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 June ~~30, 2018~~29, 2019

☐ 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.)
~~incorporation)~~				~~Identification No.)~~


9000 West 67th Street, Merriam, Kansas		66202
(Address of principal executive offices)		(Zip Code)

(913) 676-8800

(Registrant’s telephone number, including area ~~code~~ ~~(913) 676-8800~~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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 ~~☐ (Do not check if a smaller reporting company)~~◻	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 ~~1,170,550~~1,165,309 shares of common stock, $1.00 par value per share, outstanding on July ~~27, 2018.~~24, 2019.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)


	Three Months Ended				Six Months Ended
	June 29,		June 30,		June 29,		June 30,
(Millions of dollars except share and per share amounts)	2019		2018		2019		2018
Net sales:
Products (affiliate sales of $357, $343, $677 and $649)	$	1,513	$	1,382	$	2,758	$	2,673
Services (affiliate sales of $4, $3, $8 and $5)		275		278		544		542
Other		34		31		63		55
Total net sales		1,822		1,691		3,365		3,270
Cost of sales and operating expenses:
Products		1,422		1,309		2,652		2,454
Services		238		242		478		482
Other		26		24		49		46
Total cost of sales and operating expenses		1,686		1,575		3,179		2,982
Gross income		136		116		186		288
Selling, general and administrative expenses		83		84		167		159
Operating income		53		32		19		129
Other income (expense):
Interest expense		(12)		(11)		(18)		(19)
Interest income		8		3		15		6
Loss from affiliates		(16)		(16)		(34)		(22)
Other investment income (loss), net		37		12		150		(25)
Foreign currency gains (loss), net		(1)		(6)		2		(2)
Miscellaneous, net		—		(3)		—		(2)
Total other income (expense), net		16		(21)		115		(64)
Earnings before income taxes		69		11		134		65
Income tax expense		(11)		(4)		(19)		(26)
Net earnings	$	58	$	7	$	115	$	39
Less: Net loss attributable to noncontrolling interests		—		—		—		—
Net earnings attributable to Seaboard	$	58	$	7	$	115	$	39

Earnings per common share	$	50.13	$	6.28	$	98.92	$	33.03
Average number of shares outstanding		1,165,740		1,170,550		1,166,575		1,170,550

Other comprehensive loss, net of income tax benefit of $0, $1, $0 and $1:
Foreign currency translation adjustment		(9)		(17)		(11)		(27)
Unrecognized pension cost		3		(3)		6		(2)
Other comprehensive loss, net of tax	$	(6)	$	(20)	$	(5)	$	(29)
Comprehensive income (loss)		52		(13)		110		10
Less: Comprehensive loss attributable to noncontrolling interests		—		—		—		—
Comprehensive income (loss) attributable to Seaboard	$	52	$	(13)	$	110	$	10

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars except share and per share amounts)
2018

2017

2018

2017

Net sales:

Products (includes affiliate sales of $343, $270, $649 and $529)
$
1,382

$
1,153

$
2,673

$
2,278

Services (includes affiliate sales of $3, $1, $5 and $3)

278

245

542

494

Other

31

24

55

49

Total net sales

1,691

1,422

3,270

2,821

Cost of sales and operating expenses:

Products

1,309

1,056

2,454

2,078

Services

242

216

482

435

Other

24

21

46

41

Total cost of sales and operating expenses

1,575

1,293

2,982

2,554

Gross income

116

129

288

267

Selling, general and administrative expenses

84

74

159

144

Operating income

32

55

129

123

Other income (expense):

Interest expense

(11)

(7)

(19)

(10)

Interest income

2

5

4

7

Interest income from affiliates

1

6

2

12

Loss from affiliates

(16)

(8)

(22)

(7)

Other investment income (loss), net

12

28

(25)

65

Foreign currency gains (losses), net

(6)

6

(2)

9

Miscellaneous, net

(3)

(1)

(2)

(3)

Total other income (expense), net

(21)

29

(64)

73

Earnings before income taxes

11

84

65

196

Income tax expense

(4)

(25)

(26)

(53)

Net earnings
$
7

$
59

$
39

$
143

Less: Net income attributable to noncontrolling interests

—

(1)

—

—

Net earnings attributable to Seaboard
$
7

$
58

$
39

$
143

Earnings per common share
$
6.28

$
50.51

$
33.03

$
122.35

Other comprehensive income (loss), net of income tax benefit (expense) of $1, $0, $1 and $(1):

Foreign currency translation adjustment

(17)

1

(27)

(1)

Unrealized gain on investments

—

2

—

3

Unrecognized pension cost

(3)

1

(2)

2

Other comprehensive income (loss), net of tax
$
(20)

$
4

$
(29)

$
4

Comprehensive income (loss)

(13)

63

10

147

Less: Comprehensive income attributable to noncontrolling interests

—

(1)

—

—

Comprehensive income (loss) attributable to Seaboard
$
(13)

$
62

$
10

$
147

Average number of shares outstanding

1,170,550

1,170,550

1,170,550

1,170,550



Dividends declared per common share
$
1.50

$
1.50

$
3.00

$
3.00

See accompanying notes to condensed consolidated financial statements.

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

June 30,

December 31,

(Millions of dollars except share and per share amounts)
2018

2017

Assets

Current assets:

Cash and cash equivalents
$
79

$
116

Short-term investments

1,264

1,576

Receivables, net

521

482

Inventories

874

780

Other current assets

128

174

Total current assets

2,866

3,128

Net property, plant and equipment

1,104

1,077

Investments in and advances to affiliates

849

851

Other non-current assets

357

105

Total assets
$
5,176

$
5,161

Liabilities and Stockholders’ Equity

Current liabilities:

Notes payable to banks
$
141

$
162

Current maturities of long-term debt

24

53

Accounts payable

238

272

Deferred revenue

56

81

Other current liabilities

283

250

Total current liabilities

742

818

Long-term debt, less current maturities

508

482

Deferred income taxes

146

112

Long-term income tax liability

102

111

Other liabilities

260

230

Total non-current liabilities

1,016

935

Commitments and contingent liabilities

Stockholders’ equity:

Common stock of $1 par value. Authorized 1,250,000 shares; issued and outstanding 1,170,550 shares

1

1

Accumulated other comprehensive loss

(390)

(354)

Retained earnings

3,792

3,750

Total Seaboard stockholders’ equity

3,403

3,397

Noncontrolling interests

15

11

Total equity

3,418

3,408

Total liabilities and stockholders’ equity
$
5,176

$
5,161


	June 29,		December 31,
(Millions of dollars except share and per share amounts)	2019		2018
Assets
Current assets:
Cash and cash equivalents	$	110	$	194
Short-term investments		1,440		1,336
Receivables, net		546		551
Inventories		871		815
Other current assets		107		131
Total current assets		3,074		3,027
Property, plant and equipment, net		1,288		1,160
Operating lease right of use assets, net		453		—
Investments in and advances to affiliates		783		804
Goodwill		165		167
Other non-current assets		138		149
Total assets	$	5,901	$	5,307
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable to banks	$	160	$	148
Current maturities of long-term debt		54		39
Accounts payable		262		238
Deferred revenue		37		39
Deferred revenue from affiliates		28		31
Operating lease liabilities		98		—
Other current liabilities		266		289
Total current liabilities		905		784
Long-term debt, less current maturities		734		739
Long-term operating lease liabilities		391		—
Deferred income taxes		143		127
Long-term income tax liability		73		73
Other liabilities		236		255
Total non-current liabilities		1,577		1,194
Commitments and contingent liabilities
Stockholders’ equity:
Common stock of $1 par value. Authorized 1,250,000 shares; issued and outstanding 1,165,407 shares in 2019 and 1,169,217 shares in 2018		1		1
Accumulated other comprehensive loss		(415)		(410)
Retained earnings		3,823		3,727
Total Seaboard stockholders’ equity		3,409		3,318
Noncontrolling interests		10		11
Total equity		3,419		3,329
Total liabilities and stockholders’ equity	$	5,901	$	5,307

See accompanying notes to condensed consolidated financial statements.

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Six Months Ended

June 30,

July 1,

(Millions of dollars)
2018

2017

Cash flows from operating activities:

Net earnings
$
39

$
143

Adjustments to reconcile net earnings to cash from operating activities:

Depreciation and amortization

67

56

Deferred income taxes

3

17

Loss from affiliates

22

7

Dividends received from affiliates

3

19

Other investment loss (income), net

25

(65)

Other, net

2

(8)

Changes in assets and liabilities, net of acquisitions:

Receivables, net of allowance

(10)

28

Inventories

(89)

41

Other current assets

48

(11)

Current liabilities, exclusive of debt

(57)

(57)

Other, net

11

7

Net cash from operating activities

64

177

Cash flows from investing activities:

Purchase of short-term investments

(336)

(347)

Proceeds from the sale of short-term investments

615

270

Proceeds from the maturity of short-term investments

21

36

Capital expenditures

(58)

(78)

Cash paid for acquisition of businesses

(270)

(14)

Investments in and advances to affiliates, net

(17)

(64)

Principal payments received on notes receivable from affiliates

4

3

Purchase of long-term investments

(8)

(6)

Other, net

3

(1)

Net cash from investing activities

(46)

(201)

Cash flows from financing activities:

Notes payable to banks, net

(8)

23

Proceeds from long-term debt

—

5

Principal payments of long-term debt

(43)

(9)

Dividends paid

(4)

(4)

Net cash from financing activities

(55)

15

Effect of exchange rate changes on cash and cash equivalents

—

2

Net change in cash and cash equivalents

(37)

(7)

Cash and cash equivalents at beginning of year

116

77

Cash and cash equivalents at end of period
$
79

$
70


	Six Months Ended
	June 29,		June 30,
(Millions of dollars)	2019		2018
Cash flows from operating activities:
Net earnings	$	115	$	39
Adjustments to reconcile net earnings to cash from operating activities:
Depreciation and amortization		68		67
Deferred income taxes		8		3
Loss from affiliates		34		22
Dividends received from affiliates		2		3
Other investment loss (income), net		(150)		25
Other, net		6		2
Changes in assets and liabilities, net of acquisitions:
Receivables, net of allowance		(3)		(10)
Inventories		(54)		(89)
Other assets		32		51
Other liabilities, exclusive of debt		(19)		(49)
Net cash from operating activities		39		64
Cash flows from investing activities:
Purchase of short-term investments		(733)		(336)
Proceeds from the sale of short-term investments		617		615
Proceeds from the maturity of short-term investments		164		21
Capital expenditures		(156)		(58)
Cash paid for acquisition of businesses		—		(270)
Investments in and advances to affiliates, net		(11)		(17)
Issuance of notes receivable		(6)		—
Principal payments received on notes receivable from affiliates		—		4
Purchase of long-term investments		(9)		(8)
Other, net		8		3
Net cash from investing activities		(126)		(46)
Cash flows from financing activities:
Notes payable to banks, net		13		(8)
Proceeds from long-term debt		31		—
Principal payments of long-term debt		(20)		(43)
Repurchase of common stock		(14)		—
Dividends paid		(5)		(4)
Other, net		(2)		—
Net cash from financing activities		3		(55)
Effect of exchange rate changes on cash and cash equivalents		—		—
Net change in cash and cash equivalents		(84)		(37)
Cash and cash equivalents at beginning of year		194		116
Cash and cash equivalents at end of period	$	110	$	79

See accompanying notes to condensed consolidated financial statements.

