UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ]☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20162017
OR
[ ]☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________________
Commission file number: 1-3390
SEABOARD CORPORATION
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Its Charter)
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| (I.R.S. Employer Identification No.) |
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9000 West 67th Street, Merriam, Kansas 66202
(Address of principal executive offices)Principal Executive Offices) (Zip Code)
(913) 676-8800
(Registrant’s telephone number, including area code)code (913) 676-8800
SECURITIES REGISTERED PURSUANT TO SECTIONSecurities registered pursuant to Section 12(b) OF THE ACT:of the Act:
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| Title of each class Common Stock $1.00 Par Value | Name of each exchange on which registered NYSE |
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SECURITIES REGISTERED PURSUANT TO SECTIONSecurities registered pursuant to Section 12(g) OF THE ACT:of the Act:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ]☐ No [ X ]☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes [ ]☐ No [ X ]☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ]☒ No [ ]☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ]☒ No [ ]☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K10‑K or any amendment to this Form 10-K.[ ] ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “larger“large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | Accelerated filer |
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Non-accelerated filer | Smaller reporting company |
Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ]☐ No [X ]☒
The aggregate market value of the 260,841 shares of Seaboard common stock held by nonaffiliates was approximately $747,309,465,$1,042,059,795, based on the closing price of $2,865.00$3,995.00 per share on July 2, 2016,1, 2017, the end of Seaboard’s most recently completed second fiscal quarter. As of January 31, 2017,2018, the number of shares of common stock outstanding was 1,170,550.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the indicated parts of this report: (1) Seaboard Corporation’s annual report to stockholders furnished to the SEC pursuant to Rule 14a-3(b) – Parts I and II; and (2) Seaboard Corporation’s definitive proxy statement, which will be filed no later than 120 days after December 31, 2016,2017, pursuant to Regulation 14A for the 20172018 annual meeting of stockholders – Part III.
FORM 10-K
SEABOARD CORPORATION
Forward-looking Statements
This report, including information included or incorporated by reference in this report, contains certain forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance and business of Seaboard Corporation and its subsidiaries (“Seaboard”). Forward-looking statements generally may be identified as statements that are not historical in nature and statements preceded by, followed by or that include the words “believes,” “expects,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends” or similar expressions.
In more specific terms, forward-looking statements include, without limitation:
· | statements concerning the projection of revenues, income or loss, capital expenditures, capital structure or other financial items; |
· | statements regarding the plans and objectives of management for future operations; |
· | statements of future economic performance; |
· | statements regarding the intent, belief or current expectations of Seaboard and its management with respect to: |
(i) | Seaboard’s ability to obtain adequate financing and liquidity; |
(ii) | the price of feed stocks and other materials used by Seaboard; |
(iii) | the sale price or market conditions for pork, grains, sugar, turkey and other products and services; |
(iv) | the recorded tax effects under certain circumstances and changes in tax laws; |
(v) | the volume of business and working capital requirements associated with the competitive trading environment for the Commodity Trading and Milling division; |
(vi) | the charter hire rates and fuel prices for vessels; |
(vii) | the fuel costs and related spot market prices in the Dominican Republic; |
(viii) | the effect of the fluctuation in foreign currency exchange rates; |
(ix) | the profitability or sales volume of any of Seaboard’s divisions; |
(x) | the anticipated costs and completion timetables for Seaboard’s scheduled capital improvements, acquisitions and dispositions; |
(xi) | the productive capacity of facilities that are planned or under construction, and the timing of the commencement of operations at such facilities; or |
(xii) | other trends affecting Seaboard’s financial condition or results of operations, and statements of the assumptions underlying or relating to any of the foregoing statements. |
This list of forward-looking statements is not exclusive. Seaboard undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to a variety of factors. The information contained in this Form 10-K and in other filings Seaboard makes with the Securities and Exchange Commission (the “SEC”), including without limitation, the information under the items “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K, identifies important factors which could cause such differences.
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SEABOARD CORPORATION
PART I
Item 1. Business
(a) | General Development of Business |
Originally founded in 1918, today Seaboard Corporation, a Delaware corporation organized in 1946, and its subsidiaries (“Seaboard”), are a diverse global agribusiness and transportation company. In the United States (“U.S.”), Seaboard is primarily engaged in pork production and processing and ocean transportation. Overseas, Seaboard is primarily engaged in commodity merchandising, grain processing, sugar production and electric power generation. Seaboard also has an interest inequity method investment that has turkey operations in the U.S. See Item 1(c)(1)(ii) “Status of Product or Segment” below for a discussion of acquisitions, dispositions and other developments in specific divisions.
Seaboard Flour LLC and SFC Preferred, LLC, Delaware limited liability companies, collectively own approximately 76% of the outstanding common stock of Seaboard. Mr. Steven J. Bresky, President and Chief Executive Officer of Seaboard, and other members of the Bresky family, including trusts created for their benefit, own the equity interests of Seaboard Flour LLC and SFC Preferred, LLC.
(b) | Financial Information about Segments |
The financial information relating to reportable segments required by this item is incorporated herein by reference to Note 13 to the consolidated financial statements included in Seaboard’s annual report to stockholders furnished to the SEC pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this annual report on Form 10-K (“Annual Report to Stockholders”).
(c) | Narrative Description of Business |
(1) | Business Done and Intended to be Done by the Registrant |
(i) Principal Products and Services
Pork Division – Seaboard, through its subsidiary Seaboard Foods LLC, engages in the business of hog production and pork processing in the U.S. Through these operations, SeaboardSeaboard’s Pork division produces and sells fresh and frozen pork products to further processors, foodservice operators, grocery stores, distributors and retail outlets throughout the U.S. Internationally, Seaboard sells, and, to these same types of customers in Japan, Mexico, China and numerous other foreign markets.a lesser extent, internationally. Other further processing companies also purchase Seaboard’s fresh and frozen pork products in bulk and produce products, such as lunchmeat, ham, bacon and sausage. Fresh pork, such as loins, tenderloins and ribs are sold to distributors and grocery stores. Seaboard sells some of its fresh products under brand names, including Prairie Fresh®. Seaboard’sThe Pork division’s hog processing plant is located in Guymon, Oklahoma and generally operates at capacity. SeaboardThe Pork division also has a ham-boning and processing plant in Mexico. Seaboard earns fees, based primarily on the number of head processed, to market substantially all of the products produced by Triumph Foods, LLC (“Triumph”) at its pork processing plant located in St. Joseph, Missouri.
Seaboard’sThe Pork division’s hog production operations consist of the breeding and raising of over five million hogs annually primarily at facilities owned by Seaboard or at facilities owned and operated by third parties with whom Seaboard has grower contracts. The hog production operations are located in the Central U.S. As a part of the hog production operations, Seaboardthe Pork division produces specially formulated feed for the hogs at seven owned feed mills. The remaining hogs processed are purchased from third-party hog producers, primarily pursuant to purchase contracts.
SeaboardThe Pork division produces biodiesel at facilities in Guymon, Oklahoma and St. Joseph, Missouri. The biodiesel is produced from pork fat supplied by Seaboard’s Guymonthe division’s Oklahoma pork processing plant and from other animal fat or vegetable oil supplied by non-Seaboard facilities. The biodiesel is sold to fuel blenders for distribution and in the retail markets.
Seaboard’sThe Pork Divisiondivision earns fees to market substantially all of the products produced by Triumph Foods, LLC (“Triumph”) at its pork processing plant located in Missouri, and by Seaboard Triumph Foods, LLC (“STF”) at its pork processing plant located in Iowa. As part of the operations, Seaboard and Triumph sell a portion of their hogs to be processed at the STF plant. Seaboard has a 50% noncontrolling interest in STF.
The Pork division has a 50% noncontrolling interest in Daily’s Premium Meats, LLC (“Daily’s”). Daily’s produces and markets raw and pre-cooked bacon ham and sausageham under the Daily’s® brand name primarily for the food service industry and, to a lesser extent, retail markets. Daily’s has three further processing plants located in Utah, Montana and Missouri. Seaboard, STF and Triumph each supply raw product to Daily’s.
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plants located in Salt Lake City, Utah, Missoula, Montana, and St. Joseph, Missouri. Seaboard and Triumph each supply raw product to Daily’s.
