Back to GetFilings.com
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 2003
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)
(Registrant's telephone number, including area code) (913) 676-8800
Not Applicable
(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 by a check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)
Yes X . No .
There were 1,255,053.90 shares of common stock, $1.00 par
value per share, outstanding on April 25, 2003.
Total pages in filing - 19 pages
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Thousands of dollars)
(Unaudited)
March 29, December 31,
2003 2002
Assets
Current assets:
Cash and cash equivalents $ 28,503 $ 23,242
Short-term investments 42,562 30,337
Receivables, net 184,653 201,792
Inventories 240,846 243,949
Deferred income taxes 18,247 15,481
Other current assets 41,184 42,896
Total current assets 555,995 557,697
Investments in and advances to foreign affiliates 83,173 83,855
Net property, plant and equipment 622,666 621,593
Other assets 16,286 17,996
Total assets $1,278,120 $1,281,141
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable to banks $ 74,371 $ 76,112
Current maturities of long-term debt 55,938 55,869
Accounts payable 54,648 67,464
Other current liabilities 152,620 156,917
Total current liabilities 337,577 356,362
Long-term debt, less current maturities 318,176 318,746
Deferred income taxes 74,077 71,509
Other liabilities 47,406 40,639
Total non-current and deferred liabilities 439,659 430,894
Minority interest 5,806 7,154
Stockholders' equity:
Common stock of $1 par value,
Authorized 4,000,000 shares;
issued and outstanding 1,255,054 shares 1,255 1,255
Accumulated other comprehensive loss (60,711) (67,284)
Retained earnings 554,534 552,760
Total stockholders' equity 495,078 486,731
Total liabilities and stockholders' equity $1,278,120 $1,281,141
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Thousands of dollars except per share amounts)
(Unaudited)
Three Months Ended
March 29, March 30,
2003 2002
Net sales $ 461,867 $ 442,923
Cost of sales and operating expenses 426,518 399,837
Gross income 35,349 43,086
Selling, general and administrative expenses 27,375 26,332
Operating income 7,974 16,754
Other income (expense):
Interest expense (6,821) (5,451)
Interest income 742 1,675
Loss from foreign affiliates (3,291) (4,945)
Minority interest (253) (177)
Foreign currency loss, net (1,370) (5,414)
Miscellaneous, net 2,208 1,308
Total other income (expense), net (8,785) (13,004)
Earnings (loss) before income taxes and cumulative
effect of changes in accounting principles (811) 3,750
Income tax expense (122) (2,027)
Earnings (loss) before cumulative effect of changes
in accounting principles (933) 1,723
Cumulative effect of changes in accounting for asset
retirement obligations and drydock accruals,
net of income tax expense of $550 3,648 -
Net earnings $ 2,715 $ 1,723
Net earnings per common share:
Earnings per share before cumulative effect of
changes in accounting principles $ (0.74) $ 1.16
Cumulative effect of changes in accounting for asset
retirement obligations and drydock accruals 2.90 -
Net earnings per common share $ 2.16 $ 1.16
Dividends declared per common share $ 0.75 $ 0.25
Average number of shares outstanding 1,255,054 1,487,520
Pro forma amounts assuming changes in accounting
for asset retirement obligations and drydock
accruals were applied retroactively:
Net earnings (loss) $ (933) $ 2,512
Net earnings (loss) per common share $ (0.74) $ 1.69
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Thousands of dollars)
(Unaudited)
March 29, March 30,
2003 2002
Cash flows from operating activities:
Net earnings $ 2,715 $ 1,723
Adjustments to reconcile net earnings to cash
from operating activities:
Depreciation and amortization 16,414 12,849
Loss from foreign affiliates 3,291 4,945
Foreign currency exchange loss (gain) (2,507) 4,979
Cumulative effect in accounting changes, net (3,648) -
Deferred income taxes (3,309) 1,382
Changes in current assets and liabilities:
Receivables, net of allowance 18,743 (17,481)
Inventories 5,080 (8,600)
Other current assets 1,535 6,969
Current liabilities exclusive of debt (13,024) (11,988)
Other, net 1,850 1,903
Net cash from operating activities 27,140 (3,319)
Cash flows from investing activities:
Purchase of short-term investments (17,880) (32,054)
Proceeds from the sale or maturity of short-term
investments 6,156 65,885
Investments in and advances to foreign affiliates, net 1,474 375
Capital expenditures (10,517) (9,083)
Other, net 1,447 (715)
Net cash from investing activities (19,320) 24,408
Cash flows from financing activities:
Notes payable to banks, net (1,741) 3,009
Principal payments of long-term debt (1,095) (27,607)
Dividends paid (941) (372)
Bond construction fund 396 557
Net cash from financing activities (3,381) (24,413)
Effect of exchange rate change on cash 822 (765)
Net change in cash and cash equivalents 5,261 (4,089)
Cash and cash equivalents at beginning of year 23,242 22,997
Cash and cash equivalents at end of quarter $ 28,503 $ 18,908
See notes to condensed consolidated financial statements.
SEABOARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Note 1 - Accounting Policies and Basis of Presentation
The condensed consolidated financial statements include the accounts
of Seaboard Corporation and its domestic and foreign subsidiaries (the
"Company"). All significant intercompany balances and transactions
have been eliminated in consolidation. The Company's investments in
non-controlled affiliates are accounted for by the equity method. The
unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company
for the year ended December 31, 2002 as filed in its Annual Report on
Form 10-K. The Company's first three quarterly periods include
approximately 13 weekly periods ending on the Saturday closest to the
end of March, June and September. The Company's year-end is
December 31.
The accompanying unaudited condensed consolidated financial statements
include all adjustments (consisting only of normal recurring accruals)
which, in the opinion of management, are necessary for a fair
presentation of financial position, results of operations and cash
flows. Results of operations for interim periods are not necessarily
indicative of results to be expected for a full year.