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, 2017	$	1	$	(354)	$	3,750	$	11	$	3,408
Adoption of accounting guidance		—		(7)		7		—		—
Addition to noncontrolling interests		—		—		—		4		4
Comprehensive income:
Net earnings		—		—		32		—		32
Other comprehensive loss, net of tax		—		(9)		—		—		(9)
Dividends on common stock ($1.50/share)		—		—		(2)		—		(2)
Balances, March 31, 2018	$	1	$	(370)	$	3,787	$	15	$	3,433
Comprehensive income:
Net earnings		—		—		7		—		7
Other comprehensive loss, net of tax		—		(20)		—		—		(20)
Dividends on common stock ($1.50/share)		—		—		(2)		—		(2)
Balances, June 30, 2018	$	1	$	(390)	$	3,792	$	15	$	3,418

Balances, December 31, 2018	$	1	$	(410)	$	3,727	$	11	$	3,329
Reduction to noncontrolling interests		—		—		—		(1)		(1)
Comprehensive income:
Net earnings		—		—		57		—		57
Other comprehensive income, net of tax		—		1		—		—		1
Repurchase of common stock		—		—		(13)		—		(13)
Dividends on common stock ($2.25/share)		—		—		(3)		—		(3)
Balances, March 30, 2019	$	1	$	(409)	$	3,768	$	10	$	3,370
Comprehensive income:
Net earnings		—		—		58		—		58
Other comprehensive loss, net of tax		—		(6)		—		—		(6)
Repurchase of common stock		—		—		(1)		—		(1)
Dividends on common stock ($2.25/share)		—		—		(2)		—		(2)
Balances, June 29, 2019	$	1	$	(415)	$	3,823	$	10	$	3,419

See accompanying notes to condensed consolidated financial statements

SEABOARD CORPORATION AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 – Accounting Policies and Basis of Presentation

The condensed consolidated financial statements include the accounts of Seaboard Corporation and its domestic and foreign subsidiaries (“Seaboard”). All significant intercompany balances and transactions have been eliminated in consolidation. Seaboard’s investments in non-consolidated affiliates are accounted for by the equity method. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements of Seaboard for the year ended December 31, ~~2017~~2018 as filed in its annual report on Form 10-K. Seaboard’s first three quarterly periods include approximately 13 weekly periods ending on the Saturday closest to the end of March, June and September. Seaboard’s year-end is December 31.

The accompanying unaudited condensed consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) that, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows. Except for new guidance adopted prospectively as discussed below, Seaboard has consistently applied all accounting policies as disclosed in the annual report on Form 10-K to all periods presented in these condensed consolidated financial statements. Results of operations for interim periods are not necessarily indicative of results to be expected for a full year. As Seaboard conducts its commodity trading business with third parties, consolidated subsidiaries and non-consolidated affiliates on an interrelated basis, gross margin on non-consolidated affiliates cannot be clearly distinguished without making numerous assumptions primarily with respect to mark-to-market accounting for commodity derivatives.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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. Significant items subject to such estimates and assumptions include those related to allowance for doubtful accounts, valuation of inventories, impairment of long-lived assets, potential write-down related to investments in and advances to affiliates and notes receivable from affiliates, income taxes, lease liabilities and right of use (“ROU”) assets and accrued pension liability. Actual results could differ from those estimates.

Supplemental ~~Non-Cash Transaction~~Cash Flow Information

~~In conjunction with~~Non-cash investing and financing activities included purchases of property, plant and equipment in accounts payable of $15 million and the January 2018 acquisition discussed further in Note 10, Seaboard incurred debt consisting of a $46 million note payable and contingent consideration with an estimated fair value of $14 million at the time of acquisition.

~~Adoption of Highly Inflationary Accounting in Argentina~~

Guidance requires the use of highly inflationary accounting for countries whose cumulative three-year inflation exceeds 100%. In the second quarter of 2018, the Argentine peso rapidly devalued relative to the U.S. dollar, which along with increased inflation, indicated that the three-year cumulative inflation in that country exceeded 100%. As a result, Seaboard adopted highly inflationary accounting as of July 1, 2018, for Seaboard’s Sugar segment. Under highly inflationary accounting, the Sugar segment’s functional currency became the U.S. dollar, and its income statement and balance sheet will be measured in U.S. dollars using both current and historical rates of exchange. The effect of changes in exchange rates on peso-denominated monetary assets and liabilities will be reflected in foreign currency gains (losses), net. At June 30, 2018, the Sugar segment had $79 million in net assets denominated in Argentine pesos, and $2 million in net liabilities denominated in U.S. dollars. Net salesimpact upon adoption of the ~~Sugar segment were 3% of Seaboard’s consolidated net sales for~~new leasing guidance further discussed below. During the six months ended June ~~30, 2018~~29, 2019, $42 million and ~~July 1, 2017.~~$19 million of leased assets were obtained in exchange for new operating and finance lease liabilities, respectively. Cash paid for amounts included in the measurement of operating lease liabilities was $66 million, all included in net cash from operating activities. Cash paid for amounts included in the measurement of finance lease liabilities was $1 million. Seaboard reports the amortization of the ROU asset and the change in the operating lease liabilities in other liabilities, exclusive of debt in the condensed consolidated statement of cash flows.

Goodwill and Other Intangible Assets

The change in the carrying amount of goodwill of $2 million from year-end to June 29, 2019 was related to foreign currency exchange differences within the Commodity Trading and Milling (“CT&M”) segment. As of June 29, 2019, intangible assets were $63 million, net of accumulated amortization of $11 million.

Recently Issued Accounting ~~Standards~~Standard Adopted

On January 1, ~~2018,~~2019, Seaboard adopted guidance ~~that developed~~which requires the recognition of ROU assets and lease liabilities for most leases. As a ~~single,~~result of this adoption, Seaboard recorded operating lease ROU assets of $460 million, adjusted for the deferred rent liability balance at year-end, and lease liabilities of $498 million. The adoption of the new guidance did not have a material impact on the condensed consolidated statement of comprehensive ~~revenue recognition model~~income and the condensed consolidated statement of cash flows. The accounting for ~~all contracts with customers~~finance leases, formerly called capital leases, remained substantially unchanged. Seaboard adopted the new guidance using the ~~cumulative effect transition method. The adjustment to opening retained earnings, which only included the impact of contracts that~~effective date method and, therefore, prior period financials were not ~~completed at~~revised. Seaboard elected the ~~date~~package of ~~adoption, was less than $1 million.~~practical expedients available upon transition, which permitted Seaboard to not reassess prior conclusions related to contracts containing leases,

lease classification and initial direct costs. All of Seaboard’s equity method investments must adopt the new standard by December 31, ~~2019.~~2020. See Note 24 for additional details on the impact of adopting this new accounting standard.

On January 1, 2018, Seaboard adopted guidance that requires the service cost component of net periodic benefit cost to be presented in the same income statement line item as other employee compensation costs arising from services

rendered during the period. Only the service cost component is eligible for capitalization in inventory. The other components of net periodic benefit cost are presented outside of operating income and are not capitalizable. For the three and six month periods of 2017, $1 million and $3 million, respectively, of net periodic benefit cost was reclassified from selling, general and administrative expenses to miscellaneous, net below operating income. Seaboard elected to apply the practical expedient to estimate amounts for comparative periods.

On January 1, 2018, Seaboard adopted guidance that eliminated cost method accounting and requires measuring equity investments, other than those accounted for using the equity method of accounting, at fair value and recognizing fair value changes in net income if a readily determinable fair value exists. On January 1, 2018, $7 million of accumulated other comprehensive loss was reclassified to retained earnings by means of a cumulative effect adjustment, and all future gains/losses on these equity investments is reflected in other investment income (loss), net. As of January 1, 2018, Seaboard had minimal investments without readily determinable fair values, which will be recorded at cost, less impairment, and plus or minus subsequent adjustments for observable price changes.

~~Recently Issued Accounting Standard Not Yet Adopted~~

In ~~February~~June 2016, the Financial Accounting Standards Board ~~(“FASB”)~~ issued guidance ~~that a lessee should record a right-of-use (“ROU”) asset and a lease liability~~ on the ~~balance sheet~~measurement of financial instrument credit losses that requires, among other things, the use of a new current expected credit loss ("CECL") model in order to determine the allowance for ~~all leases~~doubtful accounts with ~~terms longer than 12 months. Leases~~respect to accounts receivable and notes receivable. The CECL model requires estimation of lifetime expected credit loss based on historical experience, current conditions and reasonable supportable forecasts. The new guidance replaces the existing incurred loss model and will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The recognition, measurement, and presentation of expenses and cash flows arising from a financing lease have not significantly changed from the previous guidance. For operating leases, a lessee is required to: (1) recognize a ROU asset and a lease liability, initially measured at the present value of the lease payments, in the balance sheet, (2) recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term on a generally straight-line basis and (3) classify all cash payments within operating activities in the statement of cash flows.effective for Seaboard ~~will adopt this guidance~~ on January 1, 2019, for all consolidated subsidiaries and plans to apply most practical expedients and the optional transition relief issued in July 2018 that permits the recognition and measurement of leases at the date of adoption. Therefore,2020. Seaboard ~~will not restate comparative period financial information for the effects of this accounting standard. While Seaboard continues its process of assessing its leases and~~is currently evaluating the ~~effect this~~impact of the new guidance ~~will have on its consolidated financial statements, Seaboard expects the adoption will have a material increase in assets and liabilities~~ on the consolidated ~~balance sheet due to the recording of ROU assets and corresponding lease liabilities. See Note 10 to the consolidated~~ financial ~~statements included in Seaboard’s annual report for the year ended December 31, 2017, for information about Seaboard’s lease obligations.~~statements.

Note 2 – ~~Revenue Recognition~~

Seaboard recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to receive in exchange for those goods or services. A performance obligation, the unit of account in Topic 606 ~~Revenue from Contracts with Customers~~ ~~(“Topic 606”), is a promise in a contract to transfer a distinct good or service to the customer~~. The majority of Seaboard’s revenue arrangements consist of a single performance obligation as the promise to transfer the individual product or service is not separately identifiable from other promises in the contracts, including shipping and handling and customary storage, and, therefore, not distinct. Seaboard’s transaction prices are mostly fixed, but occasionally include minimal variable consideration for early payment, volume and other similar discounts, which are highly probable based on the history with the respective customers. Taxes assessed by a governmental authority that are collected by Seaboard from a customer are excluded from sales.

Seaboard has multiple segments with diverse revenue streams. For additional information on Seaboard’s segments, see Note 10. The following tables present Seaboard’s sales disaggregated by revenue source and segment for the three and six month periods ended June 30, 2018.

Three Months Ended June 30, 2018

(Millions of dollars)

Pork

Commodity Trading & Milling

Marine

Sugar

Power

All Other

Consolidated Totals

Major Products/Services Lines:

Products

$
365

$
885

$
—

$
60

$
—

$
4

$
1,314

Transportation

4

—

263

—

—

—

267

Energy

66

—

—

1

31

—

98

Other

7

5

—

—

—

—

12

Segment/Consolidated Totals

$
442

$
890

$
263

$
61

$
31

$
4

$
1,691

Six Months Ended June 30, 2018

(Millions of dollars)

Pork

Commodity Trading & Milling

Marine

Sugar

Power

All Other

Consolidated Totals

Major Products/Services Lines:

Products

$
726

$
1,666

$
—

$
110

$
—

$
8

$
2,510

Transportation

8

—

512

—

—

—

520

Energy

159

—

—

2

54

—

215

Other

15

10

—

—

—

—

25

Segment/Consolidated Totals

$
908

$
1,676

$
512

$
112

$
54

$
8

$
3,270

Revenue from goods and services transferred to customers at a single point in time accounted for approximately 85% of Seaboard’s net sales for the six month period of 2018. Substantially all of the sales in Seaboard’s Marine segment are recognized ratably over the transit time for each voyage as Seaboard believes this is a faithful depiction of the performance obligation to its customers.

Almost all of Seaboard’s contracts with its customers are short-term, defined as less than one year. As of June 30, 2018, Seaboard had $16 million of remaining performance obligations that extend beyond one year, of which 17% is expected to be recognized as net sales in 2018, an additional 33% in 2019, and the remaining balance thereafter. Seaboard elected to use all practical expedients and therefore will not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which revenue is recognized at the amount to which it has the right to invoice for services performed. Also, Seaboard will recognize a financing component only on obligations that extend longer than one year.

Deferred revenue represents cash payments received in advance of Seaboard’s performance or revenue billed that is unearned. The Commodity Trading and Milling (“CT&M”) segment, which operates internationally with sales in Africa and South America, requires certain customers to pay in advance or upon delivery to avoid collection risk. The Marine segment’s deferred revenue balance primarily relates to the unearned portion of billed revenue when a ship is on the water and has not arrived at the designated port. The Pork segment has a marketing agreement with Triumph Foods, LLC, of which certain fees paid at commencement are recognized over the term of the agreement. Deferred revenue balances are reduced when revenue is recognized. Revenue recognized for the three and six month periods of 2018 that was included in the deferred revenue balance at the beginning of the year was $88 million and $156 million, respectively.

The primary impact of adopting the new guidance was the acceleration of revenue related to sales in Seaboard’s CT&M segment that previously had not been recognized as a fixed and determinable price was not established at the time of sale. Under the new guidance, revenue is recognized when control is transferred, and adjustments are made to revenue for pending sale prices dependent upon market fluctuations, further processing, or other factors until sales prices are finalized. The following tables summarize the impacts of adoption on Seaboard’s condensed consolidated financial statements.

