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 29, 2013
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) |
(913) 676-8800
(Registrants telephone number, including area code)
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 ___
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X No ___
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ X ] |
|
Accelerated Filer [ ] |
Non-Accelerated Filer [ ] (Do not check if a smaller reporting company) |
|
Smaller Reporting Company [ ] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___ No X .
There were 1,191,837 shares of common stock, $1.00 par value per share, outstanding on July 26, 2013.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income
(Thousands of dollars except share and per share amounts)
(Unaudited)
|
|
|
|
Three Months Ended |
|
|
|
|
Six Months Ended |
| ||||||||||||||||
|
|
|
|
June 29, |
|
|
|
June 30, |
|
|
|
|
June 29, |
|
|
|
June 30, |
| ||||||||
|
|
|
|
2013 |
|
|
|
2012 |
|
|
|
|
2013 |
|
|
|
2012 |
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Products (includes sales to affiliates of $164,548, $194,836, $347,083 and $363,184) |
|
|
|
$ |
1,371,142 |
|
|
|
$ |
1,194,991 |
|
|
|
|
$ |
2,634,415 |
|
|
|
$ |
2,385,813 |
| ||||
Service revenues |
|
|
|
237,948 |
|
|
|
248,354 |
|
|
|
|
483,960 |
|
|
|
493,109 |
| ||||||||
Other |
|
|
|
74,949 |
|
|
|
67,248 |
|
|
|
|
147,960 |
|
|
|
102,784 |
| ||||||||
Total net sales |
|
|
|
1,684,039 |
|
|
|
1,510,593 |
|
|
|
|
3,266,335 |
|
|
|
2,981,706 |
| ||||||||
Cost of sales and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Products |
|
|
|
1,294,124 |
|
|
|
1,108,998 |
|
|
|
|
2,465,826 |
|
|
|
2,176,963 |
| ||||||||
Services |
|
|
|
216,097 |
|
|
|
226,407 |
|
|
|
|
441,092 |
|
|
|
446,924 |
| ||||||||
Other |
|
|
|
58,408 |
|
|
|
54,622 |
|
|
|
|
117,101 |
|
|
|
82,659 |
| ||||||||
Total cost of sales and operating expenses |
|
|
|
1,568,629 |
|
|
|
1,390,027 |
|
|
|
|
3,024,019 |
|
|
|
2,706,546 |
| ||||||||
Gross income |
|
|
|
115,410 |
|
|
|
120,566 |
|
|
|
|
242,316 |
|
|
|
275,160 |
| ||||||||
Selling, general and administrative expenses |
|
|
|
61,861 |
|
|
|
59,843 |
|
|
|
|
125,309 |
|
|
|
121,081 |
| ||||||||
Operating income |
|
|
|
53,549 |
|
|
|
60,723 |
|
|
|
|
117,007 |
|
|
|
154,079 |
| ||||||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Interest expense |
|
|
|
(2,370 |
) |
|
|
(3,231 |
) |
|
|
|
(4,762 |
) |
|
|
(4,938 |
) | ||||||||
Interest income |
|
|
|
4,269 |
|
|
|
3,044 |
|
|
|
|
8,358 |
|
|
|
5,163 |
| ||||||||
Interest income from affiliates |
|
|
|
5,370 |
|
|
|
5,033 |
|
|
|
|
11,525 |
|
|
|
10,250 |
| ||||||||
Income (loss) from affiliates |
|
|
|
(4,547 |
) |
|
|
9,816 |
|
|
|
|
(7,397 |
) |
|
|
19,385 |
| ||||||||
Other investment income (loss), net |
|
|
|
(1,932 |
) |
|
|
(969 |
) |
|
|
|
254 |
|
|
|
2,490 |
| ||||||||
Foreign currency losses, net |
|
|
|
(135 |
) |
|
|
(3,849 |
) |
|
|
|
(1,280 |
) |
|
|
(585 |
) | ||||||||
Miscellaneous, net |
|
|
|
3,870 |
|
|
|
(4,005 |
) |
|
|
|
4,692 |
|
|
|
(2,656 |
) | ||||||||
Total other income, net |
|
|
|
4,525 |
|
|
|
5,839 |
|
|
|
|
11,390 |
|
|
|
29,109 |
| ||||||||
Earnings before income taxes |
|
|
|
58,074 |
|
|
|
66,562 |
|
|
|
|
128,397 |
|
|
|
183,188 |
| ||||||||
Income tax expense |
|
|
|
(18,048 |
) |
|
|
(16,870 |
) |
|
|
|
(30,614 |
) |
|
|
(51,496 |
) | ||||||||
Net earnings |
|
|
|
$ |
40,026 |
|
|
|
$ |
49,692 |
|
|
|
|
$ |
97,783 |
|
|
|
$ |
131,692 |
| ||||
Less: Net loss (income) attributable to noncontrolling interests |
|
|
|
(479 |
) |
|
|
405 |
|
|
|
|
(782 |
) |
|
|
614 |
| ||||||||
Net earnings attributable to Seaboard |
|
|
|
$ |
39,547 |
|
|
|
$ |
50,097 |
|
|
|
|
$ |
97,001 |
|
|
|
$ |
132,306 |
| ||||
Earnings per common share |
|
$ |
33.07 |
|
|
|
$ |
41.58 |
|
|
|
|
$ |
81.06 |
|
|
|
$ |
109.63 |
|
|
| ||||
Other comprehensive income (loss), net of income tax benefit of $2,939, $1,752, $5,540 and $2,565: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Foreign currency translation adjustment |
|
|
|
(6,699 |
) |
|
|
(3,601 |
) |
|
|
|
(12,821 |
) |
|
|
(3,141 |
) | ||||||||
Unrealized gain (loss) on investments |
|
|
|
(2,137 |
) |
|
|
(313 |
) |
|
|
|
(1,708 |
) |
|
|
1,171 |
| ||||||||
Unrealized loss on cash flow hedges |
|
|
|
- |
|
|
|
- |
|
|
|
|
- |
|
|
|
(91 |
) | ||||||||
Unrecognized pension cost |
|
|
|
2,545 |
|
|
|
2,243 |
|
|
|
|
3,737 |
|
|
|
3,320 |
| ||||||||
Other comprehensive income (loss), net of tax |
|
|
|
$ |
(6,291 |
) |
|
|
$ |
(1,671 |
) |
|
|
|
$ |
(10,792 |
) |
|
|
$ |
1,259 |
| ||||
Comprehensive income |
|
|
|
33,735 |
|
|
|
48,021 |
|
|
|
|
86,991 |
|
|
|
132,951 |
| ||||||||
Less: Comprehensive loss (income) attributable to noncontrolling interests |
|
|
|
(522 |
) |
|
|
422 |
|
|
|
|
(819 |
) |
|
|
575 |
| ||||||||
Comprehensive income attributable to Seaboard |
|
|
|
$ |
33,213 |
|
|
|
$ |
48,443 |
|
|
|
|
$ |
86,172 |
|
|
|
$ |
133,526 |
| ||||
Average number of shares outstanding |
|
|
|
1,195,815 |
|
|
|
1,204,837 |
|
|
|
|
1,196,656 |
|
|
|
1,206,871 |
| ||||||||
See accompanying notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Thousands of dollars)
(Unaudited)
|
|
June 29, |
|
December 31, |
| ||
|
|
2013 |
|
2012 |
| ||
Assets |
| ||||||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
39,011 |
|
$ |
47,651 |
|
Short-term investments |
|
358,506 |
|
313,379 |
| ||
Receivables, net of allowance |
|
538,249 |
|
521,892 |
| ||
Inventories |
|
752,101 |
|
756,864 |
| ||
Deferred income taxes |
|
22,218 |
|
24,586 |
| ||
Other current assets |
|
126,937 |
|
118,391 |
| ||
Total current assets |
|
1,837,022 |
|
1,782,763 |
| ||
Net property, plant and equipment |
|
866,315 |
|
843,879 |
| ||
Investments in and advances to affiliates |
|
403,969 |
|
410,542 |
| ||
Notes receivable from affiliate |
|
128,090 |
|
202,931 |
| ||
Goodwill |
|
43,218 |
|
43,218 |
| ||
Other intangible assets, net |
|
19,219 |
|
19,843 |
| ||
Other assets |
|
47,925 |
|
44,605 |
| ||
Total assets |
|
$ |
3,345,758 |
|
$ |
3,347,781 |
|
|
|
|
|
|
| ||
Liabilities and Stockholders Equity |
| ||||||
Current liabilities: |
|
|
|
|
| ||
Notes payable to banks |
|
$ |
65,377 |
|
$ |
28,786 |
|
Current maturities of long-term debt |
|
12,009 |
|
25,138 |
| ||
Accounts payable |
|
168,006 |
|
217,041 |
| ||
Deferred revenue |
|
64,310 |
|
53,811 |
| ||
Deferred revenue from affiliates |
|
1,787 |
|
24,131 |
| ||
Other current liabilities |
|
313,960 |
|
327,668 |
| ||
Total current liabilities |
|
625,449 |
|
676,575 |
| ||
Long-term debt, less current maturities |
|
104,172 |
|
120,825 |
| ||
Deferred income taxes |
|
28,300 |
|
33,929 |
| ||
Other liabilities and deferred credits |
|
206,340 |
|
208,263 |
| ||
Total non-current liabilities |
|
338,812 |
|
363,017 |
| ||
Commitments and contingent liabilities |
|
|
|
|
| ||
Stockholders equity: |
|
|
|
|
| ||
Common stock of $1 par value, Authorized 1,250,000 shares; issued and outstanding 1,192,568 and 1,197,660 shares |
|
1,193 |
|
1,198 |
| ||
Accumulated other comprehensive loss |
|
(182,336 |
) |
(171,544 |
) | ||
Retained earnings |
|
2,558,209 |
|
2,474,896 |
| ||
Total Seaboard stockholders equity |
|
2,377,066 |
|
2,304,550 |
| ||
Noncontrolling interests |
|
4,431 |
|
3,639 |
| ||
Total equity |
|
2,381,497 |
|
2,308,189 |
| ||
Total liabilities and stockholders equity |
|
$ |
3,345,758 |
|
$ |
3,347,781 |
|
See accompanying notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Thousands of dollars)
(Unaudited)
|
|
Six Months Ended |
| ||||
|
|
June 29, |
|
June 30, |
| ||
|
|
2013 |
|
2012 |
| ||
Cash flows from operating activities: |
|
|
|
|
| ||
Net earnings |
|
$ |
97,783 |
|
$ |
131,692 |
|
Adjustments to reconcile net earnings to cash from operating activities: |
|
|
|
|
| ||
Depreciation and amortization |
|
46,513 |
|
44,333 |
| ||
Gain from sale of fixed assets |
|
(6,393 |
) |
(2,951 |
) | ||
Deferred income taxes |
|
2,278 |
|
(17,689 |
) | ||
Pay-in-kind interest and accretion on note receivable from affiliate |
|
(6,431 |
) |
(5,758 |
) | ||
Loss (income) from affiliates |
|
7,397 |
|
(19,385 |
) | ||
Dividends received from affiliates |
|
11,129 |
|
596 |
| ||
Other investment income, net |
|
(254 |
) |
(2,490 |
) | ||
Other |
|
(109 |
) |
2,433 |
| ||
Changes in current assets and liabilities, net of business acquired: |
|
|
|
|
| ||
Receivables, net of allowance |
|
(26,429 |
) |
(15,590 |
) | ||
Inventories |
|
(3,186 |
) |
83,692 |
| ||
Other current assets |
|
(8,598 |
) |
(1,421 |
) | ||
Current liabilities, exclusive of debt |
|
(70,405 |
) |
(64,732 |
) | ||
Other, net |
|
3,119 |
|
10,523 |
| ||
Net cash from operating activities |
|
46,414 |
|
143,253 |
| ||
Cash flows from investing activities: |
|
|
|
|
| ||
Purchase of short-term investments |
|
(391,782 |
) |
(434,890 |
) | ||
Proceeds from the sale of short-term investments |
|
338,843 |
|
300,911 |
| ||
Proceeds from the maturity of short-term investments |
|
3,644 |
|
19,993 |
| ||
Investments in and advances to affiliates, net |
|
(11,913 |
) |
(6,791 |
) | ||
Capital expenditures |
|
(82,136 |
) |
(68,056 |
) | ||
Proceeds from the sale of fixed assets |
|
9,890 |
|
5,839 |
| ||
Principal payments received on long-term notes receivable from affiliate |
|
81,272 |
|
564 |
| ||
Purchase of long-term investments |
|
(3,079 |
) |
(6,525 |
) | ||
Acquisition of business, net of cash acquired |
|
- |
|
(2,825 |
) | ||
Other, net |
|
7,382 |
|
545 |
| ||
Net cash from investing activities |
|
(47,879 |
) |
(191,235 |
) | ||
Cash flows from financing activities: |
|
|
|
|
| ||
Notes payable to banks, net |
|
36,820 |
|
14,135 |
| ||
Proceeds from the issuance of long-term debt |
|
- |
|
32,682 |
| ||
Principal payments of long-term debt |
|
(29,767 |
) |
(5,928 |
) | ||
Repurchase of common stock |
|
(13,693 |
) |
(15,949 |
) | ||
Other, net |
|
(644 |
) |
208 |
| ||
Net cash from financing activities |
|
(7,284 |
) |
25,148 |
| ||
Effect of exchange rate change on cash |
|
109 |
|
(550 |
) | ||
Net change in cash and cash equivalents |
|
(8,640 |
) |
(23,384 |
) | ||
Cash and cash equivalents at beginning of year |
|
47,651 |
|
71,510 |
| ||
Cash and cash equivalents at end of period |
|
$ |
39,011 |
|
$ |
48,126 |
|
See accompanying notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 Accounting Policies and Basis of Presentation
The Condensed Consolidated Financial Statements include the accounts of Seaboard Corporation and its domestic and foreign subsidiaries (Seaboard). All significant intercompany balances and transactions have been eliminated in consolidation. Seaboards investments in non-consolidated affiliates are accounted for by the equity method. The unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of Seaboard for the year ended December 31, 2012 as filed in its Annual Report on Form 10-K. Seaboards first three quarterly periods include approximately 13 weekly periods ending on the Saturday closest to the end of March, June and September. Seaboards year-end is December 31.
The accompanying unaudited Condensed 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. As Seaboard conducts its commodity trading business with third parties, consolidated subsidiaries and non-consolidated affiliates on an interrelated basis, gross margin on non-consolidated affiliates cannot be clearly distinguished without making numerous assumptions primarily with respect to mark-to-market accounting for commodity derivatives.
Use of Estimates
The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include those related to allowance for doubtful accounts, valuation of inventories, impairment of long-lived assets, goodwill and other intangible assets, income taxes and accrued pension liability. Actual results could differ from those estimates.
Supplemental Non-Cash Transactions
As discussed in Note 9, effective January 1, 2012, Seaboard began consolidation accounting and discontinued the equity method of accounting for their investment in PS International, LLC with Seaboards ownership interest increasing from 50% to 70% as a result of cash paid, net of cash acquired of $2,825,000 in January 2012. An additional payment was made in 2012 subsequent to the second quarter of 2012 for this transaction upon final verification of certain balance sheet items as of December 31, 2011. On December 31, 2012, Seaboard further increased its ownership from 70% to 85%. Total cash paid during the first quarter 2012, net of cash acquired was $2,825,000, and increased working capital by $14,419,000, fixed assets by $163,000, goodwill by $2,590,000, intangible assets by $621,000, other long-term assets by $96,000, non-controlling interest by $5,649,000 and decreased investment in and advances to affiliates by $9,415,000. A final payment of $515,000 was made in the second quarter of 2013, which increased intangible assets. See Note 9 for additional information.
As discussed in Note 9, Seaboard has a note receivable from an affiliate which accrues pay-in-kind interest income. Seaboard recognized $3,320,000 and $6,431,000, respectively, of non-cash, pay-in-kind interest income and accretion of discount for the three and six months ended June 29, 2013 and $2,940,000 and $5,758,000, respectively, for the three and six months ended June 30, 2012, respectively, related to this note receivable.
Note 2 Investments
Seaboards short-term investments are treated as either available-for-sale securities or trading securities. All of Seaboards available-for-sale and trading securities are classified as current assets as they are readily available to support Seaboards current operating needs. Available-for-sale securities are recorded at their estimated fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive loss. Trading securities are recorded at their estimated fair value with unrealized gains and losses reflected in other investment income (loss), net. At June 29, 2013 and December 31, 2012, amortized cost and estimated fair value were not materially different for these investments.
At June 29, 2013, money market funds included $7,987,000 denominated in Canadian dollars, $5,298,000 denominated in British Pounds and $3,500,000 denominated in Euros. As of June 29, 2013, the trading securities primarily consisted of high yield debt securities.
The following is a summary of the amortized cost and estimated fair value of short-term investments for both available-for-sale and trading securities at June 29, 2013 and December 31, 2012.
|
|
|
|
|
| ||||||||
|
|
2013 |
|
2012 |
| ||||||||
|
|
Amortized |
|
Fair |
|
Amortized |
|
Fair |
| ||||
(Thousands of dollars) |
|
Cost |
|
Value |
|
Cost |
|
Value |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
$ |
148,983 |
|
$ |
148,983 |
|
$ |
126,537 |
|
$ |
126,537 |
|
Corporate bonds |
|
69,724 |
|
70,098 |
|
67,275 |
|
69,214 |
| ||||
Enhanced cash mutual fund |
|
25,000 |
|
24,978 |
|
- |
|
- |
| ||||
U.S. Government agency securities |
|
23,404 |
|
23,271 |
|
23,647 |
|
23,775 |
| ||||
Emerging markets debt mutual fund |
|
17,693 |
|
17,278 |
|
17,693 |
|
18,734 |
| ||||
U.S. Treasury securities |
|
16,973 |
|
16,935 |
|
17,165 |
|
17,169 |
| ||||
Collateralized mortgage obligations |
|
15,359 |
|
15,315 |
|
15,059 |
|
15,162 |
| ||||
Asset backed debt securities |
|
11,395 |
|
11,423 |
|
12,180 |
|
12,238 |
| ||||
Total available-for-sale short-term investments |
|
328,531 |
|
328,281 |
|
279,556 |
|
282,829 |
| ||||
High yield trading debt securities |
|
23,536 |
|
24,214 |
|
21,839 |
|
23,406 |
| ||||
Emerging markets trading debt mutual fund |
|
3,120 |
|
2,929 |
|
3,046 |
|
3,237 |
| ||||
Emerging markets trading debt securities |
|
1,989 |
|
2,034 |
|
2,361 |
|
2,600 |
| ||||
Other trading investments |
|
1,015 |
|
1,048 |
|
1,262 |
|
1,307 |
| ||||
Total available-for-sale and trading short-term investments |
|
$ |
358,191 |
|
$ |
358,506 |
|
$ |
308,064 |
|
$ |
313,379 |
|
The following table summarizes the estimated fair value of fixed rate securities designated as available-for-sale classified by the contractual maturity date of the security as of June 29, 2013.
|
|
|
| |
(Thousands of dollars) |
|
2013 |
| |
|
|
|
| |
Due within one year |
|
$ |
2,128 |
|
Due after one year through three years |
|
57,362 |
| |
Due after three years |
|
51,283 |
| |
Total fixed rate securities |
|
$ |
110,773 |
|
In addition to its short-term investments, Seaboard also has trading securities related to Seaboards deferred compensation plans classified in other current assets on the Condensed Consolidated Balance Sheets. See Note 5 to the Condensed Consolidated Financial Statements for information on the types of trading securities held related to the deferred compensation plans.
