10-Q 1 seb-20240330x10q.htm SEABOARD CORPORATION 10-Q DATED MARCH 30, 2024
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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 March 30, 2024

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 971,055 shares of common stock, $1.00 par value per share, outstanding on April 23, 2024.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended

March 30,

April 1,

(Millions of dollars except share and per share amounts)

2024

    

2023

 

Net sales:

Products (includes affiliate sales of $302 and $258)

$

1,792

$

1,984

Services (includes affiliate sales of $7 and $6)

 

350

 

463

Other

 

49

 

52

Total net sales

 

2,191

 

2,499

Cost of sales and operating expenses:

Products

 

1,769

 

2,094

Services

 

297

 

331

Other

 

38

 

40

Total cost of sales and operating expenses

 

2,104

 

2,465

Gross income

 

87

 

34

Selling, general and administrative expenses

 

107

 

97

Operating loss

 

(20)

 

(63)

Other income (expense):

Interest expense

 

(12)

 

(12)

Interest income (includes $1 and $2 from affiliates)

 

19

 

13

Income from affiliates

 

19

 

26

Other investment income, net

 

18

 

27

Foreign currency losses, net

 

(1)

 

(4)

Miscellaneous, net

 

 

Total other income, net

 

43

 

50

Earnings (loss) before income taxes

 

23

 

(13)

Income tax expense

 

(1)

 

(3)

Net earnings (loss)

$

22

$

(16)

Less: Net income attributable to noncontrolling interests

 

 

Net earnings (loss) attributable to Seaboard

$

22

$

(16)

Earnings (loss) per common share

$

22.66

$

(13.78)

Average number of shares outstanding

 

971,055

 

1,160,779

Other comprehensive income, net of income tax expense of $0 and $0:

Foreign currency translation adjustment

 

(2)

 

12

Unrecognized pension cost

 

2

 

2

Other comprehensive income, net of tax

$

$

14

Comprehensive income (loss)

 

22

 

(2)

Less: Comprehensive income attributable to noncontrolling interests

 

 

Comprehensive income (loss) attributable to Seaboard

$

22

$

(2)

See accompanying notes to condensed consolidated financial statements.

2

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

March 30,

December 31,

 

(Millions of dollars except share and per share amounts)

2024

    

2023

 

Assets

Current assets:

Cash and cash equivalents

$

78

$

56

Short-term investments

 

1,079

 

973

Receivables:

Trade

 

535

 

500

Due from affiliates

 

118

 

127

Other

 

152

 

152

Total receivables

 

805

 

779

Allowance for credit losses

 

(31)

 

(30)

Receivables, net

 

774

 

749

Inventories

 

1,324

 

1,462

Other current assets

 

132

 

123

Total current assets

 

3,387

 

3,363

Property, plant and equipment, net of accumulated depreciation of $2,012 and $1,956

 

2,433

 

2,410

Operating lease right-of-use assets, net

402

394

Investments in and advances to affiliates

 

744

 

731

Goodwill

 

163

 

160

Deferred tax asset

212

199

Other non-current assets

 

236

 

309

Total assets

$

7,577

$

7,566

Liabilities and Stockholders’ Equity

Current liabilities:

Lines of credit

$

389

$

255

Accounts payable (includes $1 and $1 from affiliates)

 

348

 

400

Deferred revenue (includes $33 and $28 from affiliates)

60

66

Operating lease liabilities

123

117

Other current liabilities

 

414

 

497

Total current liabilities

 

1,334

 

1,335

Long-term debt, less current maturities

 

994

 

997

Long-term operating lease liabilities

305

304

Other non-current liabilities

 

290

 

296

Total liabilities

 

2,923

2,932

Commitments and contingent liabilities

Stockholders’ equity:

Common stock of $1 par value. Authorized 1,250,000 shares; issued and outstanding 971,055 shares in 2024 and 2023

 

1

 

1

Accumulated other comprehensive loss

 