Consolidated Statement of Comprehensive Income

Three Months Ended

Six Months Ended

June 30, 2018

June 30, 2018

Balances Without

Balances Without

Adoption

As

Adoption

As

(Millions of dollars)

of Topic 606

Adjustments

Reported

of Topic 606

Adjustments

Reported

Total net sales

$
1,666

$
25

$
1,691

$
3,241

$
29

$
3,270

Total cost of sales

$
1,550

$
25

$
1,575

$
2,954

$
28

$
2,982

Net earnings

$
7

$
—

$
7

$
38

$
1

$
39

Consolidated Balance Sheet

June 30, 2018

Balances Without

As

(Millions of dollars)

Adoption of Topic 606

Adjustments

Reported

Receivables, net

$
501

$
20

$
521

Inventories

$
916

$
(42)

$
874

Other current assets

$
127

$
1

$
128

Deferred revenue

$
79

$
(23)

$
56

Other current liabilities

$
282

$
1

$
283

Total Seaboard stockholders’ equity

$
3,402

$
1

$
3,403

Consolidated Statement of Cash Flows

Six Months Ended June 30, 2018

Balances Without

As

(Millions of dollars)

Adoption of Topic 606

Adjustments

Reported

Net earnings

$
38

$
1

$
39

Changes in assets and liabilities, net of acquisitions:

Receivables, net of allowance

$
10

$
(20)

$
(10)

Inventories

$
(131)

$
42

$
(89)

Other current assets

$
49

$
(1)

$
48

Current liabilities, exclusive of debt

$
(35)

$
(22)

$
(57)

~~Note 3 –~~ Investments

The following is a summary of the estimated fair value of short-term investments classified as trading ~~securities held at June 30, 2018 and December 31, 2017.~~

June 30,

December 31,

(Millions of dollars)

2018

2017

Domestic equity securities

$
772

$
752

Foreign equity securities

302

319

Domestic debt securities held in mutual funds/ETFs/U.S. Treasuries

122

439

Collateralized loan obligations

30

29

High yield securities

21

21

Money market funds held in trading accounts

10

10

Other trading securities

7

6

Total trading short-term investments

$
1,264

$
1,576

securities:

Seaboard had $107 million of equity securities denominated in foreign currencies at June 30, 2018, with $43 million in euros, $23 million in Japanese yen, $20 million in British pounds, $6 million in Swiss francs and the remaining $15 million in various other currencies. At December 31, 2017, Seaboard had $114 million of equity securities denominated in foreign currencies, with $48 million in euros, $25 million in Japanese yen, $20 million in British pounds, $6 million in Swiss francs and the remaining $15 million in various other currencies. Also, money market funds included less than $1 million denominated in various foreign currencies at June 30, 2018 and December 31, 2017.



	June 29,		December 31,
(Millions of dollars)	2019		2018
Domestic equity securities	$	689	$	632
Domestic debt securities		392		268
Foreign equity securities		195		218
High yield securities		57		19
Foreign debt securities		49		16
Collateralized loan obligations		27		28
Money market funds held in trading accounts		21		146
Term deposits		5		9
Other trading securities		5		—
Total trading short-term investments	$	1,440	$	1,336

~~In January 2018, Seaboard sold $314 million of its domestic debt securities to fund an acquisition. See Note 10 for further information on this acquisition.~~

The change in unrealized gains (losses) related to trading securities still held at the end of the respective reporting period ~~were~~was $38 million and $126 million for the three and six months ended June 29, 2019, respectively, and $(2) million and $(24) million for the three and six months ended June 30, 2018, ~~respectively,~~respectively.

Seaboard had $59 million of equity securities denominated in foreign currencies as of June 29, 2019, with $29 million in euros, $11 million in Japanese yen, $9 million in British pounds, $4 million in Swiss francs and ~~$33~~the remaining $6 million in various other currencies. As of December 31, 2018, Seaboard had $66 million of equity securities denominated in foreign currencies, with $25 million in euros, $20 million in Japanese yen, $9 million in British pounds, $3 million in Swiss francs and the remaining $9 million in various other currencies. Also, money market funds included less than $1 million and ~~$65~~$10 million ~~for the three~~denominated in various foreign currencies as of June 29, 2019 and ~~six months ended July 1, 2017,~~December 31, 2018, respectively.

~~In addition to its short-term investments, Seaboard also has trading securities related to Seaboard’s deferred compensation plans classified in other current assets~~ Term deposits are denominated in the ~~condensed consolidated balance sheets. See~~ West African franc.

Note ~~6 to the condensed consolidated financial statements for information on the types of trading securities held related to the deferred compensation plans.~~

~~Note 4~~3 – Inventories

The following is a summary of ~~inventories~~inventories:



	June 29,		December 31,
(Millions of dollars)	2019		2018
At lower of LIFO cost or market:
Hogs and materials	$	375	$	361
Fresh pork and materials		32		36
LIFO adjustment		(67)		(58)
Total inventories at lower of LIFO cost or market		340		339
At lower of FIFO cost and net realizable value:
Grains, oilseeds and other commodities		277		229
Sugar produced and in process		32		17
Other		63		81
Total inventories at lower of FIFO cost and net realizable value		372		327
Grain, flour and feed at lower of weighted average cost and net realizable value		159		149
Total inventories	$	871	$	815

Note 4 – Leases

Seaboard’s operating leases are primarily for land, buildings, machinery and equipment, contract growers and vessels. Seaboard’s finance leases are primarily for contract growers. The Pork segment has contract grower agreements in place with farmers to raise a portion of Seaboard’s hogs using the farmer’s buildings, land and equipment. Seaboard’s Marine segment leases its PortMiami terminal, among other ports. The Marine and CT&M segments lease vessels for use in operations. Seaboard elected to account for lease and nonlease maintenance components as a single lease component for all classes of underlying assets. Seaboard’s nonlease components are primarily for services related to labor associated with caring for hogs in its contract grower agreements and crew services on vessel charter arrangements.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available at the lease commencement date. As of June ~~30, 2018~~29, 2019, the weighted average remaining lease term for Seaboard’s operating and finance leases was approximately 7 years and 9 years, respectively. Seaboard’s lease terms vary depending upon the class of asset and some leases include options to extend or terminate. Since Seaboard is not reasonably certain to exercise these renewal or termination options, the options are not considered in determining the lease term, and associated potential option payments or penalties are excluded from lease payments. Seaboard has elected not to recognize ROU assets and lease liabilities for short-term leases for all classes of underlying assets. Short-term leases are leases with terms greater than 1 month, but less than 12 months.

The components of lease cost were as follows:



	Three		Six
	Months		Months
	Ended		Ended
(Millions of dollars)	June 29, 2019		June 29, 2019
Operating lease cost	$	34	$	67
Finance lease cost:
Amortization of right of use assets		1		1
Interest on lease liabilities		—		—
Variable lease cost		1		4
Short-term lease cost		13		23
Total lease cost	$	49	$	95

Operating lease cost and short-term lease cost are recognized on a straight-line basis over the lease term. Finance lease cost is recognized based on the effective interest method for the lease liability and straight-line amortization of the ROU asset. Variable lease payments are recognized when the event, activity or circumstance in the lease agreement on which those payments are assessed occurs. Variable lease payments are primarily for payments in excess of minimums with regards to throughput of containers at PortMiami. Short-term leases are primarily for containers and vessels at Seaboard’s Marine segment. Lease cost is included in various line items in the condensed consolidated statements of comprehensive income or capitalized to inventory. Rental expense for leases with terms of a month or less are excluded from the total lease cost above.

Seaboard’s operating lease assets and liabilities are reported separately in the condensed consolidated balance sheet. The classification of Seaboard’s finance leases in the condensed consolidated balance sheet as of June 29, 2019 was as follows:



			Balance
Description	Balance Sheet Classification		(Millions of dollars)
Finance lease right of use assets, net	Property, plant and equipment, net	$	26
Finance lease liabilities	Other current liabilities		2
Non-current finance lease liabilities	Other liabilities		17

Maturities of lease liabilities as of June 29, 2019 were as follows:



		Operating		Finance
(Millions of dollars)		Leases		Leases
Remainder of 2019	$	71	$	2
2020		113		3
2021		99		3
2022		74		3
2023		68		3
Thereafter		188		14
Total undiscounted lease payments		613		28
Less imputed interest		(124)		(9)
Total lease liability	$	489	$	19

Seaboard’s weighted average discount rate for operating and finances leases was 6.63% and 6.93%, respectively, as of June 29, 2019. There were estimates and judgements made in determining Seaboard’s multiple discount rates based on term, country and currency, including developing a secured credit rating and spreading market yield data across maturities and country risk-free rates.

Below is Seaboard’s commitments table as of December 31, ~~2017:~~

June 30,

December 31,

(Millions of dollars)

2018

2017

At lower of LIFO cost or market:

Live hogs and materials

$
340

$
313

Fresh pork and materials

36

28

376

341

LIFO adjustment

(37)

(31)

Total inventories at lower of LIFO cost or market

339

310

At lower of FIFO cost and net realizable value:

Grains, oilseeds and other commodities

306

253

Sugar produced and in process

36

38

Other

58

90

Total inventories at lower of FIFO cost and net realizable value

400

381

Grain, flour and feed at lower of weighted average cost and net realizable value

135

89

Total inventories

$
874

$
780

~~Note 5 – Income Taxes~~

~~Pursuant to the measurement period permitted in the Securities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin 118~~2018 that disclosed operating lease payments for the ~~Tax Cuts~~next five years and ~~Jobs Act (“2017 Tax Act”),~~thereafter. Seaboard had no material ~~updates~~capital leases as of December 31, 2018.



	Years ended December 31,
(Millions of dollars)	2019		2020		2021		2022		2023		Thereafter
Ports	$	18	$	18	$	19	$	19	$	20	$	109
Vessel, time and voyage-charters		58		27		26		13		8		25
Contract grower agreements		47		41		37		27		18		61
Other operating lease payments		18		13		9		8		6		15
Total unrecognized non-cancelable commitments	$	141	$	99	$	91	$	67	$	52	$	210

Note 5 – Notes Payable, Long-Term Debt, Commitments and Contingencies

Notes Payable

Notes payable outstanding under uncommitted lines of credit was $160 million as of June 29, 2019, with $119 million denominated in South African rand, $20 million denominated in Canadian dollars, $14 million denominated in Zambian kwacha and $7 million denominated in Brazilian real. The weighted average interest rate for outstanding notes payable was 8.23% and 7.76% as of June 29, 2019 and December 31, 2018, respectively. The notes payable under the uncommitted lines of credit are unsecured and do not require compensating balances. Also, Seaboard has a $100 million committed credit line secured by certain short-term investments with no balance outstanding as of June 29, 2019. Seaboard’s borrowing capacity under its uncommitted and committed lines of credit was reduced by the outstanding balances and letters of credit totaling $18 million as of June 29, 2019.

Long-Term Debt

The following is a summary of long-term debt:



		June 29,		December 31,
(Millions of dollars)		2019		2018
Term Loan due 2028	$	695	$	698
Foreign subsidiary obligations due 2019 through 2023		94		81
Total long-term debt at face value		789		779
Current maturities of long-term debt and unamortized discount and costs		(55)		(40)
Long-term debt, less current maturities and unamortized discount and costs	$	734	$	739

The interest rate on the Term Loan was 4.03% and 4.15% as of June 29, 2019 and December 31, 2018, respectively. The weighted average interest rate on Seaboard’s foreign subsidiary obligations was 3.91% and 3.80% June 29, 2019 and December 31, 2018, respectively. Seaboard was in compliance with all restrictive debt covenants relating to ~~its provisional tax impacts related~~these agreements as of June 29, 2019.

