0000088121-15-000010.txt : 20151028
0000088121-15-000010.hdr.sgml : 20151028
20150831100041
ACCESSION NUMBER: 0000088121-15-000010
CONFORMED SUBMISSION TYPE: CORRESP
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20150831
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: SEABOARD CORP /DE/
CENTRAL INDEX KEY: 0000088121
STANDARD INDUSTRIAL CLASSIFICATION: [6221]
IRS NUMBER: 042260388
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: CORRESP
BUSINESS ADDRESS:
STREET 1: 9000 W. 67TH STREET
CITY: SHAWNEE MISSION
STATE: KS
ZIP: 66202
BUSINESS PHONE: 9136768800
MAIL ADDRESS:
STREET 1: 9000 W. 67TH STREET
CITY: SHAWNEE MISSION
STATE: KS
ZIP: 66202
FORMER COMPANY:
FORMER CONFORMED NAME: SEABOARD ALLIED MILLING CORP
DATE OF NAME CHANGE: 19820328
FORMER COMPANY:
FORMER CONFORMED NAME: HATHAWAY BAKERIES INC
DATE OF NAME CHANGE: 19710315
CORRESP
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filename1.txt
SEABOARD
CORPORATION
August 31, 2015
Kristi Marrone
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, DC 20549
RE: Seaboard Corporation
Form 10-K for the fiscal year ended December 31, 2014
Response dated August 3, 2015
File No. 001-03390
Dear Ms. Marrone:
We are writing in response to your letter dated August 21, 2015,
with respect to the above-referenced report filed by Seaboard
Corporation ("Seaboard" or the "Company"). Our numbered
responses to your comments correspond to the numbered comments in
your letter.
COMMENTS AND OUR RESPONSES
Form 10-K for the fiscal year ended December 31, 2014
Notes to Consolidated Financial Statements, page 32
Comment 1: We note your response to comment 1 that the large
majority of your current trade receivables and due
from affiliates were not past due. Please tell us the
credit terms and the specific dollar amount of past
due balances of your foreign receivables. Tell us how
you evaluated the significance of this information to
an investor's financial assessment of the company and
a comparison of the company to its competitors.
Response: Although our subsidiaries and affiliates do not have
consistent standard credit terms, most generally
range between 30 and 60 days. We do have trade
receivable accounts that age from time to time, but
we generally do not focus on accounts until they have
aged greater than 90 days, unless a specific
collectability concern has been identified. As of
December 31, 2014 approximately $33.7 million, or
6.4% of our total $530.0 million trade
receivables and due from affiliates were greater than
90 days past due, net of reserves, including $15.3
million, or 45.4% of the greater than 90 days balance,
related to the Power segment and the Brazilian flour
production business. Each of our other foreign
entities having past due receivables greater than 90
days accounted for less than 1% of the total trade
receivables and due from affiliates and did not
aggregate to any heightened level of collection risk.
Our foreign receivable risk is distributed over many
different companies, industries and countries and we
have not historically experienced greater write-offs
of foreign receivables, except for those receivables
we have specifically discussed in our filings. In
addition, due to the disaggregated nature of our
foreign receivables and certain country locations, we
are unable to benchmark collection risk to specific
competitors. The risk we reference in the Critical
Accounting Estimates and in Note 12, Segment
Information of our annual report was meant to
primarily relate to our Power Segment foreign
receivables in the Dominican Republic, which at times
has historically been dependent on the government
obtaining external financing and specific risk in
certain countries that are experiencing distressed
economic conditions and that have more significant
receivable balances, such as Brazil currently. While
we believe certain of our foreign receivables
generally represent more of a collection risk than
domestic receivables, this was not meant to be
interpreted that all our foreign receivables are
riskier than our domestic receivables. In future
Exchange Act periodic reports, we will modify
disclosure to specifically reference which foreign
trade receivables and due from affiliates receivables
are at a heightened risk and to the extent its
material and meaningful we will include
quantifications to enhance an investor's
understanding of the risk.
Form 10-Q for the quarterly period ended July 4, 2015
Note 9 - Segment Information, page 14
Comment 2: We note your response to comment 2 relating to the
$34.6 million note receivable from the bakery
business in DRC. We note on page 15 of the referenced
Form 10-Q that no payment was received in June and
you agreed to review future payment terms. Please
tell us with sufficient specificity the assumptions
used in estimating future cash flows for this
business and how you determined that those
assumptions were reasonable given the continued
operating losses and other challenges faced by this
business and the default on the first payment due in
June 2015.
