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 March 23, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 No.) incorporation or organization) 9000 W. 67th Street, Shawnee Mission, KS 66202 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Address of principal executive offices) (Zip Code) 913-676-8800 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (Registrant's telephone number, including area code) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 March 23, 1996. Total pages in filing - 12 pages <TABLE> SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Balance Sheets March 23, 1996 and December 31, 1995 (Thousands of Dollars) <CAPTION> Part I - Financial Information March 23, December 31, 1996 1995 ----------- ------------ Assets ------ <S> <C> <C> Current assets: Cash and cash equivalents $ 5,007 $ 5,529 Short-term investments 99,500 135,197 Receivables, net 125,504 117,709 Inventories 144,511 112,843 Income taxes receivable 6,607 -- Deferred income taxes 8,584 8,231 Prepaid expenses and deposits 15,221 14,251 ---------- --------- Total current assets 404,934 393,760 ---------- --------- Investments in and advances to foreign subsidiaries not consolidated 26,203 26,140 ---------- --------- Property, plant and equipment 683,734 650,402 Accumulated depreciation (223,304) (211,987) ---------- --------- Net property, plant and equipment 460,430 438,415 ---------- --------- Other assets 19,676 19,817 ---------- --------- Total assets $911,243 $878,132 ========== ========= Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Notes payable and current maturities of long-term debt $ 63,186 $ 40,826 Accounts payable 59,712 75,749 Income taxes payable -- 744 Other current liabilities 93,372 57,417 ---------- ---------- Total current liabilities 216,270 174,736 ---------- ---------- Long-term debt, less current maturities 297,582 297,440 ---------- ---------- Deferred income taxes 15,546 14,569 ---------- ---------- Other liabilities 27,721 25,577 ---------- ---------- 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 on debt securities, (net of deferred income tax expense of $25 and $150 at March 23, 1996 and December 31, 1995, respectively) 52 251 Retained earnings 339,370 350,857 ---------- ---------- Total stockholders' equity 354,124 365,810 ---------- ---------- Total liabilities and stockholders' equity $911,243 $878,132 ========== ========== <FN> See notes to condensed consolidated financial statements. </TABLE> Page 2 <TABLE> SEABOARD CORPORATION AND SUBSIDIARIES Condensed Consolidated Statements of Earnings Twelve weeks ended March 23, 1996 and March 25, 1995 (Thousands of dollars except per share amounts) <CAPTION> March 23, March 25, 1996 1995 ----------- ----------- <S> <C> <C> Net sales $297,631 $235,923 Cost of sales and operating expenses 277,427 193,836 ----------- ----------- Gross income 20,204 42,087 Selling, general and administrative expenses 33,035 28,398 ----------- ----------- Operating income (loss) (12,831) 13,689 ----------- ----------- Income (loss) from foreign subsidiaries not consolidated 68 (1,019) ----------- ----------- Other income(expense): Interest income 1,744 2,301 Interest expense (5,683) (2,534) Miscellaneous 97 (47) ----------- ----------- Total other income (expense) (3,842) (280) ----------- ----------- Earnings (loss) before income taxes (16,605) 12,390 ----------- ----------- Income tax expense(benefit): Current (6,240) 4,531 Deferred 750 (181) ----------- ----------- Total income taxes (5,490) 4,350 ----------- ----------- Net earnings (loss) $(11,115) $ 8,040 =========== =========== Earnings (loss) per common share $ (7.47) $ 5.40 =========== =========== 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 Cash Flows Twelve weeks ended March 23, 1996 and March 25, 1995 (Thousands of Dollars) <CAPTION> March 23, March 25, 1996 1995 ------------ ----------- <S> <C> <C> Net cash provided by (used in) operating activities $ (25,026) $ 3,948 ------------ ----------- Cash flows from investing activities: Purchase of investments (107,152) (67,846) Proceeds from the sale or maturity of investments 142,525 79,582 Capital expenditures, net (33,780) (29,195) Notes receivable (1,254) 1,014 Investments and advances to foreign subsidiaries not consolidated 5 987 ----------- ---------- Net cash provided by (used in) investing activities 344 (15,458) ----------- ---------- Cash flows from financing activities: Notes payable to bank 22,396 6,488 Proceeds from long-term debt 349 5,943 Principal payments (243) (1,436) Deferred grants -- 2,993 Bond construction fund 2,030 1,117 Dividends paid (372) (372) ----------- ---------- Net cash provided by (used in) financing activities 24,160 14,733 ----------- ---------- Net increase (decrease) in cash and cash equivalents (522) 3,223 Cash and cash equivalents at beginning of year 5,529 4,773 ----------- ---------- Cash and cash equivalents at end of quarter $ 5,007 $ 7,996 =========== ========== <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 4 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 March 23, 1996, and the results of operations and cash flows for the periods ended March 23, 1996 and March 25, 1995. Note 2 - ------ The results of operations for the twelve weeks ended March 23, 1996 and March 25, 1995 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 March 23, 1996 and December 31, 1995 (in thousands): <CAPTION> March 23, December 31, 1996 1995 ---------- ------------ <S> <C> <C> At lower of last-in, first-out (LIFO) cost or market: Live poultry $ 28,206 $ 26,442 Dressed poultry 23,733 21,219 Feed and baking ingredients, packaging supplies and other 8,713 8,772 ---------- ---------- 60,652 56,433 LIFO allowance (8,905) (6,965) ---------- ---------- Total inventories at lower of LIFO cost or market 51,747 49,468 ---------- ---------- At lower of first-in, first-out (FIFO) cost or market: Live hogs 32,613 28,626 Grain, flour and feed 40,146 19,551 Crops in production, fertilizers and pesticides 8,870 7,639 Dressed pork 3,727 166 Other 7,408 7,393 ---------- ---------- Total inventories at lower of FIFO cost or market 92,764 63,375 ---------- ---------- Total inventories $144,511 $112,843 ========== ========== </TABLE> Page 5 Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES - ----------------------------------------------------------------------------- March 23, December 31, 1996 1995 - ----------------------------------------------------------------------------- Current ratio 1.87:1 2.25:1 Working capital $ 188.7 $ 219.0 - ----------------------------------------------------------------------------- Cash used in operating activities for the quarter ending March 23, 1996 was $25.0 million, compared to $3.9 million of cash provided by operations in the same quarter one year earlier. The decrease in cash was primarily related to the net loss of $11.1 million and increased inventories and receivables. The increased inventories primarily represent shipments of commodities enroute to foreign customers. Additional pork inventories represent expansion of the live hog herds, grain in feed mills and finished product at a pork plant which began operating in December, 1995. The increase in accounts receivable is primarily attributable to sales of wheat to affiliated, nonconsolidated foreign flour mills. Partially offsetting these is a $21 million increase in current liabilities primarily consisting of advance payments on commodity sales and accrued voyage expenses. The Company invested $29.3 million in property, plant and equipment through March 23, 1996 in the food production and processing segment. Capital expenditures of $25.3 million were for construction of hog farrowing and finishing facilities, two feed mills and a pork-processing plant located in Guymon, Oklahoma. Cumulative capital expenditures on these facilities since 1992 total $248.5 million. The Company expects additional expenditures for facilities and working capital to total approximately $25.0 million in the next two years, of which approximately $20.6 million is currently under contract. Management anticipates the facilities will be financed from cash. Capital expenditures of $1.0 million were made at the Company's poultry processing plant in Athens, Georgia to increase processing capacity through processing equipment upgrades. Cumulative capital expenditures related to the expansion totaled $9.5 million and were funded with cash. Other capital expenditures in the food production and processing segment through March 23, 1996 included $3.0 million in general modernization and efficiency upgrades of plant and equipment. Capital expenditures in the transportation segment through March 23, 1996 totaled $4.2 million for general replacement and upgrades of property and equipment. Page 6 At December 31, 1995, the Company had $33.8 million outstanding under short-term uncommitted credit lines from banks that totaled $122 million. In the first quarter of 1996, the Company entered into a $75 million one-year revolving credit facility and a five-year $50 million revolving credit facility with a group of banks and certain uncommitted credit lines were reduced by $17 million. As of March 23, 1996, the Company had $35 million outstanding under the one-year revolving credit facility and $20.8 million outstanding under the remaining short-term uncommitted credit lines totaling $105 million. Subsequent to March 23, 1996, the Company borrowed $10 million of the $50 million revolving credit facility. Utilization of the five- year revolving credit facility is limited by existing debt covenants. 