FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended September 9, 1995 ....................................................................... Commission file number 1-3390 ....................................................................... Seaboard Corporation ....................................................................... (Exact name of registrant as specified in its charter) Delaware 04-2260388 ....................................................................... (State or other jurisdiction of (IRS Employer Identification incorporation or organization). No.) 9000 W. 67th Street, Shawnee Mission, KS 66202 ....................................................................... (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 913-676-8800 .............................. ....................................................................... Former name, former address and former fiscal year, if changed since last report. 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 number of shares outstanding of each of the issuer's classes of common stock, as of latest practicable date. Common stock of $1 par value, 1,487,520 shares outstanding, as of September 9, 1995. Total pages in filing - 13 pages <TABLE> SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets September 9, 1995 and December 31, 1994 (Thousands of Dollars) <CAPTION> Part I - Financial Information September 9, December 31, 1995 1994 ------------ ------------ Assets -------- <S> <C> <C> Current assets: Cash and cash equivalents $ 4,992 $ 4,773 Short-term investments 216,906 174,665 Receivables, net 115,723 104,695 Inventories 93,931 73,243 Deferred income taxes 9,660 6,914 Prepaid expenses and deposits 13,301 7,705 --------- --------- Total current assets 454,513 371,995 --------- --------- Investments in and advances to foreign subsidiaries not consolidated 26,986 30,453 --------- --------- Property, plant and equipment 566,824 430,151 Accumulated depreciation (199,456) (175,080) --------- --------- Net property, plant and equipment 367,368 255,071 --------- --------- Other assets 20,457 17,692 --------- --------- Total assets $869,324 $675,211 ========= ========= Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Notes payable and current maturities of long-term debt $ 34,450 $ 23,984 Accounts payable 51,014 42,560 Income taxes payable 7,704 11,931 Other current liabilities 56,810 33,999 --------- --------- Total current liabilities 149,978 112,474 --------- --------- Long-term debt, less current maturities 306,413 177,666 --------- --------- Deferred income taxes 20,437 18,810 --------- --------- Other liabilities 24,800 20,181 --------- --------- Stockholders' equity: Common stock of $1 par value, Authorized 4,000,000 shares; issued 1,789,599 shares 1,790 1,790 Less 302,079 shares held in treasury, at par value 302 302 --------- --------- 1,488 1,488 Additional capital 13,214 13,214 Unrealized gain (loss) on debt securities, (net of deferred income tax (expense) benefit of $(50) and $466 at September 9, 1995 and December 31, 1994, respectively) 84 (764) Retained earnings 352,910 332,142 --------- --------- Total stockholders' equity 367,696 346,080 --------- --------- Total liabilities and stockholders' equity $869,324 $675,211 ========= ========= <FN> See notes to condensed consolidated financial statements. </TABLE> Page 2 <TABLE> SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings Twelve weeks ended September 9, 1995 and September 10, 1994 (Thousands of dollars except per share amounts) <CAPTION> September 9, September 10, 1995 1994 ------------ ------------ <S> <C> <C> Net sales $288,263 $214,952 Cost of sales and operating expenses 248,341 183,405 ------------ ------------ Gross income 39,922 31,547 Selling, general and administrative expenses 30,426 22,939 ------------ ------------ Operating income 9,496 8,608 ------------ ------------ Income (loss) from foreign subsidiaries not consolidated 1,701 (301) ------------ ------------ Other income(expense): Interest income 3,349 2,068 Interest expense (4,648) (2,713) Miscellaneous 39 13 ------------ ------------ Total other income (expense) (1,260) (632) ------------ ------------ Earnings before income taxes 9,937 7,675 ------------ ------------ Income tax expense(benefit): Current 4,002 1,380 Deferred (1,145) 646 ------------ ------------ Total income taxes 2,857 2,026 ------------ ------------ Net earnings $ 7,080 $ 5,649 ============ ============ Earnings per common share $ 4.76 $ 3.80 ============ ============ Dividends declared per common share $ .25 $ .25 ============ ============ Average number of shares outstanding 1,487,520 1,487,520 ============ ============ <FN> See notes to condensed consolidated financial statements. </TABLE> Page 3 <TABLE> SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings Thirty-six weeks ended September 9, 1995 and September 10, 1994 (Thousands of dollars except per share amounts) <CAPTION> September 9, September 10, 1995 1994 ------------ ------------ <S> <C> <C> Net sales $779,588 $687,366 Cost of sales and operating expenses 657,366 579,818 ------------ ------------ Gross income 122,222 107,548 Selling, general and administrative expenses 89,925 71,678 ------------ ------------ Operating income 32,297 35,870 ------------ ------------ Income from foreign subsidiaries not consolidated 1,957 868 ------------ ------------ Other income(expense): Interest income 8,108 5,727 Interest expense (10,410) (9,262) Miscellaneous (91) 2,688 ------------- ------------ Total other income (expense) (2,393) (847) ------------- ------------ Earnings before income taxes 31,861 