Seaboard Corp 10-Q for FY2024 Q3
Seaboard Corp (SEB)
About this 10-Q
Seaboard Corp filed this 10-Q on October 29, 2024, covering the quarter ended September 28, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 28, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.22B
- down 7.1% from $2.39B a year earlier
- Net loss
- $149M
- compared with net income of $126M a year earlier
- Diluted EPS
- -$153.44
- compared with $108.55 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from _____________________________________ to ____________________________________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation) | | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) | | (Zip Code) |
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(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated Filer ◻ | |
Non-Accelerated Filer ◻ | Smaller Reporting Company |
| Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
There were
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
| Three Months Ended | | Nine Months Ended | | ||||||||
| September 28, | | September 30, | | September 28, | | September 30, | | ||||
(Millions of dollars except share and per share amounts) | 2024 |
| 2023 |
| 2024 |
| 2023 |
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Net sales: | | | | | | | | | | | | |
Products (includes sales to affiliates of $ | $ | | | $ | | | $ | | | $ | | |
Services (includes sales to affiliates of $ |
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Other |
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Total net sales |
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Cost of sales and operating expenses: | | | | | | | | | | | | |
Products |
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Services |
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Other |
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Total cost of sales and operating expenses |
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Gross income |
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Selling, general and administrative expenses |
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Operating income |
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Other income (expense): | | | | | | | | | | | | |
Interest expense |
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Interest income (includes $ |
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Income from affiliates |
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Other investment income (loss), net |
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Foreign currency gains (losses), net |
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Miscellaneous, net |
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Total other income, net |
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Earnings before income taxes |
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Income tax benefit (expense) |
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Net earnings (loss) | $ | ( | | $ | | | $ | ( | | $ | | |
Less: Net earnings attributable to noncontrolling interests |
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Net earnings (loss) attributable to Seaboard | $ | ( | | $ | | | $ | ( | | $ | | |
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Earnings (loss) per common share | $ | ( | | $ | | | $ | ( | | $ | | |
Average number of shares outstanding |
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Other comprehensive income (loss), net of income tax expense: | | | | | | | | | | | | |
Foreign currency translation adjustment |
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Unrecognized pension cost |
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| — | |
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Other comprehensive income (loss), net of tax | $ | | | $ | ( | | $ | | | $ | | |
Comprehensive income (loss) |
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Less: Comprehensive income attributable to noncontrolling interests |
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Comprehensive income (loss) attributable to Seaboard | $ | ( | | $ | | | $ | ( | | $ | | |
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See accompanying notes to condensed consolidated financial statements.
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SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
| September 28, | | December 31, |
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(Millions of dollars except share and per share amounts) | 2024 |
| 2023 |
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Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | $ | | | $ | | |
Short-term investments |
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Receivables: |
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Trade | | | | | | |
Due from affiliates | | | | | | |
Other (includes $ | | | | | | |
Total receivables | | | | | | |
Allowance for credit losses | | ( | | | ( | |
Receivables, net | | | | | | |
Inventories |
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Other current assets |
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Total current assets |
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Property, plant and equipment, net of accumulated depreciation of $ |
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Operating lease right-of-use assets, net | | | | | | |
Investments in and advances to affiliates |
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Goodwill |
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Deferred tax assets | | | | | | |
Other non-current assets |
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Total assets | $ | | | $ | | |
Liabilities and Stockholders’ Equity | | | | | | |
Current liabilities: | | | | | | |
Lines of credit | $ | | | $ | | |
Accounts payable (includes $ |
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Deferred revenue (includes $ | | | | | | |
Operating lease liabilities | | | | | | |
Other current liabilities |
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Total current liabilities |
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Long-term debt, less current maturities |
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Long-term operating lease liabilities | | | | | | |
Other non-current liabilities |
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Total liabilities |
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Commitments and contingent liabilities | | | | | | |
Stockholders’ equity: | | | | | | |
Common stock of $ |
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Accumulated other comprehensive loss |
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Retained earnings |
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Total Seaboard stockholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and stockholders’ equity | $ | | | $ | | |
See accompanying notes to condensed consolidated financial statements.
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SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Changes in Equity
(Unaudited)
| | | | | Accumulated | | | | | | | | | | | |
| | | | | Other | | | | | | | | | | | |
| | Common | | Comprehensive | | Retained | | Noncontrolling | | | | | ||||
(Millions of dollars) | | Stock | | Loss | | Earnings | | Interests | | Total | | |||||
Balances, December 31, 2022 | | $ | | | $ | ( | | $ | | | $ | | | $ | | |
Comprehensive loss: | | | | | | | | | | | | | | | | |
Net loss | | | — | | | — | | | ( | | | — | | | ( | |
Other comprehensive income, net of tax | | | — | | | | | | — | | | — | | | | |
Dividends on common stock ($ | | | — | | | — | | | ( | | | — | | | ( | |
Balances, April 1, 2023 | | $ | | | $ | ( | | $ | | | $ | | | $ | | |
Comprehensive income: | | | | | | | | | | | | | | | | |
Net earnings | | | — | | | — | | | | | | — | | | | |
Other comprehensive income, net of tax | | | — | | | | | | — | | | — | | | | |
Dividends on common stock ($ | | | — | | | — | | | ( | | | — | | | ( | |
Balances, July 1, 2023 | | $ | | | $ | ( | | $ | | | $ | | | $ | | |
Comprehensive income: | | | | | | | | | | | | | | | | |
Net earnings | | | — | | | — | | | | | | — | | | | |
Other comprehensive loss, net of tax | | | — | | | ( | | | — | | | — | | | ( | |
Dividends on common stock ($ | | | — | | | — | | | ( | | | — | | | ( | |
Balances, September 30, 2023 | | $ | | | $ | ( | | $ | | | $ | | | $ | | |
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Balances, December 31, 2023 | | $ | | | $ | ( | | $ | | | $ | | | $ | | |
Comprehensive income: | | | | | | | | | | | | | | | | |
Net earnings | | | — | | | — | | | | | | — | | | | |
Other comprehensive income, net of tax | | | | | | | | | | | | | | | | |
Dividends on common stock ($ | | | — | | | — | | | ( | | | — | | | ( | |
Balances, March 30, 2024 | | $ | | | $ | ( | | $ | | | $ | | | $ | | |
Comprehensive income: | | | | | | | | | | | | | | | | |
Net earnings | | | — | | | — | | | | | | — | | | | |
Other comprehensive income, net of tax | | | | | | | | | | | | | | | | |
Dividends on common stock ($ | | | — | | | — | | | ( | | | — | | | ( | |
Balances, June 29, 2024 | | $ | | | $ | ( | | $ | | | $ | | | $ | | |
Comprehensive loss: | | | | | | | | | | | | | | | | |
Net loss | | | — | | | — | | | ( | | | — | | | ( | |
Other comprehensive income, net of tax | | | — | | | | | | — | | | — | | | | |
Dividends on common stock ($ | | | — | | | — | | | ( | | | — | | | ( | |
Balances, September 28, 2024 | | $ | | | $ | ( | | $ | | | $ | | | $ | | |
See accompanying notes to condensed consolidated financial statements.
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SEABOARD CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Nine Months Ended |
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| September 28, | | September 30, | | ||
(Millions of dollars) | 2024 |
| 2023 |
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Cash flows from operating activities: | | | | | | |
Net earnings (loss) | $ | ( | | $ | | |
Adjustments to reconcile net earnings (loss) to cash from operating activities: | | | | | | |
Depreciation and amortization |
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Deferred income taxes |
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Income from affiliates |
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Dividends received from affiliates |
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Other investment income, net |
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Payment of contingent consideration liability in excess of acquisition date fair value |
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Other, net |
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Changes in assets and liabilities, net of acquisitions: | | | | | | |
Receivables, net of allowance for credit losses |
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Inventories |
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Other assets |
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Accounts payable | | ( | | | ( | |
Other liabilities, exclusive of debt |
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Net cash from operating activities |
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Cash flows from investing activities: | | | | | | |
Purchase of short-term investments |
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Proceeds from the sale of short-term investments |
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Proceeds from the maturity of short-term investments |
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Capital expenditures |
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Proceeds from the sale of property, plant and equipment |
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Proceeds from the sale of non-consolidated affiliates |
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Investment in and advances to affiliates, net | | — | | | ( | |
Purchase of long-term investments |
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Other, net |
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Net cash from investing activities |
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Cash flows from financing activities: | | | | | | |
Uncommitted lines of credit, net |
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Draws under committed lines of credit | | | | | | |
Repayments of committed lines of credit | | ( | | | ( | |
Proceeds from payable to affiliate | | | | | — | |
Principal payments of long-term debt |
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Finance lease payments | | ( | | | ( | |
Payment of contingent consideration | | — | | | ( | |
Dividends paid |
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Other, net |
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Net cash from financing activities |
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Effect of exchange rate changes on cash and cash equivalents |
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Net change in cash and cash equivalents |
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Cash and cash equivalents at beginning of year |
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Cash and cash equivalents at end of period | $ | | | $ | | |
See accompanying notes to condensed consolidated financial statements.
