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, 2005
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 name of registrant as specified in its charter)
Delaware 04-2260388
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9000 W. 67th Street, Shawnee Mission, Kansas 66202
(Address of principal executive offices) (Zip Code)
(913) 676-8800
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
Common Stock $1.00 Par Value American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) 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 if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K 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-K or any amendment to this
Form 10-K. [ X ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of "accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ ] Accelerated filer [ X ]
Non-accelerated filer [ ]
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 354,385 shares of Seaboard
voting stock held by nonaffiliates was approximately
$582,963,325, based on the closing price of $1,645.00 per share
on July 1, 2005, the end of Seaboard's second fiscal quarter. As
of February 17, 2006, the number of shares of common stock
outstanding was 1,261,367.24.
DOCUMENTS INCORPORATED BY REFERENCE
Part I, item 1(b), a part of item 1(c)(1) and the financial
information required by item 1(d) and Part II, items 6, 7, 7A and
8 are incorporated herein by reference to Seaboard Corporation's
Annual Report to Stockholders furnished to the Commission
pursuant to Rule 14a-3(b).
Part II, a part of item 5, and Part III, a part of item 10 and
items 11, 12 and 13 are incorporated herein by reference to
Seaboard Corporation's definitive proxy statement filed pursuant
to Regulation 14A for the 2006 annual meeting of stockholders.
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 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,
sugar and other products,
(iv) the sales price or market conditions for other
products and services,
(v) the ability of trading and milling to successfully
compete in the markets it serves and the volume of
business and working capital requirements associated
with the competitive trading environment,
(vi) the charter hire rates and fuel prices for vessels,
(vii) the demand for power, related spot market prices
and collectibility of receivables in the Dominican
Republic,
(viii) the effect of the fluctuation in exchange rates
for the Dominican Republic peso,
(ix) the potential effect of Seaboard's investment in a
wine business on the consolidated financial statements,
(x) the potential impact of various environmental actions
pending or threatened against Seaboard,
(xi) statements concerning profitability of any of
Seaboard's segments,
(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,
(xiii) the impact of the 2005 Daily's acquisition in enhancing
Seaboard's ability to venture into further processed pork
products, or
(xiv) the timetable for the Triumph Foods pork processing
plant to reach full double shift operating capacity.
(xv) the ability of Seaboard to successfully market the
increased volume of pork produced by Triumph Foods, or
(xvi) 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.
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 Commission, including
without limitation, the information under the headings "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.
2
PART I
Item 1. Business
(a) General Development of Business
Seaboard Corporation, a Delaware corporation, the successor
corporation to a company first incorporated in 1928, and
subsidiaries (Seaboard) is a diversified international
agribusiness and transportation company which is primarily
engaged domestically in pork production and processing, and cargo
shipping. Overseas, Seaboard is primarily engaged in commodity
merchandising, flour and feed milling, sugar production, and
electric power generation. See Item 1(c) (1) (ii) "Status of
Product or Segment" below for a discussion of developments in
specific segments.
Seaboard Flour LLC, a Delaware limited liability company, owns
approximately 70.9 percent of the outstanding common stock of
Seaboard. Mr. H. Harry Bresky, President and Chief Executive
Officer of Seaboard, and other members of the Bresky family,
including trusts created for their benefit, own approximately
99.5 percent of the common units of Seaboard Flour LLC. Such
Bresky family members also own additional shares, representing
approximately 2.4 percent of the outstanding common stock of
Seaboard.
(b) Financial Information about Industry Segments
The information required by Item 1(b) of Form 10-K relating to
Industry Segments is incorporated herein by reference to Note 13
of the Consolidated Financial Statements appearing on pages 55
through 59 of the Seaboard Corporation Annual Report to
Stockholders furnished to the Commission pursuant to Rule 14a-
3(b) and attached as Exhibit 13 to this Report.
(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 LP, previously Seaboard Farms, Inc., engages in the
businesses of hog production and pork processing in the
United States. Through these operations, Seaboard produces
and sells fresh, frozen and further processed pork products
to further processors, foodservice outlets, grocery stores
and other retail outlets, and other distributors throughout
the United States, and to Japan and other foreign markets.
Other further processing companies also purchase Seaboard's
fresh and frozen pork products in bulk and produce products,
such as lunchmeat, hams, bacon, and sausages. Fresh pork,
such as loins, tenderloins and ribs are sold to distributors
and grocery stores. Seaboard also sells further processed
pork products consisting primarily of raw and pre-cooked
bacon from its two Daily's bacon plants acquired during
2005. Seaboard sells some of its fresh products under the
brand name Prairie Freshr and began marketing its bacon and
other further processed products under the Daily'sr brand
name acquired in 2005. Seaboard's hog processing plant is
located in Guymon, Oklahoma, and operates at double shift
capacity. Seaboard's bacon plants acquired from Daily's
during 2005 are located in Salt Lake City, Utah and
Missoula, Montana.
Seaboard's hog production operations consist of the breeding
and raising of approximately 3.6 million hogs annually at
facilities primarily owned or at facilities owned and
operated by third parties with whom it has grower contracts.
The hog production operations are located in the States of
Oklahoma, Kansas, Texas and Colorado. As a part of the hog
production operations, Seaboard produces specially
formulated feed for the hogs at six owned feed mills. The
remaining hogs processed are purchased from third party hog
producers, primarily pursuant to purchase contracts.
Commodity Trading and Milling Division - Seaboard's
Commodity Trading and Milling Division, through its
subsidiaries, Seaboard Overseas Limited located in Bermuda,
Seaboard Overseas Trading and Shipping (PTY), Ltd. located
in South Africa and Ecuador, internationally markets wheat,
corn, soybean meal and other commodities in bulk to third
party customers and affiliated companies. These commodities
are purchased worldwide, with primary destinations to
Africa, South America, the Caribbean, and the Eastern
Mediterranean. The division expects to originate, transport
and market approximately 2.5 million tons of grains and
proteins on an annual basis. This estimate takes into
consideration the sale of some components of its third party
commodity trading operations as discussed in section Item
1(c) (1) (ii) "Status of Product or Segment". Seaboard
integrates the service of delivering commodities to its
customers through the use of chartered bulk vessels and its
eight owned bulk carriers.
3
This division also operates milling businesses in 12
countries, which are primarily supplied by the trading
locations discussed above. The grain processing businesses
are operated through five consolidated and six non-
consolidated affiliates in Africa, the Caribbean and South
America, with flour, feed and maize milling businesses which
produce over 1.5 million metric tons of finished products
per year. Most of the products produced by the milling
operations are sold in the countries in which the products
are produced.
Marine Division - Seaboard, through its subsidiary, Seaboard
Marine Limited, and various foreign affiliated companies and
third party agents, provides containerized cargo shipping
service to over twenty-five countries between the United
States, the Caribbean Basin, and Central and South America.
Seaboard uses a network of offices and agents throughout the
United States, Canada, Latin America and the Caribbean Basin
to book both northbound and southbound cargo to and from the
United States and between the countries it serves. Through
intermodal arrangements, Seaboard can transport cargo to and
from numerous U.S. mainland locations by either truck or
rail to and from one of its U.S. port locations, where it is
staged for export via sea or received as import cargo from
abroad.
Seaboard's primary marine operations located in Miami
includes a 135,000 square foot warehouse for cargo
consolidation and temporary storage. Seaboard also has a
70 acre terminal located at the Port of Miami. Seaboard
operates a 62 acre cargo terminal facility at the Port of
Houston that includes over 690,000 square feet of on-dock
warehouse space for temporary storage of bagged grains,
resins and other cargoes. Seaboard also makes scheduled
vessel calls in Philadelphia, Pennsylvania, Fernandina
Beach, Florida and New Orleans, Louisiana. Seaboard's fleet
consists of eight owned and approximately 27 chartered
vessels, thousands of dry, refrigerated and specialized
containers and related equipment. Seaboard also provides
cargo transportation service from its domestic ports of call
to and from multiple foreign destinations where Seaboard
does not make vessel calls through connecting carrier
agreements with third party regional and global carriers.
Sugar and Citrus Division - Seaboard, through its
subsidiary, Ingenio y Refineria San Martin del Tabacal and
other Argentine non-consolidated affiliates, is involved in
the production and refining of sugar cane and the production
and processing of citrus in Argentina. This division also
purchases sugar and citrus in bulk from third parties within
Argentina for subsequent resale. The sugar products are
primarily sold in Argentina, primarily to retailers, soft
drink manufacturers, and food manufacturers, with some
exports to the United States, South America and Europe while
the citrus products are primarily exported to the global
market. Seaboard grows a large portion of the sugar cane on
approximately 50,000 acres of land it owns in northern
Argentina. The cane is processed at an owned mill, with a
current processing capacity of approximately 200,000 metric
tons of sugar per year. The sugar mill is one of the
largest in Argentina. Another approximately 3,000 acres of
land is planted with oranges.
