Segment Information

6 Months Ended

Jul. 02, 2011

Segment Information

Segment Information

Note 9 —- Segment Information

During the second quarter of 2009, Seaboard started operations at its ham-boning and processing plant in Mexico.  Since that time, this plant has experienced certain difficulties including challenges facing many U.S. border towns in Mexico.  Despite being in operation for over two years and reaching near-capacity production levels at times, overall results have been below expectations with inconsistencies in margins and volumes.  As of July 2, 2011, Seaboard performed an impairment evaluation of this plant and determined there was no impairment based on management’s current cash flow assumptions and probabilities of outcomes.  However, if margins from this operation do not meet acceptable levels, there is a possibility that the recorded value of this facility could be deemed impaired during some future period including 2011, which may result in a charge to earnings.  The net book value of these assets as of July 2, 2011 was $9,661,000.

In the first quarter of 2011, the Commodity Trading and Milling segment recognized $101,080,000 in net sales related to previously deferred costs and deferred revenues under contracts for which the final sale prices were not fixed and determinable until 2011.

On April 8, 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic, the Estrella Del Norte (“EDN”) and Estrella Del Mar (“EDM”), for $73,102,000 (net of $3,000,000 placed in escrow for potential dry dock costs).  During March 2009, $15,000,000 was paid to Seaboard.  In the second quarter of 2011, the previously escrowed balance of $55,000,000, less $3,000,000 to remain in escrow for potential dry dock costs, plus $2,796,000 of escrow earnings and $3,306,000 for various inventory items related to the EDN, was paid to Seaboard.  Seaboard received $1,500,000 of the $3,000,000 in escrow subsequent to July 2, 2011.  Seaboard ceased depreciation on January 1, 2010 for these two power generating facilities but continued to operate them until March 30, 2011.  The net book value of the two power generating facilities and various inventory items related to EDN was $21,679,000 at the sale close date.   Seaboard recognized a gain on sale of assets of $51,423,000 in operating income in the second quarter of 2011.   In late March 2011, the purchaser entered into discussions with Seaboard to lease the EDM to Seaboard for a short period of time.  On April 20, 2011, Seaboard signed a short-term lease agreement that allowed Seaboard to resume operations of the EDM (72 megawatts) and operate it through approximately March 31, 2012.  Seaboard and the purchaser also agreed to defer the sale to the purchaser of the inventory related to the EDM until the end of the lease term.  Seaboard retained all other physical properties of this business and is currently building a 106 megawatt floating power generating facility for use in the Dominican Republic for approximately $125,000,000.  This new facility is anticipated to begin operations by the end of 2011 or early 2012, resulting in lower sales for this segment for the remainder of 2011.

The Turkey segment, accounted for using the equity method, had total net sales for the three and six month periods of 2011 of $292,814,000 and $571,271,000, respectively, and operating income for the three and six month periods of 2011 of $9,233,000 and $14,906,000, respectively.  As of July 2, 2011 and December 31, 2010, the Turkey segment had total assets of $827,087,000 and $725,464,000, respectively.  Management of the Turkey segment is evaluating several opportunities to improve the utilization at its plants and thereby increase earnings potential.   If implemented these initiatives could result in one time charges to earnings during the second half of 2011 and into 2012.   The amount of such charges is not currently determinable.

The following tables set forth specific financial information about each segment as reviewed by Seaboard’s management. Operating income for segment reporting is prepared on the same basis as that used for consolidated operating income.  Operating income, along with income or losses from affiliates for the Commodity Trading and Milling segment, is used as the measure of evaluating segment performance because management does not consider interest, other investment income and income tax expense on a segment basis.

Sales to External Customers:

	Three Months Ended				Six Months Ended
	July 2,		July 3,		July 2,		July 3,
(Thousands of dollars)	2011		2010		2011		2010
Pork	$	441,423	$	348,284	$	865,392	$	666,190
Commodity Trading and Milling	621,007		405,633		1,333,238		813,736
Marine	236,501		215,615		466,221		419,038
Sugar	72,594		45,036		139,597		98,858
Power	24,670		31,015		57,015		63,984
All Other	2,392		2,880		5,303		6,933
Segment/Consolidated Totals	$	1,398,587	$	1,048,463	$	2,866,766	$	2,068,739

Operating Income (Loss):

	Three Months Ended						Six Months Ended
	July 2,			July 3,			July 2,			July 3,
(Thousands of dollars)	2011			2010			2011			2010
Pork	$	62,494		$	58,634		$	142,089		$	85,042
Commodity Trading and Milling	15,230			19,523			38,302			42,157
Marine	(11,054		)	11,037			(4,032		)	19,303
Sugar	21,586			9,545			44,025			20,822
Power	53,057			3,706			56,606			7,734
All Other	(329		)	174			(631		)	586
Segment Totals	140,984			102,619			276,359			175,644
Corporate Items	(4,019		)	(1,372		)	(9,118		)	(6,931		)
Consolidated Totals	$	136,965		$	101,247		$	267,241		$	168,713

Income from Affiliates:

	Three Months Ended					Six Months Ended
	July 2,			July 3,		July 2,		July 3,
(Thousands of dollars)	2011			2010		2011		2010
Commodity Trading and Milling	$	4,579		$	6,033	$	10,398	$	10,850
Sugar	(99		)	503		218		574
Turkey	885			—		911		—
Segment/Consolidated Totals	$	5,365		$	6,536	$	11,527	$	11,424

Total Assets:

	July 2,		December 31,
(Thousands of dollars)	2011		2010
Pork	$	782,102	$	761,490
Commodity Trading and Milling	779,364		686,379
Marine	266,108		246,902
Sugar	231,927		223,223
Power	96,148		91,739
Turkey	284,000		277,778
All Other	9,933		6,332
Segment Totals	2,449,582		2,293,843
Corporate Items	433,037		440,243
Consolidated Totals	$	2,882,619	$	2,734,086

Investments in and Advances to Affiliates:

	July 2,		December 31,
(Thousands of dollars)	2011		2010
Commodity Trading and Milling	$	156,801	$	140,696
Sugar	3,096		2,957
Turkey	188,749		187,669
Segment/Consolidated Totals	$	348,646	$	331,322

Administrative services provided by the corporate office allocated to the individual segments represent corporate services rendered to and costs incurred for each specific segment with no allocation to individual segments of general corporate management oversight costs.  Corporate assets include short-term investments, other current assets related to deferred compensation plans, fixed assets, deferred tax amounts and other miscellaneous items.  Corporate operating losses represent certain operating costs not specifically allocated to individual segments.