Interest Rate Exchange Agreements
The Company's interest rate exchange agreements do not qualify as
hedges for accounting purposes. During the quarter ended March 29,
2003 the Company recorded losses of $749,000 related to these swaps
compared to gains of $1,160,000 for the first quarter of 2002. The
gains and losses are included in miscellaneous, net on the Condensed
Consolidated Statements of Earnings and reflect changes in fair market
value, net of interest paid or received. These amounts include net
payments of $1,985,000 and $1,475,000 during 2003 and 2002,
respectively, resulting from the difference between the fixed rate
paid and variable rate received on these contracts.
Supplemental Non-cash Disclosures
As more fully described in Note 2, the volatility of the Argentine
peso has affected the U.S. dollar value of the peso-denominated assets
and liabilities of the Sugar and Citrus segment. The following table
shows the non-cash impact of the change in exchange rates on various
balance sheet categories, as the peso devalued during the first
quarter of 2002 but strengthened during 2003.
Three Months Ended
March 29, March 30,
Increase (Decrease) (thousands of dollars) 2003 2002
Working capital $ 4,285 $(13,005)
Fixed assets 4,330 (28,830)
Other long-term net assets or liabilities 25 (387)
Accounting Changes and New Accounting Standards
Effective January 1, 2003, the Company adopted Statement of Financial
Accounting Standard No. 143 (FAS 143), "Accounting for Asset
Retirement Obligations," which required the Company to record a long-
lived asset and related liability for asset retirement obligation
costs associated with the closure of the hog lagoons it is legally
obligated to close. Accordingly, on January 1, 2003, the Company
recorded the cumulative effect of the change in accounting principle
with a charge to earnings of $2,195,000 ($1,339,000 net of tax), an
increase in fixed assets of $3,221,000, and the recognition of a
liability, discounted to reflect present value, of $5,416,000. The
retirement asset will be amortized over the economic life of the
related asset. The Company currently estimates the accretion of the
liability and amortization of the assets during 2003 will increase
cost of sales by approximately $516,000. The adoption of SFAS 143
decreased operating income by $116,000 and net earnings by $71,000,
or $0.06 per common share, for the three months ended March 29, 2003.
If the Company had adopted SFAS 143 retroactively to January 1, 2002,
operating income, net earnings and net earnings per common share would
have decreased by $116,000, $71,000 and $0.05 per share, respectively,
for the three months ended March 30, 2002.
Through December 31, 2002, costs expected to be incurred during
regularly scheduled drydocking of vessels were accrued ratably prior
to the drydock date. Effective January 1, 2003, the Company changed
its method of accounting for these costs from the accrual method to
the direct-expense method. Under the new accounting method, drydock
maintenance costs are recognized as expense when maintenance services
are performed. The Company believes the newly adopted accounting
principle is preferable in these circumstances because the maintenance
expense is not recorded until the maintenance services are performed
and, accordingly, the direct-expense method eliminates significant
estimates and judgments inherent under the accrual method. As a
result, during the three months ended March 29, 2003, the Company
reversed the balance of the accrued liability for drydock maintenance
as of December 31, 2002 for its Marine, Commodity Trading and Milling,
and Power segments, resulting in an increase in earnings of $6,393,000
($4,987,000 net of related tax expense) as a cumulative effect of a
change in accounting principle. The application of the new accounting
principle increased operating income by $1,008,000 and net earnings by
$747,000, or $0.60 per common share, for the three months ended March
29, 2003. The Company currently estimates the change from accruing in
advance to expensing as incurred will reduce cost of sales by
approximately $700,000 during 2003. If the change in accounting
principle was made retroactively to January 1, 2002, operating income,
net earnings and net earnings per common share would have increased by
$1,199,000, $860,000 and $0.58 per share respectively, for the three
months ended March 30, 2002.
In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest
Entities". FIN 46 applies to an entity if its total equity at risk is
not sufficient to permit the entity to finance its activities without
additional subordinated support or if the equity investors lack
certain characteristics of a controlling financial interest. If an
entity has these characteristics, FIN 46 requires a test to identify
the primary beneficiary based on expected losses and expected returns
associated with the variable interest. The primary beneficiary is
then required to consolidate the entity. The consolidation
requirements apply to all variable interest entities (VIEs) created
after January 31, 2003. The Company must apply the consolidation
requirements for VIEs that existed prior to February 1, 2003 and
remain in existence as of July 1, 2003.
The Company is a party to a master lease program and contract
production agreements (the "Facility Agreements") with limited
liability companies which own certain of the facilities used in
connection with the Company's vertically integrated hog production.
These arrangements are currently accounted for as operating leases.
Under the Facility Agreements, property is generally added for a three-
year, noncancelable term with periodic renewals thereafter. These hog
production facilities produce approximately 20% of the Company owned
hogs processed at the plant. Under the Facility Agreements, the
Company has certain rights to acquire any or all of the properties at
the conclusion of their respective terms at a price which is expected
to reflect estimated fair market value of the property. In the event
the Company does not acquire any property which it has ceased to
lease, the Company has a limited obligation under the Facility
Agreements for any deficiency between the amortized cost of the
property and the price for which it is sold, up to a maximum of 80% to
87% of amortized cost. These facilities are owned by companies
considered to be VIEs in accordance with FIN 46, for which the Company
is deemed to be the primary beneficiary. Accordingly, the Company
will be required to consolidate these entities in the third quarter of
2003 unless changes in the VIEs occur prior to June 30, 2003. At
March 29, 2003, the total amount of unamortized costs representing
fixed asset values was $59,731,000 and the related underlying debt
under these Facility Agreements totaled $57,338,000. The Company is
evaluating various options for these facilities, including purchasing
certain assets from one limited liability company with a value of
$25,305,000 at March 29, 2003, and/or assigning its purchase option
for all of the properties to one or more third parties with which the
Company may enter into production arrangements. As the Company has
not yet determined whether certain VIEs will exist as of July 1, 2003,
management is not yet able to determine the impact of FIN 46 on the
Company's financial position.