In 2015, the Pork Division and Triumph agreed to jointly develop and operate a pork processing facility in Sioux City, Iowa. The facility is anticipated to begin operations in the second half of 2017. As part of the operations, Seaboard agreed to provide a portion of the hogs to be processed at the facility.
Commodity Trading and Milling Division – Seaboard’s Commodity Trading and Milling (“CT&M”) Divisiondivision is an integrated agricultural commodity trading, processing and logistics company. This division markets wheat, corn, soybean meal and other commodities in bulk to third parties and affiliated companies. ThisThe CT&M division is principally managed under the name of Seaboard Overseas and Trading Group and conducts business primarily through its subsidiaries, Seaboard Overseas Limited with offices in Colombia, Ecuador, Isle of Man, Kenya, Singapore, Korea and South Africa, Seaboard Overseas Trading and Shipping (PTY) Ltd. located in South Africa, PS International, LLC located in Chapel Hill, North Carolina and Regina, Canada, and its non-consolidated affiliates, ContiLatin del Peru S.A. located in Lima, Peru, Cereoil Uruguay S.A. located in Montevideo, Uruguay, Interra International, LLC located in Atlanta, Georgia, and Chapel Hill, North Carolina, and Plum Grove Pty Ltd located in Fremantle, Australia.Australia, and Zalar Holding S.A. located in Morocco. This division also operates an ocean transportation brokerage operation through Seaboard Bulk Services, Ltd. located in Athens, Greece. Seaboard integrates the service of delivering commodities to its customers through the use of chartered and owned bulk vessels.
On January 5, 2018, the CT&M division acquired five entities operating as Groupe Mimran (“Mimran”). Mimran operates three flour mills and an associated trading business located in Senegal, Ivory Coast and Monaco. Excluding the acquisition of Mimran, the CT&M division sources, transports and markets approximately ten million tons of agricultural commodities on an annual basis. All of the commodities marketed by this division are purchased from growing regions worldwide, with primary destinations being Africa, South America, the Caribbean and Asia. This division sources, transports and markets approximately ten million tons of agricultural commodities on an annual basis. Seaboard integrates the service of delivering commodities to its customers through the use of chartered and owned bulk vessels.
ThisThe CT&M division also operates grain and feed milling and related businesses with 4138 locations in 2220 countries, including wheat flour mills in 16 countries, which are primarily supplied by the trading locations discussed above. The grain processing businesses are operated through 76 consolidated and 18 non-consolidated affiliates in Africa, South America, the Caribbean and Asia.Europe. These are primarily flour, feed and maize milling and oilseed crush businesses, which produce approximately five million metric tons of finished products per year. In addition, this division has a noncontrolling interest in a poultry businessbusinesses in Africa and a bakery business in the Democratic Republic of Congo. Most of the products produced by these operations are sold in the countries in which the products are produced or into adjacent countries.
Marine Division – Seaboard, through its subsidiary, Seaboard Marine Ltd., and various foreign affiliated companies and third-party agents, provides cargo shipping services to 2628 countries between the U.S., the Caribbean and Central and South America. SeaboardSeaboard’s Marine division uses a network of offices and agents throughout the U.S., Canada, LatinCentral and South America and the Caribbean to book cargo to and from the U.S. and between the countries it serves. Through agreements with a network of connecting carriers, Seaboardthis division can transport cargo to and from numerous U.S. locations by either truck or rail to and from one of its U.S. port locations, where it is staged for export via vessel or received as import cargo from abroad.
Seaboard’sThe Marine division’s primary marine operation isoperations are located in Miami, Florida and includes a terminal located at PortMiami and off-dock warehouses for cargo consolidation and temporary storage. SeaboardThis division also operates a cargo terminal facility at the Port of Houston that includes an on-dock warehouse space for temporary storage of bagged grains, resins and other cargoes. SeaboardThis division also makes scheduled vessel calls in Brooklyn, New York, New Orleans, Louisiana, Philadelphia, Pennsylvania, and 5049 foreign ports. Seaboard’sThe Marine division’s fleet consists of 2220 chartered and 3 owned vessels and dry, refrigerated and specialized containers and other related equipment.
Sugar Division – Seaboard, through its subsidiaries, Ingenio y Refineria San Martin del Tabacal S.R.L. and Alconoa S.R.L., as well as other Argentine non-consolidated affiliates, grows sugarcane, which it uses to produce refined sugar and alcohol in Argentina. This division also purchases sugar and alcohol in bulk from third parties mostly within Argentina for subsequent resale. The sugar products are mostly sold in Argentina, primarily to retailers, soft drink manufacturers and food manufacturers, with some exports to the U.S. and other South American countries. SeaboardSeaboard’s Sugar division grows a large portion of the sugarcane on the nearly 70,000 acres of land it owns in northern Argentina. The cane is processed at an owned mill, one of the largest in Argentina, with a current processing capacity of approximately 250,000 metric tons of sugar and approximately 2027 million gallons of
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alcohol per year. Also, this division owns a 51 megawatt cogeneration power plant that is fueled by using sugarcane by-products, natural gas and other biomass when available.
Power Division – Seaboard, through its subsidiary, Transcontinental Capital Corp. (Bermuda) Ltd., is an unregulated independent power producer generating electricity for the local power grid in the Dominican
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SEABOARD CORPORATION
Republic. SeaboardSeaboard’s Power division operates one owned floating power generating facilitybarge with capacity to generate approximately 108 megawatts of electricity that is secured on the Ozama River in Santo Domingo, Dominican Republic. The facility consists of a system of diesel engines mounted onto barge-type vessels and is capable of using natural gas or heavy fuel oil. This operation is exempt from U.S. regulations under the Public Utility Holding Company Act of 1938, as amended. SeaboardSeaboard’s Power division is not directly involved in the transmission or distribution of electricity. Seaboardelectricity and primarily sells on the spot market accessed primarily byto wholly government-owned distribution companies or partially government-owned generation companies. This division also has a 29.9% noncontrolling interest in a 300 megawatt electricity generating facility among a few other equity method investments in energy-related businesses in the Dominican Republic.
Turkey Segment – Seaboard has a 50% noncontrolling voting interest in Butterball, LLC (“Butterball”). Butterball is a vertically integrated producer, processor and marketer of branded and non-branded turkey and other products. Butterball has four processing plants, threetwo further processing plants and numerous live production and feed milling operations located in North Carolina, Arkansas, Missouri Illinois and Kansas. Butterball produces over one billion pounds of turkey each year. Butterball is a national supplier to retail and foodservice outlets, and also exports products to Mexico and numerous other foreign markets.
Other Businesses – Seaboard processes jalapeño peppers at its plant in Honduras, which are primarily shipped to and sold in the U.S.
The information required by this item with respect to the amount or percentage of total revenue contributed by any class of similar products or services, which account for 10% or more of consolidated revenue in any of the last three fiscal years, is set forth in Note 13 to the consolidated financial statements included in Seaboard’s Annual Report to Stockholders, which information is incorporated herein by reference.
(ii) Status of Product or Segment
During 2016,In August 2017, the Pork Divisiondivision acquired hog inventory and related assets through acquisitions offrom an existing farm operationsoperation for a totalan investment of $219$40 million. These assets increasedThis acquisition provided additional sows to further increase Seaboard’s hog production capacity to meet the majority of thefulfill its hog supply commitment for single shift processing at the newSTF plant, which began operations in September 2017.
During 2017, the CT&M division acquired a pulse and grain elevator in Canada for $14 million that complements an existing CT&M business in Canada, and invested an additional $7 million in a grain trading and poultry business in Morocco. The additional investment increased Seaboard’s ownership interest in this Moroccan business to 19.4% and, as a result, Seaboard changed its accounting method from the cost method to equity method effective on the date of the additional investment. On January 5, 2018, the CT&M division completed the acquisition of Mimran, including three flour mills in Senegal and Ivory Coast having a combined capacity of approximately 2,750 metric tons a day, and a trading business located in Monaco that is expected to increase Seaboard’s annual grain trading volume by approximately 900,000 tons. The purchase price was $375 million, plus an earn-out between zero and $48 million, using the exchange rate in effect at closing.
