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, 2007
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, a non-accelerated filer,
or a smaller reporting company. See the definitions of "larger
accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer [ X ] Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)
Smaller reporting company [ ]
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 354,625 shares of Seaboard
voting stock held by nonaffiliates was approximately
$831,595,625, based on the closing price of $2,345.00 per share
on June 29, 2007, the end of Seaboard's second fiscal quarter.
As of February 08, 2008, the number of shares of common stock
outstanding was 1,244,278.24.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference
into the indicated parts of this report: (1) Seaboard
Corporation's Annual Report to Stockholders furnished to the
Commission pursuant to Rule 14a-3(b) - Parts I and II; and (2)
Seaboard Corporation's definitive proxy statement filed pursuant
to Regulation 14A for the 2008 annual meeting of stockholders -
Part III.
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, grains,
sugar and other products and services,
(iv) statements concerning management's expectations of recorded
tax effects under certain circumstances,
(v) the ability of the Commodity Trading and Milling segment 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 stability of the Dominican Republic's economy, fuel
cost and related spot market prices and collections of
receivables in the Dominican Republic,
(viii) the effect of the fluctuation in foreign currency
exchange rates,
(ix) statements concerning profitability or sales volume of any
of Seaboard's segments,
(x) the anticipated costs and completion timetable for
Seaboard's scheduled capital improvements, or
(xi) other trends affecting Seaboard's financial condition or
results of operations, and statements of the assumptions
underlying or relating to any of the foregoing statements.
This list of forward-looking statements is not exclusive.
Seaboard undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new
information, future events, changes in assumptions or otherwise.
Forward-looking statements are not guarantees of future
performance or results. They involve risks, uncertainties and
assumptions. Actual results may differ materially from those
contemplated by the forward-looking statements due to a variety
of factors. The information contained in this Form 10-K and in
other filings Seaboard makes with the 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. In the United States, Seaboard is
primarily engaged in pork production and processing, and ocean
transportation. Overseas, Seaboard is primarily engaged in
commodity merchandising, grain processing, sugar production, and
electric power generation. 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 71.8 percent of the outstanding common stock of
Seaboard. Mr. Steven J. Bresky, President and Chief Executive
Officer of Seaboard, and other members of the Bresky family,
including trusts created for their benefit, own the common units of
Seaboard Flour LLC.
(b) Financial Information about Industry Segments
The financial information relating to Industry Segments required by
Item 1 of Form 10-K is incorporated herein by reference to Note 13
of the Consolidated Financial Statements appearing on pages 56
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 and frozen pork products to further processors,
foodservice operators, grocery stores, distributors and retail
outlets throughout the United States. Internationally,
Seaboard sells to distributors in Japan, Mexico 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, ham, bacon, and sausage.
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 bacon further processing plants.
Seaboard sells some of its fresh products under the brand name
Prairie Freshr and its bacon and other further processed
products under the Daily'sr brand name. Seaboard's hog
processing plant is located in Guymon, Oklahoma, and operates
at double shift capacity. Seaboard's bacon plants are located
in Salt Lake City, Utah and Missoula, Montana. Seaboard also
earns a commission, based on the number of head processed, to
market all of the products produced by Triumph Foods LLC at
their pork processing plant located in St. Joseph, Missouri.
Seaboard's hog production operations consist of the breeding
and raising of approximately 4.0 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.
Beginning in 2008, Seaboard will begin production of biodiesel
at a new facility being constructed in Guymon, Oklahoma. The
biodiesel will be sold to a third party and will be produced
from third party animal fat, vegetable oil and/or pork fat
from Seaboard's Guymon pork processing plant.
Commodity Trading and Milling Division - Seaboard's Commodity
Trading and Milling Division, primarily through its
subsidiaries, Seaboard Overseas Limited based in Bermuda, and
Seaboard Overseas Trading and Shipping (PTY), Ltd. located in
South Africa, markets wheat, corn, soybean meal and other
similar commodities in bulk to third party customers and
affiliated companies. These commodities are purchased from
most growing regions worldwide, with primary destinations
being Africa, South America, and the Caribbean. The division
sources, transports and markets approximately 3.5 million tons
of grains and proteins on an annual basis. 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 and related businesses
with 26 locations in 14 countries, which are primarily
supplied by the trading locations discussed above. The grain
processing businesses are operated through six consolidated
and eight non-consolidated affiliates in Africa, the Caribbean
and South America. These are flour, feed and maize milling
businesses which produce approximately one and a half 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 or into adjacent
countries.
