XML 26 R15.htm IDEA: XBRL DOCUMENT
v3.5.0.2

Segment Information | 9 Months Ended
--- | ---
Oct. 01, 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 September 1, 2016, Seaboard’s Pork segment acquired certain assets of Texas Farm LLC for total cash consideration of $59 million. Texas Farm LLC was a hog growing operation with hog inventory, hog farms and a feed mill located in Texas. The additional hog production will allow Seaboard to expand and realign its hog production in other states to supply the Guymon, Oklahoma, pork processing plant and the Seaboard Triumph Foods processing plant located in Sioux City, Iowa, scheduled to begin operations in mid-2017. The purchase was recorded at fair value in Seaboard’s Pork segment and the allocation of the preliminary purchase price was as follows. Goodwill is primarily attributable to workforce and the benefits of acquiring an existing operation rather than incurring the costs and time to begin a new hog operation.
(Millions of dollars) |  |
Inventories |  | $ | 16 |
Property, plant and equipment |  |  | 42 |
Goodwill |  |  | 3 |
Accounts payable |  |  | (2) |
Total consideration transferred |  | $ | 59 |
Operating results have been included in Seaboard’s Condensed Consolidated Financial Statements from the date of acquisition. There was no material impact to Seaboard’s sales and net earnings as a result of the purchase. Acquisition costs were less than $1 million. During the third quarter of 2016, Seaboard’s Pork segment acquired additional hog inventory and a sow farm for total cash consideration of $7 million. The purchase was recorded at fair value and $1 million and $6 million were allocated to inventories and property, plant and equipment, respectively. No material intangible assets were identified and acquisition costs were less than $1 million. 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 (“Christensen Farms”) 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. The purchase was recorded at fair value in Seaboard’s Pork segment and the allocation of the 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 have been included in Seaboard’s Condensed Consolidated Financial Statements from the date of acquisition. Net sales of $39 million and $93 million and an immaterial amount of net income were recognized during the three and nine months ended October 1, 2016, respectively. Acquisition costs were less than $1 million. With these purchases, Seaboard increased its sow herd to meet the majority of its supply commitment for single shift processing at the new Seaboard Triumph Foods plant. The following unaudited pro forma information presents the combined consolidated financial results for Seaboard as if all three acquisitions had been completed at the beginning of January 1, 2015.
|  | Three months ended |  | Nine months ended |
|  |  | October 1, |  | October 3, | October 1, |  | October 3, |
(Millions of dollars except per share amounts) |  |  | 2016 |  | 2015 | 2016 |  | 2015 |
Net sales |  | $ | 1,344 |  | $ | 1,482 |  | $ | 4,078 |  | $ | 4,495 |
Net earnings |  | $ | 73 |  | $ | — |  | $ | 198 |  | $ | 54 |
Earnings per common share |  | $ | 62.71 |  | $ | 0.02 |  | $ | 169.27 |  | $ | 45.77 |
The CT&M segment has a 50% noncontrolling interest in a bakery located in the Democratic Republic of Congo (“DRC”). 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 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, which was restructured during the second quarter of 2016 to extend the maturity to June 2022 and change the bi-annual payments to monthly payments of varying amounts beginning in the fourth quarter of 2016. In addition to the debt restructuring, certain events occurred during the second quarter, including the bakery’s failure to meet cash flow forecasts due to significant equipment updates that did not accomplish the intended improvement in quality and consistency of the bread, that caused new bakery management to reevaluate the business plan and the production and profitability forecast. As a result, Seaboard reserved $11 million of this note in bad debt expense within selling, general and administrative expenses in the Condensed Consolidated Statements of Comprehensive Income during the second quarter of 2016. There was no tax benefit from this transaction. As of October 1, 2016, the recorded balance of this note was $24 million, all classified as long-term. If the future long-term cash flows of this bakery do not improve, updated forecasted cash flow projections are not met, or scheduled payments are not made, more of the recorded value of the note receivable from affiliate could be deemed uncollectible in the future, which could result in a material charge to earnings. Including this business, as of October 1, 2016, Seaboard had a total of $50 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. The CT&M segment also has a 50% noncontrolling interest in a flour production business in Brazil. Since September 2013, Seaboard has contributed a total of $63 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. Due to the extent of the losses, Seaboard has previously fully reserved all advances and long-term receivable, and as such, Seaboard’s investment in the business, advances and long-term note receivable are zero as of October 1, 2016. Included in the above, Seaboard’s advances totaled $14 million during the nine months ended October 1, 2016. Seaboard recorded income (loss) from affiliate of $2 million and $(10) million for the three and nine months ended October 1, 2016, respectively, and currency translation adjustment losses included in other comprehensive income (loss) of $2 million and $4 million, respectively, as this entity’s functional currency is the Brazilian