UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ________________
Commission file number: 1-3390
SEABOARD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2260388
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9000 W. 67th Street, Shawnee Mission, Kansas 66202
(Address of principal executive offices) (ZipCode)
(913) 676-8800
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class Name of each exchange on which registered
Common Stock $1.00 Par Value American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes [ ]
No [ X ]
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or 15(d) of the Act. Yes [ ] No
[ X ]
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of "accelerated filer and large
accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [X ]
Non-accelerated filer [ ]
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes [ ] No [X ]
The aggregate market value of the 354,635 shares of Seaboard
voting stock held by nonaffiliates was approximately
$453,932,800, based on the closing price of $1,280.00 per share
on July 1, 2006, the end of Seaboard's second fiscal quarter. As
of February 16, 2007, the number of shares of common stock
outstanding was 1,261,367.24.
DOCUMENTS INCORPORATED BY REFERENCE
Part I, item 1(b), a part of item 1(c)(1) and the financial
information required by item 1(d) and Part II, items 6, 7, 7A and
8 are incorporated herein by reference to Seaboard Corporation's
Annual Report to Stockholders furnished to the Commission
pursuant to Rule 14a-3(b).
Part II, a part of item 5, and Part III, a part of item 10 and
items 11, 12 and 13 are incorporated herein by reference to
Seaboard Corporation's definitive proxy statement filed pursuant
to Regulation 14A for the 2007 annual meeting of stockholders.
Forward-Looking Statements
This report, including information included or incorporated by
reference in this report, contains certain forward-looking
statements with respect to the financial condition, results of
operations, plans, objectives, future performance and business of
Seaboard Corporation and its subsidiaries (Seaboard). Forward-
looking statements generally may be identified as:
-statements that are not historical in nature, and
-statements preceded by, followed by or that include the
words "believes," "expects," "may," "will," "should,"
"could," "anticipates," "estimates," "intends" or similar
expressions.
In more specific terms, forward-looking statements include,
without limitation:
-statements concerning projection of revenues, income or
loss, capital expenditures, capital structure or other
financial items,
-statements regarding the plans and objectives of management
for future operations,
-statements of future economic performance,
-statements regarding the intent, belief or current
expectations of Seaboard and its management with respect to:
(i) Seaboard's ability to obtain adequate financing and
liquidity,
(ii) the price of feed stocks and other materials used by
Seaboard,
(iii) the sale price or market conditions for pork, sugar and
other products and services,
(iv) statements concerning management's expectations of recorded
tax effects under certain circumstances,
(v) the ability of the Commodity Trading and Milling segment to
successfully compete in the markets it serves and the volume of
business and working capital requirements associated with the
competitive trading environment,
(vi) the charter hire rates and fuel prices for vessels,
(vii) the stability of the Dominican Republic's economy and
demand for power, related spot market prices and collections of
receivables in the Dominican Republic,
(viii) the effect of the fluctuation in exchange rates for the
Dominican Republic peso,
(ix) the potential impact of the EPA consent decrees, and various
environmental actions pending or threatened against Seaboard,
(x) statements concerning profitability or sales volume of any
of Seaboard's segments,
(xi) the impact of the 2005 Daily's acquisition in enhancing
Seaboard's ability to venture into further processed pork
products,
(xii) the timetable for the Triumph Foods pork processing
plant to reach full double shift operating capacity,
(xiii) the anticipated costs and completion timetable for
Seaboard's scheduled capital improvements, or
(xiv) 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.
Forward-looking statements are not guarantees of future
performance or results. They involve risks, uncertainties and
assumptions. Actual results may differ materially from those
contemplated by the forward-looking statements due to a variety
of factors. The information contained in this Form 10-K and in
other filings Seaboard makes with the Commission, including
without limitation, the information under the headings "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in this Form 10-K,
identifies important factors which could cause such differences.
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PART I
Item 1. Business
(a) General Development of Business
Seaboard Corporation, a Delaware corporation, the successor
corporation to a company first incorporated in 1928, and
subsidiaries (Seaboard) is a diversified international
agribusiness and transportation company. In the United States,
Seaboard is primarily engaged in pork production and processing,
and ocean transportation. Overseas, Seaboard is primarily
engaged in commodity merchandising, grain processing, sugar
production, and electric power generation. See Item 1(c) (1)
(ii) "Status of Product or Segment" below for a discussion of
developments in specific segments.
Seaboard Flour LLC, a Delaware limited liability company, owns
approximately 70.9 percent of the outstanding common stock of
Seaboard. Mr. Steven J. Bresky, President and Chief Executive
Officer of Seaboard, and other members of the Bresky family,
including trusts created for their benefit, own approximately
99.5 percent of the common units of Seaboard Flour LLC.
(b) Financial Information about Industry Segments
The information required by Item 1(b) of Form 10-K relating to
Industry Segments is incorporated herein by reference to Note 13
of the Consolidated Financial Statements appearing on pages 56
through 59 of the Seaboard Corporation Annual Report to
Stockholders furnished to the Commission pursuant to Rule 14a-
3(b) and attached as Exhibit 13 to this Report.
(c) Narrative Description of Business
(1) Business Done and Intended to be Done by the Registrant
(i) Principal Products and Services
Pork Division - Seaboard, through its subsidiary Seaboard
Foods LP, previously Seaboard Farms, Inc., engages in the
businesses of hog production and pork processing in the
United States. Through these operations, Seaboard produces
and sells fresh, frozen and further processed pork products
to further processors, foodservice operators, grocery stores
and other retail outlets, and other distributors throughout
the United States. Internationally, Seaboard sells to
distributors in Japan, Mexico and other foreign markets.
Other further processing companies also purchase Seaboard's
fresh and frozen pork products in bulk and produce products,
such as lunchmeat, hams, bacon, and sausages. Fresh pork,
such as loins, tenderloins and ribs are sold to distributors
and grocery stores. Seaboard also sells further processed
pork products consisting primarily of raw and pre-cooked
bacon from its two bacon further processing plants.
Seaboard sells some of its fresh products under the brand
name Prairie Fresh and its bacon and other further
processed products under the Daily's brand name.
Seaboard's hog processing plant is located in Guymon,
Oklahoma, and operates at double shift capacity. Seaboard's
bacon plants are located in Salt Lake City, Utah and
Missoula, Montana.
Seaboard's hog production operations consist of the breeding
and raising of approximately 3.8 million hogs annually at
facilities primarily owned or at facilities owned and
operated by third parties with whom it has grower contracts.
The hog production operations are located in the States of
Oklahoma, Kansas, Texas and Colorado. As a part of the hog
production operations, Seaboard produces specially
formulated feed for the hogs at six owned feed mills. The
remaining hogs processed are purchased from third party hog
producers, primarily pursuant to purchase contracts.
Commodity Trading and Milling Division - Seaboard's
Commodity Trading and Milling Division, through its
subsidiaries, Seaboard Overseas Limited based in Bermuda,
and Seaboard Overseas Trading and Shipping (PTY), Ltd.
located in South Africa, internationally markets wheat,
corn, soybean meal and other related commodities in bulk to
third party customers and affiliated companies. These
commodities are purchased worldwide, with primary
destinations to Africa, South America, and the Caribbean.
The division sources, transports and markets approximately
3.0 million tons of grains and proteins on an annual basis.
Seaboard integrates the service of delivering commodities to
its customers through the use of chartered bulk vessels and
its eight owned bulk carriers.
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This division also operates milling and related businesses
with twenty-five locations in thirteen countries, which are
primarily supplied by the trading locations discussed above.
The grain processing businesses are operated through six
consolidated and seven non-consolidated affiliates in
Africa, the Caribbean and South America, with flour, feed
and maize milling businesses which produce approximately 1.5
million metric tons of finished products per year. Most of
the products produced by the milling operations are sold in
the countries in which the products are produced or into
adjacent countries.
Marine Division - Seaboard, through its subsidiary, Seaboard
Marine Limited, and various foreign affiliated companies and
third party agents, provides containerized cargo shipping
service to over twenty-five countries between the United
States, the Caribbean Basin, and Central and South America.
Seaboard uses a network of offices and agents throughout the
United States, Canada, Latin America and the Caribbean Basin
to book both northbound and southbound cargo to and from the
United States and between the countries it serves. Through
intermodal arrangements, Seaboard can transport cargo to and
from numerous U.S. locations by either truck or rail to and
from one of its U.S. port locations, where it is staged for
export via vessel or received as import cargo from abroad.
Seaboard's primary marine operation is located in Miami and
includes a 135,000 square foot warehouse for cargo
consolidation and temporary storage. Seaboard also has a
70 acre terminal located at the Port of Miami. Seaboard
operates a 62 acre cargo terminal facility at the Port of
Houston that includes over 690,000 square feet of on-dock
warehouse space for temporary storage of bagged grains,
resins and other cargoes. Seaboard also makes scheduled
vessel calls in Philadelphia, Pennsylvania, Fernandina
Beach, Florida, New Orleans, Louisiana and approximately 38
foreign ports. At December 31, 2006, Seaboard's fleet
consists of ten owned and approximately 29 chartered
vessels, thousands of dry, refrigerated and specialized
containers and related equipment. In January 2007, Seaboard
purchased a vessel previously chartered. Seaboard also
provides cargo transportation service from its domestic
ports of call to and from multiple foreign destinations
where Seaboard does not make vessel calls through connecting
carrier agreements with third party regional and global
carriers.