Contingencies

On June 28, 2018, Wanda Duryea and eleven other indirect purchasers of pork products, acting on behalf of themselves and a putative class of indirect purchasers of pork products, filed a class action complaint in the U.S. District Court for the District of Minnesota against several pork processors, including Seaboard Foods LLC and Agri Stats, Inc., a company described in the complaint as a data sharing service. Subsequent to ~~mandatory deemed repatriated earnings~~the filing of this initial complaint, additional class action complaints making similar claims on behalf of putative classes of direct and indirect purchasers were filed in the ~~revaluation~~U.S. District Court for the District of ~~deferred tax assets and liabilities.~~Minnesota. The ~~ultimate impact may differ, possibly materially, from Seaboard’s provisional amounts due to,~~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 their 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 include causes of action under various state laws, including state antitrust laws, unfair competition laws, consumer protection statutes, and state common law claims for unjust enrichment. The complaints also allege that the defendants concealed this conduct from the plaintiffs and the members of the putative classes. The relief sought in the respective complaints includes treble damages, injunctive relief, pre- and post-judgment interest, costs, and attorneys’ fees on behalf of the putative classes. The complaints were amended and consolidated, and the cases are now organized into three consolidated putative class actions brought on behalf of (a) direct purchasers, (b) consumer indirect purchasers, and (c) commercial and institutional indirect purchasers. The amended complaints named Seaboard Corporation as an additional ~~analysis, changes~~defendant. On July 9, 2019, the Commonwealth of Puerto Rico filed a similar class action complaint against Seaboard Foods LLC and Seaboard Corporation in ~~interpretations~~the U.S. District Court of Puerto Rico making essentially the same contentions as set forth in the cases filed in the U.S. District Court for the District of Minnesota, but also contending violation of Puerto Rican antitrust laws. Seaboard intends to defend these cases vigorously. It is impossible at this stage either to determine the probability of a favorable or unfavorable outcome resulting from these suits, or to estimate the amount of potential loss, if any, resulting from the suits.

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 naming as parties Seaboard and ~~assumptions~~Seaboard’s subsidiaries, Seaboard Overseas Limited (“SOL”) and Seaboard Uruguay Holdings Ltd. (“Seaboard Uruguay”). Seaboard has ~~made,~~a 45% indirect ownership of Cereoil. The suit seeks an order requiring Seaboard, 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 intends to defend this case vigorously. 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. Any award in this case would offset against any award in the additional ~~regulatory guidance~~case described below filed by the Trustee on April 27, 2018.

On April 27, 2018, the Trustee for Cereoil filed another suit in the Bankruptcy Court of First Instance in Uruguay that ~~may~~was served during the second quarter naming as parties Seaboard, 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 ~~issued,~~ordered to pay all liabilities of Cereoil, net of assets. The bankruptcy filing lists total liabilities of $53 million and ~~actions~~assets of $30 million. Seaboard ~~may take as~~intends to defend this case vigorously. It is impossible at this stage to determine the probability of a ~~result~~favorable or unfavorable outcome resulting from this suit. In the event of an adverse ruling, Seaboard and the other Cereoil Defendants could be ordered to pay the amount of the net indebtedness of Cereoil, which based on the bankruptcy schedules would total $23 million. It is possible that the net indebtedness could be higher than this amount if Cereoil’s liabilities are greater than $53 million and/or Cereoil’s assets are worth less than $30 million. In addition, in the event of an adverse ruling, the Bankruptcy Court of First Instance could order payment of the Trustee’s professional fees, interest, and other expenses. Any award in this case would offset against any award in the case described above filed on March 20, 2018.

event of an adverse ruling, Seaboard and the other Cereoil Defendants could be ordered to pay the amount of the net indebtedness of Nolston, which based on the bankruptcy schedules would total $14 million. It is possible that the net indebtedness could be higher than this amount if Nolston’s liabilities are greater than $29 million and/or Nolston’s assets are worth less than $15 million. In addition, in the event of an adverse ruling, the Bankruptcy Court of First Instance could order payment of the Trustee’s professional fees, interest, and other expenses.

On September 18, 2014, and subsequently in 2015 and 2016, Seaboard received a number of grand jury subpoenas and informal requests for information from the Department of Justice, Asset Forfeiture and Money Laundering Section (“AFMLS”), seeking records related to specified foreign companies and individuals. The companies and individuals as to which the requested records relate were not affiliated with Seaboard, although Seaboard has also received subpoenas and requests for additional information relating to an affiliate of Seaboard. During 2017, ~~Tax Act. The accounting~~Seaboard received grand jury subpoenas requesting documents and information related to money transfers and bank accounts in the Democratic Republic of Congo (“DRC”) and other African countries and requests to interview certain Seaboard employees and to obtain testimony before a grand jury. Seaboard has retained outside counsel and is cooperating with the government’s investigation. It is impossible at this stage either to determine the probability of a favorable or unfavorable outcome or to estimate the amount of potential loss, if any, resulting from the government’s inquiry.

Seaboard is subject to various administrative and judicial proceedings and other legal matters related to the normal conduct of its business. In the opinion of management, the ultimate resolution of these items is not expected to be complete during the fourth quarter of 2018 when the 2017 U.S. corporate income tax return is filed. Seaboard’s projected annual income tax rate for the first half of 2018 includes less than $1 million of anticipated tax expense associated with the global intangible low-taxed income (“GILTI”) provision and no anticipated tax expense associated with the base-erosion and anti-abuse tax (“BEAT”) provision.

~~During the first quarter of 2018, Seaboard elected to change the tax status of~~have a wholly-owned subsidiary from a partnership to a corporation. This change in tax status resulted in an estimated $22 million of additional tax expense and additional deferred tax liabilities that Seaboard recognized inmaterial adverse effect on the condensed consolidated financial statements of Seaboard.

Guarantees

Certain of the non-consolidated affiliates and third-party contractors who perform services for Seaboard have bank debt supporting their underlying operations. From time to time, Seaboard will provide guarantees of that debt in order to further Seaboard’s business objectives. Seaboard does not issue guarantees of third parties for compensation. As of June 29, 2019, guarantees outstanding to affiliates and third parties were not material. Seaboard has not accrued a liability for any of the ~~three month period ended March 31, 2018.~~

~~In February 2018, Congress retroactively extended~~affiliate or third-party guarantees as management considers the ~~Federal blender’s credits~~likelihood of loss to be remote. See Notes Payable above for 2017. In accordance with U.S. GAAP, the effects of changes in tax laws, including retroactive changes, are recognized in the financial statements in the period that the changes are enacted. Accordingly, in the first quarter of 2018, a one-time tax benefit of $4 million related to the 2017 Federal blender’s credits was recorded in income tax expense. In addition to this amount, Seaboard recognized $42 million of Federal blender’s credits as non-taxable revenue in the first quarter of 2018. See Note 10 for further discussion of ~~the Federal blender’s credits.~~letters of credit.

Note 6 – Employee Benefits

Seaboard has a defined benefit pension plan for certain domestic salaried and clerical employees. At this time, no contributions are expected to be made to the plan in 2019. Seaboard also sponsors non-qualified, unfunded supplemental executive plans, and has individual, non-qualified, unfunded supplemental retirement agreements for certain retired employees. Management has no plans to provide funding for these supplemental plans in advance of when the benefits are paid.

The net periodic benefit cost for all of these plans was as follows:



	Three Months Ended				Six Months Ended
	June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2019		2018		2019		2018
Components of net periodic benefit cost:
Service cost	$	2	$	2	$	4	$	5
Interest cost		3		2		6		5
Expected return on plan assets		(3)		(2)		(5)		(5)
Amortization and other		3		2		4		3
Net periodic benefit cost	$	5	$	4	$	9	$	8

Seaboard participates in a multi-employer pension fund, the United Food and Commercial Workers International Union-Industry Pension Fund (the “Fund”). Pursuant to a collective bargaining agreement, Seaboard made contributions to the Fund based on hours worked by certain union employees who are participants in the Fund. Effective July 22, 2019, after ratification of a renewed collective bargaining agreement, Seaboard ceased contributing to the Fund, which will result in the termination of participation in the Fund. Seaboard will record an estimated $14 million withdrawal liability during the third quarter of 2019, that will be payable in quarterly installments over 20 years, beginning in the second half of 2020.

Note 7 – Derivatives and Fair Value of Financial Instruments

~~Seaboard uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three broad levels:~~

~~Level 1:~~ ~~Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities that Seaboard has the ability to access at the measurement date.~~

~~Level 2:~~ Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

~~Level 3:~~ ~~Unobservable inputs that reflect the reporting entity’s own assumptions.~~

The following ~~table~~tables shows assets and liabilities measured at fair value on a recurring basis as of June ~~30,~~29, 2019 and December 31, 2018, and also the level within the fair value hierarchy used to measure each category of assets and liabilities. ~~Seaboard determines if there are any transfers between levels at the end of a reporting period. There were no transfers between levels that occurred in the first six months of 2018.~~ The trading securities classified as other current assets below are assets held for Seaboard’s deferred compensation plans.



	Balance
	June 30,


									Balance
									June 29,
(Millions of dollars)	2018		Level 1		Level 2		Level 3		2019		Level 1		Level 2		Level 3
Assets:
Trading securities – short-term investments:
Domestic equity securities	$	772	$	772	$	—	$	—	$	689	$	689	$	—	$	—
Domestic debt securities										392		115		277		—
Foreign equity securities		302		302		—		—		195		195		—		—
Domestic debt securities held in mutual funds/ETFs/U.S. Treasuries		122		112		10		—
High yield securities										57		10		47		—
Foreign debt securities										49		2		47		—
Collateralized loan obligations		30		—		30		—		27		—		27		—
High yield securities		21		21		—		—
Money market funds held in trading accounts		10		10		—		—		21		21		—		—
Term deposits										5		5		—		—
Other trading securities		7		5		2		—		5		5		—		—
Trading securities – other current assets:
Domestic equity securities		35		35		—		—		36		36		—		—
Money market fund held in trading accounts		6		6		—		—		2		2		—		—
Foreign equity securities		3		3		—		—		2		2		—		—
Fixed income securities		2		2		—		—		2		2		—		—
Other		1		—		1		—		2		1		1		—
Derivatives:
Commodities (1)		2		2		—		—		8		8		—		—
Foreign currencies		2		—		2		—		1		—		1		—
Total Assets	$	1,315	$	1,270	$	45	$	—	$	1,493	$	1,093	$	400	$	—
Liabilities:
Contingent consideration	$	14	$	—	$	—	$	14	$	13	$	—	$	—	$	13
Derivatives:
Commodities (1)		17		17		—		—		6		6		—		—
Foreign currencies		1		—		1		—
Total Liabilities	$	32	$	17	$	1	$	14	$	19	$	6	$	—	$	13

(1)

⁽¹⁾

1012



	Balance
	December 31,
(Millions of dollars)	2018		Level 1		Level 2		Level 3
Assets:
Trading securities – short-term investments:
Domestic equity securities	$	632	$	632	$	—	$	—
Domestic debt securities		268		215		53		—
Foreign equity securities		218		218		—		—
Money market funds held in trading accounts		146		146		—		—
Collateralized loan obligations		28		—		28		—
High yield securities		19		7		12		—
Foreign debt securities		16		2		14		—
Term deposits		9		9		—		—
Other trading securities		5		5		—		—
Trading securities – other current assets:
Domestic equity securities		32		32		—		—
Money market fund held in trading accounts		5		5		—		—
Foreign equity securities		3		3		—		—
Fixed income securities		3		3		—		—
Other		1		1		—		—
Derivatives:
Commodities⁽¹⁾		6		4		2		—
Foreign currencies		2		—		2		—
Total Assets	$	1,393	$	1,282	$	111	$	—
Liabilities:
Trading securities – short-term investments:
Other trading securities	$	5	$	—	$	5	$	—
Contingent consideration		13		—		—		13
Derivatives:
Commodities⁽¹⁾		4	$	4	$	—	$	—
Total Liabilities	$	22	$	4	$	5	$	13

The following table shows assets and liabilities measured at fair value on a recurring basis as of December 31, 2017 and also the level within the fair value hierarchy used to measure each category of assets and liabilities.

Balance






December 31,

(Millions of dollars)

2017

Level 1
Level 2
Level 3

Assets:

Trading securities – short-term investments:

Domestic equity securities

$
752

$
752

$
—

$
—

Domestic debt securities held in mutual funds/ETFs/U.S. Treasuries

439

438

1

—

Foreign equity securities

319

319

—

—

Collateralized loan obligations

29

—

29

—

High yield securities

21

21

—

—

Money market funds held in trading accounts

10

10

—

—

Other trading securities

6

6

—

—

Trading securities – other current assets:

Domestic equity securities

35

35

—

—

Money market fund held in trading accounts

5

5

—

—

Foreign equity securities

4

4

—

—

Fixed income securities

2

2

—

—

Derivatives:

Commodities (1)

4

4

—

—

Foreign currencies

3

—

3

—

Total Assets

$
1,629

$
1,596

$
33

$
—

Liabilities:

Derivatives:

Commodities (1)

$
6

$
6

$
—

$
—

Foreign currencies

6

—

6

—

Total Liabilities

$
12

$
6

$
6

$
—

(1)

⁽¹⁾

Financial instruments consisting of cash and cash equivalents, net receivables, notes payable, 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. Domestic debt securities categorized as level 1 in the fair value hierarchy include debt securities held in mutual funds and ETFs. Domestic debt securities categorized as level 2 include corporate bonds, mortgage-backed securities, asset-backed securities and U.S. Treasuries. Foreign debt securities categorized as level 1 in the fair value hierarchy include debt securities held in mutual funds and ETFs with a country of origin concentration outside the U.S. Foreign debt securities categorized as level 2 include foreign government or government related securities and asset-backed securities with a country of origin concentration outside the U.S. High yield securities categorized as level 1 in the fair value hierarchy include high yield securities held in mutual funds and ETFs, and level 2 includes corporate bonds and bank loans.

