Note 9 - Segment Information

As of September 27, 2014, Seaboard’s Pork segment sold a 50% interest in Daily’s Premium Meats, LLC (“Daily’s”) to Triumph Foods LLC (“Triumph”). 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. Seaboard’s remaining 50% investment in Daily’s is accounted for in the Pork segment by using the equity method of accounting. Both Seaboard and Triumph supply raw product to Daily’s.

The Commodity Trading and Milling segment has a 50% noncontrolling interest in a bakery located in the Democratic Republic of Congo (“DRC”), which began operations in the fourth quarter of 2012. The bakery has been incurring operating losses since it began operations as it continues to resolve equipment problems and attempts to gain market share. As a result of the continuing equipment problems, other production challenges and unfavorable local market conditions causing challenges in gaining market share, Seaboard’s management determined achieving improved operating results would take significantly longer than anticipated. As a result, Seaboard’s management determined there was a decline in value considered other-than-temporary as of December 31, 2014 and thus Seaboard recorded a write-down in the fourth quarter of 2014, which represented the remaining equity investment in this business and suspended the use of the equity method as of December 31, 2014. As part of its investment in this bakery, Seaboard has an interest bearing long-term note receivable from this bakery, the terms of which require periodic principal payments, with the first payment due in June 2015 and a final maturity date of December 2020. No payment was received in June and Seaboard agreed to review future payment terms. Repayment of this note is primarily dependent upon this business improving existing operations to generate adequate future cash flows to make future payments. Seaboard discontinued recognizing interest income on the note receivable during the fourth quarter of 2014. As of July 4, 2015, the recorded balance of this note receivable from affiliate and previous accrued interest was $34,556,000, all classified as long-term given uncertainty of the timing of payments in the future. If the future cash flows of this bakery do not improve, there is a possibility that some of the recorded value of the note receivable from affiliate could be deemed uncollectible in the future, which may result in a material charge to earnings. Including this business, as of July 4, 2015 Seaboard had a total of $57,708,000 of investments in, advances to and notes receivable from all of its affiliates in the DRC, which represents the single largest foreign country risk exposure for Seaboard’s equity method investments. One of the other affiliates in the DRC, to which Seaboard sells wheat, is the only supplier of flour to this bakery.

In September 2013, Seaboard invested $17,000,000 in a flour production business in Brazil for a 50% noncontrolling equity interest and provided a $13,000,000 long-term loan to this business. Half of the interest on this long-term note receivable from affiliate is payable currently in cash and the other half accrues as pay-in-kind interest. This note receivable matures in September 2020 but can be repaid with Seaboard having the option to convert the note receivable to equity and the other equity holders having the option to match such conversion with a purchase of new shares to avoid dilution. In addition, at the time of Seaboard’s initial investment in this business, plans included potential future equal additional investments by the owners to improve existing operations and expand operations to improve long-term operating results. Seaboard’s share of additional investments and advances totaled $5,554,000 and $3,886,000 during the six months ended July 4, 2015 and the year ended December 31, 2014, respectively. This business, which has received additional third party loans during 2015, incurred significant operating losses in 2014 and for the first six months of 2015. During the three and six months ended July 4, 2015, Seaboard recorded losses from affiliate of $10,247,000 and $21,913,000, respectively, related to this investment, which included $5,846,000 in the six month period for its proportionate share of a deferred income tax asset allowance related to 2014 and 2013. These recorded losses from affiliate were first used to reduce Seaboard’s investment in the business to zero and then, the remaining equity losses of $7,194,000 were used to write-down its advances and long-term note receivable from affiliate during the second quarter of 2015. Discussions are ongoing between the owners to determine the extent and timing of future additional investments by one or both parties or additional third party loans to fund expansion in an attempt to improve operating results. However, during the second quarter, Seaboard became concerned with disagreements with the other business partner as to the necessary support of the business, including the other equity partner’s ability and willingness to fund additional capital contributions. Based on current discussions with our business partner and the management of the business, the extent of the losses and revised financial outlook of the business, the halting of the construction plans for a new plant and the amount of existing third party debt of $27,300,000, Seaboard reserved the remaining portion of the advance and long-term loans of $9,345,000 during the second quarter of 2015 and thus reduced these advances and long-term loans to zero as of July 4, 2015. This charge was recorded as a reduction to income from affiliates in the Condensed Consolidated Statements of Comprehensive Income. As of December 31, 2014, the recorded balance of this note receivable from affiliate was $13,849,000 and Seaboard’s equity investment and advances in this business was $11,669,000. Seaboard also had a gross receivable due from affiliate related to this business resulting from sales of grain and supplies of $16,480,000 and $13,969,000 as of July 4, 2015 and December 31, 2014, respectively, which Seaboard reserved $3,000,000 in the second quarter of 2015 based on an analysis of collectability and working capital. It is possible that additional reserves will be necessary during the remainder of 2015.

