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Segment Information | 3 Months Ended
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Apr. 02, 2016
Segment Information |
Segment Information | Note 9 – Segment Information Seaboard has six reportable segments: Pork, Commodity Trading and Milling (“CT&M”), Marine, Sugar, Power and Turkey, each offering a specific product or service. Below are segment updates from year-end or that impact prior period financial statements. On February 7, 2016, Seaboard’s Pork segment acquired hog inventory, a feed mill, truck washes and certain hog farms in the Central U.S. from Christensen Farms & Feedlots, Inc. and Christensen Farms Midwest, LLC for total cash consideration of $148 million. Seaboard had previously agreed to provide a portion of the hogs to be processed at the new pork processing facility being developed through STF LLC, as discussed in Note 7 to the Condensed Consolidated Financial Statements. With this purchase, Seaboard will increase its sow herd to meet the majority of such supply commitment for single shift processing at the new plant. Seaboard anticipates buying additional hog inventory and related assets during 2016 to fulfill the remaining amount of such hog supply commitment. The purchase was recorded at fair value in Seaboard’s Pork segment and the allocation of the preliminary purchase price was as follows:
(Millions of dollars) |  |
Inventories |  | $ | 33 |
Property, plant and equipment |  |  | 111 |
Intangible assets |  |  | 1 |
Goodwill |  |  | 3 |
Total consideration transferred |  | $ | 148 |
Intangible assets include customer relationships that have a weighted-average useful life of 1.6 years. Goodwill represents the farms’ established processes, workforce and close proximity to the Sioux City, Iowa, processing plant. Operating results of $20 million in net sales and an immaterial amount of net income have been included in Seaboard’s Condensed Consolidated Financial Statements from the date of acquisition for the three months ended April 2, 2016. Acquisition costs were less than $1 million. The following unaudited pro forma information presents the combined consolidated financial results for Seaboard as if the acquisition had been completed at the beginning of January 1, 2015.
|  | Three months ended |
|  | April 2, |  | April 4, |
(Millions of dollars except per share amounts) |  | 2016 |  | 2015 |
Net sales |  | $ | 1,335 |  | $ | 1,489 |
Net earnings |  | $ | 55 |  | $ | 32 |
Earnings per common share |  | $ | 45.91 |  | $ | 27.25 |
The CT&M segment has a 50% noncontrolling interest in a bakery located in the Democratic Republic of Congo (“DRC”), which began operations in 2012. As a result of continuing equipment problems, other production challenges and unfavorable local market conditions causing operating losses and challenges in gaining market share, Seaboard’s management determined achieving improved operating results would take significantly longer than initially anticipated, and determined there was a decline in value considered other than temporary as of December 31, 2014. Seaboard recorded a write-down of $11 million in loss from affiliate in the fourth quarter of 2014, which represented the remaining equity investment in this business. There was no tax benefit from this transaction. As part of its original investment, Seaboard has an interest bearing long-term note receivable from this affiliate with the first payment due June 2015 and a maturity date of December 2020. No payments have been received, and Seaboard agreed to temporarily waive this default to allow time to work with the business management and its other owners on revisions to the payment schedule to better align with the bakery’s forecasted cash flows. As of April 2, 2016, the recorded balance of this note receivable and previous accrued interest was $35 million, all classified as long-term given uncertainty of the timing of payments in the future. On April 11, 2016, Seaboard reached an agreement with the other owners to restructure this note receivable by extending the maturity 18 months to June 1, 2022 and changing the bi-annual payments to monthly payments of varying amounts beginning December 1, 2016. Based on cash flow projections of the bakery and a discounted cash flow analysis based on the terms of the note receivable, Seaboard recognized no impairment as of April 2, 2016. If the future long-term cash flows of this bakery do not improve and forecasted cash flow projections are not met, some of the recorded value of the note receivable from affiliate could be deemed uncollectible in the future, which may result in a material charge to earnings. Including this business, as of April 2, 2016, Seaboard had a total of $61 million of investments in, advances to and notes receivable from all of its affiliates in the DRC, which represent the single largest foreign country risk exposure of Seaboard’s equity method investments. One of the other affiliates in the DRC, to which Seaboard sells wheat, is the only supplier of flour to this bakery. Seaboard has a 50% noncontrolling equity interest in a flour production business in Brazil. Since September 2013, Seaboard has contributed a total of $50 million in investments and advances, and provided a $13 million long-term loan to this business. Half of the interest on this