Equity Method Investments

12 Months Ended

Dec. 31, 2019

Equity Method Investments

Investments in and Advances to Affiliates and Notes Receivable from Affiliates

Note 7 – Equity Method Investments

Seaboard has several investments in and advances to non-controlled, non-consolidated affiliates that are all accounted for using the equity method of accounting. See Note 15 for detail of the investments in and advances to affiliates by segment. Financial information from certain foreign affiliates is reported on a one- to three-month lag, depending on the specific entity.

Pork Segment		December 31,
(Millions of dollars)		2019		2018		2017
Net sales	$	1,453	$	927	$	441
Net income (loss)	$	(43)	$	(60)	$	(21)
Total assets	$	639	$	623	$	596
Total liabilities	$	277	$	243	$	138
Total equity	$	362	$	380	$	458

The Pork segment has a 50% noncontrolling interest in Daily’s Premium Meats, LLC (“Daily’s”) and STF. Daily’s produces and markets raw and pre-cooked bacon. STF operates a pork processing plant, which began operations in September 2017. Seaboard’s Pork segment supplies raw materials to both of these facilities for processing and provides marketing services to STF for its pork products. Combined condensed financial information of these entities for each of Seaboard’s years ended is included in the table above.

Seaboard and Triumph Foods, LLC (“Triumph”) formed STF in May 2015 with equal ownership of 50%. In connection with the development and operation of the plant, Seaboard contributed $73 million during 2017. Also, Seaboard agreed to provide a portion of the hogs to be processed at the plant. The Pork segment currently has a business relationship with Triumph under which Seaboard markets substantially all of the pork products produced at Triumph’s plant in Missouri and STF’s plant in Iowa.

Commodity Trading and Milling Segment	December 31,
(Millions of dollars)	2019			2018		2017
Net sales	$	3,129	$	3,238	$	2,907
Net income (loss)	$	(12)	$	(13)	$	23
Total assets	$	1,697	$	1,914	$	1,793
Total liabilities	$	1,075	$	1,242	$	1,150
Total equity	$	622	$	672	$	643

The CT&M segment has noncontrolling interests in foreign businesses conducting flour, maize and feed milling, baking operations, poultry production and processing, and agricultural commodity trading. Combined condensed financial information of these entities for each of Seaboard’s years ended is included in the table above. As of December 31, 2019, the location and percentage ownership of CT&M’s affiliates were as follows: Botswana (50%), Democratic Republic of Congo (50%), Gambia (50%), Kenya (46.64%-49%), Lesotho (50%), Mauritania (50%), Morocco (11.44%-17.08%), Nigeria (25%-48.33%), Senegal (49%), South Africa (30%-50%), Tanzania (49%) and Zambia (49%) in Africa; Colombia (40%-42%), Ecuador (25%-50%), Guyana (50%), and Peru (50%) in South America; Jamaica (50%) and Haiti (23.33%) in the Caribbean; Turkey (25%) in Europe; Australia (22.5%-25%); and Canada (45%) and the U.S. (40%) in North America. As of December 31, 2019, the CT&M segment’s carrying value of certain investments in affiliates was more than its share of the affiliates’ book value by $56 million. The excess is attributable primarily to the valuation of property, plant and equipment and intangible assets. The amortizable assets are being amortized to income (loss) from affiliates over the remaining life of the assets.

During 2018, Seaboard’s CT&M segment acquired a 50% noncontrolling interest in a grain trading and flour milling business in Mauritania for total consideration of $16 million.

Marine Segment		December 31,
(Millions of dollars)		2019		2018		2017
Net sales	$	70	$	66	$	58
Net income	$	12	$	11	$	5
Total assets	$	269	$	272	$	229
Total liabilities	$	107	$	133	$	114
Total equity	$	162	$	139	$	115

The Marine segment has a 21% noncontrolling interest in a cargo terminal business in Jamaica and a 18% noncontrolling interest in a holding company that owns a Caribbean terminal operation. Combined condensed financial information of these entities for each of Seaboard’s years ended is included in the table above. As of December 31, 2018, the Marine segment’s carrying value of certain investments in affiliates was less than its share of the affiliates’ book value by $29 million. The difference is attributable primarily to the valuation of property, plant and equipment and impairments taken by Seaboard, but not the respective entity. Certain basis adjustments are being amortized to income (loss) from affiliates over the remaining life of the assets.

Sugar and Alcohol Segment	December 31,
(Millions of dollars)	2019			2018		2017
Net sales	$	10	$	5	$	10
Net income	$	3	$	3	$	2
Total assets	$	13	$	10	$	10
Total liabilities	$	2	$	2	$	2
Total equity	$	11	$	8	$	8

The Sugar and Alcohol segment has noncontrolling interests in two sugar-related businesses in Argentina (46% and 50%). Combined condensed financial information of these entities for each of Seaboard’s years ended is included in the table above.

Power Segment	December 31,
(Millions of dollars)	2019			2018		2017
Net sales	$	143	$	138	$	105
Net income	$	10	$	33	$	23
Total assets	$	11	$	247	$	265
Total liabilities	$	4	$	139	$	145
Total equity	$	7	$	108	$	120

The Power segment has noncontrolling interests in two energy-related businesses in the Dominican Republic (45% and 50%). In September 2019, Seaboard’s Power segment sold its 29.9% noncontrolling interest in a Dominican Republic electricity generation facility for $23 million cash, net of $1 million in selling expenses and taxes and recorded a $6 million note receivable in other non-current assets in the consolidated balance sheet. There was no gain or loss recognized in the consolidated statements of comprehensive income upon the sale. Combined condensed financial information of these entities for each of Seaboard’s years ended is included in the table above.

Turkey Segment	December 31,
(Millions of dollars)	2019			2018		2017
Net sales	$	1,612	$	1,591	$	1,670
Operating income (loss)	$	(20)	$	(16)	$	15
Net loss	$	(40)	$	(30)	$	(8)
Total assets	$	1,038	$	1,072	$	999
Total liabilities	$	507	$	502	$	400
Total equity	$	531	$	570	$	599

The Turkey segment represents Seaboard’s 50% noncontrolling interest in Butterball, LLC (“Butterball”), a vertically integrated producer and processor of branded and non-branded turkey products. Butterball’s condensed financial information for each of Seaboard’s years ended is included in the table above. Within total assets, Butterball had trade name intangible assets of $111 million and goodwill of $66 million as of December 31, 2019.

In connection with its initial investment in Butterball in December 2010, Seaboard provided Butterball with a $100 million unsecured subordinated loan that had a cash and compounded pay-in-kind interest component. In December 2017, Butterball fully repaid the loan that accumulated to $164 million and accrued interest of $6 million. Seaboard holds warrants, which upon exercise for a nominal price, would enable Seaboard to acquire an additional 5% equity interest in Butterball. The warrants qualify for equity treatment under accounting standards and are classified as investments in and advances to affiliates in the consolidated balance sheets. Seaboard can exercise these warrants at any time after December 31, 2018 or prior to December 31, 2025 after which time the warrants expire. Butterball has the right to repurchase the warrants for fair market value. The warrant agreement essentially provides Seaboard with a 52.5% economic interest, as these warrants are in substance an additional equity interest. Therefore, Seaboard records 52.5% of Butterball’s earnings as income (loss) from affiliates in the consolidated statements of comprehensive income. However, all significant corporate governance matters would continue to be shared equally between Seaboard and its partner in Butterball even if the warrants were exercised, unless Seaboard already owned a majority of the voting rights at the time of exercise.