Marine Division - Seaboard, through its subsidiary, Seaboard
Marine Limited, and various foreign affiliated companies and
third party agents, provides containerized cargo shipping
service to 25 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 agreements with
a network of connecting carriers, Seaboard can transport cargo
to and from numerous U.S. locations by either truck or rail to
and from one of its U.S. port locations, where it is staged
for export via vessel or received as import cargo from abroad.
Seaboard's primary marine operation is located in Miami and
includes a 70 acre terminal located at the Port of Miami and a
135,000 square foot warehouse for cargo consolidation and
temporary storage. Seaboard also operates a 62 acre cargo
terminal facility at the Port of Houston that includes
approximately 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, New
Orleans, Louisiana and 40 foreign ports. At December 31,
2007, Seaboard's fleet consists of 12 owned and approximately
27 chartered vessels, thousands of dry, refrigerated and
specialized containers and units of 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 more than 60,000 acres of
land it owns in northern Argentina. The cane is processed at
an owned mill, with a current processing capacity of
approximately 230,000 metric tons of sugar and approximately
four million gallons of alcohol per year. The sugar mill is
one of the largest in Argentina. During 2008, it is
anticipated that construction on the alcohol distillery
operation will be completed to increase the alcohol production
capacity to approximately 13 million gallons per year. In
addition, approximately 3,000 acres of Seaboard's land in
northern Argentina is planted with orange trees.
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. Seaboard is not directly involved in the transmission
or distribution of the electricity but does have contracts to
sell directly to third party users. 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 a short-term
contract to a government-owned distribution company. The
remaining electricity is sold in the "spot market" at
prevailing market prices, primarily to three wholly or
partially government-owned electric distribution companies or
other power producers who lack sufficient power production to
service their customers.
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.
4
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 revenue in any of the last
three fiscal years is set forth in Note 13 of Seaboard's
Consolidated Financial Statements, appearing on pages 56
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
The Pork segment is constructing a processing plant in Guymon,
Oklahoma to produce biodiesel to be sold to a third party,
which will be produced from third party animal fat, vegetable
oil and/or pork fat from Seaboard's Guymon pork processing
plant. Construction is expected to be completed in the first
quarter of 2008. In addition, the Pork segment previously
announced plans to expand its processed meats capabilities by
constructing a separate further processing plant, primarily
for bacon. Construction of this facility was anticipated to
begin in the second half of 2007; however the timing of this
facility has been delayed. Also, other alternatives to
construction may be considered for this project including the
acquisition of an existing facility.
During 2007, the Pork segment constructed additional hog
finishing space to allow hogs more time to reach the desired
weight for processing at the Guymon plant. Additional hog
finishing space is currently under construction and is
expected to be completed in 2008. During 2008, it is
anticipated that modifications will be made to the Guymon
plant that will increase daily double shift processing
capacity from approximately 16,800 to 18,500 hogs.
In January 2007, Seaboard repurchased the 4.74% equity
interest in its subsidiary, Seaboard Foods LP, from the former
owners of Daily's. The former owners of Daily's had acquired
this equity interest as part of Seaboard's 2005 acquisition
of Daily's, a bacon processor located in the western United
States.
During 2006, Triumph Foods began production at its new pork
processing plant located in St. Joseph, Missouri, and Seaboard
began marketing the related pork products for a fee primarily
based on the number of head processed by Triumph Foods. This
plant has similar capacity to Seaboard's Guymon plant with the
business based upon a similar integrated model as Seaboard's.
Triumph Foods reached full double shift operating capacity
during 2007. Seaboard's sales prices for its pork products
are primarily based on an average sales price and mix of
products sold from both Seaboard's and Triumph Food's hog
processing plant.
In late September 2007, Seaboard acquired a 40% non-controlling
interest in a flour mill business located in Colombia for $8.5
million, including cash contributed into the business. During
the fourth quarter of 2007, Seaboard acquired for $6.6 million
a 50% non-controlling interest in a grain trading business in
Peru. Both of these investments are accounted for using the
equity method.