Power Division - Seaboard, through its subsidiary,
Transcontinental Capital Corp. (Bermuda) Ltd., operates as
an independent power producer in the Dominican Republic.
This operation is exempt from U.S. regulation under the
Public Utility Holding Company Act of 1938, as amended. The
business operates two floating barges with a system of
diesel engines capable of generating a combined rated
capacity of approximately 112 megawatts of electricity.
Seaboard generates electricity into the local Dominican
Republic power grid, but is not involved in the transmission
or distribution of the electricity. The barges are secured
on the Ozama River in Santo Domingo, Dominican Republic.
The electricity is sold at contracted pricing to certain
large commercial users with contract terms extending from
one to four years. Seaboard also sells power under short-
term contracts with certain government-owned distribution
companies. The remaining electricity is sold in the "spot
market" at prevailing market prices, primarily to three
wholly or partially government-owned electric distribution
companies.
Other Businesses - Seaboard purchases and processes jalapeno
peppers at its owned plant in Honduras. The processed
peppers are primarily sold to a customer in the United
States, and are shipped to the United States by Seaboard's
Marine Division and distributed from Seaboard's port
facilities.
Seaboard also has an equity investment in a wine business
that produces wine in Bulgaria for distribution, primarily
throughout Europe.
The information required by Item 1 of Form 10-K with respect
to the amount or percentage of total revenue contributed by
any class of similar products or services which account for
10 percent or more of consolidated
4
revenue in any of the last three fiscal years is set
forth in Note 13 of Seaboard's Consolidated Financial
Statements, appearing on pages 55 through 59 of the
Seaboard's Annual Report to Stockholders, furnished to
the Commission pursuant to rule 14a-3(b) and attached
as Exhibit 13 to this report, which information is
incorporated herein by reference.
(ii) Status of Product or Segment
Effective May 9, 2005 Seaboard's Commodity Trading and
Milling segment agreed to sell some components of its third
party commodity trading operations, consisting primarily of
certain forward sales contracts, certain grain inventory and
all related contracts to support such sales contracts,
including commodity futures and options, foreign exchange
agreements, purchase contracts and charter agreements. This
transaction closed on May 27, 2005. Seaboard intends to
continue competing in many of the markets and routes
associated with the sale transaction.
The Pork segment is currently planning to expand its
processed meats capabilities by constructing a separate
further processing plant, primarily for bacon and sausage
processing. Construction of this facility is expected to
begin during 2006 and to be completed in 2007. In addition,
the Pork segment is pursuing the construction of a biodiesel
processing plant to utilize by-product from its Guymon
processing plant. This plant will be completed in 2007.
In July 2005, Seaboard completed the acquisition of Daily's,
a bacon processor located in the western United States. The
acquisition included Daily's two bacon processing plants
located in Salt Lake City, Utah and Missoula, Montana.
Daily's produces premium sliced and pre-cooked bacon
primarily for food service. This acquisition continues
Seaboard's expansion of its integrated pork model into value-
added products and is expected to enhance Seaboard's ability
to venture into other further processed pork products.
In early 2004, Seaboard entered into a marketing agreement
with Triumph Foods LLC (Triumph) to market all of the pork
products processed at Triumph's pork processing plant to be
constructed in St. Joseph, Missouri. The plant began
operations in January 2006. This plant will have capacity
similar to Seaboard's Guymon, Oklahoma plant with the
business based upon the same integrated model as Seaboard's.
The Triumph plant is not expected to reach full double shift
operating capacity until late 2007 or early 2008.
Since the last half of 2003, the power industry in the DR
has suffered from a cash flow imbalance that began when the
government did not allow retail electricity rates charged by
the distribution companies to increase sufficiently to cover
the significant peso devaluation and increases in
dollar-denominated fuel costs. The government still has not
fully funded the cash shortfall accumulated at the end of
2004 resulting in past due receivables remaining
outstanding. During 2005, Seaboard experienced a more
stable payment performance resulting in management deciding
to produce at near full capacity. In addition, Seaboard is
pursuing additional investment opportunities in the power
industry.
During 2005, milling operations ceased at Seaboard's non-
controlled, non-consolidated affiliate in Angola. Seaboard
is in the process of looking for a buyer of its minority
ownership in this affiliate.
Seaboard has an equity investment in a wine business in
Bulgaria. In February 2005, the Board of Directors and the
majority of owners, including Seaboard, agreed to pursue the
sale of the entire business or all of its assets. No
assurance can be given as to whether any such sale will
occur.
(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.
(iv) Patents, Trademarks, Licenses, Franchises and
Concessions
Seaboard uses the registered trademark of Seaboard.
The Pork Division uses registered trademarks relating to its
products, including Seaboard Farms, Inc., Seaboard Farms,
Prairie Fresh, A Taste Like No Other, Daily's, Honey
Cured (as a part of a design), and Peppered Bacon (as a
part of a design). Seaboard considers the use of these
trademarks important to the marketing and promotion of its
pork products.
5
The Marine Division uses the trade name Seaboard Marine
which is also a registered trademark. Seaboard believes
there is significant recognition of the Seaboard Marine
trademark in the industry and by many of its customers.
Part of the sales within the Sugar and Citrus Division are
made under the Chango brand in Argentina, where this
division operates. Local sales prices are affected by sugar
import duties imposed by the Argentine government, which
affects the volume of sugar imported to and exported from
that market.
Seaboard's Power Division benefits from a tax exempt
concession granted by the Dominican Republic government
through 2012.
Patents, trademarks, franchises, licenses and concessions
are not material to any of Seaboard's other divisions.
(v) Seasonal Business
Profits from processed pork are generally higher in the fall
months. Sugar prices in Argentina are generally lower
during the typical sugarcane harvest period between June and
November. 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
ten percent or more of consolidated revenues. The Pork
division derives approximately thirteen percent of its
revenues from three customers in Japan through one agent.
The Power division sells power in the Dominican Republic to
a limited number of contract customers and on the spot
market accessed primarily by three wholly or partially
government-owned distribution companies.
Seaboard's Produce Division sells nearly all of its
processed jalapeno peppers to one customer under a contract
expiring in 2008. We do not believe the loss of this
customer would have a material adverse effect on Seaboard's
consolidated financial position or results of operations.
No other division has sales to a few customers which, if
lost, would have a material adverse effect on any such
segment or on Seaboard taken as a whole.
(viii) Backlog
Backlog is not material to Seaboard businesses.
(ix) Government Contracts
No material portion of Seaboard business involves government
contracts.
(x) Competitive Conditions
Competition in Seaboard's Pork Division comes from a variety
of national, international and regional producers and
processors and is based primarily on product quality,
customer service and price. According to recent issues of
Successful Farming and Feedstuffs, trade publications,
Seaboard ranks as one of the nation's top five pork
producers (based on sows in production) and top ten pork
processors (based on daily processing capacity).
Seaboard's ocean liner service for containerized cargoes
faces competition based on price and customer service.
Seaboard believes it is among the top five ranking ocean
liner services for containerized cargoes in the Caribbean
Basin based on cargo volume.
Seaboard's sugar business 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
current Argentine government price protection policies.
Seaboard's Power Division is located in the Dominican
Republic. Power generated by this segment is sold on the
spot market or to contract customers at prices primarily
based on market conditions rather than cost-based rates.
6
(xi) Research and Development Activities
Seaboard conducts research and development activities
focused on various aspects of Seaboard's vertically
integrated pork processing system, 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 is subject to numerous Federal, state and local
provisions relating to the environment which require the
expenditure of funds in the ordinary course of business.
Seaboard does not anticipate making expenditures for these
purposes, including expenditures with respect to the items
disclosed in Item 3, Legal Proceedings, which, in the
aggregate would have a material or significant effect on
Seaboard's financial condition or results of operations.
(xiii) Number of Persons Employed by Registrant
As of December 31, 2005, Seaboard, excluding non-
consolidated foreign affiliates, had 10,357 employees, of
whom 5,796 were employed in the United States.
Approximately 2,100 employees in Seaboard's Pork Division
were covered by collective bargaining agreements as of
December 31, 2005. Seaboard considers its employee
relations to be satisfactory.
(d) Financial Information about Geographic Areas
The financial information required by Item 1(d) of Form 10-K
relating to export sales is incorporated herein by reference to
Note 13 of Seaboard's Consolidated Financial Statements appearing
on pages 55 through 59 of Seaboard's Annual Report to
Stockholders furnished to the Commission pursuant to Rule 14a-
3(b) and attached as Exhibit 13 to this report.
