-----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, SaKZl3CpZLUSisHeF1IkOzNXYSEkUxfxr4f86edS5oO2IZeVZz8ZTcCpm+cF7SGm 9SAXJ2AfbI3jMJAtNsKyzQ== 0000088121-98-000011.txt : 19980814 0000088121-98-000011.hdr.sgml : 19980814 ACCESSION NUMBER: 0000088121-98-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SEABOARD CORP /DE/ CENTRAL INDEX KEY: 0000088121 STANDARD INDUSTRIAL CLASSIFICATION: POULTRY SLAUGHTERING AND PROCESSING [2015] IRS NUMBER: 042260388 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03390 FILM NUMBER: 98686240 BUSINESS ADDRESS: STREET 1: 9000 W. 67TH STREET CITY: SHAWNEE MISSION STATE: KS ZIP: 66201 BUSINESS PHONE: 913-676-8939 MAIL ADDRESS: STREET 1: 9000 W. 67 STREET CITY: SHAWNEE MISSION STATE: KS ZIP: 66202 FORMER COMPANY: FORMER CONFORMED NAME: SEABOARD ALLIED MILLING CORP DATE OF NAME CHANGE: 19820328 FORMER COMPANY: FORMER CONFORMED NAME: HATHAWAY BAKERIES INC DATE OF NAME CHANGE: 19710315 10-Q 1 1998 2ND QUARTER 10-Q FILING UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1998 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 04-260388 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 9000 W. 67th Street, Shawnee Mission, Kansas 66202 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (913) 676-8800 Not Applicable (Former name, former address and former fiscal year, if changed since last report.) 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 ___. There were 1,487,520 shares of common stock, $.01 par value per share, outstanding on July 31, 1998. Total pages in filing - 13 pages PART I - FINANCIAL INFORMATION Item 1. Financial Statements SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets June 30, 1998 and December 31, 1997 (Thousands of dollars) (Unaudited) June 30, December 31, 1998 1997 Assets Current assets: Cash and cash equivalent $ 4,755 $ 8,552 Short-term investments 115,914 108,744 Receivables, net 178,581 175,640 Inventories 187,526 211,024 Deferred income taxes 10,576 9,730 Prepaid expenses and deposits 16,640 15,545 Total current assets 513,992 529,235 Investments in and advances to foreign affiliates 117,174 93,668 Net property, plant and equipment 475,790 486,373 Other assets 16,357 15,109 Total assets $1,123,313 $1,124,385 Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks $ 176,713 $ 157,445 Current maturities of long-term debt 6,867 6,843 Accounts payable 63,699 78,805 Other current liabilities 100,028 117,809 Total current liabilities 347,307 360,902 Long-term debt, less current maturities 306,223 306,666 Deferred income taxes 29,429 27,943 Other liabilities 31,284 29,859 Total non-current and deferred liabilities 366,936 364,468 Stockholders' equity: Common stock of $1 par value, Authorized 4,000,000 shares; issued 1,789,599 shares 1,790 1,790 Less 302,079 shares held in treasury (302) (302) 1,488 1,488 Additional capital 13,214 13,214 Accumulated other comprehensive income 13 10 Retained earnings 394,355 384,303 Total stockholders' equity 409,070 399,015 Total liabilities and stockholders' equity $1,123,313 $1,124,385 See notes to condensed consolidated financial statements. SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings Three months ended June 30, 1998 and 1997 (Thousands of dollars except per share amounts) (Unaudited) June 30, June 30, 1998 1997 Net sales $ 454,645 $ 449,366 Cost of sales and operating expenses 400,257 392,286 Gross income 54,388 57,080 Selling, general and administrative expenses 35,132 32,871 Operating income 19,256 24,209 Other income (expense): Interest income 1,920 1,483 Interest expense (8,046) (7,141) Loss from foreign affiliates (2,560) (3,069) Miscellaneous 1,139 219 Total other income (expense), net (7,547) (8,508) Earnings before income taxes 11,709 15,701 Income tax expense 3,777 5,196 Net earnings $ 7,932 $ 10,505 Earnings per common share $ 5.33 $ 7.06 Dividends declared per common share $ .25 $ .25 Average number of shares outstanding 1,487,520 1,487,520 See notes to condensed consolidated financial statements. SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings Six months ended June 30, 1998 and 1997 (Thousands of dollars except per share amounts) (Unaudited) June 30, June 30, 1998 1997 Net sales $ 901,177 $ 849,546 Cost of sales and operating expenses 798,313 740,497 Gross income 102,864 109,049 Selling, general and administrative expenses 71,347 68,720 Operating income 31,517 40,329 Other income (expense): Interest income 3,536 2,694 Interest expense (15,858) (14,901) Loss from foreign affiliates (5,136) (4,718) Miscellaneous 1,759 522 Total other income (expense), net (15,699) (16,403) Earnings before income taxes 15,818 23,926 Income tax expense 5,022 8,085 Net earnings $ 10,796 $ 15,841 Earnings per common share $ 7.26 $ 10.65 Dividends declared per common share $ .50 $ .50 Average number of shares outstanding 1,487,520 1,487,520 See notes to condensed consolidated financial statements. SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows Six months ended June 30, 1998 and 1997 (Thousands of dollars) (Unaudited) June 30, June 30, 1998 1997 Cash flows from operating activities: Net earnings $ 10,796 $ 15,841 Adjustments to reconcile net earnings to cash from operating activities: Depreciation and amortization 31,265 28,236 Loss from foreign affiliates 5,136 4,718 Deferred income taxes 639 4,005 Gain from sale of fixed assets (1,479) (543) Changes in current assets and liabilities: Receivables, net of allowance (2,941) (3,160) Inventories 23,498 (28,331) Prepaid expenses and deposits (1,095) (10,594) Current liabilities exclusive of debt (32,887) 32,217 Other, net 241 1,779 Net