Note 2 - Comprehensive Income (Loss)
Components of total comprehensive income (loss), net of related taxes,
are summarized as follows:
Three Months Ended
March 29, March 30,
(Thousands of dollars) 2003 2002
Net earnings $ 2,715 $ 1,723
Other comprehensive income (loss)
net of applicable taxes:
Foreign currency translation adjustment 6,791 (35,080)
Unrealized loss on investments (32) (373)
Net unrealized loss on foreign exchange cash flow hedges (136)
(137)
Amortization of deferred gain on interest rate swaps (50) (50)
Total comprehensive income (loss) $ 9,288 $(33,917)
The components of and changes in accumulated other comprehensive loss
for the three months ended March 29, 2003 are as follows:
Balance Balance
December 31, Period March 29,
(Thousands of dollars) 2002 Change 2003
Foreign currency translation adjustment $(62,555) $ 6,791 $(55,764)
Unrealized gain on investments 118 (32) 86
Unrecognized pension cost (5,799) - (5,799)
Net unrealized loss on cash flow hedges - (136) (136)
Deferred gain on interest rate swaps 952 (50) 902
Accumulated other comprehensive loss $(67,284) $ 6,573 $(60,711)
The foreign currency translation adjustment primarily represents the
effect of the Argentine peso devaluation on the net assets of the
Company's Sugar and Citrus segment as first recorded by the Company in
the fourth quarter of 2001 when the one to one parity with the U.S.
dollar was lifted. Since that time, the peso has devalued
approximately 69%. As of March 29, 2003, the Company had $54,913,000
in net assets denominated in Argentine pesos which have been revalued
through the foreign currency translation adjustment. In addition, the
Company had $19,760,000 of dollar denominated net liabilities which
are first revalued to the peso currency through earnings. During the
first quarter of 2003, the strengthening of the peso increased total
stockholders' equity by $7,028,000 including an earnings increase of
$1,042,000 for the dollar denominated net liabilities, and a positive
translation adjustment of $5,986,000 included as a component of other
comprehensive income. During the first quarter of 2002, the
devaluation of the peso reduced total stockholders' equity by
$40,046,000 including a $4,979,000 reduction in earnings for the
dollar denominated net liabilities and a negative translation
adjustment of $35,067,000 included as a component of other
comprehensive loss. Until the second quarter of 2002, no tax benefit
was provided related to the reduction to stockholders' equity.
However, after a series of transactions was completed which changed
the organizational structure of the Company's Sugar and Citrus
segment, income tax benefits have been provided at a 35% rate.
The unrecognized pension cost is calculated and adjusted annually
during the fourth quarter. With the exception of the foreign currency
translation loss discussed above, income taxes for components of
accumulated other comprehensive loss were recorded using a 39%
effective tax rate.
Note 3 - Inventories
The following is a summary of inventories at March 29, 2003 and
December 31, 2002 (in thousands):
March 29, December 31,
2003 2002
At lower of LIFO cost or market:
Live hogs & materials $135,430 $129,386
Dressed pork & materials 29,082 21,198
164,512 150,584
LIFO allowance (12,683) (11,422)
Total inventories at lower of LIFO
cost or market 151,829 139,162
At lower of FIFO cost or market:
Grain, flour and feed 64,020 80,618
Sugar produced & in process 9,694 9,929
Other 15,303 14,240
Total inventories at lower of FIFO
cost or market 89,017 104,787
Total inventories $240,846 $243,949
Note 4 - Contingencies
In early 2003, individual bills (the Bills) were introduced in the
United States Senate and House of Representatives which include a
provision to prohibit meat packers, such as the Company, from owning
or controlling livestock intended for slaughter. The Bills also
contain a transition rule applicable to packers of pork providing for
an effective date which is 18 months after enactment. Similar
language was passed by the U.S. Senate in 2002 as part of the Senate's
version of the Farm Bill, but was eventually dropped in conference
committee and was not part of the final Farm Bill.
If any of the Bills containing the proposed language become law, it
could have a material adverse effect on the Company, its operations
and its strategy of vertical integration in the pork business.
Currently, the Company owns and operates production facilities and
owns swine and produces over three million hogs per year. If passed
in their current form, the Bills would prohibit the Company from
owning or controlling hogs, and thus would require the Company to
divest these operations, possibly at prices which are below the
carrying value of such assets on the Company's balance sheet, or
otherwise restructure its ownership and operation. At March 29, 2003,
the Company had $371,022,000 in hog production facilities classified
as net fixed assets on the Consolidated Balance Sheet and
approximately $59,731,000 in hog production facilities under master
lease agreements accounted for as operating leases. In addition, the
Company has $135,430,000 invested in live hogs and related materials
classified as inventory on the Consolidated Balance Sheet.
The Bills could also be construed as prohibiting or restricting the
Company from engaging in various contractual arrangements with third
party hog producers, such as traditional contract finishing
arrangements. Accordingly, the Company's ability to contract for the
supply of hogs to its processing facility could be significantly,
negatively impacted. At March 29, 2003, the Company had approximately
$69,954,000 in commitments through 2017 for various grower finishing
agreements.
The Company, along with industry groups and other similarly situated
companies, are vigorously lobbying against enactment of any such
legislation. However, the ultimate outcome is not presently
determinable.
The Company is a defendant in a pending arbitration proceeding and
related litigation in Puerto Rico brought by the owner of a chartered
barge and tug which were damaged by fire after delivery of the cargo.
Damages of $47.6 million are alleged. The Company received a ruling
in the arbitration proceeding in its favor which dismisses the
principal theory of recovery and that ruling has been upheld on
appeal. The arbitration is continuing based on other legal theories,
although the Company believes that it will have no responsibility for
the loss.
The Company has reached an agreement to settle litigation brought by
the Sierra Club, subject to court approval. Under the terms of the
settlement, the Company will conduct an investigation at three farms
and potentially will be required to take remedial actions at the farms
if conditions so warrant.
The Company is subject to regulatory actions and an investigation by
the United States Environmental Protection Agency and the State of
Oklahoma. In the opinion of Management, the above action and
investigation are not expected to result in a material adverse effect
on the consolidated financial statements of the Company.
The Company is subject to various other legal proceedings related to
the normal conduct of its business, including various environmental
related actions. In the opinion of management, none of these actions
is expected to result in a judgment having a materially adverse effect
on the consolidated financial statements of the Company.