Seaboard is a minority owner in a flour milling operation,
located in Angola, which closed in 2005. Seaboard is
exploring various alternatives to reopen or sell the
operation.
During 2007, Seaboard launched a plan to expand the Sugar &
Citrus business. As part of this plan, Seaboard purchased
land, planted an additional 15,000 acres of sugar cane and is
in the process of expanding the alcohol distillery operations.
This expansion has raised sugar production from approximately
200,000 metric tons per year to approximately 230,000 metric
tons per year and, is anticipated to increase alcohol
production capacity from approximately four million gallons
per year to approximately 13 million gallons per year. The
alcohol distillery expansion is expected to be completed in
2008.
The Sugar and Citrus segment is in the process of developing a
40 megawatt cogeneration plant. This plant is expected to be
completed in 2009.
At times during early 2007 and throughout 2006, Seaboard's
power production was restricted by the regulatory authorities
in the Dominican Republic. The regulatory body schedules
production based on the amount of funds available to pay for
the power produced and the relative costs of the power
produced. In addition, Seaboard is pursuing additional
investment opportunities in the power industry.
(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.
5
(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, Prairie Fresh, A Taste
Like No Other, Daily's, Daily's Premium Meats Since 1893,
High Plains Bioenergy, Prairie Fresh Prime, Seaboard Foods,
Buffet Brand and Seaboard Farms, Inc. Seaboard considers
the use of these trademarks important to the marketing and
promotion of its pork products.
The Marine Division uses the trade name Seaboard Marine which
is also a registered trademark. Seaboard believes there is
significant recognition of the Seaboard Mariner 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 13 percent of its revenues from a few
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
2009. 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 publications by
Successful Farming and Informa Economics, 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.
6
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.
(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 item
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, 2007, Seaboard, excluding non-consolidated
foreign affiliates, had 10,663 employees, of whom 5,622 were
employed in the United States. Approximately 2,000 employees
in Seaboard's Pork Division were covered by collective
bargaining agreements as of December 31, 2007. Seaboard
considers its employee relations to be satisfactory.
(d) Financial Information about Geographic Areas
In addition to the narrative disclosure provided below, the
financial information relating to export sales required by Item 1
of Form 10-K is incorporated herein by reference to Note 13 of
Seaboard's Consolidated Financial Statements appearing on pages 56
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 Angola, Democratic Republic of Congo, 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. As a result of recent presidential elections,
Kenya is presently experiencing an increase in civil strife and
unrest in certain parts of the country where Seaboard operates but,
to date, this has not had any negative 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 100 F Street N.E., Washington, D.C. 20549. The public
may obtain further information concerning the public reference room
and any applicable copy charges, as well as the process of
obtaining copies of filed documents by calling the Commission at 1-
800-SEC-0330.
The Commission maintains an internet website that contains reports,
proxy and information statements, and other information regarding
electronic filers at www.sec.gov. Seaboard provides access to its
most recent Form 10-K, 10-Q and 8-K reports, and any amendments to
these reports, on its internet website, www.seaboardcorp.com, free
of charge, as soon as reasonably practicable after those reports
are electronically filed with the 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 has identified important risks and uncertainties that
could affect the results of operations, financial condition or
business and that could cause them to differ materially from
Seaboard's historical results of operations, financial condition or
business, or those contemplated by forward-looking statements made
herein or elsewhere, by, or on behalf of, Seaboard. Factors that
could cause or contribute to such differences include, but are not
limited to, those factors described below.
(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;
- different legal and regulatory structures and unexpected
changes in legal and regulatory requirements; and
- 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
(71.8%) 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. The
recent increase in construction of ethanol plants has elevated this
risk as it has increased the competing demand for feed ingredients,
primarily corn. Similarly, accounting for approximately 20% 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 Obtain Appropriate Personnel at Remote
Locations is Important to Seaboard's Business. The remote
locations of the pork processing plant and live hog operations, the
lack of immigration reform 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. These organisms 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 organisms are not eliminated at the
further processing, foodservice or consumer level. Even an
inadvertent shipment of contaminated products is a violation of law
and may lead to increased risk of exposure to product liability
claims, product recalls and increased scrutiny by federal and state
regulatory agencies and may have a material adverse effect on
Seaboard's business, reputation, prospects, results of operations
and financial condition.
(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
9
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.
