "Company"), is a diversified international agribusiness and transportation company which is primarily engaged in domestic pork production and processing, and cargo shipping. Overseas, the Company is primarily engaged in commodity merchandising, flour and feed milling, produce farming, sugar production, 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 12 of Registrant's Consolidated Financial Statements. (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 as well as third-party hogs are processed at the Company's processing plant. Registrant operates an ocean liner service for containerized cargo primarily between Florida and ports in the Caribbean Basin and Central and South America. Registrant sources and trades commodities, such as bulk grains and oilseeds, for its subsidiaries, affiliates and third parties primarily in Africa, the Caribbean, Central and South America, the Eastern Mediterranean and Europe. Registrant operates its own bulk carriers primarily in the Atlantic Basin to conduct a portion of its commodity trading activities. Registrant, by itself or through non- controlled subsidiaries, operates flour and feed mills in Africa, the Caribbean and South America. Registrant operates a power generating facility in the Dominican Republic, produces and refines sugarcane and produces and processes citrus in Argentina, and produces wine in Bulgaria. Registrant, by itself or through non-controlled affiliates, 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. The Registrant, through non-controlled affiliates, produces salmon and processes seafood in Maine. 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 12 of Registrant's Consolidated Financial Statements. (ii) Status of Product or Segment In December 1999, the Registrant agreed to sell its domestic poultry operations. The sale was completed on January 3, 2000. Registrant continues to expand its pork segment by further investing in pork production and processing facilities. The Registrant is currently making arrangements to increase annual production to approximately three and one-half million hogs per year. In late February 2000, Registrant signed an agreement to acquire approximately 22,000 additional sows effective late March or early April 2000. The Registrant plans to construct a second vertically integrated pork operation capable of processing over four million hogs annually although the timing has not been finalized. The Registrant's Argentine subsidiary continues to make improvements to existing facilities and expand the sugarcane fields. In January 2000, the Registrant signed a construction contract to build a 71.2 megawatt barge-mounted power plant to be located in the Dominican Republic and anticipates supplying power in the fourth quarter of 2000. (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 The following names of the Registrant's businesses are registered trademarks: Seaboardr, Seaboard Farmsr and Seaboard Mariner. Patents, trademarks, franchises, licenses and concessions are not material to any of Registrant's other segments. (v) Seasonal Business Profits from processed pork are generally higher in the fall months. Produce operations are seasonal, depending on the crop being grown. Generally, crops which are exported to the United States are only in production from November through May. Sugar prices in Argentina are generally lower during the typical sugar cane harvest period between June and November. The Registrant's other segments are not seasonally dependent to any material extent. (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. All of the sales of the power segment are to the state-owned electric company of the Dominican Republic. No other segments have 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 involves government contracts. (x) Competitive Conditions Competition in Registrant's pork segment comes from a variety of national and regional producers and is based primarily on product performance, customer service and price. In the October 1999 issue of Successful Farming, an industry trade publication, the Registrant was ranked in the top five pork producers in the United States based on sows in production. Registrant's ocean liner service for containerized cargoes faces competition based on price and customer service. A new U.S. shipping law, The Ocean Reform Act of 1998, went into effect in May 1999 and permits shipping companies to enter into unregulated confidential rate agreements with shippers. Management is not able to predict the impact of this new law, if any, on the Registrant. Registrant believes it is among the top five ranking ocean liner services for containerized cargoes in the Caribbean Basin based on cargo volume. Registrant's sugar business faces significant competition for sugar sales in the local Argentine market. Sugar prices in Argentina are higher than world markets due to current Argentine government price protection policies. The entire Argentine sugar industry is experiencing financial difficulties with Tabacal and certain large competitors incurring operating losses in part because Argentine sugar prices are below historical levels. Registrant's Bulgarian wine production business faces increasing competition for quality grapes from local grape suppliers. (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, 1999, Registrant, excluding non-controlled, non-consolidated foreign subsidiaries, had 9,763 employees, of whom 4,246 were employed in the United States. These totals exclude 5,690 employees of the Poultry division which was sold on January 3, 2000, and presented as a discontinued operation in the Company's 1999 financial statements. (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 12 of Registrant's Consolidated Financial Statements. 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 affiliate shrimp farm in Ecuador, its winery in Bulgaria and its affiliate flour mills, in Democratic Republic of Congo, Ecuador, Haiti, Lesotho, Mozambique and Zambia, 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 its own and affiliate facilities abroad. Item 2. Properties (1) Pork The Registrant owns a hog processing plant in Oklahoma with a double shift capacity in excess of four million hogs per year. Hog production facilities currently consist of a combination of owned and leased farrowing, nursery and finishing units to support 160,000 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. (2) Marine Registrant leases a 135,000 square foot warehouse and more than 90 acres of port terminal land and facilities in Florida which are used in its containerized cargo operations. In addition, Registrant timecharters, under short-term agreements, between sixteen and twenty containerized ocean cargo vessels with deadweights ranging from 2,600 to 17,565 metric-tons. Registrant also bareboat charters, under long- term lease agreements, three containerized ocean cargo vessels with deadweights ranging from 12,169 to 12,648 metric tons. (3) Commodity Trading and Milling The Registrant owns in whole or in part ten flour mills with capacity to produce over 5,000 metric tons of flour per day. In addition, Registrant has feed mill capacity of 75 metric tons per hour to produce formula animal feed. The flour mills, located in Angola, Democratic Republic of Congo, Ecuador, Guyana, Haiti, Lesotho, Mozambique, Nigeria, Sierra Leone and Zambia, and the feed mills located in Ecuador, Lesotho, Nigeria and Zambia are owned; in Lesotho, Nigeria and Sierra Leone the land the mills are located on is leased under long-term agreements. The Registrant owns seven 9,000 metric- ton deadweight dry bulk carriers. (4) Sugar and Citrus Registrant has a controlling interest in an Argentine company which owns approximately 33,000 acres of planted sugarcane and approximately 2,700 acres of planted citrus. In addition, this company owns a sugar mill with a capacity to process approximately 165,000 metric tons of sugar per year. (5) Power Registrant owns a floating power generating facility, capable of producing 40 megawatts of power, located in Santo Domingo, Dominican Republic. (6) Wine Registrant owns a controlling interest in a Bulgarian winery with a capacity to produce approximately 41 million liters of wine per year. Related facilities are located on approximately 330 acres of owned land. (7) Other Registrant leases 1,900 acres in Honduras and 1,000 acres in Arizona for growing produce. Registrant also leases 40,000 square feet of refrigerated space and 70,000 square feet of dry space in the Port of Miami for warehousing produce products. Registrant, by itself or through non-controlled affiliates, operates approximately 3,100 acres of shrimp ponds in Honduras and Ecuador. Approximately 1,600 acres are leased and the rest are owned. Registrant owns a non-controlling interest in a company in Maine capable of producing over 11 million pounds of salmon per year. Registrant owns a non-controlling interest in a company in Maine with a 20,000 square feet facility for processing seafood and related products. 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. Poultry facilities sold in January 2000 consisted of four fully integrated processing facilities and two further processing facilities located in Georgia, Tennessee and Kentucky. Each processing facility contained a hatchery, feed mill and processing plant. Item 3. Legal Proceedings The Company is subject to legal proceedings related to the normal conduct of its business, including as a defendant in a maritime arbitration claim and third-party hog supplier claim more fully described in Note 11 of Registrant's Consolidated Financial Statements. 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. 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 (74) President of Registrant; President and Treasurer of Seaboard Flour Corporation (SFC) Joe E. Rodrigues (63) Executive Vice President and Treasurer Rick J. Hoffman (45) Vice President Steven J. Bresky (46) Vice President Robert L. Steer (40) Vice President - Chief Financial Officer Douglas W. Schult (43) Vice President - Human Resources James L. Gutsch (46) Vice President - Engineering David M. Becker (38) General Counsel and Assistant Secretary 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 - Chief Financial Officer of Registrant since April 1998 and previously 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 and by M.G. Waldbaum from January 1993 to January 1995. Mr. Gutsch has served as Vice President - Engineering of Registrant since December 1998. He has been employed with the Registrant since 1984. Mr. Becker has served as General Counsel and Assistant Secretary of Registrant since April 1998 and previously Assistant Secretary of Registrant since May 1994. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's common stock is traded on the American Stock Exchange under the symbol SEB. The Company had 308 shareholders of record of shares of its common stock as of December 31, 1999. The remaining information required by Item 5 is included under the caption "Quarterly Financial Data" included in Item 8 below. Item 6. Selected Financial Data (Thousands of dollars except per share amounts)Years ended December 31, 1999 1998 1997 1996 1995 Net sales $1,255,304 $1,265,366 $1,303,753 $ 962,652 $ 715,362 Earnings (loss) from continuing operations $ (13,587)$ 31,427 $ 35,070 $ 5,203 $ 3,241 Net earnings $ 47 $ 50,938 $ 29,079 $ 5,388 $ 18,508 Earnings (loss) per common share from continuing operations $ (9.13)$ 21.12 $ 23.58 $ 3.50 $ 2.18 Earnings per common share $ 0.03 $ 34.24 $ 19.55 $ 3.62 $ 12.44 Total assets $1,277,791 $1,215,897 $1,119,327 $1,002,892 $ 876,079 Long-term debt $ 318,017 $ 313,324 $ 290,521 $ 281,574 $ 281,240 Stockholders' equity $ 443,168 $ 444,728 $ 395,368 $ 367,782 $ 364,116 Dividends per common share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 In August 2000, the Company announced that assets of its Produce Division had been overstated in prior periods and management determined to restate the Company's financial statements for each of the prior periods effected. See Note 1 to the Consolidated Financial Statements for further discussion. In December 1999, the Company agreed to sell its Poultry Division. The sale was completed on January 3, 2000. Accordingly, the Company's financial statements and data above have been restated to reflect the Poultry Division as a discontinued operation for all periods presented. See Note 13 to the Consolidated Financial Statements for further discussion. As described in Note 4 to the Consolidated Financial Statements, the Company changed its method of accounting for certain inventories from FIFO to LIFO in 1999. The net effect of this change in 1999 was to increase net earnings by $2,456,000 or $1.65 per common share. In December 1998, the Company sold its baking and flour milling operations in Puerto Rico, recognizing an after-tax gain of $33,272,000 or $22.37 per common share. See Note 2 to the Consolidated Financial Statements for further discussion. 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. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations As more fully described in Note 1 to the Consolidated Financial Statements, in August 2000, the Company announced that assets of its Produce Division had been overstated in prior periods and management determined to restate the Company's financial statements for each of the prior periods effected. As more fully described in Note 13 to the Consolidated Financial Statements, in December 1999 the Company agreed to sell its Poultry Division for $375 million, consisting of the assumption of approximately $16 million in indebtedness and the remainder in cash, subject to certain adjustments. The sale was completed on January 3, 2000 resulting in a pre-tax gain of approximately $148 million ($90 million after estimated taxes). The Company's financial statements have been restated to reflect the Poultry Division as a discontinued operation for all periods presented. As a result, the Poultry Division is no longer presented as a reportable segment, and two other divisions, Power and Wine, now qualify as reportable segments of the Company. Restated Poultry results are presented as earnings (losses) from discontinued operations, net of applicable income taxes, and exclude general corporate overhead and certain interest charges previously allocated to that division. The discussions and figures below are based on these restated presentations. Liquidity and Capital Resources (Dollars in millions) 1999 1998 1997 Current ratio 1.44:1 1.64:1 1.46:1 Working capital $ 184.2 231.1 165.0 Cash from operating activities $ (40.5) 59.5 116.2 Capital expenditures $ 67.7 26.9 48.3 Long-term debt, exclusive of current maturities $ 318.0 313.3 290.5 Total capitalization* $ 854.9 847.3 760.2 * Total capitalization is defined as stockholders' equity and noncurrent liabilities. Cash provided by operating activities for 1999 decreased $100.0 million compared to 1998. The decrease is primarily related to changes in certain components of working capital, which include Tabacal for 1999 (see Sugar and Citrus segment discussion below), and a decrease in net earnings from continuing operations. Changes in components of working capital are primarily related to the timing of normal transactions for voyage settlements, trade payables and receivables. Within the Commodity Trading and Milling segment there was a higher value of inventory in transit at December 31, 1999 than at December 31, 1998 resulting in increases in grain inventory and prepaid expense