Certain of the Company's nonconsolidated affiliates and third party
contractors who perform services for the Company have bank debt
supporting their underlying operations. From time to time, the
Company will provide guarantees of that debt allowing a lower
borrowing rate or facilitating third party financing in order to
further the Company's business objectives. The Company does not issue
guarantees for compensation. The following table sets forth the terms
of guarantees of third party and nonconsolidated affiliate bank
indebtedness outstanding at March 29, 2003.
Guarantee beneficiary Maximum exposure Maturity
Foreign affiliate grain processor - Kenya $1,300,000 2003
Various hog contract growers $1,585,000 2003
The Company's guarantees of the various hog contract growers renew
annually through 2013 and 2014 until the related debt matures.
The Company's Sugar and Citrus segment has agreed to commercialize
certain sugar product for a third party under a contract expiring in
2008. In the event the Company does not perform under the contract,
it would be responsible to make payments to the third party of a
maximum of $1,000,000 for 2003, decreasing annually to $200,000
through 2008.
As of March 29, 2003, the Company had outstanding $15,048,000 of
standby letters of credit (LCs) with various banks mostly to
facilitate operations of consolidated subsidiaries. Of these LCs,
$8,755,000 also reduced available borrowing capacity under the
Company's credit lines. Also included in this amount is an LC issued
to facilitate bank borrowing of the Company's Bulgarian wine affiliate
totaling 1,431,000 Euros (approximately $1,545,000). As of March 29,
2003, this affiliate's borrowings totaled EU 937,500 (approximately
$1,012,500). This affiliate has pledged inventory with a value of
approximately $3,900,000 as collateral for the LC. Because the value
of the inventory serving as collateral for the LC is considerably more
than the balance of the related debt, the Company has determined the
fair value of this LC to be immaterial.
Note 5 - Segment Information
The following tables set forth specific financial information about
each segment as reviewed by the Company's management. Operating
income for segment reporting is prepared on the same basis as that
used for consolidated operating income. Operating income, along with
losses from foreign affiliates for the Commodity Trading and Milling
Division, is used as the measure of evaluating segment performance
because management does not consider interest and income tax expense
on a segment basis.
Management ceased its shrimp, pickle and pepper farming operations in
Honduras in the fourth quarter of 2001 and has been considering
various strategic alternatives for the Produce Division. In
February 2003, the Company signed a letter of intent with a local
Honduran shrimp farmer for the sale of shrimp farming and shrimp
processing assets for $3,900,000. As a substantial portion of the
sale price is expected to be in the form of a long-term note
receivable from the buyer, the Company will use the cost recovery
method of accounting, and no gain will be recognized by the Company
until the actual cash is collected. The sale is expected to be
completed during the second quarter of 2003. In addition, certain
pickle and pepper farming assets are leased to local farmers. Based
on an impairment evaluation as of December 31, 2002, management
believes the remaining carrying value of these assets is recoverable.
As of March 29, 2002, the carrying value of these farming assets was
$968,000 which is included with All Other in the total assets table
below.
The Bulgarian wine business (the Business) has negotiated an extension
of principal payment due dates and revised payment terms through May
2003, after it was unable to make scheduled principal payments to a
bank. The terms of the extension, among other provisions, requires
the Business to repay the majority of the principal balance plus
accrued interest by May 22, 2003 and the bank will forgive a portion
of the debt upon achievement of certain terms and conditions. In the
event the Business does not obtain external financing to make this
payment, the impact on the Business and its financial condition is
likely to impair the value of its assets, and its ability to continue
to operate without pursuing bankruptcy protection. At December 31,
2002, the Business evaluated the recoverability of its long-lived
assets based on projected future cash flows and accordingly, the
Company believes there is not an other than temporary decline in value
of its investment, pending the resolution of negotiations for
additional financing. As of March 29, 2003, the Company's investments
in and advances to the Business totaled $18,984,000. The Company's
share of losses from the Business is included with All Other in the
loss from foreign affiliates table below.
Sales to External Customers:
Three Months Ended
March 29, March 30,
(Thousands of dollars) 2003 2002
Pork $ 153,926 $ 171,058
Commodity Trading and Milling 177,775 147,538
Marine 92,286 90,815
Sugar and Citrus 12,772 14,699
Power 17,624 12,212
All Other 7,484 6,601
Segment/Consolidated Totals $ 461,867 $ 442,923
Operating Income:
Three Months Ended
March 29, March 30,
(Thousands of dollars) 2003 2002
Pork $ (1,445) $ 2,517
Commodity Trading and Milling 3,394 6,749
Marine (951) 3,613
Sugar and Citrus 4,462 3,135
Power 2,465 1,625
All Other 787 (514)
Segment Totals 8,712 17,125
Corporate Items (738) (371)
Consolidated Totals $ 7,974 $ 16,754
Loss from Foreign Affiliates:
Three Months Ended
March 29, March 30,
(Thousands of dollars) 2003 2002
Commodity Trading and Milling $ (1,700) $ (1,227)
All Other (1,591) (3,718)
Segment/Consolidated Totals $ (3,291) $(4,945)
Total Assets:
March 29, December 31,
(Thousands of dollars) 2003 2002
Pork $ 639,510 $ 627,937
Commodity Trading and Milling 226,701 239,187
Marine 116,366 117,366
Sugar and Citrus 80,538 69,515
Power 79,144 73,872
All Other 14,433 15,971
Segment Totals 1,156,692 1,143,848
Corporate Items 121,428 137,293
Consolidated Totals $1,278,120 $1,281,141
Administrative services provided by the corporate office are primarily
allocated to the individual segments based on the size and nature of
their operations. Corporate assets include short-term investments,
certain investments in and advances to foreign affiliates, fixed
assets, deferred tax amounts and other miscellaneous items. Corporate
operating losses represent certain operating costs not specifically
allocated to individual segments.