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, ~~its~~the carrying amount approximates fair value. If Seaboard’s long-term debt was measured at fair value in its condensed consolidated balance sheets, it would have been classified as level 2 in the fair value hierarchy.

The fair value of Seaboard’s contingent consideration ~~recorded in conjunction with the~~related to a 2018 acquisition ~~discussed further in Note 10~~ was classified as a level 3 in the fair value hierarchy since the calculation is dependent upon projected company specific inputs using a Monte Carlo simulation. ~~In future periods,~~ Seaboard will remeasure the estimated fair value of the contingent consideration liability until settled. ~~There was no change to the estimated fair value during the second quarter of 2018.~~

While management believes its derivatives are primarily economic hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these types of transactions as hedges for accounting purposes. As the derivatives discussed below are not accounted for as hedges, fluctuations in the related commodity prices, foreign currency exchange rates and equity prices could have a material impact on earnings in any given reporting period. ~~Seaboard also enters into speculative derivative transactions not directly related to its raw material requirements.~~ The nature of Seaboard’s market risk exposure has not changed materially since December 31, ~~2017.~~2018.

Commodity Instruments

Seaboard uses various derivative futures and options to manage its risk of price fluctuations for raw materials and other inventories, finished product sales and firm sales commitments. AtAs of June ~~30,~~29, 2019, Seaboard had open net derivative contracts to purchase 21 million bushels of grain and 11 million pounds of hogs and open net derivative contracts to sell 46 million pounds of soybean oil and 4 million gallons of heating oil. As of December 31, 2018, Seaboard had open net derivative contracts to purchase ~~87 million pounds of soybean oil and 28~~33 million bushels of grain and open net derivative contracts to sell 63 million pounds of hogs and 15 million gallons of heating oil. At December 31, 2017, Seaboard had open net derivative contracts to purchase 29 million bushels of grain and 18 million pounds of soybean oil and open net derivative contracts to sell 1326 million pounds of hogs and 7 million gallons of heating oil. Commodity derivatives are recorded at fair value with any changes in fair value being marked-to-market as a component of cost of sales in the condensed consolidated statements of comprehensive income.

Foreign Currency Exchange Agreements

Seaboard enters into foreign currency exchange agreements to manage the foreign currency exchange rate risk with respect to certain transactions denominated in foreign currencies. Foreign currency exchange agreements that are primarily related to an underlying commodity transaction are recorded at fair value with changes in value marked-to-market as a component of cost of sales in the condensed consolidated statements of comprehensive income. Foreign currency exchange agreements that are not related to an underlying commodity transaction are recorded at fair value with changes in value marked-to-market as a component of foreign currency gains (losses), net in the condensed consolidated statements of comprehensive income. AtAs of June ~~30, 2018~~29, 2019 and December 31, ~~2017,~~2018, Seaboard had trading foreign currency exchange agreements to cover a portion of its firm sales and purchase commitments and related trade receivables and payables with net notional amounts of ~~$12~~$66 million and ~~$20~~$82 million, respectively, primarily related to the South African rand ~~Canadian dollar~~ and euro. From time to time, Seaboard is subject to counterparty credit risk related to its foreign currency exchange agreements should the ~~euro.~~counterparties fail to perform according to the terms of the applicable agreements. As of June 29, 2019, Seaboard had a maximum amount of loss due to credit risk of $1 million with five counterparties related to foreign currency exchange agreements. Seaboard does not hold any collateral related to these agreements.

Equity ~~Future~~Futures Contracts

Seaboard enters into equity ~~future~~futures contracts to manage the equity price risk with respect to certain short-term investments. Equity ~~future~~futures contracts are recorded at fair value with changes in value marked-to-market as a component of other investment income (loss), net in the condensed consolidated statements of comprehensive income. The notional amounts of these equity ~~future~~futures contracts were ~~$46~~less than $1 million and $0$97 million atas of June ~~30, 2018~~29, 2019 and December 31, ~~2017,~~2018, respectively.

~~Counterparty Credit Risk~~

From time to time, Seaboard is subject to counterparty credit risk related to its foreign currency exchange agreements should the counterparties fail to perform according to the terms of the contracts. As of June 30, 2018, Seaboard had a maximum amount of loss due to credit risk of $2 million with seven counterparties related to foreign currency exchange agreements. Seaboard does not hold any collateral related to these agreements.

The following table provides the amount of gain or (loss) recognized in income for each type of derivative and where it was recognized in the condensed consolidated statements of comprehensive ~~income for the three and six months ended June 30, 2018 and July 1, 2017.~~

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)



2018

2017

2018

2017

Commodities

Cost of sales

$
(25)

$
(1)

$
(16)

$
1

Foreign currencies

Cost of sales

2

—

(4)

(5)

Foreign currencies

Foreign currency gains (losses), net

—

(1)

—

(1)

Equity

Other investment income (loss), net

—

—

(10)

—

income:



		Three Months Ended				Six Months Ended
		June 29,		June 30,		June 29,		June 30,
(Millions of dollars)		2019		2018		2019		2018
Commodities	Cost of sales	$	1	$	(25)	$	(31)	$	(16)
Foreign currencies	Cost of sales		1		2		4		(4)
Equity	Other investment income (loss), net		—		—		(3)		(10)

1214

The following table provides the fair value of each type of derivative held ~~as of June 30, 2018 and December 31, 2017~~ and where each derivative is included in the condensed consolidated balance ~~sheets.~~

Asset Derivatives

Liability Derivatives

June 30,

December 31,

June 30,

December 31,

(Millions of dollars)



2018

2017



2018

2017

Commodities(1)

Other current assets

$
2

$
4

Other current liabilities

$
17

$
6

Foreign currencies

Other current assets

2

3

Other current liabilities

1

6

Equity (1)

Short-term investments

—

—

Short-term investments

2

—

sheets:



		Asset Derivatives					Liability Derivatives
		June 29,		December 31,			June 29,		December 31,
(Millions of dollars)		2019		2018			2019		2018
Commodities⁽¹⁾	Other current assets	$	8	$	6	Other current liabilities	$	6	$	4
Foreign currencies	Other current assets		1		2	Other current liabilities		—		—
Equity ⁽¹⁾	Short-term investments		—		—	Short-term investments		—		5

⁽¹⁾

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 June 30, 2018 and December 31, 2017, the commodity derivatives had a margin account balance of $36 million and $20 million, respectively, resulting in a net other current asset in the condensed consolidated balance sheets of $21 million and $18 million, respectively. Seaboard’s equity derivatives are also presented on a net basis, including netting the derivatives within short-term investments.

~~Note 7 – Employee Benefits~~

Seaboard has a defined benefit pension plan for its domestic salaried and clerical employees. At this time, no contributions are expected to be made to the plan in 2018. Seaboard also sponsors non-qualified, unfunded supplemental executive plans, and has individual, non-qualified, unfunded supplemental retirement agreements for certain retired employees. Management has no plans to provide funding for these supplemental plans in advance of when the benefits are paid.

Of the total net periodic benefit cost presented in the table below, the service cost component is recorded in either cost of sales or selling, general and administrative expenses depending upon the employee. The other components of net periodic benefit cost are recorded in miscellaneous, net in the condensed consolidated statements of comprehensive income.

~~The net periodic benefit cost for all of these plans was as follows:~~

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)

2018

2017

2018

2017

Components of net periodic benefit cost:

Service cost

$
2

$
2

$
5

$
4

Interest cost

2

2

5

5

Expected return on plan assets

(2)

(3)

(5)

(5)

Amortization and other

2

2

3

3

Net periodic benefit cost

$
4

$
3

$
8

$
7

Note 8 ~~– Notes Payable, Long-term Debt, Commitments and Contingencies~~

~~Notes Payable~~

Of the $141 million of notes payable outstanding at June 30, 2018, all but $1 million were related to foreign subsidiaries, with $83 million denominated in South African rand, $32 million denominated in Argentine pesos, $21 million denominated in Canadian dollars and $4 million denominated in Zambian kwacha. The weighted average interest rate for outstanding notes payable was 14.95% and 10.48% at June 30, 2018 and December 31, 2017, respectively. As of June 30, 2018, Seaboard had uncommitted credit lines totaling $550 million, of which $465 million related to foreign subsidiaries. Seaboard’s borrowing capacity under its uncommitted lines at June 30, 2018 was reduced by $141 million drawn under the uncommitted lines and $23 million of letters of credit. The notes payable under the credit lines are unsecured and do not require compensating balances. Also, Seaboard has a $100 million committed credit line secured by certain short-term investments, with no balance outstanding as of June 30, 2018.

~~Long-term Debt~~

~~The following is a summary of long-term debt:~~

June 30,

December 31,
(Millions of dollars)

2018

2017
Term Loan due 2022

$
478

$
484

Foreign subsidiary obligations due 2019 through 2023

55

52

Total long-term debt at face value

533

536

Current maturities of long-term debt and unamortized discount

(25)

(54)

Long-term debt, less current maturities and unamortized discount

$
508

$
482

The interest rate on the Term Loan due 2022 was 3.72% and 3.20% at June 30, 2018 and December 31, 2017, respectively. The weighted average interest rate on Seaboard’s foreign subsidiary obligations was 4.35% and 21.80% at June 30, 2018 and December 31, 2017, respectively. Seaboard was in compliance with all restrictive debt covenants relating to these agreements as of June 30, 2018.

In conjunction with the acquisition discussed in Note 10, Seaboard incurred a euro-denominated note payable due to the sellers valued at $45 million at June 30, 2018. The change in value from the date of acquisition to the current reporting period reflects foreign currency fluctuations and the accretion of the discount to the note payable face value over the term that is recorded as additional interest expense. This foreign subsidiary obligation bears interest at an annual rate of 3.25%, with interest due annually on the anniversary date, until maturity on January 5, 2021.

~~Contingencies~~

~~On June 28, 2018, Wanda Duryea and eleven other indirect purchasers of pork products, acting on behalf of themselves and~~ ~~a putative class of indirect purchasers of pork products,~~ ~~filed a class action complaint in the~~ ~~U.S. District Court for the District of Minnesota~~ ~~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. Subsequent to the filing of this initial complaint, additional class action complaints making similar claims on behalf of putative classes of direct and indirect purchasers were filed in the U.S. District Court for the District of Minnesota. 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 their 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 include causes of action under various state laws, including state antitrust laws, unfair competition laws, consumer protection statutes, and state common law claims for unjust enrichment. The complaints also allege that the defendants concealed this conduct from the plaintiffs and the members of the putative classes. The relief sought in the respective complaints includes treble damages, injunctive relief, pre- and post-judgment interest, costs, and attorneys’ fees on behalf of the putative classes. Seaboard intends to defend these cases vigorously. It is impossible at this stage either to determine the probability of a favorable or unfavorable outcome resulting from these suits, or to estimate the amount of potential loss, if any, resulting from the suits.

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 naming as parties Seaboard and Seaboard’s subsidiaries, Seaboard Overseas Limited (“SOL”) and Seaboard Uruguay Holdings Ltd. (“Seaboard Uruguay”). Seaboard has a 45% indirect ownership of Cereoil. The suit seeks an order requiring Seaboard, 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 intends to defend this case vigorously. 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. 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 another suit in the Bankruptcy Court of First Instance in Uruguay that was served during the second quarter naming as parties Seaboard, 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 $30 million. Seaboard intends to defend this case vigorously. 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 the other Cereoil Defendants could be ordered to pay the amount of the net indebtedness of Cereoil, which based on the bankruptcy schedules would total $23 million. It is possible that the net indebtedness could be higher than this amount if Cereoil’s liabilities are greater than $53 million and/or Cereoil’s assets are worth less than $30 million. In addition, in the event of an adverse ruling, the Bankruptcy Court of First Instance could order payment of the Trustee’s professional fees, interest, and other expenses. Any award in this case would offset against any award in the case described above filed on March 20, 2018.

