-----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, DFHGCYQEjSGvsYFyGhE/BHm07CzN/LjRSZBw36+6zKqMoc/SI/wD75G3KueZsvIu AeP/4hHq/g1NJm4I7wgzZw== 0000088121-98-000012.txt : 19981116 0000088121-98-000012.hdr.sgml : 19981116 ACCESSION NUMBER: 0000088121-98-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 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: 98746060 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 3RD 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 September 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 04-2260388 (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 October 31, 1998. Total pages in filing - 15 pages PART I - FINANCIAL INFORMATION Item 1. Financial Statements SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets September 30, 1998 and December 31, 1997 (Thousands of dollars) (Unaudited) September 30, December 31, 1998 1997 Assets Current assets: Cash and cash equivalents $ 12,865 $ 8,552 Short-term investments 117,963 108,744 Receivables, net 177,921 175,640 Inventories 196,807 211,024 Deferred income taxes 11,117 9,730 Prepaid expenses and deposits 18,980 15,545 Total current assets 535,653 529,235 Investments in and advances to foreign affiliates 122,410 93,668 Net property, plant and equipment 470,656 486,373 Other assets 17,182 15,109 Total assets $1,145,901 $1,124,385 Liabilities and Stockholders' Equity Current liabilities: Notes payable to banks $ 175,048 $ 157,445 Current maturities of long-term debt 6,883 6,843 Accounts payable 67,009 78,805 Other current liabilities 113,293 117,809 Total current liabilities 362,233 360,902 Long-term debt, less current maturities 306,048 306,666 Deferred income taxes 32,342 27,943 Other liabilities 31,428 29,859 Total non-current and deferred liabilities 369,818 364,468 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 147 10 Retained earnings 399,001 384,303 Total stockholders' equity 413,850 399,015 Total liabilities and stockholders' equity $1,145,901 $1,124,385 See notes to condensed consolidated financial statements. SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings Three months ended September 30, 1998 and 1997 (Thousands of dollars except per share amounts) (Unaudited) September 30, September 30, 1998 1997 Net sales $ 438,909 $ 429,610 Cost of sales and operating expenses 382,681 372,123 Gross income 56,228 57,487 Selling, general and administrative expenses 34,721 34,253 Operating income 21,507 23,234 Other income (expense): Interest income 1,630 1,774 Interest expense (8,485) (8,271) Loss from foreign affiliates (6,916) (2,246) Miscellaneous 1,701 287 Total other income (expense), net (12,070) (8,456) Earnings before income taxes 9,437 14,778 Income tax expense 4,419 4,270 Net earnings $ 5,018 $ 10,508 Earnings per common share $ 3.37 $ 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 Nine months ended September 30, 1998 and 1997 (Thousands of dollars except per share amounts) (Unaudited) September 30, September 30, 1998 1997 Net sales $1,340,086 $1,279,156 Cost of sales and operating expenses 1,180,994 1,112,620 Gross income 159,092 166,536 Selling, general and administrative expenses 106,068 102,973 Operating income 53,024 63,563 Other income (expense): Interest income 5,166 4,468 Interest expense (24,343) (23,172) Loss from foreign affiliates (12,052) (6,964) Miscellaneous 3,460 809 Total other income (expense), net (27,769) (24,859) Earnings before income taxes 25,255 38,704 Income tax expense 9,441 12,355 Net earnings $ 15,814 $ 26,349 Earnings per common share $ 10.63 $ 17.71 Dividends declared per common share $ .75 $ .75 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 Nine months ended September 30, 1998 and 1997 (Thousands of dollars) (Unaudited) September 30, September 30, 1998 1997 Cash flows from operating activities: Net earnings $ 15,814 $ 26,349 Adjustments to reconcile net earnings to cash from operating activities: Depreciation and amortization 44,543 42,543 Loss from foreign affiliates 12,052 6,964 Deferred income taxes 2,944 4,706 Gain from sale of fixed assets (2,209) (366) Changes in current assets and liabilities: Receivables, net of allowance (2,281) (13,673) Inventories 14,217 (9,907) Prepaid expenses and deposits (3,435) (5,744) Current liabilities exclusive of debt (16,312) 38,890 Other, net 1,224 2,808 Net cash from operating activities 66,557 92,570 Cash flows from investing activities: Purchase of investments (268,518) (189,596) Proceeds from the sale or maturity of investments 259,504 177,599 Capital expenditures (34,958) (60,839) Proceeds from sale of fixed assets 8,033 6,322 Investments in and advances to foreign affiliates (40,794) (30,883) Investment in domestic affiliate (2,500) - Notes receivable 1,080 78 Net cash from investing activities (78,153) (97,319) Cash flows from financing activities: Notes payable to bank, net 17,603 (7,640) Proceeds from long-term debt - 10,097 Principal payments of long-term debt (578) (734) Bond construction fund - (1,050) Dividends paid (1,116) (1,116) Net cash from financing activities 15,909 (443) Net change in cash and cash equivalents 4,313 (5,192) Cash and cash equivalents at beginning of year 8,552 11,467 Cash and cash equivalents at end of quarter $ 12,865 $ 6,275 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 nine months ended September 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 September 30, 1998 and December 31, 1997 (in thousands): September 30, December 31, 1998 1997 At lower of last-in, first-out (LIFO) cost or market: Live poultry $ 24,989 $ 27,116 Dressed poultry 28,577 32,496 Feed and baking ingredients, packaging supplies and other 7,204 6,970 60,770 66,582 LIFO allowance 615 (4,744) Total inventories at lower of LIFO cost or market 61,385 61,838 At lower of first-in, first-out (FIFO) cost or market: Live hogs 76,101 76,484 Grain, flour and feed 23,794 37,575 Crops in production and related materials 11,024 11,166 Dressed pork 7,793 8,388 Other 16,710 15,573 Total inventories at lower of FIFO cost or market 135,422 149,186 Total inventories $ 196,807 $ 211,024 Significant decreases in commodity prices during 1998 have effectively eliminated the LIFO reserve as overall poultry feed costs have decreased below base year levels. This change in LIFO reserve is reflected in earnings as a reduction in cost of sales. 