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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 1, 2022

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 incorporation)

(I.R.S. Employer Identification No.)

9000 West 67th Street, Merriam, Kansas

66202

(Address of principal executive offices)

(Zip Code)

(913) 676-8928

(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:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock $1.00 Par Value

SEB

NYSE American

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   No

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). Yes   No

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.

Large Accelerated Filer

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  No  .

There were 1,160,779 shares of common stock, $1.00 par value per share, outstanding on October 26, 2022.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended

Nine Months Ended

October 1,

October 2,

October 1,

October 2,

(Millions of dollars except share and per share amounts)

2022

    

2021

    

2022

    

2021

 

Net sales:

Products (affiliate sales of $332, $382, $1,132 and $1,067)

$

2,299

$

1,908

$

6,901

$

5,728

Services (affiliate sales of $5, $6, $15 and $15)

 

541

 

355

 

1,556

 

998

Other

 

55

 

13

 

120

 

39

Total net sales

 

2,895

 

2,276

 

8,577

 

6,765

Cost of sales and operating expenses:

Products

 

2,254

 

1,782

 

6,677

 

5,282

Services

 

351

 

282

 

1,032

 

812

Other

 

43

 

12

 

104

 

40

Total cost of sales and operating expenses

 

2,648

 

2,076

 

7,813

 

6,134

Gross income

 

247

 

200

 

764

 

631

Selling, general and administrative expenses

 

92

 

88

 

271

 

262

Operating income

 

155

 

112

 

493

 

369

Other income (expense):

Interest expense

 

(13)

 

(11)

 

(23)

 

(7)

Interest income

 

9

 

5

 

21

 

16

Income (loss) from affiliates

 

48

 

(1)

 

94

 

Other investment income (loss), net

 

(64)

 

(9)

 

(291)

 

108

Foreign currency gains, net

 

9

 

5

 

21

 

7

Miscellaneous, net

 

1

 

3

 

11

 

10

Total other income (expense), net

 

(10)

 

(8)

 

(167)

 

134

Earnings before income taxes

 

145

 

104

 

326

 

503

Income tax benefit (expense)

 

1

 

(10)

 

32

 

(54)

Net earnings

$

146

$

94

$

358

$

449

Less: Net earnings attributable to noncontrolling interests

 

 

 

(1)

 

Net earnings attributable to Seaboard

$

146

$

94

$

357

$

449

Earnings per common share

$

125.78

$

81.50

$

307.55

$

387.09

Average number of shares outstanding

 

1,160,779

 

1,160,779

 

1,160,779

 

1,160,779

Other comprehensive income (loss), net of income tax expense of $1, $1, $1 and $2:

Foreign currency translation adjustment

 

(15)

 

8

 

(18)

 

8

Unrecognized pension cost

 

3

 

1

 

4

 

6

Other comprehensive income (loss), net of tax

$

(12)

$

9

$

(14)

$

14

Comprehensive income

 

134

 

103

 

344

 

463

Less: Comprehensive income attributable to noncontrolling interests

 

 

 

(1)

 

Comprehensive income attributable to Seaboard

$

134

$

103

$

343

$

463

See accompanying notes to condensed consolidated financial statements.

2

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

October 1,

December 31,

 

(Millions of dollars except share and per share amounts)

2022

    

2021

 

Assets

Current assets:

Cash and cash equivalents

$

70

$

75

Short-term investments

 

1,023

 

1,416

Receivables, net of allowance for credit losses of $32 and $31

 

884

 

762

Inventories

 

1,816

 

1,663

Other current assets

 

162

 

131

Total current assets

 

3,955

 

4,047

Property, plant and equipment, net

 

2,227

 

1,892

Operating lease right of use assets, net

403

496

Investments in and advances to affiliates

 

717

 

651

Goodwill

 

159

 

163

Other non-current assets

 

283

 

254

Total assets

$

7,744

$

7,503

Liabilities and Stockholders’ Equity

Current liabilities:

Lines of credit

$

490

$

516

Accounts payable

 

421

 

404

Deferred revenue

124

108

Operating lease liabilities

155

171

Other current liabilities

 