Note 3 Inventories
The following is a summary of inventories at June 29, 2013 and December 31, 2012:
|
|
|
|
|
| ||
|
|
June 29, |
|
December 31, |
| ||
(Thousands of dollars) |
|
2013 |
|
2012 |
| ||
At lower of LIFO cost or market: |
|
|
|
|
| ||
Live hogs and materials |
|
$ |
245,473 |
|
$ |
258,638 |
|
Fresh pork and materials |
|
30,507 |
|
31,495 |
| ||
|
|
275,980 |
|
290,133 |
| ||
LIFO adjustment |
|
(74,013 |
) |
(90,730 |
) | ||
Total inventories at lower of LIFO cost or market |
|
201,967 |
|
199,403 |
| ||
At lower of FIFO cost or market: |
|
|
|
|
| ||
Grains, oilseeds and other commodities |
|
332,885 |
|
317,573 |
| ||
Sugar produced and in process |
|
59,334 |
|
65,986 |
| ||
Other |
|
70,230 |
|
73,606 |
| ||
Total inventories at lower of FIFO cost or market |
|
462,449 |
|
457,165 |
| ||
Grain, flour and feed at lower of weighted average cost or market |
|
87,685 |
|
100,296 |
| ||
Total inventories |
|
$ |
752,101 |
|
$ |
756,864 |
|
Note 4 Income Taxes
Seaboards tax returns are regularly audited by federal, state and foreign tax authorities, which may result in material adjustments. Seaboards U.S. federal income tax years are closed through 2009. Seaboards 2010 U.S. income tax return is currently under IRS examination. There have not been any material changes in unrecognized income tax benefits since December 31, 2012. Interest related to unrecognized tax benefits and penalties was not material for the six months ended June 29, 2013.
On January 2, 2013, the American Taxpayer Relief Act of 2012 (the Tax Act) was signed into law. The Tax Act extended many expired corporate income tax provisions that impact current and deferred taxes for financial reporting purposes. In accordance with U.S. GAAP, the determination of current and deferred taxes is based on the provisions of the enacted law as of the balance sheet date; the effects of future changes in tax law are not anticipated. The effects of changes in tax laws, including retroactive changes, are recognized in the financial statements in the period that the changes are enacted. Accordingly, as the Tax Act was signed into law in 2013, the effects of the retroactive provisions in the new law on current and deferred tax assets and liabilities for Seaboard were recorded in the first quarter of 2013. The total impact was a one-time tax benefit of $7,945,000 recorded in the first quarter of 2013 related to certain 2012 income tax credits. In addition to this amount is a one-time credit of approximately $11,260,000 for 2012 Federal blenders credits that was recognized as revenues in the first quarter of 2013. See Note 9 for further discussion of this Federal blenders credit.
Note 5 Derivatives and Fair Value of Financial Instruments
U.S. GAAP discusses valuation techniques, such as the market approach (prices and other relevant information generated by market conditions involving identical or comparable assets or liabilities), the income approach (techniques to convert future amounts to single present amounts based on market expectations including present value techniques and option-pricing), and the cost approach (amount that would be required to replace the service capacity of an asset which is often referred to as replacement cost). U.S. GAAP utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entitys own assumptions.
The following table shows assets and liabilities measured at fair value on a recurring basis as of June 29, 2013 and also the level within the fair value hierarchy used to measure each category of assets. Seaboard uses the end of the reporting period to determine if there were any transfers between levels. There were no transfers between levels that occurred in the first six months of 2013. The trading securities classified as other current assets below are assets held for Seaboards deferred compensation plans.
|
|
|
|
|
|
|
|
|
| ||||
|
|
Balance |
|
|
|
|
|
|
| ||||
|
|
June 29, |
|
|
|
|
|
|
| ||||
(Thousands of dollars) |
|
2013 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
| ||||
Assets: |
|
|
|
|
|
|
|
|
| ||||
Available-for-sale securities - short-term investments: |
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
$ |
148,983 |
|
$ |
148,983 |
|
$ |
- |
|
$ |
- |
|
Corporate bonds |
|
70,098 |
|
- |
|
70,098 |
|
- |
| ||||
Enhanced cash mutual fund |
|
24,978 |
|
24,978 |
|
- |
|
- |
| ||||
U.S. Government agency securities |
|
23,271 |
|
- |
|
23,271 |
|
- |
| ||||
Emerging markets debt mutual fund |
|
17,278 |
|
17,278 |
|
- |
|
- |
| ||||
U.S. Treasury securities |
|
16,935 |
|
- |
|
16,935 |
|
- |
| ||||
Collateralized mortgage obligations |
|
15,315 |
|
- |
|
15,315 |
|
- |
| ||||
Asset backed debt securities |
|
11,423 |
|
- |
|
11,423 |
|
- |
| ||||
Trading securities - short-term investments: |
|
|
|
|
|
|
|
|
| ||||
High yield debt securities |
|
24,214 |
|
- |
|
24,214 |
|
- |
| ||||
Emerging markets trading debt mutual fund |
|
2,929 |
|
2,929 |
|
- |
|
- |
| ||||
Emerging markets trading debt securities |
|
2,034 |
|
- |
|
2,034 |
|
- |
| ||||
Other trading investments |
|
1,048 |
|
512 |
|
536 |
|
- |
| ||||
Trading securities - other current assets: |
|
|
|
|
|
|
|
|
| ||||
Domestic equity securities |
|
21,437 |
|
21,437 |
|
- |
|
- |
| ||||
Foreign equity securities |
|
8,587 |
|
5,323 |
|
3,264 |
|
- |
| ||||
Fixed income mutual funds |
|
5,725 |
|
5,725 |
|
- |
|
- |
| ||||
U.S. Treasury securities |
|
1,623 |
|
- |
|
1,623 |
|
- |
| ||||
Money market funds |
|
1,586 |
|
1,586 |
|
- |
|
- |
| ||||
U.S. Government agency securities |
|
1,106 |
|
- |
|
1,106 |
|
- |
| ||||
Corporate bonds |
|
83 |
|
- |
|
83 |
|
- |
| ||||
Other |
|
290 |
|
239 |
|
51 |
|
- |
| ||||
Derivatives: |
|
|
|
|
|
|
|
|
| ||||
Commodities(1) |
|
6,581 |
|
6,581 |
|
- |
|
- |
| ||||
Foreign currencies |
|
4,309 |
|
- |
|
4,309 |
|
- |
| ||||
Total Assets |
|
$ |
409,833 |
|
$ |
235,571 |
|
$ |
174,262 |
|
$ |
- |
|
Liabilities: |
|
|
|
|
|
|
|
|
| ||||
Derivatives: |
|
|
|
|
|
|
|
|
| ||||
Commodities(1) |
|
$ |
13,636 |
|
$ |
13,636 |
|
$ |
- |
|
$ |
- |
|
Interest rate swaps |
|
5,297 |
|
- |
|
5,297 |
|
- |
| ||||
Foreign currencies |
|
184 |
|
- |
|
184 |
|
- |
| ||||
Total Liabilities |
|
$ |
19,117 |
|
$ |
13,636 |
|
$ |
5,481 |
|
$ |
- |
|
(1) Seaboards commodities derivative assets and liabilities are presented in the Condensed Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts. As of June 29, 2013, the commodity derivatives had a margin account balance of $22,188,000 resulting in a net other current asset on the Condensed Consolidated Balance Sheets of $15,133,000.
The following table shows assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and also the level within the fair value hierarchy used to measure each category of assets.
|
|
Balance |
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
|
|
|
|
(Thousands of dollars) |
|
2012 |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
Available-for-sale securities - short-term investments: |
|
|
|
|
|
|
|
|
|
Money market funds |
|
$126,537 |
|
$126,537 |
|
$ - |
|
$ - |
|
Corporate bonds |
|
69,214 |
|
- |
|
69,214 |
|
- |
|
U.S. Government agency securities |
|
23,775 |
|
- |
|
23,775 |
|
- |
|
Emerging markets debt mutual fund |
|
18,734 |
|
18,734 |
|
- |
|
- |
|
U.S. Treasury securities |
|
17,169 |
|
- |
|
17,169 |
|
- |
|
Collateralized mortgage obligations |
|
15,162 |
|
- |
|
15,162 |
|
- |
|
Asset backed debt securities |
|
12,238 |
|
- |
|
12,238 |
|
- |
|
Trading securities - short term investments: |
|
|
|
|
|
|
|
|
|
High yield debt securities |
|
23,406 |
|
- |
|
23,406 |
|
- |
|
Emerging markets trading debt mutual fund |
|
3,237 |
|
3,237 |
|
- |
|
- |
|
Emerging markets trading debt securities |
|
2,600 |
|
- |
|
2,600 |
|
- |
|
Other trading investments |
|
1,307 |
|
822 |
|
485 |
|
- |
|
Trading securities - other current assets: |
|
|
|
|
|
|
|
|
|
Domestic equity securities |
|
15,864 |
|
15,864 |
|
- |
|
- |
|
Fixed income mutual funds |
|
7,153 |
|
7,153 |
|
- |
|
- |
|
Foreign equity securities |
|
6,831 |
|
4,218 |
|
2,613 |
|
- |
|
Money market funds |
|
3,157 |
|
3,157 |
|
- |
|
- |
|
U.S. Government agency securities |
|
2,117 |
|
- |
|
2,117 |
|
- |
|
U.S. Treasury securities |
|
1,567 |
|
- |
|
1,567 |
|
- |
|
Corporate bonds |
|
60 |
|
- |
|
60 |
|
- |
|
Other |
|
239 |
|
187 |
|
52 |
|
- |
|
Derivatives: |
|
|
|
|
|
|
|
|
|
Commodities(1) |
|
6,916 |
|
6,699 |
|
217 |
|
- |
|
Foreign currencies |
|
- |
|
- |
|
- |
|
- |
|
Total Assets |
|
$357,283 |
|
$186,608 |
|
$170,675 |
|
$ - |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Derivatives: |
|
|
|
|
|
|
|
|
|
Commodities(1) |
|
$ 7,112 |
|
$ 7,112 |
|
$ - |
|
$ - |
|
Interest rate swaps |
|
9,810 |
|
- |
|
9,810 |
|
- |
|
Foreign currencies |
|
4,157 |
|
- |
|
4,157 |
|
- |
|
Total Liabilities |
|
$ 21,079 |
|
$ 7,112 |
|
$ 13,967 |
|
$ - |
|
(1) Seaboards commodities derivative assets and liabilities are presented in the Condensed Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts. As of December 31, 2012, the commodity derivatives had a margin account balance of $14,063,000 resulting in a net other current asset on the Condensed Consolidated Balance Sheets of $13,867,000.
Financial instruments consisting of cash and cash equivalents, net receivables, notes payable, and accounts payable are carried at cost, which approximates fair value, as a result of the short-term nature of the instruments.
The fair value of long-term debt is estimated by comparing interest rates for debt with similar terms and maturities. If Seaboards debt was measured at fair value on its Condensed Consolidated Balance Sheets, it would have been classified as level 2 in the fair value hierarchy. The amortized cost and estimated fair values of investments and long-term debt at June 29, 2013 and December 31, 2012 are presented below.
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
2012 |
| ||||
(Thousands of dollars) |
|
Amortized Cost |
|
Fair Value |
|
Amortized Cost |
|
Fair Value |
|
Short-term investments, available-for-sale |
|
$ 328,531 |
|
$ 328,281 |
|
$ 279,556 |
|
$ 282,829 |
|
Short-term investments, trading debt securities |
|
29,660 |
|
30,225 |
|
28,508 |
|
30,550 |
|
Long-term debt |
|
116,181 |
|
119,006 |
|
145,963 |
|
149,333 |
|
While management believes its derivatives are primarily economic hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these types of transactions as hedges for accounting purposes. Since these derivatives and interest rate exchange agreements discussed below are not accounted for as hedges, fluctuations in the related commodity prices, currency exchange rates and interest rates could have a material impact on earnings in any given period. Seaboard also enters into speculative derivative transactions not directly related to its raw material requirements. The nature of Seaboards market risk exposure has not changed materially since December 31, 2012.
Commodity Instruments
Seaboard uses various derivative futures and options to manage its risk to price fluctuations for raw materials and other inventories, finished product sales and firm sales commitments. At June 29, 2013, Seaboard had open net derivative contracts to purchase 101,880,000 pounds of hogs and 19,936,000 pounds of sugar and open net derivative contracts to sell 16,500,000 pounds of soybean oil, 7,278,000 bushels of grain, 1,554,000 gallons of heating oil and 134,000 tons of soybean meal. At December 31, 2012, Seaboard had open net derivative contracts to purchase 28,896,000 pounds of sugar, 15,403,000 bushels of grain and 120,000 pounds of cheese and open net derivative contracts to sell 21,080,000 pounds of hogs, 546,000 gallons of heating oil, 220,000 pounds of dry whey powder and 53,000 tons of soybean meal. Commodity derivatives are recorded at fair value with any changes in fair value being marked to market as a component of cost of sales on the Condensed Consolidated Statements of Comprehensive Income.
Foreign Currency Exchange Agreements
Seaboard enters into foreign currency exchange agreements to manage the foreign currency exchange rate risk with respect to certain transactions denominated in foreign currencies. Foreign currency exchange agreements that were primarily related to an underlying commodity transaction were recorded at fair value with changes in value marked to market as a component of cost of sales on the Condensed Consolidated Statements of Comprehensive Income. Foreign currency exchange agreements that were not related to an underlying commodity transaction were recorded at fair value with changes in value marked to market as a component of foreign currency gain (loss) on the Condensed Consolidated Statements of Comprehensive Income.
At June 29, 2013 and December 31, 2012, Seaboard had trading foreign currency exchange agreements to cover its firm sales and purchase commitments and related trade receivables and payables with net notional amounts of $139,616,000 and $243,563,000, respectively, primarily related to the South African Rand.
Interest Rate Exchange Agreements
In May 2010, Seaboard entered into three ten-year interest rate exchange agreements which involve the exchange of fixed-rate and variable-rate interest payments over the life of the agreements without the exchange of the underlying notional amounts to mitigate the effects of fluctuations in interest rates on variable rate debt. Seaboard pays a fixed rate and receives a variable rate of interest on three notional amounts of $25,000,000 each. In August 2010, Seaboard entered into another ten-year interest rate exchange agreement with a notional amount of $25,000,000 that has terms similar to those for the other three interest rate exchange agreements referred to above. In September 2012, Seaboard terminated one interest rate exchange agreement with a notional value of $25,000,000. Seaboard made a payment in the amount of $3,861,000 to unwind this agreement. While Seaboard has certain variable rate debt, these interest rate exchange agreements do not qualify as hedges for accounting purposes. Accordingly, the changes in fair value of these agreements are recorded in Miscellaneous, net in the Condensed Consolidated Statements of Comprehensive Income. At June 29, 2013 and December 31, 2012, Seaboard had three interest rate exchange agreements outstanding with a total notional value of $75,000,000.
Counterparty Credit Risk
Seaboard is subject to counterparty credit risk related to its foreign currency exchange agreements and interest rate swaps, should the counterparties fail to perform according to the terms of the contracts. As of June 29, 2013, Seaboards foreign currency exchange agreements have a maximum amount of loss due to credit risk in the amount of $4,309,000 with six counterparties. Seaboard does not hold any collateral related to these agreements.
The following table provides the amount of gain or (loss) recognized in income for each type of derivative and where it was recognized in the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 29, 2013 and June 30, 2012.
(Thousands of dollars) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
| ||||
|
|
|
|
June 29, 2013 |
|
June 30, 2012 |
|
June 29, 2013 |
|
June 30, 2012 |
|
Commodities |
|
Cost of sales |
|
$ 5,867 |
|
$ (5,699) |
|
$ 1,059 |
|
$ (8,114) |
|
Foreign currencies |
|
Cost of sales |
|
1,993 |
|
5,118 |
|
13,499 |
|
(299) |
|
Foreign currencies |
|
Foreign currency |
|
1,820 |
|
101 |
|
5,887 |
|
(3,612) |
|
Interest rate |
|
Miscellaneous, net |
|
2,962 |
|
(4,400) |
|
3,434 |
|
(3,752) |
|
The following table provides the fair value of each type of derivative held as of June 29, 2013 and December 31, 2012 and where each derivative is included on the Condensed Consolidated Balance Sheets.
(Thousands of dollars) |
|
|
|
Asset Derivatives |
|
|
|
Liability Derivatives |
| ||||
|
|
|
|
June 29, |
|
December 31, |
|
|
|
June 29, |
|
December 31, |
|
|
|
|
|
2013 |
|
2012 |
|
|
|
2013 |
|
2012 |
|
Commodities |
|
Other current assets |
|
$ 6,581(1) |
|
$ 6,916 |
|
Other current assets |
|
$ 13,636(1) |
|
$ 7,112 |
|
Foreign currencies |
|
Other current assets |
|
4,309 |
|
- |
|
Other current liabilities |
|
184 |
|
4,157 |
|
Interest rate |
|
Other current assets |
|
- |
|
- |
|
Other current liabilities |
|
5,297 |
|
9,810 |
|
(1) Seaboards commodities derivative assets and liabilities are presented in the Condensed Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts. As of June 29, 2013 and December 31, 2012, the commodity derivatives had a margin account balance of $22,188,000 and $14,063,000, respectively, resulting in a net other current asset on the Condensed Consolidated Balance Sheets of $15,133,000 and $13,867,000, respectively.
Note 6 Employee Benefits
Seaboard maintains two defined benefit pension plans for its domestic salaried and clerical employees. At this time, no contributions are expected to be made to these plans in 2013. Seaboard also sponsors non-qualified, unfunded supplemental executive plans, and has certain individual, non-qualified, unfunded supplemental retirement agreements for certain retired employees. Management has no plans to provide funding for these supplemental plans in advance of when the benefits are paid.