balances and a partially offsetting increase in deferred revenue balances. Current liabilities exclusive of debt increased only slightly during 1999 as the Company paid $14.6 million in taxes related to the 1998 gain from the sale of baking and flour milling operations in Puerto Rico primarily offsetting the increase in deferred revenue balances. Cash provided by operating activities for 1998 decreased $56.7 million compared to 1997. The decrease in cash flows was primarily related to a decrease in net earnings from continuing operations and changes in certain components of working capital. Changes in components of working capital are primarily related to the timing of normal transactions for voyage settlements, trade payables and receivables. Within the Commodity Trading and Milling segment there was a smaller value of inventory in transit at December 31, 1998 compared to December 31, 1997 resulting in a decrease in deferred revenue balances and a partially offsetting decrease in related grain inventories. Cash from investing activities for 1999 increased $44.7 million compared to 1998. The increase is primarily related to a net sale and maturity of investments in 1999 compared to a net purchase of investments in 1998. The net purchase of investments in 1998 related to the $72.4 million in cash received from the sale of baking and flour milling operations. During 1998, investments in and advances to foreign affiliates included $45.8 million to Tabacal. As further discussed in Note 5 to the Consolidated Financial Statements, Tabacal has been consolidated since December 31, 1998. As such, funds invested in Tabacal during 1999 are reflected within the appropriate components of the cash flow statements, including capital expenditures. The Company invested $67.7 million in the property, plant and equipment of continuing operations during 1999 as described below. The Company invested $22.1 million in the Pork segment during 1999 primarily for the expansion of existing hog production facilities and for improvements to the pork processing plant. The Company plans to invest $10.0 million in 2000 for general upgrades to the pork processing plant and continued expansion of existing hog production facilities. The Company previously disclosed plans to construct a second vertically integrated pork operation and is currently making arrangements to increase annual production to approximately three and one-half million hogs. Management anticipates that this increase in hog production will primarily be accomplished through a combination of operating lease arrangements, third party contract growers or the purchase of existing businesses. The timing of the remaining expansion plans, primarily related to a second processing plant, has not been finalized. Capital expenditures in the Marine segment during 1999 totaled $20.0 million primarily for the purchase of two vessels previously chartered and for general replacement and upgrades of property and equipment. During 2000, the Company anticipates spending $7.5 million for general replacement and upgrades of property and equipment. Capital expenditures in the Commodity Trading and Milling segment totaled $4.8 million, including $2.0 million to purchase a previously chartered bulk carrier vessel from a wholly-owned subsidiary of Seaboard Flour Corporation, the owner of 75.3% of the Company's outstanding common stock. During 2000, the Company anticipates spending $4.2 million for general replacement and upgrades of property and equipment. Capital expenditures in the Sugar and Citrus segment totaled $15.0 million primarily for improvements to existing operations and expansion of sugarcane fields. During 2000, the Company anticipates spending $14.5 million for improvements to existing operations and expansion of sugarcane fields. Capital expenditures in all other segments for 1999 totaled $5.8 million in general modernization and efficiency upgrades of plant and equipment. Management anticipates that the planned capital expenditures for 2000 will be financed by internally generated cash. During 1999, the Company invested $2.8 million to acquire additional shares of a Bulgarian winery originally acquired in 1998. During 1999, the Company invested $1.7 million for a minority interest in a flour mill in Angola which is being accounted for using the equity method. In January 2000, the Company signed a construction contract to build a 71.2 megawatt barge-mounted power plant for approximately $50 million to be located in the Dominican Republic. The Company is currently evaluating financing options including potential leasing alternatives and expects to begin supplying power during the fourth quarter of 2000. In February 2000, the Company signed an agreement to purchase assets of an existing hog production operation for approximately $75 million, consisting of $36 million in cash, the assumption of $33 million in debt and $6 million payable over the next four years. The transaction is expected to close in late March or early second quarter of 2000 and will be accounted for using the purchase method. Cash from investing activities in 1998 increased $53.8 compared to 1997, primarily as a result of proceeds received from the disposition of businesses. On December 30, 1998, the Company completed the sale of its baking and flour milling businesses in Puerto Rico. These businesses were sold for $81.4 million and the assumption of $11.8 million of liabilities resulting in a gain of $54.5 million ($33.3 million after taxes). The proceeds from the sale consisted of approximately $72.4 million in cash and $9.0 million in notes receivable. See Note 2 to the Consolidated Financial Statements for further discussion. During 1998 the Company invested $26.9 million in property, plant and equipment of continuing operations. Capital expenditures in the Pork segment totaled $16.3 million primarily for improvements to the pork processing plant. Capital expenditures in the Marine segment totaled $5.2 million for general replacement and upgrades of property and equipment. Capital expenditures in all other segments totaled $5.4 million in general modernization and efficiency upgrades of plant and equipment. During 1998, the Company made $45.8 million in advances to and non-voting investments in Tabacal for working capital requirements, reduction of debt, general modernization, efficiency upgrades of plant and equipment, and expansion of sugarcane fields. In November 1998, the Company purchased a milling business in Zambia by assuming liabilities of $10.2 million. In October 1998, the Company purchased a controlling interest in an existing Bulgarian winery by acquiring newly issued shares for $15.0 million. These acquisitions were accounted for using the purchase method and would not have significantly affected net earnings or earnings per share on a pro forma basis. In July 1998, the Company completed the acquisition of a 50% interest in a flour mill in Lesotho for approximately $5.0 million. In June 1998, the Company, in a joint venture with two other partners, completed its acquisition of an interest in a flour mill in Haiti. The Company made an investment of $3.0 million for a minority interest in the joint venture, which in turn owns 70% of a Haitian company which owns the flour mill. These investments are being accounted for using the equity method. 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 smoked seafood and related products. The investment is being accounted for using the equity method. Cash from financing activities in 1999 increased $90.6 million compared to 1998 primarily related to proceeds from short-term borrowings and, to a lesser extent, terminating interest rate swap agreements. See further discussion of terminated swap agreements under "Derivative Information" below. During 1999, the Company prepaid at a discount certain long-term debt obligations assumed with the purchase of the Bulgarian winery in October 1998 and adjusted certain balances related to the acquisition. During 1999, the Company also prepaid at a discount other higher cost, U.S. dollar denominated foreign subsidiary debt obligations. These prepayments reduced total long-term debt obligations by $13.5 million. Changes to the preliminary purchase price allocations and other non- cash adjustments related to these transactions resulted in immaterial adjustments to several balance sheet line items, primarily reductions to minority interest, net property, plant and equipment, and long-term debt. During 1999, the Company's one-year revolving credit facilities totaling $145.0 million were increased to $153.3 million and extended for an additional year. In addition, the existing five-year revolving credit facility totaling $25.0 million was increased to $26.7 million. During 1999, the Company repaid the outstanding advances totaling $10.0 million on the five-year revolving credit facility and subsequently borrowed the full $26.7 million. As of December 31, 1999, the Company had $150.9 million outstanding under one-year revolving credit facilities totaling $153.3 million and $70.5 million outstanding under short-term uncommitted credit lines totaling $145.0 million. Subsequent to year-end, the Company's one-year revolving credit facilities totaling $153.3 million maturing in the first quarter of 2000 were reduced to $141.0 million and extended for an additional year and short-term uncommitted credit lines totaling $145.0 million were reduced to $132.5 million. During the first several months of 2000 the Company anticipates repaying approximately $118.3 million in notes payable and industrial development revenue bonds from the proceeds of the Poultry Division sale. Cash from financing activities in 1998 decreased $37.6 million compared to 1997 primarily related to repayments of short-term borrowings. Cash used in discontinued poultry operations in 1999 primarily represents capital expenditures ($52.9 million including expansion projects) in excess of net operating cash flows. As part of the agreement to sell the Poultry Division, the Company plans to spend an additional $13.1 million in 2000 to complete these expansions on behalf of the buyer. This amount will be included as a reduction of the gain recorded on the sale in January 2000. Cash provided by discontinued poultry operations in 1998 primarily represents net operating cash flows in excess of capital expenditures ($18.6 million). The increase in cash from discontinued operations in 1998 over 1999 and 1997 is primarily a result of higher earnings and lower capital expenditures in 1998 compared to 1999 and 1997. 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, including proceeds from the sale of the Poultry Division, are adequate for its current and intended operations. Results of Operations Net sales totaled $1,255.3 million for the year ended December 31, 1999, compared to sales of $1,265.4 million for the year ended December 31, 1998. Operating income of $12.4 million for 1999 decreased $17.4 million compared to 1998. Net sales totaled $1,265.4 million for the year ended December 31, 1998, compared to sales of $1,303.8 million for the year ended December 31, 1997. Operating income of $29.8 million for 1998 decreased $49.1 million compared to 1997. Pork Segment (Dollars in millions) 1999 1998 1997 Net sales $ 571.2 500.4 531.6 Operating income $ 37.7 (1.1) 38.4 Net sales increased $70.8 million to $571.2 million in 1999 compared to 1998. This increase is primarily the result of an increase in sales volume and, to a lesser extent, improved prices for finished pork products. The increase in sales volume is the result of the hog processing plant operating at full capacity on a double-shift basis during 1999. The plant employed a second shift during the first half of 1998, but did not achieve full double-shift capacity until the third quarter of 1998. An excess supply of live hogs depressed pork prices during 1998 and the first half of 1999. During the second half of 1999 the excess declined, resulting in improved prices for the year. Although management cannot predict pork prices for 2000, it is anticipated that prices for finished pork products will continue to be favorable. Operating income increased $38.8 million to $37.7 million in 1999 compared to 1998. This increase is primarily a result of improved sales prices, and to a lesser extent, a decrease in the cost of Company raised hogs. The decrease in the cost of Company raised hogs is primarily the result of lower grain prices. The Company also continued to benefit from low prices for third-party hogs purchased during 1999. However, an increase in this cost during the fourth quarter of 1999 compared to extremely low prices for third-party hogs during the fourth quarter of 1998 resulted in a slight increase in this cost for the year. In addition, effective January 1, 1999, the Company changed its method of accounting for certain pork inventories from FIFO to LIFO, increasing operating income in 1999 by $4.0 million. Although management cannot predict the cost of third-party hogs or grain prices for 2000, it is anticipated that market conditions for these items should continue to be favorable. Net sales decreased $31.2 million to $500.4 million in 1998 compared to 1997. This decrease is the result of lower pork prices partially offset by an increase in sales volume. Lower sales prices for most pork products resulted from an industry wide excess supply of live hogs and, to a lesser extent, pricing pressure from the Asian economic situation. The increase in sales volume is the result of the hog processing plant operating at double-shift production during all of 1998. The plant did not employ a second shift until part way through the second quarter of 1997. During the third quarter of 1998, the plant reached full capacity on a double-shift basis. Operating income decreased $39.5 million to $(1.1) million in 1998 compared to 1997. This decrease is primarily the result of lower prices for finished pork products without a comparable decrease in the cost of production. This decrease was partially offset by an increase in the percentage of cheaper third-party hogs processed compared to Company raised hogs. Marine Segment (Dollars in millions) 1999 1998 1997 Net sales $ 307.7 310.9 309.3 Operating income $ (1.9) 17.4 27.3 Net sales decreased $3.2 million to $307.7 million in 1999 compared to 1998. Cargo volumes and applicable cargo rates decreased in the first half of 1999 compared to 1998 primarily as a result of weak economic conditions in certain South American markets served by the Company. During the second half of 1999, overall cargo volume increased from 1998 due to improvements in certain markets, but the effect on net sales was largely offset as rates remained depressed. Operating income from the Marine segment decreased $19.3 million to $(1.9) million in 1999 compared to 1998, primarily as a result of lower cargo rates discussed above. Management expects that these situations will continue to have a negative effect on financial results during 2000. A new U.S. shipping law, The Ocean Reform Act of 1998, went into effect in May 1999 and permits shipping companies to enter into unregulated confidential rate agreements with shippers. Management is not able to determine the impact, if any, this new law had on 1999 financial results. Net sales increased $1.6 million to $310.9 million in 1998 compared to 1997. During the first half of 1998, the Company experienced higher cargo volumes in certain markets the Company serves. During the last half of 1998, cargo volumes