35,891 ------------- ------------ Income tax expense(benefit): Current 11,627 10,385 Deferred (1,650) 1,237 ------------- ------------ Total income taxes 9,977 11,622 ------------- ------------ Net earnings $ 21,884 $ 24,269 ============= ============ Earnings per common share $ 14.71 $ 16.32 ============= ============ Dividends declared per common share $ .75 $ .75 ============= ============ Average number of shares outstanding 1,487,520 1,487,520 ============= ============ <FN> See notes to condensed consolidated financial statements. </TABLE> Page 4 <TABLE> SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows Thirty-Six weeks ended September 9, 1995 and September 10, 1994 (Thousands of Dollars) <CAPTION> September 9, September 10, 1995 1994 ------------ ------------ <S> <C> <C> Net cash provided by operating activities $ 29,261 $ 43,676 ------------ ------------ Cash flows from investing activities: Purchase of investments (560,015) (586,700) Proceeds from the sale or maturity of investments 519,138 574,162 Capital expenditures, net (140,194) (34,316) Notes receivable 1,188 2,689 Investments and advances to foreign subsidiaries not consolidated 5,424 28 ------------ ------------ Net cash used in investing activities (174,459) (44,137) ------------ ------------ Cash flows from financing activities: Notes payable to bank 10,723 (1,552) Proceeds from long-term debt 131,369 3,792 Principal payments (2,879) (7,464) Deferred grants 3,927 4,481 Bond construction fund 3,393 -- Dividends paid (1,116) (1,116) ------------ ------------ Net cash provided by (used in) financing activities 145,417 (1,859) ------------ ------------ Net increase (decrease) in cash and cash equivalents 219 (2,320) Cash and cash equivalents at beginning of year 4,773 7,110 ------------ ------------ Cash and cash equivalents at end of quarter $ 4,992 $ 4,790 ============ ============ <FN> For purposes of the Condensed Consolidated Statements of Cash Flows, the Company considers all demand deposits and overnight investments as cash. See notes to condensed consolidated financial statements. </TABLE> Page 5 SEABOARD CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Note 1 - ------ In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position as of September 9, 1995, and the results of operations and cash flows for the periods ended September 9, 1995 and September 10, 1994. Note 2 - ------ The results of operations for the thirty-six weeks ended September 9, 1995 and September 10, 1994 are not necessarily indicative of the results to be expected for the full year. Note 3 - ------ <TABLE> The following is a summary of inventories at September 9, 1995 and December 31, 1994 (in thousands): <CAPTION> September 9, December 31, 1995 1994 ------------ ------------ <S> <C> <C> At lower of last-in, first-out (LIFO) cost or market: Live poultry $23,822 $22,230 Dressed poultry 19,100 13,344 Feed and baking ingredients, packaging supplies and other 6,964 6,121 ------------ ------------ 49,886 41,695 LIFO allowance (3,851) (1,390) ------------ ------------ Total inventories at lower of LIFO cost or market 46,035 40,305 ------------ ------------ At lower of first-in, first-out (FIFO) cost or market: Live hogs 18,442 10,122 Grain, flour and feed 11,576 7,622 Crops in production, fertilizers and pesticides 6,587 6,132 Dressed pork 3,346 2,523 Other 7,945 6,539 ------------ ------------ Total inventories at lower of FIFO cost or market 47,896 32,938 ------------ ------------ Total inventories $93,931 $73,243 ============ ============ </TABLE> Page 6 Note 4 - ------ The Company is a defendant in a pending arbitration proceeding in the matter of a chartered barge and tug which were damaged after delivering cargo. No demand for any specific dollar amount has been made. While the ultimate outcome is not presently determinable, management, after investigation of the facts and discussions with legal counsel, does not believe that the Company has any liability. A lawsuit has been brought by a private individual against the Company's Honduran subsidiary engaging in shrimp production. The individual alleges that a previous owner of the shares of stock of the Company's Honduran subsidiary fraudulently transferred his shares without his knowledge. Damages of approximately $12.5 million have been asserted. Management, after discussion with legal counsel, does not believe the Company's Honduran subsidiary has any liability. Page 7 Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES - ---------------------------------------------------------- Liquidity, as measured by current ratio and working capital, are presented as follows: September 9, 1995 December 31, 1994 ----------------- ----------------- Current Ratio 3.03 3.31 Working Capital $304,535 $259,521 (In thousands) Cash generated from operating activities was primarily a result of net earnings. Increased working capital requirements include higher inventories of live hogs as the Company's Guymon, Oklahoma pork processing plant nears completion. Increases in poultry inventories resulted from the timing of export shipments. Cash used to increase inventories has been offset by higher accrued liabilities attributable to ocean voyages in progress and accrued payroll and benefit costs. The Company invested $116.9 million in property, plant and equipment through September 9, 1995 in the food production and processing segment. Capital expenditures of $94.7 million were for construction of hog farrowing and finishing facilities, two feed mills and a pork processing plant. The facilities are located in Oklahoma, Colorado and Kansas. Cumulative capital expenditures