The net periodic benefit cost for all of these plans was as follows:
|
|
Three Months Ended |
|
Six Months Ended |
| ||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, |
|
(Thousands of dollars) |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
|
Components of net periodic benefit cost: |
|
|
|
|
|
|
|
|
|
Service cost |
|
$ 2,263 |
|
$ 2,210 |
|
$ 4,684 |
|
$ 4,436 |
|
Interest cost |
|
2,035 |
|
2,177 |
|
4,103 |
|
4,435 |
|
Expected return on plan assets |
|
(1,614 |
) |
(1,617 |
) |
(3,226 |
) |
(3,209 |
) |
Amortization and other |
|
1,543 |
|
1,567 |
|
3,179 |
|
3,097 |
|
Agreement termination gain |
|
(3,204 |
) |
- |
|
(3,204 |
) |
- |
|
Settlement |
|
- |
|
1,796 |
|
- |
|
1,796 |
|
Net periodic benefit cost |
|
$ 1,023 |
|
$ 6,133 |
|
$ 5,536 |
|
$10,555 |
|
In late April 2013, Mr. Joseph E. Rodrigues, Seaboards board member and retired former Executive Vice President and Treasurer of Seaboard Corporation, passed away. During retirement, Mr. Rodrigues received retirement payments under an individual, non-qualified, unfunded supplemental retirement agreement. Upon his death, this agreement terminated which eliminated the remaining accrued pension liability. This resulted in a one-time agreement termination gain of $3,204,000, or $1,954,000 net of tax, which was recognized in net earnings in addition to a gain of $2,148,000, or $1,310,000 net of tax, from the elimination of unrecognized pension cost in other comprehensive income during the second quarter of 2013.
During June 2012 when the actual pension costs for 2012 were finalized, it was determined that a settlement payment made in March 2012 was greater than the actual service cost and interest cost components of the 2012 net periodic pension cost for a non-qualified, unfunded supplemental executive plan. As a result, during the second quarter of 2012 a settlement loss of $1,796,000 was recorded in the Pork divisions results of operations.
Note 7 Notes Payable, Long-Term Debt, Commitments and Contingencies
In April 2013, Seaboard provided notice of call for early redemption to holders of certain Industrial Development Revenue Bonds (IDRBs) effective May 13, 2013. As a result, $10,800,000 of IDRBs were reclassified from long-term debt to current maturities of long-term debt as of March 30, 2013. A payment of $10,800,000 was made in the second quarter of 2013.
In February 2013, Seaboard refinanced its committed bank line for $200,000,000 and also extended the maturity date to February 20, 2018. The refinancing of the committed bank line revised the terms by increasing the tangible net worth to $1,870,445,000, plus 25% of cumulative consolidated net income beginning after December 31, 2012, increasing the dividend payment limit to $25,000,000 per year, increasing the subsidiary and priority indebtedness to 20% and eliminated the required consolidated funded debt to consolidated total capitalization ratio.
In December 2012, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective January 14, 2013. As a result, $13,000,000 of IDRBs were reclassified from long-term debt to current maturities of long-term debt as of December 31, 2012. A payment of $13,000,000 was made in the first quarter of 2013.
Contingencies
On September 19, 2012, the United States Immigration and Customs Enforcement (ICE) executed three search warrants authorizing the seizure of certain records from Seaboards offices in Merriam, Kansas and at the Seaboard Foods employment office and the human resources department in Guymon, Oklahoma. The warrants generally called for the seizure of employment-related files, certain e-mails and other electronic records relating to Medicaid and Medicaid recipient, certain health care providers in the Guymon area, and Seaboards health plan and certain personnel issues. This investigation is being handled by the United States Attorneys Office for the Western District of Oklahoma (USAO). Seaboard is cooperating with the USAO in connection with this investigation. No civil or criminal proceedings or charges have been filed or brought. It is not possible at this time to determine whether Seaboard will incur any fines, penalties or material liabilities in connection with this matter.
Seaboard is subject to various legal proceedings related to the normal conduct of its business, including various environmental related actions. In the opinion of management, none of these actions is expected to result in a judgment having a materially adverse effect on the Condensed Consolidated Financial Statements of Seaboard.
Contingent Obligations
Certain of the non-consolidated affiliates and third party contractors who perform services for Seaboard have bank debt supporting their underlying operations. From time to time, Seaboard will provide guarantees of that debt allowing a lower borrowing rate or facilitating third party financing in order to further Seaboards business objectives. Seaboard does not issue guarantees of third parties for compensation. As of June 29, 2013, guarantees outstanding to third parties were not material. Seaboard has not accrued a liability for any of the third party or affiliate guarantees as management considers the likelihood of loss to be remote.
As of June 29, 2013, Seaboard had outstanding letters of credit (LCs) with various banks which reduced its borrowing capacity under its committed and uncommitted credit facilities by $44,960,000 and $3,736,000, respectively. These LCs included $18,397,000 of LCs, which support the IDRBs included as long-term debt and $26,801,000 of LCs related to insurance coverages.
Commitments
In July 2013, Seaboard Marine, Ltd. (Seaboard Marine) amended its Terminal Agreement with Miami-Dade County primarily to provide increased acreage, minimum usage of port cranes and add one additional five-year renewal option. Under this amended terminal agreement, Seaboard Marines total minimum payments over the initial term of the agreement through September 30, 2028, increased by approximately $75,600,000 and now includes three five-year renewal options. This minimum amount could increase if certain conditions are met.
Note 8 Stockholders Equity and Accumulated Other Comprehensive Loss
The components of and changes in accumulated other comprehensive loss, net of tax, for the three months ended June 29, 2013 are as follows:
|
|
Cumulative |
|
|
|
|
|
|
|
|
| |||||
|
|
Foreign |
|
Unrealized |
|
Unrealized |
|
|
|
|
| |||||
|
|
Currency |
|
Gain (Loss) |
|
Loss on |
|
Unrecognized |
|
|
| |||||
|
|
Translation |
|
on |
|
Cash Flow |
|
Pension |
|
|
| |||||
(Thousands of dollars) |
|
Adjustment |
|
Investments |
|
Hedges |
|
Cost |
|
Total |
| |||||
Balance March 30, 2013 |
|
$ |
(115,579 |
) |
$ |
2,661 |
|
$ |
(113 |
) |
$ |
(63,014 |
) |
$ |
(176,045 |
) |
Other comprehensive income (loss) before reclassifications |
|
(6,699 |
) |
(1,948) |
|
- |
|
1,310 |
|
(7,337 |
) | |||||
Amounts reclassified from accumulated other comprehensive loss |
|
- |
|
(189) |
(1) |
- |
|
1,235 |
(2) |
1,046 |
| |||||
Net current-period other comprehensive income (loss) |
|
(6,699 |
) |
(2,137) |
|
- |
|
2,545 |
|
(6,291 |
) | |||||
Balance June 29, 2013 |
|
$ |
(122,278 |
) |
$ |
524 |
|
$ |
(113 |
) |
$ |
(60,469 |
) |
$ |
(182,336 |
) |
(1) This represents realized gains on the sale of available-for-sale securities and are recorded in other investment income, net.
(2) This primarily represents the amortization of actuarial losses that are included in net periodic pension cost and are recorded in operating income. See Note 6 for further discussion.
The components of and changes in accumulated other comprehensive loss, net of tax, for the six months ended June 29, 2013 are as follows:
|
|
Cumulative |
|
|
|
|
|
|
|
|
| |||||
|
|
Foreign |
|
Unrealized |
|
Unrealized |
|
|
|
|
| |||||
|
|
Currency |
|
Gain (Loss) |
|
Loss on |
|
Unrecognized |
|
|
| |||||
|
|
Translation |
|
on |
|
Cash Flow |
|
Pension |
|
|
| |||||
(Thousands of dollars) |
|
Adjustment |
|
Investments |
|
Hedges |
|
Cost |
|
Total |
| |||||
Balance December 31, 2012 |
|
$ |
(109,457 |
) |
$ |
2,232 |
|
$ |
(113 |
) |
$ |
(64,206 |
) |
$ |
(171,544 |
) |
Other comprehensive income (loss) before reclassifications |
|
(12,821 |
) |
(1,309) |
|
- |
|
1,310 |
|
(12,820 |
) | |||||
Amounts reclassified from accumulated other comprehensive loss |
|
- |
|
(399) |
(1) |
- |
|
2,427 |
(2) |
2,028 |
| |||||
Net current-period other comprehensive income (loss) |
|
(12,821 |
) |
(1,708) |
|
- |
|
3,737 |
|
(10,792 |
) | |||||
Balance June 29, 2013 |
|
$ |
(122,278 |
) |
$ |
524 |
|
$ |
(113 |
) |
$ |
(60,469 |
) |
$ |
(182,336 |
) |
(1) This represents realized gains on the sale of available-for-sale securities and are recorded in other investment income, net.
(2) This primarily represents the amortization of actuarial losses that are included in net periodic pension cost and are recorded in operating income. See Note 6 for further discussion.
As discussed in Note 6 to the Condensed Consolidated Financial Statements, Seaboard recognized a one-time retirement agreement termination gain of $1,310,000 net of tax, in unrecognized pension cost in other comprehensive income during the second quarter of 2013.
The foreign currency translation adjustment primarily represents the effect of the Argentine peso currency exchange fluctuation on the net assets of the Sugar segment. At June 29, 2013, the Sugar segment had $189,857,000 in net assets denominated in Argentine pesos and $1,700,000 in net assets denominated in U.S. dollars. Management anticipates that the Argentine peso may continue to weaken against the U.S. dollar and thus it is anticipated that Seaboard will incur additional foreign currency translation adjustment losses in other comprehensive loss during the remainder of 2013.
With the exception of the foreign currency translation adjustment to which a 35 percent federal tax rate is applied, income taxes for components of accumulated other comprehensive loss were recorded using a 39 percent effective tax rate. In addition, the unrecognized pension cost includes $20,346,000 related to employees at certain subsidiaries for which no tax benefit has been recorded.
On October 19, 2012, the Board of Directors extended through October 31, 2015 the share repurchase program initially approved on November 6, 2009. Under this share repurchase program, Seaboard was originally authorized to repurchase from time to time up to $100,000,000 market value of its Common Stock in open market or privately negotiated purchases which may be above or below the traded market price. During the period that the share repurchase program remains in effect, from time to time, Seaboard may enter into a 10b5-1 plan authorizing a third party to make such purchases on behalf of Seaboard. The stock repurchase will be funded by cash on hand. Shares repurchased will be retired and resume the status of authorized and unissued shares. All stock repurchased will be made in compliance with applicable legal requirements and the timing of the repurchases and the number of shares repurchased at any given time will depend upon market conditions, compliance with Securities and Exchange Commission regulations and other factors. The Boards stock repurchase authorization does not obligate Seaboard to acquire a specific amount of common stock and the stock repurchase program may be suspended at any time at Seaboards discretion. As of June 29, 2013, $19,512,000 remained available for repurchases under this program. For the six months ended June 29, 2013, Seaboard repurchased 5,092 shares of common stock at a total cost of $13,693,000.
In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock. The increased amount of the dividend (which has historically been $0.75 per share on a quarterly basis or $3.00 per share on an annual basis) represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per share per year). Seaboard does not currently intend to declare any further dividends for the years 2013-2016.
Note 9 - Segment Information
The Tax Act signed into law in January 2013 as discussed in Note 4, renewed and extended the Federal credits that Seaboard is entitled to receive for biodiesel it blends which had previously expired on December 31, 2011 and renewed retroactively to January 1, 2012 with an expiration of December 31, 2013. As a result, in the first quarter of 2013 the Pork segment recognized a one-time credit of approximately $11,260,000 as revenues related to this Federal blenders tax incentive for gallons produced and sold in fiscal 2012. The impact for the remainder of 2013 is not expected to be significant as market prices for biodiesel have adjusted downward as a result of the renewed credit.
In January 2012, Seaboard made a payment of $2,825,000, net of cash acquired, to increase its ownership interest from 50% to 70% in PS International, LLC (PSI), a 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. An additional payment was made in 2012 subsequent to the second quarter of 2012 for this transaction upon final verification of certain balance sheet items as of December 31, 2011. On December 31, 2012, Seaboard further increased its ownership from 70% to 85%. Total cash paid for these two transactions in 2012, net of cash acquired was $3,186,000 and $3,045,000, respectively. An additional payment in the amount of $515,000 was made in the second quarter of 2013 for the December 2012 transaction upon final verification of certain balance sheet items as of December 31, 2012. Pro forma results of operations are not presented, as the effects of consolidation are not material to Seaboards results of operations.
On April 8, 2011, Seaboard closed the sale of its two floating power generating facilities in the Dominican Republic. On April 20, 2011, Seaboard signed a short-term lease agreement that allowed Seaboard to resume operations of one of the facilities (72 megawatts). 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. Seaboard continues to operate this facility under a short-term lease agreement that may be canceled by either party. Also, as of June 29, 2013, $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.
The Turkey segment, accounted for using the equity method, represents Seaboards investment in Butterball, LLC (Butterball). Butterball had total net sales for the three and six months ended June 29, 2013 of $353,944,000 and $724,514,000, respectively, compared to total net sales for the three and six months ended June 30, 2012 of $302,423,000 and $604,039,000, respectively. Butterball had operating income (loss) for the three and six months
ended June 29, 2013 of $(2,417,000) and $(4,520,000), respectively, compared to operating income for the three and six months ended June 30, 2012 of $17,767,000 and $41,132,000, respectively. In the first quarter of 2013, Butterball incurred additional charges for impairment of fixed assets related to the planned sale of its Longmont, Colorado facility of which Seaboards proportionate share of these charges represented $(2,704,000) recognized in loss from affiliate. As of June 29, 2013 and December 31, 2012, the Turkey segment had total assets of $1,030,452,000 and $871,945,000, respectively.
On December 31, 2012, Seaboard provided a loan of $81,231,000 to Butterball, which was included in Notes Receivable from Affiliate. This loan was made to fund Butterballs purchase of assets from Gusto Packing Company, Inc., a pork and turkey further processor located in Montgomery, Illinois. In late March 2013, Butterball renegotiated its third party financing and on March 28, 2013 repaid in full this loan from Seaboard.
In conjunction with Seaboards initial investment in Butterball on December 6, 2010, Seaboard has a long-term note receivable from Butterball which had a balance of $119,060,000 as of June 29, 2013. 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 29, 2013, the balance of the term loan recorded in long-term notes receivable from affiliate was $9,030,000.
The following tables set forth specific financial information about each segment as reviewed by Seaboards 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 29, |
|
June 30, |
|
June 29, |
|
June 30, |
| ||||
(Thousands of dollars) |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Pork |
|
$ |
416,850 |
|
$ |
400,667 |
|
$ |
826,102 |
|
$ |
801,328 |
|
Commodity Trading and Milling |
|
894,762 |
|
725,076 |
|
1,695,516 |
|
1,449,614 |
| ||||
Marine |
|
226,725 |
|
236,062 |
|
456,881 |
|
469,811 |
| ||||
Sugar |
|
67,890 |
|
77,633 |
|
134,054 |
|
151,252 |
| ||||
Power |
|
74,812 |
|
67,248 |
|
147,779 |
|
102,784 |
| ||||
All Other |
|
3,000 |
|
3,907 |
|
6,003 |
|
6,917 |
| ||||
Segment/Consolidated Totals |
|
$ |
1,684,039 |
|
$ |
1,510,593 |
|
$ |
3,266,335 |
|
$ |
2,981,706 |
|
|
|
|
|
|
|
|
|
|
| ||||
Operating Income (Loss): |
|
|
|
|
|
|
|
|
| ||||
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, |
| ||||
(Thousands of dollars) |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Pork |
|
$ |
23,634 |
|
$ |
20,846 |
|
$ |
55,898 |
|
$ |
73,719 |
|
Commodity Trading and Milling |
|
8,610 |
|
11,467 |
|
20,938 |
|
37,160 |
| ||||
Marine |
|
(4,114 |
) |
1,081 |
|
(7,380 |
) |
1,572 |
| ||||
Sugar |
|
11,578 |
|
20,734 |
|
28,119 |
|
37,711 |
| ||||
Power |
|
15,037 |
|
10,654 |
|
27,976 |
|
16,474 |
| ||||
All Other |
|
18 |
|
163 |
|
138 |
|
169 |
| ||||
Segment Totals |
|
54,763 |
|
64,945 |
|
125,689 |
|
166,805 |
| ||||
Corporate Items |
|
(1,214 |
) |
(4,222 |
) |
(8,682 |
) |
(12,726 |
) | ||||
Consolidated Totals |
|
$ |
53,549 |
|
$ |
60,723 |
|
$ |
117,007 |
|
$ |
154,079 |
|
Income (Loss) from Affiliates: |
|
|
|
|
| ||||||||
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, |
| ||||
(Thousands of dollars) |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Commodity Trading and Milling |
|
$ |
(2,278 |
) |
$ |
4,305 |
|
$ |
(188 |
) |
$ |
5,012 |
|
Sugar |
|
24 |
|
(61 |
) |
117 |
|
(62 |
) | ||||
Turkey |
|
(2,293 |
) |
5,572 |
|
(7,326 |
) |
14,435 |
| ||||
Segment/Consolidated Totals |
|
$ |
(4,547 |
) |
$ |
9,816 |
|
$ |
(7,397 |
) |
$ |
19,385 |
|
Total Assets: |
|
|
|
|
| ||
|
|
June 29, |
|
December 31, |
| ||
(Thousands of dollars) |
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Pork |
|
$ |
778,556 |
|
$ |
740,245 |
|
Commodity Trading and Milling |
|
963,009 |
|
992,507 |
| ||
Marine |
|
278,254 |
|
281,215 |
| ||
Sugar |
|
238,033 |
|
254,445 |
| ||
Power |
|
255,707 |
|
235,377 |
| ||
Turkey |
|
331,456 |
|
423,825 |
| ||
All Other |
|
4,471 |
|
5,288 |
| ||
Segment Totals |
|
2,849,486 |
|
2,932,902 |
| ||
Corporate Items |
|
496,272 |
|
414,879 |
| ||
Consolidated Totals |
|
$ |
3,345,758 |
|
$ |
3,347,781 |
|
Investments in and Advances to Affiliates: |
|
|
|
|
| ||
|
|
June 29, |
|
December 31, |
| ||
(Thousands of dollars) |
|
2013 |
|
2012 |
| ||
|
|
|
|
|
| ||
Commodity Trading and Milling |
|
$ |
197,949 |
|
$ |
186,873 |
|
Sugar |
|
2,654 |
|
2,775 |
| ||
Turkey |
|
203,366 |
|
220,894 |
| ||
Segment/Consolidated Totals |
|
$ |
403,969 |
|
$ |
410,542 |
|
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 Seaboards deferred compensation programs (which are offset by the effect of the mark-to-market investments recorded in Other Investment Income, Net).
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Summary of Sources and Uses of Cash
Cash and short-term investments as of June 29, 2013 increased $36.5 million to $397.5 million from December 31, 2012. The increase was primarily the result of principal payments received on notes receivable from affiliate of $81.3 million, net cash from operating activities of $46.4 million and an increase in notes payable of $36.8 million. Partially offsetting the increase was cash used for capital expenditures of $82.1 million and principal payments of long-term debt of $29.8 million. Cash from operating activities decreased $96.8 million for the six months ended June 29, 2013 compared to the same period in 2012, primarily as a result of a decrease in inventories in the Commodity Trading and Milling segment during the 2012 period while inventories remained fairly constant for the 2013 period.