and applicable cargo rates decreased primarily as a result of weakening economic conditions in certain South American markets the Company serves and, to a lesser extent, from trade disruptions relating to Hurricane Mitch in Central America during the fourth quarter of 1998. Operating income decreased $9.9 million to $17.4 million in 1998 compared to 1997. This decrease is primarily a result of lower cargo volumes and rates during the last half of 1998, trade disruptions relating to Hurricane Mitch during the fourth quarter of 1998 and, to a lesser extent, an increase in various general and administrative costs. Commodity Trading and Milling Segment (Dollars in millions) 1999 1998 1997 Net sales $ 259.5 306.4 313.9 Operating income $ 2.6 10.5 9.5 Net sales decreased $46.9 million to $259.5 million in 1999 compared to 1998, primarily as a result of lower wheat sales to certain foreign affiliates, lower soybean sales to third parties and, to a lesser extent, a decrease in commodity prices sold in foreign markets. Wheat sales to certain foreign affiliates decreased as political unrest resulted in economic problems that reduced consumer purchasing power and thus lowered milling volumes. Such decreases were partially offset by the addition of sales during 1999 from the Company's milling operations in Zambia acquired in late 1998. Operating income decreased $7.9 million to $2.6 million in 1999 compared to 1998, primarily as a result of the decrease in wheat sales and margins to certain foreign affiliates as discussed above and operating losses from the Company's milling operations in Zambia acquired in late 1998. Continued political unrest and economic problems in countries where the Company does business could continue to have a negative effect on financial results during 2000. Net sales decreased $7.5 million to $306.4 million in 1998 compared to 1997. This decrease is primarily the result of a decrease in commodity prices sold in foreign markets partially offset by an increase in tonnage sold. Operating income increased $1.0 million to $10.5 million in 1998 compared to 1997. This increase is primarily the result of increased income from operating certain mills in foreign countries. Sugar and Citrus Segment (Dollars in millions) 1999 1998 1997 Net sales $ 46.9 - - Operating income $ (15.9) - - As discussed in Note 5 to the Consolidated Financial Statements, comparative operating results for the Sugar and Citrus segment are not presented as Tabacal was accounted for on the equity method in 1998. However, lower sugar prices have offset increased volumes resulting in lower revenues and higher losses in 1999 compared to 1998. Lower sugar prices are primarily the result of an excess supply of sugar in Argentina and, to a lesser extent, lower sugar prices on the world market. Also, during the second quarter of 1999 severance charges of $3.0 million were incurred related to certain employee layoffs enacted to reduce future operating costs. Although management cannot predict sugar prices for 2000, it is anticipated that sugar prices will remain at low levels that result in operating losses for the Company. During 1998, the loss from foreign affiliates attributable to Tabacal was $15.8 million. As a result of recent operating results for Tabacal, the Company has evaluated the recoverability of Tabacal's long-lived assets and believes that the value of those assets are presently recoverable. However, any further decline in sugar prices would likely result in the carrying values not being recoverable, which would result in a material charge to earnings for the impairment of these assets. Power Segment (Dollars in millions) 1999 1998 1997 Net sales $ 23.0 26.2 30.3 Operating income $ 7.9 8.8 7.9 Net sales decreased $3.2 million to $23.0 million in 1999 compared to 1998. Operating income decreased $0.9 million to $7.9 million in 1999 compared to 1998. These decreases are primarily a result of the termination of operations in October 1998 of a customer that was the only user of service from a generating station owned by the Company. Net sales decreased $4.1 million to $26.2 million in 1998 compared to 1997, primarily as a result of the customer discussed above decreasing usage throughout 1998 prior to terminating operations in October. Despite the decrease in sales, operating income increased $0.9 million to $8.8 million in 1998 compared to 1997 primarily due to the recovery of previously written off receivables associated with the termination of service discussed above. Wine Segment (Dollars in millions) 1999 1998 1997 Net sales $ 12.9 - - Operating income $ (5.9) - - As discussed in Note 2 to the Consolidated Financial Statements, the Company acquired an existing Bulgarian winery in October 1998. No results are presented for 1998 as the winery is reported on a three- month lag. Operating losses in 1999 are primarily a result of acquiring more expensive wine materials on the open market to supplement local grape shortages and reserving for uncollectible advances for raw materials. Although management is not able to predict the amount of operating losses for 2000, it is anticipated that operating losses will continue during 2000. Other Operations (Dollars in millions) 1999 1998 1997 Net sales $ 34.3 121.5 118.6 Operating income $ (4.7) (0.4) (0.4) Net sales from other operations decreased $87.2 million to $34.3 million in 1999 compared to 1998, while operating income decreased $4.3 million to $(4.7) million in 1999 compared to 1998. These decreases are primarily a result of the sale of the Puerto Rican baking operations in December 1998 as discussed in Note 2 to the Consolidated Financial Statements. Changes in net sales and operating income from other operations in 1998 compared to 1997 were not significant. Selling, General and Administrative Expenses Selling, general and administrative expenses (SG&A) totaled $107.8 million, $119.3 million and $116.4 million for the years ended December 31, 1999, 1998 and 1997, respectively. As a percent of revenues, SG&A decreased to 8.6% in 1999 compared to 9.4% in 1998 primarily as a result of the sale of the Puerto Rican baking operations in December 1998. This decrease is partially offset by the consolidation of Tabacal results in 1999, including the $3.0 million of severance charges discussed above, and the winery and Zambia milling operations acquired in late 1998. As a percent of revenues, SG&A increased to 9.4% in 1998 compared to 8.9% in 1997 primarily as a result of various cost increases in the Marine segment. Interest Income Interest income totaled $7.4 million, $7.1 million and $6.1 million for the years ended December 31, 1999, 1998 and 1997, respectively. The increase in 1999 reflects an increase in interest rates partially offset by a decrease in average funds invested. The increase in 1998 is primarily the result of an increase in average funds invested. Interest Expense Interest expense totaled $31.4 million, $26.4 million and $25.6 million for the years ended December 31, 1999, 1998 and 1997, respectively. The increase during 1999 over 1998 reflects an increase in both long- term and short-term average borrowings and an increase in interest rates. The increase in average borrowings during 1999 is primarily attributable to the consolidation of Tabacal in December 1998. Loss from Foreign Affiliates Loss from foreign affiliates totaled $1.4 million, $17.1 million and $8.7 million for the years ended December 31, 1999, 1998 and 1997, respectively. Losses during 1998 and 1997 are primarily attributable to the operations of Tabacal. As discussed in Note 5 to the Consolidated Financial Statements, Tabacal is included in 1999 consolidated operations. During 1998, losses increased from Tabacal as a result of lower sugar prices and planned operating efficiencies and harvest production levels not being realized. Gain on Disposition of Businesses On December 30, 1998, the Company completed the sale of its baking and flour milling businesses in Puerto Rico resulting in a pre-tax gain of $54.5 million ($33.3 million after taxes). See Note 2 to the Consolidated Financial Statements for further discussion. Miscellaneous Income Miscellaneous income totaled $3.1 million, $3.9 million and $1.2 million for the years ended December 31, 1999, 1998 and 1997, respectively. The increases in 1999 and 1998 over 1997 are primarily the result of gains on the sale of fixed assets in the Marine segment as older, fully depreciated equipment was replaced in the normal course of business. Income Tax Expense The effective tax rates increased significantly during 1999 and 1998 primarily as a result of significant increases in overall losses from foreign entities for which tax benefits are not available within their respective countries or to offset domestic income. Discontinued Operations Earnings from discontinued poultry operations, net of income taxes, decreased in 1999 compared to 1998 due primarily to lower overall sales prices for poultry products, partially offset by lower finished feed costs. An increase in poultry production within the industry has resulted in lower prices for most poultry products while the Russian economic situation continued to have a negative effect on domestic prices for dark meat sales. Earnings from discontinued operations, net of income taxes, increased in 1998 compared to 1997 primarily as a result of significantly lower finished feed costs, improved sales prices and, to a lesser extent, uninterrupted operations of a plant that was shut down for one week in 1997 for a process conversion. Other Financial Information The Company is subject to various federal and state regulations regarding environmental protection and land and water 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 material regulations. Laws and regulations in the states where the Company currently conducts its pork operations are becoming more restrictive. These and future changes could delay the Company's expansion plans or 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. During the second quarter of 1998 the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and all hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities at their fair values. Accounting for changes in the fair value of a derivative depends on its designation and effectiveness. For derivatives that qualify as effective hedges, the change in fair value will have no net impact on earnings until the hedged transaction affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value will affect current period net earnings. During the second quarter of 1999 the Financial Accounting Standards Board amended SFAS No. 133 delaying the effective date. The Company will adopt SFAS No. 133 during the first quarter of fiscal 2001. Depending on market interest rates and the types of financial hedging derivatives in place at the time of adoption, if any, adoption of this statement could result in significant adjustments to the Company's balance sheet as financial derivatives are recorded as assets or liabilities at fair value with corresponding adjustments to Other Comprehensive Income. The Company does not believe adoption will have a material impact on the Company's net earnings or cash flows. The Company has not experienced nor does it expect to experience any significant Year 2000 issues or disruptions in operations. The Company believes that the total costs, including equipment replacements and internal costs consisting primarily of payroll related costs, to resolve Year 2000 issues were not material to the Company's consolidated financial statements. The Company does not believe its businesses have been materially adversely affected by general inflation. Derivative Information The Company is exposed to various types of market risks from its day- to-day operations. Primary market risk exposures result from changing interest rates and commodity prices. Changes in interest rates impact the cash required to service variable rate debt. From time to time, the Company uses interest rate swaps to manage risks of increasing interest rates. Changes in commodity prices impact the cost of necessary raw materials as well as the selling prices of finished products. The Company uses corn, wheat, soybeans and soybean meal futures and options to manage risks of increasing prices of raw materials. The Company uses hog futures and options to manage risks of decreasing prices of pork products. The Company is also subject to foreign currency exchange rate risk on a short-term note payable denominated in foreign currency. This risk is managed through the use of a foreign currency forward exchange agreement. The table below provides information about the Company's non-trading financial instruments sensitive to changes in interest rates at December 31, 1999. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. At December 31, 1999, long-term debt includes foreign subsidiary obligations of $5.1 million denominated in U.S. dollars and $12.8 million payable in Argentine pesos. At December 31, 1998, long- term debt includes foreign subsidiary obligations of $21.5 million denominated in U.S. dollars and $14.6 million payable in Argentine pesos. The Argentine peso is currently pegged to the U.S. dollar and accordingly, management believes there is minimal exchange rate risk. Weighted average variable rates are based on rates in place at the reporting date. Short-term instruments including short-term investments, non-trade receivables and current notes payable have carrying values that approximate market and are not included in this table due to their short-term nature. (Dollars in thousands) 2000 2001 2002 2003 2004 Thereafter Total Long-term debt: Fixed rate $8,964 23,388 22,842 47,126 47,149 102,145 $251,614 Average interest rate 5.84% 7.02% 6.78% 7.48% 7.48% 8.01% 7.53% Variable rate $2,523 - 26,667 - 6,000 42,700 $ 77,890 Average interest rate 5.00% - 6.57% - 5.85% 6.17% 6.25% Non-trading financial instruments sensitive to changes in interest rates at December 31, 1998 consisted of fixed rate long-term debt totaling $263,749 million with an average interest rate of 7.71%, and variable rate long-term debt totaling $68,183 million with an average interest rate of 5.60%. At December 31, 1998, 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%. During 1999 the Company terminated these agreements for proceeds totaling $6.0 million. Inventories that are sensitive to changes in commodity prices, including carrying amounts and fair values at December 31, 1999 and 1998 are presented in Note 4 to the Consolidated Financial Statements. Projected raw material requirements, finished product sales, and firm sales commitments may also be sensitive to changes in commodity prices. The tables below provide information about the Company's derivative contracts that are sensitive to changes in commodity prices. Although used to manage overall market risks, certain contracts do not qualify as hedges for financial reporting purposes. As a result, they are classified as trading instruments and carried at fair market value. Contracts that qualify as hedges for financial reporting purposes are classified as non-trading instruments. Gains and losses on non-trading instruments are deferred and recognized as adjustments of the carrying amounts of the commodities when the hedged transaction occurs. The following tables present the notional quantity amounts, the weighted average contract prices, the contract maturities, and the fair value of the position of the Company's open trading and non-trading derivatives at December 31, 1999.