Seaboard considers its relations with the governments of the
countries in which its foreign subsidiaries and affiliates are
located to be satisfactory, but these foreign operations are
subject to risks of doing business in lesser-developed countries
which are subject to potential civil unrests and government
instabilities, 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 certain investments in its
affiliate flour mills in Haiti, Lesotho, Mozambique, Republic of
Congo and Zambia, to the extent available and deemed appropriate
against certain of these risks with the Overseas Private
Investment Corporation, an agency of the United States
Government. Nigeria is presently experiencing an increase in
insurrection and civil unrest in certain parts of the country but
not in areas where Seaboard primarily operates and, to date, this
has not had any effect on Seaboard's flour and feed operations in
that country. Currently, these situations are not expected to
have any material effect on Seaboard's cash flows or results of
operations. At the date of this report, Seaboard is not aware of
any other situations referred to above which could have a
material effect on Seaboard's business.
(e) Available Information
Seaboard electronically files with the Commission 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 Commission at their public reference
room located at Judiciary Plaza, 450 Fifth Street, N.W.,
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 the Commission at 1-800-SEC-
0330.
The Commission maintains an Internet site 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
Commission.
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.
7
Item 1A. Risk Factors
Seaboard is identifying 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, but
are not limited to, those factors described below. The risk
factors highlighted below are not the only ones that Seaboard
faces.
(a) General
(1) Seaboard's Operations Are Subject To The General Risks Of
The Food Industry. The segments of the business that are in the
food products manufacturing industry are subject to the risks
posed by:
food spoilage or food contamination;
evolving consumer preferences and nutritional and health-
related concerns;
federal, state and local food processing controls;
consumer product liability claims;
product tampering;
the possible unavailability and/or expense of liability
insurance.
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) Foreign Political And Economic Conditions 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
segments are significantly influenced by worldwide fluctuations
in commodity prices or changes in foreign political and economic
conditions. Accordingly, sales, operating income and cash flows
can fluctuate significantly from year to year. In addition,
Seaboard's international activities pose risks not faced by
companies that limit themselves to United States markets. These
risks include:
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 risk
tariffs, other trade protection measures and import or
export licensing requirements;
potentially negative consequences from changes in tax laws;
and
different legal and regulatory structures and unexpected
changes in legal and regulatory requirements.
negative perception within a foreign country of a United
States company doing business in that foreign country
Seaboard cannot assure you that it will be successful in
competing effectively in international markets.
(3) Seaboard's Common Stock Is Thinly Traded And Subject to
Daily Price Fluctuations. The common stock of Seaboard is
closely held (70.9%) and thinly traded on a daily basis on the
American Stock Exchange. Accordingly, the price of a share of
common stock can fluctuate more significantly from day-to-day
than a widely held stock that is actively traded on a daily
basis.
(b) Pork Division
(1) Fluctuations In Commodity Pork Prices Could Adversely Affect
Seaboard's Results Of Operations. Sale prices for Seaboard's
pork products are directly affected by both domestic and world
wide supply and demand for pork products and other proteins, all
of which are determined by constantly changing market forces of
supply and demand as well as other factors over which Seaboard
has little or no control. Commodity pork prices demonstrate a
cyclical nature over periods of years, reflecting changes in the
supply of fresh pork and competing proteins on the market,
especially beef and chicken. In addition, there could be
weakness in the sales prices for Seaboard's pork products due to
marketing the increased volumes of pork products produced by
Triumph Foods. Seaboard's results of operations could be adversely
affected by fluctuations in pork commodity prices.
8
(2) Increases In The Costs Of Seaboard's Feed Components And Hog
Purchases Could Adversely Affect Seaboard's Costs And Operating
Margins. Feed costs are the most significant single component of
the cost of raising hogs and can be materially affected by
commodity price fluctuations for corn and soybean meal. The
results of Seaboard's pork division business can be negatively
affected by increased costs of Seaboard's feed components.
Similarly, although accounting for less than 30% of Seaboard's
total hogs slaughtered, the cost of third party hogs purchased
fluctuates with market conditions and can have an impact on
Seaboard's total costs. The cost and supply of feed components
and the third party hogs that we purchase are determined by
constantly changing market forces of supply and demand, which are
driven by matters over which we have no control, including
weather, current and projected worldwide grain stocks and prices,
grain export prices and supports and governmental agricultural
policies. Seaboard 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 Seaboard's
feed components or in the cost of third party hogs purchased
would adversely affect Seaboard's operating margins.
(3) Seaboard's Ability To Attract And Retain Appropriate
Personnel At Remote Locations Is Important To Seaboard's
Business. The remote locations of the pork processing plant and
live hog operations could negatively affect the availability and
cost of labor. Seaboard is dependent on having sufficient
properly trained operations personnel. Attracting and retaining
qualified personnel is important to Seaboard'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 Seaboard's Sole Hog Processing Facility Would
Adversely Affect Seaboard's Business. Seaboard's Pork segment is
largely dependant on the continued operation of a single hog
processing facility. The loss of or damage to this facility for
any reason - including fire, tornado, governmental action or
other reason - would adversely affect Seaboard and Seaboard's
pork products business.
(5) Environmental Regulation And Related Litigation Could Have A
Material Adverse Effect On Seaboard. Seaboard's operations and
properties are subject to extensive and increasingly stringent
laws and regulations pertaining to, among other things, 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 may result in significant consequences to Seaboard,
including civil and criminal penalties, liability for damages and
negative publicity. Some requirements applicable to Seaboard may
also be enforced by citizen groups. Seaboard has incurred, and
will continue to incur, significant capital and operating
expenditures to comply with these laws and regulations.
(6) Health Risk To Livestock Could Adversely Affect Production,
The Supply Of Raw Materials And Seaboard's 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 can have an adverse
impact on production and production costs, the supply of raw
material to Seaboard's pork processing operations and consumer
confidence. If Seaboard's hogs are affected by disease, Seaboard
may be required to destroy infected livestock, which could
adversely affect Seaboard's production or ability to sell or
export its products. Moreover, the herd health of third party
suppliers could adversely affect the supply and cost of hogs
available for purchase by Seaboard. Adverse publicity concerning
any disease or health concern could also cause customers to lose
confidence in the safety and quality of Seaboard's food products.
(7) If Seaboard's Pork Products Become Contaminated, We May Be
Subject To Product Liability Claims And Product Recalls. Pork
products may be subject to contamination by disease producing
organisms, or pathogens. These pathogens are generally found in
the environment and as a result, regardless of the manufacturing
practices employed, there is a risk that they as a result of food
processing could be present in Seaboard's processed pork
products. Once contaminated products have been shipped for
distribution, illness and death may result if the pathogens 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 may have a material
adverse effect on Seaboard's business, reputation, prospects,
results of operations and financial condition.
9
(8) Corporate Farming Legislation Could Result In The
Divestiture Or Restructuring Of Seaboard's Pork Operations. The
development of large corporate farming operations and
concentration of hog production in larger-scale facilities has
engendered opposition from residents of states in which Seaboard
conducts its pork processing and live hog operations. In response,
corporate farming legislation periodically has been introduced in
the United States Senate and House of Representatives, as
well as in several state legislatures. These proposed anti-corporate
farming bills have included provisions to prohibit or restrict meat
packers, such as Seaboard, from owning or controlling livestock
intended for slaughter, which would require divestiture or
restructuring of Seaboard's operations.
(9) International Trade Barriers Could Adversely Affect
Seaboard's Pork Operations. This segment realizes a significant
portion of its revenues from international markets, particularly
Japan. 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.
(c) Commodity Trading & Milling Division
(1) Seaboard's Commodity & Milling Division Is Particularly
Subject To Risks Associated With Foreign Operations. This
segment principally operates in Africa, Bermuda, South America
and the Caribbean and, in most cases, in what are generally
regarded to be lesser developed countries. Many of these foreign
operations are subject to risks of doing business in lesser-
developed countries which are subject to potential civil unrests
and government instabilities, increasing the exposure to
potential expropriation, confiscation, war, insurrection, civil
strife and revolution, currency inconvertibility and devaluation,
and currency exchange controls, in addition to the risks of
overseas operations mentioned in clause (a)(2) above.
(2) Fluctuations In Commodity Grain Prices Could Adversely
Affect The Business Of Seaboard's Commodity & Milling Division.
This segment's sales are significantly affected by fluctuating
worldwide prices for various commodities, such as wheat, corn and
soybeans. These prices are determined by constantly changing
market forces of supply and demand as well as other factors over
which Seaboard has little or no control. North American and
European subsidized wheat and flour exports, including donated
food aid, and world-wide and local crop production can contribute
to these fluctuating market conditions and can have a significant
impact on the trading and milling businesses' sales, value of
commodities held in inventory and operating income. Seaboard's
results of operations could be adversely affected by fluctuations
in commodity prices.