Acquisitions, Capital Expenditures and Other Investing Activities
During the six months ended June 29, 2013, Seaboard invested $82.1 million in property, plant and equipment, of which $40.0 million was expended in the Pork segment, $11.4 million in the Commodity Trading and Milling segment, $17.5 million in the Marine segment and $13.2 million in all other segments. The Pork segment expenditures were primarily for additional finishing barns, improvements to existing facilities and related equipment and to complete construction of a new feed mill. The Commodity Trading and Milling segment expenditures were primarily for the purchase of a dry bulk vessel. The Marine segment expenditures were primarily for purchases of cargo carrying and handling equipment. All other segments capital expenditures were of a normal recurring nature and primarily include replacements of machinery and equipment, and general facility modernizations and upgrades.
For the remainder of 2013, management has budgeted capital expenditures totaling $102.7 million. The Pork segment plans to spend $46.2 million primarily for semi-tractors, additional finishing barns and improvements to existing facilities and related equipment. The Commodity Trading and Milling segment has budgeted $15.9 million primarily for improvements to existing facilities and related equipment and another payment on four dry bulk vessels being built. The final payment of $72.6 million for these vessels is anticipated to be made in 2014 for a total cost of $83.0 million. The Marine segment has budgeted $22.1 million primarily for additional cargo carrying and handling equipment. In addition, management will be evaluating whether to purchase additional containerized cargo vessels for the Marine segment and additional dry bulk vessels for the Commodity Trading and Milling segment during 2013. The Sugar segment plans to spend $17.7 million primarily on normal upgrades to existing operations, including cane re-planting. The balance of $0.8 million is planned to be spent in all other businesses. Management anticipates paying for these capital expenditures from a combination of available cash, the use of available short-term investments or Seaboards available borrowing capacity.
In July 2013, Seaboard acquired a 50% non-controlling interest in a flour milling business located in Gambia. As of June 29, 2013, Seaboard had advanced this entity $4.6 million with an additional $2.2 million paid in July 2013 and an estimated $1.5 million anticipated to be paid during the remainder of 2013, for a total investment in and advances to this affiliate of $8.3 million. This investment will be accounted for using the equity method.
On March 28, 2013, Butterball, LLC (Butterball) repaid in full the $81.2 million loan Seaboard made on December 31, 2012 to its non-consolidated affiliate, to fund its purchase of assets from Gusto Packing Company, Inc. In addition, during the first quarter of 2013, Butterball paid a $10.3 million cash dividend to Seaboard.
Effective, January 1, 2012, Seaboard increased its ownership interest in PS International, LLC (PSI), a specialty grain trading business located in Chapel Hill, North Carolina, from 50% to 70% by making an initial cash payment of $3.7 million in January 2012. See Note 9 to the Condensed Consolidated Financial Statements for further discussion.
Financing Activities and Debt
As of June 29, 2013, Seaboard had a committed line of credit totaling $200.0 million and uncommitted lines totaling $207.7 million. In February 2013, Seaboard refinanced the committed credit facility extending the maturity date to February 20, 2018. As of June 29, 2013, there were no borrowings outstanding under the committed line of credit and borrowings under the uncommitted lines of credit totaled $65.4 million, with $33.6 related to foreign subsidiaries. Outstanding standby letters of credit reduced Seaboards borrowing capacity under its committed and uncommitted credit lines by $45.0 million and $3.7 million, respectively, primarily representing $18.4 million for Seaboards outstanding Industrial Development Revenue Bonds and $26.8 million related to insurance coverage.
In April 2013, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective May 13, 2013. As a result, $10.8 million of IDRBs were reclassified from long-term debt to current maturities of long-term debt as of March 30, 2013. Seaboard paid $10.8 million in the second quarter of 2013. In December 2012, Seaboard provided notice of call for early redemption to holders of certain IDRBs effective January 14, 2013. As a result, $13.0 million of IDRBs were reclassified from long-term debt to current maturities of long-term debt as of December 31, 2012. Seaboard paid $13.0 million in the first quarter of 2013.
Seaboards remaining 2013 scheduled long-term debt maturities total $6.2 million. As of June 29, 2013, Seaboard had cash and short-term investments of $397.5 million, additional total net working capital of $814.1 million and a $200.0 million committed line of credit maturing on February 20, 2018. Accordingly, management believes Seaboards combination of internally generated cash, liquidity, capital resources and borrowing capabilities will be adequate for its existing operations and any currently known potential plans for expansion of existing operations or business segments for 2013. Management intends to continue seeking opportunities for expansion in the industries in which Seaboard operates, utilizing existing liquidity, available borrowing capacity and other financing alternatives.
As of June 29, 2013, $213.2 million of the $397.5 million of cash and short-term investments were held by Seaboards foreign subsidiaries and Seaboard could be required to accrue and pay taxes to repatriate these funds if needed for Seaboards operations in the U.S. However, Seaboards intent is to permanently reinvest these funds outside the U.S. and current plans do not demonstrate a need to repatriate them to fund Seaboards U.S. operations.
As of June 29, 2013, Seaboard believes its exposure to the current potential European sovereign debt problems is not material. Seaboard monitors these exposures and currently does not believe there is a significant risk.
On October 19, 2012, the Board of Directors extended through October 31, 2015 the share repurchase program initially approved on November 6, 2009. For the six months ended June 29, 2013, Seaboard used cash to repurchase 5,092 shares of common stock at a total price of $13.7 million. See Note 8 to the Condensed Consolidated Financial Statements for further discussion of this item.
See Note 7 to the Condensed Consolidated Financial Statements for a summary of Seaboards contingent obligations, including guarantees issued to support certain activities of non-consolidated affiliates or third parties who provide services for Seaboard.
RESULTS OF OPERATIONS
Net sales for the three and six month periods of 2013 increased by $173.4 million and $284.6 million, respectively, over the same periods in 2012. The increases primarily reflected higher sales for commodity trading from increased volumes and higher prices for wheat and soybean meal. Also, the increase for the six month period represented increased sales volume from operating the new power generating facility the entire first quarter of 2013.
Operating income decreased by $7.2 million and $37.1 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The decrease for the three month period primarily reflects lower operating income for the sugar segment as discussed below. The decrease for the six month period primarily reflects lower operating income for the Pork segment and lower margins on commodity trading sales as discussed below. Partially offsetting the decrease for the six month period was a one-time credit related to biodiesel as discussed below.
Pork Segment |
|
|
|
|
|
|
|
|
| ||||||||
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, |
| ||||||||
(Dollars in millions) |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||||||
Net sales |
|
$ |
416.9 |
|
|
$ |
400.7 |
|
|
$ |
826.1 |
|
|
$ |
801.3 |
|
|
Operating income |
|
$ |
23.6 |
|
|
$ |
20.8 |
|
|
$ |
55.9 |
|
|
$ |
73.7 |
|
|
Net sales for the Pork segment increased $16.2 million and $24.8 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The increase for the three months primarily reflects higher prices for pork products sold. The increase for the six months primarily reflects increased sales volume for biodiesel and a one-time credit of $11.3 million recorded as revenues in the first quarter of 2013 related to the Tax Act, which renewed and extended the Federal blenders credits that Seaboard is entitled to receive for biodiesel it
blends. See Note 9 to the Condensed Consolidated Financial Statements for further discussion of the Federal blenders credit.
Operating income for the Pork segment increased $2.8 million and decreased $17.8 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The increase for the three month period primarily reflects higher margins for biodiesel from increased sales volume and lower production costs while higher prices for pork products sold were offset by various increased costs, primarily for hogs internally grown. The decrease for the six month period is the result of various increased costs, primarily for hogs internally grown as a result of higher feed costs. Partially offsetting the decrease for the six month period were increased sales volume for biodiesel and the one-time credit of $11.3 million as discussed above.
Management is unable to predict future market prices for pork products, the cost of feed or the impact to Seaboard from the porcine epidemic diarrhea virus currently being experienced by the pork industry. However, management anticipates positive operating income for this segment for the remainder of 2013.
Commodity Trading and Milling Segment |
|
|
|
|
| ||||||||||
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|
Three Months Ended |
|
Six Months Ended |
| ||||||||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, |
| ||||||
(Dollars in millions) |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||||
Net sales |
|
$ |
894.8 |
|
|
$ |
725.1 |
|
|
$ |
1,695.5 |
|
$ |
1,449.6 |
|
Operating income as reported |
|
$ |
8.6 |
|
|
$ |
11.5 |
|
|
$ |
20.9 |
|
$ |
37.2 |
|
Less mark-to-market adjustments |
|
(0.6 |
) |
|
8.6 |
|
|
(8.9 |
) |
2.4 |
| ||||
Operating income excluding mark-to-market adjustments |
|
$ |
8.0 |
|
|
$ |
20.1 |
|
|
$ |
12.0 |
|
$ |
39.6 |
|
Income from affiliates |
|
$ |
(2.3 |
) |
|
$ |
4.3 |
|
|
$ |
(0.2 |
) |
$ |
5.0 |
|
Net sales for the Commodity Trading and Milling segment increased $169.7 million and $245.9 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The increases are primarily the result of higher sales volumes to third parties, especially for the three month period, and increased prices for wheat and soybean meal, especially for the six month period.
Operating income for this segment decreased $2.9 million and $16.3 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The decreases for the three and six month periods primarily reflect lower margins on commodity trading sales to third parties and certain non-consolidated affiliates in Africa, especially on sales of wheat and corn. The lower margins are primarily the result of unfavorable market conditions and certain inventory positions negatively impacted by the decrease in commodity prices in the first six months of 2013 compared to favorable market conditions and certain inventory positions positively impacted in 2012 from increasing commodity prices. Partially offsetting the decreases were fluctuations of $9.2 million and $11.3 million, respectively, of marking to market derivative contracts as discussed below. Also partially offsetting the decrease for the six month period was a recovery of previous inventory write-downs for customer contract performance issues of $4.3 million in the first quarter of 2013. Excluding the effects of the derivative contracts, as discussed below, operating income decreased $12.1 million and $27.6 million for the three and six month periods, respectively.
As worldwide commodity price fluctuations cannot be predicted, management is unable to predict the level of future sales. Due to the uncertain political and economic conditions in the countries in which Seaboard operates and the current volatility in the commodity markets, management is unable to predict future sales and operating results for this segment. However, management anticipates positive operating income for this segment for the remainder of 2013, although lower than 2012 excluding the potential effects of marking to market derivative contracts.
Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this segment would have been lower by $0.6 million and $8.9 million, respectively, for the three and six month periods of 2013 and operating income would have been higher by $8.6 million and $2.4 million, respectively, for the three and six month periods of 2012. While management believes its commodity futures and options and foreign exchange contracts are primarily economic hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these types of transactions as hedges for accounting purposes. Accordingly, while the changes in value of the derivative instruments were marked to market, the changes in value of the firm purchase or sales contracts were not. As products are delivered to customers, these existing mark-to-market adjustments should be primarily offset by
realized margins or losses as revenue is recognized over time and thus, these mark-to-market adjustments could reverse in fiscal 2013. Management believes eliminating these adjustments, as noted in the table above, provides a more reasonable presentation to compare and evaluate period-to-period financial results for this segment.
Income from affiliates for the three and six month periods of 2013 decreased by $6.6 million and $5.2 million, respectively, from the same periods in 2012. The decreases were primarily a result of unfavorable market conditions for certain affiliates in Africa. Based on the uncertainty of local political and economic environments in the countries in which the flour and feed mills operate, management cannot predict future results.
Marine Segment |
|
|
|
| ||||||||||||
|
|
Three Months Ended |
|
Six Months Ended | ||||||||||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, | ||||||||
(Dollars in millions) |
|
2013 |
|
2012 |
|
2013 |
|
2012 | ||||||||
Net sales |
|
$ |
226.7 |
|
|
$ |
236.1 |
|
|
$ |
456.9 |
|
|
$ |
469.8 |
|
Operating income (loss) |
|
$ |
(4.1 |
) |
|
$ |
1.1 |
|
|
$ |
(7.4 |
) |
|
$ |
1.6 |
|
Net sales for the Marine segment decreased $9.4 million and $12.9 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The decreases were primarily the result of decreased cargo rates in certain markets served during 2013 compared to 2012 and, to a lesser extent, lower volumes.
Operating income decreased $5.2 million and $9.0 million for the three and six month periods of 2013, respectively, compared to the same periods of 2013. The decreases primarily reflect lower cargo rates noted above. Management cannot predict changes in future cargo volumes and cargo rates or to what extent changes in economic conditions in markets served will affect net sales or operating income during the remainder of 2013. However, based on recent market conditions, management currently cannot predict if this segment will be profitable for the remainder of 2013.
Sugar Segment |
|
|
|
|
| ||||||||||||
|
|
Three Months Ended |
|
Six Months Ended |
| ||||||||||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, |
| ||||||||
(Dollars in millions) |
|
2013 |
|
2012 |
|
2013 |
|
2012 |
| ||||||||
Net sales |
|
$ |
67.9 |
|
|
$ |
77.6 |
|
|
$ |
134.1 |
|
|
$ |
151.3 |
|
|
Operating income |
|
$ |
11.6 |
|
|
$ |
20.7 |
|
|
$ |
28.1 |
|
|
$ |
37.7 |
|
|
Income (loss) from affiliates |
|
$ |
- |
|
|
$ |
(0.1 |
) |
|
$ |
0.1 |
|
|
$ |
(0.1 |
) |
|
Net sales for the Sugar segment decreased $9.7 million and $17.2 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The decreases primarily reflect lower sales prices for sugar in terms of U.S. dollars and, to a lesser degree, decreased volumes of sugar sold. Sugar sales are primarily denominated in Argentine pesos and the lower sales prices for sugar in terms of U.S. dollars was primarily the result of the exchange rate difference as the Argentine peso continued to weaken against the U.S. dollar in 2013. Partially offsetting the decrease in net sales was increased sales volume of alcohol. Management cannot predict sugar and alcohol prices for the remainder of 2013, but management anticipates that the Argentine peso may continue to weaken against the U.S. dollar.
Operating income decreased $9.1 million and $9.6 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The decreases primarily represent lower income from sugar sales primarily as a result of lower sales prices as noted above. Partially offsetting this decrease was higher income from alcohol sales from increased sales volume as noted above and lower unit cost per cubic meter sold for alcohol primarily from higher production levels. Management anticipates positive operating income for this segment for the remainder of 2013, although significantly lower than the first six months of 2013 and lower than 2012.
Power Segment |
|
|
|
| ||||||||||||
|
|
Three Months Ended |
|
Six Months Ended | ||||||||||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, | ||||||||
(Dollars in millions) |
|
2013 |
|
2012 |
|
2013 |
|
2012 | ||||||||
Net sales |
|
$ |
74.8 |
|
|
$ |
67.3 |
|
|
$ |
147.8 |
|
|
$ |
102.8 |
|
Operating income |
|
$ |
15.0 |
|
|
$ |
10.7 |
|
|
$ |
28.0 |
|
|
$ |
16.5 |
|
Net sales for the Power segment increased $7.5 million and $45.0 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The increase for the three month period primarily reflects higher spot market rates. The increase for the six month period primarily reflects increased volumes from operating the new power generating facility the entire first quarter in 2013 and, to a lesser extent, higher spot market rates. The new power generating facility started operating in March 2012. Although management cannot predict future spot market rates, sales volumes for the remainder of 2013 are anticipated to be fairly comparable to 2012 as long as the short-term leasing of one power generating facility continues, as discussed in Note 9 to the Condensed Consolidated Financial Statements.
Operating income increased $4.3 million and $11.5 million for the three and six month periods of 2013, respectively, compared to the same periods in 2012. The increases primarily reflect higher spot market rates as noted above. The increased volumes for the six month period of 2013 from operating the new power generating facility for the entire first quarter in 2013 as noted above was primarily offset by higher operating costs. Management cannot predict future fuel costs or the extent to which spot market rates will fluctuate compared to fuel costs. However, management anticipates positive operating income for this segment for the remainder of 2013, although lower than 2012.
Turkey Segment |
|
|
|
|
|
|
|
| ||||||||
|
|
Three Months Ended |
|
Six Months Ended | ||||||||||||
|
|
June 29, |
|
June 30, |
|
June 29, |
|
June 30, | ||||||||
(Dollars in millions) |
|
2013 |
|
2012 |
|
2013 |
|
2012 | ||||||||
Income (loss) from affiliate |
|
$ |
(2.3 |
) |
|
$ |
5.6 |
|
|
$ |
(7.3 |
) |
|
$ |
14.4 |
|
The Turkey segment, accounted for using the equity method, represents Seaboards investment in Butterball. The decrease in income from affiliate for the three month and six month periods of 2013 compared to the same periods in 2012 was primarily the result of higher feed cost. Also during the first quarter of 2013, Butterball incurred additional charges for impairment of fixed assets related to the planned sale of its Longmont, Colorado facility of which Seaboards proportionate share represented $2.7 million recognized in loss from affiliate. Management anticipates positive income for this segment for the remainder of 2013, excluding the potential effects of marking to market commodity derivative contracts and interest rate exchange agreements.
Foreign Currency Gains (Losses), Net
The foreign currency loss, net for the three and six month periods of 2013 primarily reflects losses from net assets denominated in the Dominican Republic peso. The foreign currency loss, net for the three month period of 2012 primarily reflects losses from net assets denominated in the South African rand. Seaboard operates in many developing countries. The political and economic conditions of these markets, along with fluctuations in the value of the U.S. dollar, cause volatility in currency exchange rates which exposes Seaboard to fluctuating foreign currency gains and losses which cannot be predicted by Seaboard.
Miscellaneous, Net
The fluctuations in miscellaneous, net for the three and six months of 2013 compared to the same periods in 2012 primarily reflect mark-to-market fluctuations from interest rate exchange agreements.
Income Tax Expense
The effective tax rate for 2013 was impacted by the one-time tax benefit of $7.9 million recorded in the first quarter of 2013 related to certain 2012 income tax credits as further discussed in Note 4 to the Condensed Consolidated Financial Statements. Excluding this one-time tax benefit, the effective tax rate for the first six months of 2013, which approximates the anticipated effective annual rate, is comparable to the tax rate for the first six months of 2012 but higher than the final annual effective tax rate for 2012. This is primarily the result of the Power segment being taxable for the first six months of 2013 compared to being non-taxable for the first quarter of 2012.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Seaboard is exposed to various types of market risks in its day-to-day operations. Seaboard utilizes derivative instruments to mitigate some of these risks including both purchases and sales of futures and options to hedge inventories, forward purchases and sale contracts. Primary market risk exposures result from changing commodity prices, foreign currency exchange rates and interest rates. Seaboard also enters into speculative derivative transactions not directly related to its raw material requirements. The nature of Seaboards market risk exposure related to these items has not changed materially since December 31, 2012. See Note 5 to the Condensed Consolidated Financial Statements for further discussion.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures - Seaboards management evaluated, under the direction of our Chief Executive and Chief Financial Officers, the effectiveness of Seaboards disclosure controls and procedures as defined in Exchange Act Rule 13a15(e) as of June 29, 2013. Based upon and as of the date of that evaluation, Seaboards Chief Executive and Chief Financial Officers concluded that Seaboards disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports it files and submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported as and when required. It should be noted that any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any system of disclosure controls and procedures is based in part upon assumptions about the likelihood of future events. Due to these and other inherent limitations of any such system, there can be no assurance that any design will always succeed in achieving its stated goals under all potential future conditions.