cash from operating activities 33,173 44,168 Cash flows from investing activities: Purchase of investments (160,179) (117,590) Proceeds from the sale or maturity of investments 153,013 105,374 Capital expenditures (24,670) (37,600) Proceeds from sale of fixed assets 6,675 3,771 Investments in and advances to foreign affiliates (28,642) (22,137) Investment in domestic affiliate (2,500) - Notes receivable 1,228 160 Net cash from investing activities (55,075) (68,022) Cash flows from financing activities: Notes payable to bank, net 19,268 10,243 Proceeds from long-term debt - 10,032 Principal payments of long-term debt (419) (482) Bond construction fund - (1,047) Dividends paid (744) (744) Net cash from financing activities 18,105 18,002 Net change in cash and cash equivalents (3,797) (5,852) Cash and cash equivalents at beginning of year 8,552 11,467 Cash and cash equivalents at end of quarter $ 4,755 $ 5,615 See notes to condensed consolidated financial statements. SEABOARD CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Note 1 - Accounting Policies and Basis of Presentation The consolidated financial statements include the accounts of Seaboard Corporation and its wholly owned domestic and foreign subsidiaries (the "Company"). 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. The unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 1997 as filed in its Annual Report on Form 10-K. The accompanying unaudited consolidated financial statements include all adjustments (consisting only of normal recurring accruals) which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows. Results of operations for interim periods are not necessarily indicative of results to be expected for a full year. The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" as of January 1, 1998. This statement establishes requirements for reporting and display of comprehensive income and its components. For the three and six months ended June 30, 1998 and 1997, Other Comprehensive Income adjustment consisted of an immaterial unrealized gain on available-for-sale securities, net of tax. Note 2 - Inventories The following is a summary of inventories at June 30, 1998 and December 31, 1997 (in thousands): June 30, December 31, 1998 1997 At lower of last-in, first-out (LIFO) cost or market: Live poultry $ 25,801 $ 27,116 Dressed poultry 25,232 32,496 Feed and baking ingredients, packaging supplies and other 6,848 6,970 57,881 66,582 LIFO allowance (1,263) (4,744) Total inventories at lower of LIFO cost or market 56,618 61,838 At lower of first-in, first-out (FIFO) cost or market: Live hogs 79,736 76,484 Grain, flour and feed 17,689 37,575 Crops in production and related materials 10,433 11,166 Dressed pork 6,780 8,388 Other 16,270 15,573 Total inventories at lower of FIFO cost or market 130,908 149,186 Total inventories $ 187,526 $ 211,024 Note 3 - Contingencies 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 is vigorously defending the action and believes that it has no responsibility for the loss. The Company also believes that it would have a claim for indemnity if it were held liable for any loss. The Company is subject to various other legal proceedings related to the normal conduct of its business. In the opinion of management, none of these actions is expected to result in a judgment having a materially adverse effect on the consolidated financial statements of the Company. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES June 30, December 31, 1998 1997 Current ratio 1.48:1 1.47:1 Working capital $166.7 $168.3 Cash from operating activities for the six months ended June 30, 1998 was $33.2 million, compared to $44.2 million for the six months ended June 30, 1997. The decrease in cash flows was primarily related to a decrease in net income and a net decrease in noncash working capital items. Changes in individual components of working capital are primarily related to the sell-off of a previous build-up of poultry leg- quarter inventory, and the timing of normal transactions including voyage settlements and trade payables. The Company invested $21.8 million in property, plant and equipment in the food production and processing segment for the six months ended June 30, 1998. Capital expenditures in the pork division of $9.0 million were primarily for improvements to the pork processing plant. For the remainder of 1998, an additional $4.5 million is expected to be spent on existing facilities. The Company previously disclosed plans to construct a second processing plant and increase annual production from two to four million hogs. In connection with these plans, the Company is currently making arrangements to increase annual production to three million hogs. This increase in hog production will be accomplished through a combination of operating lease arrangements and third party contract growers. The timing of expanding production from three to four million hogs, as well as the construction of the second processing plant, have not been finalized. Capital expenditures of $11.2 million for the six months ended June 30, 1998 were made in the poultry division, primarily for the completion of expansion projects at the Athens and Elberton, Georgia, poultry facilities. The Company anticipates spending $10.7 million for the remainder of 1998 primarily to make general upgrades to its poultry facilities. Management anticipates these expenditures will be financed by internally generated cash. Capital expenditures in the transportation segment through June 30, 1998 totaled $2.0 million for general replacement and upgrades of property and equipment. During