long-term note receivable from affiliate is payable currently in cash and the other half accrues as pay-in-kind interest. This note receivable matures in September 2020 but can be repaid with Seaboard having the option to convert the note receivable to equity and the other equity holders having the option to match such conversion with a purchase of new shares to avoid dilution. At the time of Seaboard's initial investment in this business, plans included potential future equal additional investments by the owners to improve existing operations and expand operations to improve long-term operating results. During the three months ended April 2, 2016, Seaboard’s advances totaled $1 million and Seaboard recorded losses from affiliate of $1 million related to the advances. Based on discussions with the business’ other 50% shareholder and the executive management of the business, the extent of the losses and revised financial forecast of the business economy, the halting of the construction plans for a new plant and the amount of existing third-party debt, Seaboard previously reserved a total of $22 million related to its advances and long-term note receivable. Third-party debt was $19 million and $16 million as of April 2, 2016 and December 31, 2015, respectively. In total, Seaboard’s investment in the business, advances and long-term note receivable are zero as of April 2, 2016. Seaboard has begun the legal process, as allowed per the Shareholders Agreement, to convert its debt to equity and, if successful, Seaboard would obtain control of the business and the entity would become consolidated. However, there is no certainty that Seaboard will successfully be able to obtain control. Seaboard also has a gross receivable due from affiliate related to this business resulting from sales of grain and supplies of $23 million and $17 million as of April 2, 2016 and December 31, 2015, respectively, which Seaboard recorded a reserve of $9 million during 2015 based on an analysis of collectability and working capital. During the first quarter of 2016, Seaboard’s CT&M segment provided a $12 million loan to a Peruvian affiliate. Interest is payable monthly, and the principal is due on August 31, 2017, with no prepayment penalty. Also during the first quarter of 2016, Seaboard invested $7 million of cash and converted its $8 million note receivable to equity for a 36% noncontrolling interest in a holding company that owns a controlling interest in two Haitian start-up projects consisting of a marine terminal operation and a free trade zone development, which includes a planned power plant. The investment is accounted for in the Marine segment using the equity method and reported on a three-month lag. Seaboard’s first proportionate share of income (loss) from affiliates will be recognized in the second quarter of 2016. During the second quarter of 2015, Seaboard’s Power segment invested an additional $10 million in a business operating a 300 megawatt electricity generating facility in the Dominican Republic and changed its method of accounting from a cost method investment to an equity method investment. This change in accounting required Seaboard to present its prior period financial results to reflect the equity method of accounting from the date of the initial investment. Seaboard's portion of the investee’s loss for the three months ended April 4, 2015 was not material. The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball, LLC (“Butterball”). Butterball had total net sales for the three months ended April 2, 2016 and April 4, 2015 of $385 million and $398 million, respectively. For the three months ended April 2, 2016 and April 4, 201 5, Butterball had operating income of $45 million and $43 million, respectively, and net income of $38 million and $32 million respectively. As of April 2, 2016 and December 31, 2015, Butterball had total assets of $1,101 million and $1,087 million, respectively. In connection with its initial investment in Butterball in December 2010, Seaboard provided Butterball with a $100 million unsecured subordinated loan (the “subordinated loan”) with a seven-year maturity and interest of 15% per annum, comprised of 5% payable in cash semi-annually, plus 10% pay-in-kind interest, compounded semi-annually, which accumulates and is paid at maturity. Also in connection with providing the subordinated loan, Seaboard received detachable warrants, which upon exercise for a nominal price, would enable Seaboard to acquire an additional 5% equity interest in Butterball. In January 2016, the interest on the subordinated loan was modified to 10% per annum, payable only in cash semi-annually and the warrants were also modified, whereby Seaboard can exercise these warrants at any time after December 31, 2018 or prior to December 31, 2025 after which time the warrants expire. The following tables set forth specific financial information about each segment as reviewed by Seaboard’s management. Operating income for segment reporting is prepared on the same basis as that used for consolidated operating income. Operating income, along with income or losses from affiliates for the CT&M and Turkey segments, is used as the measure of evaluating segment performance because management does not consider interest, other investment income and income tax expense on a segment basis.