Change in Internal Controls There has been no change in Seaboards internal control over financial reporting required by Exchange Act Rule 13a15 that occurred during the fiscal quarter ended June 29, 2013 that has materially affected, or is reasonably likely to materially affect, Seaboards internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1A. Risk Factors
There have been no material changes in the risk factors as previously disclosed in Seaboards Annual Report on Form 10-K for the year ended December 31, 2012.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
The following table contains information regarding Seaboards purchase of its common stock during the quarter.
Issuer Purchases of Equity Securities
Period |
|
Total Number |
|
Average Price |
|
Total Number |
|
Approximate | |||
March 31 to April 30, 2013 |
|
1,083 |
|
|
2,713.67 |
|
|
1,083 |
|
|
29,898,666 |
May 1 to May 31, 2013 |
|
907 |
|
|
2,710.44 |
|
|
907 |
|
|
27,440,295 |
June 1 to June 29, 2013 |
|
2,955 |
|
|
2,683.13 |
|
|
2,955 |
|
|
19,511,658 |
Total |
|
4,945 |
|
|
2,694.83 |
|
|
4,945 |
|
|
19,511,658 |
All purchases during the quarter were made under the authorization from our Board of Directors to purchase up to $100 million market value of Seaboard common stock initially approved on November 6, 2009, which was extended through October 31, 2015. All purchases were made through open market or privately negotiated purchases and all the repurchased shares have been retired.
Item 6. Exhibits
10.1 Amendment No. 1 to Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard Marine, Ltd. for Marine Terminal Operations dated March 30, 2009.
10.2 Amendment No. 2 to Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard Marine, Ltd. for Marine Terminal Operations dated July 31, 2013.
31.1 Certification of the Chief Executive Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Chief Financial Officer Pursuant to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 The following financial information from Seaboard Corporations Quarterly Report on Form 10-Q for the quarter ended June 29, 2013, formatted in XBRL (Extensible Business Reporting Language): (1) Condensed Consolidated Statements of Comprehensive Income, (2) Condensed Consolidated Balance Sheets, (3) Condensed Consolidated Statements of Cash Flows, and (4) the Notes to Unaudited Condensed Consolidated Financial Statements *.
* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise are not subject to liability under these sections.
This Form 10-Q contains forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Seaboard Corporation and its subsidiaries (Seaboard). Forward-looking statements generally may be identified as statements that are not historical in nature; and statements preceded by, followed by or that include the words believes, expects, may, will, should, could, anticipates, estimates, intends, or similar expressions. In more specific terms, forwardlooking statements, include, without limitation: statements concerning projection of revenues, income or loss, capital expenditures, capital structure or other financial items, including the impact of mark-to-market accounting on operating income; statements regarding the plans and objectives of management for future operations; statements of future economic performance; statements regarding the intent, belief or current expectations of Seaboard and its management with respect to: (i) Seaboards ability to obtain adequate financing and liquidity, (ii) the price of feed stocks and other materials used by Seaboard; (iii) the sales price or market conditions for pork, grains, sugar, turkey and other products and services; (iv) the recorded tax effects under certain circumstances and changes in tax laws; (v) the volume of business and working capital requirements associated with the competitive trading environment for the Commodity Trading and Milling segment; (vi) the charter hire rates and fuel prices for vessels; (vii) the fuel costs and related spot market prices in the Dominican Republic; (viii) the effect of the fluctuation in foreign currency exchange rates; (ix) the profitability or sales volume of any of Seaboards segments; (x) the anticipated costs and completion timetable for Seaboards scheduled capital improvements, acquisitions and dispositions; or (xi) other trends affecting Seaboards financial condition or results of operations, and statements of the assumptions underlying or relating to any of the foregoing statements.
This list of forward-looking statements is not exclusive. Seaboard undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to a variety of factors. The information contained in this report, including without limitation the information under the headings Managements Discussion and Analysis of Financial Condition and Results of Operations, identifies important factors which could cause such differences.
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.
|
SEABOARD CORPORATION | |
|
| |
|
|
|
|
by: |
/s/ Robert L. Steer |
|
|
Robert L. Steer, Executive Vice President, |
|
|
Chief Financial Officer |
|
|
(principal financial officer) |
|
|
|
|
Date: August 6, 2013 | |
|
|
|
|
by: |
/s/ John A. Virgo |
|
|
John A. Virgo, Senior Vice President, Corporate Controller |
|
|
and Chief Accounting Officer |
|
|
(principal accounting officer) |
|
|
|
|
Date: August 6, 2013 |
Exhibit 10.1
AMENDMENT NO.1 TO AMENDED AND RESTATED TERMINAL AGREEMENT BETWEEN MIAMI-DADE COUNTY AND SEABOARD MARINE, LTD. FOR MARINE TERMINAL OPERATIONS
THIS AMENDMENT NO. 1 is entered this 30th day of March, 2009, by and between Miami-Dade County, Florida, a political subdivision of the State of Florida (County) Seaboard Marine Ltd., a Liberian Corporation, authorized to do business in the State of Florida (Seaboard), by and through their authorized representatives in accordance with the terms, conditions and covenants contained herein below. The County and Seaboard are jointly referred to as the Parties.
WHEREAS, the County owns certain lands located in Miami-Dade County, Florida, on which the Dante B. Fascell Port of Miami-Dade (hereinafter the Port) is located;
WHEREAS, on May 20, 2008, by Resolution No. R-599-08, the Countys Board of County Commissioners approved the Amended and Restated Terminal Agreement between Miami-Dade County and Seaboard Marine Ltd. (the Seaboard Agreement) amending, restating and extending the Terminal Agreement between Miami-Dade County and Seaboard Marine Ltd. for Marine Terminal Operations dated October 1, 1998;
WHEREAS, the Seaboard Agreement provides for, among other things, minimum cargo throughput guarantees by Seaboard and commitments by the County to complete certain infrastructure improvements by certain dates which the Parties seek to modify; and
WHEREAS, Seaboard and the Port of Miami Terminal Operating Company, L.C., (POMTOC) have entered into a Terminal Services Agreement (TSA) subject to, and conditioned upon, approval by the Miami-Dade County Board of County Commissioners providing for, among other things, Seaboards utilization of up to 18 acres of terminal space at the Port currently under lease to POMTOC pursuant to the September 15, 1994 Terminal Operating Agreement between POMTOC and the County (POMTOC Agreement);
NOW, THEREFORE, in consideration of the mutual covenants, and agreements herein contained, the sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. The Seaboard Agreement shall be amended as follows:
A. The Recitals Section of the Seaboard Agreement shall be amended to include the Recitals set forth above in this Amendment No. 1.
B. Section 2 of the Seaboard Agreement providing for definitions shall be amended to add the following definition:
TSA means the Terminal Services Agreement between Seaboard and the Port of Miami Terminal Operating Company, L.C. attached as Exhibit 1 to this Amendment No. 1.
C. Subsection 4(K) of the Seaboard Agreement is amended to add the following sentences:
The County shall have no obligation to undertake commercially reasonable efforts to make up to ten (10) acres of land available to Seaboard during the time the County is making improvements as set forth in Exhibit 7 and Exhibit C of this Agreement while the
TSA is in effect and Seaboard utilizes ten (10) or more acres pursuant to the TSA. Any land in excess of ten (10) acres utilized by Seaboard pursuant to the TSA shall be included as Throughput Acres and shall be subject to the Minimum Guaranteed TEU Throughput as set forth in the Agreement. Any land utilized by Seaboard Pursuant to the TSA shall not be included in determining any entitlement Seaboard may have to a discount from the Tier 1 TEU Rate set forth in Exhibit A to the Agreement.
D. Subsection 4(Q) of the Seaboard Agreement shall be amended to delete the date November 1, 2010 in the second sentence and replace it with the date June 1, 2011.
E. Section 7 of the Seaboard Agreement shall be amended to add the following subsection:
G) Seaboard shall pay the costs to erect and relocate fencing as required to implement the TSA, the relocation of the existing Port access road (Chute Road) to the location contemplated in the TSA, the relocation of the existing access and security check point presently provided at Chute Road, and any other improvements Seaboard and POMTOC deem necessary to implement the TSA, and shall contribute up to fifty thousand dollars ($50,000) towards the installation of fiber optics to the security check point and connection to existing Seaport network should County, after notice to Seaboard, elect to proceed with said connection. ,. Seaboard shall not be obligated to relocate Chute Road or relocate the security check point at the conclusion of the TSA or any of the costs associated therewith.
F. Exhibit C to the Seaboard Agreement shall be amended as follows:
(1) The completion date for Phase I improvements - container yard paving and drainage will be extended from December 31, 2009 to June 30, 2010;
(2) The completion date for Phase II improvements - container yard paving and drainage and RTG runways will be extended from September 30, 2010 to March 31, 2011;
(3) Phase III improvements - container yard paving and drainage and RTG runways will be extended from September 30, 2011 to March 31, 2012;
(4) Phase IV improvements - container yard paving and drainage and RTG runways from September 30, 2012 to March 31, 2013; and
(5) Phase V improvements - container yard paving and drainage and RTG runways from September 30, 2014 to March 31, 2015.
The Parties agree that any delays in implementation of the improvements in the Phases above occurring before January 31, 2009 are not attributable to either Party, and shall not be the basis for any extension of any deadline above.
2. All terms and conditions of the Seaboard Agreement not modified by this Amendment No. 1 shall remain in full force and effect.
3. This Amendment No.1 shall be governed by Florida Law.
IN WITNESS WHEREOF the parties have caused this Amendment No. 1 to be executed in their respective corporate names by their appropriate officers, and have their respective corporate seals affixed thereto, all as of the day and year first written above.
SEABOARD MARINE LTD |
MIAMI-DADE COUNTY | |||
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/s/ Bruce A. Brecheisen |
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/s/ Ysela Llort |
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Name: Bruce A. Brecheisen |
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Name: |
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Title: Executive Vice President |
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Date: Jan. 30, 2009 |
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ATTEST: |
Approved as to legal form and sufficiency: | |||
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/s/ Sharon H. Nelson |
/s/ Richard Seavey | ||
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Name: Sharon H. Nelson |
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Title: Paralegal |
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Date: Jan 30, 2009 |
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ATTEST: | ||
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Clerk of the Board | ||
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/s/ Elizabeth Adorno | ||
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Deputy/Clerk |
Exhibit 10.2
AMENDMENT NO. 2
TO AMENDED AND RESTATED TERMINAL AGREEMENT BETWEEN MIAMI-DADE COUNTY AND SEABOARD MARINE, LTD. FOR MARINE TERMINAL OPERATIONS
THIS AMENDMENT NO. 2 is entered this 31st day of July, 2013, by and between Miami-Dade County, Florida, a political subdivision of the State of Florida (County) and Seaboard Marine Ltd., a Liberian Corporation, authorized to do business in the State of Florida (Seaboard), by and through their authorized representatives in accordance with the terms, conditions and covenants contained herein below. The County and Seaboard are jointly referred to as the Parties.
WHEREAS, the County owns certain lands located in Miami-Dade County, Florida, on which the Dante B. Fascell Port of Miami-Dade (hereinafter the Port) is located;
WHEREAS, on May 20, 2008, by Resolution No. R-599-08, the Countys Board of County Commissioners (Board) approved the Amended and Restated Terminal Agreement Between Miami-Dade County and Seaboard Marine Ltd. (the Initial Seaboard Agreement) amending, restating and extending the Terminal Agreement between Miami-Dade County and Seaboard Marine Ltd. for Marine Terminal Operations dated October 1, 1998;
WHEREAS, on March 3, 2009, by Resolution No. R-201-09, the Board approved Amendment No. 1 to the Initial Seaboard Agreement which, among other things, provided for Seaboards utilization, through a Terminal Services Agreement (TSA) with the Port of Miami Terminal Operating Company, L.C. (POMTOC), of up to eighteen (18) acres of terminal space at the Port currently under lease to POMTOC, pursuant to the September 15, 1994 Terminal Operating Agreement between POMTOC and the County (POMTOC Agreement) (The Initial Seaboard Agreement and Amendment No. 1 are collectedly referred to as the Seaboard Agreement);
WHEREAS, Seaboard and POMTOC desire to modify and extend the TSA to increase the terminal space available to Seaboard under the TSA up to 25.4 acres for a term equal to that remaining under the POMTOC Agreement or until such time said acreage, or substantial portion thereof become part of the leased Premises under the Seaboard Agreement. The amended TSA is being presented for consideration by the Board simultaneously with this Amendment; and
WHEREAS, the Seaboard Agreement provides for, among other things, minimum cargo throughput guarantees by Seaboard and commitments by the County to complete certain infrastructure improvements by certain dates; and
WHEREAS, Seaboard Marine, which has operated at the Port since 1987, has fulfilled its commitments under the Seaboard Agreement and has continued to grow with Seaboard vessels now carrying nearly forty-five percent (45%) of the total total TEUs passing through the Port; and
WHEREAS, the County, through its Seaport Department, desires to complete certain infrastructure improvements at the Port, which include the development of an intermodal
rail facility, and generally, working in conjunction with the various tenants at the Port to reallocate portions of Port land to efficiently accommodate the planned infrastructure improvements as well as the efficient operation of Port facilities; and
WHEREAS, the Port desires to construct the planned Port intermodal facility on land which is, in part, currently leased by the County to Seaboard under the Seaboard Agreement. The affected land is an integral part of Seaboards terminal facility and the loss of said land, if not mitigated by certain Port actions reflected in this Amendment, will have a significant and material impact on Seaboard both operationally and economically and requires the relocation of Seaboards terminal infrastructure; and
WHEREAS, the County and Seaboard desire to amend the Seaboard Agreement to make various changes and adjustments to the Seaboard Agreement, in part, to allow for the construction of the Ports intermodal rail facility on land currently leased to Seaboard under the Seaboard Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, the sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. The Seaboard Agreement shall be amended as follows:
A. The Recitals Section of the Seaboard Agreement and Amendment No. 1 shall be amended to include the Recitals set forth above in this Amendment No. 2.
B. Section 2 of the Seaboard Agreement providing for definitions shall be amended to:
i. add the following sentence at the end of the existing definition of Actual TEU Throughput: Shiftings or re-stows on Seaboards Vessel shall not be counted as a TEU towards Actual TEU Throughput.
ii. delete the reference to Section 5(L) and replace it with Section 4(L) in the definition of Actual TEU Throughput.
iii. add the following definition: Car Rack means an open-walled forty or forty-five foot conveyance used strictly for carrying vehicles that are loaded within the Port.
iv. delete the definition of Container and replace it with the following: Container means a marine cargo container or a trailer, flatbed, lowboy, platform, flatrack, Car Rack, or detached chassis. If empty flatracks, chassis, flatbeds or platforms are bundled, each bundle shall count as one Container. Flatracks and platforms, when used as ships gear, shall not be counted as a Container. Empty Car Racks, initially loaded at the Port with one or more
vehicle(s) for export, shall not be subject to TEU fees or charges when returned/imported empty to the Port, but however shall be counted as a Container.
v. the definition of Effective Date shall be amended by adding the following sentence to the end of the existing definition: As to any amendment of this Agreement, the Effective Date of any such amendment shall be the date of the Board of County Commissioners resolution that approves such amendment and after the expiration of any applicable Mayoral veto period.
vi. delete the definition of Minimum Guaranteed TEU Throughput and replace it with the following: Minimum Guaranteed TEU Throughput means the minimum Actual TEU Throughput required of Seaboard and is set for each Fiscal Year by multiplying the per acre requirements set forth in Exhibit A by the Throughput Acres in existence during the applicable Fiscal Year.
vii. replace the definition of Shortfall Fees as follows: Shortfall Fees means the difference between Actual TEU Throughput and the Minimum Guaranteed TEU Throughput multiplied by the Tier 1 TEU Rate for any applicable Fiscal Year as set forth in Exhibit A and in Section 5(E).
viii. delete the definition of Terminal Area and replace it with the following: Terminal Area means, as of the Effective Date of Amendment No. 2, the 68.97 acres of land designated in Exhibit B-(Amendment No. 2), attached hereto and incorporated by reference herein, as Parcel A, B-1 and B-2 including those buildings and structures currently occupied by Seaboard and other non-Seaboard tenants, located within said parcels. The Terminal Area is subject to adjustment from time to time as provided in the Seaboard Agreement, as amended.
ix. Delete the definition of Throughput Acres and replace it with the following: Throughput Acres means all acreage, except as specifically excluded under the Agreement, that is suitable for vertically stacking of more than two loaded containers, which as of the Effective Date of this Amendment No. 2, is comprised of Parcel A, as identified on Exhibit B, and is subject to change as the rehabilitation of additional parcels identified on Exhibit B is completed in accordance with the terms and conditions set forth in the Agreement.
x. replace the definition of TSA as follows: TSA means the Terminal Services Agreement between Seaboard and the Port of Miami Terminal Operating Company, L.C., as amended by that certain Amendment to Terminal Service Agreement dated April 1,
2013, all attached as Exhibit 1 to this Amendment No. 2.
xi. delete the definition of Vehicle and replace it with the following: Vehicles means a motorized wheeled conveyance used for transporting persons or cargo , except where loaded on or in a flat rack, Car Rack or container.
xii. replace the definition of VSA as follows: VSA means an agreement, filed with the Federal Maritime Commission, if applicable, between shipping lines providing space for cargo, containerized or otherwise, on vessels, and shall include, but not be limited to, vessel sharing agreements, conference agreements, slot charters, space charters, space sharing agreements and feeder agreements.
