-----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, C4d5MJktbF0g8CqmKaZXYzsDrpIGKdoGtrMiJFWEhO3YK1Vq7EwQLLQsh0EZdQ5N R58h468WmATs0a0FSzrrpw== 0000088121-03-000001.txt : 20030304 0000088121-03-000001.hdr.sgml : 20030304 20030304161459 ACCESSION NUMBER: 0000088121-03-000001 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20021231 FILED AS OF DATE: 20030304 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEABOARD CORP /DE/ CENTRAL INDEX KEY: 0000088121 STANDARD INDUSTRIAL CLASSIFICATION: MEAT PACKING PLANTS [2011] IRS NUMBER: 042260388 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03390 FILM NUMBER: 03591645 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: HATHAWAY BAKERIES INC DATE OF NAME CHANGE: 19710315 FORMER COMPANY: FORMER CONFORMED NAME: SEABOARD ALLIED MILLING CORP DATE OF NAME CHANGE: 19820328 10-K 1 k-10.txt SEABOARD CORPORATION 2002 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 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 incorporation (I.R.S. Employer or organization) Identification No.) 9000 W. 67th Street, Shawnee Mission, Kansas 66202 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (913) 676-8800 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock American Stock $1.00 Par Value Exchange Securities registered pursuant of Section 12(g) of the Act: None (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X Indicate by checkmark whether the registrant is an accelerated filer (as defined in Rule 126-2 of the Act). Yes X No The aggregate market value of 348,815 shares of voting stock held by nonaffiliates on January 31, 2003 was approximately $86,663,087, based on the closing price of $248.45 per share on June 29, 2002, the end of the registrant's second fiscal quarter. As of February 21, 2003, the number of shares of common stock outstanding was 1,255,053.90. DOCUMENTS INCORPORATED BY REFERENCE Part I, item 1(b), a part of item 1(c)(1) and the financial information required by item 1(d) and Part II, items 5, 6, 7, 7A and 8 are incorporated by reference to the Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b). Part III, a part of item 10 and items 11, 12 and 13 are incorporated by reference to the Registrant's definitive proxy statement filed pursuant to Regulation 14A for the 2003 annual meeting of stockholders (the "2003 Proxy Statement"). This Form 10-K and its Exhibits (Form 10-K) contain forward- looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which may include statements concerning projection of revenues, income or loss, capital expenditures, capital structure or other financial items, statements regarding the plans and objectives of management for future operations, statements of future economic performance, statements of the assumptions underlying or relating to any of the foregoing statements and other statements which are other than statements of historical fact. These statements appear in a number of places in this Form 10-K and include statements regarding the intent, belief or current expectations of the Company and its management with respect to (i) the cost and timing of the completion of new or expanded facilities, (ii) the Company's ability to obtain adequate financing and liquidity, (iii) the price of feed stocks and other materials used by the Company, (iv) the sale price for pork products from such operations, (v) the price for the Company's products and services, (vi) the demand for power and related spot prices in the Dominican Republic, (vii) the effect of the devaluation of the Argentine peso, (viii) the effect of the changes to the produce division operations on the consolidated financial statements of the Company, (ix) the potential effect of the proposed meat packer ban legislation on the Company's Pork Division, (x) the effect of the national strike in Venezuela on the Company's Marine Division, (xi) the potential effect of the Company's investments in a wine business and salmon and other seafood business on the consolidated financial statements of the Company, (xiii) the potential impact of various environmental actions pending or threatened against the Company, or (xiii) other trends affecting the Company's financial condition or results of operations. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially as a result of various factors. The accompanying information contained in this Form 10-K, including without limitation, the information under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations", identifies important factors which could cause such differences. PART I Item 1. Business (a) General Development of Business Seaboard Corporation, a Delaware corporation, the successor corporation to a company first incorporated in 1928, and subsidiaries ("Registrant" or "Company"), is a diversified international agribusiness and transportation company which is primarily engaged domestically in pork production and processing, and cargo shipping. Overseas, the Company is primarily engaged in commodity merchandising, flour and feed milling, 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 13 of Registrant's Consolidated Financial Statements appearing on pages 48 through 51 of the Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report. (c) Narrative Description of Business (1) Business Done and Intended to be Done by the Registrant (i) Principal Products and Services Registrant produces hogs and processes pork in the United States and sells fresh pork to further processors, foodservice and retail, primarily in the western half of the United States and foreign markets. Hogs produced at Company owned or leased facilities as well as third-party hogs are primarily 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 also operates a cargo terminal facility at the Port of Houston. Registrant markets grains, oilseeds and oilseed products in bulk to affiliated companies and third party customers primarily in Africa, the Caribbean, Central and South America, and the Eastern Mediterranean. Registrant operates its own bulk carriers primarily in the Atlantic Basin to conduct a portion of its commodity trading activities and charters third party bulk carriers to conduct commodity trading activities and transport bulk goods on behalf of third party customers. Registrant, by itself or through non-controlled affiliates, operates grain processing businesses in Africa, the Caribbean and South America. Registrant operates two power generating facilities in the Dominican Republic, and produces and refines sugarcane and produces and processes citrus in Argentina. Registrant processes jalapeno peppers in Honduras. Registrant also brokers shrimp for independent Honduran growers. The majority of these products are transported using the Registrant's shipping line and distribution facility in Miami, Florida. Registrant sources and sells truck freight through a brokerage business. Registrant, through a non-controlled affiliate headquartered in Norway, produces and processes salmon and other seafood. Registrant, through a non-controlled affiliate, produces wine in Bulgaria for distribution primarily throughout Europe. The information required by Item 1 with respect to the amount or percentage of total revenue contributed by any class of similar products or services which account for 10% or more of consolidated revenue in any of the last three fiscal years is hereby incorporated by reference to Note 13 of Registrant's Consolidated Financial Statements appearing on pages 48 through 51 of the Registrant's Annual Report to Stockholders furnished to the Commission pursuant to rule 14a-3(b) and attached as Exhibit 13 to this report. (ii) Status of Product or Segment In February 2002, the Company announced plans to build a second processing plant in northern Texas along with related plans to expand its vertically integrated hog production facilities. Consistent with those plans, the Company continues to acquire and permit land in order to meet the requirements to operate the plant. The Company is continuing to evaluate the timing of construction based on current financial and market conditions in the Pork industry caused by the oversupply of hogs and pork. This project is also contingent on a number of other factors, including obtaining necessary financing for the project, obtaining the necessary permits, commitments for a sufficient quantity of hogs to operate the plant, and no statutory impediments being imposed. If the Company pursues this project, it may also enter into various contract growing arrangements. Management is not able to predict the viability or the exact timing of the expansion project; however, if the Company decides to pursue the project, construction of the plant would not begin until after 2003. During the third quarter of 2002 the Company completed the first of two new Company-owned hog production facilities which increased the Company's breeding herd by approximately 12,500 sows. The second facility is expected to be completed and stocked during 2003. During the fourth quarter of 2002, the Company purchased certain hog production facilities previously leased under a master lease arrangement. These facilities supply approximately 24% of the Company-owned hogs processed at the plant. In early January 2003, a bill (the Bill) was introduced in the United States Senate which includes a provision to prohibit meat packers, such as the Company, from owning or controlling livestock intended for slaughter. The Bill also contains a transition rule applicable to packers of pork providing for an effective date which is 18 months after enactment. Similar language was passed by the U.S. Senate in 2002 as part of the Senate's version of the Farm Bill. The U.S. House of Representatives also passed a Farm Bill in 2002, but that Farm Bill did not include the prohibition on packers owning or controlling livestock and it was eventually dropped in conference committee and was not part of the final Farm Bill. If the Bill containing the proposed language becomes law, it could have a material adverse effect on the Company, its operations and its strategy of vertical integration in the pork business. Currently, the Company owns and operates production facilities and owns swine and produces approximately three million hogs per year with construction in progress for an additional quarter million hogs per year. If passed in its current form, the Bill would prohibit the Company from owning or controlling hogs, and thus would require the Company to divest these operations, possibly at prices which are below the carrying value of such assets on the Company's balance sheet, or otherwise restructure its ownership and operation. The Bill could also be construed as prohibiting or restricting the Company from engaging in various contractual arrangements with third party hog producers, such as traditional contract finishing arrangements. Accordingly, the Company's ability to contract for the supply of hogs to its processing facility could be significantly, negatively impacted. The Company, along with industry groups and other similarly situated companies are vigorously lobbying against enactment of any such legislation. During 2002, Registrant opened new commodity trading offices in Ecuador, Kenya and Peru. During 2002, the Company purchased two new ocean liner services for containerized cargo shipping out of the Port of New Orleans to Central America, and out of the Philadelphia, Pennsylvania area to the Caribbean Basin. The Registrant owns an Argentine company involved in sugar and citrus operations. In January 2002, the Argentine peso was devalued resulting in a write-down in the net assets of this Argentine company (see Note 12 of the Registrant's Consolidated Financial Statements for further discussion). The economy of Argentina has been severely, negatively impacted by the devaluation and the continuing recession. The Registrant cannot presently predict the effect the current conditions will have on the Company's future business or financial position and results of operations, but further devaluation will result in additional asset write-downs. The Company ceased its shrimp, pickle and pepper farming operations in Honduras during 2001 and is considering various strategic alternatives for these assets. In February 2003, the Registrant signed a letter of intent with a local Honduran shrimp farmer for the sale of the Company's Honduran shrimp farming and processing plant businesses. Certain of the pickle and pepper farms are currently leased and operated by local farmers under short-term agreements. During July 2002, the Registrant purchased additional shares of Fjord Seafood ASA, a fully-integrated producer and processor of salmon and other seafood headquartered in Norway, increasing its ownership to approximately 21%. During 2002, the Bulgarian wine business received an extension of principal payment due dates, and a waiver of default. This business is currently negotiating with the bank for additional revised terms and conditions. (iii) Sources and Availability of Raw Materials None of the 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 Registrant uses the registered trademark of Seaboard. The Pork Division uses registered trademarks relating to its products, including Seaboard Farms, Inc., Seaboard Farms and PrairieFresh and has applied for registration of A Taste Like No Other. The Registrant considers the use of these trademarks important to the marketing and promotion of its' fresh pork products. The Marine Division uses the trade name Seaboard Marine which is also a registered trademark. There is significant recognition for the Seaboard Marine trademark in the industry and amongst customers. Part of the sales within the Registrant's Sugar and Citrus segment are made under the Chango brand in Argentina. 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. Sugar prices in Argentina are generally lower during the typical sugarcane 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. The power segment sells power in the Dominican Republic on the spot market accessed by three local distribution companies, a state-owned electric company, and limited other customers. The Company's Produce division sells nearly all of its processed jalapeno peppers to one customer under a contract expiring in 2006. 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 quality, customer service and price. According to recent trade publications, Registrant ranks as one of the nation's top five pork producers (based on sows in production) and top ten pork processors (based on daily processing capacity). The Registrant's ocean liner service for containerized cargoes faces competition based on price and customer service. Registrant believes it is among the top five ranking ocean liner services for containerized cargoes in the Caribbean Basin based on cargo volume. The 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 Registrant's power division is located in the Dominican Republic. Power generated by this division is sold on the spot market at prices primarily based on market conditions rather than cost-based rates. (xi) Research and Development Activities Registrant does not engage in material research and development activities. (xii) Environmental Compliance Registrant is subject to numerous Federal, state and local provisions relating to the environment which require the expenditure of funds in the ordinary course of business. No amounts which would have a material or significant effect on the Registrant's financial condition or results of operations are anticipated to be expended for these purposes, including with respect to the items disclosed in Item 3. Legal Proceedings, except as incurred in the ordinary course of business. (xiii) Number of Persons Employed by Registrant As of December 31, 2002, Registrant, excluding non- consolidated foreign affiliates, had 9,294 employees, of whom 5,265 were employed in the United States. (d) Financial Information about Foreign and Domestic Operations and Export Sales The financial information required by Item 1 relating to export sales is hereby incorporated by reference to Note 13 of Registrant's Consolidated Financial Statements appearing on pages 48 through 51 of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this report. Registrant considers its relations with the governments of the countries in which its foreign subsidiaries and affiliates 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 its affiliate flour mills in Democratic Republic of Congo, 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. (e) Available Information Registrant electronically files annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act with the Commission. The public may read and copy any materials filed with the Commission at their Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may also obtain this information by calling the Commission at 1-800-SEC-0330. The Commission also maintains an Internet site that contains reports, proxy and information statements, and other information regarding electronic filers at www.sec.gov. The Registrant provides access to its most recent Form 10-K, 10-Q and 8-K reports on its Internet website, www.seaboardcorp.com, free of charge, as soon as reasonably practicable after those reports are electronically filed with the Commission. Item 2. Properties (1) Pork The Registrant owns a hog processing plant in Oklahoma with a double shift capacity of approximately four and one-half million hogs per year. Hog production facilities currently consist of a combination of owned and leased farrowing, nursery and finishing units supporting approximately 195,000 sows. Registrant currently operates six feed mills which have a combined capacity to produce approximately 1,500,000 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 70 acres of port terminal land and facilities in Florida which are used in its containerized cargo operations. Registrant owns seven ocean cargo vessels with deadweights ranging from 2,813 to 14,545 metric tons. Registrant timecharters, under short-term agreements, between fifteen and nineteen containerized ocean cargo vessels with deadweights ranging from 2,600 to 20,388 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. Registrant owns or leases approximately 30,000 dry, refrigerated and specialized containers and related equipment. Registrant also leases a 62 acre cargo handling and terminal facility in Houston which includes several warehouses totaling over 690,000 square feet for cargo storage. (3) Commodity Trading and Milling The Registrant owns in whole or in part grain-processing operations in 13 countries with productive capacity to mill over 5,800 metric tons of wheat and maize per day. In addition, Registrant has feed mill capacity of 100 metric tons per hour to produce formula animal feed. The milling operations located in Angola, Democratic Republic of Congo, Ecuador, Guyana, Haiti, Kenya, Lesotho, Mozambique, Nigeria, Republic of Congo, Sierra Leone, Uganda and Zambia own their facilities; in Kenya, Lesotho, Mozambique, Nigeria, Republic of Congo 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 and timecharters, under short-term agreements, between seven and sixteen bulk carrier ocean vessels with dead weights ranging from 8,000 to 60,000 metric tons. (4) Sugar and Citrus Registrant's Argentine sugar and citrus company owns approximately 39,000 acres of planted sugarcane and approximately 3,100 acres of planted citrus. In addition, this company owns a sugar mill with a capacity to process approximately 170,000 metric tons of sugar per year. (5) Power Registrant owns two floating power generating facilities, with a combined rated capacity of 112 megawatts, both located in Santo Domingo, Dominican Republic. (6) Other Registrant owns a jalapeno pepper processing plant in Honduras and 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. Management believes that the Registrant's present facilities are 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 milling operations may operate at less than full capacity due to low demand related to poor consumer purchasing power and imported European- subsidized finished product. 