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 weeks ending March 23, 1996 increased by $61.7 million compared to the same quarter one year earlier. Operating income decreased by $26.5 million compared to the same quarter one year ago. The segment distribution of net sales and operating income compared to the prior year are as follows (in millions). Net Sales Operating Income ---------------------- ----------------------- March 23, March 25, March 23, March 25, 1996 1995 1996 1995 --------- --------- --------- --------- Food Production and Processing Segment $ 157.5 $ 145.2 $ (13.2) $ 3.2 Commodity Segment 73.9 24.4 3.9 1.9 Transportation Segment 57.0 59.1 (2.9) 8.6 Other 9.2 7.2 (0.6) -- --------- --------- --------- --------- $ 297.6 $ 235.9 $ (12.8) $ 13.7 ========= ========= ========= ========= Food Production And Processing Segment - -------------------------------------- Corn is the most significant component of the feed used to grow the Company's poultry and hog inventories. The gross income of both the poultry and pork product lines have been affected by the rising price of corn. The price of May corn futures on the Chicago Board of Trade has risen from $2.50 per bushel on March 24, 1995 to $3.90 per bushel on March 22, 1996. Management does not expect corn prices to recover to previous levels in the current year due to anticipated short supplies of corn attributed to adverse weather conditions. The Company implements hedging stratagies to manage exposure to fluctuations in these commodity markets; however, prolonged periods of high corn prices have caused and will continue to cause an increase in the cost to grow livestock. Because poultry inventories are valued at LIFO, the higher cost of corn is reflected in earnings when purchased. The pork inventories are valued at FIFO, accordingly most of the higher cost corn is in inventory and will affect cost of sales in future quarters. If the Company is not able to recover these higher costs through higher sales prices, the Company's gross income would be negatively affected. Management, at this time, is not able to assess the likelihood or timing of its ability to increase prices. Page 7 Net sales of poultry products totaled $110.3 million in the first quarter of 1996, an increase of $14.5 million compared to the first quarter of 1995. The increase was primarily due to increased volume resulting from efficiency upgrades of equipment. Sales prices in the first quarter were slightly higher than those of a year ago but lower than prices in the fourth quarter of 1995. A temporary suspension of shipments to Russia caused an industry-wide inventory buildup in the first quarter and sales prices, particularly for leg quarters, have fallen. Russian importation of poultry resumed in the first quarter and Management expects prices to recover once inventory levels have been reduced though lower prices are expected to continue through the second quarter. Higher feed costs are the primary reason gross income from poultry sales have fallen $10.7 million to $0.5 million when compared to the first quarter of 1995. Net sales of live hogs and pork products increased by $3.6 million in the first quarter of 1996, compared to the same time one year earlier, to total $21.8 million. The increase resulted primarily from sales of pork products at the hog processing plant in Guymon, Oklahoma which began operations in December 1995. The net increase was partially offset by the discontinued operations at the Albert Lea, Minnesota pork processing plant in December 1995 when the Company leased the plant to a third party. Management expects increases in sales as the Oklahoma plant increases its production. The pork operations reported negative gross income of $4.6 million in the first quarter of 1996 compared to a negative gross income of $0.3 million in the first quarter of 1995. The decline is primarily related to the hog processing plant in Guymon, Oklahoma. The plant is in the initial stage of operations and is not expected to operate at single shift capacity until the third quarter of 1996. The Company expects second quarter results to continue to be adversely affected from operating at less than full capacity and higher grain costs. Operating income for the segment declined by $16.4 million for the quarter ending March 23, 1996 compared to the same quarter one year earlier. The decline was primarily related to higher finished feed costs and operating the pork plant at less than capacity. Commodity Trading - ----------------- Net sales from commodity trading activity increased by $49.5 million in the first quarter of 1996 compared to the same quarter one year earlier. The increase is primarily related to expanded trading of wheat, soybeans, corn and other grains in foreign markets. Page 8 Transportation Segment - ---------------------- Net sales from containerized cargo operations decreased by $2.1 million in the first quarter of 1996 compared to the first quarter of 1995 despite an increase in the number of revenue producing units moved during the quarter. Operating income from containerized cargo operations decreased by $11.5 million in the first quarter of 1996 compared to the same quarter one year ago. The decrease in sales and operating income was primarily related to lower