(410)

 

(410)

Retained earnings

 

5,045

 

5,025

Total Seaboard stockholders’ equity

 

4,636

 

4,616

Noncontrolling interests

 

18

 

18

Total equity

 

4,654

 

4,634

Total liabilities and stockholders’ equity

$

7,577

$

7,566

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, 2022

$

1

$

(422)

$

5,417

$

18

$

5,014

Comprehensive loss:

Net loss

(16)

(16)

Other comprehensive income, net of tax

14

14

Dividends on common stock ($2.25/share)

(3)

(3)

Balances, April 1, 2023

$

1

$

(408)

$

5,398

$

18

$

5,009

Balances, December 31, 2023

$

1

$

(410)

$

5,025

$

18

$

4,634

Comprehensive income:

Net income

22

22

Other comprehensive income, net of tax

Dividends on common stock ($2.25/share)

(2)

(2)

Balances, March 30, 2024

$

1

$

(410)

$

5,045

$

18

$

4,654

See accompanying notes to condensed consolidated financial statements.

4

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three Months Ended

 

March 30,

April 1,

(Millions of dollars)

2024

    

2023

 

Cash flows from operating activities:

Net earnings (loss)

$

22

$

(16)

Adjustments to reconcile net earnings (loss) to cash from operating activities:

Depreciation and amortization

 

69

 

71

Deferred income taxes

 

(15)

 

(43)

Income from affiliates

 

(19)

 

(26)

Dividends received from affiliates

 

2

 

19

Other investment income, net

 

(18)

 

(27)

Other, net

 

7

 

11

Changes in assets and liabilities, net of acquisition:

Receivables, net of allowance for credit losses

 

(23)

 

93

Inventories

 

131

 

85

Other assets

 

(12)

 

(10)

Accounts payable

(65)

(58)

Other liabilities, exclusive of debt

 

(60)

 

(6)

Net cash from operating activities

 

19

 

93

Cash flows from investing activities:

Purchase of short-term investments

 

(366)

 

(374)

Proceeds from the sale of short-term investments

 

360

 

254

Proceeds from the maturity of short-term investments

 

 

27

Capital expenditures

 

(104)

 

(111)

Proceeds from the sale of property, plant and equipment

 

6

 

14

Acquisition of a business

(3)

Other, net

 

(6)

 

(1)

Net cash from investing activities

 

(113)

 

(191)

Cash flows from financing activities:

Uncommitted lines of credit, net

19

(55)

Draws under committed lines of credit

473

426

Repayments of committed lines of credit

 

(354)

 

(368)

Principal payments of long-term debt

 

(3)

 

(2)

Finance lease payments

(14)

(14)

Dividends paid

 

(2)

 

(3)

Net cash from financing activities

 

119

 

(16)

Effect of exchange rate changes on cash and cash equivalents

 

(3)

 

(1)

Net change in cash and cash equivalents

 

22

 

(115)

Cash and cash equivalents at beginning of year

 

56

 

199

Cash and cash equivalents at end of period

$

78

$

84

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

Basis of Presentation

The accompanying condensed consolidated financial statements of Seaboard Corporation and its subsidiaries (“Seaboard”) have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the rules and regulations for reporting on Form 10-Q. Accordingly, they do not include certain information and disclosures required for comprehensive financial statements. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in Seaboard’s annual report on Form 10-K for the year ended December 31, 2023. The unaudited financial information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the results of operations, financial position and cash flows for the periods presented. Seaboard’s first three quarterly periods include approximately 13 weekly periods ending on the Saturday closest to the end of March, June and September. Results of operations and cash flows for the periods presented are not necessarily indicative of results to be expected for the full year.