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 more fully described in Note 11 of the consolidated financial statements. Sierra Club Claim The Company and Sierra Club have reached an agreement to settle the ongoing litigation brought by the Sierra Club, subject to court approval. The Complaint to bring the action was originally filed on June 2, 2000 by the Sierra Club against the Company, Seaboard Farms, Inc. ("Seaboard Farms") and Shawnee Funding, Limited Partnership ("Shawnee Funding") in the United States District Court for the Western District of Oklahoma, No. CIV -00-979-L. The Complaint alleged violations of the Clean Water Act ("CWA") at the Company's Dorman Sow Farm in Beaver County, Oklahoma. Sierra Club later amended its complaint to add claims under the Comprehensive Environmental Response Compensation & Liability Act ("CERCLA") and the Resource Conservation and Recovery Act ("RCRA"). Pursuant to the settlement, the Company will pay Sierra Club $125,000 and will pay an additional $100,000 to Ducks Unlimited to fund playa lake conservation efforts in Beaver and Texas Counties in Oklahoma. The Company will also conduct an investigation at three farms located in Kingfisher and Major Counties in Oklahoma according to an agreed upon process that may include corrective action if warranted. Sierra Club reserved the right to appeal the District Court's ruling that the Company does not have to aggregate ammonia emissions from all sources at the Dorman Sow Farm for CERCLA reporting purposes. In the event Sierra Club appeals and this ruling is reversed, as Sierra Club's sole remedy, the Company must pay Sierra Club an additional $25,000. EPA and State of Oklahoma Claims Concerning Farms in Major and Kingfisher County, Oklahoma On June 29, 2001, the EPA filed a Unilateral Administrative Order (the "RCRA Order") pursuant to Section 7003 of the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sec. 6973 ("RCRA"), against Seaboard Farms, Shawnee Funding, and PIC International Group, Inc. ("PIC") (collectively, "Respondents"). The RCRA Order alleges that five swine farms located in Major County and Kingfisher County, Oklahoma purchased from PIC are causing or could cause contamination of the groundwater. The RCRA Order alleges that, as a result, Respondents have contributed to an "imminent and substantial endangerment" within the meaning of RCRA from the leaking of solid waste in the lagoons or other infrastructure at the farms. The RCRA Order requires Respondents to develop and undertake a study to determine if there has been any contamination from farm infrastructure, and if contamination has occurred, to develop and undertake a remedial plan. In the event the Respondents fail to comply with the RCRA Order, the EPA may commence a civil action and can seek a civil penalty of up to $5,500 per day, per violation. On July 23, 2002, the Company received a notice from the State of Oklahoma, alleging that the Company has violated various provisions of Oklahoma state law and the operating permits related to these farms based on the same conditions, which gave rise to the RCRA Order. In the event the State brings an enforcement action, they have threatened to do so as an administrative action in which they can seek administrative penalties of not more than $10,000 per day of noncompliance and can seek to assess violation points which could prohibit the Company from continuing to operate one or more of these farms. Although the Company disputes the RCRA Order and the State of Oklahoma's contentions, the Company is cooperating with the EPA and the State of Oklahoma. The farms that are the subject of the RCRA Order and the allegations by the State of Oklahoma were previously owned by PIC. PIC is presently providing indemnity and defense of the RCRA Order (reserving its right to contest the obligation to do so). One indemnity agreement with PIC is subject to a $5 million limit, but the Company believes that a more general environmental indemnity agreement would require indemnification of liability in excess of that amount. The Company has demanded that PIC provide indemnity and defense with respect to the notice of violations letter received from the State of Oklahoma. PIC is disputing its obligation to provide indemnity and defense with respect to the notice of violation, and this dispute remains outstanding. Potential Additional EPA Claims EPA has been conducting a broad-reaching investigation of Seaboard Farms, seeking information as to compliance with the Clean Water Act (CWA), Comprehensive Environmental Response, Compensation & Liability Act (CERCLA) and the Clean Air Act. Through Information Requests and farm inspections, EPA obtained information that may be related to whether Seaboard Farms' operations are discharging pollutants to waters of the United States in violation of the CWA, whether National Pollutant Discharge Elimination System storm water construction permits were obtained, where required, whether there has been unlawful filling of or discharge to "wetlands" within the jurisdiction of the CWA, whether Seaboard Farms has properly reported emissions of hazardous substances into the air under CERCLA, and whether some of its farms may be emitting air pollutants at levels subject to Clean Air Act permitting requirements. As a result of the investigation, EPA requested that the Company engage in settlement discussions to avoid further EPA investigative efforts and potential formal claims being filed. EPA has presented settlement demands, and Seaboard has responded. The Company believes it has meritorious legal and factual defenses and objections to EPA's demands, but will continue to engage in settlement discussions. Such settlement discussions could lead to an Agreed Consent Order. On April 2, 2002, the United States Environmental Protection Agency ("EPA") sent to Seaboard Farms, Inc. a letter pursuant to the Clean Air Act ("CAA") demanding Seaboard Farms install and use monitoring equipment to sample emissions at certain hog confinement facilities for purposes of determining whether these operations are in compliance with the CAA. The EPA is also requesting that Seaboard Farms agree that these facilities are comparable to all other facilities operated and that the monitoring results can be reasonably extrapolated to estimate the emissions for all other farms operated by Seaboard Farms. If the specified farms are not comparable, EPA is demanding that Seaboard Farms conduct monitoring at the incomparable farms. The letter also requires that Seaboard Farms submit a plan and protocol for testing for emissions of particulate matter, volatile organic compounds and hydrogen sulfide. The Company believes that EPA's demand is beyond the Agency's authority pursuant to the CAA and that the Company cannot be required to undertake the air monitoring. Seaboard Farms calculated its emissions using scientifically acceptable methods other than monitoring and determined that the emissions from its hog operations do not require a CAA permit. Seaboard Farms set forth this position in a letter to EPA, and will have discussions with EPA regarding compliance. The EPA could bring a suit to enforce the provisions of the letter, and if a court were to determine that EPA is within its authority, the court could impose a civil penalty of up to $27,500 per day of non-compliance, and could order injunctive relief requiring that Seaboard Farms conduct the monitoring. On February 20, 2003, Seaboard Farms, Inc. received an additional Information Request from the EPA seeking information as to compliance with the CWA by the Company with respect to virtually all of its confined animal feeding operations. The Company is presently in the process of complying with the Information Request. At present, no relief has been sought by the EPA. 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 (77) Chairman of the Board, President and Chief Executive Officer of Registrant; Manager of Seaboard Flour LLC (SF) Steven J. Bresky (49) Senior Vice President, International Operations Robert L. Steer (43) Senior Vice President, Treasurer and Chief Financial Officer David M. Becker (41) Vice President, General Counsel and Assistant Secretary James L. Gutsch (49) Vice President, Engineering Rodney K. Brenneman (38) President, Seaboard Farms, Inc. John Lynch (69) President, Seaboard Marine Ltd. Mr. H. Harry Bresky has served as President and Chief Executive Officer of Registrant since February 2001 and previously as President of Registrant since 1967. He has served as Manager of SF since 2002. He served as President of Seaboard Flour Corporation from 1987 through 2002, and as Treasurer of Seaboard Flour Corporation from 1973 through 2002. Mr. Bresky is the father of Steven J. Bresky. Mr. Steven J. Bresky has served as Senior Vice President, International Operations of Registrant since February 2001 and previously as Vice President of Registrant since April 1989. Mr. Steer has served as Senior Vice President, Treasurer and Chief Financial Officer of Registrant since February 2001 and previously as Vice President, Chief Financial Officer of Registrant since April 1998 and as Vice President, Finance of Registrant since April 1996. He has been employed by the Registrant since 1984. Mr. Becker has served as Vice President, General Counsel and Assistant Secretary of Registrant since February 2001 and previously as General Counsel and Assistant Secretary of Registrant since April 1998 and as Assistant Secretary of Registrant since May 1994. Mr. Gutsch has served as Vice President, Engineering of Registrant since December 1998. He has been employed by the Registrant since 1984. Mr. Brenneman has served as President of Seaboard Farms, Inc. since June 2001 and previously served as Senior Vice President and Chief Financial Officer of Seaboard Farms, Inc. since January 1997 and prior to that, Vice President of Finance for Seaboard Farms, Inc. since January 1995. Mr. Brenneman has been employed with the Registrant or Seaboard Farms, Inc. since 1989. Mr. Lynch has served as President of Seaboard Marine, Ltd. Since 1998 and previously as Vice President of Seaboard Marine Ltd. since his employment in 1987. PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The information required by Item 5 is hereby incorporated by reference to (a) "Stock Listing" and "Quarterly Financial Data" appearing on pages 52 and 8, respectively, of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report and (b) "Compensation Committee Interlocks and Insider Participation" appearing on page 11 of the Registrant's 2003 Proxy Statement. Item 6. Selected Financial Data The information required by Item 6 is hereby incorporated by reference to the "Summary of Selected Financial Data" appearing on page 7 of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 of this Report. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The information required by Item 7 is hereby incorporated by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing on pages 9 through 22 of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report. Item 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 "Derivative Instruments and Hedging Activities" within Note 1 of the Registrant's Consolidated Financial Statements appearing on page 31, and to the material under the caption "Derivative Information" within "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing on pages 20 through 22 of the Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report. Item 8. Financial Statements and Supplementary Data The information required by Item 8 is hereby incorporated by reference to Registrant's "Quarterly Financial Data," "Independent Auditors' Report," "Consolidated Balance Sheets," "Consolidated Statements of Earnings," "Consolidated Statements of Changes in Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated Financial Statements" appearing on pages 8 and 23 through 51 of Registrant's Annual Report to Stockholders furnished to the Commission pursuant to Rule 14a- 3(b) and attached as Exhibit 13 to this Report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable. PART III Item 10. Directors and Executive Officers of Registrant Refer to "Executive Officers of Registrant" in Part I. Information required by this item relating to directors of Registrant has been omitted since Registrant filed a definitive proxy statement within 120 days after December 31, 2002, 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 2003 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 "Section 16(a) Beneficial Ownership Reporting Compliance" on page 13 of the Registrant's 2003 Proxy Statement. Item 11. Executive Compensation This item has been omitted since Registrant filed a definitive proxy statement within 120 days after December 31, 2002, 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 6 through 9 and 11 of the 2003 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, 2002, 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 2003 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, 2002, 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 11 of the 2003 Proxy Statement. Item 14. Controls and Procedures The Company has established a system of controls and other procedures designed to ensure that information required to be disclosed in its periodic reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. These disclosure controls and procedures have been evaluated under the direction of the Company's Chief Executive Officer and Chief Financial Officer within the last 90 days. Based on such evaluations, the Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures are effective. There have been no significant changes in the Company's system of internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation by the Chief Executive Officer and Chief Financial Officer. PART IV Item 15. 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-1. 3. Exhibits. 3.1 - Registrant's Certificate of Incorporation, as amended. Incorporated by reference to Exhibit 3.1 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 3.2 - Registrant's By-laws, as amended. Incorporated by reference to Exhibit 3.2 of Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2001. 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 dated 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. 4.7 - Second Amendment to the Note Purchase Agreements dated as of December 1, 1993 ($100,000,000 Senior Notes due December 1, 2005). Incorporated by reference to Exhibit 4.1 of Registrant's Form 10-Q for the quarter ended September 28, 2002. 4.8 - Second Amendment to the Note Purchase Agreements dated as of June 1, 1995 ($125,000,000 Senior Notes due June 1, 2007). Incorporated by reference to Exhibit 4.2 of Registrant's Form 10-Q for the quarter ended September 28, 2002. 4.9 - Seaboard Corporation Note Purchase Agreement dated as of September 30, 2002 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 28, 2002. 4.10 - Seaboard Corporation $32,500,000 5.8% Senior Note, Series A, due September 30, 2009 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 28, 2002. 4.11 - Seaboard Corporation $38,000,000 6.21% Senior Note, Series B, due September 30, 2009 issued pursuant to the Note Purchase Agreement described above. Incorporated by reference to Exhibit 4.5 of Registrant's Form 10-Q for the quarter ended September 28, 2002. 4.12 - Seaboard Corporation $7,500,000 6.21% Senior Note, Series C, due September 30, 2012 issued pursuant to the Note Purchase Agreement described above. Incorporated by reference to Exhibit 4.6 of Registrant's Form 10-Q for the quarter ended September 28, 2002. 4.13 - Seaboard Corporation $31,000,000 6.92% Senior Note, Series D, due September 30, 2012 issued pursuant to the Note Purchase Agreement described above. Incorporated by reference to Exhibit 4.7 of Registrant's Form 10-Q for the quarter ended September 28, 2002. * 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 Supplemental Executive Benefit Plan as Amended and Restated. Incorporated by reference to Exhibit 10.2 of Registrants Form 10-K for fiscal year ended December 31, 2000. * 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 - 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. * 10.5 - First Amendment to Registrant's Executive Retirement Plan as Amended and Restated January 1, 1997, dated February 28, 2001, amending Registrant's Executive Retirement Plan dated January 1, 1997 referenced as Exhibit 10.1. Incorporated by reference to Exhibit 10.6 of Registrant's Form 10-K for fiscal year ended December 31, 2000. * 10.6 - Registrant's Investment Option Plan dated December 18, 2000. Incorporated by reference to Exhibit 10.7 of Registrant's Form 10-K for fiscal year ended December 31, 2000. 10.7 - Reorganization Agreement by and between Seaboard Corporation and Seaboard Flour Corporation as of October 18, 2002 incorporated by reference to Exhibit 10.1 of the Form 8-K dated October 18, 2002. 10.8 - Purchase and Sale Agreement dated October 18, 2002 by and between Flour Holdings LLC and Seaboard Flour Corporation with respect to which the "Earnout Payments" thereunder have been assigned to Seaboard Corporation. Incorporated by reference to Exhibit 10.2 of Registrant's Form 10- Q for the quarter ended September 28, 2002. 13 - Sections of Annual Report to security holders incorporated by reference herein. 21 - List of subsidiaries. 99.1 - Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. 99.2 - Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002. * Management contract or compensatory plan or arrangement. (b) Reports on Form 8-K i. Seaboard Corporation filed Form 8-K dated October 8, 2002 announcing completion of a private placement of Senior Notes and its intentions for the use of the proceeds. ii. Seaboard Corporation filed Form 8-K dated October 18, 2002 announcing the repurchase of 232,414.85 shares of common stock from its parent, Seaboard Flour Corporation. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SEABOARD CORPORATION By /s/H. Harry Bresky By /s/Robert L. Steer H. Harry Bresky, President Robert L. Steer, Senior and Chief Executive Officer Vice President, Treasurer (principal executive officer) and Chief Financial Officer (principal financial officer) Date: March 4, 2003 Date: March 4, 2003 By /s/John A. Virgo John A. Virgo, Corporate Controller (principal accounting officer) Date: March 4, 2003 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 and Chairman J.E. Rodrigues, Director of the Board Date: March 4, 2003 Date: March 4, 2003 By /s/David A. Adamsen By /s/Thomas J.Shields David A. Adamsen, Director Thomas J. Shields, Director Date: March 4, 2003 Date: March 4, 2003 By /s/Douglas W. Baena Douglas W. Baena, Director Date: March 4, 2003 CERTIFICATIONS I, H. H Bresky, certify that: 1.I have reviewed this annual report on Form 10-K of Seaboard Corporation; 2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b)evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c)presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a)all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6.The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 4, 2003 /s/ H. H. Bresky H. H. Bresky, Chairman of the Board, President, and Chief Executive Officer CERTIFICATIONS I, Robert L. Steer, certify that: 1.I have reviewed this annual report on Form 10-K of Seaboard Corporation; 2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; 4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a)designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b)evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c)presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a)all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6.The registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: March 4, 2003 /s/ Robert L. Steer Robert L. Steer, Senior Vice President, Treasurer, and Chief Financial Officer SEABOARD CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedule Financial Statements Stockholders' Annual Report Page Independent Auditors' Report 23 Consolidated Balance Sheets as of December 31, 2002 and December 31, 2001 24 Consolidated Statements of Earnings for the years ended December 31, 2002, December 31, 2001 and December 31, 2000 25 Consolidated Statements of Changes in Equity for the years ended December 31, 2002, December 31, 2001and December 31, 2000 26 Consolidated Statements of Cash Flows for the years ended December 31, 2002, December 31, 2001 and December 31, 2000 27 Notes to Consolidated Financial Statements 28 The foregoing are incorporated by reference. Fjord Seafood ASA (a nonconsolidated foreign affiliate) financial statements for the years ended December 31, 2002, 2001, and 2000, will be filed by amendment to this Form 10-K no later than 180 days after December 31, 2002. The individual financial statements of all other 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 and (b) 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." II - Valuation and Qualifying Accounts for the years ended December 31, 2002, 2001 and 2000 F-3 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-1 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders Seaboard Corporation: Under date of February 21, 2003, we reported on the consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 2002 and 2001, 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, 2002, as contained in the December 31, 2002 annual report to stockholders. These consolidated financial statements and our report thereon are incorporated by reference in the annual report on Form 10-K for the year ended December 31, 2002. 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. KPMG LLP Kansas City, Missouri February 24, 2003 F-2
Schedule II SEABOARD CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts (In Thousands) Balance at Provision Write-offs net Acquisitions Balance at beginning of year (1) of recoveries and Disposals end of year Year ended December 31, 2002: Allowance for doubtful accounts $20,571 62 (4,455) - $16,178 Drydock accrual $ 6,052 3,709 (3,368) - $ 6,393 Year ended December 31, 2001: Allowance for doubtful accounts $29,801 206 (9,436) - $20,571 Drydock accrual $ 5,496 5,356 (4,800) - $ 6,052 Year ended December 31, 2000: Allowance for doubtful accounts $29,075 12,276 (8,199) (3,351) $29,801 Drydock accrual $ 5,444 4,051 (3,999) - $ 5,496 (1) Allowance for doubtful accounts provisions charged to selling, general and administrative expenses; drydock provisions charged to cost of sales.