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SEABOARD CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
Note 1 – Basis of Presentation and Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements of Seaboard Corporation and its subsidiaries (“Seaboard”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in Seaboard’s annual report on Form 10-K for the year ended December 31, 2023. The unaudited financial information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. Seaboard’s first three quarterly periods include approximately 13 weekly periods ending on the Saturday closest to the end of March, June and September. Results of operations and cash flows for the periods presented are not necessarily indicative of results to be expected for the full year.
Related-Party Transactions
Seaboard has investments in non-consolidated affiliates to further its business strategies and partner with other entities that have expertise in certain industries and countries. These investments are all accounted for using the equity method of accounting. As Seaboard conducts its agricultural commodity trading business with third parties, consolidated subsidiaries and non-consolidated affiliates on an interrelated basis, cost of sales on affiliate sales transactions cannot be distinguished without making numerous assumptions, primarily with respect to mark-to-market accounting for commodity derivatives. Purchases of raw materials or services from related parties included in cost of sales were $
Supplemental Cash Flow Information
Non-cash activities for the nine months ended September 28, 2024 and September 30, 2023, included capital expenditures of $
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| | | Nine Months Ended | | ||||
| | | September 28, | | September 30, | | ||
(Millions of dollars) | | | 2024 | | 2023 | | ||
Cash paid for amounts included in the measurement of lease liabilities: | | | | | | | | |
Operating cash flows from operating leases | | | $ | | | $ | | |
Operating cash flows from finance leases | | | | | | | | |
Financing cash flows from finance leases | | | | | | | | |
ROU assets obtained in exchange for new lease liabilities: | | | | | | | | |
Operating leases | | | $ | | | $ | | |
Finance leases | | | | | | | | |
Goodwill and Other Intangible Assets
The change in the carrying amount of goodwill was related to foreign currency translation of $
Recently Issued Accounting Standards and Disclosure Rules Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance that requires incremental segment disclosures on an annual and interim basis related to significant segment expenses. Seaboard will adopt this guidance in its annual report on Form 10-K for the year ended December 31, 2024 (“2024 10-K”), and interim periods
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beginning on January 1, 2025. The disclosure requirements must be applied retrospectively to all prior periods presented in the financial statements. Seaboard is currently evaluating the impact this guidance will have on its related disclosures. Pursuant to discussions with Seaboard’s chief executive officer (“CEO”), the chief operating decision maker (“CODM”), significant segment expenses have been evaluated and retrospective data is being compiled for enhanced segment disclosures to be included in Seaboard’s segment footnotes in the 2024 10-K.
In December 2023, the FASB issued guidance that requires additional detailed income tax disclosures related to standardization and disaggregation of information in the rate reconciliation and income taxes paid by jurisdiction. Seaboard will adopt this guidance for the annual reporting period beginning on January 1, 2025. Seaboard is currently evaluating the impact this guidance will have on its disclosures.
In March 2024, the Securities and Exchange Commission (the “SEC”) adopted final rules to enhance and standardize climate-related disclosures in registration statements and annual reports on Form 10-K. The new rules would require climate-related disclosures related to governance, strategy, risk management, targets and goals and greenhouse gas emissions. Additionally, within the notes to the financial statements, the rules would require disclosure of financial statement effects of severe weather events and other natural conditions and other climate-related financial metrics as applicable. Certain elements of the new rules are currently scheduled to become effective for Seaboard’s annual reporting period beginning on January 1, 2025, with the remaining requirements to be phased-in effective for subsequent fiscal years beginning after December 31, 2025. On April 4, 2024, the SEC issued an order staying the effectiveness of the final rules pending completion of the judicial review of consolidated challenges to the rules by the Court of Appeals for the Eighth Circuit. Seaboard is currently evaluating the impact the rules will have on its disclosures.
Note 2 – Investments
The following is a summary of the estimated fair value of short-term investments classified as trading securities:
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| | September 28, | | December 31, |
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(Millions of dollars) |
| 2024 | | 2023 |
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Domestic equity securities | | $ | | | $ | | |
Foreign equity securities | |
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Domestic debt securities | | | | | | | |
Foreign debt securities | | | | | | | |
Money market funds held in trading accounts | | | | | | | |
Other trading securities | | | | | | | |
Total trading short-term investments | | $ | | | $ | | |
The unrealized gain (loss) related to trading securities still held at the end of the respective reporting period was $
Seaboard had $
As of September 28, 2024, Seaboard had long-term investments of $
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Note 3 – Inventories
The following is a summary of inventories:
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| | September 28, | | December 31, |
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(Millions of dollars) |
| 2024 |
| 2023 | |||
At lower of FIFO cost and net realizable value (“NRV”): | | | | | | | |
Hogs and materials | | $ | | | $ | | |
Pork products and materials | |
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Grains, oilseeds and other commodities | |
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Biofuels and related credits | | | | | | | |
Other | |
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Total inventories at lower of FIFO cost and NRV | |
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Grain, flour and feed at lower of weighted average cost and NRV | |
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Total inventories | | $ | | | $ | | |
Note 4 – Lines of Credit, Long-Term Debt, Commitments and Contingencies
Lines of Credit
As of September 28, 2024, the outstanding balances under committed and uncommitted lines of credit were $
Long-Term Debt
The following is a summary of long-term debt:
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| | | September 28, | | December 31, | ||
(Millions of dollars) | | | 2024 | | 2023 | ||
Term Loan due 2033 | | $ | | | $ | | |
Foreign subsidiary obligations | | | | | | | |
Other long-term debt | | | | | | | |
Total debt at face value | | | | | | | |
Current maturities and unamortized costs | | | ( | | | ( | |
Long-term debt, less current maturities and unamortized costs | | $ | | | $ | | |
The Term Loan due 2033 credit agreement provides for quarterly payments on the $
Legal Proceedings
Seaboard is subject to various legal proceedings and claims that arise in the ordinary course of business and otherwise, including those matters described below.
Seaboard accrues liabilities for loss contingencies when it is deemed probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, Seaboard accrues the minimum amount in the range. For such matters where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, no accrual has been made.
In Seaboard’s opinion, it has made appropriate and adequate accruals for loss contingencies where necessary as of September 28, 2024. Substantially all of Seaboard’s contingencies are subject to uncertainties and, therefore, determining the likelihood of a loss or the measurement of any loss can be complex. Consequently, Seaboard is unable to estimate the
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range of reasonably possible loss in excess of the amounts accrued. Seaboard’s assessments, which result from a complex series of judgments about future events and uncertainties, are based on estimates and assumptions deemed reasonable by management, including an expected probable loss associated with settling or otherwise resolving such contingencies. These estimates and assumptions may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might change such estimates and assumptions.
At the end of each reporting period, Seaboard reviews information with respect to its legal proceedings, claims and other related loss contingencies and updates its accruals, disclosures and estimates of reasonably possible loss or range of loss based on such reviews. Costs for defending claims are expensed as incurred. Any receivable for insurance recoveries is recorded separately from the corresponding liability, and only if recovery is determined to be probable and reasonably estimable.
Seaboard believes that it has meritorious defenses to the claims asserted in the matters described below, and it intends to defend them vigorously, but litigation is inherently unpredictable and there can be no assurances as to their outcomes. Seaboard does not currently believe that any of these matters will have a material adverse effect on its business or its consolidated financial position, results of operations or cash flows. However, Seaboard could incur judgments, enter into settlements or revise its expectations regarding the outcome of matters, which could have a material adverse effect in the particular annual or quarterly period in which the amounts are accrued or paid.
Helms-Burton Act Litigation
On July 21, 2021, a lawsuit was filed by an individual, Odette Blanco de Fernandez (“Ms. de Fernandez”), and the heirs (“Inheritors”) and estates (“Estates”) of
The Act provides that any person who knowingly and intentionally “traffics” in property which was confiscated by the Cuban government may be liable to any U.S. national who acquires an ownership interest in such property for money damages in an amount equal to the greater of the current fair market value of the property or the value of the property when confiscated, plus interest from the date of confiscation, reasonable attorneys’ fees and costs, and treble damages under certain circumstances. The complaint in each of the cases alleges that the Plaintiffs acquired ownership interests to a
The Florida District Court in the Seaboard Marine case dismissed the claims of the Inheritors and the Estates because they did not acquire the ownership claims prior to March 1996, as required by the Act. The remaining plaintiff, Ms. de Fernandez, contends she owns
As to the suit against Seaboard Corporation, on October 21, 2021, the Plaintiffs filed an amended complaint which principally added allegations that there were other callings made by Seaboard Marine at the Port of Mariel and that Seaboard Corporation engaged in a pattern of doing business with individuals and entities in contravention of U.S. foreign policy. Seaboard Corporation filed a Motion to Dismiss, which is currently pending. On September 28, 2022, the Delaware District Court stayed this lawsuit against Seaboard Corporation until 30 days after the outcome of the Appeal in the Seaboard Marine case.
