Segment Information

6 Months Ended

Jun. 29, 2013

Segment Information

Segment Information

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 blender’s 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 Seaboard’s 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 Seaboard’s 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 Seaboard’s 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 Butterball’s 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 Seaboard’s 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 Seaboard’s management. Operating income for segment reporting is prepared on the same basis as that used for consolidated operating income.  Operating income, along with income or losses from affiliates for the Commodity Trading and Milling segment, is used as the measure of evaluating segment performance because management does not consider interest, other investment income and income tax expense on a segment basis.

Sales to External Customers:
	Three Months Ended						Six Months Ended
	June 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 Seaboard’s deferred compensation programs (which are offset by the effect of the mark-to-market investments recorded in Other Investment Income, Net).