Trading: Contract Volumes Wtd.-avg. Fair Futures Contracts Quantity (000's) Units Price/Unit Maturity Value (000's) Corn purchases - long 1,010 bushels $ 1.99 2000 $ 54 Corn sales - short 1,045 bushels 2.13 2000 (50) Hog sales - short 1,440 pounds 0.59 2000 16 Contract Volumes Wtd.-avg. Exercise Fair Option Contracts Quantity (000's) Units Price/Unit Maturity Value (000's) Corn puts written - long 2,300 bushels $ 2.11 2000 $ (273) Corn puts purchased - short 2,000 bushels 1.90 2000 40 Corn calls written - short 2,060 bushels 2.39 2000 (137) Corn calls purchased - long 2,725 bushels 2.57 2000 110 Wheat puts written - long 1,885 bushels 2.70 2000 (402) Wheat puts purchased - short 1,345 bushels 2.71 2000 362 Wheat calls written - short 1,750 bushels 3.40 2000 (5) Wheat calls purchased - long 2,585 bushels 3.12 2000 55 Soybean meal calls purchased - long 5.6 tons 145.98 2000 32 Soybean meal puts written - long 5.6 tons 135.98 2000 (8) Non-trading: Contract Volumes Wtd.-avg. Fair Futures Contracts Quantity (000's) Units Price/Unit Maturity Value (000's) Corn purchases - long 2,130 bushels $ 2.06 2000 $ (32) Corn sales - short 2,950 bushels 2.01 2000 (118) Wheat purchases - long 405 bushels 3.24 2000 (60) Wheat sales - short 870 bushels 2.77 2000 91 Soybean meal purchases - long 28.2 tons 144.20 2000 72 Soybean meal sales - short 31.4 tons 145.07 2000 (53)
At December 31, 1998, the Company had net trading contracts to purchase 10.8 million bushels of grain (fair value of $(628,000)) and 115,000 tons of meal (fair value of $68,000), and net contracts to sell 1.4 million pounds of hogs (fair value of $(11,000)). At December 31, 1998, the Company had net non-trading contracts to purchase 1.1 million bushels of grain (fair value of $(101,000)) and 4,000 tons of meal (fair value of $44,000). The table below provides information about the Company's financial instruments and related derivative financial instruments sensitive to foreign currency exchange rates, consisting of a Japanese Yen (Yen) denominated note obligation and a foreign currency forward exchange agreement. Information is presented in U.S. dollar equivalents. The table presents the notional amounts and weighted average exchange rate by contractual maturity date. The notional amount is generally used to calculate the contractual payments to be exchanged under the contract. Due to the short-term nature of these instruments, their carrying and contract values approximate market. (Dollars in thousands) 1999 1998 Short-term notes payable: Variable rate (Yen) $20,000 $16,560 Average interest rate 7.19% 5.85% Related derivative: Forward exchange agreement, including projected interest due at maturity (receive Yen/pay $US) $20,363 $ 16,616 Exchange rate 104.13 116.63 Item 7A. Quantitative and Qualitative Disclosures About Market Risk The information required by Item 7A is hereby incorporated by reference to the material under the captions "Financial Instruments" and "Commodity Instruments" within Note 1 of the Registrant's Consolidated Financial Statements, and to the material under the caption "Derivative Information" within "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in Item 7 above. Item 8. Financial Statements and Supplementary Data The selected quarterly financial data required by Item 8 is as follows: (Unaudited) (Thousands of dollars 1st 2nd 3rd 4th Total for except per share amounts) Quarter Quarter Quarter Quarter the Year 1999 Net sales $ 256,936 308,981 318,769 370,618 $1,255,304 Operating income $ 405 1,062 3,393 7,508 $ 12,368 Earnings (loss) from continuing operations $ (4,432) (4,195) (3,117) (1,843) $ (13,587) Net earnings (loss) $ (612) 2,158 2,152 (3,651) $ 47 Earnings (loss) per common share from continuing operations $ (2.98) (2.82) (2.09) (1.24) $ (9.13) Earnings (loss) per common share $ (0.41) 1.45 1.45 (2.46) $ 0.03 Dividends per common share $ .25 .25 .25 .25 $ 1.00 Market price range per common share: High $ 457 340 320 262 Low $ 298 256 216 185 1/4 1998 Net sales $ 321,344 329,949 303,486 310,587 $1,265,366 Operating income $ 10,822 11,546 (65) 7,467 $ 29,770 Earnings (loss) from continuing operations $ 2,852 4,073 (7,483) 31,985 $ 31,427 Net earnings $ 2,806 7,347 4,062 36,723 $ 50,938 Earnings (loss) per common share from continuing operations $ 1.92 2.74 (5.03) 21.49 $ 21.12 Earnings per common share $ 1.89 4.94 2.73 24.68 $ 34.24 Dividends per common share $ .25 .25 .25 .25 $ 1.00 Market price range per common share: High $ 435 375 1/16 336 445 Low $ 365 265 1/2 261 256 In August 2000, the Company announced that assets of its Produce Division had been overstated in prior periods and management determined to restate the Company's financial statements for each of the prior periods effected. See Note 1 to the Consolidated Financial Statements for further discussion. The effect of this restatement in 1999 was to increase (decrease) net earnings and earnings per common share by $(304,000) ($(0.20) per share), $102,000 ($0.06 per share), $(110,000) ($(0.07) per share) and $119,000 ($0.08 per share), respectively, for the first, second, third and fourth quarters of 1999. The effect of this restatement in 1998 was to increase (decrease) net earnings and earnings per common share by $(58,000) ($(0.04) per share), $(585,000) ($(0.39) per share), $(956,000) ($(0.64) per share) and $182,000 ($0.11 per share), respectively, for the first, second, third and fourth quarters of 1998. In December 1999, the Company agreed to sell its Poultry Division. The sale was completed on January 3, 2000. Accordingly, the Company's financial statements and data above have been restated to reflect the Poultry Division as a discontinued operation for all periods presented. See Note 13 to the Consolidated Financial Statements for further discussion. As described in Note 4 to the Consolidated Financial Statements, the Company changed its method of accounting for certain inventories from FIFO to LIFO during the fourth quarter of 1999. This change has been applied retroactively to January 1, 1999 and accordingly, the first three quarters of 1999 have been restated. The effect of this change in 1999 was to increase (decrease) net earnings and earnings per common share by $(1,341,000) ($(0.90) per share), $2,995,000 ($2.02 per share), $2,187,000 ($1.47 per share) and $(1,385,000) ($(0.94) per share), respectively, for the first, second, third and fourth quarters of 1999. In the fourth quarter of 1998, the Company sold its baking and flour milling operations in Puerto Rico, recognizing an after-tax gain of $33,272,000 or $22.37 per common share. See Note 2 to the Consolidated Financial Statements for further discussion. The remaining information required by Item 8 is hereby incorporated by reference to Registrant's Consolidated Financial Statements under the captions "Independent Auditors' Report," "Consolidated Statements of Earnings," "Consolidated Balance Sheets," "Consolidated Statements of Stockholders' Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements." 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, 1999, 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 2000 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 2000 Proxy Statement. Item 11. Executive Compensation This item has been omitted since Registrant filed a definitive proxy statement within 120 days after December 31, 1999, 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 through 8 and 10 of the 2000 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, 1999, 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 pages 3 and 4 of the 2000 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, 1999, 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 10 of the 2000 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. 2.1 - Asset Purchase Agreement by and between Seaboard Corporation and ConAgra, Inc., dated December 6, 1999. Incorporated by reference to Exhibit 2.1 of Registrant's Form 8-K, dated January 3, 2000. 2.2 - Addendum to Asset Purchase Agreement dated December 30, 1999. Incorporated by reference to Exhibit 2.2 of Registrant's Form 8-K, dated January 3, 2000. 3.1 - Registrant's Certificate of Incorporation, as amended, incorporated by reference to Exhibit 3.1 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 3.2 - Registrant's By-laws, as amended. Incorporated by reference to Exhibit 2.1 of Registrant's Form 10-Q for the quarter ended March 31, 1999. 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. The addenda have been omitted from the filing, but will be provided supplementary upon request of the Commission. Incorporated by reference to Exhibit 10.1 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. * 10.2 Registrant's Amended and Restated Supplemental Executive Retirement Plan. Incorporated by reference to Exhibit 10.2 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1998. * 10.3 Registrant's Supplemental Executive Retirement Plan for H. Harry Bresky dated March 21, 1995. Incorporated by reference to Exhibit 10.3 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. * 10.4 Employment Agreement for Joe E. Rodrigues dated July 9, 1986 and amended August 10, 1990. Incorporated by reference to Exhibit 10.5 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1995. * 10.5 Registrant's Executive Deferred Compensation Plan dated January 1, 1999. Incorporated by reference to Exhibit 10.1 of Registrant's Form 10-Q for the quarter ended March 31, 1999. 18 - Letter regarding change in accounting principles. 21 - List of subsidiaries. 27 - Financial Data Schedule (included in electronic copy only). * Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K On January 18, 2000 the Registrant filed a report on Form 8-K, dated January 3, 2000, disclosing the sale of its poultry businesses. This sale is further described in Note 13 to the Consolidated Financial Statements. 