Note 6 - Subsequent Event
In April 2003, the Company received $4,446,000 from a settlement of
antitrust litigation arising out of purchases by the Company of
methionine, a feed additive used by the Company. This amount will be
recorded in earnings in the second quarter of 2003. The Company had
previously received $1,928,000 in February 2003 from a similar
settlement, which was reflected in other income in the first quarter
of 2003. The April 2003 settlement concludes all antitrust litigation
related to methionine.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments increased $17.5 million primarily from
a decrease in outstanding receivables. Cash from operating activities
for the three months ended March 29, 2003, increased $30.5 million
compared to the same period one year earlier. The increase in cash
flows was primarily related to changes in the components of working
capital. Changes in components of working capital primarily reflect
the timing of normal transactions for voyage settlements and changes
in receivable balances. Within the Commodity Trading and Milling
segment, the timing of the voyage settlements contributed to higher
year-end inventory levels which were reduced during the first quarter
of 2003 compared to increased inventory levels during the first
quarter of 2002.
Cash from investing activities for the three months ended
March 29, 2003, decreased $43.7 million compared to the same period
one year earlier. The decrease primarily reflects the first quarter
2003 net purchases of short-term investments compared to net sales of
investments in the first quarter of 2002. Short-term investment
proceeds in 2002 were primarily used to pay off the Company's maturing
revolving credit facility.
The Company invested $10.5 million in property, plant and equipment
for the three months ended March 29, 2003, of which $7.5 million was
expended in the Pork segment, $1.5 million in the Marine segment, $1.0
million in the Sugar and Citrus segment, and $0.5 million in other
businesses of the Company.
The Company invested $7.5 million in the Pork segment primarily for
expansion of existing hog production facilities and land acquisition
and permitting activities to support the requirements of a second
processing plant. The Company previously announced plans to build a
second processing plant in northern Texas along with related plans to
expand its vertically integrated hog production facilities. Based on
current financial and market conditions in the pork industry caused by
the oversupply of hogs and pork, the Company is evaluating whether to
continue to develop the project. If the Company pursues this project,
it is also contingent on a number of other factors, including
obtaining financing for the project, obtaining the necessary permits,
commitments for a sufficient quantity of hogs to operate the plant,
and no statutory impediments being imposed. This project would
require extensive capital outlays and financing demands. The current
cost estimates to build the plant are approximately $150.0 million
with an additional $200.0 million for live production facilities for a
total of approximately $350.0 million. If the Company pursues this
project, it may also enter into various contract growing arrangements.
Due to the above uncertainties, management is not able to predict the
ultimate viability or the exact timing of the expansion project.
However, if the Company decides to pursue the project, construction of
the plant would not begin until after 2003. During the remainder of
2003, the Company anticipates spending $4.9 million for activities to
support this Texas project, and $11.7 million to complete the
expansion of existing hog production facilities and upgrade the
existing pork processing plant.
The Company invested $1.5 million in the Marine segment primarily for
facility improvements and the purchase of machinery and equipment.
During the remainder of 2003, the Company anticipates spending
$16.9 million to purchase previously chartered vessels and previously
leased and new equipment.
The Company invested $1.0 million in the Sugar and Citrus segment
primarily for machinery and equipment and improvements to sugarcane
fields. During the remainder of 2003, the Company anticipates
spending $2.7 million for additional improvements.
Excluding the potential Pork expansion plans, management anticipates
the additional 2003 capital expenditures for existing operations will
be financed by internally generated cash or the use of available short-
term investments.
Cash from financing activities for the three months ended March 29,
2003, increased $21.0 million compared to the same period one year
earlier reflecting the $26.7 million payment for the maturing five-
year revolving credit facility in the first quarter of 2002.
During the first quarter of 2003, the Company extended a $20.0 million
revolving credit facility and, for use by a subsidiary in the
Commodity Trading and Milling segment, entered into two new committed
lines for $75.0 million and $5.0 million which are secured by certain
of the Company's commodity trading inventory and accounts receivable.
The new lines include financial covenants for the subsidiary which
require maintenance of certain levels of working capital and net
worth, and limitations on debt to net worth and liabilities to net
worth ratios. As of March 29, 2003, the Company had committed lines
of credit totaling $125.0 million and uncommitted lines totaling $60.0
million. Borrowings outstanding under committed and uncommitted lines
as of March 29, 2003 totaled $53.4 million and $21.0 million,
respectively. As of March 29, 2003, standby letters of credit of $8.8
million reduced the Company's borrowing capacity.
The Company is a party to a master lease program and contract
production agreements (the "Facility Agreements") with limited
liability companies which own certain of the facilities that are used
in connection with the Company's vertically integrated hog production.
These arrangements are currently accounted for as operating leases.
These hog production facilities produce approximately 20% of the
Company-owned hogs processed at the plant. These facilities are owned
by companies considered to be variable interest entities (VIEs), for
which the Company is deemed to be the primary beneficiary. Pursuant
to Financial Accounting Standards Board Interpretation No. 46 (FIN
46), the Company will be required to consolidate these entities in the
third quarter of 2003 unless changes in the VIEs occur prior to
June 30, 2003. At March 29, 2003, the total amount of unamortized
costs representing fixed asset values was approximately $59.7 million
and the related underlying debt within these Facility Agreements
totaled $57.3 million. The Company is evaluating various options for
these facilities, including purchasing certain assets from one limited
liability company with a value of $25.3 million at March 29, 2003,
and/or assigning its purchase option for all of the properties to a
third party with which the Company may enter into production
arrangements. Management believes that it will have sufficient
liquidity and financing capacity to accomplish any of the
alternatives.
In addition to the financing requirement to accommodate the Pork
segment expansion plans and potential financing requirements related
to assets under Facility Agreements discussed above, the Company is
also required to make payments on maturing Senior Notes. Management
believes that the Company's current combination of liquidity, capital
resources and borrowing capabilities will be adequate for its existing
operations during fiscal 2003. Management is evaluating various
alternatives for future financings to provide adequate liquidity for
the Company's future operating and expansion plans. In addition,
management intends to continue seeking opportunities for expansion in
the industries in which it operates.
See Note 4 to the Condensed Consolidated Financial Statements for
additional information with regard to commercial commitments and
contingent obligations.
RESULTS OF OPERATIONS
Net sales for the three months ended March 29, 2003 increased by $18.9
million compared to the three months ended March 30, 2002. Operating
income decreased by $8.8 million compared to the same quarter one year
ago. Results of operations for interim periods are not necessarily
indicative of results to be expected for a full year.