on these facilities since 1992 total $159.8 million. The Company expects additional expenditures for facilities and working capital to total approximately $107 million in the next two years, of which approximately $48 million is currently under contract. Management anticipates the facilities will be financed from the proceeds of the senior notes and cash. Capital expenditures of $4.7 million were made at the Company's poultry processing plant in Athens, Georgia to expand processing capacity. Remaining capital expenditures for the expansion are expected to total $2.1 million through 1996 and will be funded with cash. Other capital expenditures in the food production and processing segment through September 9, 1995 consisted of $17.5 million in general modernization and efficiency upgrades of plant and equipment. Capital expenditures in the transportation segment through September 9, 1995 totaled $25.2 million. The Company purchased two cargo vessels for $14.7 million for use in the ocean liner service and other capital expenditures of $10.5 million were for general replacement and upgrades of equipment. $2.6 million of the capital expenditures were financed through a capitalized lease and the balance was paid using short-term uncommitted, unsecured credit lines from banks. Page 8 In June 1995, the Company issued $125.0 million in unsecured Senior Notes to various lenders, the proceeds of which are to finance the construction of hog production facilities, a pork processing plant and for general corporate purposes. The notes bear interest at 7.88% and mature in equal installments of $25.0 million on June 1, 2003, 2004, 2005, 2006 and 2007. The Company borrowed the proceeds of $3.3 million in Adjustable rate, 7-Day Demand Revenue Bonds issued by the Guymon Utilities Authority. The funds are being used to construct a waste pre-treatment facility for the Company's pork processing plant currently under construction in Guymon, Oklahoma. As of September 9, 1995 and December 31, 1994, the Company had $31.3 million and $20.6 million, respectively, outstanding under the Company's short-term uncommitted, unsecured credit lines from banks totaling $122.0 million. The Company leases various ships, facilities and equipment under noncancelable operating lease agreements. Minimum lease commitments under noncancelable leases with initial terms greater than one year are $12.3 million for the remainder of 1995, $31.4 million, $23.4 million, $18.0 million, $1.6 million, for the years ending December 31, 1996, 1997, 1998, 1999, respectively, and $5.8 million thereafter. The increase in lease commitments for the last quarter of 1995 and for the years ending in 1996, 1997 and 1998 are primarily related to the renewal of time charters on ships for extended periods. Management intends to lease additional facilities and equipment for a three year noncancelable term. These leases would increase future minimum lease payments by approximately $2.7 million in 1996 and $5.4 million annually thereafter. It is expected that, in the ordinary course of business, leases and time charters will be renewed or replaced. Management intends to continue seeking opportunities for expansion in the industries in which it operates and believes that the Company's liquidity, capital resources and borrowing capabilities are adequate for its current and intended operations. RESULTS OF OPERATIONS - --------------------------------------- Net sales for the twelve and thirty-six weeks ended September 9, 1995 increased by $73.3 million and $92.2 million, respectively, compared to the same periods one year earlier. Operating income increased by $0.9 million for the twelve weeks ended September 9, 1995 compared to the same period one year earlier. Year-to-date operating income decreased by $3.6 million compared to the same period one year ago. The segment distribution of the increase (decrease) in net sales and operating income compared to the prior year are as follows (in thousands): Operating Net Sales Income ----------------------- ----------------------- Quarter Year-to-date Quarter Year-to-date --------- ------------ --------- ------------ Food production and processing $57,078 $43,210 $ 3,101 $ 840 Transportation 15,485 45,342 (2,174) (3,452) Other 748 3,670 (39) (961) --------- ------------ ---------- ----------- $73,311 $92,222 $ 888 $ (3,573) ========= ============ ========== =========== Page 9 Food Production and Processing Segment Net sales of commodity products increased by $44.7 million and $55.6 million for the quarter and year-to-date respectively. The increase in trading consists primarily of grains shipped to new customers in the Middle East and Africa. These sales have not significantly effected operating earnings. Net sales of pork products and live hogs for the quarter and year-to-date totaled $22.3 million and $57.1 million, respectively. Net sales of pork products and live hogs have increased by $6.7 million for the quarter compared to the same period one year ago due to increased production of live hogs in anticipation of opening the processing plant in Guymon, Oklahoma. Year-to-date sales are $20.0 million lower than one year earlier due to discontinuing fresh pork sales at the Company's Minnesota processing plant. Gross income in the pork operations for the quarter and year-to-date were $0.5 million and $(1.2) million, respectively. Gross income increased during the quarter by $1.8 million compared to the same period one year earlier. The increase was primarily related to an increase in the market price of hogs and an increase in the quantity of hogs sold. For the year, gross income