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 Robert L. Steer, Vice President - Chief (principal executive officer) Financial Officer (principal financial and accounting officer) Date: August 28, 2000 Date: August 28, 2000 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. By /s/H. Harry Bresky By /s/J.E. Rodrigues H. Harry Bresky, Director J.E. Rodrigues, Director Date: August 28, 2000 Date: August 28, 2000 By /s/David A. Adamsen By /s/Thomas J. Shields David A. Adamsen, Director Thomas J. Shields, Director Date: August 28, 2000 Date: August 28, 2000 EXHIBIT 18 February 28, 2000 The Board of Directors Seaboard Corporation We have audited the consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of earnings, changes in equity and cash flows for each of the years in the three-year period ended December 31, 1999 and have reported thereon under date of February 28, 2000, as contained in the December 31, 1999 annual report to shareholders. The aforementioned consolidated financial statements and our audit report thereon are incorporated by reference in the Company's annual report on Form 10K/A for the year ended December 31, 1999. As stated in Note 4, the Company changed its method of accounting for certain inventories from the first-in, first-out method to the last-in, first-out (LIFO) method and states that the newly adopted accounting principle is preferable in the circumstances because the LIFO method of valuing inventories more closely matches current costs and revenues in periods of price level changes. In accordance with your request, we have reviewed and discussed with Company officials the circumstances and business judgment and planning upon which the decision to make this change in the method of accounting was based. With regard to the aforementioned accounting change, authoritative criteria have not been established for evaluating the preferability of one acceptable method of accounting over another acceptable method. However, for purposes of Seaboard Corporation's compliance with the requirements of the Securities and Exchange Commission, we are furnishing this letter. Based on our review and discussion, with reliance on management's business judgment and planning, we concur that the newly adopted method of accounting is preferable in the Company's circumstances. Very truly yours, KPMG LLP 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 Agencia Maritima del Istmo, S.A. Same Costa Rica Agencias Generales Conaven, C.A. Conaven Venezuela Almacenadora Conaven, S.A. Same Venezuela Atlantic Salmon (Maine) Limited Liability Company* Same Maine Cape Fear Railways, Inc. Same North Carolina Cayman Freight Shipping Services, Ltd.* Same Cayman Islands Chestnut Hill Farms, Inc. Same Florida Chestnut Hill Farms Honduras, S.A. de C.V. Same Honduras Consorcio Naviero de Occidente, C.A. Conaven Venezuela ContiSea LLC* Same Maine Cultivos Marinos, S.A. de C.V. CUMAR Honduras Delta Packaging Company Ltd.* Same Nigeria Desarrollo Industrial Bioacuatico, S.A.* DIBSA Ecuador Ducktrap River Fish Farm, L.L.C.* Same Maine Empacadora Litoral, S.A. de C.V. Same Honduras Globe International Holdings, S.A.* Same Nigeria H&O Shipping Limited Same Liberia Haiti Agro Processors Holdings, Ltd* Same Cayman Islands Ingenio y Refineria San Martin del Tabacal Tabacal Argentina KWABA - Sociedade Industrial e Comercial, SARL* KWABA Angola Les Moulins d'Haiti S.E.M. (LHM)* Same Haiti EXHIBIT 21 (continued) Lesotho Flour Mills Limited* Same Lesotho Life Flour Mill Ltd.* Same Nigeria Minoterie de Matadi, S.A.R.L.* Midema Democratic Republic of Congo Mobeira, SARL* Same Mozambique Molinos Champion, S.A.* Mochasa Ecuador Molinos del Ecuador, C.A.* Molidor Ecuador National Milling Company of Guyana, Ltd. Same Guyana National Milling Company Limited Same Zambia Port of Miami Cold Storage, Inc. Same Florida Representaciones Maritimas y Aereas, S.A. Remarsa Guatemala S.B.D., LLC Same Delaware Samovar International Finance, Inc. Same Puerto Rico SASCO Engineering Co./ Seaboard Sales Corporation Ltd. Same Bermuda Sea Cargo, S.A. Same Panama 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, Inc. Same Oklahoma Seaboard Freight & Shipping Jamaica Limited Same Jamaica Seaboard Guyana, Ltd. Same Bermuda Seaboard Holdings Ltd. Same British Virgin Islands Seaboard Marine Bahamas, Ltd. Same Bahamas Seaboard Marine Ltd. Same Liberia Seaboard Marine of Florida, Inc. Same Florida Seaboard Overseas Limited Same Bahamas EXHIBIT 21 (continued) Seaboard Ship Management Inc. Same Florida Seaboard Shipping Services (PTY) Ltd. Same South Africa Seaboard Trading and Shipping Ltd. Same Minnesota Seaboard Transport Inc. Same Oklahoma 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. (Bermuda) Ltd. Same Bermuda Vinprom Rousse AD Same Bulgaria Zenith Investments, Ltd.* Same Nigeria *Represents a non-controlled, non-consolidated affiliate. SEABOARD CORPORATION AND SUBSIDIARIES Consolidated Financial Statements and Schedule (Form 10-K/A) Securities and Exchange Commission For the year ended December 31, 1999 (With Independent Auditors' Report Thereon) SEABOARD CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule Financial Statements Page Independent Auditors' Report F-3 Consolidated Statements of Earnings for the years ended December 31, 1999, December 31, 1998 and December 31, 1997 F-4 Consolidated Balance Sheets as of December 31, 1999 and December 31, 1998 F-5 Consolidated Statements of Changes in Equity for the years ended December 31, 1999, December 31, 1998 and December 31, 1997 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 1999, December 31, 1998 and December 31, 1997 F-8 Notes to Consolidated Financial Statements F-9 The foregoing are incorporated by reference. The individual financial statements of the nonconsolidated foreign affiliates which would be required if each such foreign affiliate were a Registrant are omitted, because (a) the Registrant's and its other subsidiaries' investments in and advances to such foreign affiliates 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 affiliates 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 affiliates 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 nonconsolidated foreign affiliates in Note 5 of "Notes to the Consolidated Financial Statements." F-1 (Continued) SEABOARD CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule Schedule Page II - Valuation and Qualifying Accounts for the years ended December 31, 1999, 1998 and 1997 F-36 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 We have audited the accompanying consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of earnings, changes in equity and cash flows for each of the years in the three-year period ended December 31, 1999. 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, 1999 and 1998, and the results of their operations and their cash flows for each of the years in the three- year period ended December 31, 1999, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the accompanying consolidated balance sheets as of December 31, 1999 and 1998, and the related consolidated statements of earnings, changes in equity and cash flows for each of the years in the three-year period ended December 31, 1999 have been restated. As discussed in Note 4 to the consolidated financial statements, the Company changed its method of accounting for certain inventories from the first-in, first-out method to the last-in, first-out method in 1999. KPMG LLP Kansas City, Missouri February 28, 2000, except as to the third paragraph of Note 1, which is as of August 14, 2000 F-3 Seaboard Corporation and Subsidiaries Consolidated Statements of Earnings (Thousands of dollars except per share amounts) Years ended December 31, 1999 1998 1997 Net sales $1,255,304 $1,265,366 $1,303,753 Cost of sales and operating expenses 1,135,176 1,116,253 1,108,523 Gross income 120,128 149,113 195,230 Selling, general and administrative expenses 107,760 119,343 116,378 Operating income 12,368 29,770 78,852 Other income (expense): Interest income 7,446 7,072 6,127 Interest expense (31,418) (26,371) (25,577) Loss from foreign affiliates (1,413) (17,105) (8,733) Gain on disposition of business - 54,544 - Minority interest 1,283 - - Miscellaneous 3,128 3,908 1,221 Total other income (expense), net (20,974) 22,048 (26,962) Earnings (loss) from continuing operations before income taxes (8,606) 51,818 51,890 Income tax expense (4,981) (20,391) (16,820) Earnings (loss) from continuing operations (13,587) 31,427 35,070 Earnings (loss) from discontinued operations, net of income taxes of $8,278, $11,753 and $(3,616), for 1999, 1998 and 1997 respectively 13,634 19,511 (5,991) Net earnings $ 47 $ 50,938 $ 29,079 Earnings per common share: Earnings (loss) from continuing operations $ (9.13) $ 21.12 $ 23.58 Earnings (loss) from discontinued operations 9.16 13.12 (4.03) Earnings per common share $ 0.03 $ 34.24 $ 19.55 See accompanying notes to consolidated financial statements. F-4 Seaboard Corporation and Subsidiaries Consolidated Balance Sheets (Thousands of dollars) December 31, Assets 1999 1998 Current assets: Cash and cash equivalents $ 11,039 $ 20,716 Short-term investments 91,609 155,763 Receivables: Trade 141,838 133,282 Due from foreign affiliates 31,383 25,319 Other 27,785 21,418 201,006 180,019 Allowance for doubtful receivables (29,075) (26,117) Net receivables 171,931 153,902 Inventories 192,847 144,720 Deferred income taxes 15,031 14,604 Prepaid expenses and deposits 20,395 12,268 Current assets of discontinued operations 103,464 92,059 Total current assets 606,316 594,032 Investments in and advances to foreign affiliates 28,449 28,416 Net property, plant and equipment 480,415 462,856 Other assets 30,204 33,506 Non-current assets of discontinued operations 132,407 97,087 Total Assets $1,277,791 $1,215,897 See accompanying notes to consolidated financial statements. F-5 Seaboard Corporation and Subsidiaries Consolidated Balance Sheets (Thousands of dollars) December 31, Liabilities and Stockholders' Equity 1999 1998 Current liabilities: Notes payable to banks $ 221,353 $ 158,980 Current maturities of long-term debt 11,487 18,608 Accounts payable 61,529 58,662 Accrued liabilities 54,408 71,295 Deferred revenues 31,929 15,384 Accrued payroll 17,360 16,353 Current liabilities of discontinued operations 24,013 23,650 Total current liabilities 422,079 362,932 Long-term debt, less current maturities 318,017 313,324 Deferred income taxes 41,948 44,506 Other liabilities 34,924 27,609 Non-current liabilities of discontinued operations 16,824 17,116 Total non-current and deferred liabilities 411,713 402,555 Minority interest 831 5,682 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 Accumulated other comprehensive income (201) (81) Retained earnings 428,667 430,107 Total stockholders' equity 443,168 444,728 Total Liabilities and Stockholders' Equity $1,277,791 $1,215,897 See accompanying notes to consolidated financial statements. F-6 Seaboard Corporation and Subsidiaries Consolidated Statements of Changes in Equity (Thousands of dollars except per share amounts) Years ended December 31, 1999, 1998 and 1997
Accumulated Other Common Treasury Additional Comprehensive Retained Comprehensive Stock Stock Capital Income Earnings Income Balances, January 1, 1997 $1,790 $ (302) $ 13,214 $ 16 $ 353,064 Net earnings - - - - 29,079 $29,079 Other comprehensive income, net of income tax benefit of $3 - - - (6) - (6) Comprehensive income - - - - - 29,073 Dividends on common stock ($1.00 per share) - - - - (1,487) Balances, December 31, 1997 1,790 (302) 13,214 10 380,656 Net earnings - - - - 50,938 50,938 Other comprehensive income, net of income tax benefit of $56 - - - (91) - (91) Comprehensive income - - - - - 50,847 Dividends on common stock ($1.00 per share) - - - - (1,487) Balances, December 31, 1998 1,790 (302) 13,214 (81) 430,107 Net earnings - - - - 47 47 Other comprehensive income, net of income tax benefit of $77 - - - (120) - (120) Comprehensive income - - - - - $ (73) Dividends on common stock ($1.00 per share) - - - - (1,487) Balances, December 31, 1999 $1,790 $ (302) $ 13,214 $ (201) $ 428,667 See accompanying notes to consolidated financial statements.