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. Note 4 - Subsequent Event In October 1998, the Company entered into a letter of intent to sell its Holsum Bakers business and Harinas flour mill, both located in Puerto Rico, to a group led by the current president of Holsum Bakers for $80 million and the assumption of approximately $12 million of liabilities. The consummation of the proposed transaction is subject to the satisfaction of a number of conditions; however, the parties expect the closing to occur sometime during the fourth quarter of 1998. Neither the Holsum nor Harinas operations qualify as significant segments or major lines of business for segment or discontinued operations reporting. The Company anticipates recording a material gain on the sale of these operations. The sale of these operations is not expected to have a material effect on future earnings per share. The reduction in future operating income previously provided by these businesses is expected to be offset by either lower interest expense if proceeds from the sale are used to lower outstanding debt, or higher interest income if proceeds are invested. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES September 30, December 31, 1998 1997 Current ratio 1.48:1 1.47:1 Working capital $173.4 $168.3 Cash from operating activities for the nine months ended September 30, 1998 was $66.6 million, compared to $92.6 million for the nine months ended September 30, 1997. The decrease in cash flows was primarily related to changes in certain noncash working capital items and a decrease in net income. Changes in individual components of working capital are primarily related to the timing of normal transactions including voyage settlements and trade payables and receivables. Within the commodity trading and milling division there were fewer voyages in transit at September 30, 1998 compared to December 31, 1997 resulting in a decrease in deferred revenue balances and a partially offsetting decrease in related grain inventories. In the poultry division, the sell-off of a previous build-up of poultry leg-quarter inventory also contributed to the inventory decrease. The Company invested $30.8 million in property, plant and equipment in the food production and processing segment for the nine months ended September 30, 1998. Capital expenditures in the pork division of $14.6 million were primarily for improvements to the pork processing plant. For the remainder of 1998, an additional $1.5 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 $13.9 million for the nine months ended September 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 $4.4 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 September 30, 1998 totaled $2.8 million for general replacement and upgrades of property and equipment. During the nine months ended September 30, 1998, the Company made $37.6 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 currently cannot estimate the aggregate amount of future advances that may be required. In the first quarter of 1998, the Company extended committed, one-year revolving credit facilities totaling $145 million for an additional year. As of September 30, 1998, the Company had $142.0 million outstanding under committed, one-year revolving credit facilities totaling $160.0 million and $33.0 million outstanding under short-term uncommitted credit lines totaling $100.0 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. In October 1998, the Company purchased a controlling interest in a Bulgarian winery for approximately $15 million. The acquisition will be accounted for as a consolidated subsidiary and would not have significantly affected net earnings or earnings per share on a pro forma basis. See Note 4 to Condensed Consolidated Financial Statements for information concerning the planned sale of the Company's Puerto Rican baking and flour milling operations. The pending sale will generate available cash for the Company allowing it to reduce short-term borrowings or increase investments. 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 $(12.1) $18.4 $ 2.7 $ (8.3) Commodity Trading and Milling Segment 25.5 32.2 (2.0) (0.8) Transportation Segment (3.7) 12.4 (2.8) (1.6) Other (0.4) (2.1) 0.4 0.2 $ 9.3 $60.9 $ (1.7) $(10.5) Food Production and Processing Segment Since late 1997, lower sales prices for most pork products have resulted from an industry wide increase in production and, to a lesser extent, pricing pressure from the Asian economic situation. Poultry prices, however, improved during the current quarter and year-to-date periods compared with the respective prior year periods. Comparative third-quarter net sales for the food production and processing segment decreased $12.1 million primarily as a result of lower pork prices, partially offset by increased poultry prices and increased pork sales volumes. Comparative year-to-date net sales