Sugar and Citrus Division - Seaboard, through its
subsidiary, Ingenio y Refineria San Martin del Tabacal and
other Argentine non-consolidated affiliates, is involved in
the production and refining of sugar cane and the production
and processing of citrus in Argentina. This division also
purchases sugar and citrus in bulk from third parties within
Argentina for subsequent resale. The sugar products are
primarily sold in Argentina, primarily to retailers, soft
drink manufacturers, and food manufacturers, with some
exports to the United States, South America and Europe while
the citrus products are primarily exported to the global
market. Seaboard grows a large portion of the sugar cane on
approximately 50,000 acres of land it owns in northern
Argentina. The cane is processed at an owned mill, with a
current processing capacity of over 200,000 metric tons of
sugar and over four million gallons of alcohol per year.
The sugar mill is one of the largest in Argentina. In
addition, approximately 3,000 acres of land is planted with
oranges.
Power Division - Seaboard, through its subsidiary,
Transcontinental Capital Corp. (Bermuda) Ltd., operates as
an independent power producer in the Dominican Republic.
This operation is exempt from U.S. regulation under the
Public Utility Holding Company Act of 1938, as amended. The
business operates two floating barges with a system of
diesel engines capable of generating a combined rated
capacity of approximately 112 megawatts of electricity.
Seaboard generates electricity into the local Dominican
Republic power grid. Seaboard is not directly involved in
the transmission or distribution of the electricity but does
have contracts to sell directly to third party users. The
barges are secured on the Ozama River in Santo Domingo,
Dominican Republic. The electricity is sold at contracted
pricing to certain large commercial users with contract
terms extending from one to four years. Seaboard also sells
power under short-term contracts with certain government-
owned distribution companies. The remaining electricity is
sold in the "spot market" at prevailing market prices,
primarily to three wholly or partially government-owned
electric distribution companies.
Other Businesses - Seaboard purchases and processes jalapeno
peppers at its owned plant in Honduras. The processed
peppers are primarily sold to a customer in the United
States, and are shipped to the United States by Seaboard's
Marine Division and distributed from Seaboard's port
facilities.
The information required by Item 1 of Form 10-K with respect
to the amount or percentage of total revenue contributed by
any class of similar products or services which account for
10 percent or more of consolidated
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revenue in any of the last three fiscal years is set
forth in Note 13 of Seaboard's Consolidated Financial
Statements, appearing on pages 56 through 59 of the
Seaboard's Annual Report to Stockholders, furnished
to the Commission pursuant to rule 14a-3(b) and attached
as Exhibit 13 to this report, which information is
incorporated herein by reference.
(ii) Status of Product or Segment
The Pork segment is currently planning to expand its
processed meats capabilities by constructing a separate
further processing plant, primarily for bacon and sausage
processing. Construction of this facility is expected to
begin during late 2007 and to be completed in early 2009.
In addition, the Pork segment is constructing a biodiesel
processing plant to utilize by-product from its Guymon
processing plant. Construction of this plant began in 2006
and is expected to be completed in 2007.
In January 2007, Seaboard repurchased the 4.74% equity
interest in its subsidiary, Seaboard Foods LP, from the
former owners of Daily's. The former owners of Daily's had
acquired this equity interest as part of Seaboard's 2005
acquisition of Daily's, a bacon processor located in the
western United States.
During 2006, Triumph Foods began production at its new pork
processing plant located in St. Joseph, Missouri, and
Seaboard begin marketing the related pork products for a fee
primarily based on the number of head processed by Triumph
Foods. This plant has similar capacity to Seaboard's Guymon
plant with the business based upon a similar integrated
model as Seaboard's. Triumph Foods expects its plant to
reach full double shift operating capacity during 2007.
Seaboard's sales prices for its pork products are primarily
based on an average sales price and mix of products sold
from both Seaboard's and Triumph Food's hog processing
plant.
During 2006, Seaboard re-established its commodity trading
business in markets associated with the sale in 2005 of some
components of its third party commodity trading operations.
During 2006, Seaboard began flour milling operations in
Madagascar through the lease of two milling facilities.
Seaboard has the ability to cancel the lease with notice
which Seaboard could do if it is determined such milling
operations cannot be profitable in this country.
Seaboard is a minority owner in a flour milling operation,
located in Angola, which closed in 2005. Seaboard is
exploring various alternatives to reopen the operation.
During 2006, Seaboard established a plan to expand the Sugar
& Citrus business. As part of this plan, Seaboard has begun
the process of purchasing land, planting an additional
15,000 acres of sugar cane and expanding the alcohol
distillery operations. This expansion should raise sugar
production from approximately 200,000 metric tons per year
to approximately 230,000 metric tons per year and alcohol
production from approximately four million gallons per year
to approximately thirteen million gallons per year.
At times during 2006, Seaboard's power production was
restricted by the regulatory authorities in the Dominican
Republic. The regulatory body schedules production based on
the amount of funds available to pay for the power produced
and the relative costs of the power produced. In addition,
Seaboard is pursuing additional investment opportunities in
the power industry.
Seaboard is part of a consortium that has been awarded the
right to construct two coal-fired 305 megawatt electric
generating plants in the Dominican Republic. The amount of
equity required for the project is uncertain but Seaboard's
50% or less share of the investment could range from $25 to
$75 million depending on the amount of financing obtained by
the group and the timing of the construction of the second
plant. The timing of the project and Seaboard's ultimate
involvement cannot be determined.
(iii) Sources and Availability of Raw Materials
None of Seaboard's businesses utilize material amounts of
raw materials that are dependent on purchases from one
supplier or a small group of dominant suppliers.
(iv) Patents, Trademarks, Licenses, Franchises and
Concessions
Seaboard uses the registered trademark of Seaboard.
5
The Pork Division uses registered trademarks relating to its
products, including Seaboard Farms, Prairie Fresh, A Taste
Like No Other, Daily's, Buffet Brand and Seaboard Farms,
Inc.. Seaboard considers the use of these trademarks
important to the marketing and promotion of its pork
products.
The Marine Division uses the trade name Seaboard Marine
which is also a registered trademark. Seaboard believes
there is significant recognition of the Seaboard Marine
trademark in the industry and by many of its customers.
Part of the sales within the Sugar and Citrus Division are
made under the Chango brand in Argentina, where this
division operates. Local sales prices are affected by sugar
import duties imposed by the Argentine government, which
affects the volume of sugar imported to and exported from
that market.
Seaboard's Power Division benefits from a tax exempt
concession granted by the Dominican Republic government
through 2012.
Patents, trademarks, franchises, licenses and concessions
are not material to any of Seaboard's other divisions.
(v) Seasonal Business
Profits from processed pork are generally higher in the fall
months. Sugar prices in Argentina are generally lower
during the typical sugarcane harvest period between June and
November. Seaboard's other divisions are not seasonally
dependent to any material extent.
(vi) Practices Relating to Working Capital Items
There are no unusual industry practices or practices of
Seaboard relating to working capital items.
(vii) Depending on a Single Customer or Few Customers
Seaboard does not have sales to any one customer equal to
ten percent or more of consolidated revenues. The Pork
division derives approximately eleven percent of its
revenues from three customers in Japan through one agent.
The Power division sells power in the Dominican Republic to
a limited number of contract customers and on the spot
market accessed primarily by three wholly or partially
government-owned distribution companies.
Seaboard's Produce Division sells nearly all of its
processed jalapeno peppers to one customer under a contract
expiring in 2008. We do not believe the loss of this
customer would have a material adverse effect on Seaboard's
consolidated financial position or results of operations.
No other division has sales to a few customers which, if
lost, would have a material adverse effect on any such
segment or on Seaboard taken as a whole.
(viii) Backlog
Backlog is not material to Seaboard businesses.
(ix) Government Contracts
No material portion of Seaboard business involves government
contracts.
(x) Competitive Conditions
Competition in Seaboard's Pork Division comes from a variety
of national, international and regional producers and
processors and is based primarily on product quality,
customer service and price. According to recent
publications by Successful Farming and Informa Economics,
trade publications, Seaboard ranks as one of the nation's
top five pork producers (based on sows in production) and
top ten pork processors (based on daily processing
capacity).
Seaboard's ocean liner service for containerized cargoes
faces competition based on price and customer service.
Seaboard believes it is among the top five ranking ocean
liner services for containerized cargoes in the Caribbean
Basin based on cargo volume.
Seaboard's sugar business owns one of the largest sugar
mills in Argentina and faces significant competition for
sugar sales in the local Argentine market. Sugar prices in
Argentina can fluctuate compared to world markets due to
current Argentine government price protection policies.