Related-Party Transactions

Seaboard has investments in non-consolidated affiliates to further its business strategies and partner with other entities that have expertise in certain industries and countries. These investments are all accounted for using the equity method of accounting. As Seaboard conducts its agricultural commodity trading business with third parties, consolidated subsidiaries and non-consolidated affiliates on an interrelated basis, cost of sales on affiliate sales transactions cannot be distinguished without making numerous assumptions, primarily with respect to mark-to-market accounting for commodity derivatives. Purchases of raw materials or services from related parties included in cost of sales were $15 million and $26 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

Supplemental Cash Flow Information

Non-cash activities for the three months ended March 30, 2024 and April 1, 2023, included capital expenditures of $6 million and $8 million, respectively, that were in accounts payable. 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.

Three Months Ended

March 30,

April 1,

(Millions of dollars)

2024

2023

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

Operating cash flows from operating leases

$

47

$

48

Operating cash flows from finance leases

1

2

Financing cash flows from finance leases

14

14

ROU assets obtained in exchange for new lease liabilities:

Operating leases

$

47

$

18

Finance leases

1

1

Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill was related to foreign currency translation of $3 million within the Commodity Trading and Milling (“CT&M”) segment. As of March 30, 2024, intangible assets, included in other non-current assets, were $25 million, which consists of the gross carrying amount of $79 million net of accumulated amortization of $49 million and net of accumulated foreign currency translation of $5 million.

6

Recently Issued Accounting Standards and Disclosure Rules Not Yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued guidance that requires incremental segment disclosures on an annual and interim basis related to significant segment expenses. Seaboard will adopt this guidance in the 10-K for the year ended December 31, 2024, and interim periods beginning on January 1, 2025. The disclosure requirements must be applied retrospectively to all prior periods presented in the financial statements. Seaboard is currently evaluating the impact this guidance will have on its related disclosures.

In December 2023, the FASB issued guidance that requires additional detailed income tax disclosures related to standardization and disaggregation of information in the rate reconciliation and income taxes paid by jurisdiction. Seaboard will adopt this guidance for the annual reporting period beginning on January 1, 2025. Seaboard is currently evaluating the impact this guidance will have on its disclosures.

In March 2024, the Securities and Exchange Commission (the “SEC”) adopted final rules to enhance and standardize climate-related disclosures in registration statements and annual reports on Form 10-K. The new rules will require climate-related disclosures related to governance, strategy, risk management, targets and goals and greenhouse gas emissions. Additionally, within the notes to the financial statements, the rules would require disclosure of financial statement effects of severe weather events and other natural conditions and other climate-related financial metrics as applicable. Certain elements of the new rules are currently scheduled to become effective for Seaboard’s annual reporting period beginning on January 1, 2025, with the remaining requirements to be phased-in effective for subsequent fiscal years beginning after December 31, 2025. On April 4, 2024, the SEC issued an order staying the effectiveness of the final rules pending completion of the judicial review of consolidated challenges to the rules by the Court of Appeals for the Eighth Circuit. Seaboard is currently evaluating the impact the rules will have on its disclosures.

Note 2 – Investments

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

March 30,

December 31,

(Millions of dollars)

 

2024

2023

Domestic equity securities

$

221

$

143

Foreign equity securities

100

96

Domestic debt securities

603

593

Foreign debt securities

134

120

Money market funds held in trading accounts

 

14

 

17

Other trading securities

7

4

Total trading short-term investments

$

1,079

$

973

The unrealized gains related to trading securities still held at the end of the respective reporting period were $16 million and $30 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

Seaboard had $26 million and $18 million of short-term investments denominated in foreign currencies, primarily euros, as of March 30, 2024 and December 31, 2023, respectively.

As of March 30, 2024, Seaboard had long-term investments of $133 million, in real estate and renewable energy facilities, classified in other non-current assets on the condensed consolidated balance sheet. As of December 31, 2023, Seaboard had long-term investments of $207 million which included an investment of $68 million in a business development company (“BDC”) that completed an initial public offering (“IPO”) and became a publicly traded company on the NYSE during the first quarter of 2024. Seaboard’s securities in this BDC are subject to standard contractual sale restrictions associated with an IPO, and have phased expiration dates, with all restrictions expiring by February 2025. As of March 30, 2024, the BDC securities are included in short-term investments on the condensed consolidated balance sheet and in domestic equity securities in the table above. The reclassification of these securities from long-term investments to short-term investments was a non-cash activity on the condensed consolidated statement of cash flows.