Butterball closed its Montgomery, Illinois, further processing plant in Sioux City, Iowa. Seaboard anticipates buying additional hog inventory2017, resulting in charges primarily related to impaired fixed assets and related assets during 2017 to further increase its hog supply capacity.
The CT&M Division took deliveryaccrued severance. Seaboard’s proportionate share of two dry bulk vessels built for a total cost of approximately $45these charges, recognized in income (loss) from affiliates, was $18 million during 2016. Seaboard entered into sales-leaseback transactions for the vessels delivered, which resulted in Seaboard receiving back the amounts spent to build the vessels. During the fourth quarter of 2016, the CT&M Division increased its ownership percentage and acquired control of a flour production business in Brazil through the restructuring of affiliate debt and equity. No cash consideration was exchanged.
The Marine Division invested $7 million of cash and converted its $8 million note receivable to equity for a 36% noncontrolling interest in a holding company that owns a controlling interest in two Haitian start-up projects. These projects consist of a marine terminal operation and a free trade zone development, which includes a planned power plant. This investment, made in the first quarter of 2016, is accounted for using the equity method of accounting.year ended December 31, 2017.
(iii) Sources and Availability of Raw Materials
None of Seaboard’s businesses utilize material amounts of raw materials that are dependent on purchases from one supplier or a small group of dominant suppliers except the following. Thefollowing: the Power Segmentsegment has one primary supplier of natural gas, but the barge can run on other types of fuel. Thefuel; and the Turkey Segmentsegment purchases a significant portion of its feed and grain used in the manufacturing of feed for its turkeys in North Carolina from Seaboard’s 50% partner in Butterball.
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(iv) Patents, Trademarks, Licenses, Franchises and Concessions
Seaboard uses the trademark of Seaboard™.
The Pork Divisiondivision uses registered trademarks relating to its products, including Seaboard Farms®, Prairie Fresh®, A Taste Like No Other®, St. Joe Pork®, High Plains Bioenergy®, Prairie Fresh Prime®, Seaboard Foods®, Cook-in Bag®, 67th Street® and The Thrill Without The Grill®. The Pork Division’sDaily’s, a non-consolidated affiliate Daily’s Premium Meats, LLC,of the Pork division, uses the trademarks Daily’s®, Daily’s Premium Meats Since 1893®, Buffet Brand® and Del Pueblo®. Seaboard considers the use of these trademarks important to the marketing and promotion of its pork products.
The Marine Divisiondivision uses the registered trademarks of Seaboard Marine® and Seaboard Solutions®. Seaboard believes there is significant recognition of these trademarks in the industry and by many of its customers.
The Sugar Divisiondivision markets certain sugar sales under the Chango® brand.
The Turkey Segmentsegment uses registered trademarks, including Butterball®, Carolina Turkey® and Farm to Family Butterball®. Seaboard considers the use of these trademarks important to marketing and promotion of its turkey products.
Patents, trademarks, franchises, licenses and concessions are not material to any of Seaboard’s other divisions.
(v) Seasonal Business
The Turkey business is seasonal only on the whole bird side with the Thanksgiving and Christmas holidays driving the majority of those sales. Seaboard’s other divisions are not seasonally dependent to any material extent.
(vi) Practices Relating to Working Capital Items
There are no unusual industry practices or practices of Seaboard relating to working capital items.
(vii) Depending on a Single Customer or Few Customers
Seaboard does not have sales to any one customer equal to 10% or more of consolidated revenues. Historically, theThe CT&M Division hasdivision derived a significant portion12% of its operating incomesales from sales to a non-consolidated affiliate.affiliate for the year ended December 31, 2017. The Sugar Divisiondivision derived 26%39%, 20%26% and 15%20% of its sales from one customer for the years ended December 31, 2017, 2016 and 2015, respectively, and 2014, respectively.another customer represented 10% of its sales for the year ended December 31, 2017. The Power Divisiondivision sells power in the Dominican Republic on the spot market accessed primarily by three wholly government-owned distribution companies. The Turkey Segment had one customer that represented 13% and 11% of its sales for the years ended December 31, 2017 and 2016, respectively, and another customer that represented 11% of its sales for the year ended December 31, 2016.2017. No other division has sales to a few customers that, if lost, would have a material adverse effect on any such division or on Seaboard taken as a whole.
(viii) Backlog
Backlog is not material to Seaboard’s businesses.
(ix) Government Contracts
No material portion of Seaboard’s business involves government contracts.
(x) Competitive Conditions
Competition in Seaboard’s Pork Divisiondivision comes from a variety of regional, national and international producers and processors and is based primarily on product quality, customer service and price. According to Successful Farming and Informa Economics, trade publications, Seaboard was ranked number three in pork production (based on sows in production) and number four in processing (based on daily processing capacity, including Triumph’s and STF’s capacity) in the U.S. in 2016.2017.
Seaboard’s commodity trading business to third parties faces competition from numerous traders around the world in a very competitive environment with low margin percentages on most trades. Most of the grain processing and related businesses face competition from either imported products or other local producers in the same industries.
Seaboard’s Marine Divisiondivision faces competition based on price, reliable sailing frequencies and customer service. Seaboard believes it is among the top five ranking ocean liner services for cargoes in the Caribbean and Central America based on cargo volume.
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Seaboard’s Sugar Divisiondivision owns one of the largest sugar mills in Argentina and faces significant competition for sugar sales in the local Argentine market. Sugar prices in Argentina can fluctuate compared to world markets due to Argentine government price control and protection policies.
Seaboard’s Power Divisiondivision is located in the Dominican Republic. Power generated by this division is sold on the spot market or to contract customers at prices based on market conditions and cost-based rates.
Competition for the Turkey Segmentsegment comes from a variety of national and regional producers and processors and is based primarily on product quality, customer service and price. Butterball ranks as one of the nation’s top three turkey producers (based on live production).
(xi) Research and Development Activities
Seaboard’s Pork Divisiondivision and Turkey Segmentsegment each conduct research and development activities focused on various aspects of their respective vertically integrated pork and turkey processing systems, including improving product quality, production processes, animal genetics, nutrition and health. Incremental costs incurred to perform these tests are expensed as incurred and are not material to operating results.
(xii) Environmental Compliance
Seaboard’s Pork Divisiondivision and Turkey Segmentsegment are subject to numerous federal, state and local provisions relating to the environment that require the expenditure of funds in the ordinary course of business. SeaboardSeaboard’s Pork division and its Turkey Segmentsegment do not anticipate making expenditures for these purposes that, in the aggregate, would have a significant effect on Seaboard’s financial condition or results of operations.
(xiii) Number of Persons Employed by Registrant
At the time of this report, Seaboard, excluding the recent Mimran acquisition and non-consolidated affiliates, had approximately 12,00011,800 employees, of whom approximately 6,2006,400 were employed in the U.S.
(d) | Financial Information about Geographic Areas |
In addition to the narrative disclosure provided below, the financial information relating to export sales required by this item is incorporated herein by reference to Note 13 to the consolidated financial statements included in Seaboard’s Annual Report to Stockholders.
Seaboard considers its relations with the governments of the countries in which its foreign subsidiaries and affiliates are located to be satisfactory, but foreign operations in lesser-developed countries are subject to risks of doing business such as potential civil unrest and government instability, increasing the exposure to potential expropriation, confiscation, war, insurrection, civil strife and revolution, sales price controls, currency inconvertibility and devaluation, and currency exchange controls. To minimize certain of these risks, Seaboard has insured its investment in an affiliated flour mill in the Democratic Republic of Congo to the extent available and deemed appropriate against certain of these risks with the Overseas Private Investment Corporation, an agency of the U.S. Government. At the date of this report, Seaboard is not aware of any situations that could have a material effect on Seaboard’s business.
(e) | Available Information |
Seaboard electronically files with the SEC annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports pursuant to Section 13(a) or 15(d) of the Exchange Act. The public may read and copy any materials filed with the SEC at their public reference room located at 100 F Street N.E., Washington, D.C. 20549. The public may obtain further information concerning the public reference room and any applicable copy charges, as well as the process of obtaining copies of filed documents by calling 1-800-SEC-0330.