F-7 Seaboard Corporation and Subsidiaries Consolidated Statements of Cash Flows (Thousands of dollars) Years ended December 31, 1999 1998 1997 Cash flows from operating activities: Net earnings $ 47 $ 50,938 $ 29,079 Adjustments to reconcile net earnings to cash from operating activities: Net (earnings) loss from discontinued operations(13,634) (19,511) 5,991 Depreciation and amortization 45,582 40,479 41,746 Loss from foreign affiliates 1,413 17,105 8,733 Deferred income taxes (2,985) 10,884 2,719 Gain from sale of fixed assets (1,984) (2,737) (1,798) Gain from disposition of businesses - (54,544) - Changes in current assets and liabilities (net of businesses acquired and disposed): Receivables, net of allowance (18,029) 7,471 (16,231) Inventories (48,127) 35,341 (19,020) Prepaid expenses and deposits (8,127) (1,040) (1,398) Current liabilities exclusive of debt 3,532 (24,576) 61,086 Other, net 1,837 (346) 5,266 Net cash from operating activities (40,475) 59,464 116,173 Cash flows from investing activities: Purchase of investments (443,978) (446,868) (277,437) Proceeds from the sale of investments 456,903 311,433 193,303 Proceeds from the maturity of investments 51,073 85,053 65,754 Capital expenditures (67,713) (26,913) (48,324) Investments in and advances to foreign affiliates, net (1,446) (48,586) (41,834) Proceeds from the sale of fixed assets 5,042 9,795 7,117 Investment in domestic affiliate - (2,500) - Additional investment in a controlled subsidiary (2,791) - - Acquisition of business (net of cash acquired) - (1,388) - Proceeds from disposition of businesses - 72,359 - Net cash from investing activities (2,910) (47,615) (101,421) Cash flows from financing activities: Notes payable to banks, net 62,373 (15,025) 7,288 Proceeds from issuance of long-term debt 26,667 - 10,213 Principal payments of long-term debt (26,807) (7,400) (1,278) Dividends paid (1,487) (1,487) (1,487) Proceeds from termination of interest rate swap agreements 5,982 - - Bond construction fund - - (1,055) Net cash from financing activities 66,728 (23,912) 13,681 Net cash flows from discontinued operations (33,020) 24,227 (31,348) Net change in cash and cash equivalents (9,677) 12,164 (2,915) Cash and cash equivalents at beginning of year 20,716 8,552 11,467 Cash and cash equivalents at end of year $ 11,039 $ 20,716 $ 8,552 See accompanying notes to consolidated financial statements. F-8 Seaboard Corporation and Subsidiaries Notes to Consolidated Financial Statements December 31, 1999, 1998 and 1997 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 primarily engaged in domestic pork production and processing, and cargo shipping. Overseas, the Company is primarily engaged in commodity merchandising, flour and feed milling, produce farming, sugar production, and electric power generation. Seaboard Flour Corporation is the owner of 75.3% of the Company's outstanding common stock. Principles of Consolidation and Investments in Affiliates The consolidated financial statements include the accounts of Seaboard Corporation and its domestic and foreign subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company's investments in non-controlled affiliates are accounted for by the equity method. Financial information from certain foreign subsidiaries and affiliates is reported on a one- to three-month lag depending on the specific entity. As more fully described in Note 13, in December 1999 the Company agreed to sell its Poultry Division. Accordingly, the Company's financial statements and notes have been restated to reflect the Poultry Division as a discontinued operation for all periods presented. Restatement for Accounting Error In August 2000, the Company announced that its management had discovered that assets of its Produce Division had been overstated in prior periods due to accounting errors and irregularities in the Produce Division's books and records. The overstatements related primarily to the crops in production and related materials in Honduras as reported by the Miami headquarters of the Produce Division. As a result, management determined to restate the Company's financial statements for each of the prior periods effected back to fiscal 1995. Financial statements and related disclosures contained in this report reflect, where appropriate, changes to conform to these restatements. Net earnings and balance sheet amounts as previously reported and as restated are as follows: F-9 (Thousands of dollars) Net Earnings as Net Earnings For the Years Ended: Previously Reported as Restated December 31, 1999 $ 240 $ 47 December 31, 1998 $ 52,355 $ 50,938 December 31, 1997 $ 30,574 $ 29,079 Total Assets Stockholders' Equity as Previously as as Previously as (Thousands of dollars) Reported Restated Reported Restated December 31, 1999 $1,285,326 $1,277,791 $448,425 $ 443,168 December 31, 1998 $1,223,134 $1,215,897 $449,792 $ 444,728 Short-term Investments 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 component of accumulated other comprehensive income. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest income. Inventories Effective January 1, 1999, the Company changed its method of accounting from the lower of first-in, first-out (FIFO) cost or market to the lower of last-in, first-out (LIFO) cost or market for determining inventory cost of live hogs, dressed pork product and related materials. All other inventories are valued at the lower of 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 30 years. Property, plant and equipment leases which are deemed to be installment purchase obligations have been capitalized and included in the property, plant and equipment accounts. Maintenance, repairs and minor renewals are charged to operations while major renewals and improvements are capitalized. F-10 Deferred Grant Revenue Included in other liabilities at December 31, 1999 and 1998 is $10,704,000 and $11,127,000, 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. Comprehensive Income For the years ended December 31, 1999, 1998 and 1997, other comprehensive income adjustments were not material and consisted of unrealized gains on available-for-sale securities and foreign currency cumulative translation adjustments, net of tax. 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 containerized cargo 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 F-11 the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. See Note 12 for discussion of recoverability of Sugar and Citrus segment's long-lived assets. 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, 1999, 1998 and 1997, respectively. 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 $23,483,000 and $19,997,000 at December 31, 1999 and 1998, respectively. The amounts paid (received) for income taxes and interest are as follows: Years ended December 31, (Thousands of dollars) 1999 1998 1997 Interest (net of amounts capitalized) $ 33,090 26,444 24,753 Income taxes $ 15,432 (3,608) 7,987 F-12 Supplemental Noncash Transactions As more fully described in Notes 2 and 5, during 1998 the Company purchased two businesses, consolidated a previously non-controlled foreign affiliate and disposed of its Puerto Rican baking and flour milling operations. The following table summarizes the noncash transactions resulting from the acquisitions and consolidation of the foreign affiliate: Year ended December 31, (Thousands of dollars) 1998 Increase in other working capital $ 38,539 Decrease in investments in and advances to foreign affiliates (96,733) Increase in fixed assets 114,867 Increase in other net assets 9,198 Increase in notes payable and long-term debt (58,801) Minority interest (5,682) Cash paid, net of cash acquired and consolidated $ 1,388 The following table summarizes the noncash transactions resulting from the disposition of businesses: Year ended December 31, (Thousands of dollars) 1998 Decrease in short-term investments $ 3,429 Decrease in other working capital 1,303 Decrease in fixed assets 19,736 Decrease in other net assets 1,347 Long-term note receivable from sale (8,000) Gain on disposal 54,544 Proceeds from disposition of businesses $ 72,359 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 certain of the Company's foreign subsidiaries and affiliates primarily conduct business. These fluctuations result in exchange gains and losses. The activities of F-13 these foreign subsidiaries and affiliates are primarily conducted with U.S. subsidiaries or operate in hyper-inflationary environments. As a result, the Company translates the financial statements of certain foreign subsidiaries and affiliates using the U.S. dollar as the functional currency. The exchange gains and losses reported in earnings were not material for the years ended December 31, 1999, 1998 and 1997. Foreign currency exchange restrictions imposed upon the Company's foreign subsidiaries and foreign affiliates do not have a significant effect on the consolidated financial position of the Company. Certain foreign subsidiaries use local currency as their functional currency. Assets and liabilities of these subsidiaries are translated to U.S. dollars at year-end exchange rates, and income and expense items are translated at average rates for the year. Resulting translation gains and losses were not material for the years ended December 31, 1999, 1998 and 1997. Translation gains and losses are recorded as components of accumulated other comprehensive income. Financial Instruments The Company, from time-to-time, 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. These agreements effectively convert specifically identified, variable-rate debt into fixed-rate debt. The Company also has a foreign currency exchange agreement to manage a foreign currency exchange risk on a short-term note which is payable in foreign currency. Differences to be paid or received are accrued as interest or exchange rates change and are recognized as an adjustment to interest expense. See Note 8 for a description of outstanding exchange rate agreements. 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, 1999 and 1998, net deferred gains on terminated interest rate exchange agreements totaled $6,435,000 and $784,000, respectively. In cases where there is no remaining underlying debt instrument, gains and losses on termination are recognized currently in miscellaneous income (expense). Commodity Instruments 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, 1999, the Company had net contracts to purchase 1.0 million bushels of grain and 8.0 tons of meal, and net contracts to sell 1.4 million pounds of hogs. Gains and losses on commodity instruments designated as hedges and for which there is high correlation between changes in the value of the instrument and changes in the value of the hedged commodity are deferred and ultimately recognized in operations as part of the cost of the commodity. Gains and losses on qualifying hedges of firm commitments or probable anticipated F-14 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 in the consolidated statements of operations. For the years ended December 31, 1999, 1998 and 1997, losses on commodity contracts reported in operating income were $592,000, $3,139,000 and $2,962,000, respectively. At December 31, 1999, the net deferred loss on commodity instruments was $426,000, compared to a net deferred gain at December 31, 1998 of $92,000. These amounts are 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. Note 2 Acquisitions and Dispositions of Businesses In December 1999, the Company agreed to sell its Poultry Division. The sale of this division is presented as a discontinued operation and is more fully described in Note 13. In October 1998, the Company purchased a controlling interest in an existing Bulgarian winery by acquiring newly issued shares for $15,000,000. During 1999, the Company further increased its interest in the winery by purchasing previously issued shares for $2,791,000. In November 1998, the Company purchased a flour and feed milling operation in Zambia by assuming liabilities of approximately $10,232,000. These acquisitions were accounted for using the purchase method and would not have significantly affected sales, net earnings or earnings per share on a pro forma basis. On December 30, 1998, the Company completed the sale of its Puerto Rican baking and flour milling businesses, to a management group led by the President of the baking businesses. These assets were sold for $81,359,000 and the assumption of $11,770,000 in liabilities. The proceeds consisted of $72,359,000 in cash, an $8,000,000 interest bearing subordinated note receivable due in 2004, and a $1,000,000 interest bearing note receivable subsequently collected in the first quarter of 1999. The Company recognized a pre-tax gain of $54,544,000 ($33,272,000 after tax) in connection with this transaction. The following pro forma unaudited financial data reflects the pro forma impact on the Company's results of operations as if the sale was consummated at the beginning of each year presented, excluding the gain on the sale, with pro forma adjustments to give effect to reducing short-term borrowings, interest income earned on short-term investments and certain other adjustments, together with related income tax effects: F-15 Years ended December 31, (Thousands of dollars, except per share amounts) 1998 1997 Net sales $1,174,190 1,209,776 Earnings (loss) from continuing operations $ (4,146) 32,166 Net earnings $ 16,128 26,979 Earnings (loss) per share from continuing operations $ (2.79) 21.62 Earnings per share $ 10.84 18.14 The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the sale been consummated on the dates assumed, nor are they necessarily indicative of future operating results. Note 3 Short-term Investments Substantially all available-for-sale securities have contractual maturities within two years and are available to meet current operating needs. The amortized cost of these investments approximates fair value at December 31, 1999 and 1998. The gross realized gains and losses on sales of available-for- sale securities were not material for the years ended December 31, 1999, 1998 and 1997. The following is a summary of the estimated fair value of available- for-sale securities at December 31, 1999 and 1998: December 31, (Thousands of dollars) 1999 1998 U.S. Treasury securities and obligations of U.S. government agencies $ 33,960 $ 39,265 Obligations of states and political subdivisions 35,526 60,877 Other securities 22,123 55,621 Total securities $ 91,609 $ 155,763 F-16 Note 4 Inventories During the fourth quarter of 1999, the Company changed its method of accounting for certain inventories of the Pork Division from FIFO to LIFO, retroactively effective as of January 1, 1999. The Company believes the new method is preferable because the