Seaboard believes that it has meritorious defenses to the claims and intends to vigorously defend the litigation. However, the outcome of litigation is inherently unpredictable and subject to significant uncertainties, and if unfavorable, could result in a material liability.
Pork Price-Fixing Antitrust Litigation
On June 28, 2018,
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the District of Minnesota (the “Minnesota District Court”) against several pork processors, including Seaboard Foods LLC (“Seaboard Foods”) and Agri Stats, Inc., a company described in the complaint as a data sharing service. Additional class action complaints with similar claims on behalf of putative classes of direct and indirect purchasers were later filed in the Minnesota District Court, and additional actions by standalone plaintiffs (including the Commonwealth of Puerto Rico) were filed in or transferred to the Minnesota District Court. The consolidated actions are styled In re Pork Antitrust Litigation. The complaints allege, among other things, that beginning in January 2009, the defendants conspired and combined to fix, raise, maintain, and stabilize the price of pork products in violation of U.S. antitrust laws by coordinating output and limiting production, allegedly facilitated by the exchange of non-public information about prices, capacity, sales volume and demand through Agri Stats, Inc. The complaints on behalf of the putative classes of indirect purchasers also assert claims under various state laws, including state antitrust laws, unfair competition laws, consumer protection statutes, and common law unjust enrichment. The relief sought in the respective complaints includes treble damages, injunctive relief, pre- and post-judgment interest, costs and attorneys’ fees. On October 16, 2020, the Minnesota District Court denied the defendants’ motions to dismiss the amended complaints. On March 3, 2023, the Minnesota District Court granted the Plaintiffs’ Motions to Certify the Classes with respect to all three classes.
Additional standalone “direct action” plaintiffs filed similar actions in federal courts throughout the country, several of which named Seaboard Corporation as a defendant. Those actions filed in courts other than the District of Minnesota have been conditionally transferred to Minnesota for pretrial proceedings pursuant to an order by the Judicial Panel on Multidistrict Litigation. The states of New Mexico and Alaska filed civil cases in state court against substantially the same defendants, including Seaboard Foods and Seaboard Corporation, based on substantially similar allegations. Except in the New Mexico action, all claims against Seaboard Corporation have been dismissed without prejudice.
On June 12, 2023, Seaboard Foods entered into a settlement agreement with the putative direct purchaser plaintiff class (the “DPP Class”). The settlement with the DPP Class does not cover the claims of (a) “direct action” plaintiffs (“DPPs”) that opted-out of Seaboard’s settlement with the DPP Class and are continuing direct actions; (b) other direct purchasers that opted-out of the settlement (“Other Opt-Outs”) and may in the future file actions against Seaboard; (c) the Commercial and Industrial Indirect Purchaser Class (the “CIIP Class”); or (d) the End User Consumer Indirect Purchaser Plaintiff Class (the “EUCP Class”). Subsequent to the settlement with the DPP Class, Seaboard settled with some of the DPPs and Other Opt-Outs. Seaboard continues to litigate against the DPPs it has not settled with, but Seaboard will consider additional reasonable settlements where they are available. On June 18, 2024, and June 20, 2024, Seaboard Foods entered into settlement agreements with the CIIP Class and the EUCP Class, respectively, subject to court approval. On August 7, 2024, Seaboard Foods entered into a settlement agreement with the state of Alaska. Seaboard believes that these settlements were in the best interests of Seaboard and its stakeholders in order to avoid the uncertainty, risk, expense and distraction of protracted litigation. Seaboard believes that it has meritorious defenses to the claims alleged in these matters and intends to vigorously defend any matters not resolved by settlement. However, the outcome of litigation is inherently unpredictable and subject to significant uncertainties, and if unfavorable, could result in a material liability.
Pork Compensation Antitrust Litigation
On November 11, 2022,
On June 23, 2023, Seaboard Foods reached a settlement with the Class to settle the Class Action which was approved by the Court and paid during Seaboard’s first quarter of 2024.
Cereoil and Nolston Litigation
On March 20, 2018, the bankruptcy trustee (the “Trustee”) for Cereoil Uruguay S.A. (“Cereoil”) filed a suit in the Bankruptcy Court of First Instance in Uruguay naming as parties Seaboard Corporation and its subsidiaries, Seaboard Overseas Limited (“SOL”) and Seaboard Uruguay Holdings Ltd. (“Seaboard Uruguay”). Seaboard Corporation has a
10
alleged in this matter and intends to vigorously defend this matter. In the event of an adverse ruling, Seaboard and its
On April 27, 2018, the Trustee filed an additional suit in the Bankruptcy Court of First Instance in Uruguay that was served during the second quarter of 2018, naming as parties Seaboard Corporation, SOL, Seaboard Uruguay, all directors of Cereoil, including
On September 30, 2021, HSBC Bank (Uruguay) SA (“HSBC”), a creditor in the Cereoil bankruptcy proceeding pending in Uruguay, filed a suit in the U.S. District Court for the District of Kansas (the “Kansas District Court”) against Seaboard Corporation alleging claims for breach of contract, promissory estoppel, breach of the duty of good faith and fair dealing, unjust enrichment, fraud, negligent misrepresentation and fraud by concealment based upon a comfort letter, alleged statements by Cereoil personnel (including the Chief Financial Officer serving at the behest of Seaboard), and the same grain transactions that the Trustee challenges as fraudulent conveyances in the Cereoil bankruptcy in Uruguay discussed above. HSBC seeks $
On May 15, 2018, the Trustee for Nolston S.A. (“Nolston”) filed a suit in the Bankruptcy Court of First Instance in Uruguay that was served during the second quarter of 2018, naming as parties Seaboard and the other Cereoil Defendants. Seaboard has a
Guarantees
Certain of Seaboard’s non-consolidated affiliates have debt supporting their underlying operations. From time to time, Seaboard will provide guarantees of such debt in order to further Seaboard’s business objectives. As of September 28, 2024, guarantees outstanding were not material. Seaboard has not accrued a liability for any of the guarantees as the likelihood of loss is remote.
11
Note 5 – Derivatives and Fair Value of Financial Instruments
The following tables show assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy used to measure each category of assets and liabilities. The trading securities classified as other current assets below are assets held for Seaboard’s deferred compensation plans.
| | | | | | | | | | | | | |
| | September 28, | | | | | | | | | |
| |
(Millions of dollars) | | 2024 | | Level 1 | Level 2 | Level 3 |
| ||||||
Assets: | | | | | | | | | | | | | |
Trading securities – short-term investments: | | | | | | | | | | | | | |
Domestic equity securities | | $ | | | $ | | | $ | — | | $ | — | |
Foreign equity securities | | | | | | | | | — | | | — | |
Domestic debt securities | | | | | | | | | | | | — | |
Foreign debt securities | | | | | | | | | | | | — | |
Money market funds held in trading accounts | |
| | |
| | | | — | | | — | |
Other trading securities | | | | | | — | | | | | | — | |
Trading securities – other current assets | | | | | | | | | — | | | — | |
Derivatives | | | | | | | | | — | | | — | |
Total assets | | $ | | | $ | | | $ | | | $ | — | |
Liabilities: | | | | | | | | | | | | | |
Derivatives | | $ | | | $ | | | $ | | | $ | — | |
Total liabilities | | $ | | | $ | | | $ | | | $ | — | |
| | | | | | | | | | | | | |
| | December 31, | | | | | | | | | |
| |
(Millions of dollars) | | 2023 | | Level 1 | Level 2 | Level 3 |
| ||||||
Assets: | | | | | | | | | | | | | |
Trading securities – short-term investments: | | | | | | | | | | | | | |
Domestic equity securities | | $ | | | $ | | | $ | — | | $ | — | |
Foreign equity securities | | | | | | | | | — | | | — | |
Domestic debt securities | | | | | | | | | | | | — | |
Foreign debt securities | | | | | | | | | | | | — | |
Money market funds held in trading accounts | | | | | | | | | — | | | — | |
Other trading securities | |
| | |
| — | |
| | |
| — | |
Trading securities – other current assets | | | | | | | | | — | | | — | |
Long-term investment - BDC | |
| | |
| — | |
| | |
| — | |
Derivatives | | | | | | | | | | | | — | |
Total assets | | $ | | | $ | | | $ | | | $ | — | |
Liabilities: | | | | | | | | | | | | | |
Derivatives | | $ | | | $ | | | $ | | | $ | — | |
Total liabilities | | $ | | | $ | | | $ | | | $ | — | |
Financial instruments consisting of cash and cash equivalents, net receivables, accounts payable, and lines of credit are carried at cost, which approximates fair value as a result of the short-term nature of the instruments. The fair value of short-term investments is measured using multiple levels. Debt securities categorized as level 1 in the fair value hierarchy include debt securities held in mutual funds and exchange-traded funds.