C. Section 3 of the Seaboard Agreement shall be deleted and replaced with the following:
Section 3. Effective Date and Term
The Effective Date of this Agreement shall be May 20, 2008, the date of the Board of County Commissioners resolution approving this Agreement. The Expiration Date shall be September 30, 2028, unless Renewal Terms are exercised, and subject to the cancellation and other terms and conditions contained herein. Subject to the conditions below, Seaboard shall have the sole option to renew this Agreement on the terms and conditions contained herein for three (3) Renewal Terms of five (5) years each. Seaboards renewal option for the first Renewal Term requires it to meet either one of the following two (2) conditions: (i) Seaboards aggregate average TEU Throughput per Throughput Acre for the final five (5) Fiscal Years of the Initial Term exceeds the aggregate average per acre TEU Throughput for all Port cargo terminal operators combined during those same five (5) Fiscal Years, or (ii) Seaboards total payments (Total Payments) to the Port for any and all charges and fees (including those in this Agreement and the Tariff) exceed one hundred and ten million dollars ($110,000,000) for the final five (5) Fiscal Years of the Initial Term, which sum shall be adjusted on a pro rata basis for changes in Throughput Acres acreage. Seaboard shall have the same two (2) conditions for its option to exercise the second and third Renewal Terms, except the required amount of the Total Payments shall be one hundred and twenty-eight million dollars ($128,000,000) for the five (5) Fiscal Years of the first Renewal Term, and one hundred and forty-six million dollars ($146,000,000) for the five (5) Fiscal Years of the second Renewal Term. For purposes of the options, Seaboards Total Payments shall be adjusted for force majeure events, failure of the County to fulfill its commitments, or actions by the County that inhibit or restrict
Seaboards ability to reach the Total Payments requirement. Should Seaboard wish to enter into a Renewal Term after having met either of the two (2) conditions listed above, Seaboard shall notify the County of its intent to exercise the first renewal option no less than ninety (90) days prior to the expiration of the Initial Term or any successive Renewal Term. Should Seaboard fail to meet both of the conditions listed above for the first Renewal Term and the Parties do not agree to enter into the first Renewal Term or a successor contract, the County agrees to reimburse Seaboard for the unamortized portion of useful capital improvements made by Seaboard within the Terminal Area during the final five (5) years of the Initial Term. Any such reimbursement shall be equal to the value of the assets scheduled amortization over the five (5) year period following the Initial Term, calculated using asset lives in accordance with generally accepted accounting principles.
D. Subsection 4(A) of the Seaboard Agreement shall be deleted and replaced with the following: The County agrees to allow Seaboard Preferential Berthing Rights at the Berths 149 through 182. In the event the Port no longer has current obligations with the current user of Berth 183, the Port Director shall assign Berth 183 to Seaboard for its preferential use. The Port shall provide Seaboard the use of at least two (2) operable container gantry cranes, upon request by Seaboard, and Preferential Berthing Rights at the Berths 140 through 148. Seaboards usage of such Bays 140 through148 is subject to Seaboard utilizing the Ports operable and available gantry crane(s). In the event Bays 140 through 148 are occupied by a non-Seaboard Vessel, and/or up to two (2) operable gantry cranes, if required by Seaboard, are not available, and/or said Bays are unusable, the Port shall, on a priority basis, provide the closest available gantry berth with at least two (2) operable gantry cranes, if requested by Seaboard.
E. Subsection 4(D) of the Seaboard Agreement shall be deleted and replaced with the following: The County agrees to provide Seaboard with the uninhibited right of ingress and egress leading to and from the Terminal Area, including at the location of the Seaboard terminal gates, receiving locations, office location(s) and along the string piece. In the event Seaboard is not able to process vehicles and/or cargo owing to a backup not caused by Seaboard, the Port will promptly use reasonable efforts to marshal traffic to allow for prompt access of Seaboard vehicles and cargo to and from the Terminal Area. After completion of the Tunnel, the Port will continue to provide Seaboard only lane(s) for access to the Terminal Area.
F. Subsection 4(F) of the Seaboard Agreement shall be deleted and replaced with the following: The County acknowledges that Seaboard desires to conduct its terminal operations from a contiguous tract of land on the Port. In this regard, the County agrees that if additional land contiguous to the
Terminal Area becomes available for permanent use, other than acreage to the west of the Terminal Area, and such land is free from contractual or other obligations and not needed for general Port uses, the County shall extend to Seaboard a first right of refusal to enter into an agreement for use of such land, up to ten (10) acres, on terms to be agreed upon, but generally consistent with the Seaboard Agreement or other agreements with terminal operators at the Port. Under Seaboards first right of refusal, the Parties agree to work in good faith regarding such land and improvements thereto, and the Port shall offer them to Seaboard prior to offering them to any other third party.
G. Subsection 4(H) of the Seaboard Agreement shall be deleted and replaced with the following: The County may, through administrative action by the Port Director, offer Seaboard land for temporary rental if land becomes available, at the Land Rental Rate applicable at the time. Temporary land at the time of the Effective Date includes land designated as Parcel C in Exhibit B as amended, which shall not be Throughput Acres.
H. Subsection 4(K) of the Seaboard Agreement shall be deleted.
I. Subsection 4(L) of the Seaboard Agreement shall be deleted and replaced with the following: Upon execution of this Amendment, Seaboard may, in its discretion, provide terminal and other services for third parties providing that the TEU rate for third party cargoes will be charged at the higher of the then applicable Tier I TEU rate charged to Seaboard in this Agreement, or the average of the highest Tier 1 equivalent TEU rates of the other cargo terminal operators at the Port, unless such third party cargoes qualify for any other volume incentive provisions described in the Tariff or as otherwise may be part of an agreement between the third party and the Port. The TEUs from Seaboards third party terminal services will count towards Seaboards Actual TEU Throughput, however for the purposes of determining Discounted TEU Rates in any Fiscal Year, the TEUs from Seaboards third party terminal services shall only be applied to Seaboards Actual TEU Throughput (to determine the total discount) once Seaboard reaches TIER 3 (as identified on Exhibit A) and at such time, all TEUs from Seaboards third party terminal services during said Fiscal Year shall be applied to Actual TEU Throughput for the purposes of determining Discounted TEU Rates.
J. Subsection 4(O) of the Seaboard Agreement shall be deleted and replaced with the following: The County agrees that the lease(s) on all buildings, structures, and land in the Terminal Area, located within Parcel B1 in Exhibit B that are currently occupied and leased directly from the County by tenants other than Seaboard (Third Party Leases), shall be terminated within sufficient time for County to complete the demolition and rehabilitation of the Parcel B1 within the time frame set forth in Subsection 4(V), except that such date may be altered or extended by mutual written
agreement between Seaboard and the County, by administrative act of the Port Director. The County shall not enter into, or amend, Third Party Leases on terms not permitting compliance with this provision. With respect to Third Party Leases, the premises leased under Third Parties Leases, adjacent lands utilized by said third parties or their invitees, including, but not limited to, the means of access, ingress and egress, the County also hereby agrees that:
1. the County shall remain solely responsible for any obligations arising under or in connection with the Third Party Leases, including, but not limited to, any obligations for maintenance of the building and leased premises, and environmental obligations, any access obligations, any ingress obligations, and any egress obligations.
2. the County shall assume any and all liability, and shall indemnify and defend Seaboard against the same, except to the extent caused by act or omission of Seaboard, associated with or arising out of the Third Party Leases until the Third Party Lease is terminated by the County and the tenant vacates the areas leased and utilized under said Third Party Leases.
3. the County, as landlord, shall be solely responsible for the collection any and all rents and remittance of taxes associated with the Third Party Leases until their termination.
4. the County shall modify Third Party Leases as necessary to give full force and effect to the Seaboard Agreement and shall not permit any tenant, or invitees of any tenant to interfere with the rights of Seaboard under the Seaboard Agreement, the business operations of Seaboard, or Seaboards access to the Terminal Area or other land at the Port utilized by Seaboard.
5. the County shall ensure that each property subject to a Third Party Lease is prepared for demolition within the time frame established herein.
K. Subsection 4(P) of the Seaboard Agreement shall be deleted and replaced with the following: The County acknowledges that Seaboard has agreed, as part of this Amendment, to relinquish certain land, identified as Parcels R-1, R-2 and R-3 on Exhibit B, originally leased to Seaboard, so that the Port may construct an intermodal rail facility and, as a result, to accommodate Seaboards operational needs, Seaboard will utilize 25.4 total acres of land, made up of Parcels E-1, E-2, E-3 and E-4 identified on Exhibit B, currently leased to POMTOC under the TSA. The County agrees that the land identified as Parcels E-1 and E-3, comprising a total of 16.3 acres, shall be leased to Seaboard, become part of the Terminal Area and subject to the terms and conditions of Seaboard Agreement, at the sooner of, (a) the conclusion of the POMTOC Agreement, (b) such
time the County and POMTOC agree to a modification or extension of the POMTOC Agreement, or a new and/or amended POMTOC Agreement, which does not include Parcels E-1 and E-3, or (c) the County gains possession and control said parcels, but in no event later than October 1, 2014, at which time Seaboard shall pay the County the then current Land Rental Rate and such acreage shall be Throughput Acres. Simultaneously with the transfer of Parcels E-1 and E-3 to Seaboard, the County shall cause the lessee(s) of Parcels E-2 and E-4, as identified on Exhibit B, to make available to Seaboard, on the same terms and conditions as the TSA, the use of said land until such time as the Port completes the demolition of Shed E (located on Parcel F-1) and Shed G (located in Parcel B-1), and reconditioning of the surrounding land as provided in Section 7. In the event Parcels E-2 and E-4 shall not be under lease to a Port tenant, County shall, by administrative action of the Port Director, temporarily lease to Seaboard, at the then current Land Rental Rate, said parcels for the same duration. Land utilized by Seaboard under a TSA or temporary lease from the County shall not be Throughput Acres, except however, TEU throughput shall be counted towards Seaboards Minimum Guaranteed TEU Throughput.
At such time the County completes the demolition of Shed E (located on Parcel F-1) and reconditioning of the related land as required, Parcel F-1 identified on Exhibit B, shall become part of the Terminal Area, be considered Throughput Acres and subject to the Seaboard Agreement, and Seaboard shall pay the County the then current Land Rental Rate. The County shall not henceforth enter into any agreement or lease, or otherwise take any action inconsistent with the foregoing.
The County agrees that the third-party lease(s) for Shed E and the land identified as Parcel F-1 on Exhibit B shall be terminated as soon as legally and reasonably possible, but in any event such lease(s) shall be terminated in sufficient time for the County to deliver Parcel F-1 to Seaboard, as contemplated above by January 1, 2017, unless such date is amended or extended by mutual agreement between the County and Seaboard. Prior to delivery of Parcel F-1 to Seaboard, the County at is sole expense, shall demolish Shed E, remove fencing and other tenant constructed improvements and improve the underlying and surrounding land in a manner consistent with the paving and other improvement requirements set forth in Section 7. The costs paid by County to demolish Shed E and improve Parcel F-1, shall not count toward the Funding Cap.
The County also agrees that once Parcel F-2 becomes available at the conclusion of the construction of the intermodal rail facility, the County shall improve said land in a manner consistent with Section 7 (and adjacent Terminal Area land), and upon the completion of said improvements, Parcel F-2 shall become part of the Terminal Area, be considered Throughput Acres and subject to the Seaboard Agreement and Seaboard shall pay the County the then current Land Rental Rate.
L. Subsection 4(Q) of the Seaboard Agreement, shall be further amended to delete the date June 1, 2011 in the second sentence and replace it with the date June 30, 2014 and by adding the following sentence: The change in expiration date of the scale fee grace period shall be applied retroactively and the County acknowledges that Seaboard does not owe any scale charges at this time and that Seaboard has the right to construct, with no fees owed to the Port, scales at its own expense so long as such scales are within the land subject to the TSA or Terminal Area.
M. Section 4 of the Seaboard Agreement shall have the following subsections added:
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The County commits to substantially complete, at its cost, the scheduled construction of the bulkhead located between Bay 177 and Bay 182 (West Bulkhead) by December 31, 2014. |
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(S) - |
The County acknowledges that it is responsible for bulkhead repair and maintenance and that failure to adequately repair or maintain bulkheads, inclusive of the scheduled construction of the West Bulkhead, could negatively impact Seaboards use of the Terminal Area. The County also acknowledges the bulkheads between Bays 165 and 177 are in need of eventual rehabilitation and commits to rehabilitate such, at its cost, before June 30, 2017. The rehabilitation design will give consideration to including rails for gantry cranes. |
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Maintenance Dredging: Subject to applicable laws, the County commits to maintaining its dredging depth in the access channel and along Bays 140 through 148 east at forty (40) feet M.L.W. and along Bays 148 west to 182 at thirty-two (32) feet M.L.W. (collectively the Minimum Depth). If at any time during the Initial Term or any applicable Renewal Term Seaboard shall have a reasonable basis to believe these bays have less than Minimum Depth, (the Alleged Dredging Condition), Seaboard shall provide immediate written notice thereof to the Port Director, which notice shall include the precise location(s) of the Alleged Dredging Condition and the factual basis of thereof. |
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The County recognizes it is likely the size and draft of Vessels utilized by Seaboard will increase over the Term of the Seaboard Agreement. County will use its best efforts to plan and implement dredging improvements to accommodate deeper draft Vessels along the Berths in order to facilitate increases in Actual TEU Throughput. |
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At such time that the County needs Parcel C for other purposes it shall give Seaboard ninety (90) days written notice to vacate said parcel. At that time, the parties will, in good faith, discuss other parking alternatives that may be available. If the parties are unable to agree to a suitable alternative, Seaboard may use up to one and one-half (1.5) acres of Parcel A in Exhibit B for employee parking. So long as this designated area is west of berth 184, is no more than one and one-half (1.5) acres, and is designed in accordance with proper security regulations, it shall be considered Non-Throughput Acres. The County agrees that Seaboard will be given suitable access to this designated area from the west edge of the Terminal Area. |
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At the request of County, Seaboard, as reflected in this Amendment, has agreed to adjust the Terminal Area and relinquish certain land back to the County, which was leased to Seaboard under the Initial Seaboard Agreement, to be used by the County to construct and operate an intermodal rail facility at the Port. To adjust the Terminal Area and relinquish the land needed by the County, certain portions of the security perimeter of Seaboards Port terminal facility, access locations and other infrastructure maintained by Seaboard and essential to Seaboards operation at the Port must be altered and, in certain cases, completely relocated. In addition to its demolition responsibilities under subsection 4(P), the County shall also be similarly responsible for demolishing, at its own cost, the following: Shed G located on Parcel B-1, 1500 Building located on Parcel B-1, 1620 Building located on Parcel B-1, and 1306 Building located on Parcel A. After demolition of all such structures, the Port shall, at its cost, improve the land these structures previously occupied, extending one hundred (100) feet in all directions from the current building walls, in a manner consistent with the work done as described in Sections 7. The County and Seaboard shall mutually agree to a demolition schedule, but in any event the demolition and improvement set forth above shall be completed by January 1, 2017, except where such deadline is modified or amended by mutual agreement between the County and Seaboard. The County shall bear the costs demotion, improvement and related work, and such costs shall not count against the County Funding Cap. |
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Seaboard and the County agree a formal amendment of the Seaboard Agreement does not need to be submitted for approval to the Board each time the various parcels referenced herein become part of the Seaboard Agreement, subject to a TSA or temporary lease, or at such time(s) dates for demolition and related activities are established, amended, or extended. To facilitate the various allocations of land addressed herein, the County agrees the approval by the Board of this Second Amendment authorizes the |
Port Director to take such actions necessary to give effect to the provisions set forth herein.
N. Section 5 of the Seaboard Agreement shall have the following subsections modified/added:
D) Minimum Annual Throughput. During each Fiscal Year of the Initial Term and any Renewal Term, Seaboard shall provide the Minimum Guaranteed TEU Throughput, subject to force majeure or the failure of the County to comply with this Agreement, hereunder. The Minimum Guaranteed TEU Throughput will be adjusted pro rata to reflect any partial Fiscal Year. For the purposes of determining Actual TEU Throughput, each Vehicle, not in or on a Car Rack or Container, shall count as two-thirds of a TEU. Cargo, other than Vehicles and Containers, shall count as one (1) TEU per ten (10) tons for purposes of determining Actual TEU Throughput but said cargo shall not be utilized to determine Discount TEU Rates. Seaboard cargo on a non-Seaboard vessel as part of a VSA shall count towards Actual TEU Throughput totals, but any non-Seaboard cargoes on a non-Seaboard vessel, which is part of a Seaboard VSA, although counting towards the Actual TEU Throughput, shall be assessed at the higher of the then-applicable Seaboard Tier I TEU Rate or the average of the highest Base or Tier I TEU Rates of the other cargo terminal operators at the Port. Trans-shipped TEUs will count towards TEU throughput calculations, but only if future rates for Trans-shipped TEUs are equal to or greater than the then-applicable Tier I TEU Rate. However, notwithstanding the manner of calculation of TEU throughput, Seaboard will be responsible for paying to the Port the equivalent full TEU Rate for all TEUs falling under Tier I in Exhibit A.
G) Add the following to the end of the provision: Where land is removed from the Terminal Area under this provision, the County shall relocate, at its expense, any facilities and other infrastructure located on the land removed to location(s) within the Terminal Area reasonably designated by Seaboard.
H) deleted in its entirety.
K) Seaboard agrees to not make and releases the County from any claims or any contractor of the Tunnel for not compensating Seaboard for its loss of usage of a former security gate structure located in the Terminal Area.
L) Minimum Annual Crane Revenue Guarantee. Commencing on October 1, 2014 Seaboard shall guarantee County minimum annual payments of gantry crane rental charges (at rates and charges
governed by subsection 6(C)) computed based on a minimum number of annual crane hours of 1,750 (the Minimum Crane Hour Guarantee) so long as the County meets its obligations under subsection 4(A). Notwithstanding how many gantry crane hours Seaboard actually uses the Ports gantry cranes in any given Fiscal Year, Seaboard shall pay the County the greater of (i) the gantry crane fees and charges due the County for the actual number of crane hours used by Seaboard in such Fiscal Year, or (ii) an amount computed by multiplying the then applicable gantry crane rate(s) (under subsection 6(C)) by the Minimum Annual Crane Hour Guarantee for the applicable Fiscal Year. If following the end of any Fiscal Year during the Initial Term or applicable Renewal Term, Seaboard has paid the County crane fees during the preceding Fiscal Year in an amount less than the amount of minimum crane fees due under this Section (the Crane Fee Deficiency), Seaboard shall pay the County the full amount of such Crane Fee Deficiency by November 15 immediately following the just concluded Fiscal Year. If Seaboard pays a Crane Fee Deficiency in any Fiscal Year, and total gantry hours in the subsequent Fiscal Year exceed the Minimum Crane Hour Guarantee Base for the subsequent Fiscal Year, (but only the immediate subsequent Fiscal Year), then Seaboard shall receive a credit for the excess crane hours, but only up to the amount of the Crane Fee Deficiency paid during the previous Fiscal Year.
M) Minimum Throughput Acreage. Seaboard agrees that until parcels currently under the TSA with POMTOC are transferred by the County to Seaboard (as described in Section 4(P)), a minimum of sixty-five (65) acres will be considered as Throughput Acres for purposes of Seaboards Minimum Guaranteed TEU Throughput and TEU Throughput tiers in Exhibit A (as amended) even if the acres subject to Throughput in Exhibit B (as amended) are below sixty-five (65) acres.
O. Subsection 6(I) of the Seaboard Agreement shall be amended to add the following sentence: The Ports actual security operating costs for the Fiscal Year ended September 30, 2012 were $15.0 million.