(10) Discontinuation of Tax Credits for Biodiesel Could
Adversely Affect Seaboard's Results of Operations. Seaboard
will obtain Federal and State tax credits for the biodiesel it
produces and sells. The Federal tax credit is scheduled to
be discontinued after 2008, and if not renewed could adversely
affect Seaboard's results of operations.
(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. 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) This Segment Uses a Material Amount of Derivative Products to
Manage Certain Market Risks. The commodity trading portion of the
business enters into various commodity derivatives, foreign
exchange derivatives and freight derivatives to create what
management believes is an economic hedge for commodity trades it
executes or intends to execute with its customers. From time to
time, this portion of the business may enter into speculative
derivative transactions related to its market risks. Failure to
execute or improper execution of a derivative position or a firmly
committed sale or purchase contract, a speculative transaction that
closes without the desired result or exposure to counter party risk
could have an adverse impact on the results of operations and
liquidity.
(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.
(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
10
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. Accordingly, entering into long-term charter hire
contracts during periods of decreasing charter hire costs or short
term charter hire contracts during periods of increasing charter
hire costs could have an adverse effect on Seaboard's results of
operation.
(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. 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, which
could have an adverse effect on our results of operations.
(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 domestic
and international 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
or detention of its vessels.
(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 and alcohol production facility in Argentina, locally
growing a substantial portion of the sugar cane processed at the
mill. In addition, this segment also grows oranges in Argentina.
The majority of the sales are within Argentina. Fluctuations in
economic conditions or changes in the Argentine political climate
can have an impact on the costs of operations, the sale price of
products and export opportunities. 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, the Argentine government attempts to control inflation
through price controls on commodities, including sugar, which could
adversely impact the local sales price of sugar and the results of
operations for this segment.
(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
11
and the marketing of agricultural products. Of these risks, weather
particularly can adversely 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 which would limit our profitability in
this business. The government has the ability to arbitrarily
decide which power units will be able to operate, which could have
adverse effects on results of operations.
(2) Increases in Fuel Costs Could Adversely Affect Seaboard's
Operating Margins. Fuel is the largest cost component of this
segment's business and, therefore, margins may be adversely
affected by fluctuations in fuel if such increases can not be fully
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 16,800 hogs and generally
operates at capacity with additional weekend shifts depending on
market conditions. The plant is utilized at near capacity
throughout the year. The Pork segment is making modifications to
this facility that will increase daily double shift capacity from
approximately 16,800 hogs to 18,500 hogs in 2008. Seaboard's hog
production operations consist of the breeding and raising of
approximately 4.0 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. The Pork segment is constructing a processing plant
in Guymon, Oklahoma with the capacity to produce 30.0 million
gallons of biodiesel annually, which will be produced from third
party animal fat, vegetable oil and/or pork fat from Seaboard's
Guymon pork processing plant. Construction is expected to be
completed in the first quarter of 2008.
Seaboard's Pork Division also owns two bacon further 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
and related agribusiness operations in 14 countries which have the
capacity to mill approximately 7,700 metric tons of wheat and maize
per day. In addition, Seaboard has feed mill capacity of in excess
of 128 metric tons per hour to produce formula animal feed. The
milling operations located in Colombia, 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 on which the mills are located on
is leased under long-term agreements; and, in Madagascar the
milling facilities are leased. Certain foreign milling operations
may operate at less than full capacity due to low demand related to
poor consumer purchasing power, excess milling capacity in their
competitive environment and European-subsidized wheat and flour
exports. Seaboard also owns seven 9,000 metric-ton deadweight dry
bulk carriers, one 23,400 metric ton deadweight dry bulk carrier,
and "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 short-term agreements, between four and
27 bulk carrier ocean vessels with deadweights ranging from 4,000
to 64,000 metric tons.
12
(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 approximately 690,000 square
feet for cargo storage. At December 31, 2007, Seaboard owned 12
ocean cargo vessels with deadweights ranging from 2,600 to 19,500
metric tons and time chartered under contracts ranging from one to
three years, approximately 26 containerized ocean cargo vessels
with deadweights ranging from 3,400 to 21,800 metric tons. In
addition, Seaboard has one vessel with a deadweight of 4,800 metric
tons under contract with a term under one year. Seaboard also owns
or leases an aggregate of approximately 48,000 dry, refrigerated
and specialized containers and units of related equipment.