6
Seaboard's Power Division is located in the Dominican
Republic. Power generated by this segment is sold on the
spot market or to contract customers at prices primarily
based on market conditions rather than cost-based rates.
(xi) Research and Development Activities
Seaboard conducts research and development activities
focused on various aspects of Seaboard's vertically
integrated pork processing system, including improving
product quality, production processes, animal genetics,
nutrition and health. Incremental costs incurred to perform
these tests are expensed as incurred and are not material to
operating results.
(xii) Environmental Compliance
Seaboard is subject to numerous Federal, state and local
provisions relating to the environment which require the
expenditure of funds in the ordinary course of business.
Seaboard does not anticipate making expenditures for these
purposes, including expenditures with respect to the items
disclosed in Item 3, Legal Proceedings, which, in the
aggregate would have a material or significant effect on
Seaboard's financial condition or results of operations.
(xiii) Number of Persons Employed by Registrant
As of December 31, 2006, Seaboard, excluding non-
consolidated foreign affiliates, had 10,363 employees, of
whom 5,545 were employed in the United States.
Approximately 2,000 employees in Seaboard's Pork Division
were covered by collective bargaining agreements as of
December 31, 2006. Seaboard considers its employee
relations to be satisfactory.
(d) Financial Information about Geographic Areas
The financial information required by Item 1(d) of Form 10-K
relating to export sales is incorporated herein by reference to
Note 13 of Seaboard's Consolidated Financial Statements appearing
on pages 56 through 59 of Seaboard's Annual Report to
Stockholders furnished to the Commission pursuant to Rule 14a-
3(b) and attached as Exhibit 13 to this report.
Seaboard considers its relations with the governments of the
countries in which its foreign subsidiaries and affiliates are
located to be satisfactory, but these foreign operations are
subject to risks of doing business in lesser-developed countries
which are subject to potential civil unrests and government
instabilities, increasing the exposure to potential
expropriation, confiscation, war, insurrection, civil strife and
revolution, sales price controls, currency inconvertibility and
devaluation, and currency exchange controls. To minimize certain
of these risks, Seaboard has insured certain investments in its
affiliate flour mills in Haiti, Lesotho, Mozambique, Republic of
Congo and Zambia, to the extent available and deemed appropriate
against certain of these risks with the Overseas Private
Investment Corporation, an agency of the United States
Government. Nigeria is presently experiencing an increase in
insurrection and civil unrest in certain parts of the country but
not in areas where Seaboard primarily operates and, to date, this
has not had any effect on Seaboard's flour and feed operations in
that country. Currently, these situations are not expected to
have any material effect on Seaboard's cash flows or results of
operations. At the date of this report, Seaboard is not aware of
any other situations referred to above which could have a
material effect on Seaboard's business.
(e) Available Information
Seaboard electronically files with the Commission annual reports
on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports pursuant to Section
13(a) or 15(d) of the Exchange Act. The public may read and copy
any materials filed with the Commission at their public reference
room located at 100 F Street N.E., Washington, D.C. 20549. The
public may obtain further information concerning the public
reference room and any applicable copy charges, as well as the
process of obtaining copies of filed documents by calling the
Commission at 1-800-SEC-0330.
The Commission maintains an Internet site that contains reports,
proxy and information statements, and other information regarding
electronic filers at www.sec.gov. Seaboard provides access to
its most recent Form 10-K, 10-Q and 8-K reports, and any
amendments to these reports, on its Internet website,
www.seaboardcorp.com, free of charge, as soon as reasonably
practicable after those reports are electronically filed with the
Commission.
7
Please note that any internet addresses provided in this report
are for information purposes only and are not intended to be
hyperlinks. Accordingly, no information provided at such
Internet addresses is intended or deemed to be incorporated
herein by reference.
Item 1A. Risk Factors
Seaboard has identified important risks and uncertainties that
could affect the results of operations, financial condition or
business and that could cause them to differ materially from
Seaboard's historical results of operations, financial condition
or business, or those contemplated by forward-looking statements
made herein or elsewhere, by, or on behalf of, Seaboard. Factors
that could cause or contribute to such differences include, but
are not limited to, those factors described below.
(a) General
(1)Seaboard's Operations Are Subject To The General Risks Of
The Food Industry. The segments of the business that are in the
food products manufacturing industry are subject to the risks
posed by:
- food spoilage or food contamination;
- evolving consumer preferences and nutritional and health-
related concerns;
- federal, state and local food processing controls;
- consumer product liability claims;
- product tampering;
- the possible unavailability and/or expense of liability
insurance.
If one or more of these risks were to materialize,
Seaboard's revenues could decrease, costs of doing business
could increase, and Seaboard's operating results could be
adversely affected.
(2)Foreign Political And Economic Conditions Have A Significant
Impact On Seaboard's Business. Seaboard is a diverse
agribusiness and transportation company with global operations in
several industries. Most of the sales and costs of Seaboard's
segments are significantly influenced by worldwide fluctuations
in commodity prices or changes in foreign political and economic
conditions. Accordingly, sales, operating income and cash flows
can fluctuate significantly from year to year. In addition,
Seaboard's international activities pose risks not faced by
companies that limit themselves to United States markets. These
risks include:
- changes in foreign currency exchange rates;
- foreign currency exchange controls;
- changes in a specific country's or region's political or
economic conditions, particularly in emerging markets;
- hyperinflation;
- heightened customer credit risk;
- tariffs, other trade protection measures and import or
export licensing requirements;
- potentially negative consequences from changes in tax laws;
- different legal and regulatory structures and unexpected
changes in legal and regulatory requirements; and
- negative perception within a foreign country of a United
States company doing business in that foreign country.
Seaboard cannot assure you that it will be successful in
competing effectively in international markets.
(3)Seaboard's Common Stock Is Thinly Traded And Subject to
Daily Price Fluctuations. The common stock of Seaboard is
closely held (70.9%) and thinly traded on a daily basis on the
American Stock Exchange. Accordingly, the price of a share of
common stock can fluctuate more significantly from day-to-day
than a widely held stock that is actively traded on a daily
basis.
(b) Pork Division
(1)Fluctuations In Commodity Pork Prices Could Adversely Affect
Seaboard's Results Of Operations. Sale prices for Seaboard's
pork products are directly affected by both domestic and world
wide supply and demand for pork products and other proteins, all
of which are determined by constantly changing market forces of
supply and demand as well as other factors over which Seaboard
has little or no control. Commodity pork prices
8
demonstrate a cyclical nature over periods of years, reflecting
changes in the supply of fresh pork and competing proteins on
the market, especially beef and chicken. In addition, there
could be weakness in the sales prices for Seaboard's pork
products due to marketing the increased volumes of pork products
produced by Triumph Foods. Seaboard's results of operations
could be adversely affected by fluctuations in pork commodity prices.
(2)Increases In The Costs Of Seaboard's Feed Components And Hog
Purchases Could Adversely Affect Seaboard's Costs And Operating
Margins. Feed costs are the most significant single component of
the cost of raising hogs and can be materially affected by
commodity price fluctuations for corn and soybean meal. The
results of Seaboard's pork division business can be negatively
affected by increased costs of Seaboard's feed components. The
recent increase in construction of ethanol plants has elevated
this risk as it has increased the competing demand for feed
ingredients, primarily corn. Similarly, accounting for
approximately 20% of Seaboard's total hogs slaughtered, the cost
of third party hogs purchased fluctuates with market conditions
and can have an impact on Seaboard's total costs. The cost and
supply of feed components and the third party hogs that we
purchase are determined by constantly changing market forces of
supply and demand, which are driven by matters over which we have
no control, including weather, current and projected worldwide
grain stocks and prices, grain export prices and supports and
governmental agricultural policies. Seaboard attempts to manage
certain of these risks through the use of financial instruments,
however this may also limit its ability to participate in gains
from favorable commodity fluctuations. Unless wholesale pork
prices correspondingly increase, increases in the prices of
Seaboard's feed components or in the cost of third party hogs
purchased would adversely affect Seaboard's operating margins.
(3)Seaboard's Ability To Attract And Retain Appropriate
Personnel At Remote Locations Is Important To Seaboard's
Business. The remote locations of the pork processing plant and
live hog operations could negatively affect the availability and
cost of labor. Seaboard is dependent on having sufficient
properly trained operations personnel. Attracting and retaining
qualified personnel is important to Seaboard's success. The
inability to acquire and retain the services of such personnel
could have a material adverse effect on Seaboard's operations.
(4)The Loss Of Seaboard's Sole Hog Processing Facility Would
Adversely Affect Seaboard's Business. Seaboard's Pork segment is
largely dependant on the continued operation of a single hog
processing facility. The loss of or damage to this facility for
any reason - including fire, tornado, governmental action or
other reason - would adversely affect Seaboard and Seaboard's
pork products business.