F-3 EX-13 3 ex13.txt 2002 ANNUAL REPORT Summary of Selected Financial Data Years ended December 31, (Thousands of dollars except per share amounts) 2002 2001 2000 1999 1998 Net sales $1,829,307 $1,804,610 $1,583,696 $1,284,262 $1,294,492 Operating income $ 47,125 $ 114,352 $ 48,065 $ 12,368 $ 29,770 Earnings (loss) from continuing operations $ 13,507 $ 51,989 $ 8,872 $ (13,587) $ 31,427 Net earnings $ 13,507 $ 51,989 $ 98,909 $ 47 $ 50,938 Earnings (loss) per common share from continuing operations $ 9.38 $ 34.95 $ 5.96 $ (9.13) $ 21.12 Net earnings per common share $ 9.38 $ 34.95 $ 66.49 $ 0.03 $ 34.24 Total assets $1,281,141 $1,234,757 $1,274,234 $1,249,022 $1,211,096 Long-term debt, less current maturities $ 318,746 $ 255,819 $ 312,418 $ 318,017 $ 313,324 Stockholders' equity $ 486,731 $ 528,420 $ 540,685 $ 443,168 $ 444,728 Dividends per common share $ 2.50 $ 1.00 $ 1.00 $ 1.00 $ 1.00 In July 2002, the Company purchased additional shares of Fjord Seafood ASA (Fjord), an integrated salmon producer and processor headquartered in Norway, increasing the Company's ownership to approximately 21%. As required by Accounting Principles Board Opinion No. 18, all previous financial statements were retroactively adjusted to reflect the equity method of accounting since the time of the Company's initial investment in May 2001. As a result, for 2001, net earnings, earnings per common share and total assets were reduced by $1,316,000 ($0.88 per share) and $835,000, respectively, and stockholders' equity was increased by $1,217,000. See Note 5 to the Consolidated Financial Statements for further discussion. During 2002, the Company completed a series of transactions related to its Argentine sugar business, resulting in a one-time tax benefit of $14,303,000. See Note 7 to the Consolidated Financial Statements for further discussion. During 2002, the Company effectively repurchased 232,414.85 shares of common stock from its parent company. See Note 12 to the Consolidated Financial Statements for further discussion. The Company's 2002 and 2001 financial position and results of operations were negatively impacted by the devaluation of the Argentine peso. See Note 12 to the Consolidated Financial Statements for further discussion. The Company completed the sale of its Poultry Division on January 3, 2000, recognizing an after-tax gain on disposal of discontinued operations of $90,037,000 or $60.53 per common share. See Note 2 to the Consolidated Financial Statements for further discussion. 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. Quarterly Financial Data (unaudited) (UNAUDITED) (Thousands of dollars 1st 2nd 3rd 4th Total for except per share amounts) Quarter Quarter Quarter Quarter the Year 2002 Net sales $ 442,923 477,104 429,800 479,480 $1,829,307 Operating income $ 16,754 15,192 9,311 5,868 $ 47,125 Net earnings (loss) $ 1,723 15,098 (5,673) 2,359 $ 13,507 Earnings (loss) per common share $ 1.16 10.15 (3.81) 1.81 $ 9.38 Dividends per common share $ 0.25 0.75 0.75 0.75 $ 2.50 Market price range per common share: High $ 335.00 305.00 301.00 259.00 Low $ 260.00 202.00 220.00 195.00 2001 Net sales $ 435,260 468,513 466,898 433,939 $1,804,610 Operating income $ 18,036 39,640 29,680 26,996 $ 114,352 Net earnings $ 7,615 31,519 5,625 7,230 $ 51,989 Earnings per common share $ 5.12 21.19 3.78 4.86 $ 34.95 Dividends per common share $ 0.25 0.25 0.25 0.25 $ 1.00 Market price range per common share: High $ 182.00 207.90 280.00 325.00 Low $ 149.00 181.00 197.00 190.00 In the second quarter of 2001, the Company exchanged its non- controlling interest in a domestic seafood affiliate for a lesser interest in Fjord recognizing an after-tax gain of $11,434,000 or $7.69 per common share. During the third quarter of 2001, as a result of a decline in the stock price of this foreign seafood business considered other-than-temporary, the Company recognized an after-tax loss of $11,367,000 or $7.64 per share. In July 2002, the Company purchased additional shares of Fjord and retroactively adjusted prior quarters' financial statements to reflect the equity method of accounting since the time of the Company's initial investment. The adjustments decreased net earnings and earnings per common share by $801,000 ($0.54 per share) and $515,000 ($0.35 per share) for the third and fourth quarters of 2001, respectively, and $2,854,000 ($1.92 per share) and $583,000 ($0.39 per share) for the first and second quarters of 2002, respectively. See Note 5 to the Consolidated Financial Statements for further discussion. During the second quarter of 2002, the Company completed a series of transactions related to its Argentine sugar business, resulting in a one-time tax benefit of $14,303,000. See Note 7 to the Consolidated Financial Statements for further discussion. As a result of the devaluation of the Argentine peso, during the fourth quarter of 2001, the Company recorded a charge of $7,830,000 against net earnings related to dollar denominated net liabilities of its Argentine subsidiary. See Note 12 to the Consolidated Financial Statements for further discussion. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Cash and short-term investments as of December 31, 2002 decreased $96.2 million from December 31, 2001 as a result of payments made to effectively repurchase shares of the Company's common stock from its parent, Seaboard Flour Corporation (see Note 12 to the Consolidated Financial Statements), the additional investment in Fjord Seafood ASA (Fjord) as discussed below, and scheduled payments made on the Company's long-term debt. These outflows were partially offset by an increase in short-term borrowings. Cash from operating activities for 2002 decreased $131.7 million compared to 2001. The decrease was primarily due to lower adjusted net earnings, principally related to the Pork segment, and changes in the components of working capital. Changes in components of working capital are related to an increase in inventory primarily resulting from increased commodity trading operations and the timing of related normal transactions for voyage settlements, trade payables and receivables. Cash from operating activities for 2001 increased $159.8 million compared to 2000. The increase was primarily due to positive cash flows from components of working capital and an increase in net earnings from continuing operations. Changes in components of working capital, net of businesses acquired and disposed, are primarily related to the timing of normal transactions for voyage settlements, trade payables and receivables. Within the Commodity Trading & Milling segment, strong sales in the fourth quarter of 2000 and subsequent related collections resulted in a higher receivable balance at December 31, 2000 compared with year- end 2001. Cash from investing activities for 2002 increased $16.0 million compared to 2001. The increase is primarily related to proceeds from the net sale of short-term investments compared to net purchases in 2001, partially offset by the purchase of previously leased hog production facilities and an additional investment in Fjord during 2002, discussed below. During 2002, the Company invested a total of $149.9 million in property, plant and equipment as described below compared to $55.0 million in 2001. During 2002, the Company invested $135.1 million in the Pork segment primarily to purchase hog production facilities previously leased, expand the hog production facilities, make improvements to the pork processing plant, and purchase options for land upon which the Company could decide to expand operations as discussed below. The hog production facilities previously leased from Shawnee Funding, Limited Partnership under a master lease arrangement, were purchased during the fourth quarter of 2002 for a total of $117.5 million, including the assumption of a $10.0 million bond payable and offsetting $2.2 million cash in a construction fund. This was financed primarily with the proceeds from a private placement of Senior Notes, as discussed below. During 2003, the Company expects to invest $16.8 million for continued expansion of hog production facilities and upgrades to the pork processing plant. In February 2002, the Company announced plans to build a second processing plant in northern Texas along with related plans to expand its vertically integrated hog production facilities. Consistent with those plans, the Company continues to acquire and permit land in order to meet the requirements to operate the plant. The Company anticipates spending approximately $7 million during 2003 related to these acquisitions. The Company is continuing to evaluate the timing of construction based on current financial and market conditions in the pork industry caused by the oversupply of hogs and pork. This project is also contingent on a number of other factors, including obtaining necessary financing for the project, obtaining the necessary permits, commitments for a sufficient quantity of hogs to operate the plant, and no statutory impediments being imposed. This project would require extensive capital outlays and financing demands. The current cost estimates to build the plant are approximately $150.0 million with an additional $200.0 million for live production facilities for a total cost of approximately $350.0 million. If the Company pursues this project, it may also enter into various contract growing arrangements. Due to the above uncertainties, management is not able to predict the ultimate viability or the exact timing of the expansion project. However, if the Company decides to pursue the project, construction of the plant would not begin until after 2003. During 2002, the Company invested $9.7 million in the Marine segment primarily for the purchase of additional machinery and equipment. During 2003, the Company plans to invest $14.9 million for the purchase of previously chartered vessels, and previously leased and new equipment. During 2002, the Company invested $2.5 million in the Sugar and Citrus segment primarily for improvements to existing facilities and sugarcane fields. During 2003, the Company expects to spend $4.0 million for additional improvements. During 2002, capital expenditures in all other segments totaled $2.6 million for general modernization and efficiency upgrades of plant and equipment. Excluding potential Pork expansion plans, management anticipates the planned fiscal 2003 capital expenditures for existing operations discussed above, will be financed by internally generated cash, including potential use of available short-term investments. During the second quarter of 2001, the Company exchanged its non- controlling interest in a domestic affiliate primarily engaged in the production and processing of salmon and other seafood products for a smaller share of Fjord. During the fourth quarter of 2001, the Company participated in a private placement of additional shares and invested an additional $10.8 million in Fjord shares valued at NOK 6 per share increasing its ownership to approximately 11%. In July 2002, the Company invested an additional $26.9 million in Fjord, a fully integrated producer and processor of salmon and other seafood headquartered in Norway, increasing its ownership percentage to approximately 21%. See Notes 3 and 5 to the Consolidated Financial Statements for further discussion. Cash from investing activities for 2001 decreased $262.9 million compared to 2000. The decrease is primarily related to proceeds in the first quarter of 2000 from the sale of the poultry operations, partially offset by acquisitions and capital expenditures during 2000. See Note 2 to the Consolidated Financial Statements for further discussion of the Poultry Division sale. During 2001, the Company invested $55.0 million in property, plant and equipment. The Company invested $20.7 million in the Pork segment primarily to expand existing hog production facilities, complete construction of a new feed mill and make improvements to the pork processing plant. The Company invested $20.9 million in the Marine segment primarily for the purchase of a previously chartered vessel and for equipment. The Company invested $10.3 million in the Sugar and Citrus segment primarily for improvements to existing facilities and sugarcane fields. Capital expenditures in all other segments during 2001 totaled $3.1 million for general modernization and efficiency upgrades of plant and equipment. Cash from financing activities increased $113.8 million during 2002 compared to 2001 primarily reflecting the fourth quarter private placement of $109.0 million of Senior Notes due 2009 and 2012 with a weighted average interest rate of 6.29%. In October 2002, the Company used $107.3 million of the proceeds from this private placement to purchase the indebtedness related to hog production facilities previously leased under a master lease program, effectively reducing the Company's net lease payments. On December 31, 2002, the Company paid an additional $4.1 million and assumed a $10.0 million bond payable to complete the acquisition of Shawnee Funding, Limited Partnership effectively acquiring all of the related hog production facilities previously leased and $2.2 million of cash held in a construction fund which will be used to repay a portion of the bonds payable. Partially offsetting the increase, in October 2002, the Company effectively repurchased 232,414.85 shares of its stock at $203.26 per share from Seaboard Flour Corporation (Seaboard Flour), its parent company, for a total of $47.2 million. Seaboard Flour was required to use a portion of the consideration to repay $11.3 million to the Company to pay in full all indebtedness owed by Seaboard Flour to the Company, and to use the balance to pay bank indebtedness of Seaboard Flour and transaction expenses. See Note 12 to the Consolidated Financial Statements for further discussion. During the first quarter of 2002, the Company extended for one year a $20.0 million revolving credit facility and let expire other revolving credit facilities of $121.0 million. In December 2002 the Company established a new $25.0 million committed line of credit. The Company also has total short-term, uncommitted credit lines totaling $79.5 million at December 31, 2002. As of December 31, 2002, the Company had $21.0 million of borrowings outstanding under committed facilities and $55.1 million outstanding under the short-term uncommitted lines. The following table represents a summary of the Company's commercial commitments and contingent obligations as of December 31, 2002. Total amount (Thousands of dollars) available Short-term credit facilities - committed $ 45,000 Short-term uncommitted demand notes 79,504 Letters of credit 6,454 Total at December 31, 2002 130,958 Committed Letters of Credit and Amounts drawn against lines 89,766 Available borrowing capacity at December 31, 2002 $ 41,192 Subsequent to year-end, the Company extended for one year a $20.0 million revolving credit facility and entered into a new $75.0 million committed line for a subsidiary of the Commodity Trading and Milling segment, which is secured by certain of the Company's commodity trading inventory and accounts receivable. This new line includes financial covenants for the subsidiary which require maintenance of certain levels of working capital and net worth, and limitations on debt to net worth and liabilities to net worth ratios. After this new line was established, short-term committed lines totaled $120.0 million and short-term uncommitted lines totaled $59.5 million. Cash from financing activities increased $98.2 million during 2001 compared to 2000 primarily reflecting the higher level of note and industrial revenue bond repayments during 2000 with proceeds from the sale of the Poultry Division. Effective December 31, 2001, the Company sold a ten percent minority interest in its power barge placed in service during the fourth quarter of 2000 in the Dominican Republic for $6.0 million, consisting of $5.0 million cash and $1.0 million in contributed payables previously recorded by the Company. No gain or loss was recognized on the sale. As part of the sale agreement, the buyer has the option to sell its interest back to the Company at any time until December 31, 2004 for the book value at the time of the sale. The Company is a party to a master lease program and contract production agreements (the "Facility Agreements") with limited liability companies which own certain of the facilities that are used in connection with the Company's vertically integrated hog production. These arrangements are currently accounted for as operating leases. These hog production facilities produce approximately 20% of the Company-owned hogs processed at the plant. At December 31, 2002, the total amount of unamortized costs representing fixed asset values under these Facility Agreements was approximately $61.0 million. The $58.3 million of underlying bank debt within these facilities expires in 2006 and 2007. At December 31, 2002, total future payments, including interest, assuming the Company renews through the end of the final terms, amount to $144.7 million. These facilities are owned by companies considered to be variable interest entities (VIEs), for which the Company is deemed to be the primary beneficiary. Accordingly, the Company will be required to consolidate these entities in the third quarter of 2003 unless changes in the equity structure of the VIEs occur prior to June 30, 2003. The Company is evaluating various options for these facilities, including purchasing certain assets from one limited liability company with a value of $25.6 million at December 31, 2002, and/or assigning its purchase option for all of the properties to a third party with which the Company may enter into production arrangements. Management believes that it will have sufficient liquidity and financing capacity to accomplish any of the alternatives. The contractual cash obligation table below presents additional optional renewal payments, at current interest rates, as if the Company continues to renew the Facility Agreements through the final optional date. See Note 11 to the Consolidated Financial Statements for further discussion. A summary of the Company's contractual cash obligations and optional renewal amounts as of December 31, 2002 is as follows: (Thousands of dollars) 2003 2004 2005 2006 2007 Thereafter Contract grower finishing agreements $ 5,977 $ 6,281 $ 5,379 $ 5,210 $ 5,040 $ 43,102 Obligations under Facility Agreements 6,883 2,092 382 382 382 793 Other operating lease payments 13,016 6,461 6,222 5,218 4,394 4,725 Total lease obligations 25,876 14,834 11,983 10,810 9,816 48,620 Long-term debt 55,869 49,892 56,672 38,116 38,001 136,065 Other purchase commitments 38,524 288 288 288 288 - Total cash obligations and commitments 120,269 65,014 68,943 49,214 48,105 184,685 Additional optional annual renewal payments under Facility Agreements 4,993 9,763 11,462 11,449 11,436 84,719 Total $125,262 $74,777 $80,405 $60,663 $59,541 $269,404 In addition to the financing requirements to accommodate the Pork segment expansion plans, the Company's Senior Notes have scheduled maturities, as shown in the table above. Management believes that the Company's current combination of liquidity, capital resources and borrowing capabilities will be adequate for its existing operations during fiscal 2003. Management is evaluating various alternatives for future financings to provide adequate liquidity for the Company's future operating and expansion plans. In addition, management intends to continue seeking opportunities for expansion in the industries in which it operates. Results of Operations Net sales totaled $1,829.3 million for the year ended December 31, 2002, compared to $1,804.6 million for the year ended December 31, 2001. Operating income of $47.1 million for 2002 decreased $67.3 million compared to $114.4 million in 2001. Net sales totaled $1,804.6 million for the year ended December 31, 2001, compared to $1,583.7 million for the year ended December 31, 2000. Operating income of $114.4 million for 2001 increased by $66.3 million compared to $48.1 million in 2000. Pork Segment (Dollars in millions) 2002 2001 2000 Net sales $ 645.8 $ 772.4 $ 724.7 Operating income (loss) $ (13.9) $ 68.7 $ 63.4 Net sales for the Pork segment decreased $126.6 million to $645.8 million in 2002 compared to 2001 as the result of lower pork prices. Reduced world-wide meat supplies during 2001 contributed to higher sales prices for that year. During 2002, domestic meat supplies increased, which resulted in significantly lower sales prices compared with the prior year. Operating income for the Pork segment decreased $82.6 million to $(13.9) million in 2002 compared to 2001. This decrease is primarily the result of lower sales prices, as discussed above and higher feed costs, partially offset by a decrease in cost of third party hogs. While unable to predict future market prices, management expects overall market conditions to improve during 2003 allowing this segment to return to positive operating income for 2003. Future results may also be adversely affected by the proposed packer ban legislation as discussed in Note 11 to the Consolidated Financial Statements. Net sales increased $47.7 million to $772.4 million in 2001 compared to 2000. This increase is primarily the result of higher pork prices as a result of favorable relationship of pork supplies and pork demand. Operating income increased $5.3 million to $68.7 million in 2001 compared to 2000. This increase is primarily the result of higher pork prices, as discussed above, and processing an increased proportion of lower cost, Company-raised hogs versus third party hogs. Expanded production capacity allowed the Company to raise more of its own hogs in 2001. Partially offsetting these increases, the cost of Company-raised hogs increased over 2000, reflecting higher feed, maintenance, medical and energy costs. Commodity Trading and Milling Segment (Dollars in millions) 2002 2001 2000 Net sales $ 652.1 $ 476.2 $ 359.0 Operating income (loss) $ 18.4 $ 13.2 $ (3.5) Loss from foreign affiliates $ (3.8) $ (4.5) $ (2.4) Net sales for the Commodity Trading & Milling segment increased $175.9 million to $652.1 million in 2002 compared to 2001. This increase is primarily the result of increased commodity trading volumes of corn and wheat to third party customers and, to a lesser extent, increased milling revenues. Commodity trading volumes to third party customers increased as the Company has focused its efforts on expanding in certain existing and new trading markets. Milling revenues have increased primarily as a result of favorable operating environments in certain foreign locations, which have allowed certain mills to increase production levels. Operating income for the Commodity Trading & Milling segment increased $5.2 million to $18.4 million in 2002 compared to 2001. This increase is primarily a result of increased third party trading volumes and increased production at certain foreign milling operations as discussed above. Due to the uncertain political and economic conditions in the countries in which the Company operates, management is unable to predict future sales and operating results but anticipates positive operating income to continue in 2003. Loss from foreign affiliates decreased $0.7 million to $3.8 million in 2002 compared to 2001. This decrease is primarily a result of the $1.0 million charge in 2001 for the other than temporary decline in value of the shrimp business in Ecuador, as discussed below, partially offset by lower operating results at certain African milling operations. Based on the exposure to political and economic conditions in the countries where the foreign affiliates operate, management believes that losses from foreign affiliates may continue in 2003. Net sales increased $117.2 million to $476.2 million in 2001 compared to 2000. This increase is primarily the result of increased trading volumes of soybean meal and wheat to third parties and, to a lesser extent, wheat to foreign affiliates. Operating income increased $16.7 million to $13.2 million in 2001 compared to 2000. This increase is primarily a result of improvements in operating certain mills in foreign countries, including the first year of profitable operations in Zambia, and profitable operations of a new mill acquired during the third quarter of 2000. To a lesser extent, the increase reflects $3.5 million of recoveries of previously reserved receivables and increased commodity sales as discussed above. Loss from foreign affiliates increased $2.1 million to $4.5 million in 2001 compared to 2000. As a result of recurring losses in a shrimp business operated as a subsidiary of a foreign affiliate in Ecuador, at December 31, 2001, management evaluated its carrying value of its investment in Ecuador. Based on the evaluation, in the fourth quarter of 2001, a $1.0 million loss was recognized for the other than temporary decline in value of this investment. The increase was also the result of lower earnings at a milling operation in Haiti. Marine Segment (Dollars in millions) 2002 2001 2000 Net sales $ 383.4 $ 384.9 $ 364.9 Operating income $ 16.6 $ 24.0 $ 14.5 Net sales for the Marine Segment remained relatively constant at $383.4 million in 2002 compared to $384.9 in 2001. Overall, cargo volumes increased in most existing markets and certain new routes were added during the fourth quarter of 2002. These increases were partially offset by significant declines in certain South American routes as a result of political instability in Venezuela throughout 2002. In addition, in December 2002 a general strike commenced in Venezuela resulting in the discontinuance of all port calls to that country. The overall increase in cargo volumes was also partially offset by generally lower cargo rates in 2002 compared to 2001. Operating income for the Marine Segment decreased $7.4 million to $16.6 million in 2002 compared to 2001, as a direct result of the political