Sales to External Customers: |  | Three Months Ended |
|  | April 2, |  | April 4, |
(Millions of dollars) |  | 2016 |  | 2015 |
Pork |  | $ | 328 |  | $ | 321 |
Commodity Trading and Milling |  |  | 709 |  |  | 820 |
Marine |  |  | 227 |  |  | 237 |
Sugar |  |  | 33 |  |  | 45 |
Power |  |  | 17 |  |  | 25 |
All Other |  |  | 5 |  |  | 4 |
Segment/Consolidated Totals |  | $ | 1,319 |  | $ | 1,452 |
Operating Income (Loss): |  | Three Months Ended |
|  | April 2, |  | April 4, |
(Millions of dollars) |  | 2016 |  | 2015 |
Pork |  | $ | 29 |  | $ | 16 |
Commodity Trading and Milling |  |  | 9 |  |  | 4 |
Marine |  |  | 3 |  |  | 7 |
Sugar |  |  | — |  |  | 4 |
Power |  |  | — |  |  | 3 |
Segment Totals |  |  | 41 |  |  | 34 |
Corporate |  |  | (5) |  |  | (6) |
Consolidated Totals |  | $ | 36 |  | $ | 28 |
Income (Loss) from Affiliates: |  | Three Months Ended |
|  | April 2, |  | April 4, |
(Millions of dollars) |  | 2016 |  | 2015 |
Pork |  | $ | 3 |  | $ | 2 |
Commodity Trading and Milling |  |  | (4) |  |  | (9) |
Marine |  |  | 1 |  |  | 1 |
Sugar |  |  | 1 |  |  | — |
Power |  |  | 1 |  |  | — |
Turkey |  |  | 20 |  |  | 17 |
Segment/Consolidated Totals |  | $ | 22 |  | $ | 11 |
Total Assets: |  | April 2, |  | December 31, |
(Millions of dollars) |  | 2016 |  | 2015 |
Pork |  | $ | 1,035 |  | $ | 858 |
Commodity Trading and Milling |  |  | 955 |  |  | 988 |
Marine |  |  | 311 |  |  | 296 |
Sugar |  |  | 132 |  |  | 202 |
Power |  |  | 198 |  |  | 271 |
Turkey |  |  | 469 |  |  | 448 |
All Other |  |  | 5 |  |  | 6 |
Segment Totals |  |  | 3,105 |  |  | 3,069 |
Corporate |  |  | 1,291 |  |  | 1,362 |
Consolidated Totals |  | $ | 4,396 |  | $ | 4,431 |
Investments in and Advances to Affiliates: |  | April 2, |  | December 31, |
(Millions of dollars) |  | 2016 |  | 2015 |
Pork |  | $ | 134 |  | $ | 115 |
Commodity Trading and Milling |  |  | 214 |  |  | 218 |
Marine |  |  | 34 |  |  | 19 |
Sugar |  |  | 3 |  |  | 3 |
Power |  |  | 35 |  |  | 34 |
Turkey |  |  | 302 |  |  | 282 |
Segment/Consolidated Totals |  | $ | 722 |  | $ | 671 |
Administrative services provided by the corporate office are allocated to the individual segments and represent corporate services rendered to and costs incurred for each specific segment, with no allocation to individual segments for general corporate management oversight costs. Corporate assets include short-term investments, other current assets related to deferred compensation plans, fixed assets, deferred tax amounts and other miscellaneous items. Corporate operating losses represent certain operating costs not specifically allocated to individual segments and include costs related to Seaboard’s deferred compensation plans, which are offset by the effect of the mark-to-market adjustments on these investments recorded in other investment income (loss), net.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8981-108599 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9038-108599 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 33 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8971-108599 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 12 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8595-108599 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8380-108599 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8984-108599 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9031-108599 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e9054-108599 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8538-108599 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 29 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8864-108599 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8924-108599 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 30 -URI http://asc.fasb.org/extlink&oid=51669610&loc=d3e8906-108599 + Details
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