408

 

353

Total current liabilities

 

1,598

 

1,552

Long-term debt, less current maturities

 

703

 

708

Deferred income taxes

 

 

99

Long-term operating lease liabilities

279

360

Other non-current liabilities

 

393

 

350

Total non-current liabilities

 

1,375

 

1,517

Commitments and contingent liabilities

Stockholders’ equity:

Common stock of $1 par value. Authorized 1,250,000 shares; issued and outstanding 1,160,779 shares in 2022 and 2021

 

1

 

1

Accumulated other comprehensive loss

 

(446)

 

(432)

Retained earnings

 

5,197

 

4,847

Total Seaboard stockholders’ equity

 

4,752

 

4,416

Noncontrolling interests

 

19

 

18

Total equity

 

4,771

 

4,434

Total liabilities and stockholders’ equity

$

7,744

$

7,503

See accompanying notes to condensed consolidated financial statements.

3

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, 2020

$

1

$

(471)

$

4,287

$

11

$

3,828

Comprehensive income:

Net earnings

179

179

Other comprehensive income, net of tax

16

16

Dividends on common stock ($2.25/share)

(3)

(3)

Balances, April 3, 2021

$

1

$

(455)

$

4,463

$

11

$

4,020

Comprehensive income (loss):

Net earnings

176

176

Other comprehensive loss, net of tax

(11)

(11)

Dividends on common stock ($2.25/share)

(2)

(2)

Balances, July 3, 2021

$

1

$

(466)

$

4,637

$

11

$

4,183

Comprehensive income:

Net earnings

94

94

Other comprehensive income, net of tax

9

9

Acquisition of noncontrolling interest

6

6

Dividends on common stock ($2.25/share)

(2)

(2)

Balances, October 2, 2021

$

1

$

(457)

$

4,729

$

17

$

4,290

Balances, December 31, 2021

$

1

$

(432)

$

4,847

$

18

$

4,434

Comprehensive income (loss):

Net earnings

103

1

104

Other comprehensive loss, net of tax

(1)

(1)

Dividends on common stock ($2.25/share)

(3)

(3)

Balances, April 2, 2022

$

1

$

(433)

$

4,947

$

19

$

4,534

Comprehensive income (loss):

Net earnings

108

108

Other comprehensive loss, net of tax

(1)

(1)

Dividends on common stock ($2.25/share)

(2)

(2)

Balances, July 2, 2022

$

1

$

(434)

$

5,053

$

19

$

4,639

Comprehensive income (loss):

Net earnings

146

146

Other comprehensive loss, net of tax

(12)

(12)

Dividends on common stock ($2.25/share)

(2)

(2)

Balances, October 1, 2022

$

1

$

(446)

$

5,197

$

19

$

4,771

See accompanying notes to condensed consolidated financial statements

4

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended

 

October 1,

October 2,

(Millions of dollars)

2022

    

2021

 

Cash flows from operating activities:

Net earnings

$

358

$

449

Adjustments to reconcile net earnings to cash from operating activities:

Depreciation and amortization

 

163

 

131

Deferred income taxes

 

(103)

 

(30)

Income from affiliates

 

(94)

 

Dividends received from affiliates

 

23

 

30

Other investment loss (income), net

 

291

 

(108)

Other, net

 

26

 

17

Changes in assets and liabilities, net of dispositions:

Receivables, net of allowance for credit losses

 

(144)

 

(123)

Inventories

 

(160)

 

(343)

Other assets

 

(30)

 

(17)

Accounts payable

13

96

Other liabilities, exclusive of debt

 

34

 

(6)

Net cash from operating activities

 

377

 

96

Cash flows from investing activities:

Purchase of short-term investments

 

(447)

 

(1,777)

Proceeds from the sale of short-term investments

 

604

 

1,818

Proceeds from the maturity of short-term investments

 

15

 

25

Capital expenditures

 

(367)

 

(324)

Proceeds from the sale of property, plant and equipment

 

22

 

30

Acquisition of business

(58)

(7)

Principal payments received on notes receivable

4

21

Purchase of long-term investments

 

(113)

 

(77)