instability in Venezuela throughout 2002 as discussed above. The duration and extent of the reduced demand, primarily attributable to the political instability and general strike in Venezuela, will continue to effect future results as long as shipping demand for the affected South American routes remain depressed. However, Management expects operating income will remain positive for 2003, although continued economic uncertainties in certain South American routes could continue to reduce overall profitability. Net sales increased $20.0 million to $384.9 million in 2001 compared to 2000. This increase primarily reflects increased volumes to certain markets during the year while average cargo rates decreased slightly compared to the prior year average. The increased sales also reflect a full year of services provided at a cargo terminal facility at the Port of Houston which was acquired during the second quarter of 2000. Although economic uncertainties still existed in certain South American markets, volumes in these markets improved during 2001 compared to 2000, partially offset by a decline in volumes to the Caribbean Basin. Operating income increased $9.5 million to $24.0 million in 2001 compared to 2000, primarily reflecting improved results in certain South American markets discussed above. Sugar and Citrus Segment (Dollars in millions) 2002 2001 2000 Net sales $ 57.7 $ 77.7 $ 60.1 Operating income (loss) $ 16.3 $ 6.6 $ (7.6) Net sales for the Sugar and Citrus segment decreased $20.0 million to $57.7 million in 2002 compared to 2001, primarily reflecting the devaluation of the Argentine peso, discussed below. The reduction was partially offset by higher sales prices for sugar (in pesos) and increased sales volumes from export sales. Operating income increased $9.7 million in 2002 compared to 2001, reflecting the reduction in cost of goods sold as a result of the devaluation discussed below and, to a lesser extent, improved peso sales prices. While management is not able to predict future sugar prices or the effects of devaluation as discussed below, management expects operating income will remain positive for 2003. The functional currency of the Sugar and Citrus Segment is the Argentine peso. As discussed in Note 12 to the Consolidated Financial Statements, in December 2001, the Argentine government placed restrictions on the exchange of currency. On January 6, 2002, the government of Argentina officially ended the one peso to one U.S. dollar parity. On January 11, 2002, the currencies began market trading resulting in ongoing devaluation. This devaluation has resulted in material currency translation losses beginning in December 2001 and continuing through the first half of 2002. During the second half of 2002, the Argentine peso stabilized somewhat. Operating income discussed above does not include the effects of the material currency translation losses on shareholders' equity and net earnings that have been incurred by the Company in 2002 and 2001. The economy of Argentina has been severely, negatively impacted by the devaluation and continuing recession. To date, the peso prices for sugar have increased more than peso costs have increased, resulting in improved operating income in terms of U.S. dollars. However, as a result of the economic turmoil and uncertainty, it is not possible for management to predict if this trend will continue. Net sales increased $17.6 million to $77.7 million in 2001 compared to 2000, primarily a result of improved sugar prices and higher sales volumes. Sales volumes increased primarily as a result of an increase in the resale of sugar purchased from third parties. Operating income for 2001 increased $14.2 million to $6.6 million compared to 2000, primarily as a result of higher sugar prices, increased sales volumes, increases in production efficiencies and a lower provision for doubtful accounts. Power Segment (Dollars in millions) 2002 2001 2000 Net sales $ 63.1 $ 63.6 $ 35.8 Operating income $ 14.3 $ 14.6 $ 6.0 Net sales for the Power segment remained fairly constant at $63.1 million in 2002 compared to $63.6 million in 2001. Operating income also remained fairly constant at $14.3 million in 2002 compared to $14.6 million in 2001. During 2002, increased transmission fees incurred in conjunction with spot market sales were primarily offset by recovery of previously written-off receivables. While management is not able to predict future market rates, demand for power in the Dominican Republic is expected to remain strong during 2003. Accordingly, management expects operating income to remain positive for 2003. Net sales increased $27.8 million to $63.6 million in 2001 compared to 2000 reflecting a full year of operations of the second power barge that began in October of 2000. Through the third quarter of 2001, all sales from this segment were made under contract to the state-owned electric company. That contract was rescinded during September 2001 and the Company began selling power at market rates on the spot market. Operating income for the Power segment increased $8.6 million to $14.6 million in 2001 compared to 2000 primarily reflecting the operations of the second power barge. Wine Segment (Dollars in millions) 2002 2001 2000 Net sales $ - $ - $ 6.8 Operating loss $ - $ - $ (9.2) Loss from foreign affiliate $ (2.9) $ (3.7) $ - As discussed in Note 2 to the Consolidated Financial Statements, Seaboard's consolidated wine segment and a cash contribution were exchanged for a non-controlling interest in a larger Bulgarian wine business (the Business) on December 29, 2000. As a result of this exchange, the wine segment results are reported using the equity method of accounting since 2001. The results for 2001 only include nine months as it is recorded on a three-month lag. As a result of the three month lag, in order to reflect operating results of the Wine segment through the date of the exchange, this segment's results for 2000 include 15 months of operations. During the third quarter of 2002, the Business negotiated an extension of principal payment due dates and a waiver of default when it was unable to make a scheduled principal payment to a bank and to achieve certain related loan covenants. In February 2003, the Business received an additional extension with revised interim payment terms through May 2003 and is currently in negotiations with the bank for additional revised terms and conditions. In the event the Business does not obtain additional revisions to the loan terms and/or waivers, or is unable to fulfill the revised interim payment terms and the bank pursues legal recourse, the impact on the Business and its financial condition is likely to impair the value of its assets, and its ability to continue to operate without pursuing bankruptcy protection. In addition, as of December 31, 2002, the Business has evaluated the recoverability of its long-lived assets based on projected future cash flows and accordingly, the Company believes there is not an other than temporary decline in value, pending the resolution of negotiations with the bank. As of December 31, 2002, the Company's investments in and advances to the Business totaled $19.7 million. All Other Segments (Dollars in millions) 2002 2001 2000 Net sales $ 27.1 $ 29.8 $ 32.3 Operating loss $ (0.8) $ (8.8) $ (11.5) Loss from foreign affiliates $ (10.2) $ (1.3) $ - Net Sales for All Other segments decreased $2.7 million to $27.1 million in 2002 compared to 2001 and operating loss improved $8.0 million for 2002 compared to 2001. These decreases are primarily the result of the Produce division's decision to cease shrimp, pickle and pepper farming operations in Honduras in late 2001 and, to a lesser extent, discontinuing two non-produce related small businesses during early 2002. Management expects to be near break-even or better for 2003. As discussed in Note 13 to the Consolidated Financial Statements, in February 2003, management signed a letter of intent for the sale of the shrimp farming and shrimp processing assets and has evaluated the recoverability of the other long-lived farming assets discussed above at December 31, 2002. Based on this evaluation, the Produce division incurred a $0.3 million charge in 2002 for impairment of pickle and pepper farming related assets, and is currently considering various strategic alternatives for the remaining pickle and pepper farming assets. An additional impairment charge could be incurred depending on the final decision regarding the alternatives if the remaining carrying value of $1.2 million for these farming assets is not fully recoverable. The loss from foreign affiliates represents the Company's share of losses from Fjord recorded on a three-month lag beginning in the third quarter of 2001. See Note 3 to the Consolidated Financial Statements for a discussion of the Company's increased investment in Fjord which required a retroactive adjustment to apply the equity method of accounting since the acquisition of the initial shares. Losses increased in 2002 compared to 2001 as a result of low worldwide salmon prices and include $3.8 million for the Company's share of charges incurred to close and consolidate certain operations. Although management cannot predict worldwide salmon prices, losses are expected to continue. Net Sales for All Other segments decreased $2.5 million to $29.8 million in 2001 compared to 2000. Sales decreased primarily as the result of lower prices and yields of shrimp grown and sold within the Produce Division. Operating loss decreased $2.7 million to $8.8 million in 2001 compared to 2000. The improvement in operating loss is primarily the result of the Company discontinuing the business of marketing fruits and vegetables grown through joint ventures or independent growers by selling certain assets of its Produce Division during the third quarter of 2000 (see Note 2 to the Consolidated Financial Statements). Partially offsetting the improvement were increased operating losses from the existing Produce Division operations, including a severance charge to earnings of $1.3 million related to ceasing shrimp, pickle and pepper farming operations in Honduras. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses decreased $12.3 million to $102.9 million in 2002 compared to 2001. This decrease is primarily a result of lower operating costs for the Sugar and Citrus segment reflecting the effects of the Argentine peso devaluation on peso denominated expenses, recovery of previously written-off receivables in the Power segment and discontinuing operations of certain other small businesses. As a percentage of revenues, SG&A decreased to 5.6% for 2002 from 6.4% in 2001. SG&A decreased $14.0 million to $115.2 million in 2001 compared to 2000. This decrease is primarily a result of changing to the equity method of accounting for the Wine business for 2001 (as discussed in Note 2 to the Consolidated Financial Statements) and, to a lesser extent, recoveries of previously reserved receivables and discontinuing the business of marketing fruits and vegetables by the Produce Division in the prior year, as discussed above, partially offset by increases discussed below. The increases reflect increased service and support functions related to expanded operations in the Commodity Trading and Milling, Marine and Power segments. As a percentage of revenues, SG&A decreased to 6.4% for 2001 from 8.2% in 2000, primarily as a result of increased revenues in these segments in excess of the related SG&A increases. Interest Expense Interest expense totaled $22.7 million, $27.7 million and $30.1 million for the years ended December 31, 2002, 2001 and 2000, respectively. The decrease in 2002 from 2001 primarily reflects lower average interest rates and, to a lesser extent, lower average level of short-term borrowings outstanding during 2002. The decrease in 2001 from 2000 primarily reflects a decrease in short-term borrowings and, to a lesser extent, lower interest rates on variable rate debt. Interest Income Interest income totaled $5.9 million, $8.5 million and $12.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. The decrease in 2002 from 2001 primarily reflects a decrease in average funds invested and, to a lesser extent, lower interest rates. The decrease in 2001 from 2000 primarily reflects lower interest rates and, to a lesser extent, a decrease in average funds invested. Other Investment Income, Net Other investment income, net totaled $0.8 million, $4.8 million and $5.7 million for the years ended December 31, 2002, 2001 and 2000, respectively. During 2001, the Company sold its shares of a long-term investment in a foreign company recognizing a gain of $3.7 million. In 2000, other investment income, net is primarily attributable to a $3.6 million gain recognized on the sale of certain marketable securities held for sale and increased profitability from the prior ownership of a domestic seafood business investment as discussed in Note 3 to the Consolidated Financial Statements. Loss on Exchange/Disposition of Businesses On December 29, 2000, the Company exchanged its controlling interest in a Bulgarian wine operation and cash for a non- controlling interest in a larger wine operation resulting in a $5.6 million loss. During the third quarter of 2000, the Company discontinued the business of marketing fruits and vegetables grown through joint ventures or independent growers by selling certain assets of its Produce Division resulting in a $2.0 million loss. Foreign Currency Losses Foreign currency losses totaled $17.1 million, $8.8 million and $0.1 million for the years ended December 31, 2002, 2001 and 2000, respectively. The losses primarily reflect the Argentine peso devaluation effect on dollar denominated net liabilities of the Company's Argentine subsidiary of $12.5 million and $7.8 million for 2002 and 2001, respectively. See Note 12 to the Consolidated Financial Statements for further discussion. In addition, during 2002, the Company experienced increased foreign currency losses in its Commodity Trading and Milling and Power divisions. The Company operates in many developing countries throughout the world. The political and economic conditions of these markets cause volatility in currency exchange rates and expose the Company to the risk of exchange loss. Miscellaneous, Net Miscellaneous, net totaled $(5.7) million, $5.6 million and $7.5 million for the years ended December 31, 2002, 2001 and 2000, respectively. During 2002 the Company recorded losses of $25.0 million on the Company's ten-year interest rate swap agreements as a result of falling interest rates compared to gains of $2.8 million recognized during 2001. These swap agreements do not qualify as hedges for accounting purposes and accordingly, changes in the market value are recorded to earnings as interest rates change. See Note 9 to the Consolidated Financial Statements for additional discussion. During 2002, a gain of $18.3 million was recognized for proceeds received from a lawsuit as discussed in Note 11 to the Consolidated Financial Statements. During 2000, a $3.8 million gain was realized from the recognition of unamortized proceeds from prior terminations of interest rate agreements associated with debt repaid during the year. Income Tax Expense During 2002, the Company recognized a one-time tax benefit of $14.3 million related to the cumulative basis difference in the Company's Argentine subsidiary. See Note 7 to the Consolidated Financial Statements for further discussion. Excluding the effects of this subsidiary, the effective tax rate for 2002 compared to 2001 primarily reflects the effects of increased permanently deferred foreign earnings and lower domestic taxable income. The effective tax rates decreased significantly during 2001 compared to 2000 primarily as a result of increased permanently deferred foreign earnings during 2001 partially offset by the effect of certain other permanent differences. 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, in all material respects, with all such 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. On February 12, 2003, the Environmental Protection Agency (EPA) published its final regulations related to concentrated animal feeding operations (CAFOs) which are applicable to the Company's hog confinement operations. The regulations require the Company to obtain federal National Pollutant Discharge Elimination System (NPDES) Permits and to implement nutrient management plans with respect to virtually all of the Company's hog confinement operations. The Company believes that it will be able to obtain the requisite permits and implement the requisite nutrient management plans without incurring expenditures which will have any material adverse effect on the financial condition or results of operations of the Company. The Financial Accounting Standards Board (FASB) has issued Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations", effective for fiscal years beginning after June 15, 2002. This statement will require the Company to record a long-lived asset and related liability for estimated future costs of retiring certain assets. The estimated asset retirement obligation, discounted to reflect present value, will grow to reflect accretion of the interest component. The related retirement asset will be amortized over the economic life of the related asset. Upon adoption of this statement, a cumulative effect of a change in accounting principle will be recorded to recognize the deferred asset and related accumulated amortization to date and the estimated discounted asset retirement liability together with cumulative accretion since the inception of the liability. The Company will incur asset retirement obligation costs associated with the closure of the hog lagoons it is legally obligated to close. Accordingly, the Company has performed detailed assessments and obtained the appraisals required to estimate the future retirement costs based on current regulations. The Company will record, as a cumulative effect, a $2.2 million charge to earnings ($1.3 million, net of tax), an increase in net fixed assets of $3.2 million and a liability of $5.4 million for this change in accounting principle on January 1, 2003. During 2003, the Company estimates the total accretion of the liability and depreciation of fixed assets to increase cost of sales by approximately $0.5 million. In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". FIN 45 applies to guarantors only and applies only to direct and indirect guarantees with specified contract characteristics. FIN 45 increases disclosure requirements for guarantees in place as of December 31, 2002. See Note 11 to the Consolidated Financial Statements for the related disclosure. Also, for guarantees issued or modified after December 31, 2002, FIN 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The adoption of FIN 45 is not expected to have a material impact on the Company's financial position or net earnings. In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities". FIN 46 applies to entities if its total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated support or if the equity investors lack certain characteristics of a controlling financial interest. If an entity is determined to meet those certain characteristics, FIN 46 requires a test to identify the primary beneficiary based on expected losses and expected returns associated with the variable interest. The primary beneficiary is then required to consolidate the entity. The consolidation requirements apply to all variable interest entities (VIEs) created after January 31, 2003. The Company must apply the consolidation requirements for VIEs that existed prior to February 1, 2003 and remain in existence as of July 1, 2003. See Note 11 to the Consolidated Financial Statements for the related disclosure of existing VIEs as of December 31, 2002. As the Company has not yet determined the ultimate existence of certain VIEs as of July 1, 2003, management is not yet able to determine the impact of FIN 46 on the Company's financial position. The Company does not believe its businesses have been materially adversely affected by general inflation. Critical Accounting Policies The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Management has identified the accounting policies believed to be the most important to the portrayal of the Company's financial condition and results, and which require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. These critical accounting policies include: Allowance for doubtful receivables - Management uses various data and historical information to evaluate the adequacy of this reserve for receivables estimated to be uncollectible as of the consolidated balance sheet date. Changes in estimates, developing trends and other new information can have a material effect on future evaluations. In addition, the Company's receivables are heavily weighted towards foreign receivables ($154.7 million or 71% at December 31, 2002), including receivables from foreign affiliates discussed below, which generally represent more of a collection risk than its domestic receivables. Investments in and advances to foreign affiliates - Management uses the equity method of accounting for these investments. At the balance sheet date, management will evaluate certain equity investments for potential decline in value deemed other than temporary when conditions warrant such an assessment. Since these investments mostly involve entities in foreign countries considered underdeveloped, changes in the local economy or political environment may occur suddenly and can materially alter this evaluation. In certain cases, the Company has an ongoing business relationship through sales of grain to these entities that also include receivables from these foreign affiliates. Management considers the long-term business prospects of such investments when making its assessment. At December 31, 2002, the total investment in and advances to foreign affiliates was $83.9 million. See Note 5 to the Consolidated Financial Statements for further discussion. Employee Pension Obligations and Related Expense - The Company's employee pension obligations and related expense are dependent on management's assumptions used by actuaries in calculating such amounts. These assumptions include discount rates, expected return on plan assets, long-term rate of increase in compensation levels and other factors. Actual results that differ from management's assumptions are accumulated and amortized over future periods and, therefore, generally affect the recognized obligation and related expense. While management believes that the assumptions used are appropriate, significant differences in the actual experience or changes in the assumptions would affect the obligation and related expense. See Note 10 to the Consolidated Financial Statements for more information regarding costs and assumptions for employee pension plans. Contingent liabilities - Management has evaluated the various exposures, including environmental exposures of its Pork division, described in Note 11 to the Consolidated Financial Statements. Based on currently available information and analysis, management believes that all such items have been adequately accrued for and reflected in the consolidated balance sheet as of December 31, 2002. Future changes in information, legal statutes or events could result in changes to estimates that could have a material adverse impact on the financial statements. Determining functional currencies of foreign operations - The Company has several foreign subsidiaries and locations that account for $774.3 million, or 42% of sales, $388.7 million, or 30% of assets and $227.4 million, or 29% of liabilities, as of December 31, 2002. Management is required to translate the financial statements of the foreign entities from the currency in which they keep their accounting records into United States dollars using the appropriate exchange rates. Depending on the entities' functional currency, this process creates exchange gains and losses which are either included in the statements of operations or as foreign currency translation adjustments as a separate part of equity, classified as accumulated other comprehensive loss. The functional currency is determined by management after consideration of the relevant economic facts and circumstances specific to each entity. The magnitude of these exchange gains or losses is determined by movements of the exchange rates of the foreign currencies against the United States dollar. As described in Note 12 to the consolidated financial statements, during 2002 and 2001 the Company experienced a devaluation of its assets in Argentina. As of December 31, 2002, the Company had $97.2 million ($62.6 million net of tax) in cumulative foreign currency translation adjustment recorded on the balance sheet. Changes by management in the designation of the foreign entities' functional currency and fluctuations in prevailing exchange rates could have a material impact on future Consolidated Financial Statements. 