(4) Sugar and Citrus - Seaboard's Argentine Sugar and Citrus
Division owns more than 60,000 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
230,000 metric tons of sugar and approximately four million gallons
of alcohol 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. During 2008, it is anticipated construction will be
completed on the alcohol distillery operation to increase the
alcohol production capacity to approximately 13 million gallons per
year. 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 400,000 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. At times during early
2007 and throughout 2006, Seaboard's power production was
restricted by the regulatory authorities in the Dominican Republic.
The regulatory body schedules production based on the amount of
funds available to pay for the power produced and the relative
costs of the power produced. Seaboard operates as an independent
power producer. Seaboard is not directly involved in the
transmission and distribution facilities that deliver the power to
the end users but does have contracts to sell directly to third
party 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
The information required by Item 3 of Form 10-K is incorporated
herein by reference to Note 11 of Seaboard's Consolidated Financial
Statements appearing on page 53 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 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, executive officers
are elected at the annual meeting of the Board of Directors
following the Annual Meeting of Stockholders and hold office until
the next such annual meeting or until their respective successors
are duly chosen and qualified. There are no arrangements or
understandings pursuant to which any executive officer was elected.
13
Name (Age) Positions and Offices with Registrant and Affiliates
Steven J. Bresky (54) President and Chief Executive Officer
Robert L. Steer (48) Senior Vice President, Chief Financial Officer
David M. Becker (46) Vice President, General Counsel and Secretary
Barry E. Gum (41) Vice President, Finance and Treasurer
James L. Gutsch (54) Vice President, Engineering
Ralph L. Moss (62) Vice President, Governmental Affairs
David S. Oswalt (40) Vice President, Taxation and Business Development
John A. Virgo (47) Vice President, Corporate Controller and
Chief Accounting Officer
Rodney K. Brenneman (43) President, Seaboard Foods, LP
David M. Dannov (46) President, Seaboard Overseas and Trading Group
Edward A. Gonzalez (42) President, Seaboard Marine Ltd.
Mr. Steven J. Bresky has served as President and Chief Executive
Officer since July 2006 and previously as Senior Vice President,
International Operations of Seaboard from February 2001 to July
2006.
Mr. Steer has served as Senior Vice President, Chief Financial
Officer of Seaboard since December 2006 and previously as Senior
Vice President, Treasurer and Chief Financial Officer from 2001-
2006.
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.
Mr. Gum has served as Vice President, Finance and Treasurer of
Seaboard since December 2006, previously as Vice President, Finance
from 2003-2006 and 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.
Mr. Dannov has served as President of Seaboard Overseas and Trading
Group since August 2006 and previously as Vice President, Treasurer
of Seaboard Overseas and Trading Group from 1996 to 2006.
Mr. Gonzalez has served as President of Seaboard Marine, Ltd. since
January 2005 and previously as Vice President of Terminal
Operations of Seaboard Marine Ltd. from 2000 to 2005.
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 47 and 48
of the Seaboard Corporation Annual Report to Stockholders furnished
to the Commission
14
pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this Report
(which discussion is incorporated herein by reference), 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.
The following table sets forth information concerning any 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.
Purchases of Equity Securities by the Issuer and Affiliated
Purchasers
Issuer Purchases of Equity Securities
Total Approximate
Number Dollar
of Shares Value of
Purchased Shares
as Part that May
of Yet Be
Total Average Publicly Purchased
Number of Price Announced Under the
Shares Paid per Plans or Plans or
Period Purchased Share Programs Programs
September 30 to October 31, 2007 - n/a n/a $32,159,314
November 1 to November 30, 2007 3,344 $1,480.92 3,344 $27,207,127
December 1 to December 31, 2007 5,102 $1,508.42 5,102 $19,511,158
Total 8,446 $1,497.53 8,446 $19,511,158
All purchases during the quarter were made under the authorization
from our Board of Directors announced on August 8, 2007 to
purchase up to $50 million of shares of Seaboard common stock. An
expiration date of August 31, 2009 has been specified for this
authorization. All purchases were made through open-market
purchases and all the repurchased shares have been retired.
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," (b) the dividends per common share information and market
price range per common share information under "Quarterly Financial
Data" and (c) the information under "Company Performance Graph"
appearing on pages 60, 9 and 8, 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 7 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
10 through 26 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.