real. Seaboard also has a gross trade receivable due from affiliate related to this business resulting from sales of grain and supplies of $22 million and $17 million as of October 1, 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. On October 28, 2016, Seaboard reached an agreement with the other shareholder to revise the Shareholders Agreement to restructure the affiliate debt and equity of the business, which resulted in the dilution of the other shareholder’s ownership. No cash consideration was exchanged. As a result of the dilution, Seaboard owns 98% of the voting equity and obtained control of the business. During the fourth quarter of 2016, Seaboard will account for the transaction as a business combination achieved in stages by remeasuring its equity interest to fair value as of the acquisition date and will recognize any gain or loss in earnings. Seaboard will then include the financial results of the business in its consolidated financial statements from the date of acquisition. The business had third-party debt of $13 million and $16 million as of October 1, 2016 and December 31, 2015, respectively. The purchase price allocation was not complete as of the date of the filing pending the valuation of assets acquired and liabilities assumed. During the first quarter of 2016, the CT&M segment provided a $12 million loan to a Peruvian affiliate. The Peruvian affiliate repaid $6 million in the second quarter of 2016 and the remaining $6 million in the third quarter of 2016. Interest was payable monthly and the principal due on August 31, 2017, with no prepayment penalty. 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 was recognized in the second quarter of 2016. During the second quarter of 2015, the 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”). As of October 1, 2016 and December 31, 2015, Butterball had total assets of $1,143 million and $1,087 million, respectively. Butterball’s summarized income statement information is as follows:
|  | Three Months Ended |  | Nine Months Ended |
|  |  | October 1, |  | October 3, |  | October 1, |  | October 3,
(Millions of dollars) |  |  | 2016 |  | 2015 |  | 2016 |  | 2015
Net sales |  | $ | 450 |  | $ | 511 |  | $ | 1,226 |  | $ | 1,299 |
Operating income |  | $ | 27 |  | $ | 69 |  | $ | 116 |  | $ | 163 |
Net income |  | $ | 22 |  | $ | 58 |  | $ | 94 |  | $ | 134 |
In connection with its initial investment in Butterball in December 2010, Seaboard provided Butterball with a $100 million unsecured 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 |  | Nine Months Ended |
|  | October 1, |  | October 3, |  | October 1, |  | October 3, |
(Millions of dollars) |  | 2016 |  | 2015 |  | 2016 |  | 2015 |
Pork |  | $ | 371 |  | $ | 347 |  | $ | 1,058 |  | $ | 999 |
Commodity Trading and Milling |  |  | 673 |  |  | 756 |  |  | 2,089 |  |  | 2,355 |
Marine |  |  | 225 |  |  | 230 |  |  | 684 |  |  | 709 |
Sugar |  |  | 34 |  |  | 49 |  |  | 103 |  |  | 139 |
Power |  |  | 23 |  |  | 25 |  |  | 59 |  |  | 78 |
All Other |  |  | 4 |  |  | 4 |  |  | 13 |  |  | 11 |
Segment/Consolidated Totals |  | $ | 1,330 |  | $ | 1,411 |  | $ | 4,006 |  | $ | 4,291 |
Operating Income (Loss): |  | Three Months Ended |  | Nine Months Ended |
|  | October 1, |  | October 3, |  | October 1, |  | October 3, |
(Millions of dollars) |  | 2016 |  | 2015 |  | 2016 |  | 2015 |
Pork |  | $ | 54 |  | $ | 26 |  | $ | 133 |  | $ | 61 |
Commodity Trading and Milling |  |  | (13) |  |  | (5) |  |  | 15 |  |  | 7 |
Marine |  |  | 9 |  |  | (2) |  |  | 19 |  |  | 10 |
Sugar |  |  | (7) |  |  | 3 |  |  | (5) |  |  | 8 |
Power |  |  | 4 |  |  | 3 |  |  | 6 |  |  | 10 |
All Other |  |  | 1 |  |  | 1 |  |  | 2 |  |  | 1 |
Segment Totals |  |  | 48 |  |  | 26 |  |  | 170 |  |  | 97 |
Corporate |  |  | (6) |  |  | (3) |  |  | (16) |  |  | (14) |
Consolidated Totals |  | $ | 42 |  | $ | 23 |  | $ | 154 |  | $ | 83 |
Income (Loss) from Affiliates: |  | Three Months Ended |  | Nine Months Ended |
|  | October 1, |  | October 3, |  | October 1, |  | October 3, |
(Millions of dollars) |  | 2016 |  | 2015 |  | 2016 |  | 2015 |
Pork |  | $ | 3 |  | $ | 2 |  | $ | 10 |  | $ | 8 |
Commodity Trading and Milling |  |  | 5 |  |  | (19) |  |  | (10) |  |  | (44) |
Marine |  |  | — |  |  | 1 |  |  | 1 |  |  | 2 |
Sugar |  |  | — |  |  | 1 |  |  | 1 |  |  | 1 |
Power |  |  | 2 |  |  | 1 |  |  | 3 |  |  | 2 |
Turkey |  |  | 11 |  |  | 30 |  |  | 49 |  |  | 70 |
Segment/Consolidated Totals |  | $ | 21 |  | $ | 16 |  | $ | 54 |  | $ | 39 |
Total Assets: |  | October 1, |  | December 31, |
(Millions of dollars) |  | 2016 |  | 2015 |
Pork |  | $ | 1,118 |  | $ | 858 |
Commodity Trading and Milling |  |  | 1,005 |  |  | 988 |
Marine |  |  | 316 |  |  | 296 |
Sugar |  |  | 161 |  |  | 202 |
Power |  |  | 188 |  |  | 271 |
Turkey |  |  | 483 |  |  | 448 |
All Other |  |  | 5 |  |  | 6 |
Segment Totals |  |  | 3,276 |  |  | 3,069 |
Corporate |  |  | 1,367 |  |  | 1,362 |
Consolidated Totals |  | $ | 4,643 |  | $ | 4,431 |
Investments in and Advances to Affiliates: |  | October 1, |  | December 31, |
(Millions of dollars) |  | 2016 |  | 2015 |
Pork |  | $ | 166 |  | $ | 115 |
Commodity Trading and Milling |  |  | 208 |  |  | 218 |
Marine |  |  | 35 |  |  | 19 |
Sugar |  |  | 4 |  |  | 3 |
Power |  |  | 28 |  |  | 34 |
Turkey |  |  | 315 |  |  | 282 |
Segment/Consolidated Totals |  | $ | 756 |  | $ | 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.

X
- References No definition available. + Details
Name: | us-gaap_SegmentReportingAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&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=68060357&loc=d3e8906-108599 + Details
Name: | us-gaap_SegmentReportingDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration