Segment Information

6 Months Ended

Jun. 30, 2012

Segment Information

Segment Information

Note 9 - Segment Information

In January 2012, Seaboard made a payment of $3,660,000 to increase its ownership interest from 50% to 70% in PS International, LLC (PSI), an international specialty grain trading business headquartered 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 payment 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.

On April 8, 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic. As a result, Seaboard recognized a gain on sale of assets of $51,423,000 in operating income in the second quarter of 2011. 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 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 June 30, 2012, $1,500,000 of the original sale price for this power generating facility remained in escrow for potential dry dock costs and also serves as the lease security deposit for Seaboard’s obligation under the lease.  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.  The total project costs capitalized were $136,000,000.

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 and six months ended June 30, 2012 of $302,423,000 and $604,039,000, respectively, compared to total net sales for the three and six months ended July 2, 2011 of $292,814,000 and $571,271,000, respectively. Butterball had operating income for the three and six months ended June 30, 2012 of $17,767,000 and $41,132,000, respectively, compared to operating income for the three and six months ended July 2, 2011 of $9,233,000 and $14,906,000, respectively.  As of June 30, 2012 and December 31, 2011, the Turkey segment had total assets of $908,269,000 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 $106,451,000 as of June 30, 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 June 30, 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				Six Months Ended
	June 30,		July 2,		June 30,		July 2,
(Thousands of dollars)	2012		2011		2012		2011
Pork	$	400,667	$	441,423	$	801,328	$	865,392
Commodity Trading and Milling	725,076		621,007		1,449,614		1,333,238
Marine	236,062		236,501		469,811		466,221
Sugar	77,633		72,594		151,252		139,597
Power	67,248		24,670		102,784		57,015
All Other	3,907		2,392		6,917		5,303
Segment/Consolidated Totals	$	1,510,593	$	1,398,587	$	2,981,706	$	2,866,766

Operating Income (Loss):

	Three Months Ended						Six Months Ended
	June 30,			July 2,			June 30,			July 2,
(Thousands of dollars)	2012			2011			2012			2011
Pork	$	20,846		$	62,494		$	73,719		$	142,089
Commodity Trading and Milling	11,467			15,230			37,160			38,302
Marine	1,081			(11,054		)	1,572			(4,032		)
Sugar	20,734			21,586			37,711			44,025
Power	10,654			53,057			16,474			56,606
All Other	163			(329		)	169			(631		)
Segment Totals	64,945			140,984			166,805			276,359
Corporate Items	(4,222		)	(4,019		)	(12,726		)	(9,118		)
Consolidated Totals	$	60,723		$	136,965		$	154,079		$	267,241

Income (Loss) from Affiliates:

	Three Months Ended						Six Months Ended
	June 30,			July 2,			June 30,			July 2,
(Thousands of dollars)	2012			2011			2012			2011
Commodity Trading and Milling	$	4,305		$	4,579		$	5,012		$	10,398
Sugar	(61		)	$	(99	)	(62		)	218
Turkey	5,572			885			14,435			911
Segment/Consolidated Totals	$	9,816		$	5,365		$	19,385		$	11,527

Total Assets:

	June 30,		December 31,
(Thousands of dollars)	2012		2011
Pork	$	729,262	$	738,574
Commodity Trading and Milling	740,034		755,903
Marine	261,322		261,781
Sugar	252,857		269,564
Power	247,437		165,118
Turkey	331,907		312,164
All Other	6,534		6,257
Segment Totals	2,569,353		2,509,361
Corporate Items	540,814		497,367
Consolidated Totals	$	3,110,167	$	3,006,728

Investments in and Advances to Affiliates:

	June 30,		December 31,
(Thousands of dollars)	2012		2011
Commodity Trading and Milling	$	165,280	$	160,402
Sugar	2,980		3,177
Turkey	215,811		201,261
Segment/Consolidated Totals	$	384,071	$	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).