was almost unchanged compared to the same period one year earlier. Management expects fourth quarter 1995 and first quarter 1996 results to be adversely affected by costs associated with the start-up of its hog processing plant in Guymon, Oklahoma. Net sales of poultry products for the quarter and year-to-date were $108.5 million and $311.3 million, respectively. Net sales increased during the quarter and year-to-date by $4.2 million and $16.9 million, respectively, compared to the same periods one year earlier. The increase in net sales during the quarter was primarily related to an increase in the average selling price of poultry products. Year-to-date net sales increased primarily as a result of increased production at the Company's processing plant in Western Kentucky. Gross income on poultry products for the quarter was $15.6 million, an increase of $3.3 million compared to the same period one year earlier. Year-to-date gross income was $37.9 million, an increase of $5.4 million compared to the same period one year ago. The increase occurred primarily in the third quarter and can be attributed to stronger selling prices for poultry products. Finished feed costs began increasing in the third quarter due to higher grain costs. These higher grain costs are expected to increase the cost of production at the Company's live hog and poultry operations during the fourth quarter of 1995. Operating income within the food production and processing segment increased for the quarter and year-to-date compared to the same periods one year earlier. The increase was primarily related to margins generated at the Company's poultry operations which were partially offset by expenses incurred in advance of the opening of the processing plant now being constructed in Guymon, Oklahoma. Transportation Segment Net sales in the transportation segment increased for the quarter and year-to-date compared to the same periods one year earlier. The increase resulted from new and expanded services to South America and the Caribbean Basin and increased volume within existing services in Central America. Page 10 Operating income for the quarter and year-to-date decreased compared to the same period one year ago. The decrease is attributable to costs associated with expanding services and to lower freight rates in certain markets. The lower rates are the result of increased competition. The U.S. Congress is currently considering the elimination of the Federal Maritime Commission. Management cannot yet determine the impact of this, however, it could result in greater competition from larger shipping lines and lower freight rates. Selling, General and Administrative Expenses Selling, general and administrative expenses increased for the quarter and year-to-date by $7.5 million and $18.2 million, respectively, compared to the same periods one year earlier. The increase is primarily attributable to staffing and expenses relating to pork operations in advance of the opening of the processing plant now being constructed in Guymon, Oklahoma. In addition, selling, general and administrative costs increased as a result of reserving for certain domestic and foreign accounts receivable and increased marketing and administrative support of expanded shipping routes and product lines. Other Interest income increased during the quarter and year-to-date compared to the same periods one year earlier. The increase is primarily related to the cash proceeds from the issuance of the Senior Notes invested in short-term investments and an increase in rates on invested funds. Interest expense increased for the quarter and year-to-date compared to the same periods one year ago primarily as a result of the issuance of $125.0 million in Senior Notes and an increase in short-term borrowings. Interest rate exchange agreements resulted in additional interest expense of $0.5 million in the first quarter of 1994. Miscellaneous income in the second quarter of 1994 includes a $2.9 million gain from liquidating an interest rate exchange agreement. The Company entered into the interest rate exchange agreement as an anticipatory hedge against interest rate risk associated with variable rate financing. Subsequent to obtaining the interest rate exchange agreement the Company received commitments for fixed rate financing and, therefore, terminated the agreement. Foreign currency gains and losses included in earnings for 1995 and 1994 were not material. The effective tax rate for the quarter increased compared to the same period one year earlier. The increase is primarily related to the expiration of Targeted Jobs Tax Credit. The Company does not believe its businesses have been materially adversely affected by inflation. Page 11 SEABOARD CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits 4.3 - Note Purchase Agreement dated June 1, 1995 between the registrant and various purchasers as listed in the exhibit. 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. 4.4 - Seaboard Corporation 7.88% Senior Notes Due June 1, 2007 issued pursuant to the Note Purchase Agreement described above. 27 - Financial Data Schedule (b) Reports on Form 8-K. Seaboard Corporation has not filed any reports on Form 8-K during the twelve week period ended September 9, 1995. Page 12 PART II - OTHER INFORMATION SIGNATURES Pursuant to the requirements 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. DATE: October 24, 1995 Seaboard Corporation by: /s/ Rick J. Hoffman ------------------------------- Rick J. Hoffman, Vice President by: /s/ Jesse H. Bechtold ----------------------------------- Jesse H. Bechtold, Chief Accounting Officer Page 13