Segment Information

9 Months Ended

Sep. 28, 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.

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 nine months ended September 28, 2013 of $444,787,000 and $1,169,301,000, respectively, compared to total net sales for the three and nine months ended September 29, 2012 of $369,949,000 and $973,988,000, respectively. Butterball had operating income (loss) for the three and nine months ended September 28, 2013 of $1,282,000 and $(3,238,000), respectively, compared to operating income for the three and nine months ended September 29, 2012 of $7,554,000 and $48,686,000, respectively.  In the first and third quarters 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 $(1,155,000) and $(3,859,000) recognized in loss from affiliate for the three and nine months ended September 28, 2013, respectively.  As of September 28, 2013 and December 31, 2012, the Turkey segment had total assets of $1,058,004,000 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 Affiliates.  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 $122,438,000 as of September 28, 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 September 28, 2013, the balance of the term loan recorded in long-term notes receivable from affiliates 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				Nine Months Ended
	September 28,		September 29,		September 28,		September 29,
(Thousands of dollars)	2013		2012		2013		2012
Pork	$	435,981	$	413,077	$	1,262,083	$	1,214,405
Commodity Trading and Milling	857,994		675,649		2,553,510		2,125,263
Marine	219,466		242,330		676,347		712,141
Sugar	58,500		69,025		192,554		220,277
Power	73,607		75,778		221,386		178,562
All Other	2,557		3,557		8,560		10,474
Segment/Consolidated Totals	$	1,648,105	$	1,479,416	$	4,914,440	$	4,461,122

Operating Income (Loss):

	Three Months Ended				Nine Months Ended
	September 28,		September 29,		September 28,		September 29,
(Thousands of dollars)	2013		2012		2013		2012
Pork	$	34,099	$	29,863	$	89,997	$	103,582
Commodity Trading and Milling	8,808		16,662		29,746		53,822
Marine	(15,033)		13,006		(22,413)		14,578
Sugar	193		13,615		28,312		51,326
Power	13,429		18,649		41,405		35,123
All Other	216		93		354		262
Segment Totals	41,712		91,888		167,401		258,693
Corporate Items	(7,942)		(6,831)		(16,624)		(19,557)
Consolidated Totals	$	33,770	$	85,057	$	150,777	$	239,136

Income (Loss) from Affiliates:

	Three Months Ended				Nine Months Ended
	September 28,		September 29,		September 28,		September 29,
(Thousands of dollars)	2013		2012		2013		2012
Commodity Trading and Milling	$	(999)	$	2,143	$	(1,187)	$	7,155
Sugar	54		(122)		171		(184)
Turkey	(4,044)		297		(11,370)		14,732
Segment/Consolidated Totals	$	(4,989)	$	2,318	$	(12,386)	$	21,703

Total Assets:

	September 28,		December 31,
(Thousands of dollars)	2013		2012
Pork	$	776,480	$	740,245
Commodity Trading and Milling	1,024,475		992,507
Marine	273,529		281,215
Sugar	237,344		254,445
Power	282,076		235,377
Turkey	330,855		423,825
All Other	4,713		5,288
Segment Totals	2,929,472		2,932,902
Corporate Items	400,413		414,879
Consolidated Totals	$	3,329,885	$	3,347,781

Investments in and Advances to Affiliates:

	September 28,		December 31,
(Thousands of dollars)	2013		2012
Commodity Trading and Milling	$	194,645	$	186,873
Sugar	2,526		2,775
Turkey	199,388		220,894
Segment/Consolidated Totals	$	396,559	$	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).