15
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 pages 37
and 38 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
24 through 26 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 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 9 and pages 28 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, 2007, 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 rule 13a - 15(e). Based upon and as of the
date of that evaluation, Seaboard's chief executive and chief
financial officers concluded that Seaboard's disclosure controls
and procedures were effective to ensure that information required
to be disclosed in the reports it files and submits under the
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 of Form 10-K concerning
management's report on Seaboard's internal control over financial
reporting, as defined in Exchange Act rule 13a-15(f) is
incorporated herein by reference to Seaboard's "Management's Report
on Internal Control over Financial Reporting" appearing on page 27
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.
Registered Public Accounting Firm's Attestation Report -
Information required by Item 9A of Form 10-K with respect to the
registered public accounting firm's attestation report on
Seaboard's internal controls over financial reporting is
incorporated herein by reference to "Report of Independent
Registered Public Accounting Firm" appearing on page 29 of
Seaboard's Annual Report to Stockholders furnished to the
commission pursuant to Rule 14-3(b) and attached as Exhibit 13 to
this report.
Change in Internal Controls - There has been no change in
Seaboard's internal control over financial reporting that occurred
during the fiscal quarter ended December 31, 2007 that has
materially affected, or is reasonably likely to materially affect,
Seaboard's internal control over financial reporting.
Item 9B. Other Information
Not Applicable.
16
PART III
Item 10. Directors, Executive Officers of the Registrant and
Corporate Governance
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. 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 5 of Seaboard's
definitive proxy statement filed pursuant to Regulation 14A for the
2007 annual meeting of Stockholders ("2008 Proxy Statement"), (b)
the disclosure relating to Seaboard's audit committee and "audit
committee financial expert" and its director nomination procedures
under "Board of Directors Information -- Committees of the Board --
Audit Committee" and "Board of Directors Information -- Director
Nominations" appearing on pages 6 and 7 of the 2008 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 25 of the 2008 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 "Board of Directors Information -- Compensation
of Directors" and "Employment Arrangements with Named Executive
Officers" appearing on page 7 and pages 10 and 11 of the 2008 Proxy
Statement, and (b) the disclosure relating to compensation of
executive officers under "Executive Compensation and Other
Information," "Benefit Plans" and "Compensation Committee
Interlocks and Insider Participation," "Compensation Committee
Report" and "Compensation Discussion and Analysis" appearing on
pages 8 and 9, and pages 11 through 22 of the 2008 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 page 4
of the 2008 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and
Director Independence
The information required by Item 13 of Form 10-K is incorporated
herein by reference to the disclosure under "Compensation Committee
Interlocks and Insider Participation" appearing on pages 21 and 22
of the 2008 Proxy Statement, and the disclosure under "Board of
Directors Information - Controlled Corporation" and "Board of
Directors Information - Committees of the Board" appearing on page
6 of the 2008 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 the disclosure under "Item 2 Selection of
Independent Auditors" appearing on pages 22 through 24 of the 2008
Proxy Statement.
17
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 Restated Certificate of Incorporation.
Incorporated herein by reference to Exhibit 3.1 of
Seaboard's Form 10-Q for the quarter ended April 1, 2006.
3.2 Seaboard's By-laws, as amended. Incorporated herein by
reference to Exhibit 3.2 of Seaboard's Form 10-K for
fiscal year ended December 31, 2006.
4.1 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.
4.2 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.
4.3 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.
4.4 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.
4.5 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.
4.6 Seaboard Corporation Credit Agreement dated as of December
3, 2004 ($200,000,000 revolving credit facility expiring
on December 2, 2009). Incorporated herein by reference to
Exhibit 4.14 of Seaboard's Form 10-K for fiscal year ended
December 31, 2004.
4.7 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
4.8 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. Incorporated
herein by reference to Exhibit 10.1 of Seaboard's Form 10-
K for fiscal year ended December 31, 2006.
18
10.2* Seaboard Corporation Executive Deferred Compensation
Plan dated December 29, 2005, amending and restating the
Seaboard Corporation Executive Deferred Compensation Plan
dated January 1, 1999. Incorporated herein by reference
to Exhibit 10.3 of Seaboard's Form 10-K for fiscal year
ended December 31, 2006.