The SEC maintains an internet website that contains reports, proxy and information statements, and other information regarding electronic filers at www.sec.gov. Seaboard provides access to its most recent Form 10-K, 10-Q and 8-K reports, and any amendments to these reports, on its internet website, www.seaboardcorp.com, free of charge, as soon as reasonably practicable after those reports are electronically filed with the SEC.
Please note that any internet addresses provided in this report are for information purposes only and are not intended to be hyperlinks. Accordingly, no information provided at such Internet addresses is intended or deemed to be incorporated herein by reference.
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Executive Officers of the Registrant
The following table lists the executive officers and certain significant employees of Seaboard. Generally, executive officers are elected at the annual meeting of the Board of Directors following the Annual Meeting of Stockholders and hold office until the next such annual meeting or until their respective successors are duly chosen and qualified. There are no arrangements or understandings pursuant to which any executive officer was elected.
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Name (Age) |
| Positions and Offices with Registrant and Affiliates |
Steven J. Bresky |
| President and Chief Executive Officer |
Robert L. Steer |
| Executive Vice President, Chief Financial Officer |
David M. Becker |
| Senior Vice President, General Counsel and Secretary |
James L. Gutsch |
| Senior Vice President, Engineering |
Ralph L. Moss |
| Senior Vice President, Governmental Affairs |
David S. Oswalt |
| Senior Vice President, Finance and Treasurer |
David H. Rankin |
| Senior Vice President, Taxation and Business Development |
Michael D. Trollinger |
| Vice President, Corporate Controller and Chief Accounting Officer |
Ty A. Tywater |
| Vice President, Audit Services |
David M. Dannov |
| President, Seaboard Overseas and Trading Group |
Edward A. Gonzalez |
| President, Seaboard Marine Ltd. |
Terry J. Holton |
| President, Seaboard Foods LLC |
Mr. Bresky has served as President and Chief Executive Officer of Seaboard since July 2006.
Mr. Steer has served as Executive Vice President, Chief Financial Officer of Seaboard since April 2011.
Mr. Becker has served as Senior Vice President, General Counsel and Secretary of Seaboard since April 2011.
Mr. Gutsch has served as Senior Vice President, Engineering of Seaboard since April 2011.
Mr. Moss has served as Senior Vice President, Governmental Affairs of Seaboard since April 2011.
Mr. Oswalt has served as Senior Vice President, Finance and Treasurer since April 2013, and previously as Senior Vice President, Taxation and Business Development of Seaboard from 2011 to 2013 and as Vice President, Taxation and Business Development from 2003 to 2011.2013.
Mr. Rankin has served as Senior Vice President, Taxation and Business Development since April 2015 and previously as Vice President, Taxation and Business Development since April 2013 and Vice President of Seaboard from 2010 to 2013.
Mr. Trollinger has served as Vice President, Corporate Controller and Chief Accounting Office of Seaboard since March 2015. Prior to that, he served as Vice President, Finance & Operational Reporting for Jack Cooper Enterprises, Inc. from 2011 to 2015.
Mr. Tywater has served as Vice President, Audit Services of Seaboard since November 2008.
Mr. Dannov has served as President of Seaboard Overseas and Trading Group since August 2006.
Mr. Gonzalez has served as President of Seaboard Marine Ltd. since January 2005.
Mr. Holton has served as President of Seaboard Foods LLC since December 2011.
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Item 1A. Risk Factors
Seaboard has identified important risks and uncertainties that could affect the results of operations, financial condition or business and that could cause them to differ materially from Seaboard’s historical results of operations, financial condition or business, or those contemplated by forward-looking statements made herein or elsewhere, by, or on behalf of, Seaboard. Factors that could cause or contribute to such differences include those factors described below.
(a) | General |
(1) | Seaboard’s Operations Are Subject to the General Risks of the Food Industry. The divisions of the business that are in the food products manufacturing industry are subject to the risks posed by: |
· | food spoilage or |
· | evolving consumer preferences and nutritional and health-related concerns; |
· | international, foreign, federal, state |
· | consumer product liability claims; |
· | product tampering; and |
· | public perception of food production practices, including handling of production and live animals. |
If one or more of these risks were to materialize, Seaboard’s revenues could decrease, costs of doing business could increase, and Seaboard’s operating results could be adversely affected.
(2) | International Operations Subject Seaboard to Risks That Could Have a Significant Impact on Seaboard’s Business. Seaboard is a diverse agribusiness and transportation company with global operations in several industries. Most of the sales and costs of Seaboard’s divisions are significantly influenced by worldwide fluctuations in commodity prices or changes in foreign political and economic conditions. Accordingly, revenues, operating income and cash flows |
· | changes in foreign currency exchange rates; |
· | foreign currency exchange controls; |
· | changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets; |
· | hyperinflation; |
· | heightened customer credit and execution risk; |
· | tariffs, other trade protection measures and import or export licensing requirements; |
· | potentially negative consequences from changes in tax laws; |
· |
|
· | negative perception within a foreign country of a U.S. company doing business in that foreign country; |
· | compliance with U.S. laws and regulations for conducting international business such as Foreign Account Tax Compliance Act, Foreign Corrupt Practices Act and Office of Foreign Assets Control regulations; |
· | expropriation, civil unrest and government |
· | inconsistent application or enforcement of local laws, including tax laws. |
(3) | Deterioration of Economic Conditions Could Negatively Impact Seaboard’s Business. Seaboard’s business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates, availability of capital markets, consumer spending rates, energy availability and costs, and the effects of governmental initiatives to manage economic conditions. Any such changes could adversely affect the demand for Seaboard’s meat products, grains, shipping services and other products, or the cost and availability of needed raw materials and packaging materials, thereby negatively affecting Seaboard’s financial results. The current national and global economic conditions, could, among other things: |
· | impair the financial condition of some of Seaboard’s customers and suppliers thereby increasing customer bad debts or non-performance by customers and suppliers; |
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· | negatively impact global demand for protein and grain-based products, which could result in a reduction of revenues, operating income and cash flows; |
· | decrease the value of Seaboard’s investments in equity and debt securities, including pension plan assets, causing losses that would adversely impact Seaboard’s net earnings; and |
· | impair the financial viability of Seaboard’s insurers. |
(4) | Ocean Transportation Has Inherent Risks. Seaboard’s owned and chartered vessels along with related cargoes are at risk of being damaged or lost because of events such as: |
· | bad weather; |
· | mechanical failures; |
· | grounding, fire, explosions and collisions; |
· | human error; and |
· | war, piracy and terrorism. |
All of these hazards cancould result in death or injury to persons, loss of property, environmental damages, delays or rerouting. If one of Seaboard’s vessels were involved in an incident, the resulting negative public perception could have a material adverse effect on Seaboard’s business, financial condition and results of operations. Also, many aspects of the marine industry are subject to extensive governmental regulations. Compliance with applicable laws, regulations and standards may require installation of costly equipment or operational changes, while the failure to comply may result in administrative and civil penalties, criminal sanctions, the suspension or termination of Seaboard’s operations or detention of its vessels.