(5)Environmental Regulation And Related Litigation Could Have A
Material Adverse Effect On Seaboard. Seaboard's operations and
properties are subject to extensive and increasingly stringent
laws and regulations pertaining to, among other things, the
discharge of materials into the environment and the handling and
disposition of wastes (including solid and hazardous wastes) or
otherwise relating to protection of the environment. Failure to
comply with these laws and regulations and any future changes to
them may result in significant consequences to Seaboard,
including civil and criminal penalties, liability for damages and
negative publicity. Some requirements applicable to Seaboard may
also be enforced by citizen groups. Seaboard has incurred, and
will continue to incur, significant capital and operating
expenditures to comply with these laws and regulations.
(6)Health Risk To Livestock Could Adversely Affect Production,
The Supply Of Raw Materials And Seaboard's Business. Seaboard is
subject to risks relating to its ability to maintain animal
health and control diseases. The general health of the hogs and
the reproductive performance of the sows can have an adverse
impact on production and production costs, the supply of raw
material to Seaboard's pork processing operations and consumer
confidence. If Seaboard's hogs are affected by disease, Seaboard
may be required to destroy infected livestock, which could
adversely affect Seaboard's production or ability to sell or
export its products. Moreover, the herd health of third party
suppliers could adversely affect the supply and cost of hogs
available for purchase by Seaboard. Adverse publicity concerning
any disease or health concern could also cause customers to lose
confidence in the safety and quality of Seaboard's food products.
(7)If Seaboard's Pork Products Become Contaminated, We May Be
Subject To Product Liability Claims And Product Recalls. Pork
products may be subject to contamination by disease producing
organisms, or pathogens. These pathogens are generally found in
the environment and as a result, regardless of the manufacturing
practices employed, there is a risk that they as a result of food
processing could be present in Seaboard's processed pork
products. Once contaminated products have been shipped for
distribution, illness and death may result if the pathogens are
not eliminated at the further processing, foodservice or consumer
level. Even an
9
inadvertent shipment of contaminated products is a violation of
law and may lead to increased risk of exposure to product liability
claims, product recalls and increased scrutiny by federal and state
regulatory agencies and may have a material adverse effect on
Seaboard's business, reputation, prospects, results of operations
and financial condition.
(8)Corporate Farming Legislation Could Result In The
Divestiture Or Restructuring Of Seaboard's Pork Operations. The
development of large corporate farming operations and
concentration of hog production in larger-scale facilities has
engendered opposition from residents of states in which Seaboard
conducts its pork processing and live hog operations. In
response, corporate farming legislation periodically has been
introduced in the United States Senate and House of
Representatives, as well as in several state legislatures. These
proposed anti-corporate farming bills have included provisions to
prohibit or restrict meat packers, such as Seaboard, from owning
or controlling livestock intended for slaughter, which would
require divestiture or restructuring of Seaboard's operations.
(9)International Trade Barriers Could Adversely Affect
Seaboard's Pork Operations. This segment realizes a significant
portion of its revenues from international markets, particularly
Japan. International sales are subject to risks related to
general economic conditions, imposition of tariffs, quotas, trade
barriers and other restrictions, enforcement of remedies in
foreign jurisdictions and compliance with applicable foreign
laws, and other economic and political uncertainties. These and
other risks could result in border closings or other
international trade barriers having an adverse effect on
Seaboard's earnings.
(c) Commodity Trading & Milling Division
(1)Seaboard's Commodity & Milling Division Is Particularly
Subject To Risks Associated With Foreign Operations. This
segment principally operates in Africa, Bermuda, South America
and the Caribbean and, in most cases, in what are generally
regarded to be lesser developed countries. Many of these foreign
operations are subject to risks of doing business in lesser-
developed countries which are subject to potential civil unrests
and government instabilities, increasing the exposure to
potential expropriation, confiscation, war, insurrection, civil
strife and revolution, currency inconvertibility and devaluation,
and currency exchange controls, in addition to the risks of
overseas operations mentioned in clause (a)(2) above.
(2)Fluctuations In Commodity Grain Prices Could Adversely
Affect The Business Of Seaboard's Commodity & Milling Division.
This segment's sales are significantly affected by fluctuating
worldwide prices for various commodities, such as wheat, corn and
soybeans. These prices are determined by constantly changing
market forces of supply and demand as well as other factors over
which Seaboard has little or no control. North American and
European subsidized wheat and flour exports, including donated
food aid, and world-wide and local crop production can contribute
to these fluctuating market conditions and can have a significant
impact on the trading and milling businesses' sales, value of
commodities held in inventory and operating income. Seaboard's
results of operations could be adversely affected by fluctuations
in commodity prices.
(3)Seaboard's Commodity & Milling Division Largely Depends On
The Availability Of Chartered Ships. Most of Seaboard's third
party trading is transported with chartered ships. Charter hire
rates, influenced by available charter capacity and demand for
worldwide trade in bulk cargoes, and related fuel costs can
impact business volumes and margins.
(4)Seaboard's Failure To Establish Economic Hedges For
Commodities May Adversely Affect Seaboard's Business. The
commodity trading portion of the business enters into various
commodity derivatives and, in some cases, foreign exchange
derivatives to create an economic hedge for commodity trades it
executes with its customers. Failure to execute or improper
execution of a derivative position or a firmly committed sale or
purchase contract could have an adverse impact on the results of
operations and liquidity.
(5)This Segment is Subject to Higher than Normal Risks for
Attracting and Retaining Key Personnel. In the Commodity Trading
environment, a loss of a key employee such as a commodity trader
can have a negative impact resulting from the loss of revenues as
personal customer relationships can be vital to obtaining and
retaining business with various foreign customers. In the
milling portion of this segment, employing and retaining
qualified expatriate personnel is a key element of success given
the difficult living conditions, the unique operating
environments and the reliance on a relatively small number of
executives to manage each individual location.
10
(d) Marine Division
(1)The Demand For Seaboard's Marine Division's Services Are
Affected By International Trade And Fluctuating Freight Rates.
This segment provides containerized cargo shipping services
primarily from the United States to over twenty-five different
countries in the Caribbean Basin, and Central and South America.
In addition to the risks of overseas operations mentioned in
clause (a)(2) above, fluctuations in economic conditions,
unstable or hostile local political situations in the countries
in which Seaboard operates can affect import/export trade volumes
and the price of container freight rates and adversely affect
Seaboard's results of operations.
(2)Chartered Ships Are Subject To Fluctuating Rates. The
largest expense for this division is time charter cost. Certain
of the ships are under charters longer than one year while others
are less than one year. These costs can vary greatly due to a
number of factors including the worldwide supply and demand for
shipping. It is not possible to determine in advance whether a
charter contract for more or less than one year will be favorable
to Seaboard's business. Accordingly, entering into long-term
charter hire contracts during periods of decreasing charter hire
costs or short term charter hire contracts during periods of
increasing charter hire costs could have an adverse affect on
Seaboard's results of operation.
(3)Increasing Fuel Prices Can Adversely Affect Seaboard's
Business. Ship fuel expenses are one of the segment's largest
expenses. These costs can vary greatly from year-to-year
depending on world fuel prices. Although a fuel surcharge can be
added to the freight rates charged by Seaboard to its customers,
increases in the surcharge to a customer can lag actual fuel cost
increases paid by Seaboard and can be influenced by competitive
pressures thereby having an adverse effect on our results of
operations. Also, but to a lesser extent, fuel price increases
can impact the cost of inland transportation costs.
(4)Marine Transportation Is An Inherently Risky Business.
Seaboard's vessels and their cargoes are at risk of being damaged
or lost because of events such as:
- marine disasters;
- bad weather;
- mechanical failures;
- grounding, fire, explosions and collisions;
- human error; and
- war and terrorism.
All of these hazards can result in death or injury to
persons, loss of property, environmental damages, delays or
rerouting. If one of Seaboard's vessels were involved in an
accident, the resulting media coverage could have a material
adverse effect on Seaboard's business, financial condition
and results of operations. Moreover, Seaboard's port
operations can be subject to disruption due to hurricanes,
especially at Seaboard's major port of operations in Miami,
Florida, which could have an adverse effect on our results
of operations.
(5)Seaboard is Subject To Complex Laws And Regulations That Can
Adversely Affect The Cost, Manner Or Feasibility Of Doing
Business. Increasingly stringent federal, state and local laws
and regulations governing worker health and safety, environmental
protection, port and terminal security, and the operation of
vessels significantly affect Seaboard's operations. Many aspects
of the marine industry are subject to extensive governmental
regulation by the Federal Maritime Commission, the U.S. Coast
Guard, and U.S. Customs and Border Protection, and to regulation
by private industry organizations. Compliance with applicable
laws, regulations and standards may require installation of
costly equipment or operational changes, while the failure to
comply may result in administrative and civil penalties, criminal
sanctions or the suspension or termination of Seaboard's
operations.
(e) Sugar and Citrus Division
(1)The Success Of This Segment Depends On The Condition Of The
Argentinean Economy And Political Climate. This segment operates
a sugar mill in Argentina, locally growing a substantial portion
of the sugar cane processed at the mill. The majority of the
sugar sales are within Argentina. Fluctuations in economic
conditions or changes in the Argentine political climate can have
an impact on the costs of operations and the sale price of sugar.