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, commodity prices and foreign currency exchange rates. Changes in interest rates impact the cash required to service variable rate debt and leases with variable rate interest components. 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, finished product sales and firm sales commitments. The Company uses corn, wheat, soybeans and soybean meal futures and options to manage certain risks of increasing prices of raw materials and firm sales commitments. From time to time, the Company uses hog futures to manage risks of increasing prices of live hogs acquired for processing. Changes in foreign currency exchange rates impact the cash paid or received by the Company on foreign currency denominated receivables and payables. The Company manages certain of these risks through the use of foreign currency forward exchange agreements. The table below provides information about the Company's non- trading financial instruments sensitive to changes in interest rates at December 31, 2002. For debt obligations, the table presents principal cash flows and related weighted average interest rates by expected maturity dates. At December 31, 2002, long-term debt included foreign subsidiary obligations of $2.6 million payable in Argentine pesos, $2.1 million denominated in Congolese francs, and $2.0 million denominated in U.S. dollars. At December 31, 2001, long-term debt included foreign subsidiary obligations of $6.6 million payable in Argentine pesos, $2.6 million denominated in U.S. dollars, and $2.0 million denominated in Congolese francs. 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) 2003 2004 2005 2006 2007 Thereafter Total Long-term debt: Fixed rate $51,562 $49,892 $56,672 $38,116 $38,001 $94,465 $328,708 Average interest rate 7.45% 7.34% 7.17% 7.51% 7.46% 6.80% 7.21% Variable rate $ 4,307 - - - - 41,600 $ 45,907 Average interest rate 2.03% - - - - 1.65% 1.69% Non-trading financial instruments sensitive to changes in interest rates at December 31, 2001 consisted of fixed rate long- term debt totaling $247.5 million with an average interest rate of 7.47%, and variable rate long-term debt totaling $63.5 million with an average interest rate of 2.42%. The Company entered into five, ten-year interest rate exchange agreements during 2001 whereby the Company pays a stated fixed rate and receives a variable rate of interest on a total notional amount of $150,000,000. As of December 31, 2002, the weighted average fixed rate payable by the Company was 5.52% and aggregate fair value of the contracts at December 31, 2002 of $(18.0) million was recorded in accrued financial derivative liabilities. As of December 31, 2001, these agreements had a net fair value of $2.0 million. Inventories that are sensitive to changes in commodity prices, including carrying amounts and fair values at December 31, 2002 and 2001 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, during the fourth quarter of 2001, the Company discontinued the extensive record-keeping required to account for any remaining commodity transactions as fair value hedges and expensed $1.1 million to cost of sales. The Company continues to believe its commodity futures and options are economic hedges and not speculative transactions although they do not qualify as hedges under accounting rules. Since the Company does not account for these derivatives as hedges, fluctuations in the related commodity prices could have a material impact on earnings in any given year. The following tables present the notional quantity amounts, the weighted average contract prices, the contract maturities, and the fair values of the Company's open commodity derivative positions at December 31, 2002. Trading: Contract Volumes Wtd.-avg. Fair Value Futures Contracts Quantity Units Price/Unit Maturity (000's) Corn purchases-long 21,649,490 bushels $ 2.68 2003 $(2,087) Corn sales-short 10,700,066 bushels 2.67 2003 734 Wheat purchases-long 3,320,511 bushels 4.25 2003 (2,296) Wheat sales-short 3,205,511 bushels 4.27 2003 2,282 Soybean meal purchases- long 171,200 tons 164.77 2003 62 Soybean meal sales-short 72,800 tons 166.18 2003 (72) Soybean purchases-long 250,000 bushels 5.64 2003 3 Soybean sales-short 860,000 bushels 5.55 2003 (83) Contract Volumes Wtd.-avg. Fair Value Options Contracts Quantity Units Price/Unit Maturity (000's) Wheat puts written-long 50,000 bushels $ 4.50 2003 $ (54) Wheat puts purchased- short 50,000 bushels 4.50 2003 56 Wheat calls purchased- long collars 50,000 bushels 4.60 2003 (12) Wheat calls written- short collars 50,000 bushels 4.60 2003 13 Corn puts written-long 500,000 bushels 2.70 2003 (114) Corn calls purchased- long collars 500,000 bushels 3.00 2003 (49) At December 31, 2001, the Company had net trading contracts to purchase 8.9 million bushels of grain (fair value of $197,000) and 200,800 tons of meal (fair value of $(1,760,000)). The table below provides information about the Company's forward currency exchange agreements and the related trade receivables and financial instruments sensitive to foreign currency exchange rates at December 31, 2002. Information is presented in U.S. dollar equivalents and all contracts mature in 2003. The table presents the notional amounts and weighted average exchange rate. The notional amount is generally used to calculate the contractual payments to be exchanged under the contract. Contract/ Change in (Dollars in thousands) Historical Cost FairValues Trading: Forward exchange agreements (receive $U.S./pay South African rands (ZAR)) $12,051 $ (241) Nontrading: Firmly committed sales contracts (ZAR) $85,373 $ 12,525 Accounts receivable hedged (denominated in ZAR) $12,869 $ 3,339 Firmly committed sales contracts (Euro) $ 252 $ 4 Accounts receivable hedged (denominated in Euro) $ 638 $ 28 Related derivatives: Forward exchange agreements (receive $U.S./pay ZAR) $93,396 $(14,043) Forward exchange agreements (receive $U.S./pay Euro) $ 892 $ (33) Average contractual exchange rates: Forward exchange agreements (receive $U.S./pay ZAR) 10.01 Forward exchange agreements (receive $U.S./pay Euro) 0.99 At December 31, 2001, the Company had net agreements to exchange $86,136,000 of contracts denominated in South African rands at an average contractual exchange rate of 10.23 ZAR to one U.S. dollar. The stock of the Company's investment in Fjord's is denominated in Norwegian Kroner (NOK). To hedge a portion of the risk of change in the foreign currency exchange rate on this investment, during 2001 the Company entered into a foreign currency exchange agreement whereby the Company received a fixed price of NOK 0.109 to one U.S. dollar. This hedge expired during 2002 and was not renewed. Responsibility for Financial Statements The consolidated financial statements appearing in this annual report have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America and necessarily include amounts based upon judgments with due consideration given to materiality. The Company relies on a system of internal accounting controls that is designed to provide reasonable assurance that assets are safeguarded, transactions are executed in accordance with Company policy and are properly recorded, and accounting records are adequate for preparation of financial statements and other information. The concept of reasonable assurance is based on recognition that the cost of a control system should not exceed the benefits expected to be derived and such evaluations require estimates and judgments. The design and effectiveness of the system are monitored by a professional staff of internal auditors. The consolidated financial statements have been audited by the independent accounting firm of KPMG LLP, whose responsibility is to examine records and transactions and to gain an understanding of the system of internal accounting controls to the extent required by auditing standards generally accepted in the United States of America and render an opinion as to the fair presentation of the consolidated financial statements. The Board of Directors pursues its review of auditing, internal controls and financial statements through its audit committee, composed entirely of independent directors. In the exercise of its responsibilities, the audit committee meets periodically with management, with the internal auditors and with the independent accountants to review the scope and results of audits. Both the internal auditors and independent accountants have unrestricted access to the audit committee with or without the presence of management. Independent Auditors' Report We have audited the accompanying consolidated balance sheets of Seaboard Corporation and subsidiaries as of December 31, 2002 and 2001, 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, 2002. 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 auditing standards generally accepted in the United States of America. 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, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 5 to the consolidated financial statements, as a result of an additional investment in a foreign affiliate during 2002, the accompanying consolidated balance sheet as of December 31, 2001 and the related consolidated statements of earnings, changes in equity, and cash flows for the year then ended have been retroactively adjusted to apply the equity method of accounting to such investment since the initial ownership interest was acquired in 2001. /s/KPMG LLP Kansas City, Missouri February 24, 2003 SEABOARD CORPORATION Consolidated Balance Sheets December 31, (Thousands of dollars) 2002 2001 Assets Current assets: Cash and cash equivalents $ 23,242 $ 22,997 Short-term investments 30,337 126,795 Receivables: Trade 150,563 156,779 Due from foreign affiliates 41,360 27,187 Other 26,047 24,021 217,970 207,987 Allowance for doubtful receivables (16,178) (20,571) Net receivables 201,792 187,416 Inventories 243,949 205,345 Deferred income taxes 15,481 10,075 Other current assets 42,896 36,343 Total current assets 557,697 588,971 Investments in and advances to foreign affiliates 83,855 68,189 Net property, plant and equipment 621,593 556,273 Other assets 17,996 21,324 Total Assets $1,281,141 $1,234,757 Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks $ 76,112 $ 37,703 Current maturities of long-term debt 55,869 55,166 Accounts payable 67,464 61,513 Accrued compensation and benefits 35,633 34,682 Accrued financial derivative liabilities 33,630 12,811 Income taxes payable 17,583 17,343 Other accrued liabilities 70,071 61,382 Total current liabilities 356,362 280,600 Long-term debt, less current maturities 318,746 255,819 Deferred income taxes 71,509 129,905 Other liabilities 40,639 33,946 Total non-current and deferred liabilities 430,894 419,670 Minority interest 7,154 6,067 Commitments and contingent liabilities Stockholders' equity: Common stock of $1 par value. Authorized 4,000,000 shares; issued 1,255,054 and 1,789,599 shares 1,255 1,790 Shares held in treasury - (302) 1,255 1,488 Additional capital - 13,214 Accumulated other comprehensive loss (67,284) (62,873) Retained earnings 552,760 576,591 Total stockholders' equity 486,731 528,420 Total Liabilities and Stockholders' Equity $1,281,141 $1,234,757 See accompanying notes to consolidated financial statements. SEABOARD CORPORATION Consolidated Statements of Earnings Years ended December 31, (Thousands of dollars except per share amounts) 2002 2001 2000 Net sales $1,829,307 $1,804,610 $1,583,696 Cost of sales and operating expenses 1,679,264 1,575,070 1,406,439 Gross income 150,043 229,540 177,257 Selling, general and administrative expenses 102,918 115,188 129,192 Operating income 47,125 114,352 48,065 Other income (expense): Interest expense (22,659) (27,732) (30,134) Interest income 5,887 8,500 12,580 Other investment income, net 757 4,823 5,686 Loss on exchange of business - - (7,607) Loss from foreign affiliates (16,826) (9,508) (2,440) Minority interest (1,087) - 785 Foreign currency loss, net (17,143) (8,776) (89) Miscellaneous, net (5,696) 5,564 7,457 Total other income (expense), net (56,767) (27,129) (13,762) Earnings (loss) from continuing operations before income taxes (9,642) 87,223 34,303 Income tax benefit (expense) 23,149 (35,234) (25,431) Earnings from continuing operations 13,507 51,989 8,872 Gain on disposal of discontinued operations, net of income taxes of $57,305 - - 90,037 Net earnings $ 13,507 $ 51,989 $ 98,909 Net earnings per common share: Net earnings per share from continuing operations $ 9.38 $ 34.95 $ 5.96 Net earnings per share from discontinued operations - - 60.53 Net earnings per common share $ 9.38 $ 34.95 $ 66.49 Dividends per common share $ 2.50 $ 1.00 $ 1.00 Average number of shares outstanding 1,439,753 1,487,520 1,487,520 See accompanying notes to consolidated financial statements. SEABOARD CORPORATION Consolidated Statements of Changes in Equity (Thousands of dollars except per share amounts)
Accumulated Other Common Treasury Additional Comprehensive Retained Stock Stock Capital Loss Earnings Total Balances, January 1, 2000 $1,790 $ (302) $13,214 $ (201) $428,667 $443,168 Comprehensive income Net earnings 98,909 98,909 Other comprehensive income net of income tax expense of $61: Unrealized gain on investments 95 95 Comprehensive income 99,004 Dividends on common stock (1,487) (1,487) Balances, December 31, 2000 1,790 (302) 13,214 (106) 526,089 540,685 Comprehensive loss Net earnings 51,989 51,989 Other comprehensive loss net of income tax benefit of $115: Foreign currency translation adjustment (62,433) (62,433) Unrealized loss on investments (213) (213) Unrecognized pension cost (1,273) (1,273) Cumulative effect of SFAS 133 adoption related to deferred gains on interest rate swaps 1,352 1,352 Amortization of deferred gains on interest rate swaps (200) (200) Comprehensive loss (10,778) Dividends on common stock (1,487) (1,487) Balances, December 31, 2001 1,790 (302) 13,214 (62,873) 576,591 528,420 Comprehensive income Net earnings 13,507 13,507 Other comprehensive income net of income tax benefit of $37,557: Foreign currency translation adjustment 33 33 Unrealized gain on investments 282 282 Unrecognized pension cost (4,526) (4,526) Amortization of deferred gains on interest rate swaps (200) (200) Comprehensive income 9,096 Repurchase of common stock and cancellation of treasury stock (535) 302 (13,214) (33,794) (47,241) Dividends on common stock (3,544) (3,544) Balances, December 31, 2002 $1,255 $ - $ - $(67,284) $552,760 $486,731 See accompanying notes to consolidated financial statements.
SEABOARD CORPORATION Condensed Consolidated Statements of Cash Flows Years ended December 31, (Thousands of dollars) 2002 2001 2000 Cash flows from operating activities: Net earnings $ 13,507 $ 51,989 $ 98,909 Adjustments to reconcile net earnings to cash from operating activities: Net gain on disposal of discontinued operations - - (90,037) Depreciation and amortization 52,636 55,800 50,383 Loss from foreign affiliates 16,826 9,508 2,440 Other investment income, net (757) (4,823) (5,686) Foreign currency exchange loss 15,552 7,830 - Deferred income taxes (26,244) 26,086 57,809 Gain from recognition of deferred swap proceeds - - (3,760) Gain from sale of fixed assets (1,452) (1,958) (492) Loss from exchange/disposition of business - - 7,607 Changes in current assets and liabilities: Receivables, net of allowance (28,408) 7,085 (87,240) Inventories (50,917) (8,831) (31,186) Other current assets (3,292) (21,725) (5,587) Current liabilities exclusive of debt 41,693 31,202 3,491 Other, net (1,658) 7,065 2,812 Net cash from operating activities 27,486 159,228 (537) Cash flows from investing activities: Purchase of short-term investments (129,806) (388,786) (586,972) Proceeds from the sale of short-term investments 223,643 270,204 528,571 Proceeds from the maturity of short-term investments 2,725 84,016 58,791 Investments in and advances to foreign affiliates, net (27,674) (5,048) (23,310) Capital expenditures (149,879) (54,962) (116,933) Acquisition of businesses (net of cash acquired) - - (45,444) Proceeds from disposal of discontinued operations, net - - 356,107 Other, net 9,487 7,101 4,589 Net cash from investing activities (71,504) (87,475) 175,399 Cash flows from financing activities: Notes payable to banks, net 38,409 (42,777) (140,873) Proceeds from issuance of long-term debt 109,000 - 5,211 Principal payments of long-term debt (51,352) (31,773) (24,901) Purchase of common stock (47,241) - - Sale of minority interest in a controlled subsidiary - 5,000 - Dividends paid (3,544) (1,487) (1,487) Bond construction fund 563 3,116 (4,091) Net cash from financing activities 45,835 (67,921) (166,141) Effect of exchange rate change on cash (1,572) (595) - Net change in cash and cash equivalents 245 3,237 8,721 Cash and cash equivalents at beginning of year 22,997 19,760 11,039 Cash and cash equivalents at end of year $ 23,242 $ 22,997 $ 19,760 See accompanying notes to consolidated financial statements. 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 domestically in pork production and processing, and cargo shipping. Overseas, the Company is primarily engaged in commodity merchandising, flour and feed milling, sugar production, and electric power generation. Seaboard Flour, LLC (the Parent Company, formerly Seaboard Flour Corporation) is the owner of 70.8% 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. Short-term Investments Short-term investments are retained for future use in the business and may include money market accounts, 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 any related unrealized gains and losses reported net of tax, as a component of accumulated other comprehensive income. When held, 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 The Company uses 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 first-in, first-out (FIFO) cost or market. Property, Plant and Equipment Property, plant and equipment are carried at cost and are being depreciated generally on the straight-line method over useful lives ranging from 3 to 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. Routine maintenance, repairs and minor renewals are charged to operations while major renewals and improvements are capitalized. Costs expected to be incurred during regularly scheduled drydocking of vessels are accrued ratably prior to the drydock date. Deferred Grant Revenue Included in other liabilities at December 31, 2002 and 2001 is $9,434,000 and $9,857,000, respectively, of deferred grant revenue. Deferred grant revenue represents economic development funds contributed to the Company by government entities that were limited to construction of a hog processing facility in Guymon, Oklahoma. Deferred grants are being amortized to income over the life of the assets acquired with the funds. Income Taxes Deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Revenue Recognition Revenue of the Company's containerized cargo service is recognized ratably over the transit time for each voyage. Revenue of the Company's commodity trading business is recognized when the commodity is delivered to the customer. The Company recognizes all other revenues on commercial exchanges at the time title to the goods transfers to the buyer. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Impairment of Long-lived Assets Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-lived Assets" (SFAS 144). SFAS 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to Be Disposed of" however, it retains most of the provisions of that Statement related to the recognition and measurement of the impairment of long-lived assets to be "held and used." The Statement provides more guidance on estimating cash flows when performing a recoverability test, requires that a long-lived asset to be disposed of other than by sale be classified as "held and used" until it is disposed of, and establishes more restrictive criteria to classify an asset as "held for sale." The adoption had no immediate impact on the Company's financial statements. At each balance sheet date, long-lived assets, primarily fixed assets, are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to future 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 exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. See Note 13 for discussion of recoverability of certain 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 1,439,753 for the year ended December 31, 2002 and 1,487,520 for the years ended December 31, 2001 and 2000. 