Proceeds from the sale of subsidiaries, net of cash sold

15

Proceeds from the sale of non-consolidated affiliates

 

13

 

Other, net

 

(13)

 

10

Net cash from investing activities

 

(325)

 

(281)

Cash flows from financing activities:

Uncommitted lines of credit, net

 

(5)

 

142

Draws under committed lines of credit

1,076

443

Repayments of committed lines of credit

(1,090)

(342)

Principal payments of long-term debt

 

(7)

 

(53)

Payments on finance leases

(28)

(9)

Dividends paid

 

(7)

 

(7)

Other, net

 

1

 

(1)

Net cash from financing activities

 

(60)

 

173

Effect of exchange rate changes on cash and cash equivalents

 

3

 

(2)

Net change in cash and cash equivalents

 

(5)

 

(14)

Cash and cash equivalents at beginning of year

 

75

 

76

Cash and cash equivalents at end of period

$

70

$

62

See accompanying notes to condensed consolidated financial statements.

5

SEABOARD CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Basis of Presentation and Accounting Policies

The condensed consolidated financial statements are unaudited and include the accounts of Seaboard Corporation and its subsidiaries (“Seaboard”). Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S”) have been condensed or omitted pursuant to such rules and regulations of the U.S. Securities and Exchange Commission. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes of Seaboard included in our annual report on Form 10-K for the year ended December 31, 2021. Seaboard’s first three quarterly periods include approximately 13 weekly periods ending on the Saturday closest to the end of March, June and September. Preparation of condensed consolidated financial statements requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The accompanying condensed consolidated financial statements include all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position as of October 1, 2022 and the results of operations and cash flows for the three and nine months then ended. Results of operations and cash flows for the periods presented are not necessarily indicative of results to be expected for the full year.

Supplemental Cash Flow Information

Non-cash investing activities for the nine months ended October 1, 2022, included purchases of property, plant and equipment in accounts payable of $17 million. The following table includes supplemental cash and non-cash information related to leases. Seaboard reports the amortization of right-of-use (“ROU”) assets and changes in operating lease liabilities in other liabilities, exclusive of debt in the condensed consolidated statements of cash flows.

Nine Months Ended

October 1,

October 2,

(Millions of dollars)

2022

2021

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$

145

$

117

Operating cash flows from finance leases

5

3

Financing cash flows from finance leases

28

9

ROU assets obtained in exchange for new lease liabilities:

Operating leases

$

34

$

153

Finance leases

113

49

Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill was related to an acquisition in the Pork segment of $4 million and foreign currency exchange losses of $8 million within the Commodity Trading and Milling (“CT&M”) segment. See Note 8 for further discussion of the acquisition. As of October 1, 2022, other intangible assets, included in other non-current assets, were $35 million, net of accumulated amortization of $38 million.

Income Taxes

For quarters, Seaboard computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pre-tax income or loss and adjusts the provision for discrete tax items recorded in the period.

6

Note 2 – Investments

The following is a summary of the estimated fair value of short-term investments classified as trading securities:

October 1,

December 31,

 

(Millions of dollars)

    

2022

2021

 

Domestic equity securities

$

413

$

472

Domestic debt securities

352

542

Foreign equity securities

 

134

 

193

Foreign debt securities

91

133

Money market funds held in trading accounts

20

59

Other trading securities

13

17

Total trading short-term investments

$

1,023

$

1,416

The change in unrealized gains (losses) related to trading securities still held at the end of the respective reporting period was ($65) million and ($220) million for the three and nine months ended October 1, 2022, respectively, and ($9) million and $7 million for the three and nine months ended October 2, 2021, respectively.

Seaboard had $16 million and $46 million of short-term investments denominated in foreign currencies, primarily euros, as of October 1, 2022 and December 31, 2021, respectively.