increased $18.4 million primarily as a result of improved poultry prices and increased poultry and pork sales volumes, partially offset by lower pork prices. For both the third-quarter and year-to-date comparative periods, poultry margins improved and pork margins declined. Operating income for the quarter improved by $2.7 million as improvements in poultry margins exceeded declines in pork margins. Year-to-date operating income decreased $8.3 million as declines in pork margins exceeded improvements in poultry margins. Changes in poultry and pork margins are more fully described below. Net sales of poultry products totaled $135.4 and $385.3 million for the three and nine months ended September 30, 1998, an increase of $7.0 and $25.6 million compared to the respective periods one year earlier. For the third-quarter comparative periods, the increase is primarily the result of improved poultry prices, partially offset by a decrease in sales volume. Although management cannot predict poultry prices, it is not anticipated that prices will continue at these higher levels for the remainder of 1998 and early 1999. Specifically, the Russian economic situation had a negative effect on prices in September 1998 for certain export products, especially leg-quarters. For the year-to-date comparative periods, the increase in net sales is primarily the result of higher sales volume and, to a lesser extent, improved prices. Increased sales volume at the Elberton, Georgia, plant throughout 1998 and selling off a build-up of leg-quarter inventory in the first quarter of 1998 contributed to the increase in year-to-date net sales. 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 tray-pack products. Gross income from poultry sales totaled $27.8 and $49.3 million for the three and nine months ended September 30, 1998, compared to $8.2 and $18.6 million for the respective periods one year earlier. These increases are primarily the result of significantly lower finished feed costs, improved sales prices 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 $124.5 and $379.5 million for the three and nine months ended September 30, 1998, a decrease of $19.9 and $7.3 million compared to the respective periods one year earlier. These decreases resulted from lower sales prices as discussed above, despite increases in sales volume. The increases in sales volume are the result of the hog processing plant operating at double-shift production during all of 1998. The plant did not employ a second shift until part way through the second quarter of 1997. During the third quarter of 1998, the plant reached full capacity on a double shift basis. Gross income decreased to $(0.1) and $5.3 million for the three and nine months ended September 30, 1998, compared to $17.4 and $45.3 million for the respective periods one year earlier. These decreases are primarily the result of lower prices for finished pork products without a comparable decrease in the cost of production. Management anticipates that pork prices will continue to have a negative effect on financial results during the remainder of 1998 and early 1999. In October 1998, Hurricane Mitch caused damage to certain of the Company's food production and processing businesses in Central America. Based on preliminary estimates, management anticipates inventory losses could lower earnings during the fourth quarter of 1998 and early 1999. Substantially all damage to building and equipment and related business interruption losses will be covered by insurance. Commodity Trading and Milling Segment Commodity Trading and Milling net sales increased to $73.2 and $233.4 million for the three and nine months ended September 30, 1998, from $47.7 and $201.2 million for the respective periods one year earlier. These increases are primarily the result of higher volumes of commodity sales, mainly soybeans, partially offset by lower commodity prices. Operating income for the three and nine months ended September 30, 1998, decreased $2.0 and $0.8 million, to $0.7 and $7.5 million, respectively, compared to the same periods one year earlier. The decreases are primarily the result of increased costs related to third-quarter shipments delayed in accessing a foreign port, and to a lesser extent an increase in reserves on accounts receivable. These decreases are partially offset by increased income from operating certain mills in foreign countries. Transportation Segment Compared with the same periods one year earlier, net sales from containerized cargo operations decreased $3.7 to $73.0 million for the three month period, and increased $12.4 to $234.5 million for the nine month period. Cargo volumes were higher during the first six months of 1998 compared to 1997 resulting in the increase in year-to-date sales. However, weakening financial conditions in certain foreign markets the company serves resulted in lower volumes and rates during the third quarter of 1998. Management expects the lower volumes and rates in these markets to continue into the fourth quarter and early 1999. In addition, October 1998 shipping delays caused by Hurricane Mitch in Central America could also reduce volume and earnings in the fourth quarter of 1998. The Company is presently unable to predict if hurricane damage to various customers of the Company will have any effect on future volume and earnings in that market. Operating income from containerized cargo operations decreased to $2.6 and $17.5 million for the three and nine months ended September 30, 1998, from $5.4 and $19.1 million for the respective periods one year earlier. The decrease in the three month period is primarily a result of the lower volumes and rates during that period. The decrease in the nine month period results primarily from an increase in various general and administrative costs. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses increased $0.5 and $3.1 million to $34.7 and $106.1 million for the three and nine months ended September 30, 1998, compared to the respective periods one year earlier. As a percentage of revenues, and compared with the same periods one year earlier, SG&A decreased 0.1% from 8.0% to 7.9% for both the three and nine month periods. As a percentage of revenue, increased selling expenses in the poultry division and various general and administrative costs in the transportation segment are essentially offset by decreases in the pork division due to increased production. Other Income and Expense Interest income increased during the nine months ended September 30, 1998, compared to the respective period one year earlier, primarily from an increase in average invested funds. Loss from foreign affiliates is primarily related to Tabacal. Losses at Tabacal increased during September 1998 as a result of lower sugar prices and planned operating efficiencies and harvest production levels not being realized. Based on a continuing deterioration of these factors subsequent to September 1998, management expects such increased losses to continue for the remainder of 1998 and early 1999. Increases in miscellaneous income are primarily the result of gains on the sale of fixed assets in the transportation division as older, fully depreciated fleet equipment is replaced in the normal course of business. Income Taxes The effective tax rate increased to 47% and 37% for the three and nine months ending September 30, 1998, from 29% and 32% for the respective periods one year earlier. The increase is primarily attributable to an increase in losses from foreign affiliates. 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. Depending on market interest rates and the types of financial hedging derivatives in place at the time of adoption, adoption of this statement could result in significant adjustments to the Company's balance sheet as financial derivatives are recorded as assets or liabilities at fair value with corresponding adjustments to Other Comprehensive Income. The Company does not believe adoption will have a material impact on the Company's results of operations or cash flows. The Company has expanded the scope of its original Year 2000 assessment and is nearing completion of the assessment of its primary mainframe computer systems, both hardware and software. Resolution of issues identified within the primary mainframe computer systems, including all necessary testing, is expected to be completed over the next several months. The Company is in the early stages of assessing other computer and electronic information systems throughout its operations, with the objective of addressing any issues deemed critical to operations by early 1999. Certain equipment with embedded chip technology cannot be tested or guaranteed by the manufacturer for Year 2000 compliance. Consequently, general contingency plans are being developed for certain locations including lists of spare parts to have on hand in case of failure. Although not deemed critical to consolidated operations, computer systems at certain international locations are being reviewed and upgrades are planned or in process. The failure to identify or resolve any significant Year 2000 issue in a timely manner could have a material adverse effect on the Company, including an interruption in, or a failure of, certain normal business activities or operations. The Company is also in the process of communicating with significant suppliers and customers to determine the extent to which the Company is vulnerable to failure of those third parties to resolve their own Year 2000 issues. The Company does not anticipate the cost of Year 2000 compliance by suppliers to be passed on to the Company and has not been informed of any material risks related to third party Year 2000 compliance. However, the failure of a significant third party supplier or customer to resolve their own Year 2000 issues in a timely manner could have a material adverse effect on the Company. For example, business disruptions resulting from noncompliance by a local utility (either electric, gas or water) or chartered vessel service would likely have a material adverse effect on the Company. Based upon assessments completed to date, the Company believes that the total costs, including internal costs consisting primarily of payroll related costs, to resolve Year 2000 issues will not be material to the Company's consolidated financial position. Not all assessments are complete at this date and the discovery of a significant Year 2000 issue unknown at this time could materially alter this estimate. 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 September 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 cash requirements and financial results of Tabacal, (vi) the impact of Year 2000 issues, or (vii) 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: November 12, 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 THE SCHEDLUE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE THIRD QUARTER 10-Q FILING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1998 SEP-30-1998 12865 117963 177921 0 196807 535653 793097 322441 1145901 362233 0 0 0 1488 412362 1145901 1340086 1340086 1180994 1180994 106068 0 24343 25255 9441 15814 0 0 0 15814 10.63 10.63
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