As of December 31, 2023, Seaboard held a long-term investment in a BDC that primarily lends to and invests in debt securities of privately held companies. During the first quarter of 2024, the BDC completed an IPO, and the investment is included in short-term domestic equity securities as of September 28, 2024. See Note 2 to the condensed consolidated financial statements for further discussion.
The fair value of long-term debt is estimated by comparing interest rates for debt with similar terms and maturities. As Seaboard’s long-term debt is mostly variable-rate, the carrying amount approximates fair value. If Seaboard’s long-term debt was measured at fair value on its condensed consolidated balance sheets, it would have been classified as level 2 in the fair value hierarchy.
Seaboard’s operations are exposed to market risks from changes in commodity prices, foreign currency exchange rates, interest rates and equity prices. Seaboard uses various commodity derivative futures and options contracts to manage some
12
of its risk of price fluctuations for raw materials and other inventories, finished product sales and firm sales commitments. Seaboard also enters into foreign currency exchange agreements to manage the foreign currency exchange rate risk with respect to certain transactions denominated in foreign currencies. From time to time, Seaboard enters into interest rate swap agreements to manage the interest rate risk with respect to certain variable-rate long-term debt and enters into equity futures contracts to manage the equity price risk with respect to certain short-term investments. Although management believes its derivatives are primarily economic hedges, Seaboard does not perform the extensive record-keeping required to account for these types of transactions as hedges for accounting purposes. These derivative contracts are recorded at fair value, with any changes in fair value recognized in the condensed consolidated statements of comprehensive income (loss). As the derivative contracts are not accounted for as hedges, fluctuations in the related prices or rates could have a material impact on earnings in any given reporting period. The nature of Seaboard’s market risk exposure has not materially changed since December 31, 2023.
Seaboard had the following aggregated outstanding notional amounts related to derivative financial instruments:
| | | | | | | | | | | | | | | |
| | | | | | | | | | | September 28, | | December 31, | ||
(Millions) | | Metric | | | | | | | | | 2024 | | 2023 | ||
Commodities: | | | | | | | | | | | | | | | |
Grain | | Bushels | | | | | | | | | | | | | |
Hogs and pork products | | Pounds | | | | | | | | | | | | | |
Soybean oil | | Pounds | | | | | | | | | | | | | |
Foreign currencies | | U.S. dollar | | | | | | | | | | | | | |
Credit risks associated with these derivative contracts are not significant because Seaboard minimizes counterparty exposure by dealing with credit-worthy counterparties and using margin accounts for some commodity contracts. As of September 28, 2024, the maximum amount of credit risk related to foreign currency contracts, had the counterparties failed to perform according to the terms of the contract, was less than $
The following table provides the fair value of each type of derivative held and where each derivative is included in the condensed consolidated balance sheets:
| | | | | | | | | | | | | | | | | |
| | | | Asset | | | | Liability | | ||||||||
| | | | September 28, | | December 31, | | | | September 28, | | December 31, | | ||||
(Millions of dollars) |
| |
| 2024 |
| 2023 |
| |
| 2024 |
| 2023 | | ||||
Commodities |
| | $ | | | $ |
| | $ | | | $ | | ||||
Foreign currencies |
| |
| — | |
| |
| |
| | |
| | | ||
Seaboard’s commodity derivative assets and liabilities are presented in the condensed consolidated balance sheets on a net basis, including netting the derivatives with the related margin accounts. As of September 28, 2024 and December 31, 2023, the commodity derivatives had a margin account balance of $
The following table provides the amount of gain (loss) recognized in income for each type of derivative and where it was recognized in the condensed consolidated statements of comprehensive income (loss):
| | | | | | | | | | | | | | | |
| | | | Three Months Ended | | Nine Months Ended | | ||||||||
| | | | September 28, | | September 30, | | September 28, | | September 30, | | ||||
(Millions of dollars) |
| |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| ||||
Commodities |
| | $ | | | $ | — | | $ | ( | | $ | ( | | |
Foreign currencies |
| |
| | |
| | |
| | |
| | | |
Foreign currencies |
| Foreign currency gains (losses), net | |
| ( | |
| | |
| ( | |
| — | |
13
Note 6 – Stockholders’ Equity and Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss (“AOCL”), net of related taxes, were as follows:
| | | | | | | | | | |
| | Cumulative | | | | | | | ||
| | Foreign | | Cumulative | | | | | ||
| | Currency | | Unrecognized | | | | | ||
| | Translation | | Pension | | | | | ||
(Millions of dollars) | | Adjustment | | Cost | | Total | | |||
Balance December 31, 2022 | | $ | ( | | $ | ( | | $ | ( | |
Other comprehensive income before reclassifications | |
| | |
| | |
| | |
Amounts reclassified from AOCL to net earnings | |
| — | |
| | (a) |
| | |
Other comprehensive income, net of tax | |
| | |
| | |
| | |
Balance April 1, 2023 | | $ | ( | | $ | ( | | $ | ( | |
Other comprehensive income before reclassifications | |
| | |
| | |
| | |
Amounts reclassified from AOCL to net earnings | |
| | |
| | |
| | |
Other comprehensive income, net of tax | |
| | |
| | |
| | |
Balance July 1, 2023 | | $ | ( | | $ | ( | | $ | ( | |
Other comprehensive loss before reclassifications | |
| ( | |
| — | |
| ( | |
Amounts reclassified from AOCL to net earnings | |
| | |
| | |
| | |
Other comprehensive income (loss), net of tax | |
| ( | |
| — | |
| ( | |
Balance September 30, 2023 | | $ | ( | | $ | ( | | $ | ( | |
| | | | | | | | | | |
Balance December 31, 2023 | | $ | ( | | $ | ( | | $ | ( | |
Other comprehensive loss before reclassifications | |
| ( | |
| — | |
| ( | |
Amounts reclassified from AOCL to net earnings | |
| — | |
| | (a) |
| | |
Other comprehensive income (loss), net of tax | |
| ( | |
| | |
| — | |
Balance March 30, 2024 | | $ | ( | | $ | ( | | $ | ( | |
Other comprehensive income before reclassifications | |
| — | |
| — | |
| — | |
Amounts reclassified from AOCL to net earnings | |
| | |
| | |
| | |
Other comprehensive income, net of tax | |
| | |
| | |
| | |
Balance June 29, 2024 | | $ | ( | | $ | ( | | $ | ( | |
Other comprehensive income before reclassifications | |
| | |
| | |
| | |
Amounts reclassified from AOCL to net earnings | |
| | |
| — | |
| | |
Other comprehensive income, net of tax | |
| | |
| | |
| | |
Balance September 28, 2024 | | $ | ( | | $ | ( | | $ | ( | |
| (a) | This reclassification adjustment primarily represents the amortization of actuarial losses (gains) that were included in net periodic pension cost. |
Note 7 – Segment Information
Seaboard’s
The Pork segment primarily produces hogs to process and sells pork products to further processors, food service operators, distributors and grocery stores throughout the U.S. and in foreign markets. The Liquid Fuels segment produces renewable diesel and biodiesel from pork fat and other animal fats and vegetable oils, along with related environmental credits, for sale to third parties in the U.S. The CT&M segment is an integrated agricultural commodity trading, processing and logistics operation that markets wheat, corn, soybean meal and other agricultural commodities in bulk to third-party customers and to non-consolidated affiliates in international markets. The Marine segment provides cargo shipping services in the U.S., the Caribbean and Central and South America. The Power segment is an independent power producer in the Dominican Republic that owns
14
During Seaboard’s second quarter of 2024, changes to Seaboard’s organizational structure became effective, and Seaboard’s CODM assumed direct oversight of the liquid fuels business, which had previously been reported in the Pork segment. As a result, the liquid fuels business became its own reportable segment. Additionally, the previously separate reportable Sugar and Alcohol segment became part of All Other as the ongoing economic conditions of Argentina reduced this segment’s impact on the condensed consolidated financial statements. The prior period information below has been recast to conform to the new presentation.
Other than the below, there were no other noteworthy changes in the segments’ businesses or relationships with affiliates since December 31, 2023.