In this regard, local sale prices are affected by sugar import
duties imposed by the Argentine government, which affects the
volume of sugar imported to and exported from that market. If
import duties are changed, this could have a negative impact on
Seaboard's sale price of sugar. In addition, recently the
Argentine government
11
began to attempt controlling inflation by instituting price
controls on commodities, including sugar, which could adversely
impact the local sales price of sugar and the results of
operations for this segment.
(2)This Segment Is Subject To The Risks That Are Inherent In
Any Agricultural Business. Seaboard's results of operations for
this segment may be adversely affected by numerous factors over
which we have little or no control and that are inherent in any
agricultural business, including reductions in the market prices
for Seaboard's products, adverse weather and growing conditions,
pest and disease problems, and new government regulations
regarding agriculture and the marketing of agricultural products.
Of these risks, weather particularly can adversely affect the
amount and quality of the sugar cane produced by Seaboard and
Seaboard's competitors located in other regions of Argentina.
(3)The Loss Of Seaboard's Sole Processing Facility Would
Adversely Affect The Business Of This Segment. Seaboard's Sugar
and Citrus segment is largely dependant on the continued
operation of a single processing facility. The loss of or damage
to this facility for any reason - including fire, tornado,
governmental action or other reason - would adversely affect the
business of this segment.
(f) Power Division
(1)This Segment Is Subject To Risks Of Doing Business In The
Dominican Republic. This segment operates in the Dominican
Republic (DR). In addition to significant currency fluctuations
and the other risks of overseas operations mentioned in clause
(a)(2) above, this segment can experience difficulty in obtaining
timely collections of trade receivables from the government
partially-owned distribution companies or other companies that
must also collect from the government in order to make payments
on their accounts. Currently, the DR does not allow a free
market to enable prices to rise with demand which would limit our
profitability in this business. The government has the ability
to arbitrarily decide which power units will be able to operate,
which could have adverse effects on results of operations.
(2)Increases In Fuel Costs Could Adversely Affect Seaboard's
Operating Margins. Fuel is the largest cost component of this
segment's business and, therefore, margins may be adversely
affected by fluctuations in fuel if such increases can not be
fully passed to customers.
Item 1B. Unresolved Staff Comments
None
Item 2. Properties
(1) Pork - Seaboard's Pork Division owns a hog processing plant
in Guymon, Oklahoma, which opened in 1995. It has a daily
double shift capacity to process approximately 16,000 hogs and
generally operates at capacity with additional weekend shifts
depending on market conditions. The plant is utilized at near
capacity throughout the year. Seaboard's hog production
operations consist of the breeding and raising of approximately
3.8 million hogs annually at facilities it primarily owns or at
facilities owned and operated by third parties with whom it has
grower contracts. This business owns and operates six centrally
located feed mills which have a combined capacity to produce
approximately 1,700,000 tons of formulated feed annually used
primarily to support Seaboard's existing hog production, and has
the capability of supporting additional hog production in the
future. These facilities are located in Oklahoma, Texas, Kansas
and Colorado.
Seaboard's Pork Division also owns two bacon further processing
plants located in Salt Lake City, Utah and Missoula, Montana.
These plants are utilized at or near capacity throughout the
year, which is a combined daily smoking capacity of approximately
300,000 pounds of raw pork bellies.
(2) Commodity Trading and Milling - Seaboard's Commodity Trading
and Milling Division owns, in whole or in part, grain-processing
and related agribusiness operations in thirteen countries which
have the capacity to mill over 6,600 metric tons of wheat and
maize per day. In addition, Seaboard has feed mill capacity of
in excess of 128 metric tons per hour to produce formula animal
feed. The milling operations located in Democratic Republic of
Congo, Ecuador, Guyana, Haiti, Kenya, Lesotho, Mozambique,
Nigeria, Republic of Congo, Sierra Leone, Uganda and Zambia own
their facilities; in Kenya, Lesotho, Mozambique, Nigeria,
Republic of Congo and Sierra Leone the land the mills are located
on is leased under long-term agreements; and, in Madagascar the
milling facilities are leased. Certain foreign milling
operations may operate at less than full capacity due to low
demand related to poor consumer purchasing power, excess
12
milling capacity in their competitive environment and European-
subsidized wheat and flour exports. Seaboard also owns seven
9,000 metric- ton deadweight dry bulk carriers, one 23,400
metric ton deadweight dry bulk carrier, and "time charters" (the
charter of a vessel, whereby the vessel owner is responsible to
provide the captain and crew necessary to operate the vessel)
under short-term agreements, between eleven and fifteen bulk
carrier ocean vessels with deadweights ranging from 4,000 to
64,000 metric tons.
(3) Marine - Seaboard's Marine Division leases a 135,000 square
foot warehouse and 70 acres of port terminal land and facilities
in Miami, Florida which are used in its containerized cargo
operations. Seaboard also leases an approximately 62 acre cargo
handling and terminal facility in Houston, Texas, which includes
several on-dock warehouses totaling over 690,000 square feet for
cargo storage. At December 31, 2006, Seaboard owned ten ocean
cargo vessels with deadweights ranging from 2,600 to 14,545
metric tons and time charters under long-term contracts ranging
from one to three years, and short-term agreements, of
approximately twenty-nine containerized ocean cargo vessels with
deadweights ranging from 3,377 to 20,433 metric tons. In January
2007, Seaboard purchased a vessel previously chartered with a
deadweight of 19,000 metric tons. Seaboard owns or leases an
aggregate of approximately 42,000 dry, refrigerated and
specialized containers and related equipment.
(4) Sugar and Citrus - Seaboard's Argentine Sugar and Citrus
Division owns approximately 50,000 acres of planted sugarcane and
approximately 3,000 acres of orange trees. Depending on local
harvest and market conditions, this business also purchases third
party sugar and citrus for resale. In addition, this division
owns a sugar mill with a current capacity to process over 200,000
metric tons of sugar and over four million gallons of alcohol per
year. This capacity is sufficient to process all of the cane
harvested by this division and certain additional quantities
harvested on behalf of the third party farmers in the region.
The sugarcane fields and processing mill are located in northern
Argentina in the Salta Province, which experiences seasonal
rainfalls that may limit the harvest season, which then affects
the duration of mill operations and quantities of sugar produced.
This division also owns a juice processing plant and fresh fruit
packaging plant with capacity to produce approximately 5,000 tons
of concentrated juice and package approximately 400,000 boxes of
fresh fruit annually.
(5) Power - Seaboard's Power Division owns two floating electric
power generating facilities, consisting of a system of diesel
engines mounted onto barge-type vessels, with a combined rated
capacity of approximately 112 megawatts, both located on the
Ozama River in Santo Domingo, Dominican Republic. The barges
historically generated power at near capacity throughout the year
as the demand for power in the Dominican Republic exceeds
reliable power supply. Seaboard operates as an independent power
producer. Seaboard is not directly involved in the transmission
and distribution facilities that deliver the power to the end
users but does have contracts to sell directly to third party
users.
(6) Other - Seaboard owns a jalapeno pepper processing plant and
warehouse in Honduras.
Management believes that Seaboard's present facilities are
adequate and suitable for its current purposes.
Item 3. Legal Proceedings
Sierra Club Settlement
In order to settle threatened additional litigation with Sierra
Club, Seaboard's subsidiary, Seaboard Foods LP ("Seaboard
Foods"), agreed to conduct an investigation to determine if
corrective action is required at three farms purchased from PIC
International Group, Inc. ("PIC") located in Kingfisher and Major
Counties in Oklahoma according to an agreed-upon process. Based
on the investigation, it has been determined that two farms do
not require any corrective action. The investigation at the one
remaining farm concluded the lagoon at this farm is a likely
source of elevated nitrates in the ground water. Seaboard Foods
advised the Oklahoma Department of Agriculture, Food & Forestry
as to this fact, and is in the process of getting approval for
and making the necessary corrective action, which will include
constructing a replacement lagoon. The cost of the lagoon and
any other implications is not known with certainty, but the cost
is expected to be approximately $1.5 million. Seaboard Foods has
given notice to PIC as to its right to indemnification from any
loss as a result of the lagoon. As of the date of this report,
PIC has declined to provide indemnification.
Environmental Protection Agency (EPA) and State of Oklahoma
Claims Concerning Farms in Major and Kingfisher County, Oklahoma
Seaboard Foods has been subject to an ongoing Unilateral
Administrative Order ("RCRA Order"), pursuant to
13
Section 7003 of the Resource Conservation and Recovery Act, as
amended, 42 U.S.C. Sec. 6973 ("RCRA"), filed by the United States
Environmental Protection Agency ("EPA") on June 29, 2001. The
RCRA Order relates to five swine farms located in Major
County and Kingfisher County, Oklahoma purchased from PIC
International Group, Inc. ("PIC"), which is also a party to the
RCRA Order.