Seaboard had long-term investments of $187 million and $156 million as of October 1, 2022 and December 31, 2021, respectively, classified in other non-current assets on the consolidated balance sheets. These investments are primarily in a business development company (“BDC”), real estate and renewable energy facilities. The BDC investment is included in the fair value hierarchy table in Note 6 and the other investments are primarily accounted for under the equity method of accounting with any gains/losses recorded in other investment income (loss). During the second quarter of 2022, Seaboard committed to invest $52 million in a solar renewable energy project in Guam and received $46 million of federal investment tax credits upon commercial operation of the project that impacted Seaboard’s effective tax rate as a discrete item. Seaboard accounts for this solar investment using the flow-through method and recognized the impact of the investment tax credits in the period earned on a gross basis, with the charge related to the reduction of the investment recorded in other investment income (loss) offset by the benefit of the credits recorded in income tax benefit (expense). Seaboard funded $10 million of this commitment during the second quarter of 2022 and funded the remaining commitment of $42 million in the third quarter of 2022.

Note 3 – Inventories

The following is a summary of inventories:

October 1,

December 31,

 

(Millions of dollars)

    

2022

    

2021

At lower of FIFO cost and net realizable value (“NRV”):

Hogs and materials

$

515

$

489

Pork products and materials

 

72

 

64

Grains, oilseeds and other commodities

 

714

 

634

Biofuels and related credits

167

147

Other

 

95

 

92

Total inventories at lower of FIFO cost and NRV

 

1,563

 

1,426

Grain, flour and feed at lower of weighted average cost and NRV

 

253

 

237

 Total inventories

$

1,816

$

1,663

7

Note 4 – Lines of Credit, Long-Term Debt, Commitments and Contingencies

Lines of Credit

As of October 1, 2022, the outstanding balances under committed and uncommitted lines of credit were $143 million and $347 million, respectively. Of the total outstanding balance as of October 1, 2022, $205 million was denominated in foreign currencies with $178 million denominated in the South African rand and the remaining in various other currencies. As of December 31, 2021, the outstanding balances under committed and uncommitted lines of credit were $157 million and $359 million, respectively. Of the total outstanding balance as of December 31, 2021, $218 million was denominated in foreign currencies, with $177 million denominated in the South African rand and the remaining in various other currencies. The weighted average interest rate for outstanding lines of credit was 6.19% and 2.71% as of October 1, 2022 and December 31, 2021, respectively.

As of both October 1, 2022 and December 31, 2021, Seaboard had a committed line of credit with borrowing capacity of $250 million. During the third quarter of 2022, Seaboard amended this committed line of credit agreement to extend the maturity date to December 31, 2022, and change the interest rate index from LIBOR to SOFR (Secured Overnight Financing Rate), as LIBOR will cease to exist after June 30, 2023.

Long-term Debt

Long-term debt includes borrowings under term loans and other contractual obligations, including notes payable. The interest rate on the Term Loan due 2028 was 4.74% and 1.73% as of October 1, 2022 and December 31, 2021, respectively.

The following is a summary of long-term debt:

October 1,

December 31,

(Millions of dollars)

2022

2021

Term Loan due 2028

$

672

$

677

Foreign subsidiary obligations

1

1

Other long-term debt

38

39

Total debt at face value

711

717

Current maturities and unamortized discount and costs

(8)

(9)

Long-term debt, less current maturities and unamortized discount and costs

$

703

$

708

Seaboard was in compliance with all restrictive debt covenants relating to these agreements as of October 1, 2022.

Legal Proceedings

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 four of her siblings (Ms. de Fernandez, together with the Inheritors and the Estates being referred to as the “Plaintiffs”) against Seaboard Corporation in the U.S. District Court for the District of Delaware (the “Delaware District Court”), making claims under Title III of the Cuban Liberty and Solidarity Act of 1996, also known as the Helms-Burton Act (the “Act”). The same Plaintiffs filed a separate lawsuit against Seaboard Marine Ltd. (“Seaboard Marine”) on December 20, 2020, in the U.S. District Court for the Southern District of Florida (the “Florida District Court”).

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 70-year concession to develop port facilities at Mariel Bay, Cuba, and ownership of surrounding land, and that these and other property rights were confiscated by the Cuban government in 1960. The complaints further allege that Seaboard Corporation and Seaboard Marine knowingly and intentionally “trafficked” in the confiscated property within the meaning of the Act by carrying and/or directing cargo to the Port of Mariel.