Response: The bakery business in the Democratic Republic of
Congo was a greenfield construction, originating
during the fourth quarter of 2012. The initial start-
up phase has been extended as challenges such as
securing a consistent fuel and electricity source,
the development of a country-specific distribution
model, and
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resolving technical and quality issues have taken
longer than originally projected. Cash flow
assumptions were revised at the end of 2014 to reflect
the extended nature of the start-up period as
compared to the original forecast which resulted in
the write-off of the investment. The forecast used at
December 31, 2014 estimated continued losses in the
near term and that once the operational and market
issues (credible and sustainable distribution
channels, steady stream of power and consistent
quality of production) were resolved, the business
plan, which projects increasing production and market
share, would be achieved resulting in positive cash
flows and a sustained level of profitability.
As of the second quarter of 2015, the forecast was
revised to reflect the actual improvements in volume
and EBITDA achieved during the first six months of
2015 as compared to our 2014 year-end revised
projections. Specific improvements included new
products being developed and sold, improved shelf
life and quality, and the completion of new logistics
design which is expected to improve volumes and
profitability.
We used a probability weighting of the different cash
flow scenarios, but did not assume that the other
equity partner's guarantee of the debt was
collectable, although it may be. In evaluating the
future cash flows estimates, we used a discount
factor based on the effective rate on the note
receivable. In addition, we used commission, volume,
pricing and margins assumptions consistent with what
is currently being achieved and took into account the
positive impact of improved shelf life and quality.
Our forecasts reflect that when all operational and
market issues are substantially resolved, the
business will deliver a more reliable and consistent
product and achieve increased volume and additional
market share. Although our equity investment in this
business has been written-off, management believes
the business plan is achievable and that the business
will generate positive cash flows sufficient to
recover the note receivable.
We compare our assumptions to weekly snapshots of
bread production that provides sales volumes, price
per product sold, variable costs and consumption
rates per sack of flour, kilograms of yeast and salt
and liter of fuel to monitor the progress of the
specific improvements and as a comparison to
forecast. Additionally, although no agreement has
been reached, we believe the payment terms and
maturity of the bakery's debt to us will be extended
to better match the projected future cash flows of
the business.
Comment 3: We note your response to comment 3. We note that your
investment in and advances and note receivable from
the flour production business in Brazil have been
written down to zero. We further note on page 15 of
the referenced Form 10-Q that you had a gross
receivable due from affiliate related to this
business resulting from sales of grain and supplies
of $16.5 million as of July 4, 2015 which you
reserved $3 million based on an analysis of
collectability and
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working capital. Please tell us with sufficient
specificity how you came to the conclusion that
no additional allowance for losses was necessary as
of July 4, 2015.
Response: In evaluating the collectability of the $16.5 million
trade receivable, Seaboard considered the working
capital of the business, which is one of the measures
that Seaboard typically uses as an indicator of
impairment, along with our knowledge and
understanding of the operational performance and
capabilities of the business. Historically, negative
working capital has been a good early indicator of
collectability concerns at Seaboard's nonconsolidated
affiliates, although it does not always mean
impairment because it does not reflect the cash flow
generating capability of the fixed assets. As of the
end of the second quarter of 2015, the company had
negative working capital. To evaluate the amount of
any allowance for bad debt that should be recorded,
we considered a probability weighting of collection
scenarios that assumed third-party bank debt would
first be paid back and then evaluated the remaining
cash available to recover the receivable. The
critical assumptions used in the various collection
scenarios were the completion of the refurbishment of
an operating plant during the third quarter,
improvements to the shelf life and quality of the
flour resulting from operational changes made over
the last year and the expiration of a mill tolling
agreement during the third quarter of 2015. Our
analysis indicated that a reserve of $3 million was
required.
Management notes certain positive developments were
included in the analysis of collectability including
the improvement of yield and the third quarter ending
of a toll milling arrangement that has previously
constrained the company's ability to make certain
improvements. Additional positive developments
expected but not specifically included in this
analysis were the impact of a new production line at
our primary milling facility, successful replacement
of the managing director and certain overhead
reductions expected during the second half of 2015.
We hope that the above has been of assistance to you and that it
is fully responsive to your comments. If you have any questions
or require any further information, please call me at
(913) 676-8833 or Michael Trollinger, Vice President, Corporate
Controller and Chief Accounting Officer at (913) 676-8735.
Very truly yours,
SEABOARD CORPORATION
/s/ Robert L. Steer
Robert L. Steer
Executive Vice President and
Chief Financial Officer
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