(5) | Seaboard’s Common Stock Is Thinly Traded and Subject to Daily Price Fluctuations. The common stock of Seaboard is closely held and thinly traded on a daily basis on the NYSE |
(6) | Seaboard Has Investments in Non-Consolidated Affiliates That Are Managed by |
(7) | Seaboard Is Increasingly Dependent on Information Technology Systems to Manage and Support a Variety of Business Processes and Activities. Any significant breakdown, invasion, destruction, or interruption of these systems could negatively impact operations. In addition, there is a risk of business interruption and reputational damage from leakage of confidential information. Also, the disclosure of sensitive non-public company information through external media channels could lead to information loss. Any business interruptions or damage to Seaboard’s reputation could negatively impact its financial condition, results of operations, and the market price of its common stock. |
(b) | Pork Division |
(1) | Fluctuations in Commodity Pork Prices Could Adversely Affect the Results of Operations. Sales prices for this division’s products are directly affected by both domestic and |
(2) | Increases in Costs of This Division’s Feed Components and Third-Party Hog Purchases Could Adversely Affect Costs and Operating Margins. Feed costs are the most significant single component of the cost of raising hogs and |
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Similarly, accounting for approximately |
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no control, including weather, current and projected worldwide grain stocks and prices, grain export prices and supports, and governmental agricultural policies. This division attempts to manage certain of these risks through the use of financial instruments; however, this may also limit its ability to participate in gains from favorable commodity fluctuations. Unless wholesale pork prices correspondingly increase, increases in the prices of this division’s feed components or in the cost of third-party hogs purchased would adversely affect Seaboard’s operating margins. |
(3) | Seaboard May Be Unable to Obtain Appropriate Personnel at Remote Locations. The remote locations of the pork processing plant and live hog operations and a more restrictive national policy on immigration could negatively affect the availability and cost of labor. This division is dependent on having sufficient properly trained operations personnel. Attracting and retaining qualified personnel is important to this division’s success. The inability to acquire and retain the services of such personnel could have a material adverse effect on Seaboard’s operations. |
(4) | The Loss of This Division’s |
(5) | Environmental Regulation and Related Litigation Could Have a Material Adverse Effect on the Business. This division’s operations and properties are subject to extensive and increasingly stringent laws and regulations pertaining to, among other things, odors, the discharge of materials into the environment and the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment. Failure to comply with these laws and regulations and any future changes to them could result in significant consequences to Seaboard, including civil and criminal penalties, liability for damages and negative publicity. Some requirements applicable to this division may also be enforced by citizen groups. Seaboard has incurred, and will continue to incur, operating expenditures to comply with these laws and regulations. |
(6) | Health Risk to Livestock Could Adversely Affect Production, the Supply of Raw Materials and the Business. Seaboard is subject to risks relating to its ability to maintain animal health and control diseases. The general health of the hogs and the reproductive performance of the sows |
(7) | If This Division’s Products Become Contaminated, It Could Be Subject to Product Liability Claims and Product Recalls. Pork products may be subject to contamination by disease producing organisms and foreign material. Once contaminated products have been shipped for distribution, illness and death may result if the organisms are not eliminated at the further processing, foodservice or consumer level. Even an inadvertent shipment of contaminated products is a violation of law and may lead to increased risk of exposure to product liability claims, product recalls and increased scrutiny by federal and state regulatory agencies and could have a material adverse effect on |
(8) | International Trade Barriers Could Adversely Affect This Division’s Operations. This division realizes a significant portion of its revenues from international markets, particularly Japan, Mexico and China. International sales are subject to risks related to general economic conditions, imposition of tariffs, quotas, trade barriers and other restrictions, enforcement of remedies in foreign jurisdictions and compliance with applicable foreign laws, and other economic and political uncertainties. These and other risks could result in border closings or other international trade barriers having an adverse effect on Seaboard’s earnings. |
(9) | The Operating Profit of the Biodiesel Production Facilities Could Be Adversely Impacted by Various Factors. The profitability of this division’s biodiesel plants could be adversely affected by various factors, including the market price of pork fat, other animal fat and vegetable oil, which |
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mandates to use biofuels could adversely affect this division’s results of operations and could result in the potential impairment of the recorded value of the property, plant and equipment related to these facilities. Also, the Federal blender’s credits are not permanent and may not be renewed. |
(10) | Difficulties Could Be Experienced in the |
(c) | Commodity Trading and Milling Division |
(1) | This Division Is Subject to Risks Associated with Foreign Operations. This division principally operates in Africa, South America, the Caribbean and |
(2) | Fluctuations in Commodity |
(3) | This Division Uses a Material Amount of Derivative Products to Manage Certain Market Risks. The commodity trading portion of |
(4) | This Division Is Subject to Higher Than Normal Risks for Attracting and Retaining Key Personnel. In the commodity trading environment, |
(5) | This Division Faces Increasing Competition. This division is experiencing increasing competition in certain foreign markets by |
(d) | Marine Division |
(1) | The Demand for This Division’s Services Are Affected by International Trade and Fluctuating Freight Rates. This division provides cargo shipping services primarily from the U.S. to many different countries in the Caribbean and Central and South America. In addition to the risks of overseas operations mentioned in (a)(2) above, fluctuations in economic conditions, unstable or hostile local political situations in the countries in which |
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(2) | Chartered Ships Are Subject to Fluctuating Rates. Time-charter expenses are one of |
(3) | Increased Fuel Prices May Adversely Affect This Division’s Business. Ship fuel expenses are one of |
(4) | Hurricanes May Disrupt Operations. This division’s port operations can be subject to disruption due to hurricanes, especially at this division’s major ports in Miami, Florida and Houston, Texas, which could have an adverse effect on |
(5) | This Division Is Subject to Complex Laws and Regulations That May Adversely Affect the Revenues, Cost, Manner or Feasibility of Doing Business. Federal, state and local laws and domestic and international regulations governing worker health and safety, environmental protection, port and terminal security, and the operation of vessels, including fuel regulations, significantly affect this division’s operations, including rate discussions and other related arrangements. Many aspects of the marine industry, including rate agreements and vessel cost sharing agreements, are subject to extensive governmental regulation by the Federal Maritime Commission, the U.S. Coast Guard, and U.S. Customs and Border Protection, and to regulation by private industry organizations. Compliance with applicable laws, regulations and standards may require installation of costly equipment or operational changes, while the failure to comply may result in administrative and civil penalties, criminal sanctions, the suspension or termination of Seaboard’s operations or detention of its vessels. In addition, future changes in laws, regulations and standards, including allowed freight rate discussions and other related arrangements, may result in additional costs or a reduction in revenues. |
(6) | This Division’s Revenues and Cost Structure |
(e) | Sugar Division |
(1) | The Success of This Division Depends on the Condition of the Argentine Economy, Currency and Political Climate. This division operates a sugar mill, alcohol production and power generation facility in Argentina, locally growing a substantial portion of the sugarcane processed at the mill. Fluctuations in economic conditions or changes in the Argentine political climate |
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(2) | This Division Is Subject to the Risks That Are Inherent in any Agricultural Business. Seaboard’s results of operations for this division may be adversely affected by numerous factors over which Seaboard has little or no control and that are inherent in any agricultural business, including reductions in the market prices for this division’s products, adverse weather and growing conditions, pest and disease problems, and new government regulations regarding agriculture and the marketing of agricultural products. Of these risks, weather particularly |
(3) | The Loss of This Division’s Sole Processing Facility Would Adversely Affect the Business. This division is largely dependent on the continued operation of a single sugar mill. The loss of or damage to this mill for any reason, including fire, tornado or earthquake, or the occurrence of adverse governmental action or labor unrest resulting in labor strikes would adversely affect the business of this division. |
(4) | Labor |
(5) | The Operating Profit of the Alcohol Production Facility Could Be Adversely Impacted by Government Regulations. The profitability of this division’s alcohol production facility could be adversely affected by Argentine government regulations regarding production quotas, |
(6) | The Operating Profit of the Cogeneration Power Plant Could Be Adversely Impacted by Contract for the Sale of Energy. The sale price for energy produced and sold by this division’s cogeneration power plant is based on a biomass cogeneration contract with the Argentine government. The profitability of the cogeneration power plant could be adversely affected by this division’s failure to enforce the terms of the contract, which could adversely affect |
(f) | Power Division |
(1) | This Division is Subject to Risks of Doing Business in the Dominican Republic. In addition to significant currency fluctuations and the other risks of overseas operations mentioned in clause (a)(2) above, this division could experience difficulty in obtaining timely collections of trade receivables from the government owned distribution companies or other companies that must also collect from the government in order to make payments on their accounts. Currently, the Dominican Republic does not allow a free market to enable prices to rise with demand, which could limit this division’s profitability. The government has the ability to arbitrarily decide which power units will be able to operate, which can ultimately determine spot market prices for electricity generated and sold into the power grid and, therefore, could have adverse effects on results of operations. |