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 20% of the companies that were granted the concession and owned land in or around Mariel Bay, Cuba. On August 19, 2022, the Florida District Court granted Seaboard Marine’s Motion for Summary

8

Judgement and entered a Final Judgment in favor of Seaboard Marine. On September 1, 2022, the Plaintiffs appealed the Final Judgment to the United States Court of Appeals for the Eleventh Circuit. The Plaintiffs’ appeal is pending.

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 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.

The operative complaints in each lawsuit seek unspecified damages (including treble damages) and pre-filing interest as provided in the Act; pre-judgment interest; attorneys’ fees, costs and expenses; and such other relief as is just and proper. Seaboard Corporation and Seaboard Marine have meritorious defenses to the claims alleged in these matters and intend to vigorously defend these matters. It is impossible at this stage either to determine the probability of a favorable or unfavorable outcome resulting from either of these suits, or to reasonably estimate the amount of potential loss or range of potential loss, if any, resulting from the suits. However, the outcome of litigation is inherently unpredictable and subject to significant uncertainties, and if unfavorable, could result in a material liability.

Pork Antitrust Litigation

On June 28, 2018, twelve indirect purchasers of pork products filed a class action complaint in the U.S. District Court for the District of Minnesota (the “District Court”) against several pork processors, including Seaboard Foods LLC and Agri Stats, Inc., a company described in the complaint as a data sharing service. The complaint also named Seaboard Corporation as a defendant. Additional class action complaints with similar claims on behalf of putative classes of direct and indirect purchasers were later filed in the District Court, and three additional actions by standalone plaintiffs (including the Commonwealth of Puerto Rico) were filed in or transferred to the District Court. The consolidated actions are styled In re Pork Antitrust Litigation. The operative 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 District Court denied defendants’ motions to dismiss the amended complaints, but the District Court later dismissed all claims against Seaboard Corporation without prejudice.

In 2021 and 2022, additional standalone plaintiffs filed similar actions in other federal courts throughout the country, several of which name Seaboard Corporation as a defendant. These actions have been or are expected to be conditionally transferred to Minnesota for pretrial proceedings pursuant to an order by the Judicial Panel on Multidistrict Litigation. Also in 2021, the states of New Mexico and Alaska filed civil cases in state court against substantially the same defendants, including Seaboard Foods LLC and Seaboard Corporation, based on substantially similar allegations.

Seaboard believes that it has meritorious defenses to the claims alleged in these matters and intends to vigorously defend these matters. It is impossible at this stage either to determine the probability of a favorable or unfavorable outcome resulting from these suits, or to reasonably estimate the amount of potential loss or range of potential loss, if any, resulting from the suits.

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 that was served during the second quarter of 2018, naming as parties Seaboard Corporation and its subsidiaries, Seaboard Overseas Limited (“SOL”) and Seaboard Uruguay Holdings Ltd. (“Seaboard Uruguay”). Seaboard Corporation has a 45% indirect ownership of Cereoil. The suit seeks an order requiring Seaboard Corporation, SOL and Seaboard Uruguay to reimburse Cereoil the amount of $22 million, contending that deliveries of soybeans to SOL pursuant to purchase agreements should be set aside as fraudulent conveyances. Seaboard believes that it has meritorious defenses to the claims alleged in this matter and intends to vigorously defend this matter. It is impossible at this stage to determine the probability of a favorable or unfavorable outcome resulting from this suit. In the event of an adverse ruling, Seaboard and its two subsidiaries could be ordered to pay the amount of $22 million plus

9

interest. Any award in this case would offset against any award in the additional case described below filed by the Trustee on April 27, 2018.

On April 27, 2018, the Trustee for Cereoil 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 two individuals employed by Seaboard who served as directors at the behest of Seaboard, and the Chief Financial Officer of Cereoil, an employee of Seaboard who also served at the behest of Seaboard (collectively, the “Cereoil Defendants”). The Trustee contends that the Cereoil Defendants acted with willful misconduct to cause Cereoil’s insolvency, and thus should be ordered to pay all liabilities of Cereoil, net of assets. The bankruptcy filing lists total liabilities of $53 million and assets of $