On September 11, 2006, Seaboard Foods and PIC signed a Consent
Decree with the United States to resolve the RCRA Order, which
Consent Decree was approved by the U.S. District Court on
December 8, 2006. Pursuant to the Consent Decree, Seaboard Foods
and PIC agreed to a civil penalty totaling $240,000, which PIC
has paid. In addition to payment of the civil penalty,
Seaboard Foods and PIC agreed to take a number of remedial
actions with respect to the five farms subject to the RCRA Order,
and Seaboard Foods agreed to take additional remedial actions
with respect to one additional farm. These remedial actions
include: groundwater remediation and lagoon replacement and/or
barn repairs at three of the farms, ongoing leak detection and
groundwater monitoring at all of the farms, contingency response
plans effective upon the future detection of infrastructure leaks
or over-application of effluent on land application acreage,
investigation work regarding infrastructure at two of the farms,
modification of land application procedures, and study of land
application practices. If the remedial actions to be taken
pursuant to the EPA Consent Decree are not effective, other
actions with additional costs will be required.
In March 2006, Seaboard Foods entered into a Settlement Agreement
with the State of Oklahoma to resolve a regulatory action with
respect to the same properties involved in the EPA RCRA Order.
Pursuant to this Settlement Agreement, Seaboard Foods paid a fine
of $100,000, agreed to undertake certain supplemental
environmental projects at a cost of $80,000, and agreed to take
remedial actions that are substantially identical to those
provided for in the Consent Decree with the United States.
PIC is jointly responsible for the remedial obligations under the
EPA Consent Decree and has been indemnifying Seaboard Foods with
respect thereto, pursuant to an indemnification agreement which
has a $5,000,000 limit. PIC previously advised Seaboard Foods
that it is not responsible for the expenditures in excess of
$5,000,000, which Seaboard Foods disputes. Although there has
been no formal resolution of this dispute with PIC, the amounts
expended to date by PIC total in excess of $5,000,000, and PIC
has continued to pay substantially all expenditures required to
comply with the EPA Consent Decree. Moreover, as noted above,
PIC is jointly responsible for the remedial obligations and
substantially all other obligations under the EPA Consent Decree.
As such, Seaboard believes that PIC will continue to take the
actions necessary and to pay the costs of complying with the EPA
Consent Decree. Seaboard Foods also believes that a more general
indemnity agreement would require indemnification of liability in
excess of $5,000,000 although PIC disputes this.
Potential Additional EPA Claims
The EPA has also been conducting a broad-reaching investigation
of Seaboard Foods, seeking information as to compliance with the
Clean Water Act ("CWA"), Comprehensive Environmental Response,
Compensation & Liability Act ("CERCLA") and the Clean Air Act.
On September 11, 2006, Seaboard Foods entered into a Consent
Decree with the United States to settle the matter, pursuant to
which Seaboard Foods agreed to pay a civil penalty of $205,000
and to take various other actions which will cost approximately
$150,000. As a part of the Consent Decree, Seaboard Foods has
applied to participate in the National AFO/CAFO Air Emissions
Agreement with the EPA. The $100,000 penalty that Seaboard Foods
will pay to participate in the National AFO/CAFO Air Emissions
Agreement will be applied to satisfy a portion of the civil
penalty payment under the Consent Decree. Consummation of the
Consent Decree with the United States is subject to approval of
the United States District Court for the Western District of
Oklahoma.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
last quarter of the fiscal year covered by this report.
Executive Officers of Registrant
The following table lists the executive officers and certain
significant employees of Seaboard. Generally, each executive
officer is elected at the annual meeting of the Board of
Directors following the Annual Meeting of Stockholders and holds
his office until the next such annual meeting or until his
successor is duly chosen and qualified. There are no
arrangements or understandings pursuant to which any executive
officer was elected.
14
Name (Age) Positions and Offices with Registrant and Affiliates
Steven J. Bresky (53) President and Chief Executive Officer
Robert L. Steer (47) Senior Vice President, Chief Financial Officer
David M. Becker (45) Vice President, General Counsel and Secretary
Barry E. Gum (40) Vice President, Finance and Treasurer
James L. Gutsch (53) Vice President, Engineering
Ralph L. Moss (61) Vice President, Governmental Affairs
David S. Oswalt (39) Vice President, Taxation and Business Development
John A. Virgo (46) Vice President, Corporate Controller and Chief
Accounting Officer
Rodney K. Brenneman (42) President, Seaboard Foods, LP
David M. Dannov (45) President, Seaboard Overseas and Trading Group
Edward A. Gonzales (41) President, Seaboard Marine Ltd.
Mr. Steven J. Bresky has served as President and Chief Executive
Officer since July 2006, previously as Senior Vice President,
International Operations of Seaboard from February 2001 to July
2006 and previously as Vice President of Seaboard from 1989 to
2001.
Mr. Steer has served as Senior Vice President, Chief Financial
Officer of Seaboard since December 2006 and previously as Senior
Vice President, Treasurer and Chief Financial Officer from 2001-
2006.
Mr. Becker has served as Vice President, General Counsel and
Secretary of Seaboard since December 2003, and previously as Vice
President, General Counsel and Assistant Secretary from 2001 to
2003.
Mr. Gum has served as Vice President, Finance and Treasurer of
Seaboard since December 2006, previously as Vice President,
Finance from 2003-2006 and Director of Finance from 2000 to 2003.
Mr. Gutsch has served as Vice President, Engineering of Seaboard
since December 1998.
Mr. Moss has served as Vice President, Governmental Affairs of
Seaboard since December 2003 and previously as Director,
Government Affairs from 1993 to 2003.
Mr. Oswalt has served as Vice President, Taxation and Business
Development of Seaboard since December 2003 and previously as
Director of Tax from 1995 to 2003.
Mr. Virgo has served as Vice President, Corporate Controller and
Chief Accounting Officer of Seaboard since December 2003 and
previously as Corporate Controller from 1996 to 2003.
Mr. Brenneman has served as President of Seaboard Foods LP
(previously Seaboard Farms Inc.) since June 2001.
Mr. Dannov has served as President of Seaboard Overseas and
Trading Group since August 2006 and previously as Vice President,
Treasurer of Seaboard Overseas and Trading Group from 1996 to
2006.
Mr. Gonzales has served as President of Seaboard Marine, Ltd.
since January 2005 and previously as Vice President of Terminal
Operations of Seaboard Marine Ltd. from 2000 to 2005.
PART II
Item 5. Market for Registrant's Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities
Seaboard's Board of Directors intends that Seaboard will continue
to pay quarterly dividends, with the actual amount of any
dividends being dependant upon such factors as Seaboard's
financial condition, results of operations and current and
anticipated cash needs, including capital requirements. As
discussed in Note 8 of the consolidated financial statements
appearing on pages 46 and 47 of the Seaboard Corporation Annual
Report to Stockholders furnished to the Commission
15
pursuant to Rule 14a-3(b) and attached as Exhibit 13 to
this Report, Seaboard's ability to declare and pay dividends is
subject to limitations imposed by the note agreements referred to
there.
Seaboard has not established any equity compensation plans or
individual agreements for its employees under which Seaboard
common stock, or options, rights or warrants with respect to
Seaboard common stock, may be granted.
There were no purchases made by or on behalf of Seaboard or any
"affiliated purchaser" (as defined by applicable rules of the
Commission) of shares of Seaboard's common stock during the
fourth quarter of the fiscal year covered by this report.
In addition to the information provided above, the information
required by Item 5 of Form 10-K is incorporated herein by
reference to (a) the information under "Stockholder Information -
Stock Listing," (b) the dividends per common share information
and market price range per common share information under
"Quarterly Financial Data" and (c) the information under "Company
Performance Graph" appearing on pages 60, 9 and 8, respectively,
of Seaboard's Annual Report to Stockholders furnished to the
Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13
to this report.
Item 6. Selected Financial Data
The information required by Item 6 of Form 10-K is incorporated
herein by reference to the "Summary of Selected Financial Data"
appearing on page 7 of Seaboard's Annual Report to Stockholders
furnished to the Commission pursuant to Rule 14a-3(b) and
attached as Exhibit 13 of this Report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by Item 7 of Form 10-K is incorporated
herein by reference to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing on pages
10 through 25 of Seaboard's Annual Report to Stockholders
furnished to the Commission pursuant to Rule 14a-3(b) and
attached as Exhibit 13 to this Report.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
The information required by Item 7A of Form 10-K is incorporated
herein by reference to (a) the material under the captions
"Derivative Instruments and Hedging Activities" within Note 1 of
Seaboard's Consolidated Financial Statements appearing on page 36
of Seaboard's Annual Report to Stockholders furnished to the
Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13
to this Report, and (b) the material under the caption
"Derivative Information" within "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
appearing on pages 23 through 25 of Seaboard's Annual Report to
Stockholders furnished to the Commission pursuant to Rule 14a-
3(b) and attached as Exhibit 13 to this Report.