During the second quarter of 2024, the CT&M segment sold its remaining
The following tables present Seaboard’s sales disaggregated by major product/service and segment:
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net Sales: | | | Three Months Ended September 28, 2024 | | |||||||||||||||||||||
| | | | | | Liquid | | | | | | | | | | | | All | | | Intersegment | | | Consolidated | |
(Millions of dollars) | | | Pork | | | Fuels | | | CT&M | | | Marine | | | Power | | | Other | | | Eliminations | | | Totals | |
External customer net sales | | | | | | | | | | | | | | | | | | | | | | | | | |
Products | | $ | | | $ | | | $ | | | $ | — | | $ | — | | $ | | | $ | — | | $ | | |
Transportation | | | | | | — | | | — | | | | | | — | | | — | | | — | | | | |
Energy | | | — | | | — | | | — | | | — | | | | | | | | | — | | | | |
Other | | | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Total external customer net sales | | | | | | | | | | | | | | | | | | | | | — | | | | |
Intersegment net sales (a) | | | | | | — | | | — | | | | | | — | | | — | | | ( | | | — | |
Segment/consolidated totals | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | ( | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net Sales: | | | Three Months Ended September 30, 2023 | | |||||||||||||||||||||
| | | | | | Liquid | | | | | | | | | | | | All | | | Intersegment | | | Consolidated | |
(Millions of dollars) | | | Pork | | | Fuels | | | CT&M | | | Marine | | | Power | | | Other | | | Eliminations | | | Totals | |
External customer net sales | | | | | | | | | | | | | | | | | | | | | | | | | |
Products | | $ | | | $ | | | $ | | | $ | — | | $ | — | | $ | | | $ | — | | $ | | |
Transportation | | | | | | — | | | — | | | | | | — | | | — | | | — | | | | |
Energy | | | — | | | — | | | — | | | — | | | | | | | | | — | | | | |
Other | | | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Total external customer net sales | | | | | | | | | | | | | | | | | | | | | — | | | | |
Intersegment net sales (a) | | | | | | — | | | — | | | | | | — | | | — | | | ( | | | — | |
Segment/consolidated totals | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | ( | | $ | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net Sales: | | | Nine Months Ended September 28, 2024 | | |||||||||||||||||||||
| | | | | | Liquid | | | | | | | | | | | | All | | | Intersegment | | | Consolidated | |
(Millions of dollars) | | | Pork | | | Fuels | | | CT&M | | | Marine | | | Power | | | Other | | | Eliminations | | | Totals | |
External customer net sales | | | | | | | | | | | | | | | | | | | | | | | | | |
Products | | $ | | | $ | | | $ | | | $ | — | | $ | — | | $ | | | $ | — | | $ | | |
Transportation | | | | | | — | | | — | | | | | | — | | | | | | — | | | | |
Energy | | | — | | | — | | | — | | | — | | | | | | | | | — | | | | |
Other | | | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Total external customer net sales | | | | | | | | | | | | | | | | | | | | | — | | | | |
Intersegment net sales (a) | | | | | | — | | | — | | | | | | — | | | — | | | ( | | | — | |
Segment/consolidated totals | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | ( | | $ | | |
15
| | | | | | | | | | | | | | | | | | | | | | | | | |
Net Sales: | | | Nine Months Ended September 30, 2023 | ||||||||||||||||||||||
| | | | | | Liquid | | | | | | | | | | | | All | | | Intersegment | | | Consolidated | |
(Millions of dollars) | | | Pork | | | Fuels | | | CT&M | | | Marine | | | Power | | | Other | | | Eliminations | | | Totals | |
External customer net sales | | | | | | | | | | | | | | | | | | | | | | | | | |
Products | | $ | | | $ | | | $ | | | $ | — | | $ | — | | $ | | | $ | — | | $ | | |
Transportation | | | | | | — | | | — | | | | | | — | | | | | | — | | | | |
Energy | | | — | | | — | | | — | | | — | | | | | | | | | — | | | | |
Other | | | | | | — | | | | | | — | | | — | | | — | | | — | | | | |
Total external customer net sales | | | | | | | | | | | | | | | | | | | | | — | | | | |
Intersegment net sales (a) | | | | | | — | | | — | | | | | | — | | | — | | | ( | | | — | |
Segment/consolidated totals | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | ( | | $ | | |
| (a) | The Pork segment’s intersegment sales primarily represent the sale of pork fat to the Liquid Fuels segment, which uses it as a feedstock in the renewable diesel and biodiesel production processes. The Marine segment’s intersegment sales primarily represent shipping services provided to the jalapeño pepper processing business. Intercompany transactions are eliminated in consolidation. |
The following tables present Seaboard’s operating income (loss) and income (loss) from affiliates by segment. Operating income (loss) for segment reporting is prepared on the same basis as that used for consolidated operating income. Operating income (loss), along with income (loss) from affiliates for the Pork, CT&M, and Turkey segments, is used as the measure of evaluating segment performance because management does not consider interest, other investment income (loss) and income tax benefit (expense) on a segment basis. 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 of general corporate management oversight costs. Corporate operating results 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.
| | | | | | | | | | | | | |
Operating Income (Loss): | | Three Months Ended | | Nine Months Ended |
| ||||||||
| | September 28, | | September 30, | | September 28, | | September 30, | | ||||
(Millions of dollars) |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| ||||
Pork | | $ | | | $ | ( | | $ | | | $ | ( | |
Liquid Fuels | | | ( | | | | | | ( | | | ( | |
CT&M | |
| | |
| | |
| | | | | |
Marine | |
| ( | |
| | |
| | | | | |
Power | |
| | |
| | |
| | |
| | |
All Other | |
| — | |
| | |
| ( | |
| | |
Segment Totals | |
| | |
| | |
| | |
| | |
Corporate | |
| ( | |
| ( | |
| ( | |
| ( | |
Consolidated Totals | | $ | | | $ | | | $ | | | $ | — | |
| | | | | | ||||||||
Income (Loss) from Affiliates: | | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 28, | | September 30, | | September 28, | | September 30, |
| ||||
(Millions of dollars) |
| 2024 |
| 2023 |
| 2024 |
| 2023 |
| ||||
Pork | | $ | | | $ | | | $ | | | $ | | |
CT&M | | | | | | ( | | | | | | ( | |
Marine | | | | | | | | | | | | | |
Power | | | — | | | — | | | — | | | — | |
Turkey | |
| | |
| | |
| | |
| | |
Segment/Consolidated Totals | | $ | | | $ | | | $ | | | $ | | |
16
The following tables present total assets by segment and the investments in and advances to affiliates by segment. Corporate assets primarily include cash and short-term investments, other current assets related to deferred compensation plans, long-term investments and other miscellaneous items.
| | | | | | | |
Total Assets: | | September 28, | | December 31, |
| ||
(Millions of dollars) |
| 2024 |
| 2023 |
| ||
Pork | | $ | | | $ | | |
Liquid Fuels | | | | | | | |
CT&M | |
| | |
| | |
Marine | |
| | |
| | |
Power | |
| | |
| | |
Turkey | |
| | |
| | |
All Other | |
| | |
| | |
Segment Totals | |
| | |
| | |
Corporate | |
| | |
| | |
Consolidated Totals | | $ | | | $ | | |
| | | | | | | |
Investments in and Advances to Affiliates: | | September 28, | | December 31, |
| ||
(Millions of dollars) |
| 2024 |
| 2023 |
| ||
Pork | | $ | | | $ | | |
CT&M | | | | | | | |
Marine | | | | | | | |
Power | | | | | | | |
Turkey | | | | | | | |
All Other | |
| | |
| | |
Segment/Consolidated Totals | | $ | | | $ | | |
The Turkey segment represents Seaboard’s investment in Butterball, LLC (“Butterball”), which is accounted for using the equity method. As of September 28, 2024 and December 31, 2023, Butterball had total assets of $
| | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||
| | September 28, | | September 30, | | September 28, | | September 30, | | ||||
(Millions of dollars) | | 2024 |
| 2023 |
| 2024 |
| 2023 | | ||||
Net sales | | $ | | | $ | | | $ | | | $ | | |
Operating income | | $ | | | $ | | | $ | | | $ | | |
Net earnings | | $ | | | $ | | | $ | | | $ | | |
Note 8 – Income Taxes
Seaboard assesses the realizability of its deferred tax assets each reporting period. A valuation allowance is established if it is more likely than not that the deferred tax assets will not be realized. Realizability of deferred tax assets is based on the weight of available positive and negative evidence to estimate whether sufficient future taxable income will be generated. A valuation allowance is maintained on deferred tax assets until there is sufficient evidence to support the reversal of the valuation allowance.
As of September 28, 2024, Seaboard’s U.S. operations were in a historical three-year cumulative loss position, which is significant objective negative evidence under U.S. GAAP, specifically Accounting Standards Codification (“ASC”) 740 Income Taxes. Also, ASC 740 generally precludes consideration of expected future earnings in determining whether deferred tax assets are realizable. Due to the three-year cumulative loss and Seaboard’s inability to consider expected future earnings, Seaboard recorded a valuation allowance adjustment totaling $
17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Management Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, Seaboard’s consolidated financial statements and the accompanying notes included in this quarterly report on Form 10-Q and within Seaboard’s annual report on Form 10-K filed for the year ended December 31, 2023. Certain statements in this report contain forward-looking statements. See the section entitled “Forward-looking Statements” for more information on these forward-looking statements, including a discussion of the most significant factors that could cause actual results to differ materially from those in the forward-looking statements.
LIQUIDITY AND CAPITAL RESOURCES
Management believes Seaboard’s combination of internally generated capital resources and borrowing capabilities will be adequate for its existing operations and any currently known potential plans for expansion of existing operations in both the short-term and long-term.