freight rates resulting from competition in certain markets. Management cannot predict when rates in these markets will improve and, therefore, the results of operations in future periods could continue to be adversely affected. Other Operations - ---------------- Net sales from electric power generating increased by $2.0 million in the first quarter of 1996 compared to the same time one year earlier to total $9.2 million. Operating income decreased primarily as a result of increasing reserves on the receivables from the sale of electric power in the Dominican Republic. Selling, General and Administrative Expenses - -------------------------------------------- Selling, general and administrative (SG&A) expenses totaled $33.0 million for the quarter ending March 23, 1996, an increase of $4.6 million compared to the same time one year earlier. The increase was primarily related to reserves for potential uncollectible receivables. The increased SG&A expenses associated with opening the pork plant in Oklahoma were offset by the decrease in SG&A expenses from the discontinued operations at the Albert Lea, Minnesota pork processing plant in December, 1995. Interest Income and Expense - --------------------------- Interest income declined during the quarter compared to the same quarter one year earlier resulting primarily from a decrease in invested funds. Interest expense increased during the quarter by $3.1 million compared to the same quarter one year earlier. The increase was primarily related to the issuance of long-term debt in the second quarter of 1995 and increased short-term borrowings. The Company does not believe its businesses have been materially adversely affected by general inflation. Page 9 SEABOARD CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The annual meeting of stockholders was held on April 22, 1996 in Newton, Massachusetts. Two items were submitted to a vote of stockholders as described in the Company's Proxy Statement dated March 29, 1996. The table below briefly describes the proposals and results of the stockholders' vote. Votes in Votes Broker Favor Against Abstain Nonvotes --------- ------- ------- -------- 1. To elect: H. Harry Bresky, 1,340,371 0 6,072 0 Joe E. Rodrigues 1,340,451 0 5,992 0 David A. Adamsen 1,340,351 0 6,092 0 and Thomas J. Shields 1,340,351 0 6,092 0 As directors. 2. To ratify selection of KPMG Peat Marwick LLP As independent auditors. 1,346,183 50 210 0 Page 10 SEABOARD CORPORATION AND SUBSIDIARIES PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4.5 - $75.0 million Amended And Restated Short-Term Revolving Credit Agreement dated as of March 28, 1996. The Exhibits to the Amended And Restated Short-Term Revolving Credit Agreement have been omitted from the filing, but will be provided supplementally upon request of the commission. 4.6 - $50.0 million Amended And Restated Long-Term Revolving Credit Agreement dated as of March 28, 1996. The Exhibits to the Amended And Restated Long-Term Revolving Credit Agreement have been omitted from the filing, but will be provided supplementally upon request of the commission. 4.7 - Seaboard Corporation Note Agreement dated as of December 1, 1993 ($100,000,000 Senior Notes due December 1, 2005). First Amendment to Note Agreement. 4.8 - Seaboard Corporation Note Agreement dated as of June 1, 1995 ($125,000,000 Senior Notes due June 1, 2007). First Amendment to Note Agreement. (b) Reports on Form 8-K. Seaboard Corporation has not filed any reports on Form 8-K during the twelve week period ended March 23, 1996. This Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which may include 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 of the assumptions underlying or relating to any of the foregoing statements and other statements which are other than statements of historical fact. These statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief or current expectations of the Company and its management with respect to (i) the cost and timing of the completion of new or expanded facilities, (ii) the Company's financing plans, (iii) the Company's competitive position, (iv) the supply and price of feed stocks and other materials used by the Company, (v) the demand and price for the Company's products and services, or (vi) other trends affecting the Company's financial condition or results of operations. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially as a result of various factors. The accompanying information contained in this Form 10-Q, including with limitation the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" identifies important factors which could cause such differences. Page 11 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: May 6, 1996 Seaboard Corporation by: /s/ Robert Steer ------------------------------------ Robert Steer, Vice President-Finance by: /s/ Jesse H. Bechtold ------------------------------------------- Jesse H. Bechtold, Chief Accounting Officer Page 12