7

Note 3 – Inventories

The following is a summary of inventories:

March 30,

December 31,

 

(Millions of dollars)

    

2024

    

2023

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

Hogs and materials

$

529

$

527

Pork products and materials

 

75

 

61

Grains, oilseeds and other commodities

 

283

 

366

Biofuels and related credits

139

160

Other

 

107

 

124

Total inventories at lower of FIFO cost and NRV

 

1,133

1,238

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

 

191

 

224

Total inventories

$

1,324

$

1,462

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

Lines of Credit

As of March 30, 2024, the outstanding balances under committed and uncommitted lines of credit were $224 million and $165 million, respectively. Of the total outstanding balance as of March 30, 2024, $91 million was denominated in foreign currencies, with $77 million denominated in the South African rand and the remaining in various other currencies. As of December 31, 2023, the outstanding balances under committed and uncommitted lines of credit were $105 million and $150 million, respectively. Of the total outstanding balance as of December 31, 2023, $70 million was denominated in foreign currencies, with $57 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 6.97% and 7.34% as of March 30, 2024 and December 31, 2023, respectively.

Long-Term Debt

The following is a summary of long-term debt:

March 30,

December 31,

(Millions of dollars)

2024

2023

Term Loan due 2033

$

970

$

973

Foreign subsidiary obligations

3

1

Other long-term debt

38

38

Total debt at face value

1,011

1,012

Current maturities and unamortized costs

(17)

(15)

Long-term debt, less current maturities and unamortized costs

$

994

$

997

The Term Loan due 2033 credit agreement provides for quarterly payments on the $975 million original principal balance, with the balance due on November 10, 2033. The interest rate was 7.05% and 7.08% as of March 30, 2024 and December 31, 2023, respectively. Seaboard was in compliance with all restrictive debt covenants relating to these agreements as of March 30, 2024.

Legal Proceedings

Seaboard is subject to various legal proceedings and claims that arise in the ordinary course of business and otherwise, including those matters described below.

Seaboard accrues liabilities for loss contingencies when it is deemed probable that a loss has been incurred and the amount of the loss can be reasonably estimated. If a range of loss is estimated, and some amount within that range appears to be a better estimate than any other amount within that range, then that amount is accrued. If no amount within the range can be identified as a better estimate than any other amount, Seaboard accrues the minimum amount in the range. For such matters where a loss is believed to be reasonably possible, but not probable, or the loss cannot be reasonably estimated, no accrual has been made.

In Seaboard’s opinion, it has made appropriate and adequate accruals for loss contingencies where necessary as of March 30, 2024. Substantially all of Seaboard’s contingencies are subject to uncertainties and, therefore, determining the

8

likelihood of a loss or the measurement of any loss can be complex. Consequently, Seaboard is unable to estimate the range of reasonably possible loss in excess of the amounts accrued. Seaboard’s assessments, which result from a complex series of judgments about future events and uncertainties, are based on estimates and assumptions deemed reasonable by management, including an expected probable loss associated with settling or otherwise resolving such contingencies. These estimates and assumptions may prove to be incomplete or inaccurate, and unanticipated events and circumstances may occur that might change such estimates and assumptions.

At the end of each reporting period, Seaboard reviews information with respect to its legal proceedings, claims and other related loss contingencies and updates its accruals, disclosures and estimates of reasonably possible loss or range of loss based on such reviews. Costs for defending claims are expensed as incurred. Any receivable for insurance recoveries is recorded separately from the corresponding liability, and only if recovery is determined to be probable and reasonably estimable.