Item 8. Financial Statements and Supplementary Data
The information required by Item 8 of Form 10-K is incorporated
herein by reference to Seaboard's "Quarterly Financial Data,"
"Report of Independent Registered Public Accounting Firm,"
"Consolidated Statements of Earnings," "Consolidated Balance
Sheets," "Consolidated Statements of Cash Flows," "Consolidated
Statements of Changes in Equity" and "Notes to Consolidated
Financial Statements" appearing on page 9 and pages 27 through 59
of Seaboard's Annual Report to Stockholders furnished to the
Commission pursuant to Rule 14a-3(b) and attached as Exhibit 13
to this Report.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures - As of December
31, 2006, Seaboard's management has evaluated, under the
direction of our chief executive and chief financial officers,
the effectiveness of Seaboard's disclosure controls and
procedures, as defined in Exchange Act rule 13a - 15(e). Based
upon and as of the date of that evaluation, Seaboard's chief
executive and chief financial officers concluded that Seaboard's
disclosure controls and procedures were effective to ensure that
information required to be disclosed in the reports it files and
submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported as and when required. It
should be noted that any system of disclosure controls and
procedures, however well designed and operated, can provide only
reasonable, and not absolute,
16
assurance that the objectives of the system are met. In
addition, the design of any system of disclosure controls and
procedures is based in part upon assumptions about the
likelihood of future events. Due to these and other inherent
limitations of any such system, there can be no assurance that
any design will always succeed in achieving its stated goals
under all potential future conditions.
Management's Report on Internal Control Over Financial Reporting
- Information required by Item 9A concerning management's report
on Seaboard's internal control over financial reporting, as
defined in Exchange Act rule 13a-15(f) is incorporated herein by
reference to Seaboard's "Management's Report on Internal Control
over Financial Reporting" appearing on page 26 of Seaboard's
Annual Report to Stockholders furnished to the commission
pursuant to Rule 14a-3(b) and attached as Exhibit 13 to this
report.
Registered Public Accounting Firm's Attestation Report -
Information required by Item 9A with respect to Section 308(b) of
regulation S-K is incorporated herein by reference to "Report of
Independent Registered Public Accounting Firm" appearing on Pages
27 and 28 of Seaboard's Annual Report to Stockholders furnished
to the commission pursuant to Rule 14-3(b) and attached as
Exhibit 13 to this report.
Change in Internal Controls - There has been no change in
Seaboard's internal control over financial reporting that
occurred during the fiscal quarter ended December 31, 2006 that
has materially affected, or is reasonably likely to materially
affect, Seaboard's internal control over financial reporting.
Item 9B. Other Information
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
We refer you to the information under the caption "Executive
Officers of Registrant" appearing immediately following the
disclosure in Item 4 of Part I of this report.
Seaboard has a Code of Ethics Policy (the Code) for directors,
officers (including our chief executive officer, chief financial
officer, chief accounting officer, controller and persons
performing similar functions) and employees. Seaboard has posted
the Code on its internet website, www.seaboardcorp.com, and
intends to disclose any future changes and waivers to the Code by
posting such information on that website.
In addition to the information provided above, the information
required by Item 10 of Form 10-K is incorporated herein by
reference to (a) the disclosure relating to directors under "Item
1: Election of Directors" appearing on page 4 and 5 of
Seaboard's definitive proxy statement filed pursuant to
Regulation 14A for the 2007 annual meeting of Stockholders ("2007
Proxy Statement"), (b) the disclosure relating to Seaboard's
audit committee and "audit committee financial expert" and its
director nomination procedures under "Board of Directors
Information -- Committees of the Board -- Audit Committee" and
"Board of Directors Information -- Director Nominations"
appearing on pages 6 and 7 of the 2007 Proxy Statement, and (c)
the disclosure relating to late filings of reports required under
Section 16(a) of the Securities Exchange Act of 1934 under
"Section 16(a) Beneficial Ownership Reporting Compliance"
appearing on pages 26 and 27 of the 2007 Proxy Statement.
Item 11. Executive Compensation
The information required by Item 11 of Form 10-K is incorporated
herein by reference to (a) the disclosure relating to
compensation of directors under "Board of Directors Information -
- Compensation of Directors" and "Employment Arrangements with
Named Executive Officers" appearing on page 8 and pages 10
through 12 of the 2007 Proxy Statement, and (b) the disclosure
relating to compensation of executive officers under "Executive
Compensation and Other Information," "Benefit Plans" and
"Compensation Committee Interlocks and Insider Participation,"
"Compensation Committee Report" and "Compensation Discussion and
Analysis" appearing on pages 8 through 10, and pages 12 through
24 of the 2007 Proxy Statement.
17
Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters
Seaboard has not established any equity compensation plans or
individual agreements for its employees under which Seaboard
common stock, or options, rights or warrants with respect to
Seaboard common stock may be granted.
In addition to the information provided above, the information
required by Item 12 of Form 10-K is incorporated herein by
reference to the disclosure under "Principal Stockholders" and
"Share Ownership of Management and Directors" appearing on pages
3 and 4 of the 2007 Proxy Statement.
Item 13. Certain Relationships and Related Transactions
The information required by Item 13 of Form 10-K is incorporated
herein by reference to "Compensation Committee Interlocks and
Insider Participation" appearing on pages 23 and 24 of the 2007
Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by Item 14 of Form 10-K is incorporated
herein by reference to "Item 2 Selection of Independent
Auditors" appearing on pages 24 through 26 of the 2007 Proxy
Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
1. Consolidated financial statements.
See Index to Consolidated Financial Statements on page F-1.
2. Consolidated financial statement schedules.
See Index to Consolidated Financial Statements on page F-1.
3. Exhibits.
3.1 Seaboard's Restated Certificate of Incorporation.
Incorporated herein by reference to Exhibit 3.1 of
Seaboard's Form 10-Q for the quarter ended April 1,
2006.
3.2 Seaboard's By-laws, as amended.
4.1 Note Purchase Agreement dated June 1, 1995 between
Seaboard and various purchasers as listed in the
exhibit. Incorporated herein by reference to Exhibit
4.3 of Seaboard's Form 10-Q for the quarter ended
September 9, 1995.
4.2 Seaboard Corporation 7.88% Senior Note Due June 1, 2007
issued pursuant to the Note Purchase Agreement
described above. Incorporated herein by reference to
Exhibit 4.4 of Seaboard's Form 10-Q for the quarter
ended September 9, 1995.
4.3 Seaboard Corporation Note Agreement dated as of
June 1, 1995 ($125,000,000 Senior Notes due
June 1, 2007). First Amendment to Note Agreement.
Incorporated herein by reference to Exhibit 4.8 of
Seaboard's Form 10-Q for the quarter ended
March 23, 1996.
4.4 Second Amendment to the Note Purchase Agreements dated
as of June 1, 1995 ($125,000,000 Senior Notes due June
1, 2007). Incorporated herein by reference to Exhibit
4.2 of Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.5 Seaboard Corporation Note Purchase Agreement dated as
of September 30, 2002 between Seaboard and various
purchasers as listed in the exhibit. Incorporated
herein by reference to Exhibit 4.3 of Seaboard's Form
10-Q for the quarter ended September 28, 2002.
4.6 Seaboard Corporation $32,500,000 5.8% Senior Note,
Series A, due September 30, 2009 issued pursuant to
the Note Purchase Agreement described above.
Incorporated herein by reference to Exhibit 4.4 of
Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
18
4.7 Seaboard Corporation $38,000,000 6.21% Senior Note,
Series B, due September 30, 2009 issued pursuant to
the Note Purchase Agreement described above.
Incorporated herein by reference to Exhibit 4.5 of
Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.8 Seaboard Corporation $7,500,000 6.21% Senior Note,
Series C, due September 30, 2012 issued pursuant to
the Note Purchase Agreement described above.
Incorporated herein by reference to Exhibit 4.6 of
Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.9 Seaboard Corporation $31,000,000 6.92% Senior Note,
Series D, due September 30, 2012 issued pursuant to
the Note Purchase Agreement described above.
Incorporated herein by reference to Exhibit 4.7 of
Seaboard's Form 10-Q for the quarter ended
September 28, 2002.
4.10 Seaboard Corporation Credit Agreement dated as of
December 3, 2004 ($200,000,000 revolving credit
facility expiring on December 2, 2009). Incorporated
herein by reference to Exhibit 4.14 of Seaboard's Form
10-K for fiscal year ended December 31, 2004.
4.11 Amendment No. 1 to Seaboard Corporation Credit
Agreement dated December 3, 2004 ($200,000,000
revolving credit facility expiring on December 2,
2009). Incorporated herein by reference to Exhibit 4.1
of Seaboard's Form 10-Q for the quarter ended July 2,
2005
4.12 Notice of Reduction of Aggregate Commitments (from
$200,000,000 to $100,000,000) under Credit Agreement
dated as of December 3, 2004 among Seaboard
Corporation, Bank of America, N.A., Scotia Capital,
Inc., Harris Trust and Savings Bank and Suntrust Bank
and the Other Lenders Party Hereto Incorporated herein
by reference to Exhibit 4.1 of Seaboard's Form 10-Q for
the quarter ended October 1, 2005
10.1* Seaboard Corporation Executive Retirement Plan,
2005 Amendment and Restatement dated March 6, 2006,
amending and restating the Seaboard Corporation
Executive Retirement Plan dated November 5, 2004.