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 $23,782,000 and $19,320,000 at December 31, 2002 and 2001, respectively. The amounts paid for interest and income taxes are as follows: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Interest (net of amounts capitalized) $ 21,310 29,182 29,821 Income taxes $ 2,856 2,557 11,805 Supplemental Noncash Transactions During the fourth quarter of 2002, in connection with the purchase of certain hog production facilities previously leased, the Company assumed a $10,000,000 bond payable and acquired $2.2 million of related funds held in trust which will be used to repay a portion of the bonds assumed. See Note 6 for additional information. As more fully described in Note 12, a devaluation of the Argentine peso decreased the U.S. dollar value of the assets and liabilities of the Sugar and Citrus segment during 2002 and 2001. The devaluation of the peso-denominated assets and liabilities reduced working capital for 2002 and 2001 by approximately $17,177,000 and $22,355,000, and reduced fixed assets by $35,302,000 and $47,244,000, respectively. In addition, net long- term assets were reduced by $2,107,000 during 2002 and net long-term liabilities increased by $625,000 during 2001. As more fully described in Note 2, during 2001 $1.0 million in previously recorded payables was contributed as partial consideration received for the sale of a minority interest in a power barge. As more fully described in Note 2, during 2000 the Company sold its Poultry Division, acquired the assets of an existing hog production operation, a cargo terminal facility and a flour and feed milling facility, sold certain assets of its Produce Division and exchanged its controlling interest in a Bulgarian wine operation and cash for a non-controlling interest in a larger Bulgarian wine operation. The following table summarizes the noncash transactions resulting from the disposition and exchange of businesses in 2000. Year ended (Thousands of dollars) December 31, 2000 Decrease in net working capital (including current income tax liability) $ 75,745 Increase in investments in and advances to foreign affiliates (25,274) Decrease in other fixed assets 7,865 Decrease in other net assets 102 Decrease in net assets of discontinued operation 195,034 Increase in deferred income tax liability 8,914 Loss on exchange/disposition of businesses (7,607) Gain on disposal of discontinued operations, net of income taxes 90,037 Net proceeds from exchange/disposition of businesses $344,816 Net proceeds from exchange/disposition of businesses in 2000 include $356,107,000 in proceeds from disposal of discontinued operations and $11,291,000 in cash paid and contributed in the exchange of a business. The following table summarizes the noncash transactions resulting from acquisitions in 2000: Year ended (Thousands of dollars) December 31, 2000 Increase in other working capital $ 8,654 Increase in fixed assets 76,781 Increase in other net assets 600 Increase in notes payable and long-term debt (37,091) Increase in other liabilities (3,500) Cash paid, net of cash acquired and consolidated $ 45,444 Foreign Currency Transactions and Translation 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. Certain 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 these foreign subsidiaries and affiliates are primarily conducted with U.S. subsidiaries or operate in hyper-inflationary environments. As a result, the Company remeasures the financial statements of certain foreign subsidiaries and affiliates using the U.S. dollar as the functional currency. 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 during the year. Translation gains and losses are recorded as components of other comprehensive loss. U.S. dollar denominated net liability conversions to the local currency are recorded through income. Derivative Instruments and Hedging Activities Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Investments and Hedging Activities," as amended. This statement 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. This statement imposes extensive record-keeping requirements in order to designate a derivative financial instrument as a hedge. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the instrument and the related change in value of the underlying commitment. For derivatives that qualify as effective hedges, the change in fair value has 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 does affect current period net earnings. The Company holds and issues certain derivative instruments to manage various types of market risks from its day-to-day operations including commodity futures and option contracts, foreign currency exchange agreements and interest rate exchange agreements. While management believes each of these instruments manages various market risks, only certain instruments are designated and accounted for as hedges under SFAS 133 as a result of the extensive record-keeping requirements of this statement. Adoption of this statement resulted in adjustments during 2001 primarily to the Company's balance sheet as derivative instruments and related agreements and deferred amounts were recorded as assets and liabilities with corresponding adjustments to other comprehensive loss or earnings. The adoption resulted in a cumulative-effect-type adjustment increasing other comprehensive income by $1,352,000, net of related income taxes, as deferred proceeds from previously terminated swap agreements were reclassified from liabilities. The adoption did not have a material impact on the Company's earnings or cash flows. Transactions with Parent Company At December 31, 2001, the Company had a long-term receivable balance from the Parent Company of $8,576,000. Interest on this receivable was charged at the prime rate. In the first quarter of 2002, the receivable was formalized into Promissory Notes payable upon demand, was collateralized by 100,000 shares of Company stock, and the Company advanced an additional $1,553,000 to the Parent Company and changed the interest rate to be the greater of the prime rate or 7.88% per annum. Related interest income for the years ended December 31, 2002, 2001, 2000 amounted to $634,000, $580,000, $192,000, respectively. In October 2002, the Company effectively repurchased common stock from its Parent Company and the Parent Company repaid the Promissory Note in full. See Note 12 for further discussions. As of December 31, 2002, the Company had a liability to the Parent Company of $51,000 for funds advanced to cover reimbursement of certain costs. New Accounting Standards The Financial Accounting Standards Board (FASB) has issued SFAS No. 143, "Accounting for Asset Retirement Obligations", effective for fiscal years beginning after June 15, 2002. This statement will require the Company to record a long-lived asset and related liability for estimated future costs of retiring certain assets. The estimated asset retirement obligation, discounted to reflect present value, will grow to reflect accretion of the interest component. The related retirement asset will be amortized over the economic life of the related asset. Upon adoption of this statement, a cumulative effect of a change in accounting principle will be recorded at the beginning of the year to recognize the deferred asset and related accumulated amortization to date and the estimated discounted asset retirement liability together with cumulative accretion since the inception of the liability. The Company will incur asset retirement obligation costs associated with the closure of the hog lagoons it is legally obligated to close. Accordingly, the Company has performed detailed assessments and obtained the appraisals to estimate the future retirement costs. On January 1, 2003 the Company will record a cumulative effect of approximately $2,195,000 as a charge to earnings ($1,339,000, net of tax), an increase in net fixed assets of $3,221,000 and a liability of $5,416,000 for this change in accounting principle. The Company currently estimates the total accretion of the liability and depreciation of fixed assets to increase cost of sales during 2003 by approximately $516,000. In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". FIN 45 applies to guarantors only and applies only to direct and indirect guarantees with specified contract characteristics. FIN 45 increases disclosure requirements for guarantees in place as of December 31, 2002. See Note 11 for the related disclosure. Also, for guarantees issued or modified after December 31, 2002, FIN 45 requires a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The adoption of FIN 45 is not expected to have a material impact on the Company's financial position or net earnings. In January 2003, the FASB issued FASB Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities". FIN 46 applies to entities if its total equity at risk is not sufficient to permit the entity to finance its activities without additional subordinated support or if the equity investors lack certain characteristics of a controlling financial interest. If an entity is determined to meet those certain characteristics, FIN 46 requires a test to identify the primary beneficiary based on expected losses and expected returns associated with the variable interest. The primary beneficiary is then required to consolidate the entity. The consolidation requirements apply to all variable interest entities (VIEs) created after January 31, 2003. The Company must apply the consolidation requirements for VIEs that existed prior to February 1, 2003 and remain in existence as of July 1, 2003. See Note 11 for the related disclosure of existing VIEs as of December 31, 2002. As the Company has not yet determined the ultimate existence of certain VIEs as of July 1, 2003, management is not yet able to determine the impact of FIN 46 on the Company's financial position. Note 2 Acquisitions and Dispositions of Businesses Effective December 31, 2001, the Company sold a ten percent minority interest in its power barge placed in service during the fourth quarter of 2000 in the Dominican Republic for $6.0 million, consisting of $5.0 million cash and $1.0 million in contributed payables previously recorded by the Company. No gain or loss was recognized on the sale. As part of the sale agreement, the buyer has the option to sell its interest back to the Company at any time until December 31, 2004 for the recorded book value at the time of the sale. The Company completed the sale of its Poultry Division on January 3, 2000 to ConAgra, Inc. for $375 million, consisting of the assumption of approximately $16 million in indebtedness and the remainder in cash, resulting in a pre-tax gain on the sale of approximately $147.3 million ($90.0 million after estimated taxes). The sale of this division is presented as a discontinued operation. During the first quarter of 2000, the Company purchased the assets of an existing hog production operation for approximately $75 million consisting of $34 million in cash and the assumption of $34 million in debt, $4 million of currently payable liabilities and $3 million payable over the next four years. The transaction was accounted for using the purchase method and would not have significantly affected net earnings or earnings per share on a pro forma basis. During the second quarter of 2000, the Company purchased the assets of a cargo terminal facility for approximately $9.1 million consisting of $8.2 million in cash, including transaction expenses, and the assumption of $0.9 million in debt. The transaction was accounted for using the purchase method and would not have significantly affected net earnings or earnings per share on a pro forma basis. During the third quarter of 2000, the Company purchased the assets of a flour and feed milling facility in the Republic of Congo for approximately $5.9 million, consisting of $3.4 million in cash and $2.5 million payable over the next ten years. The transaction was accounted for using the purchase method and would not have significantly affected net earnings or earnings per share on a pro forma basis. During the third quarter of 2000, the Company discontinued the business of marketing fruits and vegetables grown through joint ventures or independent growers by selling certain assets of its Produce Division resulting in a $2.0 million loss. During the fourth quarter of 2000, the Company exchanged its controlling interest in a Bulgarian wine company and $10.4 million cash for a non-controlling interest in a larger Bulgarian wine operation, realizing a $5.6 million pre-tax ($3.6 million after tax) loss on the exchange. This investment has subsequently been accounted for using the equity method. Note 3 Investments The Company's marketable debt securities are treated as available for sale securities and are stated at their fair market values, which approximate amortized cost. All available for sale securities are readily available to meet current operating needs. The following is a summary of the estimated fair value of available-for-sale securities classified as short-term investments at December 31, 2002 and 2001. December 31, (Thousands of dollars) 2002 2001 Obligations of states and political subdivisions $10,765 $ 69,158 Money market funds 19,572 36,077 Corporate and asset-backed securities - 13,839 U.S. Treasury securities and obligations of U.S. government agencies - 5,947 Other securities - 1,774 Total short-term investments $30,337 $126,795 Other investment income for each year is as follows: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Realized gain on exchange of domestic affiliate $ - $ 18,745 $ - Loss from other-than-temporary decline in investment value - (18,635) - Realized gain on sale of securities 383 1,192 3,586 Other 374 3,521 2,100 Other investment income, net $ 757 $ 4,823 $ 5,686 At December 31, 2000, the Company owned a non-controlling interest in a joint venture in Maine primarily engaged in the production and processing of salmon and other seafood products. This investment was accounted for under the equity method. On May 2, 2001, this joint venture completed a merger with Fjord Seafood ASA (Fjord), an integrated salmon producer and processor headquartered in Norway. The merger resulted in the Company exchanging its interest for 5,950,000 shares of common stock of Fjord. Based on the fair market value of Fjord stock on May 2, 2001, as quoted on the Oslo Stock Exchange, the Company recognized a gain in the second quarter of 2001 of $18,745,000 ($11,434,000 after taxes) related to this transaction. In mid-August 2001, Fjord's management announced significantly lower operating results primarily caused by sustained low market prices for salmon resulting in a decline of Fjord's stock price. On September 28, 2001, Fjord's management announced plans for a NOK 700 million private placement to raise needed capital. As a result of the events discussed above and the amount of the per share price decline, management determined the decline in value of its total investment in Fjord is other than temporary. As a result, a charge to earnings was recorded in the third quarter of 2001 for $18,635,000 ($11,367,000 after taxes). In November 2001, Fjord completed the private placement. As part of this plan, Seaboard invested an additional $10,779,000 for 15,800,000 shares at NOK 6 per share, increasing its ownership to approximately 11%. During the third quarter of 2002, the Company increased its ownership in Fjord to approximately 21% and now accounts for this investment using the equity method of accounting. See Note 5 for further discussion. Note 4 Inventories A summary of inventories at the end of each year is as follows: December 31, (Thousands of dollars) 2002 2001 At lower of LIFO cost or market: Live hogs and related materials $129,386 $124,212 Dressed pork and related materials 21,198 12,930 150,584 137,142 LIFO allowance (11,422 ) (5,231) Total inventories at lower of LIFO cost or market 139,162 131,911 At lower of FIFO cost or market: Grain, flour and feed 80,618 42,581 Sugar produced and in process 9,929 15,039 Other 14,240 15,814 Total inventories at lower of FIFO cost or market 104,787 73,434 Total inventories $243,949 $205,345 The use of the LIFO method decreased net earnings in 2002, 2001 and 2000 by $3,777,000 ($2.62 per common share), $2,992,000 ($2.01 per common share) and $2,655,000 ($1.78 per common share), respectively. If the FIFO method had been used for certain inventories of the Pork Division, inventories would have been $11,422,000 and $5,231,000 higher than those reported at December 31, 2002 and 2001, respectively. Note 5 Investments in and Advances to Foreign Affiliates The Company has made investments in and advances to non- controlled foreign affiliates primarily conducting grain processing business in flour and feed milling. The location and percentage ownership of these foreign affiliates are as follows: Angola (45%), the Democratic Republic of Congo (50%), Lesotho (50%), Kenya (35%), Mozambique (50%) and Nigeria (50%) in Africa; Ecuador (50%) in South America; and Haiti (33%) in the Caribbean. In addition, the Company has a 21% ownership interest in a fully integrated producer and processor of salmon and other seafood headquartered in Norway, and owns a 37% investment in and has made advances to a wine business in Bulgaria. 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 2000. During the third quarter of 2002, the Company purchased for $26,908,000 an additional 66,666.667 shares of Fjord. This additional investment increased the Company's ownership to approximately 21%. Through the second quarter of 2002, this investment was accounted for as a long-term available-for-sale equity investment. As a result of the increase in ownership to over 20% in the third quarter of 2002, the Company began to account for this investment under the equity method and, as required by Accounting Principles Board Opinion No. 18, retroactively adjusted all prior period's financial statements as if the equity method of accounting had been used at the time of its initial investment in Fjord on May 2, 2001. As a result, for 2001 net earnings and total assets were reduced by $1,316,000 ($0.88 per share) and $835,000, respectively, and stockholders' equity was increased by $1,217,000. As of December 31, 2002, the aggregate market value of the Company's investment in Fjord, based on the per share price quoted on the Oslo Stock Exchange, was $32,708,000 compared to the investment's carrying value of $37,037,000. During the third quarter of 2002, the Bulgarian wine business (the Business) negotiated an extension of principal payment due dates and a waiver of default when it was unable to make a scheduled principal payment to a bank and to achieve certain related loan covenants. In February 2003, the Business received an additional extension with revised interim payment terms through May 2003 and is currently in negotiations with the bank for additional revised terms and conditions. In the event the Business does not obtain additional revisions to the loan terms and/or waivers, or is unable to fulfill the revised interim payment terms and the bank pursues legal recourse, the impact on the Business and its financial condition is likely to impair the value of its assets, and its ability to continue to operate without pursuing bankruptcy protection. In addition, as of December 31, 2002, the Business has evaluated the recoverability of its long-lived assets based on projected future cash flows and accordingly, the Company believes there is not an other than temporary decline in value of its investment, pending the resolution of negotiations with the bank. As of December 31, 2002, the Company's investments in and advances to the Business totaled $19,667,000. During the first quarter of 2000, the Company invested $7,500,000 for a minority interest in a flour and feed mill operation in Kenya. During the fourth quarter of 2000, the Company acquired a non-controlling interest in a Bulgarian wine operation. See Note 2 for further discussion. The Company generally is the primary provider of choice for grains and supplies purchased by the non-controlled foreign affiliates primarily conducting grain processing. Sales of grain and supplies to these non-consolidated foreign affiliates are included in consolidated net sales for the years ended December 31, 2002, 2001 and 2000, and amounted to $124,151,000, $113,191,000 and $106,876,000, respectively. At December 31, 2002, the Company had $27,151,000 of investments in and advances to, and $41,308,000 of receivables due from, these foreign affiliates. 