LIFO method of valuing inventories more closely matches current costs and revenues in periods of price level changes. The net effect of this change was to increase net earnings from continuing operations by $2,456,000 or $1.65 per common share. A summary of inventories at the end of each year is as follows: December 31, (Thousands of dollars) 1999 1998 At lower of LIFO (FIFO for 1998) cost or market: Live hogs and related materials $ 75,662 $ 73,804 Dressed pork and related materials 8,360 8,766 84,022 82,570 LIFO allowance 4,026 - Total inventories at lower of LIFO cost or market 88,048 82,570 At lower of FIFO cost or market: Grain, flour and feed 41,772 6,478 Sugar produced and in process 22,398 26,025 Crops in production and related materials 7,490 5,408 Wine and other spirits 8,391 4,288 Other 24,748 19,951 Total inventories at lower of FIFO cost or market 104,799 62,150 Total inventories $ 192,847 $ 144,720 F-17 Note 5 Investments in and Advances to Foreign Affiliates The Company has made investments in and advances to non-controlled foreign affiliates primarily conducting business in flour and feed milling. The foreign affiliates are located in Angola, the Democratic Republic of Congo, Lesotho, Mozambique, Nigeria and Sierra Leone in Africa; Ecuador in South America; and Haiti in the Caribbean. These investments 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 1997. During the second quarter of 1999, the Company invested $1.7 million for a minority interest in a flour mill in Angola. In July 1998, the Company acquired for $5,000,000 a non-controlling interest in a flour mill in Lesotho. In June 1998, the Company, in a joint venture with two other partners, acquired an interest in a flour mill in Haiti. The Company made an investment of $3,000,000 for a minority interest in the joint venture, which in turn owns 70% of a Haitian company which owns the flour mill. These investments are being accounted for using the equity method. Ingenio y Refineria San Martin del Tabacal S.A. (Tabacal) is an Argentine company primarily engaged in growing and refining sugarcane and, to a lesser extent, citrus production. The Company accounted for this investment using the equity method from July 1996 (date of acquisition) through December 1998. Losses from foreign affiliates during 1998 and 1997 are primarily attributable to the operations of Tabacal. Effective December 31, 1998, the Company obtained voting control over a majority of the capital stock of Tabacal. Accordingly, as of December 31, 1998, Tabacal is accounted for as a consolidated subsidiary. See Note 1 for further discussion of the effects of the consolidation on the 1998 balance sheet. Sales of grain and supplies to non-consolidated foreign affiliates are included in consolidated net sales for the years ended December 31, 1999, 1998 and 1997, and amounted to $69,739,000, $107,424,000 and $79,946,000, respectively. Combined condensed financial information of the non-controlled, non- consolidated foreign affiliates for their fiscal periods ended within each of the Company's years ended, excluding Tabacal's 1999 operating results and 1999 and 1998 balance sheets, are as follows: F-18 December 31, (Thousands of dollars) 1999 1998 1997 Net sales $ 166,592 217,362 208,340 Net loss $ (8,966) (20,497) (13,831) Total assets $ 122,008 137,381 240,511 Total liabilities $ 61,557 72,995 193,094 Total equity $ 60,451 64,386 47,417 Note 6 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) 1999 1998 Land and improvements $ 81,317 $ 76,750 Buildings and improvements 154,647 153,092 Machinery and equipment 388,887 353,917 Transportation equipment 82,174 71,506 Office furniture and fixtures 13,697 12,048 Construction in progress 14,023 6,926 734,745 674,239 Accumulated depreciation and amortization (254,330) (211,383) Net property, plant and equipment $ 480,415 $ 462,856 Note 7 Income Taxes Income taxes attributable to continuing operations for the years ended December 31, 1999, 1998 and 1997 differ from the amounts computed by applying the statutory U.S. Federal income tax rate to earnings (loss) from continuing operations before income taxes for the following reasons: F-19 Years ended December 31, (Thousands of dollars) 1999 1998 1997 Computed "expected" tax expense (benefit) $(3,012) $18,136 $18,162 Adjustments to tax expense (benefit) attributable to: Foreign tax differences 8,988 7,680 705 Tax-exempt investment income (358) (730) (621) State income taxes, net of Federal benefit 12 199 944 Other (649) (4,894) (2,370) Income tax expense - continuing operations 4,981 20,391 16,820 Income tax expense (benefit) - discontinued operations 8,278 11,753 (3,616) Total income tax expense $13,259 $32,144 $13,204 The components of total income taxes are as follows: Years ended December 31, (Thousands of dollars) 1999 1998 1997 Current: Federal $ 2,976 $(11,570) $ 7,227 Foreign (including Puerto Rico) 5,332 17,126 6,469 State and local (419) (118) 909 Deferred: Federal (3,445) 14,300 2,587 Foreign (including Puerto Rico) (6) 110 (730) State and local 543 543 358 Income tax expense - continuing operations 4,981 20,391 16,820 Unrealized changes in other comprehensive income (77) (56) (3) Income tax expense (benefit) - discontinued operations 8,278 11,753 (3,616) Total income taxes $13,182 $ 32,088 $13,201 F-20 Components of the net deferred income tax liability at the end of each year are as follows: December 31, (Thousands of dollars) 1999 1998 Deferred income tax liabilities: Cash basis farming adjustment $ 17,162 $ 18,084 Deferred earnings of foreign subsidiaries 1,749 4,819 Depreciation 64,116 52,853 Other 4,123 775 87,150 76,531 Deferred income tax assets: Reserves/accruals 48,591 40,001 Foreign losses 2,420 3,165 Other 11,372 5,613 62,383 48,779 Valuation allowance 2,150 2,150 Net deferred income tax liability $ 26,917 $ 29,902 The Company believes that its future taxable income will be sufficient for full realization of the deferred tax assets. The valuation allowance represents the effect of accumulated losses on certain foreign subsidiaries that will not be recognized without future liquidation or sale of these subsidiaries. At December 31, 1999 and 1998 current income taxes payable totaled $7,155,000 and $14,699,000, respectively. At December 31, 1999 and 1998, 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 $30,000,000. F-21 Note 8 Notes Payable and Long-term Debt Notes payable amounting to $221,353,000 and $158,980,000 at December 31, 1999 and 1998, respectively, consisted of obligations due banks within one year. At December 31, 1999, these funds were outstanding under the Company's one-year revolving credit facilities totaling $153.3 million and short-term uncommitted credit lines from banks totaling $145.0 million, less outstanding letters of credit commitments totaling $6.0 million. Subsequent to year-end, the Company's one-year revolving credit facilities totaling $153.3 million maturing in the first quarter of 2000 were reduced to $141.0 million and extended for an additional year and short-term uncommitted credit lines totaling $145.0 were reduced to $132.5 million. Weighted average interest rates on the notes payable were 7.24% and 6.18% at December 31, 1999 and 1998, respectively. Included in notes payable at December 31, 1999 and 1998, are $20,000,000 and $16,560,000, respectively, payable in Japanese Yen (Yen) and outstanding under a $20 million uncommitted line of credit. At December 31, 1999 and 1998, the Company had foreign exchange contracts in place effectively fixing the exchange rate on this $20,000,000 note payable at 104.13 Yen to one U.S. dollar, and on the $16,560,000 note payable at 116.63 Yen to one U.S. dollar, respectively. 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. F-22 A summary of long-term debt at the end of each year is as follows: December 31, (Thousands of dollars) 1999 1998 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 (IDRBs), floating rates (5.75% - 6.78% at December 31, 1999) due through 2027 48,700 48,700 Revolving credit facility, floating rate (6.57% at December 31, 1999) due 2002 26,667 10,000 Foreign subsidiary obligations (9.00% - 14.50%) due 2001 through 2007 15,353 26,665 Foreign subsidiary obligations, floating rate (5.00% at December 31, 1999) due 2000 2,522 9,484 Term loan, 3.00%, due 2000 5,415 5,415 Capital lease obligations and other 5,847 6,668 329,504 331,932 Current maturities of long-term debt (11,487) (18,608) Long-term debt, less current maturities $ 318,017 $ 313,324 Of the 1999 foreign subsidiary obligations, $5,085,000 is denominated in U.S. dollars and the remaining $12,790,000 is payable in Argentine pesos. Of the 1998 foreign subsidiary obligations, $21,532,000 was denominated in U.S. dollars and the remaining $14,617,000 was payable in Argentine pesos. At December 31, 1999, Argentine land and sugar production facilities and equipment with a depreciated cost of $17,621,000, secure certain bond issues and foreign subsidiary debt. Included in other assets at December 31, 1999 and 1998 are $1,532,000 and $1,477,000, respectively, of unexpended bond proceeds held in trust that are invested in accordance with the bond issuance agreements. The terms of the note agreements pursuant to which the senior notes, IDRBs, 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; requires the maintenance of consolidated tangible net worth, as defined, of not less than $250,000,000; and limits the Company's ability to sell assets under F-23 certain circumstances. The Company is in compliance with all restrictive debt covenants relating to these agreements as of December 31, 1999. At December 31, 1998, 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 were scheduled to expire in 2007. However, during 1999 the Company terminated these agreements for proceeds totaling $5,982,000. These proceeds will be amortized as a reduction of interest expense through the original expiration dates in 2007, or recognized as other income to the extent of any early repayment of the related debt. Unamortized proceeds of $582,000 at December 31, 1999 relate to agreements associated with debt of the Company's discontinued poultry operations (see Note 13) and will be recognized as a component of the gain on the disposal in the first quarter of 2000. Ownership of these agreements, including any amortization of termination proceeds, increased interest expense in 1999 by $799,000 and in 1998 by $808,000. Annual maturities of long-term debt at December 31, 1999 are as follows: $11,487,000 in 2000, $23,388,000 in 2001, $49,509,000 in 2002, $47,126,000 in 2003, $53,149,000 in 2004 and $144,845,000 thereafter. Note 9 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, 1999 and 1998 the fair value of the Company's short-term investments was $91,609,000 and $155,763,000, respectively, with an amortized cost of $91,684,000 and $155,682,000 at December 31, 1999 and 1998, respectively. The fair value of long-term debt is determined by comparing interest rates for debt with similar terms and maturities. At December 31, 1999 and 1998 the fair value of the Company's long-term debt was $325,275,000 and $347,269,000, respectively, with a carrying value of $329,504,000 and $331,932,000 at December 31, 1999 and 1998, respectively. Other financial instruments consisting of cash and cash equivalents, net receivables, notes payable, and accounts payable are carried at cost, which approximates fair value, as a result of the short-term nature of the instruments. F-24 Note 10 Employee Benefits The Company maintains defined benefit pension plans for its domestic salaried and clerical 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 changes in the plans' benefit obligations and fair value of assets for the years ended December 31, 1999 and 1998, and a statement of the funded status as of December 31, 1999 and 1998 are as follows: December 31, (Thousands of dollars) 1999 1998 Reconciliation of benefit obligation: Benefit obligation at beginning of year $ 30,072 $ 35,786 Service cost 2,419 2,640 Interest cost 2,231 2,558 Actuarial losses (gains) (1,685) 1,514 Benefits paid (1,273) (2,075) Divestitures (see Note 2) - (10,351) Benefit obligation at end of year 31,764 30,072 Reconciliation of fair value of plan assets: Fair value of plan assets at beginning of year 26,213 30,763 Actual return on plan assets 2,734 3,492 Employer contributions 48 1,028 Benefits paid (1,273) (2,075) Divestitures (see Note 2) - (6,995) Fair value of plan assets at end of year 27,722 26,213 F-25 Funded status (4,042) (3,859) Unrecognized transition obligation 1,052 1,213 Unamortized prior service cost (1,966) (2,188) Unrecognized net actuarial gains (5,315) (3,167) Accrued benefit cost $ (10,271) $ (8,001) Assumptions used in determining pension information were: Years ended December 31, 1999 1998 1997 Weighted-average assumptions: Discount rate 8.00% 7.25% 7.50% Expected return on plan assets 8.75% 8.75% 8.75% Long-term rate of increase in compensation levels 4.50% 4.50% 4.25-4.50% The net periodic benefit cost of these plans was as follows: Years ended December 31, (Thousands of dollars) 1999 1998 1997 Components of net periodic benefit cost: Service cost $ 2,419 $ 2,640 $ 2,506 Interest cost 2,231 2,558 2,282 Expected return on plan assets (2,268) (2,692) (2,407) Amortization and other (65) (68) (94) Net periodic benefit cost $ 2,317 $ 2,438 $ 2,287 As of December 31, 1999, the projected benefit obligation and accumulated benefit obligation for unfunded pension plans were $3,583,000 and $2,685,000, respectively. As of December 31, 1998, the projected benefit obligation and accumulated benefit obligation for unfunded pension plans were $2,561,000 and $2,143,000, respectively. As more fully described in Note 13, the Poultry Division was sold in January 2000 and is presented as a discontinued operation. Poultry employees retain benefits in the primary pension plan summarized above and are treated as terminated and fully vested at the date of the sale. This results in a $1.6 million curtailment gain and will be recognized as a component of the gain on the sale in January 2000. A plan for certain F-26 production employees of the Poultry Division was assumed by the buyer and the above information for 1998 and 1997 has been excluded from the presentation above. The Company has certain individual, non-qualified, unfunded supplemental retirement agreements for certain executive employees. Pension expense for these plans was $658,000, $514,000 and $574,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Included in other liabilities at December 31, 1999 and 1998 is $8,492,000 and $8,207,000, 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 $1,157,000, $1,102,000 and $916,000 for the years ended December 31, 1999, 1998 and 1997, respectively. Note 11 Commitments and Contingencies The Company leases various ships, facilities and equipment under noncancelable operating lease agreements. In addition, the Company is a party to master lease programs with limited partnerships which own certain of the facilities used by the Company in connection with its hog production. These arrangements are accounted for as operating leases. Under these arrangements, 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 lessors 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 $58,253,000, $57,515,000 and $48,628,000 in 1999, 1998 and 1997, respectively. Minimum lease commitments under noncancelable leases with initial terms greater than one year at December 31, 1999, were $23,020,000 for 2000, $15,283,000 for 2001, $11,223,000 for 2002, $9,039,000 for 2003, $6,666,000 for 2004 and $35,560,000 thereafter. It is expected that, in the ordinary course of business, leases will be renewed or replaced. In January 2000, the Company signed a construction contract to build a 71.2 megawatt barge-mounted power plant for approximately $50 million to be located in the Dominican Republic. The Company is currently evaluating financing options including potential leasing alternatives and expects to begin supplying power during the fourth quarter of 2000. In February 2000, the Company signed an agreement to purchase assets of an existing hog production operation for approximately $75 million, consisting of $36 million in cash, the assumption of $33 million in debt and $6 million payable over the next four years. The transaction is expected to close in late F-27 March or early second quarter of 2000 and will be accounted for using the purchase method. 