(3) Seaboard's Commodity & Milling Division Largely Depends On
The Availability Of Chartered Ships. Although this segment owns
eight ships, most of Seaboard's third party trading is
transported with chartered ships. Charter hire rates, influenced
by available charter capacity and demand for worldwide trade in
bulk cargoes, and related fuel costs can impact business volumes
and margins.
(4) Seaboard's Failure To Establish Economic Hedges For
Commodities May Adversely Affect Seaboard's Business. The
commodity trading portion of the business enters into various
commodity derivatives and, in some cases, foreign exchange
derivatives to create an economic hedge for commodity trades it
executes with its customers. Failure to execute or improper
execution of a derivative position could have an adverse impact
on the results of operations.
(5) This Segment is Subject to Higher than Normal Risks for
Attracting and Retaining Key Personnel. In the Commodity Trading
environment, a loss of a key employee such as a commodity trader
can have a negative impact resulting from the loss of revenues as
personal customer relationships can be vital to obtaining and
retaining business with various foreign customers. In the
milling portion of this segment, employing and retaining
qualified expatriate personnel is a key element of success given
the difficult living conditions, the unique operating
environments and the reliance on a relatively small number of
executives to manage each individual location.
10
(d) Marine Division
(1) The Demand For Seaboard's Marine Division's Services Are
Affected By International Trade And Fluctuating Freight Rates.
This segment provides containerized cargo shipping services
primarily from the United States to over twenty-five different
countries in the Caribbean Basin, and Central and South America.
In addition to the risks of overseas operations mentioned in
clause (a)(2) above, fluctuations in economic conditions,
unstable or hostile local political situations in the countries
in which Seaboard operates can affect import/export trade volumes
and the price of container freight rates and adversely affect
Seaboard's results of operations.
(2) Chartered Ships Are Subject To Fluctuating Rates. The
largest expense for this division is time charter cost. Certain
of the ships are under charters longer than one year while others
are less than one year. These costs can vary greatly due to a
number of factors including the worldwide supply and demand for
shipping. It is not possible to determine in advance whether a
charter contract for more or less than one year will be favorable
to Seaboard's business.
(3) Increasing Fuel Prices Can Adversely Affect Seaboard's
Business. Ship fuel expenses are one of the segment's largest
expenses. These costs can vary greatly from year-to-year
depending on world fuel prices. Although a fuel surcharge can be
added to the freight rates charged by Seaboard to its customers,
increases in the surcharge can lag actual fuel cost increases and
can be influenced by competitive pressures. Also, but to a
lesser extent, fuel price increases can impact the cost of inland
transportation costs.
(4) Marine Transportation Is An Inherently Risky Business.
Seaboard's vessels and their cargoes are at risk of being damaged
or lost because of events such as:
marine disasters;
bad weather;
mechanical failures;
grounding, fire, explosions and collisions;
human error; and
war and terrorism.
All of these hazards can 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
accident, the resulting media coverage could have a material
adverse effect on Seaboard's business, financial condition
and results of operations. Moreover, Seaboard's port
operations can be subject to disruption due to hurricanes,
especially at Seaboard's major port of operations in Miami,
Florida.
(5) Seaboard is Subject To Complex Laws And Regulations That Can
Adversely Affect The Cost, Manner Or Feasibility Of Doing
Business. Increasingly stringent federal, state and local laws
and regulations governing worker health and safety, environmental
protection, port and terminal security, and the operation of
vessels significantly affect Seaboard's operations. Many aspects
of the marine industry 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 or the suspension or termination of Seaboard's
operations.
(e) Sugar and Citrus Division
(1) The Success Of This Segment Depends On The Condition Of The
Argentinean Economy And Political Climate. This segment operates
a sugar mill in Argentina, locally growing a substantial portion
of the sugar cane processed at the mill. The majority of the
sugar sales are within Argentina. Fluctuations in economic
conditions or changes in the Argentine political climate can have
an impact on the costs of operations and the sale price of sugar.
In this regard, local sale prices are affected by sugar import
duties imposed by the Argentine government, which affects the
volume of sugar imported to and exported from that market. If
import duties are changed, this could have a negative impact on
Seaboard's sale price of sugar. In addition, recently the
Argentine government began to attempt controlling inflation by
instituting price controls on commodities, including sugar, which
could impact the local sales price of sugar and the results of
operations for this segment.
11
(2) This Segment Is Subject To The Risks That Are Inherent In
Any Agricultural Business. Seaboard's results of operations for
this segment may be adversely affected by numerous factors over
which we have little or no control and that are inherent in any
agricultural business, including reductions in the market prices
for Seaboard'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 can affect the amount and
quality of the sugar cane produced by Seaboard and Seaboard's
competitors located in other regions of Argentina.
(3) The Loss Of Seaboard's Sole Processing Facility Would
Adversely Affect The Business Of This Segment. Seaboard's Sugar
and Citrus segment is largely dependant on the continued
operation of a single processing facility. The loss of or damage
to this facility for any reason - including fire, tornado,
governmental action or other reason - would adversely affect the
business of this segment.
(f) Power Division
(1) This Segment Is Subject To Risks Of Doing Business In The
Dominican Republic. This segment operates in the Dominican
Republic (DR). In addition to significant currency fluctuations
and the other risks of overseas operations mentioned in clause
(a)(2) above, this segment can experience difficulty in obtaining
timely collections of trade receivables from the government
partially-owned distribution companies or other companies that
must also collect from the government in order to make payments
on their accounts. Currently, the DR does not allow a free
market to enable prices to rise with demand. The government has
the ability to arbitrarily decide which power units will be able
to operate.
(2) Increases In Fuel Costs Could Adversely Affect Seaboard's
Operating Margins. Fuel is the largest cost component of this
segment's business. Although increases in fuel have generally
been passed through to customers, margins may be affected by
fluctuations in fuel if such increases can not be passed to
customers.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
(1) Pork - Seaboard's Pork Division owns a hog processing plant
in Guymon, Oklahoma, which opened in 1995. It has a daily
double shift capacity to process approximately 16,000 hogs and
generally operates at capacity with additional weekend shifts
depending on market conditions. The plant is utilized at near
capacity throughout the year. Seaboard's hog production
operations consist of the breeding and raising of approximately
3.6 million hogs annually at facilities it primarily owns or at
facilities owned and operated by third parties with whom it has
grower contracts. This business owns and operates six centrally
located feed mills which have a combined capacity to produce
approximately 1,700,000 tons of formulated feed annually used
primarily to support Seaboard's existing hog production, and has
the capability of supporting additional hog production in the
future. These facilities are located in Oklahoma, Texas, Kansas
and Colorado.
Seaboard's Pork Division also owns two bacon processing plants
located in Salt Lake City, Utah and Missoula, Montana. These
plants are utilized at or near capacity throughout the year,
which is a combined daily smoking capacity of approximately
300,000 pounds of raw pork bellies.
(2) Commodity Trading and Milling - Seaboard's Commodity Trading
and Milling Division owns, in whole or in part, grain-processing
operations in 12 countries which have the capacity to mill over
6,000 metric tons of wheat and maize per day. In addition,
Seaboard has feed mill capacity of in excess of 112 metric tons
per hour to produce formula animal feed. The milling operations
located in Democratic Republic of Congo, Ecuador, Guyana, Haiti,
Kenya, Lesotho, Mozambique, Nigeria, Republic of Congo, Sierra
Leone, Uganda and Zambia own their facilities; in Kenya, Lesotho,
Mozambique, Nigeria, Republic of Congo and Sierra Leone the land
the mills are located on is leased under long-term agreements.
Certain foreign milling operations may operate at less than full
capacity due to low demand related to poor consumer purchasing
power and European-subsidized wheat and flour exports. Seaboard
also owns seven 9,000 metric-ton deadweight dry bulk carriers and
one 23,400 metric ton deadweight dry bulk carrier, "time
charters" (the charter of a vessel, whereby the vessel owner is
responsible to provide the captain and crew necessary to operate
the vessel), under
12
short-term agreements, between seven and forty-three bulk carrier
ocean vessels with deadweights ranging from 8,000 to 60,000
metric tons.
(3) Marine - Seaboard's Marine Division leases a 135,000 square
foot warehouse and 70 acres of port terminal land and facilities
in Miami, Florida which are used in its containerized cargo
operations. Seaboard also leases an approximately 62 acre cargo
handling and terminal facility in Houston, Texas, which includes
several on-dock warehouses totaling over 690,000 square feet for
cargo storage. Seaboard owns eight ocean cargo vessels with
deadweights ranging from 2,600 to 14,545 metric tons and time
charters under long-term contracts ranging from one to three
years, and short-term agreements, of approximately twenty-five
containerized ocean cargo vessels with deadweights ranging from
3,377 to 19,456 metric-tons. In addition, this business also
"bareboat charters" (the charter of a vessel, whereby the
charterer is responsible for providing the captain and crew
necessary to operate the vessel), under long-term lease
agreements, two containerized ocean cargo vessels each with
deadweights of 12,169 metric tons. Seaboard owns or leases an
aggregate of approximately 39,000 dry, refrigerated and
specialized containers and related equipment.