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 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 lists total liabilities of $29 million and assets of $15 million. Seaboard intends to defend this case vigorously. 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 the other Cereoil Defendants could be ordered to pay the amount of the net indebtedness of Nolston, which based on the bankruptcy schedules would total $14 million. It is possible that the net indebtedness could be higher than this amount if Nolston’s liabilities are greater than $29 million and/or Nolston’s assets are worth less than $15 million. In addition, in the event of an adverse ruling, the Bankruptcy Court of First Instance could order payment of the Trustee’s professional fees, interest, and other expenses.

On September 18, 2014, and subsequently in 2015 and 2016, Seaboard received a number of grand jury subpoenas and informal requests for information from the Department of Justice, Asset Forfeiture and Money Laundering Section (“AFMLS”), seeking records related to specified foreign companies and individuals. The companies and individuals as to which the requested records relate were not affiliated with Seaboard, although Seaboard has also received subpoenas and requests for additional information relating to an affiliate of Seaboard. During 2017, Seaboard received grand jury subpoenas requesting documents and information related to money transfers and bank accounts in the Democratic Republic of Congo (“DRC”) and other African countries and requests to interview certain Seaboard employees and to obtain testimony before a grand jury. Seaboard has retained outside counsel and is cooperating with the government’s investigation. It is impossible at this stage either to determine the probability of a favorable or unfavorable outcome or to estimate the amount of potential loss, if any, resulting from the government’s inquiry.

On September 19, 2012, the U.S. Immigration and Customs Enforcement (“ICE”) executed three search warrants authorizing the seizure of certain records from Seaboard’s offices in Merriam, Kansas and at the Seaboard Foods employment office and the human resources department in Guymon, Oklahoma. The warrants generally called for the seizure of employment-related files, certain e-mails and other electronic records relating to Medicaid and Medicaid recipients, certain health care providers in the Guymon area, and Seaboard’s health plan and certain personnel issues. The U.S. Attorney’s Office for the Western District of Oklahoma (“USAO”), which has been leading the investigation, previously advised Seaboard that it intended to close its investigation and that no charges would be brought against Seaboard. However, discussions continue with the USAO, ICE and the Oklahoma Attorney General's office regarding the matter, including the possibility of a settlement. No proceedings have been filed or brought as of the date of this report. It is not possible at this time to determine whether a settlement will be reached or whether Seaboard will incur any material fines, penalties or liabilities in connection with this matter.

Seaboard is subject to various administrative and judicial proceedings and other legal matters related to the normal conduct of its business. In the opinion of management, the ultimate resolution of these items is not expected to have a material adverse effect on the condensed consolidated financial statements of Seaboard.

~~Contingent Obligations~~

Certain of the non-consolidated affiliates and third-party contractors who perform services for Seaboard have bank debt supporting their underlying operations. From time to time, Seaboard will provide guarantees of that debt in order to further Seaboard’s business objectives. Seaboard does not issue guarantees of third parties for compensation. As of June 30, 2018, guarantees outstanding to affiliates and third parties were not material. Seaboard has not accrued a liability for any of the affiliate or third-party guarantees as management considers the likelihood of loss to be remote. See Notes Payable above for discussion of letters of credit.

~~Note 9~~ – Stockholders’ Equity and Accumulated Other Comprehensive Loss

~~Seaboard has a share repurchase program in place that was approved by its~~In October 2017, the Board of Directors ~~and is in effect~~extended through October 31, ~~2019. As of June 30, 2018, the authorized amount of repurchases under~~2019 the share repurchase ~~program remained at $100 million. Seaboard did not repurchase any shares of common stock during the three and six months ended June 30, 2018.~~program. Under this share repurchase program, Seaboard is authorized to repurchase its common stock from time to time in open market or privately negotiated purchases, which may be above or below the traded market price. During the period that the share repurchase program remains in effect, ~~from time to time,~~ Seaboard may enter into a ~~10b5‑1~~10b5-1 plan authorizing a third party to make such purchases on behalf of Seaboard. All stock repurchased will be made in compliance with applicable legal requirements and funded by cash on hand. The timing of the repurchases and the number of shares repurchased ~~at any given time~~ will depend upon market conditions, compliance with ~~SEC~~Securities and Exchange Commission regulations and other factors. The Board of Directors’ stock repurchase authorization does not obligate Seaboard to acquire a specific amount of common stock, and the stock repurchase program may be suspended at any time at Seaboard’s discretion. As of June 29, 2019, $81 million remained available for repurchase under this program. Seaboard repurchased 3,810 shares of common stock at a total price of $14 million during the six months ended June 29, 2019.

The changes in the components of other comprehensive income (loss), net of related taxes, are as follows:

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)

2018


2017


2018

2017

Foreign currency translation adjustment

$
(17)

$
1

$
(27)

$
(1)

Unrealized gain on investments (1)

—

2

—

3

Unrecognized pension cost (2)

(3)

1

(2)

2

Other comprehensive income (loss), net of tax

$
(20)

$
4

$
(29)

$
4



	Three Months Ended				Six Months Ended
	June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2019		2018		2019		2018
Foreign currency translation adjustment	$	(9)	$	(17)	$	(11)	$	(27)
Unrecognized pension cost ⁽¹⁾		3		(3)		6		(2)
Other comprehensive loss, net of tax	$	(6)	$	(20)	$	(5)	$	(29)

⁽¹⁾

Effective January 1, 2018, upon adoption of new guidance, all unrealized gains (losses) on investments are included in the condensed consolidated statement of comprehensive income. The accumulated other comprehensive income balance as of December 31, 2017, was reclassified to retained earnings on January 1, 2018.

⁽²⁾

(1)

This primarily represents the amortization of actuarial losses that were included in net periodic benefit ~~cost~~cost. Amounts for the three and ~~recorded in operating income and~~six months ended June 30, 2018 included other actuarial adjustments. ~~See Note 7 to the condensed consolidated financial statements for further discussion.~~

The components of accumulated other comprehensive loss, net of related taxes, are as follows:



	June 30,		December 31,


					June 29,		December 31,
(Millions of dollars)	2018		2017		2019		2018
Cumulative foreign currency translation adjustment	$	(324)	$	(297)	$	(360)	$	(349)
Unrealized gain on investments		—		7
Unrecognized pension cost		(66)		(64)		(55)		(61)
Total accumulated other comprehensive loss	$	(390)	$	(354)	$	(415)	$	(410)

The cumulative foreign currency translation adjustment primarily represents the effect of the Argentine peso currency exchange fluctuation on the net assets of the Sugar and Alcohol segment. During the three and six month periods of 2018, Seaboard recognized $18 million and $29 million, respectively, of other comprehensive loss related to the devaluation of the Argentine peso. Management cannot predict the volatility in the currency exchange rate. Argentina was determined by management to be a highly inflationary economy in the second quarter of 2018, and as a result, the Sugar segment’s functional currency will be U.S. dollarsHowever, effective in the third quarter of 2018, ~~until~~ the ~~economic environment stabilizes. See Note 1~~Sugar and Alcohol segment’s functional currency changed from the Argentine peso to the ~~condensed consolidated financial statements for further discussion of this determination and its impact.~~

U.S. dollar due to highly inflationary accounting. For the six ~~month period~~months ended June ~~30, 2018,~~29, 2019, less than $1 million of income taxes for ~~the cumulative~~ foreign currency translation ~~adjustment~~ was recorded because substantially all of the cumulative foreign currency translation adjustment related to foreign subsidiaries for which no tax benefit was recorded. ~~See Note 5 for discussion~~

As of the election to change the tax status of a wholly-owned subsidiary from a partnership to a corporation. At July 1, 2017, income taxes for the cumulative foreign currency translation adjustment was recorded using a 35% effective tax rate except for $89 million related to certain subsidiaries for which no tax benefit was recorded. AtJune 29, 2019 and June 30, 2018, ~~and July 1, 2017,~~ income taxes for the cumulative unrecognized pension cost were recorded using an effective tax rate of 26% ~~and 39%, respectively,~~ except for unrecognized pension cost of ~~$22~~$20 million and ~~$19~~$22 million, respectively, related to employees at certain subsidiaries for which no tax benefit was recorded.

Note 9 – Revenue Recognition

Seaboard has multiple segments with diverse revenue streams. The following tables present Seaboard’s sales disaggregated by revenue source and segment:



		Three Months Ended June 29, 2019
(Millions of dollars)		Pork		Commodity Trading & Milling		Marine		Sugar and Alcohol		Power		All Other		Consolidated Totals
Major Products/Services Lines:
Products	$	427	$	999	$	—	$	29	$	—	$	5	$	1,460
Transportation		3		—		259		—		—		1		263
Energy		53		—		—		1		33		—		87
Other		9		3		—		—		—		—		12
Segment/Consolidated Totals	$	492	$	1,002	$	259	$	30	$	33	$	6	$	1,822



		Three Months Ended June 30, 2018
(Millions of dollars)		Pork		Commodity Trading & Milling		Marine		Sugar and Alcohol		Power		All Other		Consolidated Totals
Major Products/Services Lines:
Products	$	365	$	885	$	—	$	60	$	—	$	4	$	1,314
Transportation		4		—		263		—		—		—		267
Energy		66		—		—		1		31		—		98
Other		7		5		—		—		—		—		12
Segment/Consolidated Totals	$	442	$	890	$	263	$	61	$	31	$	4	$	1,691

��



		Six Months Ended June 29, 2019
(Millions of dollars)		Pork		Commodity Trading & Milling		Marine		Sugar and Alcohol		Power		All Other		Consolidated Totals
Major Products/Services Lines:
Products	$	784	$	1,825	$	—	$	54	$	—	$	8	$	2,671
Transportation		7		—		513		—		—		1		521
Energy		87		—		—		1		62		—		150
Other		17		6		—		—		—		—		23
Segment/Consolidated Totals	$	895	$	1,831	$	513	$	55	$	62	$	9	$	3,365



		Six Months Ended June 30, 2018
(Millions of dollars)		Pork		Commodity Trading & Milling		Marine		Sugar and Alcohol		Power		All Other		Consolidated Totals
Major Products/Services Lines:
Products	$	726	$	1,666	$	—	$	110	$	—	$	8	$	2,510
Transportation		8		—		512		—		—		—		520
Energy		159		—		—		2		54		—		215
Other		15		10		—		—		—		—		25
Segment/Consolidated Totals	$	908	$	1,676	$	512	$	112	$	54	$	8	$	3,270

Revenue from goods and services transferred to customers at a single point in time accounted for approximately 85% of Seaboard’s net sales for the three and six months ended June 29, 2019 and June 30, 2018. Substantially all of the sales in Seaboard’s Marine segment are recognized ratably over the transit time for each voyage as Seaboard believes this is a faithful depiction of the performance obligation to its customers. Almost all of Seaboard’s contracts with its customers are short-term, defined as less than one year. As of June 29, 2019, Seaboard had $9 million of remaining performance obligations that extend beyond one year, of which 33% is expected to be recognized as net sales in 2019 and the remaining balance in 2020.

Deferred revenue represents cash payments received in advance of Seaboard’s performance or revenue billed that is unearned. The CT&M segment, which operates internationally with sales in Africa, South America, the Caribbean and Asia, requires certain customers to pay in advance or upon delivery to avoid collection risk. The Marine segment’s deferred revenue balance primarily relates to the unearned portion of billed revenue when a ship is on the water and has not arrived at the designated port. The Pork segment has a marketing agreement with Triumph Foods, LLC, of which certain fees paid at commencement are recognized over the term of the agreement. Deferred revenue balances are reduced when revenue is recognized. Deferred revenue recognized as revenue for the three and six month periods ended June 29, 2019, was $130 million and $265 million, respectively. Deferred revenue recognized as revenue for the three and six month periods ended June 30, 2018, was $88 million and $156 million, respectively.

Note 10 – Income Taxes

Seaboard computes its year-to-date provision for income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for discrete tax items recorded in the period. Seaboard’s projected annual income tax rate for the second quarter of 2019 included $1 million of anticipated tax expense associated with the global intangible low-taxed income (“GILTI”) provision and no anticipated tax expense associated with the base-erosion and anti-abuse tax (“BEAT”) provision.

In the normal course of business, Seaboard’s tax filings are subject to audit by federal, state and foreign tax authorities. In June 2019, the Internal Revenue Service notified Seaboard that they will examine the 2016 federal income tax return.