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 recently received a ruling in its favor which dismisses the principal theory of recovery although the appeal period has not expired. Accordingly, the Company believes that it has no responsibility for the loss. The Company is a defendant in a lawsuit brought in federal court by a third-party hog supplier claiming breach of agreement, common law fraud and violation of the federal RICO statute. Damages of approximately $25 million are alleged. Any amount awarded under the RICO count would be trebled. The Company has counterclaimed asserting breach of agreement and claiming damages of approximately $16 million. The Company believes it has meritorious defenses to all counts and that the RICO count is without merit. 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 12 Segment Information Seaboard Corporation has six reportable segments: Pork, Marine, Commodity Trading and Milling, Sugar and Citrus, Power, and Wine, each offering a specific product or service. The Pork segment sells fresh and value-added pork products mainly to further processors and foodservice companies both domestically and overseas. The Marine segment, primarily based out of the Port of Miami, offers containerized cargo shipping services throughout Latin America and the Caribbean. The Commodity Trading and Milling segment sources bulk and bag commodities primarily overseas and operates foreign flour and feed mills. The Sugar and Citrus segment produces and processes sugar and citrus in Argentina to be marketed locally and for export to the United States and Europe. The Power segment generates electric power from a floating generating facility located in the Dominican Republic. The Wine segment, located in Bulgaria, produces wines, brandies and other beverages to be marketed throughout Europe and for export to the United Kingdom, Canada, Russia and the United States. Revenues from all other segments are primarily derived from operations including produce farming and baking (sold in December 1998, see Note 2). Each of the six main segments is separately managed and each was started or acquired independent of the other segments. In December 1999, the Company agreed to sell its Poultry Division (see Note 13). As a result, the Poultry Division is no longer reported as a separate segment and two other operations, Power and Wine, now qualify as reportable segments of the Company. As discussed in Note 13, certain amounts F-28 have been restated to exclude general corporate overhead previously allocated to the discontinued operation. The Company accounted for its investment in Tabacal using the equity method through December 1998. Effective December 31, 1998, the Company obtained voting control over a majority of the capital stock of Tabacal. Accordingly, during 1999 the operating results of Tabacal are accounted for as a consolidated subsidiary. Due to the significance of Tabacal's operating results, it is reported as an additional segment (Sugar and Citrus) in 1999. Results in 1999 include severance charges of $3.0 million related to certain employee layoffs enacted to reduce future operating costs. The December 31, 1998, total assets by segment information has been restated to reflect Tabacal as a separate segment. No comparative 1998 segment operating results information is provided as Tabacal's results were reported under the equity method in 1998. The entire Argentine sugar industry is experiencing financial difficulties, with Tabacal and certain large competitors incurring operating losses in part because Argentine sugar prices are below historical levels. As a result of these recent operating losses for Tabacal, the Company has evaluated the recoverability of Tabacal's long-lived assets and believes that the value of those assets are presently recoverable. However, any further decline in sugar prices would likely result in the carrying values not being recoverable, which would result in a material charge to earnings for the impairment of these assets. The following tables set forth specific financial information about each segment as reviewed by the Company's management. Operating income for segment reporting is prepared on the same basis as that used for consolidated operating income. Operating income is used as the measure of evaluating segment performance because management does not consider interest and income tax expense on a segment basis. Sales to External Companies: Years ended December 31, (Thousands of dollars) 1999 1998 1997 Pork $ 571,159 $ 500,357 $ 531,587 Marine 307,663 310,903 309,306 Commodity Trading and Milling 259,489 306,406 313,900 Sugar and Citrus 46,855 - - Power 22,975 26,183 30,336 Wine 12,859 - - All other 34,304 121,517 118,624 Segment/Consolidated Totals $1,255,304 $1,265,366 $1,303,753 F-29 Operating Income: Years ended December 31, (Thousands of dollars) 1999 1998 1997 Pork $ 37,661 $ (1,122) $ 38,378 Marine (1,893) 17,379 27,297 Commodity Trading and Milling 2,615 10,505 9,542 Sugar and Citrus (15,909) - - Power 7,942 8,839 7,879 Wine (5,946) - - All other (4,673) (395) (390) Segment Totals 19,797 35,206 82,706 Corporate Items (7,429) (5,436) (3,854) Consolidated Totals $ 12,368 $ 29,770 $ 78,852 Depreciation and Amortization: Years ended December 31, (Thousands of dollars) 1999 1998 1997 Pork $ 20,759 $ 20,676 $ 20,225 Marine 9,651 8,451 9,476 Commodity Trading and Milling 3,230 2,985 3,037 Sugar and Citrus 7,102 - - Power 1,547 1,638 1,623 Wine 362 - - All other 2,160 6,125 6,212 Segment Totals 44,811 39,875 40,573 Corporate Items 771 604 1,173 Consolidated Totals $ 45,582 $ 40,479 $ 41,746 F-30 Capital Expenditures: Years ended December 31, (Thousands of dollars) 1999 1998 1997 Pork $ 22,072 $ 16,304 $ 31,850 Marine 20,001 5,151 9,020 Commodity Trading and Milling 4,816 1,162 1,464 Sugar and Citrus 14,998 - - Power 389 79 1,381 Wine 3,746 - - All other 715 3,200 4,381 Segment Totals 66,737 25,896 48,096 Corporate Items 976 1,017 228 Consolidated Totals $ 67,713 $ 26,913 $ 48,324 Total Assets: December 31, (Thousands of dollars) 1999 1998 Pork $ 401,316 $ 387,699 Marine 97,561 99,609 Commodity Trading and Milling 161,477 108,822 Sugar and Citrus 167,972 162,094 Power 21,068 32,736 Wine 29,156 31,066 All other 38,931 35,990 Segment Totals 917,481 858,016 Corporate Items 124,439 168,735 Discontinued Poultry Operations 235,871 189,146 Consolidated Totals $1,277,791 $1,215,897 Administrative services provided by the corporate office are primarily allocated to the individual segments based on the size and nature of their operations. Prior to the third quarter of 1999, these costs were primarily allocated based on revenues. This change is deemed to provide a more accurate allocation and does not have a material impact on prior period comparative F-31 information. Corporate assets include short-term investments, investments in and advances to foreign affiliates, fixed assets, deferred tax amounts and other miscellaneous items. Corporate operating losses represent certain operating costs not specifically allocated to individual segments and general Corporate overhead previously allocated to the discontinued Poultry operations. Geographic Information No individual foreign country accounts for 10% or more of sales to external customers. The following table provides a geographic summary of the Company's net sales based on the location of product delivery: Years ended December 31, (Thousands of dollars) 1999 1998 1997 United States $ 639,167 $ 651,581 $ 683,851 Caribbean, Central and South America 355,337 336,868 315,409 Africa 102,022 126,150 160,524 Pacific Basin and Far East 84,148 72,033 82,975 Canada/Mexico 40,294 35,972 20,676 Eastern Mediterranean 13,124 39,436 37,123 Europe 21,212 3,326 3,195 Totals $1,255,304 $1,265,366 $1,303,753 The following table provides a geographic summary of the Company's long- lived assets according to their physical location and primary port for Company owned vessels: December 31, (Thousands of dollars) 1999 1998 United States $ 331,765 $ 323,458 Argentina 111,486 103,968 All other 37,164 35,430 Totals $ 480,415 $ 462,856 F-32 At December 31, 1999 and 1998, the Company had approximately $93,624,000 and $80,096,000, respectively, of foreign receivables, excluding receivables due from foreign affiliates, which represent more of a collection risk than the Company's domestic receivables. The Company believes that its allowance for doubtful receivables is adequate. Note 13 Discontinued Operations / Subsequent Event In December 1999, the Company agreed to sell its Poultry Division to ConAgra, Inc. for $375 million, consisting of the assumption of approximately $16 million in indebtedness and the remainder in cash, subject to certain adjustments. The sale was completed on January 3, 2000 resulting in a pre-tax gain on the sale of approximately $148 million ($90 million after estimated taxes). This gain is based on certain estimates including a final working capital adjustment and construction costs the Company is required to fund in 2000 to complete certain expansion projects on behalf of the buyer. Any differences between these estimates and their actual settlement will change the gain accordingly. The Company's financial statements have been restated to reflect the Poultry Division as a discontinued operation for all periods presented. Operating results of the discontinued poultry operations are summarized below. The amounts exclude general corporate overhead previously allocated to the Poultry Division for segment reporting purposes. The amounts include interest on debt at the Poultry Division assumed by the buyer and an allocation of the interest on the Company's general credit facilities based on a ratio of the net assets of the discontinued operations to the total net assets of the Company plus existing debt under the Company's general credit facilities. The results for 1999 reflect activity through November 1999 (the measurement date); results for 1998 and 1997 reflect activity for each entire year. Net losses incurred after the measurement date (for the month of December 1999) totaled $4,180,000 and have been deferred as a component of current assets of discontinued operations at December 31, 1999. These losses will be recognized in January 2000 as a reduction of the gain realized on the sale. Years ended December 31, (Thousands of dollars) 1999 1998 1997 Net sales $437,695 514,503 476,580 Operating income (loss) $ 27,023 36,414 (4,076) Earnings (loss) from discontinued operations $ 13,634 19,511 (5,991) F-33 Assets and liabilities of the discontinued poultry operations are summarized below: December 31, (Thousands of dollars) 1999 1998 Receivables $ 27,367 $ 27,681 Inventories 70,532 62,889 Prepaid expenses and deposits 1,385 1,489 Deferred net loss after measurement date 4,180 - Current assets of discontinued operations $ 103,464 $ 92,059 Net property, plant and equipment $ 132,224 $ 96,893 Other assets 183 194 Non-current assets of discontinued operations $ 132,407 $ 97,087 Accounts payable $ 14,189 $ 14,819 Accrued liabilities 9,824 8,831 Current liabilities of discontinued operations $ 24,013 $ 23,650 Long-term debt $ 16,145 $ 16,145 Other liabilities 679 971 Non-current liabilities of discontinued operations $ 16,824 $ 17,116 F-34 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Seaboard Corporation: Under date of February 28, 2000, we reported on the consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 1999 and 1998, and the related consolidated statements of earnings, changes in equity and cash flows for each of the years in the three-year period ended December 31, 1999, as contained in the December 31, 1999 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10K/A for the year ended December 31, 1999. 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 4 to the consolidated financial statements, the Company changed its method of accounting for certain inventories from the first-in, first-out method to the last-in, first-out method in 1999. KPMG LLP Kansas City, Missouri February 28, 2000 F-35
Schedule II SEABOARD CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts (In Thousands) Balance at Provision Write-offs net Aquisitions Balance at beginning of year (1) of recoveries and Disposals end of year Year ended December 31, 1999: Allowance for doubtful accounts $26,117 7,105 4,147 -- $29,075 Year ended December 31, 1998: Allowance for doubtful accounts $20,658 5,902 1,790 1,347 $26,117 Year ended December 31, 1997: Allowance for doubtful accounts $19,448 3,845 2,635 -- $20,658 (1) Charged to selling, general and administrative expenses.
F-36 EX-27 2 res99fds.xfd FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FISCAL 1999 10-K/A FILING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S.DOLLARS 12-MOS Jan-01-1999 Dec-31-1999 Dec-31-1999 1 11,039 0 171,931 29,075 192,847 606,316 734,745 254,330 1,277,791 422,079 0 0 0 1,488 441,680 1,277,791 1,255,304 1,255,304 1,135,176 1,135,176 107,760 7,105 31,418 (8,606) 4,981 (13,587) 13,634 0 0 47 0.03 0.03
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