Pork Segment
Three Months Ended
March 29, March 30,
(Dollars in millions) 2003 2002
Net sales $153.9 $171.1
Operating income $ (1.4) $ 2.5
Net sales for the Pork segment decreased $17.2 million in the first
quarter of 2003 compared to the first quarter of 2002 as a result of a
lower pork prices and lower sales volumes. Excess domestic meat
supplies continue to result in lower sales prices compared to the
prior year although prices improved in the first quarter of 2003
compared to the second half of 2002. Lower sales volume resulted from
holding selected production in inventory during the first quarter of
2003 in anticipation of improved market conditions during the
remainder of 2003 compared to 2002.
Operating income for the Pork segment decreased $3.9 million in the
first quarter of 2003 compared to the first quarter of 2002 primarily
as a result of lower sales prices and volumes discussed above and
higher feed costs, partially offset by a decrease in cost of third
party hogs and, to a lesser extent, lower plant processing costs.
While unable to predict future market prices, management expects
overall market conditions to improve during 2003 allowing this segment
to return to positive operating income for 2003. Future results may
also be adversely affected by the proposed packer ban legislation
discussed in Note 4 to the Condensed Consolidated Financial
Statements.
Commodity Trading and Milling Segment
Three Months Ended
March 29, March 30,
(Dollars in millions) 2003 2002
Net sales $177.8 $147.5
Operating income $ 3.4 $ 6.7
Loss from foreign affiliates $ (1.7) $ (1.2)
Net sales for the Commodity Trading and Milling segment increased
$30.3 million in the first quarter of 2003 compared to the first
quarter of 2002. This increase is the result of increased commodity
trading volumes, primarily corn to third party customers, and, to a
lesser extent, increased milling revenues. Milling revenues reflect
improved prices and higher sales volumes primarily as a result of
favorable operating environments in certain foreign locations, which
have allowed mills in those locations to increase production levels.
Operating income for this segment decreased $3.3 million in the first
quarter of 2003 compared to the first quarter of 2002. The decrease
primarily reflects the difference between realized derivative gains
and losses on open commodity contracts between years and, to a lesser
extent, losses from foreign currency forward exchange agreements not
qualifying as hedges for accounting purposes. This decrease was
partially offset by improved margins at certain African milling
locations. While the Company believes its commodity futures and
options are economic hedges of its firm purchase and sales contracts,
the Company does not perform the extensive record-keeping required to
account for commodity transactions as fair value hedges. As a result,
while the derivative contracts have been marked-to-market through cost
of goods sold, the related, offsetting change in market value of the
firm commitments have not been recognized. Operating income for 2003
included realized derivative losses of $0.4 million compared to gains
of $3.2 million during the first quarter of 2002. Due to the
uncertain political and economic conditions in the countries in which
the Company operates, management is unable to predict future sales and
operating results, but anticipates positive operating income to
continue in 2003.
Loss from foreign affiliates increased $0.5 million primarily as a
result of increased losses at a certain African milling operation.
Based on current political and economic situations in the countries
the flour and feed mills operate, management believes losses from
foreign affiliates may continue for the remainder of 2003.
Marine Segment
Three Months Ended
March 29, March 30,
(Dollars in millions) 2003 2002
Net sales $ 92.3 $ 90.8
Operating income $ (1.0) $ 3.6
Net sales for the Marine segment increased $1.5 million in the first
quarter of 2003 compared to the first quarter of 2002. This increase
primarily reflects increased cargo volumes in most existing markets,
certain new routes added during the fourth quarter of 2002, and
military cargo volumes in the middle east. These increases were
partially offset by the significant declines in cargo volumes for
certain South American routes as a result of the political instability
in Venezuela. Commercial activity has not yet recovered from the
general strike that began in December of 2002 and ended in February
2003. Lower average cargo rates also contributed to offset revenue
increases when compared to the prior year.
Operating income for the Marine segment decreased $4.6 million in the
first quarter of 2003 compared to the first quarter of 2002, primarily
reflecting the effects of the political instability and strike in
Venezuela as discussed above, higher fuel costs and, to a lesser
extent, increased bad debt expense. The duration and extent of the
reduced demand, primarily attributable to the political instability
and general strike in Venezuela, will continue to affect future
results as long as shipping demand for the affected South American
routes remains depressed. However, management expects operating
income will be positive for 2003 although continued economic
uncertainties in certain South American routes could continue to
reduce overall profitability.
Sugar and Citrus Segment
Three Months Ended
March 29, March 30,
(Dollars in millions) 2003 2002
Net sales $ 12.8 $ 14.7
Operating income $ 4.5 $ 3.1
The functional currency of the Sugar and Citrus segment is the
Argentine peso. After the Argentine government ended the one peso to
one U.S. dollar parity in January 2002, the peso suffered significant
and on-going devaluation throughout most of 2002. During the first
quarter of 2003, this trend reversed and the peso regained some value.
See Note 2 to the Condensed Consolidated Financial Statements for
further discussion.
Net sales for the Sugar and Citrus segment decreased $1.9 million in
the first quarter of 2003 compared to the first quarter of 2002
reflecting reduced sugar sales volumes, primarily for resale sugar as
a result of lower quantities of sugar purchased from third parties.
The peso price of sugar has increased over the last year to offset the
effects of the devaluation of the peso. Operating income increased
$1.4 million for the first quarter of 2003 compared to the prior year
reflecting the improved sales prices and the lower operating costs in
terms of U.S. dollar resulting from the devalued peso. The peso price
of sugar has increased more than peso costs resulting in higher
operating income. While management is not able to predict future
sugar prices or whether costs will begin to increase more than sugar
prices in the coming months, management expects operating income will
remain positive for 2003.
Power Segment
Three Months Ended
March 29, March 30,
(Dollars in millions) 2003 2002
Net sales $ 17.6 $ 12.2
Operating income $ 2.5 $ 1.6
Net sales for the Power segment increased $5.4 million in the first
quarter of 2003 compared to the first quarter of 2002 reflecting
higher spot market rates. During the first quarter of 2002, market
rates were significantly lower, reflecting, in part, lower average
fuel costs, a component of pricing. Fuel prices have increased
substantially, causing an increase in spot prices.