Note 1011 – Segment Information

Seaboard has six reportable segments: Pork, CT&M, Marine, Sugar and Alcohol, Power and Turkey, each offering a specific product or service. For details on the respective products or services, ~~refer to~~see Note 1314 to the consolidated financial statements included in Seaboard’s annual report for the year ended December 31, ~~2017.~~2018. Below are segment updates from year-end.

In February ~~2018, Congress retroactively extended~~2019, the ~~Federal blender’s credits for 2017, which resulted in Seaboard’s~~ Pork segment ~~recognizing~~entered into an asset purchase agreement to buy an idle ethanol plant in Hugoton, Kansas for approximately ~~$42 million of revenue~~$40 million. Seaboard accounted for this transaction as an asset acquisition as no workforce or substantive processes were acquired. The purchase price was allocated to property, plant and equipment based on a relative fair value basis.

The Power segment is currently constructing a new floating power barge for use in the ~~first quarter of 2018 for the biodiesel it blends. There was no tax expense on this transaction.~~

On January 5, 2018, Seaboard’s CT&M segment acquired substantially all of the outstanding common shares of Borisniak Corp., Societe Les Grands Moulins d’Abidjan, Les Grands Moulins de Dakar, Eurafrique, and Societe Mediterraneenne de Transport, collectively operating as Groupe Mimran (“Mimran”). Mimran operates three flour mills and an associated grain trading business locatedDominican Republic that is anticipated to begin operations in ~~Senegal, Ivory Coast and Monaco. This~~ ~~acquisition~~2021. The total project is expected to ~~increase~~ exceed $160 million. Seaboard’s ~~flour and feed milling capacity and annual~~ ~~grain trading volume.~~

~~The total purchase price for this acquisition is subject~~Power segment continues to ~~a working capital adjustment and, based on~~explore strategic alternatives, including the ~~acquisition date fair values and using the exchange rate in effect at the time of acquisition, was $330 million consisting of:~~

(Millions of dollars)

Fair Value

Cash payment, net of $64 million of cash acquired

$
270

Euro-denominated note payable due 2021, 3.25% interest

46

Contingent consideration

14

Total fair value of consideration at acquisition date

$
330

~~See Note 8 for further description~~possible sale or relocation of the note payable. The fair value of the contingent consideration, classified in other non-current liabilities on the condensed consolidated balance sheet, is dependent on the probability of Mimran achieving certain financial performance targets using earnings before interest, taxes, depreciation and amortization (“EBITDA”) as a metric. The contingent consideration ranges between zero and $48 million payable between five and eight years following the closing, at the discretion of the sellers.

Seaboard is in the process of obtaining a third-party valuation of the tangible and intangible assets, and therefore the initial allocation of the purchase price is subject to refinement. The purchase was recorded at fair value and preliminarily allocated as follows:

(Millions of dollars)

Fair Value

Current assets

$
84

Property, plant and equipment

57

Intangible assets

100

Goodwill

161

Other long-term assets

4

Total fair value of assets acquired

406

Current liabilities

(38)

Other long-term liabilities

(34)

Total fair value of liabilities assumed

(72)

Less: Noncontrolling interest

(4)

Net fair value of assets acquired

$
330

The intangible assets include $28 million allocated to trade names, amortizable over 7‑9 years, and $72 million allocated to customer relationships, amortizable over 7‑11 years. Goodwill represents Mimran’s market presence and an experienced workforce. The intangible assets and goodwill are not deductible for income tax purposes.

Certain Mimran entities acquired are accounted for on a three-month lag. For the three and six month periods ended June 30, 2018, net sales of $109 million and $153 million, respectively, and net earnings of $4 million and $9 million, respectively, were recognized in Seaboard’s condensed consolidated financial statements from the date of acquisition. Acquisition costs, incurred primarily in 2017, of $1 million were expensed in selling, general and administrative expenses.

~~The following unaudited pro forma information presents the combined consolidated financial results for Seaboard as if the acquisition had been completed at January 1, 2017.~~

Three months ended
Six months ended

June 30,

July 1,
June 30,

July 1,

(Millions of dollars except per share amounts)

2018

2017
2018

2017

Net sales

$
1,691

$
1,493

$
3,330

$
2,956

Net earnings

$
7

$
65

$
43

$
156

Earnings per common share

$
6.28

$
56.61

$
36.74

$
133.39

During the first quarter of 2018, Seaboard’s CT&M segment invested total consideration of $16 million for a 50% noncontrolling interest in a grain trading and flour milling business in Mauritania. The investment amount is subject to change dependent upon resolution of certain contingencies. The investment is accounted for using the equity method of accounting and reported on a three-month lag. Seaboard’s first proportionate share of this affiliate’s income (loss) was recognized in the second quarter of 2018.

The CT&M segment has a 50% noncontrolling interest in a bakery located in the DRC. Seaboard’s investment balance is zero. As part of its original investment, Seaboard has an interest bearing long-term note receivable from this affiliate that had an aggregate principal and interest balance of approximately $11 million and $15 million at June 30, 2018 and December 31, 2017, respectively, all classified as long-term in other non-current assets given uncertainty of the timing of payments in the future. The note receivable is 50% guaranteed by the other shareholder in the entity. Beginning with the third quarter of 2017, Seaboard has recorded this entity’s current period losses against the note receivable, and the losses were $2 million and $4 million for three and six months ended June 30, 2018, respectively. If the future long-term cash flows of this bakery do not improve, more of the recorded value of this note receivable from affiliate could be deemed uncollectible in the future, which could result in a further charge to earnings.

The Marine segment has a 36% noncontrolling interest in a holding company that owns a Caribbean start-up terminal operation. During the first quarter of 2017, the holding company’s terminal operations encountered the loss of a customer and defaulted on certain third-party debt obligations. In addition, third-party engineering studies identified significant unexpected construction modifications needed for the terminal operation. As a result, Seaboard evaluated its investment and receivables for impairment and recorded a $5 million charge on its investment, a $1 million charge on its convertible note receivable and a $3 million allowance on its affiliate receivables. The holding company is investigating various strategic alternatives, such as additional capital calls, restructuring of the third-party debt and restructuring of the affiliate equity and receivables, which includes the deferral of all affiliated receivable payments until such future time as cash flow is sufficient to pay all third-party debt. If future long-term cash flows do not improve, there is a possibility that there could be additional charges.

In March 2017, the Power segment was notified by the Ministry of Environment and Natural Resources (the “Ministry”), a division within the Dominican Republic government, that it would not renew the environmental license for Seaboard’sexisting power plant on a barge located in the Ozama River, which would have required Seaboard to find a new location by the third quarter of 2018. However, during the first quarter of 2018, the Ministry renewed Seaboard’s environmental license to operate the power plant in its current location through 2020.barge.

The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball, LLC (“Butterball”). As of June ~~30, 2018~~29, 2019 and December 31, ~~2017,~~2018, Butterball had total assets of ~~$1,130~~$1,175 million and ~~$999~~$1,072 million, respectively. Butterball’s summarized income statement information iswas as follows:

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)

2018


2017


2018


2017

Net sales

$
326

$
354

$
647

$
704

Operating loss

$
(12)

$
(20)

$
(10)

$
(10)

Net loss

$
(15)

$
(27)

$
(13)

$
(22)



	Three Months Ended				Six Months Ended
		June 29,		June 30,		June 29,		June 30,
(Millions of dollars)		2019		2018		2019		2018
Net sales	$	343	$	326	$	646	$	647
Operating loss	$	(8)	$	(12)	$	(27)	$	(10)
Net loss	$	(16)	$	(15)	$	(37)	$	(13)

1817

The following tables set forth specific financial information about each segment as reviewed by Seaboard’s management. Operating income (loss) for segment reporting is prepared on the same basis as that used for consolidated operating income. Operating income (loss), along with income or loss from affiliates for the Pork, CT&M and Turkey segments, is used as the measure of evaluating segment performance because management does not consider interest, other investment income (loss) and income tax expense on a segment basis.





Sales to External Customers:	Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,		July 1,		June 30,		July 1,
									June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2018		2017		2018		2017		2019		2018		2019		2018
Pork	$	442	$	414	$	908	$	784	$	492	$	442	$	895	$	908
Commodity Trading and Milling		890		701		1,676		1,428		1,002		890		1,831		1,676
Marine		263		232		512		466		259		263		513		512
Sugar		61		48		112		88
Sugar and Alcohol										30		61		55		112
Power		31		23		54		47		33		31		62		54
All Other		4		4		8		8		6		4		9		8
Segment/Consolidated Totals	$	1,691	$	1,422	$	3,270	$	2,821	$	1,822	$	1,691	$	3,365	$	3,270



Operating Income (Loss):	Three Months Ended				Six Months Ended
	June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2019		2018		2019		2018
Pork	$	25	$	17	$	(9)	$	109
Commodity Trading and Milling		29		(2)		36		9
Marine		4		4		4		—
Sugar and Alcohol		(4)		10		(8)		12
Power		8		6		12		6
All Other		—		1		1		1
Segment Totals		62		36		36		137
Corporate		(9)		(4)		(17)		(8)
Consolidated Totals	$	53	$	32	$	19	$	129



Income (Loss) from Affiliates:	Three Months Ended				Six Months Ended
	June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2019		2018		2019		2018
Pork	$	(6)	$	(6)	$	(14)	$	(13)
Commodity Trading and Milling		(5)		(4)		(5)		(6)
Marine		—		1		1		1
Sugar and Alcohol		1		—		1		—
Power		2		1		2		3
Turkey		(8)		(8)		(19)		(7)
Segment/Consolidated Totals	$	(16)	$	(16)	$	(34)	$	(22)

Operating Income (Loss):

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)

2018

2017

2018

2017

Pork

$
17

$
52

$
109

$
102

Commodity Trading and Milling

(2)

1

9

18

Marine

4

1

—

4

Sugar

10

3

12

6

Power

6

2

6

4

All Other

1

1

1

1

Segment Totals

36

60

137

135

Corporate

(4)

(5)

(8)

(12)

Consolidated Totals

$
32

$
55

$
129

$
123

Income (Loss) from Affiliates:

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)

2018

2017

2018

2017

Pork

$
(6)

$
3

$
(13)

$
3

Commodity Trading and Milling

(4)

2

(6)

6

Marine

1

—

1

(6)

Sugar

—

—

—

—

Power

1

1

3

1

Turkey

(8)

(14)

(7)

(11)

Segment/Consolidated Totals

$
(16)

$
(8)

$
(22)

$
(7)

1918



Total Assets:	June 29,		December 31,
(Millions of dollars)	2019		2018
Pork	$	1,548	$	1,304
Commodity Trading and Milling		1,516		1,423
Marine		534		345
Sugar and Alcohol		138		138
Power		250		203
Turkey		275		295
All Other		11		8
Segment Totals		4,272		3,716
Corporate		1,629		1,591
Consolidated Totals	$	5,901	$	5,307



Investments in and Advances to Affiliates:	June 29,		December 31,
(Millions of dollars)	2019		2018
Pork	$	188	$	192
Commodity Trading and Milling		252		255
Marine		31		28
Sugar and Alcohol		5		4
Power		32		30
Turkey		275		295
Segment/Consolidated Totals	$	783	$	804

Total Assets:

June 30,

December 31,

(Millions of dollars)

2018

2017

Pork

$
1,313

$
1,309

Commodity Trading and Milling

1,482

964

Marine

338

376

Sugar

144

197

Power

186

188

Turkey

303

315

All Other

7

4

Segment Totals

3,773

3,353

Corporate

1,403

1,808

Consolidated Totals

$
5,176

$
5,161

Investments in and Advances to Affiliates:

June 30,

December 31,

(Millions of dollars)

2018

2017

Pork

$
217

$
231

Commodity Trading and Milling

255

240

Marine

29

28

Sugar

4

4

Power

41

38

Turkey

303

310

Segment/Consolidated Totals

$
849

$
851

Administrative services provided by the corporate office are allocated to the individual segments and represent corporate services rendered to and costs incurred for each specific segment, with no allocation to individual segments of general corporate management oversight costs. Corporate assets include short-term investments, other current assets related to deferred compensation plans, fixed assets and other miscellaneous items. Corporate operating losses represent certain operating costs not specifically allocated to individual segments and include costs related to Seaboard’s deferred compensation plans, which are offset by the effect of the mark-to-market adjustments on these investments recorded in other investment income (loss), net.

