Note 9 –Segment Information

As of September 27, 2014, Seaboard’s Pork segment sold to Triumph a 50% interest in Daily’s for cash proceeds of $72,500,000 plus a receivable of $1,720,000 for preliminary working capital adjustments, resulting in a gain on sale of controlling interest in subsidiary of $64,392,000 ($39,279,000 net of taxes, or $33.56 per share) in the third quarter of 2014. The final sale price is subject to agreement on the final working capital adjustments but any such remaining adjustment is not anticipated to be significant. Daily’s produces and markets raw and pre-cooked bacon, ham and sausage and has two further processing plants located in Salt Lake City, Utah and Missoula, Montana. The Pork segment currently has a business relationship with Triumph under which Seaboard markets substantially all of the pork products produced at Triumph’s plant in St. Joseph, Missouri. Through September 27, 2014, Seaboard consolidated the operating results of Daily’s as part of its Pork segment operations. As a result of this transaction, Seaboard deconsolidated Daily’s from its Condensed Consolidated Balance Sheet as of September 27, 2014 (see Note 1, Supplemental Non-Cash Transactions, for details of the impact on the Condensed Consolidated Balance Sheet from this deconsolidation). Seaboard’s remaining 50% investment in Daily’s will be accounted for in the Pork segment by using the equity method of accounting. Based on the cash consideration received for this transaction and preliminary third party valuations for fixed assets and certain intangible assets, it was determined the fair value of Seaboard’s remaining 50% investment in Daily’s exceeded book value by $31,336,000, which is included in the gain on sale above, for a total fair value of $72,500,000. In addition, both Seaboard and Triumph contributed $2,000,000 each to Daily’s as additional equity to provide Daily’s with additional working capital resulting in a total investment in affiliate of $74,500,000 related to Daily’s for Seaboard as of September 27, 2014. Pro forma results of operations are not presented as the effects of deconsolidation are not material to Seaboard’s results of operations, primarily as Seaboard supplies raw product to Daily’s. Triumph also supplies raw product to Daily’s. It is expected that both Seaboard and Triumph will continue to sell raw product to Daily’s.

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. In addition, the bakery has been incurring operating losses since it began operations as it continues to resolve equipment problems and attempt to gain market share. As of September 27, 2014, the recorded balance of this Note Receivable from Affiliates was $34,556,000 and Seaboard’s equity investment in this bakery was $11,869,000. If the current operating results of this bakery do not improve in the future, there is a possibility that some of the recorded value of the Note Receivable from Affiliate could be deemed uncollectible or there could be a decline in value deemed other than temporary for the related equity investment, or both, during some future period which may result in a material charge to earnings. Including this investment, as of September 27, 2014 Seaboard had a total of $71,593,000 of investments in, advances to and notes receivable from all of its affiliates in the Democratic Republic of Congo, which represents the single largest foreign country risk exposure for Seaboard’s equity method investments. One of the other affiliates, to which Seaboard sells wheat, is the only supplier of flour to this bakery.

On September 24, 2014, Seaboard invested $17,333,000 in a cargo terminal business in Jamaica for a 21% non-controlling interest. This investment will be accounted for in the Marine segment using the equity method reported on a three-month lag basis and thus Seaboard’s first proportionate share of earnings will not be recognized until the first quarter of 2015.

The Power segment had 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 ceased operations of the leased facility on September 3, 2014. Seaboard had previously sold this facility to the current owner in 2011. In conjunction with ceasing operations, Seaboard sold inventory related to these operations, the sale of which had been deferred until the end of the lease term. In addition, $1,500,000 of the original sale price for this facility, which remained in escrow as security for the lease, was paid to Seaboard. Finalization of the transfer of the leased facility to the owner and related settlement of all items occurred on September 18, 2014. As a result, Seaboard recognized a $4,953,000 gain from sale of assets in operating income related to these items in the third quarter of 2014.

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 27, 2014 of $486,971,000 and $1,218,402,000, respectively, compared to total net sales for the three and nine months ended September 28, 2013 of $444,787,000 and $1,169,301,000, respectively. Butterball had operating income for the three and nine months ended September 27, 2014 of $35,881,000 and $85,311,000, respectively, compared to operating income (loss) for the three and nine months ended September 28, 2013 of $1,282,000 and $(3,238,000), 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 affiliates, for the three and nine months ended September 28, 2013, respectively. This facility was sold in the second quarter of 2014 for approximately the remaining net book value. As of September 27, 2014 and December 31, 2013, the Turkey segment had total assets of $1,073,196,000 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 $137,105,000 as of September 27, 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				Nine Months Ended

	September 27,		September 28,		September 27,		September 28,
(Thousands of dollars)	2014		2013		2014		2013

Pork	$	454,927	$	435,981	$	1,303,752	$	1,262,083
Commodity Trading and Milling	858,497		857,994		2,562,001		2,553,510
Marine	205,260		219,466		616,684		676,347
Sugar	47,786		58,500		145,128		192,554
Power	51,622		73,607		158,503		221,386
All Other	4,549		2,557		10,800		8,560
Segment/Consolidated Totals	$	1,622,641	$	1,648,105	$	4,796,868	$	4,914,440

Operating Income (Loss):

	Three Months Ended						Nine Months Ended

	September 27,			September 28,			September 27,			September 28,
(Thousands of dollars)	2014			2013			2014			2013

Pork	$	70,400		$	34,099		$	241,090		$	89,997
Commodity Trading and Milling	13,309			8,808			43,502			29,746
Marine	(4,564		)	(15,033		)	(15,013		)	(22,413		)
Sugar	6,280			193			22,695			28,312
Power	15,044			13,429			19,489			41,405
All Other	531			216			860			354
Segment Totals	101,000			41,712			312,623			167,401
Corporate Items	(4,914		)	(7,942		)	(16,995		)	(16,624		)
Consolidated Totals	$	96,086		$	33,770		$	295,628		$	150,777

Income (Loss) from Affiliates:

	Three Months Ended						Nine Months Ended

	September 27,			September 28,			September 27,			September 28,
(Thousands of dollars)	2014			2013			2014			2013

Commodity Trading and Milling	$	(4,729	)	$	(999	)	$	(6,934	)	$	(1,187	)
Sugar	(112		)	54			636			171
Turkey	14,333			(4,044		)	30,237			(11,370		)
Segment/Consolidated Totals	$	9,492		$	(4,989	)	$	23,939		$	(12,386	)

Total Assets:

	September 27,		December 31,
(Thousands of dollars)	2014		2013

Pork	$	790,645	$	773,641
Commodity Trading and Milling	1,112,976		1,056,930
Marine	278,418		271,012
Sugar	184,589		226,245
Power	238,609		267,431
Turkey	383,344		342,083
All Other	7,289		6,428
Segment Totals	2,995,870		2,943,770
Corporate Items	474,199		474,278
Consolidated Totals	$	3,470,069	$	3,418,048

Investments in and Advances to Affiliates:

	September 27,		December 31,
(Thousands of dollars)	2014		2013

Pork	$	74,500	$	-
Commodity Trading and Milling		190,271		197,036
Marine	17,333		-
Sugar	2,634		2,768
Turkey	237,333		207,096
Segment/Consolidated Totals	$	522,071	$	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).