Liquidity includes cash and cash equivalents, short-term investments and available borrowing capacity under lines of credit facilities. As of September 28, 2024, Seaboard had cash and short-term investments of nearly $1.2 billion and total net working capital of $874 million. The following table presents a summary of Seaboard’s available borrowing capacity under lines of credit.
| | | | |
|
| Total Amount |
| |
(Millions of dollars) | | Available | | |
Short-term uncommitted and committed lines | | $ | 1,323 | |
Amounts drawn against lines | |
| (427) | |
Available borrowing capacity as of September 28, 2024 | | $ | 896 | |
As of September 28, 2024, $87 million of the $1.2 billion of cash and short-term investments were held by Seaboard’s foreign subsidiaries. Historically, Seaboard has considered substantially all foreign profits as being permanently invested in its foreign operations, including all cash and short-term investments held by foreign subsidiaries. During 2022, Seaboard reversed its indefinite reinvestment assertion in connection with certain previously-taxed undistributed earnings of its Seaboard Marine subsidiary due to the tax effectiveness of repatriating. For all other foreign subsidiaries, Seaboard intends to continue permanently reinvesting their funds outside the U.S. as they continue to demonstrate no need to repatriate them to fund Seaboard’s U.S. operations for the foreseeable future. As a result, Seaboard has not recorded deferred taxes for state or foreign withholding taxes that would result upon repatriation of these funds to the U.S. Determination of the tax that might be paid on unremitted earnings if eventually remitted is not practical due to the complexity of the multi-jurisdictional tax environment in which Seaboard operates.
Cash Flows
Cash provided by operating activities decreased $362 million for the nine months ended September 28, 2024, compared to the same period in 2023. The decrease in cash generated from working capital was $361 million on a net basis. The working capital changes primarily reflected a decrease in cash flows from receivables of $267 million due to timing of collections, a decrease in cash flows for inventories due to lower commodity prices of $48 million and an increase in cash flows related to payments of other liabilities of $35 million. The change in earnings, adjusted for non-cash items, including the valuation allowance adjustment of $176 million to offset U.S. deferred tax assets for the nine-months ended September 28, 2024, was not significant period-over-period.
Cash flows from investing activities for short-term investments are part of Seaboard’s overall liquidity management strategy. Short-term investment purchases are a result of the investment of excess cash, asset allocation from the active management of the portfolio and re-investment of matured securities. Proceeds from the sale of short-term investments may be used to fund working capital needs and capital expenditure purchases. During the nine months ended September 28, 2024, Seaboard invested $373 million in property, plant and equipment, including biogas recovery projects in the Pork segment and installment payments on vessels under construction in the Marine segment and other investments. At certain hog farms, the Pork segment is constructing biogas recovery facilities to capture methane from its hog lagoons and inject it as renewable natural gas into the local pipeline infrastructure. One dual-fueled vessel was completed and delivered during the third quarter of 2024, and another vessel is expected to be completed during the fourth quarter of 2024. For the remainder of 2024, management has budgeted capital expenditures totaling approximately $165 million. Management anticipates paying for these capital expenditures from a combination of available cash, proceeds from the sale of available short-term investments and Seaboard’s available borrowing capacity.
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Cash flows from financing activities primarily include draws and repayments on lines of credit. Seaboard’s lines of credit are used to fund working capital and investments in capital expenditures, as needed. The primary long-term debt outstanding is a Term Loan due in 2033 with a balance of $968 million as of September 28, 2024.
RESULTS OF OPERATIONS
Beginning in the second quarter of 2024, Liquid Fuels became a separate reportable segment and the former Sugar and Alcohol segment became part of All Other. The historical periods presented have been recast to reflect these changes. See Note 7 to the condensed consolidated financial statements for further discussion.
Net Sales
Net sales decreased $170 million and $662 million for the three- and nine-month periods of 2024, respectively, compared to the same periods in 2023. The decrease for the three-month period primarily reflected a decline of $138 million in CT&M segment sales due to lower prices of commodities sold. The decrease for the nine-month period primarily reflected a decline of $496 million in CT&M segment sales due to lower prices of commodities sold, partially offset by higher volumes sold, a decline in Marine segment sales of $156 million due to lower freight rates, and a decline in Liquid Fuels segment sales of $143 million due to lower prices of environmental credits sold. The decreases were partially offset by an increase in Pork segment sales of $162 million due primarily to higher volumes of pork products and market hogs sold. See the net sales discussion by reportable segment below for more details.
Operating Income (Loss)
Operating income decreased $35 million and increased $42 million for the three- and nine-month periods of 2024, respectively, compared to the same periods in 2023. The decrease for the three-month period primarily reflected a decline in operating income in the Liquid Fuels and Marine segments of $30 million and $41 million, respectively, partially offset by an increase in Pork segment operating income of $52 million. The increase in operating income for the nine-month period primarily reflected an increase in Pork segment operating income of $334 million due to higher margins on the sale of pork products and market hogs, partially offset by a $164 million decrease in Marine segment operating income due to lower voyage revenue, and a $75 million decrease in Liquid Fuels segment operating income. See the operating income discussion by reportable segment below for more details.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $7 million and $16 million for the three- and nine-month periods of 2024, respectively, compared to the same periods in 2023, primarily due to higher personnel costs, partially offset by the final adjustment to the contingent consideration liability recognized and paid during the third quarter of 2023.
Interest Expense
Interest expense increased $12 million and $9 million for the three- and nine-month periods of 2024, respectively, compared to the same periods in 2023. The increase for the three-month period was primarily due to higher interest rates on more outstanding debt and a decrease in capitalized interest on construction in progress. In November 2023, Seaboard amended its Term Loan Credit Agreement and increased the principal amount from $700 million to $975 million. The increase for the nine-month period primarily related to higher interest rates on more outstanding debt, partially offset by an increase in capitalized interest on construction in progress.
Foreign Currency Gains (Losses), Net
Foreign currency gains, net decreased $9 million and $24 million for the three- and nine-month periods of 2024, respectively, compared to the same periods in 2023, primarily due to fluctuations in the South African rand.
Income Tax Expense
The effective tax rate for the three- and nine-month periods of 2024 was higher as compared to the same periods of 2023 primarily due to a valuation allowance on U.S. deferred tax assets recorded during the third quarter of 2024, partially offset by increased federal and state tax credits. As a result of establishing the valuation allowance against the U.S. deferred tax asset balances, Seaboard was unable to recognize a benefit of its year-to-date domestic losses and certain tax credits. See Note 8 to the condensed consolidated financial statements for additional information on factors that contributed to the valuation allowance during the third quarter of 2024. Seaboard has a history of using tax credits before they expire, and although U.S. GAAP required Seaboard to record a valuation allowance based on past results, management currently believes that these deferred tax assets will be realized in the future over time, although there can be no assurance as to the timing or if these will be realized at all. Seaboard’s federal tax credits have long carryforward periods that expire between 2042 and 2044. Despite recent pre-tax book losses in the U.S. operations as a result of challenging commodity conditions, Seaboard has no federal net operating loss carryforwards.
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In 2021, the Organisation for Economic Co-operation and Development released Pillar Two Model Rules (“Pillar Two”). The model is designed to ensure large multinational enterprises pay a minimum level of tax on the income arising in each jurisdiction where they operate. The rules include transitional safe harbors that provide temporary exemption of operations in some jurisdictions if certain criteria are met. Some foreign jurisdictions in which Seaboard operates enacted Pillar Two legislation effective in 2024, but the impact will not be material to Seaboard in 2024. Seaboard is continuing to monitor legislative developments across relevant jurisdictions and the potential impact on future results.
Segment Results
See Note 7 to the condensed consolidated financial statements for a reconciliation of net sales and operating income (loss) by reportable segment to consolidated net sales and consolidated operating income (loss), respectively.
Pork Segment
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||||||||||||||
| | Sept. 28, | | Sept. 30, | | | $ | | % | | Sept. 28, | | Sept. 30, | | | $ | | % | | ||||||
(Millions of dollars) |
| 2024 |
| 2023 | | | Change | | Change | | 2024 |
| 2023 | | | Change | | Change | | ||||||
Net sales | | $ | 493 | | $ | 483 | | $ | 10 | | 2 | % | | $ | 1,532 | | $ | 1,370 | | $ | 162 | | 12 | % | |
Operating income (loss) | | $ | 12 | | $ | (40) | | $ | 52 | | 130 | % | | $ | 9 | | $ | (325) | | $ | 334 | | 103 | % | |
Income from affiliates | | $ | 6 | | $ | 8 | | $ | (2) | | (25) | % | | $ | 21 | | $ | 27 | | $ | (6) | | (22) | % | |
For the three-month period of 2024, higher volumes of pork products and market hogs sold contributed sales of $31 million and were offset by a decrease in the market price, reducing sales $32 million. Renewable natural gas sales increased, but sales are currently not significant. For the nine-month period of 2024, higher volumes of pork products and market hogs sold contributed sales of $102 million and higher market prices contributed to an increase in sales of $34 million.