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, including the new acquisitions since their respective investment dates, are as follows: Commodity Trading and Milling Segment December 31, (Thousands of dollars) 2002 2001 2000 Net sales $296,261 280,792 230,460 Net loss $ (9,407) (12,447) (8,843) Total assets $160,658 150,085 163,572 Total liabilities $107,103 87,181 98,177 Total equity $ 53,555 62,904 65,395 Wine and Other December 31, (Thousands of dollars) 2002 2001 2000 Net sales $438,263 174,549 - Net loss $(74,281) (24,792) - Total assets $708,096 617,373 93,962 Total liabilities $476,356 497,169 54,383 Total equity $231,740 120,204 39,579 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) 2002 2001 Land and improvements $ 84,879 $ 82,096 Buildings and improvements 238,638 180,896 Machinery and equipment 502,800 468,225 Transportation equipment 106,909 104,146 Office furniture and fixtures 12,355 11,993 Construction in progress 20,426 19,506 966,007 866,862 Accumulated depreciation and amortization (344,414) (310,589) Net property, plant and equipment $ 621,593 $ 556,273 During 2002, the Company purchased certain hog production facilities previously leased under a master lease agreement with Shawnee Funding, Limited Partnership for $117,535,000, consisting of $107,535,000 net cash and the assumption of a $10,000,000 bond payable. This purchase was primarily financed with the proceeds from a private placement of notes for $109.0 million, as further discussed in Note 8. Note 7 Income Taxes Income taxes attributable to continuing operations for the years ended December 31, 2002, 2001 and 2000 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: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Computed "expected" tax expense (benefit) $ (3,375) $ 30,988 $ 12,006 Adjustments to tax expense (benefit) attributable to: Foreign tax differences (19,083) (3,175) 10,160 Tax-exempt investment income (87) (497) (1,718) State income taxes, net of Federal benefit 313 582 (2,506) Other (917) 7,336 7,489 Income tax (benefit) expense - continuing operations (23,149) 35,234 25,431 Income tax expense - discontinued operations - - 57,305 Total income tax (benefit) expense $(23,149) $ 35,234 $ 82,736 The components of total income taxes are as follows: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Current: Federal $ - $ 5,635 $(35,613) Foreign 2,989 1,357 4,131 State and local 107 1,994 (1,334) Deferred: Federal (27,193) 27,565 57,204 Foreign 573 (113) (8) State and local 375 (1,204) 1,051 Income tax (benefit) expense-continuing operations (23,149) 35,234 25,431 Unrealized changes in other comprehensive income (37,557) (115) 61 Income tax expense - discontinued operations - - 57,305 Total income taxes $(60,706) $35,119 $ 82,797 Components of the net deferred income tax liability at the end of each year are as follows: December 31, (Thousands of dollars) 2002 2001 Deferred income tax liabilities: Cash basis farming adjustment $ 14,061 $ 15,287 Deferred earnings of foreign subsidiaries 13,894 60,833 Depreciation 90,738 98,584 LIFO 14,582 19,360 Other - 3,799 133,275 197,863 Deferred income tax assets: Reserves/accruals 45,786 64,765 Foreign losses - 1,339 Tax credit carryforwards 13,443 19,449 Net operating loss carryforwards 33,591 1,000 Other 3,723 424 96,543 86,977 Valuation allowance 19,296 8,944 Net deferred income tax liability $ 56,028 $119,830 The Company had not previously recognized any tax benefits from losses generated by Tabacal for financial reporting purposes since it was not a controlled entity for tax purposes and it was not apparent that the permanent basis difference would reverse in the foreseeable future. In February 2002, the Company began a tender offer in Argentina to purchase the outstanding shares of Tabacal not owned by the Company. During the second quarter of 2002, the Company completed a series of transactions which culminated in Tabacal's conversion from a Sociedad Anonima (S.A.) to a Sociedad de Responsabilidad Limitada (S.R.L.) organizational entity. This conversion resulted in the Company recognizing a one time tax benefit of $48,944,000, of which $34,641,000 reduced the currency translation adjustment recorded as accumulated other comprehensive income. The remaining benefit of $14,303,000 was recognized as a current tax benefit in the Consolidated Statement of Earnings for 2002. The Company believes its future taxable income will be sufficient for full realization of the deferred tax assets. The valuation allowance relates to the tax benefits from losses on investments that would be recognized as capital losses, and from net operating losses. The Company does not believe these benefits are more likely than not to be realized due to limitations imposed on the deduction of these losses. At December 31, 2002, the Company had tax credit carryforwards of approximately $13,443,000. Approximately $1,743,000 of these carryforwards expire in varying amounts in 2003 through 2021 while the remaining balance may be carried forward indefinitely. At December 31, 2002, the Company had federal net operating loss carryforwards of approximately $93,118,000 expiring in varying amounts in 2004 and 2022. At December 31, 2002 and 2001, 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 $55,000,000. Note 8 Notes Payable, Long-term Debt and Commitments Notes payable amounting to $76,112,000 and $37,703,000 at December 31, 2002 and 2001, respectively, consisted of obligations due banks on demand or within one year. At December 31, 2002, these funds were outstanding under the Company's committed short-term lines totaling $45.0 million and its uncommitted lines totaling $79.5 million. The committed lines include a $5,000,000 facility denominated in South African Rand, which was completely drawn as of December 31, 2002. At December 31, 2002, the Company's borrowing capacity under these lines was also reduced by a letter of credit for $7.2 million. The weighted average interest rates on the notes payable were 3.69% and 3.02% at December 31, 2002 and 2001, respectively. Subsequent to year-end, the Company extended for one year a $20.0 million revolving credit facility and entered into a new $75.0 million committed line for a subsidiary of the Commodity Trading and Milling segment, which is secured by certain of the Company's commodity trading inventory and accounts receivable. This new line includes financial covenants for the subsidiary which require maintenance of certain levels of working capital and net worth, and limitations on ratios of debt to net worth and liabilities to net worth. After this new line was established, short-term committed lines totaled $120.0 million and short-term uncommitted lines were reduced to $59.5 million. As of December 31, 2002, the notes payable under the credit lines from banks were unsecured. The lines of credit do not require compensating balances. Facility fees on these agreements are not material. In October 2002, the Company completed a private placement of $109.0 million of Senior Notes due 2009 and 2012 with a weighted average interest rate of 6.29%. The Senior Notes provide debt covenants which include an increase in the minimum consolidated tangible net worth from $250.0 to $350.0 million plus 25% of cumulative consolidated net income beginning January 1, 2002, a new restricted payment provision which limits aggregate dividends to $10.0 million plus 50% of consolidated net income less 100% of consolidated net losses beginning January 1, 2002, and a new interest charge coverage ratio of 2.0 to 1.0. The debt covenants for the existing Senior Notes were also amended to reflect these provisions. The Company used $107.3 million of the proceeds from this private placement to refinance the indebtedness related to hog production facilities previously leased under a master lease program, effectively reducing the Company's net lease payments. On December 31, 2002, the Company paid an additional $4.1 million to complete the acquisition of Shawnee Funding, Limited Partnership, effectively acquiring all of the related hog production facilities previously leased. As part of the purchase, the Company also assumed a variable rate (1.65% at December 31, 2002) $10.0 million bond payable due 2014 and $2.2 million of related cash in a construction fund. A summary of long-term debt at the end of each year is as follows: December 31, (Thousands of dollars) 2002 2001 Private placements 6.49% senior notes, due 2003 through 2005 $ 60,000 $ 80,000 7.88% senior notes, due 2003 through 2007 125,000 125,000 5.80% senior notes, due 2005 through 2009 32,500 - 6.21% senior notes, due 2009 38,000 - 6.21% senior notes, due 2006 through 2012 7,500 - 6.92% senior notes, due 2012 31,000 - Industrial Development Revenue Bonds (IDRBs), floating rates (1.65% at December 31, 2002) due 2014 through 2027 45,600 35,600 Promissory note, 6.87%, due 2003 through 2008 24,654 28,424 Revolving credit facility, floating rate - 26,667 Foreign subsidiary obligations, (10.00% - 17.50%) due 2003 through 2010 6,432 10,024 Foreign subsidiary obligation, floating rate due 2003 307 1,251 Capital lease obligations and other 3,622 4,019 374,615 310,985 Current maturities of long-term debt (55,869) (55,166) Long-term debt, less current maturities $318,746 $255,819 Of the 2002 foreign subsidiary obligations, $2,601,000 is payable in Argentine pesos, $2,138,000 is denominated in Congolese francs and the remaining $2,000,000 is denominated in U.S. dollars. Of the 2001 foreign subsidiary obligations, $6,625,000 is payable in Argentine pesos, $2,613,000 is denominated in U.S. dollars and the remaining $2,037,000 is denominated in Congolese francs. At December 31, 2002, Argentine land and sugar production facilities and equipment with a depreciated cost of $3,959,000 secured certain bond issues and foreign subsidiary debt. Included in other current assets at December 31, 2002 and other assets at December 31, 2001 are $4,152,000 and $2,506,000 respectively, of unexpended bond proceeds held in trust that are invested in accordance with the bond issuance agreements. During 2003, the Company expects to use certain construction funds to redeem portions of the related IDRBs. As a result, a portion of the construction fund balance was classified as a current asset as of December 31, 2002 and $1,790,000 of related debt was included in current maturities of long-term debt. The terms of the note agreements pursuant to which the senior notes, industrial development revenue bonds (IDRBs), promissory note 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; an interest charge coverage ratio of 2.0 to 1.0; requires the maintenance of consolidated tangible net worth, as defined, of not less than $350,000,000 plus 25% of cumulative consolidated net income beginning January 1, 2002; limits aggregate dividend payments to $10.0 million plus 50% of consolidated net income less 100% of consolidated net losses beginning January 1, 2002; and limits the Company's ability to sell assets under certain circumstances. The Company is in compliance with all restrictive debt covenants relating to these agreements as of December 31, 2002. Annual maturities of long-term debt at December 31, 2002 are as follows: $55,869,000 in 2003, $49,892,000 in 2004, $56,672,000 in 2005, $38,116,000 in 2006, $38,001,000 in 2007 and $136,065,000 thereafter. Note 9 Derivatives and Fair Value of Financial Instruments Financial instruments consisting of cash and cash equivalents, net receivables, notes payable, and accounts payable are carried at cost, which approximates fair value, as a result of the short- term nature of the instruments. The cost and fair values of the Company's investments and long- term debt at December 31, 2002 and 2001 are presented below. December 31 2002 2001 (Thousands of dollars) Cost Fair Value Cost Fair Value Short-term investments $ 30,337 $ 30,337 $127,064 $126,795 Long-term debt 374,615 386,732 310,985 319,822 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. The fair value of long-term debt is determined by comparing interest rates for debt with similar terms and maturities. Interest Rate Exchange Agreements 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 mitigate the effects of fluctuations in interest rates on variable rate debt and certain leases. At December 31, 2002 and 2001, deferred gains on prior year's terminated interest rate exchange agreements (net of tax) totaled $952,000 and $1,152,000, respectively, relating to swaps that hedged variable rate debt. This amount is included in accumulated other comprehensive loss on the Consolidated Balance Sheet. For the years ended December 31, 2002, 2001 and 2000, interest rate exchange agreements accounted for as hedges, including any amortization of terminated proceeds, decreased interest expense by $329,000, $326,000 and $561,000, respectively. At December 31, 2002 and 2001 the Company had five, ten-year interest rate exchange agreements outstanding that are not paired with specific variable rate contracts, whereby the Company pays a stated fixed rate and receives a variable rate of interest on a total notional amount of $150,000,000. While the Company has certain variable rate debt and operating lease payments with variable interest rate components, the Company's interest rate exchange agreements do not qualify as hedges for accounting purposes. At December 31, 2002, the fair values of those contracts totaled $(18,019,000). At December 31, 2001, the fair value of those contracts in gain positions totaled $2,251,000, and a contract in a loss position had a fair value of $(210,000). The contract values are included in other current assets and accrued financial derivative liabilities on the Consolidated Balance Sheets. For the year ended December 31, 2002 and 2001, the net (loss) or gain for interest rate exchange agreements not accounted for as hedges was $(25,030,000) and $2,808,000, respectively, and was included in miscellaneous, net in the Consolidated Statements of Operations. The loss for 2002 includes net payments of $4,970,000 resulting from the difference between the fixed rate paid and variable rate received on these contracts. Upon completion of the Poultry Division sale in January 2000, as discussed in Note 2, unamortized proceeds from prior termination of interest rate agreements of $582,000 associated with debt of the Company's discontinued poultry operations were recognized as a component of the gain on the disposal in the first quarter of 2000. During 2000, the Company repaid approximately $165,774,000 in notes payable, IDRBs and other debt primarily with proceeds from the Poultry Division sale. As a result of these repayments, approximately $3,760,000 in unamortized proceeds from prior terminations of interest rate agreements related to these notes was recognized as miscellaneous income. Commodity Instruments The Company uses corn, wheat, soybeans and soybean meal futures and options to manage its exposure to price fluctuations for raw materials, finished product sales and firm sales commitments. However, due to the extensive record-keeping required to account for any remaining commodity transactions as hedges under SFAS 133, the Company marks to market its commodity futures and options primarily as a component of cost of sales. The Company continues to believe its commodity futures and options are economic hedges and not speculative transactions although they do not qualify as hedges under accounting rules. Since the Company does not account for these derivatives as hedges, fluctuations in the related commodity prices could have a material impact on earnings in any given year. At December 31, 2002 and 2001, the Company had open net contracts to purchase 410,000 and 443,000 metric tons of grain with fair values of $(1,617,000) and $(1,563,000) respectively, included with other accrued financial derivative liabilities on the Consolidated Balance Sheets. For the year ended December 31, 2002, the Company realized a net gain of $5,304,000 related to commodity contracts, primarily included in cost of sales on the Consolidated Statements of Operations. For the years ended December 31, 2001 and 2000, losses on commodity contracts were $2,681,000 and $1,315,000, respectively. Foreign currency exchange agreements The Company also enters into foreign currency exchange agreements to manage the foreign currency exchange rate risk with respect to certain transactions denominated in foreign currencies. Gains and losses on foreign currency exchange agreements are designated as fair value hedges and recognized in operating income along with the related contract. At December 31, 2002 and 2001, the Company had hedged South African Rand (ZAR) denominated firm sales contracts totaling $85,373,000 and $66,008,000 with changes in fair values of $12,525,000 and $(11,443,000), respectively. At December 31, 2002 and 2001, the Company had related hedged ZAR denominated trade receivables with historical values of $12,869,000 and $11,164,000, respectively, with changes in fair value of $3,339,000 and $(2,699,000). To hedge the change in value of these firm contracts and trade receivables, the Company entered into agreements to exchange $93,396,000 and $77,172,000 of contracts denominated in ZAR, with derivative fair values of $(14,043,000) and $14,201,000, respectively. During 2001, the Company also had hedged ZAR denominated firm purchase contracts at December 31, 2001 totaling $1,749,000 with a change in fair value of $260,000. Hedging the change in value of this agreement, the Company entered into agreements to exchange $1,749,000 for ZAR with derivative fair values of $(260,000) at December 31, 2001. These agreements were treated as fair value hedges and were included in other current assets or accrued financial derivative liabilities on the Consolidated Balance Sheets. The net gains and losses on the exchange agreements were not material for the years ended December 31, 2002, 2001 and 2000. At December 31, 2002, the Company had hedged Euro denominated sales contracts totaling $252,000 with a change in fair value of $4,000 and related Euro denominated accounts receivable with a historical value of $638,000 and a change in fair value of $28,000. To hedge the change in values of the firm contracts and receivables, the Company entered into agreements to exchange $892,000 of contracts denominated in Euros with a total derivative fair value of $(33,000). Additionally, at December 31, 2002 and 2001, the Company had trading foreign exchange contracts (receive $U.S./pay ZAR) for notional amounts of $12,051,000 and $10,773,000, respectively, with fair values of $(241,000) and $1,406,000. As of December 31, 2001, the Company also had trading foreign exchange contracts (receive ZAR/ pay $U.S.) for a notional amount of $60,000 with a fair value of $(10,000). The stock of the Company's equity investment in Fjord's common stock is denominated in Norwegian Kroner (NOK). To hedge the risk of change in the foreign currency exchange rate on this investment, during 2001 the Company entered into a foreign currency exchange agreement whereby the Company received a fixed price at a future date for approximately NOK 95,000,000. The fair value of this agreement at December 31, 2001 was $(186,000), included in other accrued financial derivative liabilities on the Consolidated Balance Sheets. This hedge expired during 2002 and was not renewed. For the year ended December 31, 2002 and 2001, the loss related to this hedge was not material. Note 10 Employee Benefits The Company maintains a defined benefit pension plan 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 primarily invested in various mutual funds. The changes in the plans' benefit obligations and fair value of assets for the years ended December 31, 2002 and 2001, and a statement of the funded status as of December 31, 2002 and 2001 are as follows: December 31, (Thousands of dollars) 2002 2001 Reconciliation of benefit obligation: Benefit obligation at beginning of year $ 41,126 $35,817 Service cost 2,242 1,886 Interest cost 2,978 2,751 Actuarial losses 4,466 3,071 Benefits paid (1,645) (2,399) Benefit obligation at end of year 49,167 41,126 Reconciliation of fair value of plan assets: Fair value of plan assets at beginning of year 25,661 27,389 Actual return on plan assets (2,391) (1,342) Employer contributions 2,362 2,013 Benefits paid (1,645) (2,399) Fair value of plan assets at end of year 23,987 25,661 Funded status (25,180) (15,465) Unrecognized transition obligation 407 512 Unamortized prior service cost (802) (939) Unrecognized net actuarial losses 15,396 6,594 Accrued benefit cost $(10,179) $(9,298) Amounts recognized in the Consolidated Balance Sheets as of December 31, 2002 and 2001 consist of: December 31, (Thousands of dollars) 2002 2001 Accrued benefit liability $(19,610) $(11,386) Accumulated other comprehensive loss 9,431 2,088 Accrued benefit cost $(10,179) $(9,298) Assumptions used in determining pension information were: Years ended December 31, 2002 2001 2000 Weighted-average assumptions Discount rate 6.75% 7.25% 7.75% Expected return on plan assets 8.45% 8.75% 8.75% Long-term rate of increase in compensation levels 4.00-5.00% 4.00-5.00% 4.50% The Company has recognized the full amount of its actuarially determined pension liability. The unrecognized pension cost has been recorded as a charge to accumulated other comprehensive loss, net of related tax. As of December 31, 2002, the projected benefit obligation and accumulated benefit obligation for unfunded pension plans were $8,918,000 and $6,618,000, respectively. As of December 31, 2001, the projected benefit obligation and accumulated benefit obligation for unfunded pension plans were $6,780,000 and $5,184,000, respectively. The net periodic benefit cost of these plans was as follows: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Components of net periodic benefit cost: Service cost $ 2,242 $ 1,886 $ 1,802 Interest cost 2,978 2,751 2,498 Expected return on plan assets (2,209) (2,404) (2,417) Amortization and other 232 21 (136) Net periodic benefit cost $ 3,243 $ 2,254 $ 1,747 The Company also has certain individual, non-qualified, unfunded supplemental retirement agreements for certain executive employees. Pension expense for these plans was $726,000, $936,000 and $933,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Included in other liabilities at December 31, 2002 and 2001 is $9,975,000 and $9,915,000, respectively, representing the accrued benefit obligation for these plans. As of December 31, 2002, an unrecognized pension cost related to this plan of $76,000 was included in accumulated other comprehensive loss, net of related tax. 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 $1,428,000, $1,301,000 and $1,241,000 for the years ended December 31, 2002, 2001 and 2000, respectively. Note 11 Commitments and Contingencies In early January 2003, a bill (the Bill) was introduced in the United States Senate which includes a provision to prohibit meat packers, such as the Company, from owning or controlling livestock intended for slaughter. The Bill also contains a transition rule applicable to packers of pork providing for an effective date which is 18 months after enactment. Similar language was passed by the U.S. Senate in 2002 as part of the Senate's version of the Farm Bill. The U.S. House of Representatives also passed a Farm Bill in 2002, but that Farm Bill did not include the prohibition on packers owning or controlling livestock and it was eventually dropped in conference committee and was not part of the final Farm Bill. If the Bill containing the proposed language becomes law, it could have a material adverse effect on the Company, its operations and its strategy of vertical integration in the pork business. Currently, the Company owns and operates production facilities and owns swine and produces approximately three million hogs per year with construction in progress for an additional quarter million hogs per year. If passed in its current form, the Bill would prohibit the Company from owning or controlling hogs, and thus would require the Company to divest these operations, possibly at prices which are below the carrying value of such assets on the Company's balance sheet, or otherwise restructure its ownership and operation. At December 31, 2002, the Company has $368,908,000 in hog production facilities classified as net fixed assets on the Consolidated Balance Sheet and approximately $60,960,000 in hog production facilities under master lease agreements accounted for as operating leases. In addition, the Company has $129,386,000 invested in live hogs and related materials classified as inventory on the Consolidated Balance Sheet. The Bill could also be construed as prohibiting or restricting the Company from engaging in various contractual arrangements with third party hog producers, such as traditional contract finishing arrangements. Accordingly, the Company's ability to contract for the supply of hogs to its processing facility could be significantly, negatively impacted. At December 31, 2002, the Company has $70,989,000 in commitments through 2017 for various grow finishing agreements. The Company, along with industry groups and other similarly situated companies are vigorously lobbying against enactment of any such legislation. The ultimate outcome of this matter is not presently determinable. The Company is a defendant in a pending arbitration proceeding and related litigation in Puerto Rico brought by the owner of a chartered barge and tug which were damaged by fire after delivery of the cargo. Damages of $47.6 million are alleged. The Company received a ruling in the arbitration proceeding in its favor which dismisses the principal theory of recovery and that ruling has been upheld on appeal. The arbitration is continuing based on other legal theories, although the Company believes that it will have no responsibility for the loss. The Company has reached an agreement to settle litigation brought by the Sierra Club, subject to court approval. Under the terms of the settlement, the Company will pay $225,000 and potentially make an additional payment of $25,000 pending results of further court proceedings with respect to certain additional properties. The Company is subject to regulatory actions and an investigation by the United States Environmental Protection Agency and the State of Oklahoma. In the opinion of Management, the above action and investigation are not expected to result in a material adverse effect on the consolidated financial statements of the Company. The Company was a plaintiff in a lawsuit against several manufacturers of vitamins and feed additives which have pleaded guilty in the context of criminal proceedings to price fixing. The manufacturers admitted to the price fixing in the criminal context, and were liable for the overcharges made. During 2002, the Company recorded as miscellaneous income $18,315,000, representing the total amount received as final settlement from the manufacturers. The Company is subject to various other legal proceedings related to the normal conduct of its business, including various environmental related actions. 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. Contingent Obligations Certain of the Company's nonconsolidated affiliates and third party contractors who perform services for the Company have bank debt supporting their underlying operations. From time to time, the Company will provide guarantees of that debt allowing a lower borrowing rate or facilitating third party financing in order to further the Company's business objectives. The Company does not issue guarantees for compensation. The following table sets forth the terms of guarantees of third party and nonconsolidated affiliate bank indebtedness outstanding at December 31, 2002. Guarantee beneficiary Maximum exposure Maturity Foreign affiliate grain processor - Kenya $ 1,300,000 2003 Various hog contract growers $ 792,000 2003 The Company's guarantees of the various hog contract growers renew annually through 2013 and 2014 until the related debt matures. As of December 31, 2002, the Company had outstanding $13,654,000 of letters of credit (LCs) with various banks facilitating operations of consolidated subsidiaries. Of these LCs, $7,200,000 also reduced available borrowing capacity under the Company's committed credit lines as discussed in Note 8. The Company's Sugar and Citrus segment has agreed to commercialize certain sugar product for a third party under a contract expiring in 2008. In the event the Company does not perform under the contract, it would be responsible to make payments to the third party of a maximum of $1,000,000 for 2003, decreasing annually to $200,000 through 2008. During January 2003, Company facilitated bank borrowing by its Bulgarian wine affiliate through the issuance of a standby LC denominated in euros. Under the terms of the LC, the Company would indemnify the bank for up to EU 1,431,000 (approximately $1.4 million) in the event of a default by the affiliate. This affiliate has pledged inventory with a value of approximately $3.9 million as collateral for the guarantee. This LC matures in 2004. Commitments The Company has committed to make approximately $5,000,000 of additional capital expenditures at one of its African grain processing businesses in exchange for certain local tax incentives. In addition, the Company has agreed to provide a $5,000,000 line of credit and $2,500,000 term loan to an affiliate in Kenya, of which as of December 31, 2002, $1,300,000 has been drawn in the form of a guarantee, as shown above, and $1,493,000 was outstanding from grain sales to this affiliate. As of December 31, 2002 the Company had various noncancelable purchase commitments as described in the table below. Purchase commitments Years ended December 31, (Thousands of dollars) 2003 2004 2005 2006 2007 Fuel purchase contract $30,736 $ - $ - $ - $ - Equipment purchases 1,683 - - - - Vessel purchases 3,946 - - - - Other Purchase Contracts 1,090 - - - - Hog procurement contracts 1,069 288 288 288 288 Total firm commitments $38,524 $ 288 $ 288 $ 288 $ 288 The power segment has entered into a contract for the supply of substantially all fuel required for 2003 at market-based prices. The fuel commitment shown above reflects the average price per barrel at December 31, 2002. The Company has exercised purchase options for previously leased cargo containers, equipment and two vessels for its marine segment. The pork segment purchases certain third-party hogs under long-term purchase contracts. The commitment amount reflects current payment levels as of December 31, 2002. The Company leases various ships, facilities and equipment under noncancelable operating lease agreements. In addition, the Company is a party to a master lease program and contract production agreements (the "Facility Agreements") with limited liability companies which own certain of the facilities used in connection with the Company's vertically integrated hog production. These arrangements are currently accounted for as operating leases. Under the Facility Agreements, property is generally added for a three-year, noncancelable term with periodic renewals thereafter. These hog production facilities produce approximately 20% of the Company owned hogs processed at the plant. At December 31, 2002, the total amount of unamortized costs representing fixed asset values under these Facility Agreements was approximately $60,960,000. The $58,277,000 of underlying bank debt expires in 2006 and 2007. Under the Facility Agreements, the Company has certain rights to acquire any or all of the properties at the conclusion of their respective terms at a price which is expected to reflect estimated fair market value of the property. In the event the Company does not acquire any property which it has ceased to renew, the Company has a limited obligation under the Facility Agreements for any deficiency between the amortized cost of the property and the price for which it is sold, up to a maximum of 80% to 87% of amortized cost. These facilities are owned by companies considered to be variable interest entities (VIEs) in accordance with FIN 46, for which the Company is deemed to be the primary beneficiary. Accordingly, the Company will be required to consolidate these entities in the third quarter of 2003 unless changes in the equity structure of the VIEs occur prior to June 30, 2003. The Company is evaluating various options for these facilities, including purchasing certain assets from one limited liability company ($25.6 million) and/or assigning its purchase option for all of the properties to a third party with which the Company may enter into production arrangements. Rental expense for operating leases, including payments made under the Facility Agreements, amounted to $71,124,000, $64,484,000 and $62,308,000 in 2002, 2001 and 2000, respectively. Minimum lease commitments under noncancelable leases and Facility Agreements with initial terms greater than one year at December 31, 2002 were $25,876,000 for 2003, $14,834,000 for 2004, $11,983,000 for 2005, $10,810,000 for 2006, $9,816,000 for 2007 and $48,620,000 thereafter. These lease commitments include amounts to be paid to contract growers based on current performance levels. It is expected that, in the ordinary course of business, leases will be renewed or replaced. Assuming the Company renews the Facility Agreements each year until the end of the final term, as of December 31, 2002, optional renewal payments, including interest based on current interest rates, for periodic renewals under the Facility Agreements would be $4,993,000 for 2003, $9,763,000 for 2004, $11,462,000 for 2005, $11,449,000 for 2006 $11,436,000 for 2007 and $84,719,000 thereafter. Note 12 Stockholders' Equity and Accumulated Other Comprehensive Loss In October 2002, the Company consummated a transaction with the Parent Company, pursuant to which the Company effectively repurchased 232,414.85 shares of its common stock owned by the Parent Company for $203.26 per share. Of the total consideration of $47,241,000, the Parent Company was required under the terms of the transaction immediately to pay $11,260,000 to the Company to repay in full all indebtedness owed by the Parent Company to the Company, and to use the balance of the consideration to pay bank indebtedness of the Parent Company and transaction expenses. The transaction was approved by the Company's Board of Directors after receiving the recommendation in favor of the transaction by a special committee of independent directors. The special committee was advised by independent legal counsel and an independent investment banking firm. As a result of the transaction, the Parent Company's ownership interest in the Company dropped from approximately 75 percent to approximately 71 percent. As a part of the transaction, the Parent Company also transferred to the Company rights to receive possible future cash payments from a subsidiary of the Parent Company, based primarily on the future sale of real estate owned by that subsidiary. To the extent the Company receives cash payments in the future as a result of those transferred rights, the Company will issue to the Parent Company, at the ten day rolling average closing price, determined as of the twentieth day prior to the issue date, new shares of common stock. The maximum number of shares of the Company's common stock which may be issued to the Parent Company under this transaction is capped and cannot exceed the number of shares which were originally purchased from the Parent Company. During the fourth quarter of 2002, the Company cancelled 534,547 shares of common stock held in treasury including shares previously held by the Parent Company. The components of accumulated other comprehensive loss, net of related taxes, are summarized as follows: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Cumulative foreign currency translation adjustment $(62,555) $(62,588) $(155) Unrealized gain (loss) on investments 118 (164) 49 Unrecognized pension cost (5,799) (1,273) - Deferred gain on interest rate swaps 952 1,152 - Accumulated other comprehensive loss $(67,284) $(62,873) $(106) Beginning in December, 2001, the Argentine government placed restrictions on the exchange of currency in that country. On January 6, 2002, the government of Argentina officially ended the one peso to one U.S. dollar parity. On January 11, 2002, the currencies began market trading resulting in an immediate devaluation of over 40% and continued devaluation through the first half of 2002, for a cumulative devaluation of approximately 73%. As the result of this devaluation, stockholders' equity has been reduced by $50,372,000 and $68,974,000 for the years ended December 31, 2002 and 2001, respectively. These reductions were recorded as charges against earnings of $12,540,000 and $7,830,000 for each respective year relating to net dollar denominated debt of the Company's Argentine subsidiary, and currency translation adjustments of $37,832,000 and $61,144,000 as other comprehensive losses for the peso denominated net assets as of December 31, 2002 and 2001, respectively. At December 31, 2002, the Company has $48,306,000 in net assets denominated in Argentine pesos and $9,671,000 in net liabilities denominated in U.S. dollars in Argentina. Through the first quarter of 2002, no tax benefit was provided related to this reduction of shareholders' equity. In the second quarter of 2002, as described in Note 7, the Company recorded a deferred tax benefit of $34,641,000 relating to the currency translation adjustment component of accumulated other comprehensive loss and a one-time current benefit of $14,303,000 through the Consolidated Statements of Earnings. With the exception of the provision related to the foreign currency translation losses discussed above, which are taxed at a 35% rate, income taxes for components of accumulated other comprehensive loss were recorded using a 39% effective tax rate. Note 13 Segment Information Seaboard Corporation had five reportable segments through December 31, 2002: Pork, Commodity Trading and Milling, Marine, Sugar and Citrus, and Power, 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 Commodity Trading and Milling segment sources bulk and bag commodities primarily overseas, including sales of such products to its non- consolidated foreign affiliates, and operates foreign flour and feed mills. The Marine segment, primarily based out of the Port of Miami, offers containerized cargo shipping services throughout Latin America and the Caribbean. The Sugar and Citrus segment produces and processes sugar and citrus in Argentina primarily to be marketed locally. The Power segment generates electric power from two floating generating facilities located in the Dominican Republic. As discussed in Note 2, in December 2000 the Company exchanged its controlling interest in its Wine segment and a cash investment for a non-controlling interest in a larger wine operation accounted for using the equity method. As a result, the Company's segment disclosures reflect operating results for the Wine segment through 2000. Revenues from all other segments are primarily derived from the produce and domestic trucking transportation operations. Each of the five main segments is separately managed and each was started or acquired independent of the other segments. As the Sugar and Citrus segment operates solely in Argentina with primarily local sales and operating expenses, the functional currency is the Argentine peso. As more fully described in Note 12, the Company recorded the effects of the devaluation of the Argentine peso in 2002 and 2001. As a result, during 2002 and 2001, peso-denominated assets devalued approximately $63,493,000 and $80,229,000, respectively. As a result of recurring losses in a shrimp business operated as a subsidiary of a foreign affiliate in Ecuador, at December 31, 2001, the Company evaluated the carrying value of its investment in the affiliate. Based on its evaluation in the fourth quarter of 2001, the Company recognized a charge of $1,023,000 for the other than temporary decline in value in its investment in a foreign affiliate as a charge to losses from foreign affiliates related to the shrimp business in the Commodity Trading and Milling segment. The Company has been considering various strategic alternatives for the Produce Division. During the fourth quarter of 2001, the Company ceased shrimp, pickle and pepper farming operations in Honduras. As a result, the Company incurred a charge to earnings for $1,300,000 primarily related to employee severance at these locations for the year ended December 31, 2001. In February 2003, the Company signed a letter of intent with a local Honduran shrimp farmer for the sale of shrimp farming and shrimp processing assets for $3,900,000. As a substantial portion of the sale price is expected to be in the form of a long-term note receivable from the buyer, the Company will use the cost recovery method of accounting and no gain will be recognized by the Company until the actual cash is collected. In addition, as of December 31, 2002, management evaluated the long-lived asset values of the pickle and pepper farming operations. Certain of these assets are currently being leased to local farmers. Based on this evaluation, an impairment charge of $319,000 was recorded to operating income. An additional impairment charge could be incurred depending on the final decision regarding the alternatives if the remaining carrying value of $1,246,000 for these farming assets is not fully recoverable. 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, along with losses from foreign affiliates for the Commodity Trading and Milling Division, 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 Customers: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Pork $ 645,820 $ 772,447 $ 724,708 Commodity Trading and Milling 652,120 476,207 358,999 Marine 383,419 384,906 364,915 Sugar and Citrus 57,700 77,662 60,061 Power 63,106 63,572 35,846 Wine - - 6,825 All other 27,142 29,816 32,342 Segment/Consolidated Totals $1,829,307 $1,804,610 $1,583,696 Operating Income: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Pork $ (13,876) $ 68,717 $ 63,350 Commodity Trading and Milling 18,430 13,223 (3,518) Marine 16,599 24,001 14,450 Sugar and Citrus 16,294 6,614 (7,587) Power 14,258 14,576 6,007 Wine - - (9,171) All other (784) (8,786) (11,539) Segment Totals 50,921 118,345 51,992 Corporate (3,796) (3,993) (3,927) Consolidated Totals $ 47,125 $ 114,352 $ 48,065 Loss from Foreign Affiliates: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Commodity Trading and Milling $ (3,813) $ (4,506) $ (2,440) Wine (2,855) (3,686) - All Other (10,158) (1,316) - Segment/Consolidated Totals $ (16,826) $ (9,508) $ (2,440) Depreciation and Amortization: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Pork $ 24,069 $ 22,083 $ 21,378 Commodity Trading and Milling 3,148 2,975 3,266 Marine 14,276 13,763 12,181 Sugar and Citrus 3,857 9,338 7,557 Power 5,220 5,153 2,310 Wine - - 934 All other 1,322 1,599 1,917 Segment Totals 51,892 54,911 49,543 Corporate 744 889 840 Consolidated Totals $ 52,636 $ 55,800 $ 50,383 Capital Expenditures: Years ended December 31, (Thousands of dollars) 2002 2001 2000 Pork $ 135,145 $ 20,686 $ 26,356 Commodity Trading and Milling 1,122 2,034 1,895 Marine 9,710 20,879 17,097 Sugar and Citrus 2,545 10,252 14,380 Power 814 422 52,098 Wine - - 2,703 All other 128 398 2,068 Segment Totals 149,464 54,671 116,597 Corporate 415 291 336 Consolidated Totals $ 149,879 $ 54,962 $ 116,933 Total Assets: Years ended December 31, (Thousands of dollars) 2002 2001 Pork $ 627,937 $ 508,642 Commodity Trading and Milling 239,187 172,684 Marine 117,366 131,334 Sugar and Citrus 69,515 115,402 Power 73,872 77,102 All other 15,971 20,276 Segment Totals 1,143,848 1,025,440 Corporate 137,293 209,317 Consolidated Totals $1,281,141 $1,234,757 Administrative services provided by the corporate office are primarily allocated to the individual segments based on the size and nature of their operations. Corporate assets include short- term investments, certain 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. Geographic Information The Company had sales in South Africa totaling $242,415,000 and $155,921,000 for the years ended December 31, 2002 and 2001, respectively, representing approximately 13% and 9% of total sales for each respective year. No other 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) 2002 2001 2000 United States $ 636,091 $ 747,877 $ 725,327 Caribbean, Central and South America 541,332 548,386 434,353 Africa 478,273 348,217 260,706 Pacific Basin and Far East 94,550 106,504 104,919 Canada/Mexico 56,575 41,638 31,643 Eastern Mediterranean 14,435 6,861 18,013 Europe 8,051 5,127 8,735 Totals $1,829,307 $1,804,610 $1,583,696 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) 2002 2001 United States $521,693 $408,889 Argentina 30,385 67,497 All other 69,515 79,887 Totals $621,593 $556,273 At December 31, 2002 and 2001, the Company had approximately $113,331,000 and $113,855,000, 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 its allowance for doubtful receivables is adequate. EX-21 4 ex-21.txt LIST OF SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES NAMES UNDER STATE OR OTHER OF THE WHICH SUBSIDIARIES JURISDICTION REGISTRANT DO BUSINESS OF INCORPORATION Agencias Generales Conaven, C.A. Conaven Venezuela Agencia Maritima del Istmo, S.A. Same Costa Rica Almacenadora Conaven, S.A. Conaven Venezuela Boyar Estates S.A.* Same Luxembourg Cape Fear Railways, Inc. Same North Carolina Cayman Freight Shipping Services, Ltd.* Same Cayman Islands Chestnut Hill Farms Honduras, S.A. de C.V. Same Honduras Delta Packaging Company Ltd.* Same Nigeria Desarrollo Industrial Bioacuatico, S.A.* Same Ecuador Eureka Chicken Limited * Same Zambia Fjord Seafood ASA * Same Norway H&O Shipping Limited Same Liberia Ingenio y Refineria San Martin del Tabacal Tabacal Argentina JacintoPort International LP Same Texas KWABA - Sociedade Industrial e Comercial, SARL* KWABA Angola Les Moulins d'Haiti S.E.M. (LHM)* Same Haiti Lesotho Flour Mills Limited* Same Lesotho Life Flour Mill Ltd.* Same Nigeria Minoterie de Matadi, S.A.R.L.* Same Democratic Republic of Congo Minoterie du Congo, S.A. Same Republic of Congo Mobeira, SARL* Same Mozambique Molinos Champion, S.A.* Same Ecuador Molinos del Ecuador, C.A.* Same Ecuador Mount Dora Farms Inc. Same Florida National Milling Company of Guyana, Ltd. Same Guyana National Milling Corporation Limited Same Zambia Port of Miami Cold Storage, Inc. Same Florida Representaciones Maritimas y Aereas, S.A. Same Guatemala Representaciones y Ventas S.A.* Same Ecuador 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 Marine Bahamas, Ltd. Same Bahamas Seaboard Marine of Haiti, S.E. Same Haiti Seaboard Marine Ltd. Same Liberia Seaboard Marine of Florida, Inc. Same Florida Seaboard Marine (Trinidad) Limited Same Trinidad Seaboard Overseas Limited Same Bahamas Seaboard Overseas Management Company, Ltd. Same Bermuda Seaboard Overseas Peru SRL Same Peru Seaboard Overseas Trading and Shipping (PTY) Ltd. Same South Africa Seaboard Ship Management Inc. Same Florida Seaboard Software Innovations, Inc. Same Delaware 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 Shawnee Funding Limited Partnership Same Delaware Top Feeds Limited* Same Nigeria Transcontinental Capital Corp. (Bermuda) Ltd. TCCB Bermuda Unga Holdings Limited* Unga Kenya *Represents a non-controlled, non-consolidated affiliate. EX-99.1 5 ex991.txt CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the Report) by Seaboard Corporation (the Company), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ H. H. Bresky H. H. Bresky, Chairman of the Board, President and Chief Executive Officer EX-99.2 6 ex992.txt CERTIFICATION OF THE CHIEF FINANCIAL OFFICER Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (the Report) by Seaboard Corporation (the Company), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge: The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Robert L. Steer Robert L. Steer, Senior Vice President, Treasurer and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----