Segment Information

6 Months Ended

Jun. 28, 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 Commodity Trading and Milling segment has a 50% non-controlling interest in a bakery located in the Democratic Republic of Congo which began start-up operations in the fourth quarter of 2012.  As part of its investment in this bakery, Seaboard has an interest bearing long-term note receivable from this bakery which has a decreasing balance with the first payment due in June 2015 and a final maturity date of December 2020.  Repayment of this note is dependent upon this business improving existing operations to generate adequate future cash flows to make scheduled payments when due.  As of June 28, 2014, the recorded balance of this Note Receivable from Affiliates was $34,144,000.

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.  Seaboard will operate the leased facility until September 30, 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 and currently provides security for the lease until the end of the lease term.  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 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.

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 28, 2014 of $375,668,000 $731,431,000, respectively, compared to total net sales for the three and six months ended June 29, 2013 of $353,944,000 and $724,514,000, respectively. Butterball had operating income for the three and six months ended June 28, 2014 of $28,682,000 and $49,430,000, respectively, compared to operating loss for the three and six months ended June 29, 2013 of $(2,417,000) and $(4,520,000), 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.  This facility was sold in the second quarter of 2014 for approximately the remaining net book value. As of June 28, 2014 and December 31, 2013, the Turkey segment had total assets of $1,035,666,000 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 $133,294,000 as of June 28, 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				Six Months Ended
	June 28,		June 29,		June 28,		June 29,
(Thousands of dollars)	2014		2013		2014		2013
Pork	$	466,735	$	416,850	$	848,825	$	826,102
Commodity Trading and Milling	914,114		894,762		1,703,504		1,695,516
Marine	210,960		226,725		411,424		456,881
Sugar	46,986		67,890		97,342		134,054
Power	53,033		74,812		106,881		147,779
All Other	2,763		3,000		6,251		6,003
Segment/Consolidated Totals	$	1,694,591	$	1,684,039	$	3,174,227	$	3,266,335

Operating Income (Loss):

	Three Months Ended						Six Months Ended
	June 28,			June 29,			June 28,			June 29,
(Thousands of dollars)	2014			2013			2014			2013
Pork	$	110,213		$	23,634		$	170,690		$	55,898
Commodity Trading and Milling	18,263			8,610			30,193			20,938
Marine	(3,057		)	(4,114		)	(10,449		)	(7,380		)
Sugar	9,654			11,578			16,415			28,119
Power	6,129			15,037			4,445			27,976
All Other	(8		)	18			329			138
Segment Totals	141,194			54,763			211,623			125,689
Corporate Items	(6,855		)	(1,214		)	(12,081		)	(8,682		)
Consolidated Totals	$	134,339		$	53,549		$	199,542		$	117,007

Income (Loss) from Affiliates:

	Three Months Ended						Six Months Ended
	June 28,			June 29,			June 28,			June 29,
(Thousands of dollars)	2014			2013			2014			2013
Commodity Trading and Milling	$	(2,170	)	$	(2,278	)	$	(2,205	)	$	(188	)
Sugar	443			24			748			117
Turkey	9,530			(2,293		)	15,904			(7,326		)
Segment/Consolidated Totals	$	7,803		$	(4,547	)	$	14,447		$	(7,397	)

Total Assets:

	June 28,		December 31,
(Thousands of dollars)	2014		2013
Pork	$	793,538	$	773,641
Commodity Trading and Milling	1,114,690		1,056,930
Marine	263,238		271,012
Sugar	179,876		226,245
Power	244,382		267,431
Turkey	365,199		342,083
All Other	7,531		6,428
Segment Totals	2,968,454		2,943,770
Corporate Items	467,429		474,278
Consolidated Totals	$	3,435,883	$	3,418,048

Investments in and Advances to Affiliates:

	June 28,		December 31,
(Thousands of dollars)	2014		2013
Commodity Trading and Milling	$	191,799	$	197,036
Sugar	2,853		2,768
Turkey	223,000		207,096
Segment/Consolidated Totals	$	417,652	$	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 (Loss), Net).