Operating income increased $0.9 million for the first quarter of 2003
compared to the first quarter of 2002 primarily reflecting the higher
spot market rates. While fuel expense for the 2003 quarter was
significantly higher than the prior year, sales prices increased more
than fuel costs. While management is not able to predict future
market rates, demand for power in the Dominican Republic is expected
to remain strong during 2003. Accordingly, management expects
operating income to remain positive for 2003.
All Other
Three Months Ended
March 29, March 30,
(Dollars in millions) 2003 2002
Net sales $ 7.5 $ 6.6
Operating income (loss) $ 0.8 $ (0.5)
Loss from foreign affiliates $ (1.6) $ (3.7)
Net sales and operating income for all other businesses increased
$0.9 million and $1.3 million, respectively, in the first quarter of
2003 compared to the first quarter of 2002. These improvements
primarily reflect discontinuing certain produce operations in 2002,
discontinuing other small businesses, plus improved results from the
remaining operations of the Produce division. In February 2003,
management signed a letter of intent for the sale of the shrimp
farming and shrimp processing assets and is currently considering
various alternatives for the remaining pickle and pepper farming
assets. Management evaluated the recoverability of the pickle and
pepper farming assets as of December 31, 2002 and currently believes
the remaining carrying value of $1.0 million as of March 29, 2003 is
recoverable. A future impairment charge could be charged, however,
depending on final decisions regarding the alternatives for these
assets.
The loss from foreign affiliates represents the Company's share of
losses from equity method investments in Fjord Seafood ASA (Fjord) and
a Bulgarian wine business. Continued losses from Fjord result from
sustained low world-wide salmon prices although the losses decreased
in the first quarter of 2003 compared to 2002. Although management
cannot predict worldwide salmon prices, losses are expected to
continue through 2003. The Bulgarian wine business (the Business) has
negotiated an extension of principal payment due dates and revised
payment terms through May 2003, after it was unable to make scheduled
principal payments to a bank. The terms of the extension, among other
provisions, requires the Business to repay the majority of the
principal balance plus accrued interest by May 22, 2003 and the bank
will forgive a portion of the debt upon achievement of certain terms
and conditions. In the event the Business does not obtain external
financing to make this payment, the impact on this business and its
financial condition is likely to impair the value of its assets, and
its ability to continue to operate without pursuing bankruptcy
protection. As of March 29, 2003 the Company's investments in and
advances to this business totaled $19.0 million.
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses for the first
quarter of 2003 increased by $1.0 million over the first quarter of
2002 primarily as a result of increased bad debt expense, principally
in the Marine division. As a percentage of revenues, SG&A remained at
5.9% in the first quarter of 2003 consistent with the first quarter of
2002.
Interest Expense
Interest expense increased $1.4 million in the first quarter of 2003
compared to the first quarter of 2002. The increase is primarily the
result of a higher average level of short-term and long-term
borrowings outstanding during the 2003 quarter, partially offset by
lower average interest rates.
Interest Income
Interest income decreased $0.9 million in the first quarter of 2003
compared to the first quarter of 2002 reflecting a lower level of
average funds invested during 2003.
Foreign Currency Losses
Foreign currency losses decreased to $1.4 million for the first
quarter of 2003 compared with $5.4 million for the same period in
2002. The losses during 2003 primarily result from the effects of
recent devaluation of the Dominican Republic peso on peso-denominated
net assets of the Power division, principally customer receivables,
partially offset by the effect of improvements in the Argentine peso
on dollar denominated net liabilities of the Sugar and Citrus segment.
See Note 2 to the Condensed Consolidated Financial Statements for
additional discussion of the Argentine peso devaluation. The Company
operates in many developing countries throughout the world. The
political and economic conditions of these markets cause volatility in
currency exchange rates and expose the Company the risk of exchange
loss.
Miscellaneous, Net
Miscellaneous, net, for the first quarter of 2003 includes a gain of
$1.9 million from a settlement of antitrust litigation arising out of
purchases by the Company of methionine, a feed additive used by the
Company. Miscellaneous, net also includes a loss of $0.7 million
compared to a gain of $1.2 million from interest rate exchange
agreements for the first quarters of 2003 and 2002, respectively.
These swap agreements do not qualify as hedges for accounting purposes
and accordingly, changes in the market value are recorded to earnings
as interest rates change.
Income Tax Expense
The effective tax rate decreased during 2003 compared to 2002
primarily as the result of increased permanently deferred foreign
earnings and lower domestic taxable income.
Other Financial Information
In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities". FIN 46 applies to an entity if its total equity
at risk is not sufficient to permit the entity to finance its
activities without additional subordinated support or if the equity
investors lack certain characteristics of a controlling financial
interest. If an entity has these certain characteristics, FIN 46
requires a test to identify the primary beneficiary based on expected
losses and expected returns associated with the variable interest.
The primary beneficiary is then required to consolidate the entity.
The consolidation requirements apply to all variable interest entities
(VIEs) created after January 31, 2003. The Company must apply the
consolidation requirements for VIEs that existed prior to February 1,
2003 and remain in existence as of July 1, 2003. See Note 1 to the
Condensed Consolidated Financial Statements for the related disclosure
of existing VIEs as of March 29, 2003. As the Company has not yet
determined whether certain VIEs will exist as of July 1, 2003,
management is not yet able to determine the impact of FIN 46 on the
Company's financial position.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to various types of market risks from its day-
to-day operations. Primary market risk exposures result from changing
interest rates, commodity prices and foreign currency exchange rates.
Changes in interest rates impact the cash required to service variable
rate debt. From time to time, the Company uses interest rate swaps to
manage risks of increasing interest rates. Changes in commodity
prices impact the cost of necessary raw materials, finished product
sales and firm sales commitments. The Company uses corn, wheat,
soybeans and soybean meal futures and options to manage certain risks
of increasing prices of raw materials and firm sales commitments.