Seaboard believes that it has meritorious defenses to the claims asserted in the matters described below, and it intends to defend them vigorously, but litigation is inherently unpredictable and there can be no assurances as to their outcomes. Seaboard does not currently believe that any of these matters will have a material adverse effect on its business or its consolidated financial position, results of operations or cash flows. However, Seaboard could incur judgments, enter into settlements or revise its expectations regarding the outcome of matters, which could have such a material adverse effect in the particular annual or quarterly period in which the amounts are accrued or paid.

Helms-Burton Act Litigation

On July 21, 2021, a lawsuit was filed by an individual, Odette Blanco de Fernandez (“Ms. de Fernandez”), and the heirs (“Inheritors”) and estates (“Estates”) of 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 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.

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 Judgment and entered a Final Judgment (the “Summary Judgment”) in favor of Seaboard Marine. On September 1, 2022, the Plaintiffs appealed the Summary Judgment to the United States Court of Appeals for the Eleventh Circuit (“Appeal”). Oral arguments with respect to the Appeal were held on January 24, 2024, and the Court has not yet ruled.

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.

Seaboard believes that it has meritorious defenses to the claims and intends to vigorously defend the litigation.  However, the outcome of litigation is inherently unpredictable and subject to significant uncertainties, and if unfavorable, could result in a material liability.

9

Pork Price-Fixing 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 “Minnesota District Court”) against several pork processors, including Seaboard Foods LLC (“Seaboard Foods”) and Agri Stats, Inc., a company described in the complaint as a data sharing service. 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 Minnesota District Court, and additional actions by standalone plaintiffs (including the Commonwealth of Puerto Rico) were filed in or transferred to the Minnesota District Court. The consolidated actions are styled In re Pork Antitrust Litigation. The complaints allege, among other things, that beginning in January 2009, the defendants conspired and combined to fix, raise, maintain, and stabilize the price of pork products in violation of U.S. antitrust laws by coordinating output and limiting production, allegedly facilitated by the exchange of non-public information about prices, capacity, sales volume and demand through Agri Stats, Inc. The complaints on behalf of the putative classes of indirect purchasers also assert claims under various state laws, including state antitrust laws, unfair competition laws, consumer protection statutes, and common law unjust enrichment. The relief sought in the respective complaints includes treble damages, injunctive relief, pre- and post-judgment interest, costs and attorneys’ fees. On October 16, 2020, the Minnesota District Court denied the defendants’ motions to dismiss the amended complaints, but the Minnesota District Court later dismissed all claims against Seaboard Corporation without prejudice. On March 3, 2023, the Minnesota District Court granted the Plaintiffs’ Motions to Certify the Classes with respect to all three classes.

Additional standalone “direct action” plaintiffs filed similar actions in federal courts throughout the country, several of which named Seaboard Corporation as a defendant. Those actions filed in courts other than the District of Minnesota have been conditionally transferred to Minnesota for pretrial proceedings pursuant to an order by the Judicial Panel on Multidistrict Litigation. The states of New Mexico and Alaska filed civil cases in state court against substantially the same defendants, including Seaboard Foods and Seaboard Corporation, based on substantially similar allegations. Except in the New Mexico action, all claims against Seaboard Corporation have been dismissed without prejudice.

On June 12, 2023, Seaboard Foods entered into a settlement agreement for approximately $10 million with the putative direct purchaser plaintiff class (the “DPP Class”).  Seaboard believes that this settlement was in the best interests of Seaboard and its stakeholders in order to avoid the uncertainty, risk, expense and distraction of protracted litigation. Members of the class were given the opportunity to opt-out of the settlement and commence or continue their own actions. The settlement with the DPP Class does not cover the claims of (a) the “direct action” plaintiffs (“DPP’s”) that opted-out of Seaboard’s settlement with the DPP Class; (b) other direct purchasers, if any, that opted-out of the settlement and may in the future file actions against Seaboard; (c) the End User Consumer Indirect Purchaser Plaintiff Class (the “EUCP Class”); or (d) the Commercial and Industrial Indirect Purchaser Class (the “CIIP Class”). Subsequent to the settlement with the DPP Class, Seaboard settled some of the actions brought by the DPP’s. Seaboard continues to litigate against the DPP’s it has not settled with, the EUCP Class and the CIIP Class, and will consider additional reasonable settlements where they are available. Seaboard believes that it has meritorious defenses to the claims alleged in these matters and intends to vigorously defend any matters not resolved by settlement. However, the outcome of litigation is inherently unpredictable and subject to significant uncertainties, and if unfavorable, could result in a material liability.