the six months ended June 30, 1998, the Company made $29.8 million in advances to and non-voting investments in Ingenio y Refineria San Martin del Tabacal S.A. (Tabacal) in which the Company owns a non- controlling interest. The Company cannot presently predict the amount of additional advances that may be needed for the remainder of 1998. In the first quarter of 1998, the Company extended committed, one-year revolving credit facilities totaling $145 million for an additional year. As of June 30, 1998, the Company had $142.2 million outstanding under committed, one-year revolving credit facilities totaling $160.0 million and $34.5 million outstanding under short-term uncommitted credit lines totaling $95.0 million. In January 1998, the Company invested $2.5 million for a minority interest in a new limited liability company in Maine. The new company acquired the assets of an existing seafood company which processes and distributes prepackaged smoked seafood and related products. The investment is being accounted for using the equity method. In June 1998, the Company, pursuant to a joint venture with two other partners, completed its acquisition of an interest in a flour mill in Haiti. The Company made an investment of $3.0 million for a minority interest in the joint venture, which in turn owns 70% of a Haitian company which owns the flour mill. In July 1998, the Company completed the acquisition of a 50% interest in a flour mill in Lesotho for approximately $5.0 million. These investments are being accounted for using the equity method. Management intends to continue seeking opportunities for expansion in the industries in which it operates and believes that the Company's liquidity, capital resources and borrowing capabilities are adequate for its current and intended operations. RESULTS OF OPERATIONS The segment distribution of the increase (decrease) in net sales and operating income compared to the prior year are as follows (in millions): Net Sales Operating Income Quarter Year-to-Date Quarter Year-to-Date Food Production and Processing Segment $ 4.8 $ 30.5 $ (5.3) $(11.0) Commodity Trading and Milling Segment (5.2) 6.7 1.5 1.2 Transportation Segment 6.5 16.1 (0.1) 1.2 Other (0.8) (1.7) (1.1) (0.2) $ 5.3 $ 51.6 $ (5.0) $ (8.8) Food Production and Processing Segment Since late 1997, an industry wide increase in meat production has resulted in lower sales prices in most meat markets, especially pork products. Although pork prices continue to be depressed, poultry prices improved during the second quarter of 1998. Despite these recent price pressures, net sales for the food production and processing segment increased $4.8 and $30.5 million, respectively, for the three and six months ended June 30, 1998 primarily as a result of increased poultry and pork sales volumes. Operating income decreased $5.3 and $11.0 million, respectively, for the three and six months ended June 30, 1998, compared to the same periods one year earlier. As more fully described below, these decreases are primarily the result of a substantial decrease in pork margins, partially offset by improved poultry margins. Net sales of poultry products totaled $124.7 and $249.9 million for the three and six months ended June 30, 1998, an increase of $10.0 and $18.6 million compared to the periods one year earlier, respectively. These increases are primarily a result of increased sales volume at the Elberton, Georgia, plant and, to a lesser extent, selling off a build-up of leg-quarter inventory. The addition of a new cooking line at the Elberton location in late 1997 has increased the Company's capacity to offer further processed products in place of retail traypack products. Gross income from poultry sales increased to $14.0 and $21.5 million for the three and six month periods of 1998, respectively, from $4.1 and $10.4 million for the similar periods of 1997. These increases are primarily the result of lower finished feed costs and uninterrupted operation of the Athens, Georgia, plant. During 1997, the Athens plant was shut down for one week to convert from retail tray-pack to food service production. Net sales for the pork operations totaled $133.2 and $254.9 million for the three and six months ended June 30, 1998, a decrease of $4.3 million and an increase of $12.5 million compared to the same periods one year earlier, respectively. The decrease in sales for the three month period resulted from lower sales prices, despite an increase in sales volume. The increase in sales for the six month period resulted from increased sales volumes partially offset by lower sales prices. The increases in sales volume are the result of the hog processing plant operating at double-shift production during the entire first six months of 1998, compared with single-shift production in the first quarter of 1997 and double-shift capacity for only part of the second quarter of 1997. Gross income decreased to $3.9 and $5.4 million for the three and six months ended June 30, 1998, respectively, compared to $17.4 and $27.9 million for the same periods one year earlier. The decreases in gross income are primarily the result of lower prices for finished pork products without a comparable decrease in the cost of production. Management anticipates that lower pork prices will continue to have a negative effect on financial results during the remainder of 1998 compared to 1997. Commodity Trading and Milling Segment Compared with the same periods one year earlier, net sales from commodity trading and milling activity decreased $5.2 to $77.6 million for the three month period, and increased $6.7 to $160.2 million for the six month period. The decrease in sales for the three months was primarily a result of lower volumes of commodity sales to foreign markets. The increase for the six months is primarily the result of higher volumes of commodity sales, mainly soybeans, partially offset by lower commodity prices. Operating income for the three and six months ended June 30, 1998, increased $1.5 and $1.2 million, to $4.3 and $6.8 million, respectively, compared to the same periods one year earlier. The increases are the result of increased income from operating certain mills in foreign countries. Transportation Segment Net sales from containerized cargo operations increased by $6.5 and $16.1 million to $83.3 and $161.6 million for the three and six months ended June 30, 1998, respectively, compared to the same periods one year earlier. Operating income from containerized cargo operations decreased $0.1 to $7.0 million for the three month period, and increased $1.2 to $14.9 million for the six month period. The increases in revenue and six month operating income are primarily related to increased cargo volumes in certain markets that the Company serves. Increased cargo capacities result in higher profit margins. The decrease in operating income for the three month period is primarily attributable to an increase in various general and administrative costs. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses increased $2.3 and $2.6 million to $35.1 and $71.3 million for the three and six months ended June 30, 1998, respectively, compared to the same periods one year earlier. As a percentage of revenues, and compared with the same periods one year earlier, SG&A increased from 7.3% to 7.7% for the three month period, and decreased from 8.1% to 7.9% for the six month period. SG&A increased for the three months as a result of increased selling expenses in the poultry division and various general and administrative costs in the transportation segment. SG&A decreased as a percentage of revenues for the six months as a result of increased pork production. Other Income and Expense Interest income increased during the three and six months ended June 30, 1998, compared to the same periods one year earlier, primarily from an increase in average invested funds. Interest expense increased during the three and six month periods of 1998 compared to same periods in 1997 as a result of increased short-term borrowings. Loss from foreign affiliates is primarily related to Tabacal. Other Financial Information The Company will adopt Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information" for the year ending December 31, 1998. This statement requires companies to report certain information about operating segments in their financial statements and establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS 131 defines operating segments as components of an enterprise about which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and in assessing performance. Application to interim financial statements in the year of adoption is not required, however, comparative information for interim periods in the year of adoption will be reported in the financial statements for interim periods in fiscal 1999. During the second quarter of 1998 the Financial Accounting Standards board issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments and all hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities at their fair values. Accounting for changes in the fair value of a derivative depends on its designation and effectiveness. For derivatives that qualify as effective hedges, the change in fair value will have no net impact on earnings until the hedged transaction affects earnings. For derivatives that are not designated as hedging instruments, or for the ineffective portion of a hedging instrument, the change in fair value will affect current period earnings. The Company will adopt SFAS No. 133 during its first quarter of fiscal 2000 and does not believe it will have a material impact on the Company's reported financial position, results of operations or cash flows. SEABOARD CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None (b) Reports on Form 8-K. Seaboard Corporation has not filed any reports on Form 8-K during the quarter ended June 30, 1998. This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which 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-Q and include statements regarding the intent, belief or current expectations of the Company and its management with respect to (i) the cost and timing of the completion of new or expanded facilities, (ii) the Company's financing plans, (iii) the price of feed stocks and other materials used by the Company, (iv) the price for the Company's products and services, (v) the anticipated improvement in the financial results of Tabacal, or (vi) 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-Q under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" identifies important factors which could cause such differences. PART II - OTHER INFORMATION SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: August 13, 1998 Seaboard Corporation by: /s/ Robert L. Steer Robert L. Steer, Vice President-Chief Financial Officer (Authorized officer and principal financial and accounting officer) EX-27 2 EX-27 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1998 JUN-30-1998 4755 115914 178581 0 187526 513992 784731 308941 1123313 347307 0 0 0 1488 407582 1123313 901177 901177 798313 798313 71347 0 15858 15818 5022 10796 0 0 0 10796 7.26 7.26
-----END PRIVACY-ENHANCED MESSAGE-----