(4) Sugar and Citrus - Seaboard's Argentine Sugar and Citrus
Division owns approximately 50,000 acres of planted sugarcane and
approximately 3,000 acres of orange trees. Depending on local
harvest and market conditions, this business also purchases third
party sugar and citrus for resale. In addition, this division
owns a sugar mill with a current capacity to process
approximately 200,000 metric tons of sugar per year. This
capacity is sufficient to process all of the cane harvested by
this division and certain additional quantities harvested on
behalf of the 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 produced. This division also
owns a juice processing plant and fresh fruit packaging plant
with capacity to produce approximately 5,000 tons of concentrated
juice and package approximately 300,000 boxes of fresh fruit
annually.
(5) Power - Seaboard's Power Division owns two floating electric
power generating facilities, consisting of a system of diesel
engines mounted onto barge-type vessels, with a combined rated
capacity of approximately 112 megawatts, both located on the
Ozama River in Santo Domingo, Dominican Republic. The barges
historically generated power at near capacity throughout the year
as the demand for power in the Dominican Republic exceeds
reliable power supply. Seaboard operates as an independent power
producer and is not involved in the transmission and distribution
facilities that deliver the power to the end users.
(6) Other - Seaboard owns a jalapeno pepper processing plant and
warehouse in Honduras.
Management believes that Seaboard's present facilities are
adequate and suitable for its current purposes.
Item 3. Legal Proceedings
Sierra Club Settlement
In order to settle threatened additional litigation with Sierra
Club, Seaboard's subsidiary, Seaboard Foods LP ("Seaboard
Foods"), agreed to conduct an investigation to determine if
corrective action is required at three farms purchased from PIC
International Group, Inc. ("PIC") located in Kingfisher and Major
Counties in Oklahoma according to an agreed-upon process. Based
on the investigation, it has been determined that two farms do
not require any corrective action. The investigation at the one
remaining farm concluded the lagoon at this farm is a likely
source of elevated nitrates in the ground water. Seaboard Foods
advised the Oklahoma Department of Agriculture, Food & Forestry
as to this fact, and is in the process of getting approval for
and making the necessary corrective action, which will include
constructing a replacement lagoon. The cost of the lagoon and
any other implications is not known with certainty, but the cost
is expected to be approximately $1.5 million. Seaboard Foods has
given notice to PIC as to its right to indemnification from any
loss as a result of the lagoon. As of the date of this report,
PIC has declined to provide indemnification.
13
Environmental Protection Agency (EPA) and State of Oklahoma
Claims Concerning Farms in Major and Kingfisher County, Oklahoma
On June 29, 2001, the EPA filed a Unilateral Administrative Order
(the "RCRA Order") pursuant to Section 7003 of the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Sec. 6973
("RCRA"), against Seaboard Foods, Shawnee Funding, Limited
Partnership and PIC (collectively, "Respondents"). The RCRA
Order alleges that five swine farms located in Major County and
Kingfisher County, Oklahoma purchased from PIC are causing or
could cause contamination of the groundwater. The RCRA Order
alleges that, as a result, Respondents have contributed to an
"imminent and substantial endangerment" within the meaning of
RCRA from the leaking of solid waste in the lagoons or other
infrastructure at the farms. The RCRA Order requires Respondents
to develop and undertake a study to determine if there has been
any contamination from farm infrastructure, and if contamination
has occurred, to develop and undertake a remedial plan. In the
event the Respondents fail to comply with the RCRA Order, the EPA
may commence a civil action and can seek a civil penalty of up to
$5,500 per day, per violation.
On July 23, 2002, Seaboard Foods received a Notice of Violation
from the State of Oklahoma, alleging that Seaboard Foods has
violated various provisions of state law and the operating
permits related to these same farms based on the same conditions
which gave rise to the RCRA Order. In the event the State brings
an enforcement action, they have threatened to do so as an
administrative action in which they can seek administrative
penalties of not more than $10,000 per day of noncompliance and
can seek to assess violation points which could prohibit
Seaboard Foods from continuing to operate one or more of these
farms.
On April 15, 2003, the EPA sent a formal Notice of Violation
letter to the Respondents, alleging that the Respondents have
failed to comply with the RCRA Order because they have not
undertaken an investigation of land on which Seaboard Foods
spreads effluent originating from the five facilities. The
Respondents believe that the Notice of Violation letter has no
merit because the RCRA Order, by its terms, does not cover these
areas, and the EPA does not have jurisdiction to impose the RCRA
Order with respect to land application activities.
Seaboard Foods disputes the RCRA Order and the State of
Oklahoma's contentions on legal and factual grounds, and advised
the EPA that it will not comply with the RCRA Order, as written.
Notwithstanding, Seaboard Foods has undertaken an extensive
investigation under the RCRA Order, and has had significant
discussions with the EPA and the State of Oklahoma, proposing to
pay a civil penalty and to undertake continued monitoring and
take a number of corrective actions with respect to the farms,
and one additional farm, in order to attempt to settle the
RCRA Order and the Oklahoma Notice of Violation. Originally, the
EPA advised Seaboard Foods that any such settlement must include
a civil fine of $1.2 million, but the EPA has since reduced the
amount of its demand for a civil penalty to $305,000.
Seaboard Foods believes that the EPA has no authority to impose a
civil fine, but settlement discussions are continuing.
A tentative verbal settlement has been reached with the State of
Oklahoma which would require Seaboard Foods to pay a fine of
$100,000 and to undertake agreed-upon supplemental environmental
projects at a cost of $80,000. The settlement is subject to the
final terms being agreed to and the approval of the Oklahoma
Board of Agriculture. Irrespective of the settlement,
Seaboard Foods has completed, or is in the process of completing,
many of the proposed corrective actions at the relevant farms.
PIC is indemnifying Seaboard Foods with respect to the action
pursuant to an indemnification agreement which has a $5 million
limit. To date, the $5 million limit has not been exceeded. If
the tentative settlement with the State of Oklahoma is agreed to,
the estimated cumulative costs which will be expended will total
approximately $6.9 million, not including the additional legal
costs required to negotiate the settlement or the penalties
demanded by the EPA and tentatively agreed to with the State of
Oklahoma. If the measures taken pursuant to the settlement are
not effective, other measures with additional costs may be
required. PIC has advised Seaboard Foods that it is not
responsible for the costs in excess of $5 million.
Seaboard Foods disputes PIC's determination of the costs to be
included in the calculation to determine whether the $5 million
limit will be exceeded, and believes that the costs to be
considered are less than $5 million, such that PIC is responsible
for all such costs and penalties, except for approximately
$180,000 of estimated costs that would be incurred over 5 years
subsequent to the settlement for certain testing and sampling.
Seaboard Foods has agreed to conduct such testing and sampling as
part of the sampling it conducts in the normal course of
operations, and believes that the incremental costs incurred to
conduct such testing and sampling will be less than $180,000.
Seaboard Foods also believes that a more general indemnity
agreement would require indemnification of liability in excess of
$5 million (excluding the estimated $180,000 cost for testing and
sampling), although PIC disputes this.
14
Potential Additional EPA Claims
The EPA has been conducting a broad-reaching investigation of
Seaboard Foods, seeking information as to compliance with the
Clean Water Act (CWA), Comprehensive Environmental Response,
Compensation & Liability Act (CERCLA) and the Clean Air Act.
Through Information Requests and farm inspections, the EPA
obtained information that may be related to whether
Seaboard Foods' operations are discharging pollutants to waters
of the United States in violation of the CWA, whether National
Pollutant Discharge Elimination System storm water construction
permits were obtained, where required, whether there has been
unlawful filling of or discharge to "wetlands" within the
jurisdiction of the CWA, whether Seaboard Foods has properly
reported emissions of hazardous substances into the air under
CERCLA, and whether some of its farms may be emitting air
pollutants at levels subject to Clean Air Act permitting
requirements. As a result of the investigation, the EPA
requested that Seaboard Foods engage in settlement discussions to
avoid further the EPA investigative efforts and potential formal
claims being filed. The EPA has presented settlement demands,
and Seaboard Foods has responded. Management believes it has
meritorious legal and factual defenses and objections to the
EPA's demands, but will continue to engage in settlement
discussions. Such settlement discussions could lead to an
enforceable settlement agreement.