The increase in operating income for the three- and nine-month periods of 2024 reflected higher margins on pork products and market hogs sold, primarily due to higher sales and lower hog production costs, including lower feed costs of $41 million and $141 million, respectively, and mark-to-market gains on derivative contracts. Also, inventory adjustments to the lower of cost and net realizable value (“LCNRV”) reserve resulted in a decrease of $9 million and an increase of $44 million in operating income for the three- and nine-month periods of 2024, respectively, based on a comparison of changes to the reserve per market prices at each respective period end. Inventory adjustments to the LCNRV reserve were necessary since the third quarter of 2022 to properly state the hog inventory balances at quoted future market prices for pork products and grain costs. With more favorable pork prices and lower grain commodity costs, the LCNRV reserve was not needed for the second and third quarter of 2024. Management is unable to predict market prices for pork products, the cost of feed or third-party hogs for future periods; however, based on current conditions, management anticipates this segment to be profitable for the remainder of 2024.
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Liquid Fuels Segment
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||||||||||||||
| | Sept. 28, | | Sept. 30, | | | $ | | % | | Sept. 28, | | Sept. 30, | | | $ | | % | | ||||||
(Millions of dollars) |
| 2024 |
| 2023 | | | Change | | Change | | 2024 |
| 2023 | | | Change | | Change | | ||||||
Net sales | | $ | 182 | | $ | 208 | | $ | (26) | | (13) | % | | $ | 387 | | $ | 530 | | $ | (143) | | (27) | % | |
Operating income (loss) | | $ | (24) | | $ | 6 | | $ | (30) | | (500) | % | | $ | (100) | | $ | (25) | | $ | (75) | | (300) | % | |
The decrease in sales for the three-month period of 2024 was due to lower market prices and volumes of environmental credits sold of $36 million and $9 million, respectively, partially offset by an increase in fuel sales of $19 million. Higher volumes of fuel sold increased sales $49 million, partially offset by lower prices which decreased sales $29 million. The increase in fuel volumes sold was primarily a result of consistent production at the renewable diesel plant during the third quarter of 2024. The decrease in sales for the nine-month period of 2024 was due to lower environmental credits sales and fuel sales of $94 million and $49 million, respectively. The decrease in environmental credit sales was primarily the result of lower market prices which decreased sales $88 million. As the renewable diesel plant was not operational for approximately four months during the first half of 2024 due to maintenance and repairs, fuel sales were impacted. Lower volumes of fuel sold decreased sales $30 million.
Operating income decreased for the three- and nine-month periods of 2024 primarily due to a decrease in margins of $28 million and $71 million, respectively. Margins decreased for the three-month period due to lower sales prices and higher production costs on fuel gallons sold. The decrease for the nine-month period primarily reflected lower sales, partially offset by a decrease in production costs. Management is unable to predict market prices for biodiesel, renewable diesel, environmental credits, or the cost of feedstocks for future periods; however, based on current market conditions with lower renewable diesel and biodiesel prices and higher animal fat feedstock costs, management is uncertain whether this segment will be profitable for the remainder of 2024. Commodity markets are volatile, and management believes that current industry economic conditions are temporary.
With the passing of the Inflation Reduction Act of 2022, the federal blender’s credits are expected to expire after December 31, 2024. A new clean fuel production credit will replace the federal blender’s credits starting in 2025 with value based on the greenhouse gas emissions factor of fuel produced and sold. This clean fuel production credit is expected to be less than the federal blender’s credit; however regulatory guidance is pending in order to implement this new credit. For the nine-month periods of 2024 and 2023, the federal blender’s credits included in sales was $88 million and $82 million, respectively.
CT&M Segment
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||||||||||||||
| | Sept. 28, | | Sept. 30, | | | $ | | % | | Sept. 28, | | Sept. 30, | | | $ | | % | | ||||||
(Millions of dollars) |
| 2024 |
| 2023 | | | Change | | Change | | 2024 |
| 2023 |
| | Change | | Change | | ||||||
Net sales | | $ | 1,115 | | $ | 1,253 | | $ | (138) | | (11) | % | | $ | 3,436 | | $ | 3,932 | | $ | (496) | | (13) | % | |
Operating income | | $ | 31 | | $ | 33 | | $ | (2) | | (6) | % | | $ | 83 | | $ | 93 | | $ | (10) | | (11) | % | |
Income (loss) from affiliates | | $ | 4 | | $ | (6) | | $ | 10 | | 167 | % | | $ | 14 | | $ | (16) | | $ | 30 | | 188 | % | |
The decrease in sales for the three- and nine-month periods of 2024 was primarily due to lower average sales prices of commodities sold which decreased sales $212 million and $753 million, respectively. The decrease was partially offset by higher volumes sold, which increased sales $74 million and $257 million for the three- and nine-month periods, respectively. Sales prices for many of Seaboard’s products are directly affected by both domestic and worldwide supply and demand for commodities and competing products, all of which are determined by constantly changing market forces.
The slight decrease in operating income for the three-month period of 2024 primarily reflected lower margins related to the decline in sales prices. The decrease in operating income for the nine-month period of 2024 reflected an increase of $22 million in mark-to-market losses on derivatives contracts, partially offset by higher margins due to lower commodity costs. Due to worldwide commodity price fluctuations, the uncertain political and economic conditions in the countries in which this segment operates and the volatility in the commodity markets, management is unable to predict sales and operating results for this segment for future periods; however, management anticipates this segment will be profitable for the remainder of 2024, without the effects of mark-to-market adjustments on derivative contracts that cannot be predicted.
CT&M’s investments in affiliates are represented by numerous milling, feed and protein affiliates, with no individual investment representing a material fluctuation. The increase in income from affiliates for the three- and nine-month periods of 2024 was primarily due to higher margins with lower commodity costs.
21
Marine Segment
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||||||||||||||
| | Sept. 28, | | Sept. 30, | | | $ | | % | | Sept. 28, | | Sept. 30, | | | $ | | % | | ||||||
(Millions of dollars) |
| 2024 |
| 2023 | | | Change | | Change |
| 2024 |
| 2023 |
| | Change | | Change | | ||||||
Net sales | | $ | 324 | | $ | 333 | | $ | (9) | | (3) | % | | $ | 981 | | $ | 1,137 | | $ | (156) | | (14) | % | |
Operating income (loss) | | $ | (1) | | $ | 40 | | $ | (41) | | (103) | % | | $ | 32 | | $ | 196 | | $ | (164) | | (84) | % | |
The decrease in sales for the three- and nine-month periods of 2024 was due to an overall decline in average freight rates due to competitive pressures, partially offset by an increase in cargo volumes. Cargo volumes increased 9% and 5% for the three- and nine-month periods of 2024, respectively, compared to the same periods in 2023.
The decrease in operating income for the three-month period of 2024 was primarily the result of lower voyage revenue and an increase in voyage-related costs primarily due to the increase in cargo volumes and rates of some services received, such as stevedoring. The decrease in operating income for the nine-month period of 2024 was primarily the result of lower voyage revenue. An increase in stevedoring and terminal costs was offset by lower charter-hire costs. Management cannot predict changes in fuel costs or other voyage costs, cargo volumes or cargo rates for future periods; however, management anticipates this segment will be profitable for the remainder of 2024.
Power Segment
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||||||||||||||
| | Sept. 28, | | Sept. 30, | | | $ | | % | | Sept. 28, | | Sept. 30, | | | $ | | % | | ||||||
(Millions of dollars) |
| 2024 |
| 2023 | | | Change | | Change |
| 2024 |
| 2023 | | | Change | | Change | | ||||||
Net sales | | $ | 66 | | $ | 71 | | $ | (5) | | (7) | % | | $ | 173 | | $ | 186 | | $ | (13) | | (7) | % | |
Operating income | | $ | 20 | | $ | 27 | | $ | (7) | | (26) | % | | $ | 45 | | $ | 59 | | $ | (14) | | (24) | % | |
The decrease in sales for the three-month period of 2024 primarily reflected lower spot market rates due to lower fuel prices. The decrease in sales for the nine-month period of 2024 primarily reflected less power generation due to repairs and maintenance conducted during 2024.
The decrease in operating income for the three- and nine-month periods of 2024 primarily reflected lower revenue. During the nine-month period of 2024, lower fuel costs were offset by an increase in maintenance costs. Management cannot predict fuel costs or the extent that spot market rates will fluctuate compared to fuel costs or other power producers for future periods; however, management anticipates this segment will be profitable for the remainder of 2024. While EDM II, the barge that began operations in 2012, remains in operation in the Dominican Republic, Seaboard continues to explore strategic alternatives for this barge, including a sale or relocation.