(2) | Fluctuations in Fuel Costs Could Adversely Affect This Division’s Operating Margins. Fuel is the largest cost component of this division’s business and, therefore, margins could be adversely affected by fluctuations in fuel prices if such fluctuations cannot be fully passed to customers through the spot market price mechanism. |
(3) | Supply of Natural Gas is Limited in the Dominican Republic. Supply of natural gas in the Dominican Republic is limited to one primary supplier. Although the barge can run on other types of fuel, supply disruptions of natural gas could have a negative impact on this division’s operating income. |
(4) | The Loss of This Division’s Sole Facility Would Adversely Affect the Business. This division is dependent on the continued operation of a single facility. The loss of or damage to this facility for any reason, including fire, hurricane, tornado or earthquake, or the occurrence of adverse governmental actions or labor unrest resulting in labor strikes would adversely affect the business of this division. |
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(g) | Turkey Segment |
(1) | Fluctuations in Commodity Turkey Prices Could Adversely Affect the Results of Operations. Sales prices for turkey products are directly affected by both domestic and worldwide supply and demand for turkey products and |
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other proteins, which are determined by constantly changing market forces of supply and demand as well as other factors over which Butterball has little or no control. Butterball’s results of operations and the value of Seaboard’s investment in Butterball could be adversely affected by fluctuations in the turkey commodity prices. |
(2) | Increases in Costs of Butterball’s Feed Components and Turkey Purchases Could Adversely Affect Costs and Operating Margins. Feed costs are the most significant single component of the cost of raising turkeys and |
(3) | Adverse Operating Results Could Result in Need for Additional Investment. Butterball has third-party bank loan facilities separate from Seaboard that are secured by substantially all of the assets of Butterball. Adverse operating results could cause Butterball to default on such loan facilities, which could result in a significant adverse impact on Butterball’s financial position, or result in Seaboard needing to increase |
(4) | Decreased Perception of Value in the |
(5) | The Loss of Butterball’s Primary Further Processing Facility Could Adversely Affect Butterball’s Business. Although Butterball has four processing plants and |
(6) | If Butterball’s Turkey Products Become Contaminated, the Company Could Be Subject to Product Liability Claims and Product Recalls. Butterball’s products may be subject to contamination by disease producing organisms and foreign material. Even an inadvertent shipment of contaminated products is a violation of law and may lead to increased risk of exposure to product liability claims, product recalls and increased scrutiny by federal and state regulatory agencies and may have a material adverse effect on the company’s business, reputation, and prospects. This could adversely affect the results of operations and financial condition of Butterball and the value of Seaboard’s investment in Butterball. |
(7) | Health Risk to Poultry Could Adversely Affect Production, the Supply of Raw Materials and Butterball’s Business. Butterball is subject to risks relating to its ability to maintain animal health and control diseases, such as avian influenza. The general health of the turkeys and reproductive performance |
(8) | Butterball May Be Unable to Obtain Appropriate Personnel at Remote Locations. The remote locations of some of Butterball’s processing plants and live turkey operations, along with a more restrictive national policy on immigration, could negatively affect the availability and cost of labor. Butterball is dependent on having sufficient properly trained operations personnel. Attracting and retaining qualified personnel is important to |
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Butterball’s success. The inability to acquire and retain the services of such personnel could have a material adverse effect on Butterball’s operations and the value of Seaboard’s investment in Butterball. |
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Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Seaboard’s principal properties by Divisiondivision are described below:
(1) Pork - Seaboard’s Pork Divisiondivision owns a hog processing plant in Guymon, Oklahoma. It has a daily double shiftdouble-shift capacity to process approximately 20,500 hogs and generally operates at capacity with additional weekend shifts depending on market conditions. Seaboard’s hog production operations consist of the breeding and raising of over five million hogs annually at facilities it primarily owns or at facilities owned and operated by third parties with whom it has grower contracts. This division owns and operates seven centrally located feed mills, which have a combined capacity to produce approximately three million tons of formulated feed annually. These feed mills are used primarily to support Seaboard’s existing hog production, and have the capability of supporting additional hog production in the future. These facilities are located in Iowa, Oklahoma, Texas, Kansas and Colorado. The Pork Divisiondivision also operates a ham-boning and processing plant in Mexico that has the capacity to process 96 million pounds of ham annually.
The Pork Divisiondivision owns a biodiesel plantplants in Guymon, Oklahoma, with the capacity to produce 36 million gallons of biodiesel annually. The Pork Division also owns a biodiesel plant inand St. Joseph, Missouri, with the capacity to produce 46 million gallons and 28 million gallons, respectively, of biodiesel annually.
Seaboard’s Pork Division’sDaily’s, a non-consolidated affiliate, Daily’s, owns three bacon further processing plants located in Salt Lake City, Utah, Missoula, Montana, and St. Joseph, Missouri. The Salt Lake City and Missoula plants are utilized near capacity throughout the year, while the St. Joseph plant is a fairly new production facility. The three plants have a combined daily smoking capacity of approximately 600,000 pounds of raw pork bellies.
The Pork Division and Triumph formedSTF, a joint venture during 2015 to develop and operatenon-consolidated affiliate, owns a pork processing facilityplant in Sioux City, Iowa, which is anticipated to beginthat began operations in the second half ofSeptember 2017. The plant is expected to process about three million market hogs annually when operating a single shift.
(2) Commodity Trading and Milling - Seaboard’s CT&M Divisiondivision owns, in whole or in part, grain-processing and related agribusiness operations in 2220 countries that have the capacity to mill approximately 10,80010,400 metric tons of wheat and maize per day, produce 6,0007,800 metric tons of animal feed per day, and crush 2,4002,500 metric tons of oilseeds per day. The grain-processing and related agribusiness operations located in Botswana, Brazil, Colombia, Democratic Republic of Congo, Ecuador, Gambia, Ghana, Guyana, Haiti, Jamaica, Kenya, Lesotho, Madagascar,Morocco, Mozambique, Nigeria, Peru, Republic of Congo, South Africa, Turkey, Uganda, Uruguay and Zambia own their facilities; and in Kenya, Lesotho, Morocco, Mozambique, Nigeria, Republic of Congo and Zambia, the land on which thecertain facilities are located is leased under long-term agreements. Certain foreign milling operations may operate at less than full capacity due to low demand, poor consumer purchasing power, excess milling capacity in their competitive environment or imported flour. ThisThe CT&M division has an investmentinvestments through non-consolidated affiliates in poultry businesses operating in parts of EasternMorocco, Kenya, Tanzania and Southern Africa. This division also has an investment through a non-consolidated affiliate inZambia and a bakery business in the Democratic Republic of Congo. SeaboardSeaboard’s CT&M division owns three 18,900 metric ton deadweight dry bulk vessels and charters between 1520 and 50 bulk vessels with deadweights ranging from 8,0007,000 to 76,00083,000 metric tons under short-term agreements. During 2015 and 2016,Also, the CT&M Division took delivery ofdivision charters four dry bulk vessels, each with a deadweight of 28,000 metric tons, which were originally purchased and then subsequently sold and leased-back.On January 5, 2018, the CT&M division completed the acquisition of Mimran, including three flour mills in Senegal and Ivory Coast having a combined capacity of approximately 2,750 metric tons a day, and a trading business located in Monaco that is expected to increase Seaboard’s annual grain trading volume by approximately 900,000 tons.
(3) Marine - Seaboard’s Marine Divisiondivision leases approximately 267,000 square feet of off-port warehouse space and 9192 acres of port terminal land and facilities in Miami, Florida, which are used in its containerized cargo operations. SeaboardSeaboard’s Marine division also leases an approximately 62 acre cargo handling and terminal facility in Houston, Texas, which includes several on-dock warehouses totaling approximately 690,000 square feet for cargo storage. At December 31, 2016, Seaboard2017, the Marine division owned three ocean cargo vessels with deadweights ranging from 7,700 to 11,000 metric tons. In addition, Seaboardthis division chartered 2220 vessels under contracts that typically range from approximately sixtwo months to twothree years with deadweights ranging from approximately 11,000 to 34,500 metric tons but has also entered into some longer-term charters up to eleven years. Seaboard’s Marine division owns or leases dry, refrigerated and specialized containers and other related equipment.
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deadweights ranging from approximately 8,000 to 34,500 metric tons but has also entered into some longer-term charters up to ten years. Seaboard owns or leases dry, refrigerated and specialized containers and other related equipment.
(4) Sugar - Seaboard’s Sugar Divisiondivision owns nearly 70,000 acres of planted sugarcane and a sugar mill with a current capacity to process approximately 250,000 metric tons of sugar and an alcohol distillery with a current capacity of approximately 2027 million gallons of alcohol per year. This capacity is sufficient to process all of the cane harvested by this division and additional quantities purchased from third-party farmers in the region. The sugarcane fields and processing mill are located in northern Argentina in the Salta Province, which experiences seasonal rainfalls that may limit the harvest season, which then affects the duration of mill operations and quantities of sugar and alcohol produced. The Sugar Divisiondivision also owns a 51 megawatt cogeneration power plant that supplies electricity to the Argentine power grid under a renewable energy contract with an Argentine state owned company. The plant is powered by the burning of sugarcane by-products, natural gas and other biomass when available.
(5) Power - Seaboard’s Power Divisiondivision owns one floating electric power generating facility (108 megawatts). The facility consistsbarge with capacity to generate approximately 108 megawatts of a system of diesel engines mounted onto barge-type vessels locatedelectricity that is secured on the Ozama River in Santo Domingo, Dominican Republic. The owned facility is capable of using natural gas or heavy fuel oil.
(6) Turkey – Seaboard’s Turkey Segment has a total of four processing plants, threetwo further processing plants and numerous company and third-party live production facilities and feed milling operations, all of which are located in North Carolina, Arkansas, Missouri Illinois and Kansas. These plants produce over one billion pounds of turkey each year.
(7) Other - Seaboard owns a jalapeño pepper processing plant and warehouse in Honduras.
In addition to the information provided above, the information under the caption “Principal Locations” of Seaboard’s Annual Report to Stockholders is incorporated herein by reference.
Management believes that Seaboard’s present facilities are adequate and suitable for its current purposes.
Item 3. Legal Proceedings
The information required by this item is incorporated herein by reference to Note 10 to the consolidated financial statements included in Seaboard’s Annual Report to Stockholders and attached as Exhibit 13.
Item 4. Mine Safety Disclosures
Not Applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
In December 2012,each of the four quarters of 2017, Seaboard declared and paid a dividendquarterly dividends of $12.00$1.50 per share on theof common stock. The amount of the dividend represented a prepayment of the 2013, 2014, 2015 and 2016 dividends. Therefore, Seaboard did not declare a dividend during the two years ended December 31, 2016. Seaboard’s Board of Directors intends that Seaboard will continue to pay quarterly dividends for the reasonably foreseeable future, with the amount of any dividends being dependent upon such factors as Seaboard’s financial condition, results of operations and current and anticipated cash needs, including capital requirements. On February 2, 2017, Seaboard declared a quarterly dividend of $1.50 per share of common stock payable on February 23, 2017.As discussed in Note 7 to the consolidated financial statements included in Seaboard’s Annual Report to Stockholders and attached as Exhibit 13 (which discussion is incorporated herein by reference), Seaboard’s ability to declare and pay dividends is subject to limitations imposed by debt agreements referred to there.described therein. Seaboard did not declare a dividend during 2016 and 2015. In December 2012, Seaboard declared and paid a dividend of $12.00 per share on the common stock. The amount of the dividend represented a prepayment of the 2013, 2014, 2015 and 2016 dividends.
Seaboard has not established any equity compensation plans or individual agreements for its employees under which Seaboard common stock, or options, rights or warrants with respect to Seaboard common stock, may be granted.
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Seaboard presently may repurchase up to $100 million market value of its common stock from time to time in open market or privately negotiated purchases under its share repurchase program. See Note 11 to the consolidated financial statements included in Seaboard’s Annual Report to Stockholders for further discussion. There were no purchases made by or on behalf of Seaboard or any “affiliated purchaser” (as defined by applicable rules of the SEC) of shares of Seaboard’s common stock during the fourth quarter of the fiscal year covered by this report. In addition to the information provided above, the information required by this item is incorporated herein by reference to the information under the captions of “Stockholder
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“Stockholder Information – Stock Listing,” “Quarterly Financial Data” and “Company Performance Graph” of Seaboard’s Annual Report to Stockholders.
Item 6. Selected Financial Data
The information required by this item is incorporated herein by reference to the “Summary of Selected Financial Data” of Seaboard’s Annual Report to Stockholders and attached as Exhibit 13 to this report.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The information required by this item is incorporated herein by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Seaboard’s Annual Report to Stockholders and attached as Exhibit 13 to this report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is incorporated herein by reference to the information under the caption “Derivative Information” within “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Derivative Instruments and Hedging Activities” within Note 1 and Note 8 of Seaboard’s consolidated financial statements of Seaboard’s Annual Report to Stockholders and attached as Exhibit 13 to this report.
Item 8. Financial Statements and Supplementary Data
The information required by this item is incorporated herein by reference to the information under the captions “Quarterly Financial Data,” “Report of Independent Registered Public Accounting Firm,” “Consolidated Statements of Comprehensive Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” “Consolidated Statements of Changes in Equity” and “Notes to Consolidated Financial Statements” included in Seaboard’s Annual Report to Stockholders and attached as Exhibit 13 to this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures – As of December 31, 2016,2017, Seaboard’s management has evaluated, under the direction of its chief executive and chief financial officers, the effectiveness of Seaboard’s disclosure controls and procedures, as defined under the Securities Exchange Act of 1934 (the “Exchange Act”) Rule 13a-15(e). Based upon and as of the date of that evaluation, Seaboard’s chief executive and chief financial officers concluded that Seaboard’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required. It should be noted that any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any system of disclosure controls and procedures is based in part upon assumptions about the likelihood of future events. Due to these and other inherent limitations of any such system, there can be no assurance that any design will always succeed in achieving its stated goals under all potential future conditions.
Reports on Internal Control Over Financial Reporting – Management’s report on internal control over financial reporting and the attestation report of KPMG LLP, Seaboard’s independent registered public accounting firm, on Seaboard’s internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f), is incorporated herein
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by reference to all information under the captions “Management’s Report on Internal Control over Financial Reporting” and “Report of Independent Registered Public Accounting Firm,” respectively, of Seaboard’s Annual Report to Stockholders and attached as Exhibit 13 to this report. Management’s assessment of the effectiveness of Seaboard’s internal control over financial reporting as of December 31, 2016, excluded Belarina Alimentos S.A. (“Belarina”), which was consolidated on October 28, 2016. Belarina’s total assets constituted approximately $44 million, or less than 1%, of Seaboard’s consolidated assets at December 31, 2016. Due to financial information for this foreign affiliate being reported on a three-month lag, no sales were included in Seaboard’s consolidated financial statements.
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Change in Internal Control Over Financial Reporting –Effective October 28, 2016, Seaboard began consolidation accounting and discontinued the equity method of accounting for its investment in Belarina with Seaboard’s ownership interest increasing from 50% to 98%. Management is currently in the process of documenting and evaluating internal controls with respect to Belarina. Although management does not consider it material to its results of operations, Seaboard is in the process of assessing the level of controls needed and overall materiality in order to incorporate into its Sarbanes-Oxley Act of 2002 Section 404 compliance program with an effective date of January 1, 2018. Except as set forth above, there There have been no changes in Seaboard’s internal control over financial reporting that occurred during the fiscal quarter ended December 31, 20162017 that has materially affected, or is reasonably likely to materially affect, Seaboard’s internal control over financial reporting.
Item 9B. Other Information
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information about the executive officers of the Company is included under the caption “Executive Officers of the Registrant” in Item 1 of this annual report on Form 10-K.
Seaboard has a Code of Ethics Policy (the “Code”) for directors, officers (including the chief executive officer, chief financial officer, chief accounting officer, and persons performing similar functions) and employees. Seaboard has posted the Code on its internet website, www.seaboardcorp.com, and intends to disclosesatisfy the disclosure requirement under Item 10 of Form 10-K regarding any future changes and waivers to the Code by posting such information on that website.
In addition to the information provided above, the information required by this item is incorporated herein by reference to the information under the captions “Item 1: Election of Directors,” “Board of Directors Information – Committees of the Board – Audit Committee,” “Board of Directors Information – Director Nominations” and “Section 16(a) Beneficial Ownership Reporting Compliance” of Seaboard’s definitive proxy statement for the 20172018 annual meeting of stockholders, which will be filed no later than 120 days after December 31, 20162017 (“Proxy Statement”).
Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the information under the captions “Board of Directors Information – Compensation of Directors,” “Executive Compensation and Other Information,” “Employment Arrangements with Named Executive Officers,” “Benefit Plans,” “Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Report,” and “Compensation Discussion and Analysis” included in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Seaboard has not established any equity compensation plans or individual agreements for its employees under which Seaboard common stock, or options, rights or warrants with respect to Seaboard common stock may be granted.