Pork Compensation Antitrust Litigation

On November 11, 2022, three employees of pork or beef processing plants filed a class action complaint (the “Class Action”) in the U.S. District Court for the District of Colorado (the “Court”) individually and on behalf of all other employees at such plants (the “Class”), against several pork and beef processors and their subsidiaries and related companies, including Seaboard Foods. The complaint alleges, among other things, that beginning in January 2014, the defendants conspired in violation of antitrust laws to fix and depress the compensation paid to the Class by, among other things, participating in third-party compensation surveys and exchanging wage-related information through a third-party benchmarking service. The relief sought includes treble damages, injunctive relief, pre- and post-judgment interest, costs and attorneys’ fees.

On June 23, 2023, Seaboard Foods reached a settlement with the Class to settle the Class Action for an immaterial amount which was approved by the Court and paid during Seaboard’s first quarter of 2024.

10

Cereoil and Nolston Litigation

On March 20, 2018, the bankruptcy trustee (the “Trustee”) for Cereoil Uruguay S.A. (“Cereoil”) filed a suit in the Bankruptcy Court of First Instance in Uruguay naming as parties Seaboard Corporation and its subsidiaries, Seaboard Overseas Limited (“SOL”) and Seaboard Uruguay Holdings Ltd. (“Seaboard Uruguay”). Seaboard Corporation has a 45% indirect ownership of Cereoil. The suit (the “Clawback Action”) seeks an order requiring Seaboard Corporation, SOL and Seaboard Uruguay to reimburse Cereoil the amount of approximately $22 million (approximately $30 million with interest at the statutory rate) (the “Clawback Amount”), 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. In the event of an adverse ruling, Seaboard and its two subsidiaries could be ordered to pay the Clawback Amount to Cereoil.

On April 27, 2018, the Trustee filed an additional suit in the Bankruptcy Court of First Instance in Uruguay that was served during the second quarter of 2018, naming as parties Seaboard Corporation, SOL, Seaboard Uruguay, all directors of Cereoil, including 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 listed the U.S. dollar equivalent of liabilities of approximately $50 million and assets of approximately $30 million. Based on the information received from the Trustee on the administration of the case and the liquidation of assets, as of March 30, 2024 the U.S. dollar equivalent of liabilities was estimated to be approximately $45 million, and the liquidation value of the remaining assets is negligible. Seaboard believes that it has meritorious defenses to the claims alleged in this matter and intends to vigorously defend this matter. In the event of an adverse ruling, Seaboard Corporation and the other Cereoil Defendants could be ordered to pay the liabilities of Cereoil, net of any amounts received from the liquidation of Cereoil’s assets, and could be ordered to pay an inflation adjustment, interest, the Trustee’s fees and other expenses. Any award in this case should be reduced by the amount of any award in the Clawback Action described above that is paid to Cereoil.