P. Seaboard may, in its discretion, maintain a tariff establishing rates, rules and terms and conditions applicable to work and services provided by or on behalf of Seaboard at its terminal facility (Terminal Area, TSA land or other lands leased or operated by Seaboard at the Port), provided that such tariff does not conflict with the Ports Tariff.
Q. Subsection 7(C) of the Seaboard Agreement, as amended, shall be amended to add the following sentences: Seaboard acknowledges that the County has satisfactorily met the completion dates for the first three (3) phases of the five (5) phases described in Exhibit C. The County
acknowledges that Seaboard has fully and satisfactorily paid three million dollars ($3,000,000) for its share of these completed phases.
R. Subsection 7(F) of the Seaboard Agreement shall be amended to add the following sentences: Seaboard acknowledges that the County satisfactorily completed the East Bulkhead project described in Section 4(J) and that all construction deadlines were met. The County and Seaboard agree that $14,696,927.00 has been paid by the County for the three (3) completed phases, leaving a remainder of $6,303,073.00 in the current County Funding Cap plus the funds the County has received or will receive from Seaboard for its share. The parties agree that the demolition, improvement and rehabilitation activities described in subsection 4(O), 4(P), 4(V) and 7(G) shall not be counted against the County Funding Cap.
S. Subsection 7(G) of the Seaboard Agreement shall be deleted and replaced with the following:
(G) The County shall complete and pay for the costs of the following:
(i) relocation of the current Chute Road to the area north/east of the TSA Parcels E-3 and E-4. At the conclusion of the TSA (or temporary lease) as set forth herein, County shall pay for the relocation of Chute Road to the north and east of Parcels E-1 and E-3.
(ii) construct temporary entry/TIR gates/support function with canopies, utilities (including power and fiber optics), striping, etc. in Parcel E-3 in accordance with applicable design and configuration requirements provided by Seaboard.
(iii) relocate perimeter fencing around the TSA parcels and pay for the relocations costs associated with absorbing the TSA parcels into the Seaboard terminal facility. At the conclusion of the TSA, County shall pay for the relocation of the perimeter fencing around Parcels E-3 and E-1 (which will border the relocated Chute Road).
(iv) provide for safe and continued access for vehicles to the 1630 Building.
(v) pave and stripe approximately 180 parking spots to the north of the 1630 Building.
T. Section 33 shall be amended to delete the last sentence of Section 33 and replace it with the following: Should Seaboard elect to assign this Agreement to an entity that is neither a wholly-owned subsidiary or affiliate, Seaboard must pay the County two-hundred and fifty thousand dollars ($250,000) for each year remaining on the Seaboard Agreement and all three (3) renewal terms.
U. The following section will be added: Section 44. As provided in subsection 4(G) of the Agreement, the Port Director, with Seaboards consent, made minor adjustments, both increases and decreases, to Seaboards Terminal Area due to multiple construction projects, including the Tunnel. Since the Initial Agreements Effective Date, Seaboard has continued to pay land rent based upon the Terminal Area described in the Initial Agreement, which resulted in overpayments by Seaboard. A reconciliation, agreed to by both parties, has shown that the Port owes Seaboard approximately $560,403 for net overpayments made by Seaboard. Within thirty (30) days after the Effective Date of this Amendment No. 2, Seaboard will release the County from this sum and any other overpayment credit obligations related to land adjustments.
V. Due to adding a third Renewal Term, as described in amended Section 3, Exhibit A shall be replaced with a new Exhibit A-(Amendment No. 2) as attached and such references to Exhibit A in the Seaboard Agreement, as amended, shall be deemed to be referencing, as applicable, Exhibit A (Amendment No.2)
Due to the changes in the Terminal Area, as described in amended Section 2, Exhibit B shall be replaced with a new Exhibit B-(Amendment No. 2) as attached and such references to Exhibit B in the Seaboard Agreement, as amended, shall be deemed to be referencing, as applicable, Exhibit B (Amendment No.2).
W. The parties mutually agree Exhibit C to the Seaboard Agreement shall be further amended as follows:
(1) The completion date for Phase IV improvements - container yard paving and drainage and RTG runways from March 31, 2013 (as amended) to May 31, 2015; and
(2) The completion date for Phase V improvements - container yard paving and drainage and RTG runways from March 31, 2015 (as amended) to January 31, 2016.
The Parties agree that any delays in implementation of the improvements in Phases IV and V occurring before the date of this Amendment No. 2 are not attributable to either Party.
2. On port rail rates. To the extent permitted by applicable law, the Port shall use best efforts to cause rates charged for the use of the intermodal rail service at the Port to be reasonably competitive with rates charged for the use of similarly situated facilities within fifty (50) miles of the Port.
3. All terms and conditions of the Seaboard Agreement and Amendment No. 1 not modified by this Amendment No. 2 shall remain in full force and effect.
IN WITNESS WHEREOF the parties have caused this Amendment No. 2 to be executed in their respective corporate names by their appropriate officers, and have their respective corporate seals affixed thereto, all as of the day and year first written above.
SEABOARD MARINE LTD. |
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MIAMI-DADE COUNTY | |
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By: /s/ Bruce A. Brecheisen |
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By: /s/ Jack Osterholt | |
Name: |
Bruce A. Brecheisen |
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Name: |
Title |
EVP |
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Title: |
Date: |
18 June 2013 |
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Date: |
ATTEST: |
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Approved as to legal form and sufficiency: | |
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By: /s/ Daniel ONeil |
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/s/ Richard Seavey | |
Name: |
Daniel ONeil |
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Title |
Director |
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Date: |
18 June 2013 |
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ATTEST: |
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Clerk of the Board |
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/s/ Gene Spencer |
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Deputy Clerk |
EXHIBITS TO AMENDMENT NO. 2 TO AMENDED
AND RESTATED TERMINAL AGREEMENT
Following is a list of the Exhibits to Amendment No. 2 to Amended and Restated Terminal Agreement, which are omitted from the Amendment No. 2 which is filed with the Securities and Exchange Commission (SEC). Seaboard Corporation (Seaboard) undertakes to provide to the SEC the Exhibits, as requested, subject to Seaboards right to request confidential treatment under the Freedom of Information Act.
Exhibit A -- TEU Minimum Throughput Guarantees and Rates |
Exhibit B -- Seaboard Acreage |
Exhibit 1 -- Amendment to Terminal Service Agreement |
Exhibit 31.1
CERTIFICATIONS
I, Steven J. Bresky, certify that:
1. I have reviewed this report on Form 10-Q of Seaboard Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 6, 2013 |
/s/ Steven J. Bresky |
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Steven J. Bresky, Chairman of the Board, |
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President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATIONS
I, Robert L. Steer, certify that:
1. I have reviewed this report on Form 10-Q of Seaboard Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: August 6, 2013 |
/s/ Robert L. Steer |
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Robert L. Steer, Executive Vice President, |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2013 (the Report) by Seaboard Corporation (the Company), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
· The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
· The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 6, 2013 |
/s/ Steven J. Bresky |
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Steven J. Bresky, Chairman of the Board, |
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President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the fiscal quarter ended June 29, 2013 (the Report) by Seaboard Corporation (the Company), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
· The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and
· The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: August 6, 2013 |
/s/ Robert L. Steer |
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Robert L. Steer, Executive Vice President, |
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Chief Financial Officer |
Investments (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Investments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the amortized cost and estimated fair value of short-term investments for both available-for-sale and trading securities |
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Summary of estimated fair value of fixed rate securities designated as available-for-sale, classified by the contractual maturity date of the security |
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Income Taxes
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6 Months Ended |
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Jun. 29, 2013
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Income Taxes | |
Income Taxes | Note 4 – Income Taxes
Seaboard’s tax returns are regularly audited by federal, state and foreign tax authorities, which may result in material adjustments. Seaboard’s U.S. federal income tax years’ are closed through 2009. Seaboard’s 2010 U.S. income tax return is currently under IRS examination. There have not been any material changes in unrecognized income tax benefits since December 31, 2012. Interest related to unrecognized tax benefits and penalties was not material for the six months ended June 29, 2013.
On January 2, 2013, the American Taxpayer Relief Act of 2012 (the Tax Act) was signed into law. The Tax Act extended many expired corporate income tax provisions that impact current and deferred taxes for financial reporting purposes. In accordance with U.S. GAAP, the determination of current and deferred taxes is based on the provisions of the enacted law as of the balance sheet date; the effects of future changes in tax law are not anticipated. The effects of changes in tax laws, including retroactive changes, are recognized in the financial statements in the period that the changes are enacted. Accordingly, as the Tax Act was signed into law in 2013, the effects of the retroactive provisions in the new law on current and deferred tax assets and liabilities for Seaboard were recorded in the first quarter of 2013. The total impact was a one-time tax benefit of $7,945,000 recorded in the first quarter of 2013 related to certain 2012 income tax credits. In addition to this amount is a one-time credit of approximately $11,260,000 for 2012 Federal blender’s credits that was recognized as revenues in the first quarter of 2013. See Note 9 for further discussion of this Federal blender’s credit. |
Investments (Details) (USD $)
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Jun. 29, 2013
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Dec. 31, 2012
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Investments | ||
Total available-for-sale and trading short term investments, amortized cost | $ 358,191,000 | $ 308,064,000 |
Total available-for-sale and trading short term investments, fair value | 358,506,000 | 313,379,000 |
Estimated fair value of fixed rate securities designated as available-for-sale, classified by the contractual maturity date of the security | ||
Due within one year | 2,128,000 | |
Due after one year through three years | 57,362,000 | |
Due after three years | 51,283,000 | |
Total fixed rate securities | 110,773,000 | |
Available-for-sale securities
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Investments | ||
Amortized Cost | 328,531,000 | 279,556,000 |
Fair Value | 328,281,000 | 282,829,000 |
Money market funds
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Investments | ||
Amortized Cost | 148,983,000 | 126,537,000 |
Fair Value | 148,983,000 | 126,537,000 |
Money market funds | Denominated in Canadian dollars
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Investments | ||
Fair Value | 7,987,000 | |
Money market funds | Denominated in British pounds
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Investments | ||
Fair Value | 5,298,000 | |
Money market funds | Denominated in Euros
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Investments | ||
Fair Value | 3,500,000 | |
Corporate bonds
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Investments | ||
Amortized Cost | 69,724,000 | 67,275,000 |
Fair Value | 70,098,000 | 69,214,000 |
Enhanced cash mutual fund
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Investments | ||
Amortized Cost | 25,000,000 | |
Fair Value | 24,978,000 | |
U.S. Government agency securities
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Investments | ||
Amortized Cost | 23,404,000 | 23,647,000 |
Fair Value | 23,271,000 | 23,775,000 |
Emerging markets debt mutual fund
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Investments | ||
Amortized Cost | 17,693,000 | 17,693,000 |
Fair Value | 17,278,000 | 18,734,000 |
U.S. Treasury securities
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Investments | ||
Amortized Cost | 16,973,000 | 17,165,000 |
Fair Value | 16,935,000 | 17,169,000 |
Collateralized mortgage obligations
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Investments | ||
Amortized Cost | 15,359,000 | 15,059,000 |
Fair Value | 15,315,000 | 15,162,000 |
Asset backed debt securities
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Investments | ||
Amortized Cost | 11,395,000 | 12,180,000 |
Fair Value | 11,423,000 | 12,238,000 |
High yield trading debt securities
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Investments | ||
Amortized Cost | 23,536,000 | 21,839,000 |
Fair Value | 24,214,000 | 23,406,000 |
Emerging markets trading debt mutual fund
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Investments | ||
Amortized Cost | 3,120,000 | 3,046,000 |
Fair Value | 2,929,000 | 3,237,000 |
Emerging markets trading debt securities
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Investments | ||
Amortized Cost | 1,989,000 | 2,361,000 |
Fair Value | 2,034,000 | 2,600,000 |
Other trading investments
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Investments | ||
Amortized Cost | 1,015,000 | 1,262,000 |
Fair Value | $ 1,048,000 | $ 1,307,000 |
Inventories (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Inventories | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of inventories |
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Derivatives and Fair Value of Financial Instruments (Details) (USD $)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
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Jun. 29, 2013
Commodities
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Dec. 31, 2012
Commodities
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Jun. 29, 2013
Money market funds
|
Dec. 31, 2012
Money market funds
|
Jun. 29, 2013
Corporate bonds
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Dec. 31, 2012
Corporate bonds
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Jun. 29, 2013
Enhanced cash mutual fund
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Jun. 29, 2013
U.S. Government agency securities
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Dec. 31, 2012
U.S. Government agency securities
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Jun. 29, 2013
Emerging markets debt mutual fund
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Dec. 31, 2012
Emerging markets debt mutual fund
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Jun. 29, 2013
U.S. Treasury securities
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Dec. 31, 2012
U.S. Treasury securities
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Jun. 29, 2013
Collateralized mortgage obligations
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Dec. 31, 2012
Collateralized mortgage obligations
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Jun. 29, 2013
Asset backed debt securities
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Dec. 31, 2012
Asset backed debt securities
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Jun. 29, 2013
High yield trading debt securities
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Dec. 31, 2012
High yield trading debt securities
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Jun. 29, 2013
Emerging markets trading debt mutual fund
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Dec. 31, 2012
Emerging markets trading debt mutual fund
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Jun. 29, 2013
Emerging markets trading debt securities
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Dec. 31, 2012
Emerging markets trading debt securities
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Jun. 29, 2013
Recurring basis
Balance at period end
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Dec. 31, 2012
Recurring basis
Balance at period end
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Jun. 29, 2013
Recurring basis
Balance at period end
Commodities
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Dec. 31, 2012
Recurring basis
Balance at period end
Commodities
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Jun. 29, 2013
Recurring basis
Balance at period end
Interest rate swaps
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Dec. 31, 2012
Recurring basis
Balance at period end
Interest rate swaps
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Jun. 29, 2013
Recurring basis
Balance at period end
Foreign currencies
|
Dec. 31, 2012
Recurring basis
Balance at period end
Foreign currencies
|
Jun. 29, 2013
Recurring basis
Balance at period end
Money market funds
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
Money market funds
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
Money market funds
Other current assets
|
Dec. 31, 2012
Recurring basis
Balance at period end
Money market funds
Other current assets
|
Jun. 29, 2013
Recurring basis
Balance at period end
Corporate bonds
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
Corporate bonds
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
Corporate bonds
Other current assets
|
Dec. 31, 2012
Recurring basis
Balance at period end
Corporate bonds
Other current assets
|
Jun. 29, 2013
Recurring basis
Balance at period end
Enhanced cash mutual fund
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
U.S. Government agency securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
U.S. Government agency securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
U.S. Government agency securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Balance at period end
U.S. Government agency securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Balance at period end
Emerging markets debt mutual fund
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
Emerging markets debt mutual fund
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
U.S. Treasury securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
U.S. Treasury securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
U.S. Treasury securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Balance at period end
U.S. Treasury securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Balance at period end
Collateralized mortgage obligations
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
Collateralized mortgage obligations
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
Asset backed debt securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
Asset backed debt securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
High yield trading debt securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
High yield trading debt securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
Emerging markets trading debt mutual fund
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
Emerging markets trading debt mutual fund
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
Emerging markets trading debt securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
Emerging markets trading debt securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
Other trading investments
Short-term investments
|
Dec. 31, 2012
Recurring basis
Balance at period end
Other trading investments
Short-term investments
|
Jun. 29, 2013
Recurring basis
Balance at period end
Domestic equity securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Balance at period end
Domestic equity securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Balance at period end
Foreign equity securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Balance at period end
Foreign equity securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Balance at period end
Fixed income mutual funds
Other current assets
|
Dec. 31, 2012
Recurring basis
Balance at period end
Fixed income mutual funds
Other current assets
|
Jun. 29, 2013
Recurring basis
Balance at period end
Other
Other current assets
|
Dec. 31, 2012
Recurring basis
Balance at period end
Other
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 1
|
Dec. 31, 2012
Recurring basis
Level 1
|
Jun. 29, 2013
Recurring basis
Level 1
Commodities
|
Dec. 31, 2012
Recurring basis
Level 1
Commodities
|
Jun. 29, 2013
Recurring basis
Level 1
Money market funds
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 1
Money market funds
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 1
Money market funds
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 1
Money market funds
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 1
Enhanced cash mutual fund
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 1
Emerging markets debt mutual fund
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 1
Emerging markets debt mutual fund
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 1
Emerging markets trading debt mutual fund
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 1
Emerging markets trading debt mutual fund
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 1
Other trading investments
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 1
Other trading investments
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 1
Domestic equity securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 1
Domestic equity securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 1
Foreign equity securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 1
Foreign equity securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 1
Fixed income mutual funds
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 1
Fixed income mutual funds
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 1
Other
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 1
Other