In addition to the information provided above, the information required by this item is incorporated herein by reference to the information under the captions “Principal Stockholders” and “Share Ownership of Management and Directors” included in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the information under the captions “Compensation Committee Interlocks and Insider Participation,” “Board of Directors Information – Controlled Corporation” and “Board of Directors Information – Committees of the Board” included in the Proxy Statement.
Item 14.14. Principal Accounting Fees and Services
The information required by this item is incorporated herein by reference to the information under the captions “Item 2: Selection of Independent Auditors” included in the Proxy Statement.
1918
FORM 10-K
SEABOARD CORPORATION
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) List the following documents filed as a part of the report:
1. Financial statements.
The consolidated financial statements and accompanying notes are incorporated herein by reference to the Annual Report to Stockholders filed as Exhibit 13 hereto.
2. Financial statement schedules.
Schedule II - Valuation and Qualifying Accounts |
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All other schedules are omitted as the required information is not applicable or the information is presented in the consolidated financial statements or related consolidated notes.
3. Exhibits.
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| Exhibit No. |
| Description |
| 2.1+ | ||
3.1 |
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| 3.2 |
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| 10.1* |
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| 10.2* |
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| 10.3* |
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| 10.5* |
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19
FORM 10-K
SEABOARD CORPORATION
| 10.7* |
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| 10.8* |
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20
FORM 10-K
SEABOARD CORPORATION
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10.21* | |||||
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20
FORM 10-K
SEABOARD CORPORATION
10.23* | |||||
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21
FORM 10-K
SEABOARD CORPORATION
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| 32.1+ |
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| 32.2+ |
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| 99.1+ |
| Audited statements of Butterball, LLC as of |
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| 101.INS+ |
| XBRL Instance Document. |
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| 101.SCH+ |
| XBRL Taxonomy Extension Schema Document. |
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| 101.CAL+ |
| XBRL Taxonomy Extension Calculation Linkbase Document. |
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| 101.DEF+ |
| XBRL Taxonomy Extension Definition Linkbase Document. |
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| 101.LAB+ |
| XBRL Taxonomy Extension Label Linkbase Document. |
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| 101.PRE+ |
| XBRL Taxonomy Extension Presentation Linkbase Document. |
* Management contract or compensatory plan or arrangement.
+ Filed electronically herewith.
21
FORM 10-K
SEABOARD CORPORATION
(b) Exhibits.
See exhibits identified above under Item 15(a)(3).
(c) Financial Statement Schedules.
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Schedule II - Valuation and Qualifying Accounts |
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Schedule II – Report of Independent Registered Public Accounting Firm |
| 25 |
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22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrantRegistrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| SEABOARD CORPORATION | ||
(Registrant) | |||
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| By: | /s/ Steven J. Bresky |
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| Steven J. Bresky, Chairman of the Board, |
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| President and Chief Executive Officer |
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| Date: | February 21, |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrantRegistrant and in the capacities and on the dates indicated.
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| Date |
| Title |
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| /s/ Steven J. Bresky |
| February 21, |
| Chairman of the Board, President, |
| Steven J. Bresky |
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| Chief Executive Officer and |
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| Director (principal executive |
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| officer) |
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| /s/ Robert L. Steer |
| February 21, |
| Executive Vice President, |
| Robert L. Steer |
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| Chief Financial Officer |
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| (principal financial officer) |
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| /s/ Michael D. Trollinger |
| February 21, |
| Vice President, Corporate |
| Michael D. Trollinger |
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| Controller and Chief Accounting |
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| Officer (principal accounting |
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| /s/ David A. Adamsen |
| February 21, |
| Director |
| David A. Adamsen |
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| /s/ Douglas W. Baena |
| February 21, |
| Director |
| Douglas W. Baena |
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| /s/ Edward I. Shifman, Jr. |
| February 21, |
| Director |
| Edward I. Shifman, Jr. |
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| /s/ Paul M. Squires |
| February 21, |
| Director |
| Paul M. Squires |
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23
Schedule II
SEABOARD CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In Millions)
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| Balance at |
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| Provision(1) |
| Net deductions(2) |
| end of year |
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| Provision(1) |
| Net deductions(2) |
| end of year |
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Allowance for Doubtful Accounts: |
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Year Ended December 31, 2017 |
| $ | 14 |
| 16 |
| (1) |
| $ | 29 |
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Year Ended December 31, 2016 |
| $ | 21 |
| (1) |
| (6) |
| $ | 14 |
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| $ | 21 |
| (1) |
| (6) |
| $ | 14 |
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Year Ended December 31, 2015 |
| $ | 12 |
| 13 |
| (4) |
| $ | 21 |
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| $ | 12 |
| 13 |
| (4) |
| $ | 21 |
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Year Ended December 31, 2014 |
| $ | 13 |
| — |
| (1) |
| $ | 12 |
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(1) The allowanceDuring 2017, $12 million of the provision iswas charged to selling, general and administrative expenses.expenses, $2 million to income from affiliates related to reserves on convertible notes and $2 million to cost of sales related to a rebate reserve.
(2) Includes write-offs net of recoveries and currency translation adjustments.
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| Provision (1) |
| Net deductions |
| end of year |
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| Provision (1) |
| Net deductions |
| end of year |
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Allowance for Notes Receivable: |
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Year Ended December 31, 2017 |
| $ | 16 |
| — |
| — |
| $ | 16 |
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Year Ended December 31, 2016 |
| $ | — |
| 16 |
| — |
| $ | 16 |
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| $ | — |
| 16 |
| — |
| $ | 16 |
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| Balance at |
| Charge (credit) |
| Balance at |
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| beginning of year |
| to expense |
| end of year |
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Allowance for Deferred Tax Assets: |
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Year Ended December 31, 2017 |
| $ | 58 |
| 1 |
| $ | 59 |
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Year Ended December 31, 2016 |
| $ | 19 |
| 39 |
| $ | 58 |
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Year Ended December 31, 2015 |
| $ | 21 |
| (2) |
| $ | 19 |
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| Balance at |
| Charge (credit) |
| Balance at |
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| beginning of year |
| to expense |
| end of year |
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Allowance for Deferred Tax Assets: |
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Year Ended December 31, 2016 |
| $ | 19 |
| 39 |
| $ | 58 |
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Year Ended December 31, 2015 |
| $ | 21 |
| (2) |
| $ | 19 |
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Year Ended December 31, 2014 |
| $ | 18 |
| 3 |
| $ | 21 |
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| Balance at |
| Credit |
| Balance at |
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| Balance at |
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| beginning of year |
| to expense |
| end of year |
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| beginning of year |
| to expense |
| end of year |
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Reserve for LIFO Valuation: |
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Year Ended December 31, 2017 |
| $ | 21 |
| 10 |
| $ | 31 |
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Year Ended December 31, 2016 |
| $ | 28 |
| (7) |
| $ | 21 |
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| $ | 28 |
| (7) |
| $ | 21 |
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Year Ended December 31, 2015 |
| $ | 37 |
| (9) |
| $ | 28 |
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| $ | 37 |
| (9) |
| $ | 28 |
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Year Ended December 31, 2014 |
| $ | 62 |
| (25) |
| $ | 37 |
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See accompanying report of independent registered public accounting firm.
24
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TheTo the Stockholders and Board of Directors and Stockholders
Seaboard Corporation:
Under dateOur audits of the consolidated financial statements referred to in our report dated February 21, 2018 appearing in the 2017 we reported on the consolidated balance sheetsAnnual Report of Seaboard Corporation and subsidiaries (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2016, as contained in the annual(which report on Form 10-K for the year 2016. In connection with our audits of the aforementionedand consolidated financial statements weare incorporated by reference in this Annual Report on Form 10-K) also audited the related consolidatedincluded an audit of financial statement schedule noted as Schedule II under Item 15(a)(2). This financial statement schedule is the responsibility of the Company’s management. Our responsibility is to express anII. In our opinion, on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.therein when read in conjunction with the related consolidated financial statements.
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| /s/ KPMG LLP |
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Kansas City, Missouri |
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February 21, |
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25