Incorporated herein by reference to Exhibit 10.1 of
Seaboard's Form 10-K for fiscal year ended December 31,
2006.
10.2* Seaboard Corporation Supplemental Executive
Retirement Plan for H. Harry Bresky dated
March 21, 1995. Incorporated herein by reference to
Exhibit 10.3 of Seaboard's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
10.3* Seaboard Corporation Executive Deferred
Compensation Plan dated December 29, 2005, amending and
restating the Seaboard Corporation Executive Deferred
Compensation Plan dated January 1, 1999. Incorporated
herein by reference to Exhibit 10.3 of Seaboard's Form
10-K for fiscal year ended December 31, 2006.
10.4* Seaboard Corporation Executive Retirement Plan
Trust dated November 5, 2004 between Seaboard
Corporation and Robert L. Steer as trustee.
Incorporated herein by reference to Exhibit 10.2 of
Seaboard's Form 10-Q for the quarter ended October 2,
2004.
10.5* Seaboard Corporation Investment Option Plan dated
December 18, 2000. Incorporated herein by reference to
Exhibit 10.7 of Seaboard's Form 10-K for fiscal year
ended December 31, 2000.
10.6 Reorganization Agreement by and between Seaboard
Corporation and Seaboard Flour Corporation as of
October 18, 2002. Incorporated herein by reference to
Exhibit 10.1 of the Form 8-K dated October 18, 2002.
10.7 Purchase and Sale Agreement dated October 18, 2002 by
and between Flour Holdings LLC and Seaboard Flour
Corporation with respect to which the "Earnout
Payments" thereunder have been assigned to Seaboard
Corporation. Incorporated herein by reference to
Exhibit 10.2 of Seaboard's Form 10-Q for the quarter
ended September 28, 2002.
10.8 Marketing Agreement dated February 2, 2004 by and among
Seaboard Corporation, Seaboard Farms, Inc., Triumph
Foods LLC, and for certain limited purposes only, the
members of Triumph Foods LLC. Incorporated herein by
reference to Exhibit 10.2 of Seaboard's Form 8-K dated
February 3, 2004.
19
10.9* Seaboard Corporation Retiree Medical Benefit Plan
dated March 4, 2005. Incorporated herein by reference
to Exhibit 10.10 of Seaboard's Form 10-K for fiscal
year ended December 31, 2004.
10.10* Seaboard Corporation Executive Officers' Bonus
Policy. Incorporated herein by reference to Exhibit
10.10 of Seaboard's Form 10-K for fiscal year ended
December 31, 2006.
10.11* Employment Agreement between Seaboard Corporation
and Steven J. Bresky dated July 1, 2005. Incorporated
herein by reference to Exhibit 10.1 of Seaboard's Form
10-Q for the quarter ended July 2, 2005.
10.12* Employment Agreement between Seaboard Corporation
and Robert L. Steer dated July 1, 2005. Incorporated
herein by reference to Exhibit 10.2 of Seaboard's Form
10-Q for the quarter ended July 2, 2005.
10.13* Employment Agreement between Seaboard Farms, Inc.
and Rodney K. Brenneman dated July 1, 2005.
Incorporated herein by reference to Exhibit 10.3 of
Seaboard's Form 10-Q for the quarter ended July 2,
2005.
10.14* Employment Agreement between Seaboard Corporation
and Edward A. Gonzalez dated July 1, 2005.
Incorporated herein by reference to Exhibit 10.14 of
Seaboard's Form 10-K for fiscal year ended December 31,
2006.
10.15* Seaboard Corporation Nonqualified Deferred
Compensation Plan dated December 29, 2005.
Incorporated herein by reference to Exhibit 10.15 of
Seaboard's Form 10-K for fiscal year ended December 31,
2006.
10.16* Amendment to Employment Agreement between Seaboard
Corporation and Edward A. Gonzalez dated August 8,
2006. Incorporated herein by reference to Exhibit 10.1
of Seaboard's Form 10-Q for the quarter ended July 1,
2006.
10.17* Employment Agreement between Seaboard Corporation
and David M. Dannov dated July 1, 2006.
10.18* Second Amendment to Employment Agreement between
Seaboard Corporation and Edward A. Gonzalez dated
January 17, 2007.
13 Sections of Annual Report to security holders
specifically incorporated herein by reference herein.
21 List of subsidiaries.
31.1 Certification of the Chief Executive Officer Pursuant
to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification of the Chief Financial Officer Pursuant
to Exchange Act Rules 13a-14(a)/15d-14(a), as Adopted
Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of the Chief Executive Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of the Chief Financial Officer Pursuant
to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
* Management contract or compensatory plan or arrangement.
(b) Exhibits.
See exhibits identified above under Item 15(a)3.
(c) Financial Statement Schedules.
See financial statement schedules identified above under Item
15(a)2.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
SEABOARD CORPORATION
By /s/Steven J. Bresky By /s/Robert L. Steer
Steven J. Bresky, President and Robert L. Steer, Senior Vice
Chief Executive Officer (principal President, Chief Financial
executive officer) Officer (principal financial officer)
Date: March 5, 2007 Date: March 5, 2007
By /s/John A. Virgo
John A. Virgo, Vice President, Corporate
Controller and Chief Accounting Officer
(principal accounting officer)
Date: March 5, 2007
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of registrant and in the capacities and on the dates
indicated.
By By /s/Steven J. Bresky
H. H. Bresky, Director and Chairman Steven J. Bresky, Director
of the Board
Date: Date: March 5, 2007
By /s/David A. Adamsen By /s/Kevin M. Kennedy
David A. Adamsen, Director Kevin M. Kennedy, Director
Date: March 5, 2007 Date: March 5, 2007
By /s/Douglas W. Baena By /s/Joseph E. Rodrigues
Douglas W. Baena, Director Joseph E. Rodrigues, Director
Date: March 5, 2007 Date: March 5, 2007
21
SEABOARD CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedule
Financial Statements
Stockholders'
Annual Report Page
Report of Independent Registered Public Accounting Firm 27
Consolidated Statement of Earnings for the years
ended December 31, 2006, December 31, 2005 and
December 31, 2004 29
Consolidated Balance Sheets as of December 31, 2006
and December 31, 2005 30
Consolidated Statement of Cash Flows for the years
ended December 31, 2006, December 31, 2005 and
December 31, 2004 31
Consolidated Statement of Changes in Equity for the
years ended December 31, 2006, December 31, 2005 and
December 31, 2004 32
Notes to Consolidated Financial Statements 33
The foregoing are incorporated herein by reference.
The individual financial statements of the nonconsolidated
foreign affiliates, which would be required if each such foreign
affiliate were a Registrant, are omitted because (a) Seaboard's
and its other subsidiaries' investments in and advances to such
foreign affiliates do not exceed 20% of the total assets as shown
by the most recent consolidated balance sheet and (b) Seaboard's
and its other subsidiaries' equity in the earnings before income
taxes and extraordinary items of the foreign affiliates does not
exceed 20% of such income of Seaboard and consolidated
subsidiaries compared to the average income for the last five
fiscal years.
Combined condensed financial information as to assets,
liabilities and results of operations have been presented for
nonconsolidated foreign affiliates in Note 5 of "Notes to the
Consolidated Financial Statements."
II - Valuation and Qualifying Accounts for the years ended
December 31, 2006, 2005 and 2004 F-3
All other schedules are omitted as the required information is
inapplicable or the information is presented in the consolidated
financial statements or related consolidated notes.
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
Seaboard Corporation:
Under date of March 5, 2007, we reported on the consolidated
balance sheets of Seaboard Corporation and subsidiaries (the
Company) as of December 31, 2006 and 2005, and the related
consolidated statements of earnings, changes in equity and cash
flows for each of the years in the three-year period ended
December 31, 2006, as contained in the December 31, 2006 annual
report to stockholders. These consolidated financial statements
and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended December 31, 2006.
In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index.
This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
Our report dated March 5, 2007 contains an explanatory paragraph
that states that the Company adopted Statement of Financial
Accounting Standards No. 158, Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans, in 2006.
KPMG LLP
Kansas City, Missouri
March 5, 2007
F-2
Schedule II
SEABOARD CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In Thousands)
Balance at Provision Net deductions Balance at
beginning of year (1) (2) end ofyear
Year ended December 31, 2006:
Allowance for doubtful accounts $16,155 2,479 (3,996) $14,638
Year ended December 31, 2005:
Allowance for doubtful accounts $14,524 3,987 (2,356) $16,155
Year ended December 31, 2004:
Allowance for doubtful accounts $23,359 2,463 (11,298) $14,524
(1) The allowance for doubtful accounts provision is charged to
selling, general and administrative expenses.
(2) Includes write-offs net of recoveries and currency
translation adjustments.
F-3