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 2
|
Dec. 31, 2012
Recurring basis
Level 2
|
Dec. 31, 2012
Recurring basis
Level 2
Commodities
|
Jun. 29, 2013
Recurring basis
Level 2
Interest rate swaps
|
Dec. 31, 2012
Recurring basis
Level 2
Interest rate swaps
|
Jun. 29, 2013
Recurring basis
Level 2
Foreign currencies
|
Dec. 31, 2012
Recurring basis
Level 2
Foreign currencies
|
Jun. 29, 2013
Recurring basis
Level 2
Corporate bonds
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 2
Corporate bonds
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 2
Corporate bonds
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 2
Corporate bonds
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 2
U.S. Government agency securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 2
U.S. Government agency securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 2
U.S. Government agency securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 2
U.S. Government agency securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 2
U.S. Treasury securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 2
U.S. Treasury securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 2
U.S. Treasury securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 2
U.S. Treasury securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 2
Collateralized mortgage obligations
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 2
Collateralized mortgage obligations
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 2
Asset backed debt securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 2
Asset backed debt securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 2
High yield trading debt securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 2
High yield trading debt securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 2
Emerging markets trading debt securities
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 2
Emerging markets trading debt securities
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 2
Other trading investments
Short-term investments
|
Dec. 31, 2012
Recurring basis
Level 2
Other trading investments
Short-term investments
|
Jun. 29, 2013
Recurring basis
Level 2
Foreign equity securities
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 2
Foreign equity securities
Other current assets
|
Jun. 29, 2013
Recurring basis
Level 2
Other
Other current assets
|
Dec. 31, 2012
Recurring basis
Level 2
Other
Other current assets
|
|
Derivatives and Fair Value of Financial Instruments | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transfers that occurred into or out of level 1 | $ 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transfers that occurred into or out of level 2 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Transfers that occurred into or out of level 3 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Available-for-sale securities | 148,983,000 | 126,537,000 | 70,098,000 | 69,214,000 | 24,978,000 | 23,271,000 | 23,775,000 | 17,278,000 | 18,734,000 | 16,935,000 | 17,169,000 | 15,315,000 | 15,162,000 | 11,423,000 | 12,238,000 | 148,983,000 | 126,537,000 | 70,098,000 | 69,214,000 | 24,978,000 | 23,271,000 | 23,775,000 | 17,278,000 | 18,734,000 | 16,935,000 | 17,169,000 | 15,315,000 | 15,162,000 | 11,423,000 | 12,238,000 | 148,983,000 | 126,537,000 | 24,978,000 | 17,278,000 | 18,734,000 | 70,098,000 | 69,214,000 | 23,271,000 | 23,775,000 | 16,935,000 | 17,169,000 | 15,315,000 | 15,162,000 | 11,423,000 | 12,238,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trading securities | 24,214,000 | 23,406,000 | 2,929,000 | 3,237,000 | 2,034,000 | 2,600,000 | 1,586,000 | 3,157,000 | 83,000 | 60,000 | 1,106,000 | 2,117,000 | 1,623,000 | 1,567,000 | 24,214,000 | 23,406,000 | 2,929,000 | 3,237,000 | 2,034,000 | 2,600,000 | 1,048,000 | 1,307,000 | 21,437,000 | 15,864,000 | 8,587,000 | 6,831,000 | 5,725,000 | 7,153,000 | 290,000 | 239,000 | 1,586,000 | 3,157,000 | 2,929,000 | 3,237,000 | 512,000 | 822,000 | 21,437,000 | 15,864,000 | 5,323,000 | 4,218,000 | 5,725,000 | 7,153,000 | 239,000 | 187,000 | 83,000 | 60,000 | 1,106,000 | 2,117,000 | 1,623,000 | 1,567,000 | 24,214,000 | 23,406,000 | 2,034,000 | 2,600,000 | 536,000 | 485,000 | 3,264,000 | 2,613,000 | 51,000 | 52,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | 6,581,000 | 6,916,000 | 4,309,000 | 6,581,000 | 6,699,000 | 217,000 | 4,309,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Margin account | 22,188,000 | 14,063,000 | 22,188,000 | 14,063,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative assets and liabilities, net basis | 15,133,000 | 13,867,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Assets | 409,833,000 | 357,283,000 | 235,571,000 | 186,608,000 | 174,262,000 | 170,675,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivatives | 13,636,000 | 7,112,000 | 5,297,000 | 9,810,000 | 184,000 | 4,157,000 | 13,636,000 | 7,112,000 | 5,297,000 | 9,810,000 | 184,000 | 4,157,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Liabilities | $ 19,117,000 | $ 21,079,000 | $ 13,636,000 | $ 7,112,000 | $ 5,481,000 | $ 13,967,000 |
Income Taxes (Details) (USD $)
|
Mar. 30, 2013
|
---|---|
Income Taxes | |
One-time tax benefit on enactment of law | $ 7,945,000 |
One-time Federal blender's credits that will be recognized as revenues | $ 11,260,000 |
Stockholders' Equity and Accumulated Other Comprehensive Loss (Details) (USD $)
|
0 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oct. 19, 2012
|
Dec. 31, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
Jun. 29, 2013
|
Jun. 30, 2012
|
Dec. 31, 2012
|
Jun. 29, 2013
Cumulative Foreign Currency Translation Adjustment
|
Jun. 29, 2013
Cumulative Foreign Currency Translation Adjustment
|
Jun. 29, 2013
Unrealized Gain (Loss) on Investments
|
Jun. 29, 2013
Unrealized Gain (Loss) on Investments
|
Jun. 29, 2013
Unrealized Loss on Cash Flow Hedges
|
Mar. 30, 2013
Unrealized Loss on Cash Flow Hedges
|
Dec. 31, 2012
Unrealized Loss on Cash Flow Hedges
|
Jun. 29, 2013
Unrecognized Pension Cost
|
Jun. 29, 2013
Unrecognized Pension Cost
|
|
Components of and changes in accumulated other comprehensive loss, net of tax | ||||||||||||||||
Balance at beginning of the period | $ (176,045,000) | $ (171,544,000) | $ (115,579,000) | $ (109,457,000) | $ 2,661,000 | $ 2,232,000 | $ (113,000) | $ (113,000) | $ (113,000) | $ (63,014,000) | $ (64,206,000) | |||||
Other comprehensive income (loss) before reclassifications | (7,337,000) | (12,820,000) | (6,699,000) | (12,821,000) | (1,948,000) | (1,309,000) | 1,310,000 | 1,310,000 | ||||||||
Amounts reclassified from accumulated other comprehensive loss | 1,046,000 | 2,028,000 | (189,000) | (399,000) | 1,235,000 | 2,427,000 | ||||||||||
Other comprehensive income (loss), net of tax | (6,291,000) | (1,671,000) | (10,792,000) | 1,259,000 | (6,699,000) | (12,821,000) | (2,137,000) | (1,708,000) | 2,545,000 | 3,737,000 | ||||||
Balance at end of the period | (171,544,000) | (182,336,000) | (182,336,000) | (171,544,000) | (122,278,000) | (122,278,000) | 524,000 | 524,000 | (113,000) | (113,000) | (113,000) | (60,469,000) | (60,469,000) | |||
Agreement termination gain unrecognized in other comprehensive income, net of tax | 1,310,000 | |||||||||||||||
Net assets of Sugar segment denominated in Argentine pesos | 189,857,000 | 189,857,000 | ||||||||||||||
Net assets of Sugar segment denominated in U.S. dollars | 1,700,000 | 1,700,000 | ||||||||||||||
Income tax rate for foreign currency translation gains and losses (as a percent) | 35.00% | |||||||||||||||
Effective income tax rate for components of accumulated other comprehensive loss (as a percent) | 39.00% | |||||||||||||||
Unrecognized pension cost related to employees at certain subsidiaries | 20,346,000 | 20,346,000 | ||||||||||||||
Tax benefit recorded on unrecognized pension cost | 0 | |||||||||||||||
Stock repurchase programs, authorized amount | 100,000,000 | |||||||||||||||
Remaining authorized repurchase amount under November 2009 share repurchase program | 19,512,000 | |||||||||||||||
Common shares repurchased | 5,092 | |||||||||||||||
Repurchase of common stock | $ 13,693,000 | |||||||||||||||
Common stock dividend declared and paid (in dollars per share) | $ 12.00 | |||||||||||||||
Common stock dividend historical amount on a quarterly basis (in dollars per share) | $ 0.75 | |||||||||||||||
Common stock dividend historical amount on annual (in dollars per share) | $ 3.00 | |||||||||||||||
Prepayment of dividend for 2013 (in dollars per share) | $ 3.00 | $ 3.00 | ||||||||||||||
Prepayment of dividend for 2014 (in dollars per share) | $ 3.00 | $ 3.00 | ||||||||||||||
Prepayment of dividend for 2015 (in dollars per share) | $ 3.00 | $ 3.00 | ||||||||||||||
Prepayment of dividend for 2016 (in dollars per share) | $ 3.00 | $ 3.00 |
Derivatives and Fair Value of Financial Instruments (Details 5) (USD $)
|
6 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
Jun. 29, 2013
Commodities
|
Dec. 31, 2012
Commodities
|
Jun. 29, 2013
Commodities
Other current assets
|
Dec. 31, 2012
Commodities
Other current assets
|
Jun. 29, 2013
Foreign currencies
item
|
Jun. 29, 2013
Foreign currencies
Other current assets
|
Jun. 29, 2013
Foreign currencies
Other current liabilities
|
Dec. 31, 2012
Foreign currencies
Other current liabilities
|
Jun. 29, 2013
Interest rate
Other current liabilities
|
Dec. 31, 2012
Interest rate
Other current liabilities
|
|
Fair value of each type of derivative and its location in the Condensed Consolidated Balance Sheets | ||||||||||
Asset Derivatives | $ 6,581,000 | $ 6,916,000 | $ 4,309,000 | |||||||
Liability Derivatives | 13,636,000 | 7,112,000 | 184,000 | 4,157,000 | 5,297,000 | 9,810,000 | ||||
Margin account | 22,188,000 | 14,063,000 | ||||||||
Derivative assets and liabilities, net basis | 15,133,000 | 13,867,000 | ||||||||
Loss due to credit risk associated with derivative contracts | $ 4,309,000 | |||||||||
Number of counterparties | 6 |
Inventories (Details) (USD $)
In Thousands, unless otherwise specified |
Jun. 29, 2013
|
Dec. 31, 2012
|
---|---|---|
At lower of LIFO cost or market: | ||
Live hogs and materials | $ 245,473 | $ 258,638 |
Fresh pork and materials | 30,507 | 31,495 |
Inventories at lower of LIFO cost or market, Gross | 275,980 | 290,133 |
LIFO adjustment | (74,013) | (90,730) |
Total inventories at lower of LIFO cost or market | 201,967 | 199,403 |
At lower of FIFO cost or market: | ||
Grains, oilseeds and other commodities | 332,885 | 317,573 |
Sugar produced and in process | 59,334 | 65,986 |
Other | 70,230 | 73,606 |
Total inventories at lower of FIFO cost or market | 462,449 | 457,165 |
Grain, flour and feed at lower of weighted average cost or market | 87,685 | 100,296 |
Total inventories | $ 752,101 | $ 756,864 |
Investments
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 29, 2013
|
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Investments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments | Note 2– Investments
Seaboard’s short-term investments are treated as either available-for-sale securities or trading securities. All of Seaboard’s available-for-sale and trading securities are classified as current assets as they are readily available to support Seaboard’s current operating needs. Available-for-sale securities are recorded at their estimated fair value with unrealized gains and losses reported, net of tax, as a separate component of accumulated other comprehensive loss. Trading securities are recorded at their estimated fair value with unrealized gains and losses reflected in other investment income (loss), net. At June 29, 2013 and December 31, 2012, amortized cost and estimated fair value were not materially different for these investments.
At June 29, 2013, money market funds included $7,987,000 denominated in Canadian dollars, $5,298,000 denominated in British Pounds and $3,500,000 denominated in Euros. As of June 29, 2013, the trading securities primarily consisted of high yield debt securities.
The following is a summary of the amortized cost and estimated fair value of short-term investments for both available-for-sale and trading securities at June 29, 2013 and December 31, 2012.
The following table summarizes the estimated fair value of fixed rate securities designated as available-for-sale classified by the contractual maturity date of the security as of June 29, 2013.
In addition to its short-term investments, Seaboard also has trading securities related to Seaboard’s deferred compensation plans classified in other current assets on the Condensed Consolidated Balance Sheets. See Note 5 to the Condensed Consolidated Financial Statements for information on the types of trading securities held related to the deferred compensation plans. |
Derivatives and Fair Value of Financial Instruments
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Derivatives and Fair Value of Financial Instruments | Note 5 –Derivatives and Fair Value of Financial Instruments
U.S. GAAP discusses valuation techniques, such as the market approach (prices and other relevant information generated by market conditions involving identical or comparable assets or liabilities), the income approach (techniques to convert future amounts to single present amounts based on market expectations including present value techniques and option-pricing), and the cost approach (amount that would be required to replace the service capacity of an asset which is often referred to as replacement cost). U.S. GAAP utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The following table shows assets and liabilities measured at fair value on a recurring basis as of June 29, 2013 and also the level within the fair value hierarchy used to measure each category of assets. Seaboard uses the end of the reporting period to determine if there were any transfers between levels. There were no transfers between levels that occurred in the first six months of 2013. The trading securities classified as other current assets below are assets held for Seaboard’s deferred compensation plans.
(1) Seaboard’s commodities derivative assets and liabilities are presented in the Condensed Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts. As of June 29, 2013, the commodity derivatives had a margin account balance of $22,188,000 resulting in a net other current asset on the Condensed Consolidated Balance Sheets of $15,133,000.
The following table shows assets and liabilities measured at fair value on a recurring basis as of December 31, 2012 and also the level within the fair value hierarchy used to measure each category of assets.
(1) Seaboard’s commodities derivative assets and liabilities are presented in the Condensed Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts. As of December 31, 2012, the commodity derivatives had a margin account balance of $14,063,000 resulting in a net other current asset on the Condensed Consolidated Balance Sheets of $13,867,000.
Financial instruments consisting of cash and cash equivalents, net receivables, notes payable, and accounts payable are carried at cost, which approximates fair value, as a result of the short-term nature of the instruments.
The fair value of long-term debt is estimated by comparing interest rates for debt with similar terms and maturities. If Seaboard’s debt was measured at fair value on its Condensed Consolidated Balance Sheets, it would have been classified as level 2 in the fair value hierarchy. The amortized cost and estimated fair values of investments and long-term debt at June 29, 2013 and December 31, 2012 are presented below.
While management believes its derivatives are primarily economic hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these types of transactions as hedges for accounting purposes. Since these derivatives and interest rate exchange agreements discussed below are not accounted for as hedges, fluctuations in the related commodity prices, currency exchange rates and interest rates could have a material impact on earnings in any given period. Seaboard also enters into speculative derivative transactions not directly related to its raw material requirements. The nature of Seaboard’s market risk exposure has not changed materially since December 31, 2012.
Commodity Instruments
Seaboard uses various derivative futures and options to manage its risk to price fluctuations for raw materials and other inventories, finished product sales and firm sales commitments. At June 29, 2013, Seaboard had open net derivative contracts to purchase 101,880,000 pounds of hogs and 19,936,000 pounds of sugar and open net derivative contracts to sell 16,500,000 pounds of soybean oil, 7,278,000 bushels of grain, 1,554,000 gallons of heating oil and 134,000 tons of soybean meal. At December 31, 2012, Seaboard had open net derivative contracts to purchase 28,896,000 pounds of sugar, 15,403,000 bushels of grain and 120,000 pounds of cheese and open net derivative contracts to sell 21,080,000 pounds of hogs, 546,000 gallons of heating oil, 220,000 pounds of dry whey powder and 53,000 tons of soybean meal. Commodity derivatives are recorded at fair value with any changes in fair value being marked to market as a component of cost of sales on the Condensed Consolidated Statements of Comprehensive Income.
Foreign Currency Exchange Agreements
Seaboard enters into foreign currency exchange agreements to manage the foreign currency exchange rate risk with respect to certain transactions denominated in foreign currencies. Foreign currency exchange agreements that were primarily related to an underlying commodity transaction were recorded at fair value with changes in value marked to market as a component of cost of sales on the Condensed Consolidated Statements of Comprehensive Income. Foreign currency exchange agreements that were not related to an underlying commodity transaction were recorded at fair value with changes in value marked to market as a component of foreign currency gain (loss) on the Condensed Consolidated Statements of Comprehensive Income.
At June 29, 2013 and December 31, 2012, Seaboard had trading foreign currency exchange agreements to cover its firm sales and purchase commitments and related trade receivables and payables with net notional amounts of $139,616,000 and $243,563,000, respectively, primarily related to the South African Rand.
Interest Rate Exchange Agreements
In May 2010, Seaboard entered into three ten-year interest rate exchange agreements which involve the exchange of fixed-rate and variable-rate interest payments over the life of the agreements without the exchange of the underlying notional amounts to mitigate the effects of fluctuations in interest rates on variable rate debt. Seaboard pays a fixed rate and receives a variable rate of interest on three notional amounts of $25,000,000 each. In August 2010, Seaboard entered into another ten-year interest rate exchange agreement with a notional amount of $25,000,000 that has terms similar to those for the other three interest rate exchange agreements referred to above. In September 2012, Seaboard terminated one interest rate exchange agreement with a notional value of $25,000,000. Seaboard made a payment in the amount of $3,861,000 to unwind this agreement. While Seaboard has certain variable rate debt, these interest rate exchange agreements do not qualify as hedges for accounting purposes. Accordingly, the changes in fair value of these agreements are recorded in Miscellaneous, net in the Condensed Consolidated Statements of Comprehensive Income. At June 29, 2013 and December 31, 2012, Seaboard had three interest rate exchange agreements outstanding with a total notional value of $75,000,000.
Counterparty Credit Risk
Seaboard is subject to counterparty credit risk related to its foreign currency exchange agreements and interest rate swaps, should the counterparties fail to perform according to the terms of the contracts. As of June 29, 2013, Seaboard’s foreign currency exchange agreements have a maximum amount of loss due to credit risk in the amount of $4,309,000 with six counterparties. Seaboard does not hold any collateral related to these agreements.
The following table provides the amount of gain or (loss) recognized in income for each type of derivative and where it was recognized in the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 29, 2013 and June 30, 2012.
The following table provides the fair value of each type of derivative held as of June 29, 2013 and December 31, 2012 and where each derivative is included on the Condensed Consolidated Balance Sheets.
(1) Seaboard’s commodities derivative assets and liabilities are presented in the Condensed Consolidated Balance Sheets on a net basis, including netting the derivatives with the related margin accounts. As of June 29, 2013 and December 31, 2012, the commodity derivatives had a margin account balance of $22,188,000 and $14,063,000, respectively, resulting in a net other current asset on the Condensed Consolidated Balance Sheets of $15,133,000 and $13,867,000, respectively.
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Inventories
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Jun. 29, 2013
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Inventories | Note 3 – Inventories
The following is a summary of inventories at June 29, 2013 and December 31, 2012:
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Derivatives and Fair Value of Financial Instruments (Details 2) (USD $)
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Jun. 29, 2013
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Dec. 31, 2012
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Amortized Cost
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Schedule of amortized cost and estimated fair values of investments and long term debt | ||
Available-for-sale securities | $ 328,531,000 | $ 279,556,000 |
Trading securities | 29,660,000 | 28,508,000 |
Long-term debt | 116,181,000 | 145,963,000 |
Fair Value
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Schedule of amortized cost and estimated fair values of investments and long term debt | ||
Available-for-sale securities | 328,281,000 | 282,829,000 |
Trading securities | 30,255,000 | 30,550,000 |
Long-term debt | $ 119,006,000 | $ 149,333,000 |
Employee Benefits (Details) (USD $)
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3 Months Ended | 6 Months Ended | ||
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Jun. 29, 2013
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Jun. 30, 2012
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Jun. 29, 2013
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Components of net periodic benefit cost: | ||||
Service cost | $ 2,263,000 | $ 2,210,000 | $ 4,684,000 | $ 4,436,000 |
Interest cost | 2,035,000 | 2,177,000 | 4,103,000 | 4,435,000 |
Expected return on plan assets | (1,614,000) | (1,617,000) | (3,226,000) | (3,209,000) |
Amortization and other | 1,543,000 | 1,567,000 | 3,179,000 | 3,097,000 |
Agreement termination gain | (3,204,000) | (3,204,000) | ||
Settlement | 1,796,000 | 1,796,000 | ||
Net periodic benefit cost | 1,023,000 | 6,133,000 | 5,536,000 | 10,555,000 |
Agreement termination gain, net of tax | 1,954,000 | |||
Agreement termination gain unrecognized in other comprehensive income, before tax | 2,148,000 | |||
Agreement termination gain unrecognized in other comprehensive income, net of tax | 1,310,000 | |||
Defined benefit pension plan
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Target allocation and pension plan asset allocation | ||||
Number of defined benefit plans | 2 | 2 | ||
Contributions expected to be made to defined benefit pension plans | $ 0 | $ 0 |