Segment Information

3 Months Ended

Mar. 31, 2012

Segment Information

Segment Information

Note 9 - Segment Information

In January 2012, Seaboard made an initial payment of $3,660,000 increasing its ownership interest from 50% to 70% in PS International, LLC (PSI), an international specialty grain trading business located in North Carolina. As a result, effective January 1, 2012, Seaboard began consolidation accounting and discontinued the equity method of accounting for this investment. The final amount of this additional investment will be determined during 2012 upon final verification of certain balance sheet items as of December 31, 2011.  Pro forma results of operations are not presented, as the effects of consolidation are not material to Seaboard’s results of operations.

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. Also, in the first quarter of 2011, this segment incurred a grain inventory write-down of $1,698,000 (with no tax benefit recognized), or $1.40 per share for various customer contract performance issues.

On April 8, 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic.  In late March 2011, the purchaser entered into discussions with Seaboard to lease one of the facilities 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 one of the facilities (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 leased facility until the end of the lease term.  In late March 2012, this lease was extended to August 31, 2012.  After August 31, 2012, this lease will automatically extend on a month-to-month basis but is cancellable by either party while the purchaser reconsiders its long-term plans for the facility.  Also, as of March 31, 2012, $1,500,000 of the original sale price for this power generating facility remained in escrow for potential dry dock costs.  Seaboard retained all other physical properties of this business and constructed a new 106 megawatt floating power generating facility for use in the Dominican Republic, which began commercial operations in March 2012.  As of March 31, 2012, total project costs capitalized was $126,347,000.  There will be some additional amounts capitalized in the second quarter of 2012 for an estimated total project cost of $136,000,000, including capitalized interest.

The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball, LLC (Butterball).  Butterball had total net sales for the three months ended March 31, 2012 and April 2, 2011 of $301,616,000 and $278,457,000, respectively, and operating income for the three months ended March 31, 2012 and April 2, 2011 of $23,365,000 and $5,673,000, respectively.  As of March 31, 2012 and December 31, 2011, the Turkey segment had total assets of $844,155,000 and $819,618,000, respectively.

In conjunction with Seaboard’s initial investment in Butterball on December 6, 2010, Seaboard has a long-term note receivable from Butterball which had a balance of $103,511,000 as of March 31, 2012.  Part of the interest earned on this note is pay-in-kind interest, which accumulates and is paid at maturity.  During the third quarter of 2011, Seaboard provided a term loan of $13,037,000 to Butterball to pay off capital leases for certain fixed assets which originally were financed with third parties.  The effective interest rate on the term loan is approximately 12%.  Although the term loan expires on January 31, 2018, Seaboard anticipates that Butterball will pay off the term loan prior to such expiration date as Butterball is expected to sell all of the related assets and is required to remit the proceeds from such sale to Seaboard to repay the loan.  As of March 31, 2012, the balance of the term loan recorded in long-term notes receivable from affiliate was $9,645,000.

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
	March 31,		April 2,
(Thousands of dollars)	2012		2011
Pork	$	400,661	$	423,969
Commodity Trading and Milling	724,538		712,231
Marine	233,749		229,720
Sugar	73,619		67,003
Power	35,536		32,345
All Other	3,010		2,911
Segment/Consolidated Totals	$	1,471,113	$	1,468,179

Operating Income (Loss):
	Three Months Ended
	March 31,			April 2,
(Thousands of dollars)	2012			2011
Pork	$	52,873		$	79,595
Commodity Trading and Milling	25,693			23,072
Marine	491			7,022
Sugar	16,977			22,439
Power	5,820			3,549
All Other	6			(302		)
Segment Totals	101,860			135,375
Corporate Items	(8,504		)	(5,099		)
Consolidated Totals	$	93,356		$	130,276

Income from Affiliates:
	Three Months Ended
	March 31,			April 2,
(Thousands of dollars)	2012			2011
Commodity Trading and Milling	$	707		$	5,819
Sugar	(1		)	317
Turkey	8,863			26
Segment/Consolidated Totals	$	9,569		$	6,162

Total Assets:
	March 31,		December 31,
(Thousands of dollars)	2012		2011
Pork	$	738,476	$	738,574
Commodity Trading and Milling	855,102		755,903
Marine	266,581		261,781
Sugar	253,838		269,564
Power	200,645		165,118
Turkey	323,338		312,164
All Other	6,280		6,257
Segment Totals	2,644,260		2,509,361
Corporate Items	467,884		497,367
Consolidated Totals	$	3,112,144	$	3,006,728

Investments in and Advances to Affiliates:
	March 31,		December 31,
(Thousands of dollars)	2012		2011
Commodity Trading and Milling	$	157,826	$	160,402
Sugar	3,121		3,177
Turkey	210,182		201,261
Segment/Consolidated Totals	$	371,129	$	364,840

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 and include costs related to Seaboard’s deferred compensation programs (which are offset by the effect of the mark-to-market investments recorded in Other Investment Income, Net).