Segment Information

3 Months Ended

Mar. 29, 2014

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 blender’s credits that Seaboard was 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 Federal blender’s credits have not been renewed for 2014.

The Power segment has been operating a floating power generating facility (72 megawatts) in the Dominican Republic under a short-term lease agreement.  On April 1, 2014, Seaboard provided notice to cancel the lease.  Although the final date for operating the leased facility has yet to be finalized, it is anticipated to be during the second or third quarter of 2014.  Seaboard had previously sold this facility to the current owner in 2011.  As part of the original sale in 2011, Seaboard and the purchaser agreed to defer the sale of inventory to the purchaser related to the leased facility until the end of the lease term.  In addition, $1,500,000 of the original sale price for this facility remained in escrow for potential dry dock costs pending final inspection and testing.  Finalization of the transfer of the leased facility to the owner and related settlement of all items noted above is anticipated to occur during the third or fourth quarter of 2014.  At that time, Seaboard anticipates recognizing a gain related to these items of an amount estimated to be approximately $4,500,000, depending on final dry dock costs, if any, which would reduce the amount of gain.

The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball, LLC (Butterball).  Butterball had total net sales for the three months ended March 29, 2014 and March 30, 2013 of $355,763,000 and $370,570,000, respectively. Butterball had operating income (loss) for the three months ended March 29, 2014 and March 30, 2013 of $20,748,000 and $(2,103,000), 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 affiliates. As of March 29, 2014 and December 31, 2013, the Turkey segment had total assets of $985,913,000 and $907,004,000, 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 in December 2010, Seaboard has a long-term note receivable from Butterball which had a balance of $129,551,000 as of March 29, 2014.  Part of the interest earned on this note is pay-in-kind interest, which accumulates and is paid at maturity in December 2017.

The following tables set forth specific financial information about each segment as reviewed by Seaboard’s management. Operating income for segment reporting is prepared on the same basis as that used for consolidated operating income.  Operating income, along with income or losses from affiliates for the Commodity Trading and Milling segment, is used as the measure of evaluating segment performance because management does not consider interest, other investment income and income tax expense on a segment basis.

Sales to External Customers:

	Three Months Ended
	March 29,		March 30,
(Thousands of dollars)	2014		2013
Pork	$	382,090	$	409,252
Commodity Trading and Milling	789,390		800,754
Marine	200,464		230,156
Sugar	50,356		66,164
Power	53,848		72,967
All Other	3,488		3,003
Segment/Consolidated Totals	$	1,479,636	$	1,582,296

Operating Income (Loss):

	Three Months Ended
	March 29,		March 30,
(Thousands of dollars)	2014		2013
Pork	$	60,477	$	32,264
Commodity Trading and Milling	11,930		12,328
Marine	(7,392)		(3,266)
Sugar	6,761		16,541
Power	(1,684)		12,939
All Other	337		120
Segment Totals	70,429		70,926
Corporate Items	(5,226)		(7,468)
Consolidated Totals	$	65,203	$	63,458

Income (Loss) from Affiliates:

	Three Months Ended
	March 29,		March 30,
(Thousands of dollars)	2014		2013
Commodity Trading and Milling	$	(35)	$	2,090
Sugar	305		93
Turkey	6,374		(5,033)
Segment/Consolidated Totals	$	6,644	$	(2,850)

Total Assets:

	March 29,		December 31,
(Thousands of dollars)	2014		2013
Pork	$	785,617	$	773,641
Commodity Trading and Milling	1,013,417		1,056,930
Marine	270,362		271,012
Sugar	169,306		226,245
Power	216,728		267,431
Turkey	351,926		342,083
All Other	7,045		6,428
Segment Totals	2,814,401		2,943,770
Corporate Items	525,413		474,278
Consolidated Totals	$	3,339,814	$	3,418,048

Investments in and Advances to Affiliates:

	March 29,		December 31,
(Thousands of dollars)	2014		2013
Commodity Trading and Milling	$	192,697	$	197,036
Sugar	2,476		2,768
Turkey	213,470		207,096
Segment/Consolidated Totals	$	408,643	$	406,900

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).