From time to time, the Company uses hog futures to manage risks of
increasing prices of live hogs acquired for processing. Changes in
foreign currency exchange rates impact the cash paid or received by
the Company on foreign currency denominated receivables and payables.
The Company manages certain of these risks through the use of foreign
currency forward exchange agreements. Changes in the exchange rate
for the Argentine peso affect the valuation of foreign currency
denominated net assets of the Company's Argentine subsidiary and net
earnings for the impact of the change on that subsidiary's dollar
denominated net liabilities. The Company's market risk exposure
related to these items has not changed materially since December 31,
2002.
Item 4. Controls and Procedures
The Company has established a system of controls and other procedures
designed to ensure that information required to be disclosed in its
periodic reports filed under the Securities Exchange Act of 1934, as
amended, is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission's
rules and forms. These disclosure controls and procedures have been
evaluated under the direction of the Company's Chief Executive Officer
and Chief Financial Officer within the last 90 days. Based on such
evaluations, the Chief Executive Officer and Chief Financial Officer
have concluded that the disclosure controls and procedures are
effective. There have been no significant changes in the Company's
system of internal controls or in other factors that could
significantly affect internal controls subsequent to the evaluation by
the Chief Executive Officer and Chief Financial Officer.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
EPA Claims Concerning Farms in Major and Kingfisher County, Oklahoma
The Company is subject to an ongoing Unilateral Administrative Order
(the "RCRA Order") pursuant to Section 7003 of the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Sec. 6973
("RCRA") filed by the Environmental Protection Agency ("EPA") on
June 29, 2001 against Seaboard Farms, Inc., Shawnee Funding, Limited
Partnership, and PIC International Group, Inc. ("PIC") (collectively,
"Respondents"). The RCRA Order alleges that five swine farms located
in Major County and Kingfisher County, Oklahoma purchased from PIC are
causing or could cause contamination of the groundwater. The RCRA
Order alleges that, as a result, Respondents have contributed to an
"imminent and substantial endangerment" within the meaning of RCRA
from the leaking of solid waste in the lagoons or other infrastructure
at the farms. The RCRA Order requires Respondents to develop and
undertake a study to determine if there has been any contamination
from farm infrastructure, and if contamination has occurred, to
develop and undertake a remedial plan. In the event the Respondents
fail to comply with the RCRA Order, the EPA may commence a civil
action and can seek a civil penalty of up to $5,500 per day, per
violation.
The Respondents generally have been complying with the RCRA Order, and
have had significant and ongoing dialogue with EPA to settle the RCRA
Order. However, on April 15, 2003, EPA sent a formal Notice of
Violation letter to the Respondents, alleging that the Respondents
have failed to comply with the RCRA Order because they have not
undertaken an investigation of land on which the Company spreads
effluent originating from the five facilities. The Respondents
believe that the Notice of Violation letter has no merit because the
RCRA Order, by its terms, does not cover these areas, and EPA did not
have jurisdiction to impose the RCRA Order.
The farms that are the subject of the RCRA Order were previously owned
by PIC. PIC is presently providing indemnity and defense of the RCRA
Order (reserving its right to contest the obligation to do so). One
indemnity agreement with PIC is subject to a $5 million limit, but the
Company believes that a more general environmental indemnity agreement
would require indemnification of liability in excess of that amount.
Potential Additional EPA Claims
EPA has been conducting a broad-reaching investigation of Seaboard
Farms, Inc. On March 24, 2003, Seaboard Farms, Inc. received an
additional information request seeking information as to a hog farm
and a feed mill, each located in Colorado. The Company is in the
process of complying with the Information Request. At present, no
relief has been sought by the EPA.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders was held on April 28, 2003 in
Newton, Massachusetts. Two items were submitted to a vote of
stockholders as described in the Company's Proxy Statement dated March
27, 2003. The following table briefly describes the proposals and
results of the stockholders' vote.
Votes in Votes
Favor Against Abstain
1. To elect:
H. Harry Bresky 1,188,081 0 22,488
David A. Adamsen 1,205,270 0 5,299
Douglas W. Baena 1,205,430 0 5,139
Joe E. Rodrigues 1,194,373 0 16,196
and Kevin M. Kennedy 1,205,440 0 5,129
as directors.
2. To ratify selection of KPMG LLP
as independent auditors. 1,204,523 3,632 2,414
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
18 Letter from KPMG LLP regarding change in accounting
principles
99.1 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
99.2 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
(b) Reports on Form 8-K
Seaboard Corporation has not filed any reports on Form 8-K during
the quarter ended March 29, 2003.
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 Report 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 ability to obtain adequate financing
and liquidity, (iii) the price of feed stocks and other materials used
by the Company, (iv) the sale price for pork products from such
operations, (v) the price for the Company's products and services,
(vi) the demand for power and related spot prices in the Dominican
Republic, (vii) the effect of the devaluation of the Argentine peso,
(viii) the effect of changes to the produce division operations on the
consolidated financial statements of the Company, (ix) the potential
effect of the proposed meat packer ban legislation, (x) the effect of
the national strike in Venezuela on the Company's Marine Division,
(xi) the potential effect of the Company's investments in a wine
business and salmon and other seafood business on the consolidated
financial statements of the Company, (xii) the potential impact of
various environmental actions pending or threatened against the
Company or (xiii) 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
without limitation the information under the headings "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," identifies important factors which could cause such
differences.
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 5, 2003
Seaboard Corporation
by: /s/ Robert L. Steer
Robert L. Steer, Senior Vice President,
Treasurer, and Chief Financial Officer
(principal financial officer)
by: /s/ John A. Virgo
John A. Virgo, Corporate Controller
(principal accounting officer)
CERTIFICATIONS
I, H. H. Bresky, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Seaboard
Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 5, 2003
/s/ H. H. Bresky
H. H. Bresky, Chairman of the Board,
President and Chief Executive Officer
I, Robert L. Steer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Seaboard
Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the
periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including
its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which
this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant
changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of
our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: May 5, 2003
/s/ Robert L. Steer
Robert L. Steer, Senior Vice President,
Treasurer and Chief Financial Officer