10.3* 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.
10.4* 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.
10.5 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.
10.6* 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.
10.7* Seaboard Corporation Executive Officers' Bonus
Policy. Incorporated herein by reference to Exhibit 10.10
of Seaboard's Form 10-K for fiscal year ended December 31,
2006.
10.8* 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.
10.9* 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.
10.10* 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.
10.11* Employment Agreement between Seaboard Corporation and
Edward A. Gonzalez dated July 1, 2005. Incorporated
herein by reference to Exhibit 10.14 of Seaboard's Form 10-
K for fiscal year ended December 31, 2006.
10.12* Seaboard Corporation Nonqualified Deferred
Compensation Plan dated December 29, 2005. Incorporated
herein by reference to Exhibit 10.15 of Seaboard's Form 10-
K for fiscal year ended December 31, 2006.
10.13* Amendment to Employment Agreement between Seaboard
Corporation and Edward A. Gonzalez dated August 8, 2006.
Incorporated herein by reference to Exhibit 10.1 of
Seaboard's Form 10-Q for the quarter ended July 1, 2006.
10.14* Employment Agreement between Seaboard Corporation and
David M. Dannov dated July 1, 2006. Incorporated herein
by reference to Exhibit 10.17 of Seaboard's Form 10-K for
fiscal year ended December 31, 2006.
10.15* Second Amendment to Employment Agreement between
Seaboard Corporation and Edward A. Gonzalez dated January
17, 2007. Incorporated herein by reference to Exhibit
10.18 of Seaboard's Form 10-K for fiscal year ended
December 31, 2006.
13 Sections of Annual Report to security holders specifically
incorporated herein by reference herein.
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.
19
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.
20
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/Steven J. Bresky By /s/Robert L. Steer
Steven J. Bresky, President and Robert L. Steer,
Chief Executive Officer Senior Vice President,
(principal executive officer) Chief Financial Officer
(principal financial officer)
Date: February 28, 2008 Date: February 28, 2008
By /s/John A. Virgo
John A. Virgo, Vice President, Corporate
Controller and Chief Accounting Officer
(principal accounting officer)
Date: February 28, 2008
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/Steven J. Bresky By /s/Kevin M. Kennedy
Steven J. Bresky, Director and Kevin M. Kennedy, Director
Chairman of the Board
Date: February 28, 2008 Date: February 28, 2008
By /s/David A. Adamsen By /s/Joseph E. Rodrigues
David A. Adamsen, Director Joseph E. Rodrigues, Director
Date: February 28, 2008 Date: February 28, 2008
By /s/Douglas W. Baena
Douglas W. Baena, Director
Date: February 28, 2008
21
SEABOARD CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Financial Statements
Stockholders'
Annual Report Page
Report of Independent Registered Public Accounting Firm 28
Consolidated Statement of Earnings for the years
ended December 31, 2007, December 31, 2006 and
December 31, 2005 30
Consolidated Balance Sheets as of December 31, 2007
and December 31, 2006 31
Consolidated Statement of Cash Flows for the years
ended December 31, 2007, December 31, 2006 and
December 31, 2005 32
Consolidated Statement of Changes in Equity for the
years ended December 31, 2007, December 31, 2006 and
December 31, 2005 33
Notes to Consolidated Financial Statements 34
The foregoing is 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, 2007, 2006 and 2005 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 February 28, 2008, we reported on the consolidated
balance sheets of Seaboard Corporation and subsidiaries (the
Company) as of December 31, 2007 and 2006, 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, 2007, as contained in the December 31, 2007 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, 2007.
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 February 28, 2008 contains an explanatory
paragraph that states the Company adopted Statement of Financial
Accounting Standards No. 158, Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans, in 2006.
KPMG LLP
Kansas City, Missouri
February 28, 2008
F-2
Schedule II
SEABOARD CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In Thousands)
Balance at Provision Net deductions Balance at
beginning of year (1) (2) end of year
Year ended December 31, 2007:
Allowance for doubtful accounts $14,638 1,401 (7,979) $ 8,060
Year ended December 31, 2006:
Allowance for doubtful accounts $16,155 2,479 (3,996) $14,638
Year ended December 31, 2005:
Allowance for doubtful accounts $14,524 3,987 (2,356) $16,155
(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.
F-3