Turkey Segment
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | ||||||||||||||||||||
| | Sept. 28, | | Sept. 30, | | | $ | | % | | Sept. 28, | | Sept. 30, | | | $ | | % | | ||||||
(Millions of dollars) |
| 2024 |
| 2023 | | | Change | | Change |
| 2024 |
| 2023 | | | Change | | Change | | ||||||
Income from affiliates | | $ | 6 | | $ | 20 | | $ | (14) | | (70) | % | | $ | 21 | | $ | 61 | | $ | (40) | | (66) | % | |
The Turkey segment represents Seaboard’s 52.5% investment in Butterball, which is accounted for using the equity method. Butterball’s net income decreased $28 million and $78 million for the three- and nine-month periods of 2024, compared to the same periods in 2023, respectively. The decrease in net income was primarily due to a decrease in sales of $50 million and $139 million for the three- and nine-month periods of 2024, respectively, due to weaker pricing, partially offset by lower production costs. The average selling price decreased 10% and 8% for the three- and nine-month periods of 2024, respectively, primarily due to lower market prices. Sales volumes did not have a significant impact on the results of the three-and nine-month periods. Management is unable to predict market prices for turkey products or the cost of feed for future periods; however, management anticipates this segment will be profitable for the remainder of 2024.
22
CRITICAL ACCOUNTING ESTIMATE
The preparation of Seaboard’s condensed consolidated financial statements requires Seaboard to make estimates, judgments, and assumptions. A summary of significant accounting policies and the critical accounting estimate is included in Seaboard’s annual report on Form 10-K for the year ended December 31, 2023. There were no changes to significant accounting policies or the critical accounting estimate during the nine months ended September 28, 2024.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Seaboard is exposed to various types of market risks in its day-to-day operations. Primary market risk exposures result from changing commodity prices, foreign currency exchange rates, interest rates and equity prices. Occasionally, Seaboard utilizes derivative instruments to manage these overall market risks. The nature of Seaboard’s market risk exposure related to these items has not changed materially since December 31, 2023. See Note 5 to the condensed consolidated financial statements for further discussion of market risk exposure.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures — Seaboard’s management evaluated, under the direction of the Chief Executive and Chief Financial Officers, the effectiveness of Seaboard’s disclosure controls and procedures as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of September 28, 2024. Based upon and as of the date of that evaluation, Seaboard’s Chief Executive and Chief Financial Officers concluded that Seaboard’s disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required. It should be noted that any system of disclosure controls and procedures, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any system of disclosure controls and procedures is based in part upon assumptions about the likelihood of future events. Due to these and other inherent limitations of any such system, there can be no assurance that any design will always succeed in achieving its stated goals under all potential future conditions.
Change in Internal Control Over Financial Reporting — There have been no changes in Seaboard’s internal control over financial reporting required by Exchange Act Rule 13a-15(f) that occurred during the fiscal quarter ended September 28, 2024 that has materially affected, or is reasonably likely to materially affect, Seaboard’s internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For information related to Seaboard’s legal proceedings, see Note 4 to the condensed consolidated financial statements.
Item 1A. Risk Factors
There have been no material changes in the risk factors as previously disclosed in Seaboard’s annual report on Form 10-K for the year ended December 31, 2023.
Item 5. Other Information
During the three months ended September 28, 2024, director or officer of Seaboard adopted or terminated a “Rule b5-1 trading arrangement” or “non-Rule b5- trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K. There were no reportable events during the quarter ended September 28, 2024 otherwise reportable under this Item 5.
23
Item 6. |
| Exhibits |
| | |
Exhibit No. | | Description |
| | |
| | |
31.1 | | |
31.2 | | |
| | |
32.1 | | |
32.2 | | |
| | |
101.INS | | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
| | |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
| | |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| | |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
| | |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
| | |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| ||
Forward-looking Statements
This Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including with respect to the financial condition, results of operations, plans, objectives, future performance and business of Seaboard. Forward-looking statements generally may be identified as statements that are not historical in nature and statements preceded by, followed by or that include the words “believes,” “expects,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends,” or similar expressions. In more specific terms, forward-looking statements, include without limitation: statements concerning projection of revenues, income or loss, adequate liquidity levels, capital expenditures, capital structure or other financial items, including the impact of mark-to-market accounting on operating income; statements regarding the plans and objectives of management for future operations; statements of future economic performance; statements regarding the intent, belief or current expectations of Seaboard and its management with respect to: (i) Seaboard’s ability to obtain adequate financing and liquidity; (ii) the price of feed stocks and other materials used by Seaboard; (iii) the sales price or market conditions for pork, agricultural commodities, renewable diesel and biodiesel, freight, sugar, alcohol, turkey and other products and services; (iv) the recorded tax effects under certain circumstances and changes in tax laws; (v) the volume of business and working capital requirements associated with the competitive trading environment for the CT&M segment; (vi) the charter hire rates and fuel prices for vessels; (vii) the fuel costs and related spot market prices for electricity in the Dominican Republic; (viii) the effect of the fluctuation in foreign currency exchange rates; (ix) the profitability or sales volume of any of Seaboard’s segments; (x) the anticipated costs and completion timetables for Seaboard’s scheduled capital improvements, acquisitions and dispositions; (xi) the productive capacity of facilities that are planned or under construction, and the timing of the commencement of operations at such facilities; (xii) potential future impact on Seaboard’s business of new legislation, rules or policies; (xiii) adverse results in pending or future litigation matters; (xiv) Seaboard’s ability to realize deferred tax assets or the need to record valuation allowances in future periods; or (xv) other trends affecting Seaboard’s financial condition or results of operations, and statements of the assumptions underlying or relating to any of the foregoing statements.
This list of forward-looking statements is not exclusive. Forward-looking statements are based only on Seaboard’s current beliefs, expectations and assumptions regarding its future financial condition, results of operations, plans, objectives, performance and business. Seaboard undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise, except as required by law. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to a variety of factors. Such factors include risks associated with international operations, including the ongoing conflict
24
between Russia and Ukraine and tensions in the Middle East, deterioration of economic conditions, interest rate fluctuations, inflation, systemic pressures in the banking industry, including potential disruptions in credit markets, supply chain and labor market disruptions, stock price fluctuations, decentralization of operations, investments in non-consolidated affiliates, inherent uncertainties in the determination of the valuation allowance on deferred income tax assets, cyber-attacks and cybersecurity breaches, the food industry, health risks to animals, fluctuations in commodity prices, increases in costs of purchases, difficulties in obtaining and retaining appropriate personnel, the loss or closure of principal properties, disruptions of operations of suppliers and co-packers, ocean transportation, fluctuations in fuel costs, general risks of litigation, compliance with complex rules and regulations, including stringent environmental regulation and measures to address climate change, and specific risks relating to Seaboard’s segments. The information contained in this report, including without limitation the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the information included under the caption “Risk Factors” in Seaboard’s latest annual report on Form 10-K describes these factors and identifies other important factors that could cause such differences.
25
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.
| Seaboard Corporation | |
| | (Registrant) |
| | |
| by: | /s/ David H. Rankin |
| | David H. Rankin |
| | Executive Vice President, Chief Financial Officer |
| | |
| | (principal financial officer) |
| | |
| Date: October 29, 2024 | |
| | |
| | |
| by: | /s/ Barbara M. Smith |
| | Barbara M. Smith |
| | Vice President, Corporate Controller |
| | |
| | (principal accounting officer) |
| | |
| Date: October 29, 2024 | |
| | |
26
Exhibit 31.1
CERTIFICATIONS
I, Robert L. Steer, certify that:
| 1. | I have reviewed this report on Form 10-Q of Seaboard Corporation; |
| 2. | Based on my knowledge, this 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 report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this 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 report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: October 29, 2024 | /s/ Robert L. Steer | |
| Robert L. Steer | |
| President, Chief Executive Officer | |
| | |
| (principal executive officer) | |
Exhibit 31.2
CERTIFICATIONS
I, David H. Rankin, certify that:
| 1. | I have reviewed this report on Form 10-Q of Seaboard Corporation; |
| 2. | Based on my knowledge, this 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 report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this 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 report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: October 29, 2024 | /s/ David H. Rankin | |
| David H. Rankin | |
| Executive Vice President, | |
| Chief Financial Officer | |
| | |
| (principal financial officer) | |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2024 (the Report) by Seaboard Corporation (the Company), the undersigned, as the Chief Executive Officer of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| ● | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| ● | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 29, 2024 | /s/ Robert L. Steer | | |
| Robert L. Steer President and Chief Executive Officer | | |
| | | |
| (principal executive officer) | | |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the filing of the Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 2024 (the Report) by Seaboard Corporation (the Company), the undersigned, as the Chief Financial Officer of the Company, hereby certifies pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
| ● | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| ● | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: October 29, 2024 | /s/ David H. Rankin | | ||
| David H. Rankin | | ||
| Executive Vice President and Chief Financial Officer | | ||
| | | ||
| (principal financial officer) | | ||