In September 2014, Seaboard invested $17,333,000 in a cargo terminal business in Jamaica for a 21% noncontrolling interest. This investment is 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 was recognized in the first six months 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, but on April 1, 2014, Seaboard provided notice to cancel the lease and ceased operation of the leased facility on September 3, 2014. During the second quarter of 2015, Seaboard invested an additional $10,000,000 in a business operating a 300 megawatt electricity generating facility in the Dominican Republic and changed its method of accounting from a cost method investment at Corporate to an equity method investment in the Power segment. As a result, Seaboard reclassified the $5,910,000 initial investment from Corporate to the Power segment along with $12,691,000 of Seaboard’s interest in this business’ reported net income since the date of its initial investment, which is reflected as an adjustment to retained earnings as of January 1, 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 six months ended July 4, 2015 of $390,739,000 and $788,437,000, respectively, compared to total net sales for the three and six months ended June 28, 2014 of $375,668,000 and $731,431,000, respectively. Butterball had operating income for the three and six months ended July 4, 2015 of $51,362,000 and $93,959,000, respectively, compared to operating income for the three and six months ended June 28, 2014 of $28,682,000 and $49,430,000, respectively. As of July 4, 2015 and December 31, 2014, Butterball had total assets of $1,040,435,000 and $1,021,182,000, respectively.

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 $149,691,000 as of July 4, 2015. 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
	July 4,		June 28,		July 4,		June 28,
(Thousands of dollars)	2015		2014		2015		2014

Pork	$	331,259	$	466,735	$	652,147	$	848,825
Commodity Trading and Milling	778,688		914,114		1,599,276		1,703,504
Marine	241,679		210,960		478,339		411,424
Sugar	45,107		46,986		90,366		97,342
Power	27,510		53,033		52,641		106,881
All Other	3,643		2,763		7,475		6,251

Segment/Consolidated Totals	$	1,427,886	$	1,694,591	$	2,880,244	$	3,174,227

Operating Income (Loss):
	Three Months Ended						Six Months Ended
	July 4,			June 28,			July 4,			June 28,
(Thousands of dollars)	2015			2014			2015			2014

Pork	$	18,537		$	110,213		$	34,933		$	170,690
Commodity Trading and Milling	7,380			18,263			11,862			30,193
Marine	5,451			(3,057		)	12,230			(10,449		)
Sugar	993			9,654			4,992			16,415
Power	4,342			6,129			6,976			4,445
All Other	235			(8		)	343			329

Segment Totals	36,938			141,194			71,336			211,623
Corporate Items	(5,276		)	(6,855		)	(11,835		)	(12,081		)

Consolidated Totals	$	31,662		$	134,339		$	59,501		$	199,542

Income (Loss) from Affiliates:
	Three Months Ended						Six Months Ended
	July 4,			June 28,			July 4,			June 28,
(Thousands of dollars)	2015			2014			2015			2014

Pork	$	3,836		$	-		$	6,489		$	-
Commodity Trading and Milling	(15,947		)	(2,170		)	(25,196		)	(2,205		)
Marine	413			-			1,066			-
Sugar	111			443			527			748
Power	573			317			125			954
Turkey	23,271			9,530			40,025			15,904

Segment/Consolidated Totals	$	12,257		$	8,120		$	23,036		$	15,401

Total Assets:
	July 4,		December 31,
(Thousands of dollars)	2015		2014

Pork	$	812,570	$	821,172
Commodity Trading and Milling	976,396		1,103,461
Marine	301,484		283,276
Sugar	179,423		198,271
Power	232,928		219,604
Turkey	427,404		393,425
All Other	5,909		5,887

Segment Totals	2,936,114		3,025,096
Corporate Items	802,232		666,662

Consolidated Totals	$	3,738,346	$	3,691,758

Investments in and Advances to Affiliates:
	July 4,		December 31,
(Thousands of dollars)	2015		2014

Pork	$	85,105	$	79,832
Commodity Trading and Milling	197,797		178,344
Marine	18,106		17,333
Sugar	3,351		2,994
Power	30,473		20,348
Turkey	270,182		244,560

Segment/Consolidated Totals	$	605,014	$	543,411

Administrative services provided by the corporate office are allocated to the individual segments and represent corporate services rendered to and costs incurred for each specific segment, with no allocation to individual segments for 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).