On April 2, 2002, the EPA sent to Seaboard Foods a letter
pursuant to the Clean Air Act ("CAA") demanding Seaboard Foods
monitor emissions at certain hog confinement facilities for
purposes of determining whether these operations are in
compliance with the CAA. The EPA also requested that
Seaboard Foods agree that these facilities are comparable to all
other facilities operated, and that the monitoring results can be
reasonably extrapolated to estimate the emissions for all other
farms operated by Seaboard Foods. If any of the specified farms
are not comparable, the letter demanded that Seaboard Foods
conduct monitoring at those farms. The letter also required that
Seaboard Foods submit a plan and protocol for testing for
emissions of particulate matter, volatile organic compounds and
hydrogen sulfide.
Although management believes that the EPA's demand is beyond the
Agency's authority pursuant to the CAA and that Seaboard Foods
cannot be required to undertake the air monitoring,
Seaboard Foods is engaging in discussions with the EPA to attempt
to reach an agreement that will be satisfactory to the EPA.
The EPA has proposed to settle the matter by Seaboard Foods
paying a civil fine of $345,000 and taking various other actions
which will cost approximately $150,000. In addition,
Seaboard Foods has applied to participate in the National
AFO/CAFO Air Emissions Agreement with the EPA, with a portion of
the civil fine being applied to satisfy the $100,000 payment
owing under the Air Emissions Agreement. Management believes it
has meritorious legal and factual defenses and objections to the
EPA's demands, but settlement discussions are continuing.
If no agreement is reached with the EPA, it could bring a suit to
enforce the provisions of the letter, and if a court were to
determine that the EPA is within its authority, the court could
impose a civil penalty of up to $27,500 per day of
non-compliance, and could order injunctive relief requiring that
Seaboard Foods conduct the monitoring. Seaboard Foods believes
the emissions from its hog operations do not require CAA permits.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
last quarter of the fiscal year covered by this report.
Executive Officers of Registrant
The following table lists the executive officers and certain
significant employees of Seaboard. Generally, each executive
officer is elected at the annual meeting of the Board of
Directors following the Annual Meeting of Stockholders and holds
his office until the next such annual meeting or until his
successor is duly chosen and qualified. There are no
arrangements or understandings pursuant to which any executive
officer was elected.
15
Name (Age) Positions and Offices with Registrant and Affiliates
H. Harry Bresky (80) Chairman of the Board, President and
Chief Executive Officer of Seaboard;
Manager of Seaboard Flour LLC
Steven J. Bresky (52) Senior Vice President, International Operations
Robert L. Steer (46) Senior Vice President, Treasurer and Chief Financial
Officer
David M. Becker (44) Vice President, General Counsel and Secretary
Barry E. Gum (39) Vice President, Finance
James L. Gutsch (52) Vice President, Engineering
Ralph L. Moss (60) Vice President, Governmental Affairs
David S. Oswalt (38) Vice President, Taxation and Business Development
John A. Virgo (45) Vice President, Corporate Controller and Chief
Accounting Officer
Rodney K. Brenneman (41) President, Seaboard Foods, LP
Edward A. Gonzales (40) President, Seaboard Marine Ltd.
Mr. H. Harry Bresky has served as President and Chief Executive
Officer of Seaboard since February 2001 and previously as
President of Seaboard from 1967 to 2001. He has served as
Manager of Seaboard Flour, LLC (previously Seaboard Flour
Corporation) since 2002. Previously he served as President of
Seaboard Flour Corporation from 1987 through 2002, and as
Treasurer of Seaboard Flour Corporation from 1973 through 2002.
Mr. Bresky is the father of Steven J. Bresky.
Mr. Steven J. Bresky has served as Senior Vice President,
International Operations of Seaboard since February 2001 and
previously as Vice President of Seaboard from 1989 to 2001.
Mr. Steer has served as Senior Vice President, Treasurer and
Chief Financial Officer of Seaboard since February 2001 and
previously as Vice President, Chief Financial Officer of Seaboard
from 1998 to 2001.
Mr. Becker has served as Vice President, General Counsel and
Secretary of Seaboard since December 2003, and previously as Vice
President, General Counsel and Assistant Secretary from 2001 to
2003. He served as General Counsel and Assistant Secretary of
Seaboard from 1998 to 2001.
Mr. Gum has served as Vice President, Finance of Seaboard since
December 2003, previously as Director of Finance from 2000 to
2003.
Mr. Gutsch has served as Vice President, Engineering of Seaboard
since December 1998.
Mr. Moss has served as Vice President, Governmental Affairs of
Seaboard since December 2003 and previously as Director,
Government Affairs from 1993 to 2003.
Mr. Oswalt has served as Vice President, Taxation and Business
Development of Seaboard since December 2003 and previously as
Director of Tax from 1995 to 2003.
Mr. Virgo has served as Vice President, Corporate Controller and
Chief Accounting Officer of Seaboard since December 2003 and
previously as Corporate Controller from 1996 to 2003.
Mr. Brenneman has served as President of Seaboard Foods LP
(previously Seaboard Farms Inc.) since June 2001 and previously
served as Senior Vice President and Chief Financial Officer of
Seaboard Farms, Inc. from 1997 to 2001.
Mr. Gonzales has served as President of Seaboard Marine, Ltd.
since January 2005 and previously served as Vice President of
Terminal Operations of Seaboard Marine Ltd. from 2000 to 2005.
16
PART II
Item 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
Seaboard's Board of Directors intends that Seaboard will continue
to pay quarterly dividends, with the actual amount of any
dividends being dependant upon such factors as Seaboard's
financial condition, results of operations and current and
anticipated cash needs, including capital requirements. As
discussed in Note 8 of the consolidated financial statements
appearing on pages 45 and 46 of the Seaboard Corporation Annual
Report to Stockholders furnished to the Commission pursuant to
Rule 14a-3(b) and attached as Exhibit 13 to this Report,
Seaboard's ability to declare and pay dividends is subject to
limitations imposed by the note agreements referred to there.
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.
On November 3, 2005, Seaboard issued 6,313.34 shares of its
common stock to its parent company, Seaboard Flour Corporation.
The issuance of these shares resulted from a previously disclosed
transaction consummated by Seaboard and Seaboard Flour in 2002.
As a part of this transaction, Seaboard received tax net
operating losses ("NOLs") having a benefit totaling $8,317,416.
To the extent that Seaboard used the NOLs to reduce its federal
income taxes payable, Seaboard agreed to issue to Seaboard Flour
shares of common stock having a value equal to the NOL utilized.
On September 15, 2005, Seaboard filed tax returns utilizing the
NOLs which resulted in a $8,317,416 reduction in its federal
income tax. Seaboard thereby became obligated to issue shares of
its common stock to Seaboard Flour. The number of shares issued
was determined based upon the average closing price of Seaboard's
common stock for the ten trading days preceding October 1, 2005,
or approximately $1,317.44 per share. The issuance of the
6,313.34 shares of common stock to Seaboard Flour was not
registered under the Securities Act of 1933 in reliance upon the
exemption from the registration requirements provided by Section
4(2) of the Securities Act. Section 4(2) provides an exemption
from the registration requirements of the Securities Act for
transactions by an issuer not involving a public offering.
There were no purchases made by or on behalf of Seaboard or any
"affiliated purchaser" (as defined by applicable rules of the
Commission) 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 Item 5 of Form 10-K is incorporated herein by
reference to (a) the information under "Stockholder Information -
Stock Listing" and (b) the dividends per common share information
and market price range per common share information under
"Quarterly Financial Data" appearing on pages 60 and 7,
respectively, of Seaboard's Annual Report to Stockholders
furnished to the Commission pursuant to Rule 14a-3(b) and
attached as Exhibit 13 to this report.
Item 6. Selected Financial Data
The information required by Item 6 of Form 10-K is incorporated
herein by reference to the "Summary of Selected Financial Data"
appearing on page 6 of Seaboard's Annual Report to Stockholders
furnished to the Commission pursuant to Rule 14a-3(b) and
attached as Exhibit 13 of this Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by Item 7 of Form 10-K is incorporated
herein by reference to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing on pages
8 through 24 of Seaboard's Annual Report to Stockholders
furnished to the Commission pursuant to Rule 14a-3(b) and
attached as Exhibit 13 to this Report.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
The information required by Item 7A of Form 10-K is incorporated
herein by reference to (a) the material under the captions
"Derivative Instruments and Hedging Activities" within Note 1 of
Seaboard's Consolidated Financial Statements appearing on page 35
of Seaboard's Annual Report to Stockholders furnished to the
Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13
to this Report, and (b) the material under the caption
"Derivative Information" within "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
appearing on pages 22 through 24 of Seaboard's Annual Report to
Stockholders furnished to the Commission pursuant to Rule 14a-
3(b) and attached as Exhibit 13 to this Report.