On September 30, 2021, HSBC Bank (Uruguay) SA (“HSBC”), a creditor in the Cereoil bankruptcy proceeding pending in Uruguay, filed a suit in the U.S. District Court for the District of Kansas (the “Kansas District Court”) against Seaboard Corporation alleging claims for breach of contract, promissory estoppel, breach of the duty of good faith and fair dealing, unjust enrichment, fraud, negligent misrepresentation and fraud by concealment based upon a comfort letter, alleged statements by Cereoil personnel (including the Chief Financial Officer serving at the behest of Seaboard), and the same grain transactions that the Trustee challenges as fraudulent conveyances in the Cereoil bankruptcy in Uruguay discussed above. HSBC seeks $10 million plus interest and other relief in excess of $3 million. In March 2022, Seaboard filed a motion to dismiss HSBC’s claims on various grounds. On September 23, 2022, the Kansas District Court dismissed six of HSBC’s seven claims. Three of those claims, for fraud, negligent misrepresentation and fraud by concealment, can be refiled by HSBC in Uruguay. The other three claims, for breach of contract, breach of the duty of good faith and fair dealing and unjust enrichment, were dismissed with prejudice and cannot be refiled unless HSBC successfully appeals the Kansas District Court order. The one claim not dismissed in this matter is for promissory estoppel. Seaboard believes that it has meritorious defenses to this claim and intends to vigorously defend it. In the event of an adverse ruling, Seaboard Corporation could be ordered to pay HSBC the amounts described above.

On May 15, 2018, the Trustee for Nolston S.A. (“Nolston”) filed a suit in the Bankruptcy Court of First Instance in Uruguay that was served during the second quarter of 2018, naming as parties Seaboard and the other Cereoil Defendants. Seaboard has a 45% indirect ownership of Nolston. The Trustee contends that the Cereoil Defendants acted with willful misconduct to cause Nolston’s insolvency, and thus should be ordered to pay all liabilities of Nolston, net of assets. The bankruptcy filing listed the U.S. dollar equivalent of liabilities of approximately $29 million and assets of approximately $15 million. Based on the administration of the case which resulted in duplicative claims made in the Cereoil case and the liquidation of assets, as of March 30, 2024, the U.S. dollar equivalent of liabilities was estimated to be approximately $1 million, and there are no remaining assets with any value. Seaboard believes that it has meritorious defenses to the claims alleged in this matter and intends to vigorously defend this matter. In the event of an adverse ruling, Seaboard Corporation and the other defendants could be ordered to pay the liabilities of Nolston, and could be ordered to pay an inflation adjustment, interest, the Trustee’s fees and other expenses.

Guarantees

Certain of Seaboard’s non-consolidated affiliates have debt supporting their underlying operations. From time to time, Seaboard will provide guarantees of such debt in order to further Seaboard’s business objectives. As of March 30, 2024,

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guarantees outstanding were not material. Seaboard has not accrued a liability for any of the guarantees as the likelihood of loss is remote.

Note 5 – Derivatives and Fair Value of Financial Instruments

The following tables show assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy used to measure each category of assets and liabilities. The trading securities classified as other current assets below are assets held for Seaboard’s deferred compensation plans.

    

    

    

    

 

March 30,

 

(Millions of dollars)

2024

Level 1

Level 2

Level 3

 

Assets:

Trading securities – short-term investments:

Domestic equity securities

$

221

$

221

$

$

Foreign equity securities

100

100

Domestic debt securities

 

603

 

171

 

432

Foreign debt securities

 

134

 

3

 

131

Money market funds held in trading accounts

14

14

Other trading securities

 

7

 

 

7

 

Trading securities – other current assets

17

17

Derivatives

7

6

1

Total assets

$

1,103

$

532

$

571

$

Liabilities:

Derivatives

$

16

$

14

$

2

$

Total liabilities

$

16

$

14

$

2

$

    

    

    

    

 

December 31,

 

(Millions of dollars)

2023

Level 1

Level 2

Level 3

 

Assets:

Trading securities – short-term investments:

Domestic equity securities

$

143

$

143

$

$

Foreign equity securities

96

96

Domestic debt securities

593

173

420

Foreign debt securities

120

3

117

Money market funds held in trading accounts

 

17

 

17

 

 

Other trading securities

 

4

 

 

4

 