17
Item 8. Financial Statements and Supplementary Data
The information required by Item 8 of Form 10-K is incorporated
herein by reference to Seaboard's "Quarterly Financial Data,"
"Report of Independent Registered Public Accounting Firm,"
"Consolidated Statements of Earnings," "Consolidated Balance
Sheets," "Consolidated Statements of Cash Flows," "Consolidated
Statements of Changes in Equity" and "Notes to Consolidated
Financial Statements" appearing on page 7 and pages 26 through 59
of Seaboard's Annual Report to Stockholders furnished to the
Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13
to this Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures - As of December
31, 2005, Seaboard's management has evaluated, under the
direction of our chief executive and chief financial officers,
the effectiveness of Seaboard's disclosure controls and
procedures, as defined in Exchange Act 15(d) - 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 Securities Exchange Act of 1934 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.
Management's Report on Internal Control Over Financial Reporting
- - Information required by Item 9A pursuant to rules 13a-15(f) is
incorporated herein by reference to Seaboard's "Management's
Report on Internal Control over Financial Reporting" appearing on
page 25 of Seaboard's Annual Report to Stockholders furnished to
the commission pursuant to Rule 14a-3(b) and attached as Exhibit
13 to this report.
Change in Internal Controls - During the third quarter of 2005,
Seaboard completed the acquisition of Daily's. Management is
currently completing post merger integration plans which include
converting certain accounting information systems and is in the
process of documenting and evaluating internal controls with
respect to Daily's. Although management does not consider it
material to its results of operations, Seaboard intends to extend
its Sarbanes-Oxley Act of 2002 Section 404 compliance program to
include Daily's with an effective date of July 1, 2006. Except as
set forth above, there has been no change in Seaboard's internal
control over financial reporting that occurred during the fiscal
quarter ended December 31, 2005 that has materially affected, or
is reasonably likely to materially affect, Seaboard's internal
control over financial reporting.
Item 9B. Other Information
Retiree Medical Benefit Plan - As previously disclosed, the
Seaboard Corporation Retiree Medical Benefit Plan provides family
medical insurance to certain executive officers upon the
retirement, involuntary termination of employment, change of
control or death of the participant. Participants in this Plan
include Mr. H. Bresky, Mr. S. Bresky, Mr. Steer and Mr.
Brenneman. On March 6, 2006, Mr. Gonzalez was added as a
participant in this Plan.
PART III
Item 10. Directors and Executive Officers of the Registrant
We refer you to the information under the caption "Executive
Officers of Registrant" appearing immediately following the
disclosure in Item 4 of Part I of this report.
Seaboard has a Code of Ethics Policy (the Code) for directors,
officers (including our chief executive officer, chief financial
officer, chief accounting officer, controller and persons
performing similar functions) and employees. A copy of this Code
was attached as Exhibit 14 to Seaboard's annual report on Form 10-
K for the year ended December 31, 2004.
18
Seaboard has posted the Code on its internet website,
www.seaboardcorp.com, and intends to disclose 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 Item 10 of Form 10-K is incorporated herein by
reference to (a) the disclosure relating to directors under "Item
1: Election of Directors" appearing on page 4 and 5 of
Seaboard's definitive proxy statement filed pursuant to
Regulation 14A for the 2006 annual meeting of Stockholders ("2006
Proxy Statement"), (b) the disclosure relating to Seaboard's
audit committee and "audit committee financial expert" and its
director nomination procedures under "Meetings of the Board of
Directors and Committees -- Committees of the Board" appearing on
pages 5 through 7 of the 2006 Proxy Statement, and (c) the
disclosure relating to late filings of reports required under
Section 16(a) of the Securities Exchange Act of 1934 under
"Section 16(a) Beneficial Ownership Reporting Compliance"
appearing on page 23 of the 2006 Proxy Statement.
Item 11. Executive Compensation
The information required by Item 11 of Form 10-K is incorporated
herein by reference to (a) the disclosure relating to
compensation of directors under "Meetings of the Board of
Directors and Committees -- Committees of the Board" appearing on
pages 5 through 7 of the 2006 Proxy Statement, and (b) the
disclosure relating to compensation of executive officers under
"Executive Compensation and Other Information," "Retirement
Plans" and "Compensation Committee Interlocks and Insider
Participation" appearing on pages 8 through 15 and pages 18 and
19 of the 2006 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 Item 12 of Form 10-K is incorporated herein by
reference to the disclosure under "Principal Stockholders" and
"Share Ownership of Management and Directors" appearing on pages
3 and 4 of the 2006 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 of Form 10-K is incorporated
herein by reference to "Compensation Committee Interlocks and
Insider Participation" appearing on pages 18 and 19 of the 2006
Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by Item 14 of Form 10-K is incorporated
herein by reference to "Item 2 Selection of Independent
Auditors" appearing on pages 19 through 21 of the 2006 Proxy
Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
1. Consolidated financial statements.
See Index to Consolidated Financial Statements on page F-1.
2. Consolidated financial statement schedules.
See Index to Consolidated Financial Statements on page F-1.
3. Exhibits.
3.1 Seaboard's Certificate of Incorporation, as amended.
Incorporated herein by reference to Exhibit 3.1 of
Seaboard's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992.
3.2 Seaboard's By-laws, as amended.
19
4.1 Note Purchase Agreement dated June 1, 1995 between
Seaboard and various purchasers as listed in the
exhibit. Incorporated herein by reference to Exhibit
4.3 of Seaboard's Form 10-Q for the quarter ended
September 9, 1995. The Annexes and Exhibits to the
Note Purchase Agreement have been omitted from the
filing, but will be provided supplementally upon
request of the Commission.
4.2 Seaboard Corporation 7.88% Senior Note Due June 1, 2007
issued pursuant to the Note Purchase Agreement
described above. Incorporated herein by reference to
Exhibit 4.4 of Seaboard's Form 10-Q for the quarter
ended September 9, 1995.
4.3 Seaboard Corporation Note Agreement dated as of
June 1, 1995 ($125,000,000 Senior Notes due
June 1, 2007). First Amendment to Note Agreement.
Incorporated herein by reference to Exhibit 4.8 of
Seaboard's Form 10-Q for the quarter ended
March 23, 1996.
4.4 Second Amendment to the Note Purchase Agreements dated
as of June 1, 1995 ($125,000,000 Senior Notes due June
1, 2007). Incorporated herein by reference to Exhibit
4.2 of Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.5 Seaboard Corporation Note Purchase Agreement dated as
of September 30, 2002 between Seaboard and various
purchasers as listed in the exhibit. Incorporated
herein by reference to Exhibit 4.3 of Seaboard's Form
10-Q for the quarter ended September 28, 2002. The
Annexes and Exhibits to the Note Purchase Agreement
have been omitted from the filing, but will be provided
supplementally upon request of the Commission.
4.6 Seaboard Corporation $32,500,000 5.8% Senior Note,
Series A, due September 30, 2009 issued pursuant to
the Note Purchase Agreement described above.
Incorporated herein by reference to Exhibit 4.4 of
Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.7 Seaboard Corporation $38,000,000 6.21% Senior Note,
Series B, due September 30, 2009 issued pursuant to
the Note Purchase Agreement described above.
Incorporated herein by reference to Exhibit 4.5 of
Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.8 Seaboard Corporation $7,500,000 6.21% Senior Note,
Series C, due September 30, 2012 issued pursuant to
the Note Purchase Agreement described above.
Incorporated herein by reference to Exhibit 4.6 of
Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.9 Seaboard Corporation $31,000,000 6.92% Senior Note,
Series D, due September 30, 2012 issued pursuant to
the Note Purchase Agreement described above.
Incorporated herein by reference to Exhibit 4.7 of
Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.10 Seaboard Corporation Credit Agreement dated as of
December 3, 2004 ($200,000,000 revolving credit
facility expiring on December 2, 2009). The schedules
and exhibits to the Credit Agreement have been omitted
from this filing, but will be provided supplementally
upon request of the Commission. Incorporated herein by
reference to Exhibit 4.14 of Seaboard's Form 10-K for
fiscal year ended December 31, 2004.
4.11 Amendment No. 1 to Seaboard Corporation Credit
Agreement dated December 3, 2004 ($200,000,000
revolving credit facility expiring on December 2,
2009). Incorporated herein by reference to Exhibit 4.1
of Seaboard's Form 10-Q for the quarter ended July 2,
2005
4.12 Notice of Reduction of Aggregate Commitments (from
$200,000,000 to $100,000,000) under Credit Agreement
dated as of December 3, 2004 among Seaboard
Corporation, Bank of America, N.A., Scotia Capital,
Inc., Harris Trust and Savings Bank and Suntrust Bank
and the Other Lenders Party Hereto Incorporated herein
by reference to Exhibit 4.1 of Seaboard's Form 10-Q for
the quarter ended October 1, 2005
10.1* Seaboard Corporation Executive Retirement Plan,
2005 Amendment and Restatement dated March 6, 2006,
amending and restating the Seaboard Corporation
Executive Retirement Plan dated November 5, 2004. The
addendums to the Executive Retirement Plan have been
omitted from the filing, but will be provided
supplementally upon request of the Commission.