Trading securities – other current assets

22

22

Long-term investment – BDC

 

68

 

 

68

 

Derivatives

12

9

3

Total assets

$

1,075

$

463

$

612

$

Liabilities:

Derivatives

$

9

$

4

$

5

$

Total liabilities

$

9

$

4

$

5

$

Financial instruments consisting of cash and cash equivalents, net receivables, lines of credit and accounts payable are carried at cost, which approximates fair value as a result of the short-term nature of the instruments. The fair value of short-term investments is measured using multiple levels. Debt securities categorized as level 1 in the fair value hierarchy include debt securities held in mutual funds and exchange traded funds.

As of December 31, 2023, Seaboard held a long-term investment in a BDC that primarily lends to and invests in debt securities of privately held companies. During the first quarter of 2024, the BDC completed an IPO, and the investment is included in short-term domestic equity securities as of March 30, 2024. See Note 2 to the condensed consolidated financial statements for further discussion.

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The fair value of long-term debt is estimated by comparing interest rates for debt with similar terms and maturities. As Seaboard’s long-term debt is mostly variable-rate, the carrying amount approximates fair value. If Seaboard’s long-term debt was measured at fair value on its condensed consolidated balance sheets, it would have been classified as level 2 in the fair value hierarchy.

Seaboard’s operations are exposed to market risks from changes in commodity prices, foreign currency exchange rates, interest rates and equity prices. Seaboard uses various commodity derivative futures and options to manage some of its risk of price fluctuations for raw materials and other inventories, finished product sales and firm sales commitments. Seaboard also enters into foreign currency exchange agreements to manage the foreign currency exchange rate risk with respect to certain transactions denominated in foreign currencies. From time to time, Seaboard enters into interest rate swap agreements to manage the interest rate risk with respect to certain variable rate long-term debt and enters into equity futures contracts to manage the equity price risk with respect to certain short-term investments. Although management believes its derivatives are primarily economic hedges, Seaboard does not perform the extensive record-keeping required to account for these types of transactions as hedges for accounting purposes. These derivative contracts are recorded at fair value, with any changes in fair value recognized in the condensed consolidated statements of comprehensive income. As the derivative contracts are not accounted for as hedges, fluctuations in the related prices or rates could have a material impact on earnings in any given reporting period. The nature of Seaboard’s market risk exposure has not materially changed since December 31, 2023.

Seaboard had the following aggregated outstanding notional amounts related to derivative financial instruments:

March 30,

December 31,

(Millions)

Metric

2024

2023

Commodities:

Grain

Bushels

10

19

Hogs and pork products

Pounds

145

133

Soybean oil

Pounds

76

10

Foreign currencies

U.S. dollar

329

152

Credit risks associated with these derivative contracts are not significant because Seaboard minimizes counterparty exposure by dealing with credit-worthy counterparties and using margin accounts for some contracts. As of March 30, 2024, the maximum amount of credit risk, had the counterparties failed to perform according to the terms of the contract, was $1 million.

The following table provides the fair value of each type of derivative held and where each derivative is included in the condensed consolidated balance sheets:

Asset

Liability

March 30,

December 31,

March 30,

December 31,

(Millions of dollars)

    

    

2024

    

2023

    

    

2024

    

2023

Commodities

 

Other current assets

$

6

$

9

 

Other current liabilities

$

15

$

4

Foreign currencies

Other current assets

1

3

Other current liabilities

1

5

Seaboard’s commodity derivative assets and liabilities are presented in the condensed consolidated balance sheets on a net basis, including netting the derivatives with the related margin accounts. As of March 30, 2024 and December 31, 2023, the commodity derivatives had a margin account balance of $51 million and $19 million, respectively, resulting in a net other current asset in the condensed consolidated balance sheets of $43 million and $24 million, respectively.

The following table provides the amount of gain (loss) recognized in income for each type of derivative and where it was recognized in the condensed consolidated statements of comprehensive income:

Three Months Ended