20
10.2* Seaboard Corporation Supplemental Executive
Retirement Plan for H. Harry Bresky dated
March 21, 1995. Incorporated herein by reference to
Exhibit 10.3 of Seaboard's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
10.3* Seaboard Corporation Executive Deferred
Compensation Plan dated December 29, 2005, amending and
restating the Seaboard Corporation Executive Deferred
Compensation Plan dated January 1, 1999.
10.4* Seaboard Corporation Executive Retirement Plan
Trust dated November 5, 2004 between Seaboard
Corporation and Robert L. Steer as trustee.
Incorporated herein by reference to Exhibit 10.2 of
Seaboard's Form 10-Q for the quarter ended October 2,
2004.
10.5* Seaboard Corporation Investment Option Plan dated
December 18, 2000. Incorporated herein by reference to
Exhibit 10.7 of Seaboard's Form 10-K for fiscal year
ended December 31, 2000.
10.6 Reorganization Agreement by and between Seaboard
Corporation and Seaboard Flour Corporation as of
October 18, 2002. Incorporated herein by reference to
Exhibit 10.1 of the Form 8-K dated October 18, 2002.
10.7 Purchase and Sale Agreement dated October 18, 2002 by
and between Flour Holdings LLC and Seaboard Flour
Corporation with respect to which the "Earnout
Payments" thereunder have been assigned to Seaboard
Corporation. Incorporated herein by reference to
Exhibit 10.2 of Seaboard's Form 10-Q for the quarter
ended September 28, 2002.
10.8 Marketing Agreement dated February 2, 2004 by and among
Seaboard Corporation, Seaboard Farms, Inc., Triumph
Foods LLC, and for certain limited purposes only, the
members of Triumph Foods LLC. Incorporated herein by
reference to Exhibit 10.2 of Seaboard's Form 8-K dated
February 3, 2004.
10.9* Seaboard Corporation Retiree Medical Benefit Plan
dated March 4, 2005. Incorporated herein by reference
to Exhibit 10.10 of Seaboard's Form 10-K for fiscal
year ended December 31, 2004. The exhibit to the
Retiree Medical Benefit Plan has been omitted from this
filing, but will be provided supplementally upon
request of the Commission.
10.10* Seaboard Corporation Executive Officers' Bonus
Policy.
10.11* Employment Agreement between Seaboard Corporation
and Steven J. Bresky dated July 1, 2005. Incorporated
herein by reference to Exhibit 10.1 of Seaboard's Form
10-Q for the quarter ended July 2, 2005.
10.12* Employment Agreement between Seaboard Corporation
and Robert L. Steer dated July 1, 2005. Incorporated
herein by reference to Exhibit 10.2 of Seaboard's Form
10-Q for the quarter ended July 2, 2005.
10.13* Employment Agreement between Seaboard Farms, Inc.
and Rodney K. Brenneman dated July 1, 2005.
Incorporated herein by reference to Exhibit 10.3 of
Seaboard's Form 10-Q for the quarter ended July 2,
2005.
10.14* Employment Agreement between Seaboard Corporation
and Edward A. Gonzalez dated July 1, 2005.
10.15* Seaboard Corporation Nonqualified Deferred
Compensation Plan dated December 29, 2005. The
appendix to the Nonqualified Deferred Compensation Plan
has been omitted from this filing, but will be provided
supplementally upon request of the Commission.
13 Sections of Annual Report to security holders
specifically incorporated herein by reference herein.
14 Code of Ethics Policy as amended as of March 4, 2005.
Incorporated herein by reference to Exhibit 14 of
Seaboard's Form 10-K for fiscal year ended December 31,
2004.
21 List of subsidiaries.
31.1 Certification of the Chief Executive Officer Pursuant
to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
21
31.2 Certification of the Chief Financial Officer Pursuant
to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
* Management contract or compensatory plan or arrangement.
(b) Exhibits.
See exhibits identified above under Item 15(a)3.
(c) Financial Statement Schedules.
See financial statement schedules identified above under Item
15(a)2.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SEABOARD CORPORATION
By /s/H. H. Bresky By /s/Robert L. Steer
H. H. Bresky, President and Chief Robert L. Steer, Senior Vice
Executive Officer President, Treasurer and Chief
(principal executive officer) Financial Officer (principal
financial officer)
Date: March 6, 2006 Date: March 6, 2006
By /s/John A. Virgo
John A. Virgo, Vice President, Corporate
Controller and Chief Accounting Officer
(principal accounting officer)
Date: March 6, 2006
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of registrant and in the capacities and on the dates
indicated.
By /s/H. H. Bresky By /s/Kevin M. Kennedy
H. H. Bresky, Director and Chairman Kevin M. Kennedy, Director
of the Board
Date: March 6, 2006 Date: March 6, 2006
By /s/David A. Adamsen By /s/Joseph E. Rodrigues
David A. Adamsen, Director Joseph E. Rodrigues, Director
Date: March 6, 2006 Date: March 6, 2006
By /s/Douglas W. Baena
Douglas W. Baena, Director
Date: March 6, 2006
23
SEABOARD CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Financial Statements
Stockholders'
Annual Report Page
Report of Independent Registered Public Accounting Firm 26
Consolidated Statement of Earnings for the years
ended December 31, 2005, December 31, 2004 and
December 31, 2003 28
Consolidated Balance Sheets as of December 31, 2005
and December 31, 2004 29
Consolidated Statement of Cash Flows for the years
ended December 31, 2005, December 31, 2004 and
December 31, 2003 30
Consolidated Statement of Changes in Equity for the
years ended December 31, 2005, December 31, 2004 and
December 31, 2003 31
Notes to Consolidated Financial Statements 32
The foregoing are incorporated herein by reference.
The individual financial statements of the nonconsolidated
foreign affiliates, which would be required if each such foreign
affiliate were a Registrant, are omitted because (a) Seaboard's
and its other subsidiaries' investments in and advances to such
foreign affiliates do not exceed 20% of the total assets as shown
by the most recent consolidated balance sheet and (b) Seaboard's
and its other subsidiaries' equity in the earnings before income
taxes and extraordinary items of the foreign affiliates does not
exceed 20% of such income of Seaboard and consolidated
subsidiaries compared to the average income for the last five
fiscal years.
Combined condensed financial information as to assets,
liabilities and results of operations have been presented for
nonconsolidated foreign affiliates in Note 5 of "Notes to the
Consolidated Financial Statements."
II - Valuation and Qualifying Accounts for the years ended
December 31, 2005, 2004 and 2003 F-3
All other schedules are omitted as the required information is
inapplicable or the information is presented in the consolidated
financial statements or related consolidated notes.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Seaboard Corporation:
Under date of March 6, 2006, we reported on the consolidated
balance sheets of Seaboard Corporation and subsidiaries (the
Company) as of December 31, 2005 and 2004, and the related
consolidated statements of earnings, changes in equity and cash
flows for each of the years in the three-year period ended
December 31, 2005, as contained in the December 31, 2005 annual
report to stockholders. These consolidated financial statements
and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended December 31, 2005.
In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index.
This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an
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.
Our report dated March 6, 2006 contains an explanatory paragraph
that states that the Company adopted Statement of Financial
Standards No. 143, "Accounting for Asset Retirement Obligations,"
and FASB Interpretation No. 46, "Consolidation of Variable
Interest Entities," and changed its method of accounting for
costs expected to be incurred during regularly scheduled
drydocking of vessels from the accrual method to the direct-
expense method in 2003.
KPMG LLP
Kansas City, Missouri
March 6, 2006
F-2
Schedule II
SEABOARD CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In Thousands)
Balance at Provision Net deductions Accounting Balance at
beginning of year (1) (2) changes(3) end of year
Year ended December 31, 2005:
Allowance for doubtful accounts $14,524 3,987 (2,356) - $16,155
Year ended December 31, 2004:
Allowance for doubtful accounts $23,359 2,463 (11,298) - $14,524
Year ended December 31, 2003:
Allowance for doubtful accounts $16,178 8,473 (1,292) - $23,359
Drydock accrual $ 6,393 - - (6,393) $ -
<FN>
(1) The allowance for doubtful accounts provision is charged to
selling, general and administrative expenses.
(2) Includes write-offs net of recoveries and currency
translation adjustments.
(3) Effective January 1, 2003, Seaboard changed its method of
accounting for drydock maintenance costs from the accrue-in-
advance method to the direct-expense method. As a result,
Seaboard reversed its allowance for drydock accrual as a
cumulative effect of a change in accounting principle.
F-3