2019

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

LIQUIDITY AND CAPITAL RESOURCES

Summary of Sources and Uses of Cash

Cash and short-term investments as of June ~~30, 2018 decreased $349~~29, 2019 increased $20 million to ~~$1,343~~$1,550 million from December 31, ~~2017. The decrease was primarily the result of a business acquisition discussed below.~~2018. Cash from operating activities decreased ~~$113~~$25 million for the six months ended June ~~30, 2018~~29, 2019 compared to the same period in ~~2017,~~2018, primarily ~~as a result of~~due to lower ~~cash from net~~adjusted earnings ~~and~~for unrealized gains on short-term investments, partially offset by decreased cash ~~from~~for working capital ~~primarily inventory.~~needs.

Capital Expenditures, Acquisitions and Other Investing Activities

During the six months ended June ~~30, 2018,~~29, 2019, Seaboard Corporation and its subsidiaries (“Seaboard”) invested ~~$58~~$156 million in property, plant and equipment, of which ~~$31~~$88 million was in the Pork segment, ~~$17~~$13 million in the Commodity Trading and Milling (“CT&M”) segment, $8$11 million in the Marine segment, $37 million in the Power segment and the remaining amount in other segments. The Pork segment expenditures were primarily for ~~improvements to existing facilities~~the expansion of the Guymon pork processing plant and the purchase of an idle ethanol plant and all of its related ~~equipment and additional hog finishing barns.~~assets in Hugoton, Kansas. The Power segment expenditures were primarily for its new power barge under construction. All other capital expenditures were primarily of a normal recurring nature ~~and primarily included~~such as replacements of machinery and equipment and general facility modernizations and upgrades.

For the remainder of ~~2018,~~2019, management has budgeted capital expenditures totaling ~~$184~~$261 million. The Pork segment ~~plans to spend $56~~budgeted $116 million primarily for ~~improvements~~modifications to ~~existing facilities~~convert the recently purchased idle ethanol plant to a renewable diesel production facility and ~~related equipment and additional hog finishing barns.~~expansion of the Guymon pork processing plant. The CT&M segment ~~plans to spend $63~~budgeted $30 million primarily for milling ~~assets and other improvements to existing facilities and related equipment.~~assets. The Marine segment ~~plans to spend $48~~budgeted $33 million primarily for additional cargo carrying and handling ~~equipment and port improvements.~~equipment. The Sugar and Alcohol segment ~~plans to spend $14~~budgeted $24 million primarily for ~~increasing milling capacity and improving logistics infrastructure.~~alcohol fermentation expansion. The Power segment budgeted $57 million primarily for its new power barge. The balance of $3$1 million is planned to be spent in all other businesses primarily for normal upgrades to existing operations. Management anticipates paying for these capital expenditures from a combination of available cash, the use of available short-term investments and Seaboard’s available borrowing capacity.

~~During~~In the second quarter of ~~2018, Seaboard’s Power segment began exploring strategic alternatives, including purchasing another power barge. The Pork segment’s joint venture,~~2019, Seaboard contributed $10 million to Seaboard Triumph Foods, LLC, ~~announced plans~~a non-consolidated affiliate of the Pork segment, for ~~a second shift targeted to begin~~working capital needs. Additional contributions may be necessary in the ~~fourth quarter of 2018. Seaboard will provide a portion of the hogs to be processed.~~future.

During the first quarter of 2018, Seaboard’s CT&M segment acquired three flour mills and an associated grain trading business located in Senegal, Ivory Coast and Monaco for total consideration of $330 million, net of cash acquired. The acquisition was primarily funded using proceeds from Seaboard’s short-term investments and the incurrence of a note payable to the sellers. With this business, the CT&M segment expects to increase Seaboard’s flour and feed milling capacity and annual grain trading volumes. Also during the first quarter, Seaboard’s CT&M segment invested total consideration of $16 million for a 50% noncontrolling interest in a grain trading and flour milling business in Mauritania. See Note 10 to the condensed consolidated financial statements for further information on this acquisition and investment.

Financing Activities and Debt

As of June ~~30, 2018,~~29, 2019, Seaboard had short-term uncommitted lines of credit ~~lines~~ totaling ~~$550~~$616 million and a committed line totaling $100 million. ~~Borrowings~~There was $160 million borrowed under the uncommitted lines of credit ~~totaled $141 million,~~as of ~~which $140 million related to foreign subsidiaries.~~June 29, 2019. Seaboard’s borrowing capacity under its uncommitted lines of credit was further reduced by letters of credit totaling ~~$23~~$18 million.

As of June ~~30, 2018,~~29, 2019, Seaboard had an unsecured term loan, which matures in ~~2022,~~2028, with a balance of ~~$478~~$695 million and ~~$55~~$94 million of foreign subsidiary debt, ~~primarily~~ denominated in ~~euros~~U.S. dollars and Argentine pesos. Seaboard was in compliance with all restrictive covenants related to these loans and facilities as of June 30, 2018. See Note 8 to the condensed consolidated financial statements for further information on Seaboard’s debt and a summary of Seaboard’s contingent obligations, including guarantees issued to support certain activities of non-consolidated affiliates and third parties who provide services for Seaboard.euros.

As of June ~~30, 2018,~~29, 2019, Seaboard had cash and short-term investments of ~~$1,343~~$1,550 million and additional total net working capital of ~~$781~~$619 million. Accordingly, management believes Seaboard’s combination of internally generated cash, liquidity, capital resources and borrowing capabilities will be adequate for its existing operations and any currently known potential plans for expansion of existing operations or business segments for ~~2018.~~2019. Management intends to continue seeking

opportunities for expansion in the industries in which Seaboard operates, utilizing existing liquidity, available borrowing capacity and other financing alternatives.

As of June ~~30, 2018, $182~~29, 2019, $171 million of the ~~$1,343~~$1,550 million of cash and short-term investments were held by Seaboard’s foreign ~~subsidiaries, and~~subsidiaries. Historically, Seaboard ~~could be required to accrue and pay taxes to repatriate these funds if needed for Seaboard’s operations in the United States. However, Seaboard’s intent is to permanently reinvest~~has considered substantially all foreign profits as being permanently invested in its foreign operations, including all cash and short-term investments ~~and~~held by foreign subsidiaries. Seaboard intends to continue permanently reinvesting the majority of these funds outside the U.S. as current plans do not demonstrate a need to repatriate them to fund Seaboard’s ~~domestic~~U.S. operations. For any planned repatriation to the U.S., Seaboard would record applicable deferred taxes for state or foreign withholding taxes.

RESULTS OF OPERATIONS

Net sales for the three and six month periods of ~~2018~~2019 increased ~~$269~~$131 million and ~~$449~~$95 million, respectively, compared to the same periods in ~~2017.~~2018. The ~~three-month and six-month increases were~~increase for the three month period was primarily the result of higher ~~volume of third-party and affiliate sales~~volumes for certain commodities in the CT&M segment ~~higher volume and rates in the Marine segment~~ and higher ~~sales~~prices of ~~biodiesel in the Pork segment. The six-month increase also included the Federal blender’s credits in the Pork segment.~~

Operating income decreased $23 million for the three month period and increased $6 million for the six month period of 2018 compared to the same periods in 2017. The three-month decrease primarily reflected lower margins on pork products sold in the Pork segment, ~~and losses on mark-to-market derivative contracts in the CT&M segment,~~ partially offset by ~~higher margins~~lower biodiesel revenue in the Pork segment and lower selling prices and volumes in the Sugar and ~~CT&M segments. The six-month increase primarily reflected the Federal blender’s credits offset by lower margins in the Pork~~Alcohol segment.

~~Pork Segment~~

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)

2018

2017

2018

2017

Net sales

$
442

$
414

$
908

$
784

Operating income

$
17

$
52

$
109

$
102

Income (loss) from affiliates

$
(6)

$
3

$
(13)

$
3

Net sales for the Pork segment increased $28 million and $124 million for the three and six month periods of 2018, respectively, compared to the same periods in 2017. During the three month period, the increase was primarily the result of increased volumes and prices of biodiesel sales and higher sales of market hogs to third parties and affiliates. During the six month period, the increase was primarily the result of the receipt of the Federal blender’s credits of $42 million recorded as revenue in the first quarter of 2018, increased volumes and prices of biodiesel sales and higher sales of market hogs to third-parties and affiliates. See Note 10 to the condensed consolidated financial statements for further discussion of the Federal blender’s credits.

Operating income for the Pork segment decreased $35 million for the three month period and increased $7 million for the six month period of 2018 compared to the same periods in 2017. The decrease for the three month period was primarily due to lower prices for pork products along with higher feed costs, partially offset by higher volume of pork products sold. The increase for the six month period was primarily the result of higher volumes for certain commodities in the ~~Federal blender’s credits~~CT&M segment and higher prices of ~~$42 million as discussed above,~~pork products sold and higher sales volume of market hogs in the Pork segment, partially offset by lower biodiesel prices and not receiving the federal blender’s credits in the first quarter of 2019 as compared to 2018 in the Pork segment and lower revenue in the Sugar and Alcohol segment.

Operating income increased $21 million and decreased $110 million for the three and six month periods of 2019, respectively, compared to the same periods in 2018. The increase for the three month period was primarily due to higher gains on mark-to-market derivative contracts, higher margins on product sales in the Pork segment, partially offset by lower biodiesel margins in the Pork segment and lower sugar and alcohol margins in the Sugar and Alcohol segment. The decrease for the six month period primarily reflected not receiving the federal blender’s credits and lower prices on pork products sold and losses on mark-to-market derivative contracts in the Pork segment and lower alcohol margins in the Sugar and Alcohol segment, partially offset by higher margins on certain commodities and gains on derivative contracts.

Pork Segment



	Three Months Ended				Six Months Ended
	June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2019		2018		2019		2018
Net sales	$	492	$	442	$	895	$	908
Operating income (loss)	$	25	$	17	$	(9)	$	109
Loss from affiliates	$	(6)	$	(6)	$	(14)	$	(13)

Net sales for the Pork segment increased $50 million and decreased $13 million for the three and six month periods of 2019, respectively, compared to the same periods in 2018. The increase for the three month period was primarily due to higher overall prices for pork products ~~along with~~sold, higher ~~feed costs,~~sales volume and prices of market hogs, partially offset by lower biodiesel prices. The decrease for the six month period was primarily the result of receiving no federal blender’s credits in the first quarter of 2019 compared to 2018 when the Pork segment received $42 million of revenue related to 2017 production. The federal blender’s credits have not been extended and there is no assurance that the federal blender’s credits will be renewed or retroactively extended. In addition, revenue decreased in the first half of 2019 as a result of lower biodiesel prices partially offset by higher volume of market hogs sold and higher domestic and export pork ~~products sold. Seaboard sells~~prices.

Operating income for the Pork segment increased $8 million and decreased $118 million for the three and six month periods of 2019, respectively, compared to the same periods in 2018. The increase for the three month period of 2019 was primarily due to improved overall margins from higher pork prices and to ~~international customers including China~~a lesser extent, market hog sales, partially offset by lower margins on biodiesel sales and ~~Mexico,~~mark-to-market losses on strategic hog positions. The decrease for the six month period was primarily due to not receiving the federal blender’s credits discussed above, lower margins on biodiesel sales and ~~recent incremental tariffs, the duration of which is uncertain, are having a negative impact~~mark-to-market losses on ~~earnings.~~strategic hog positions. Management is unable to predict future market prices for pork products, the cost of feed or ~~cost of~~ third-party ~~hogs. However,~~hogs or the government’s intentions with the federal blenders’ credits. Based on market conditions, management ~~anticipates positive operating income for~~currently cannot predict if this segment will be profitable for the remainder of ~~2018.~~2019.

~~Income from affiliates decreased $9~~21

Commodity Trading and Milling Segment



	Three Months Ended				Six Months Ended
	June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2019		2018		2019		2018
Net sales	$	1,002	$	890	$	1,831	$	1,676
Operating income (loss) as reported	$	29	$	(2)	$	36	$	9
Mark-to-market losses (gains)		(7)		18		(4)		12
Operating income excluding mark-to-market adjustments	$	22	$	16	$	32	$	21
Loss from affiliates	$	(5)	$	(4)	$	(5)	$	(6)

Net sales for the CT&M segment increased $112 million and ~~$16~~$155 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017,~~2018. The increase for the three month period primarily ~~due to~~reflects higher volume of certain commodities for third-party customers, partially offset by lower prices on soybean and soybean meal. The increase for the ~~start-up~~six month period primarily reflected higher volume of ~~Seaboard Triumph Foods, LLC operations, which began in September 2017.~~

~~Commodity Trading and Milling Segment~~

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)

2018

2017

2018

2017

Net sales

$
890

$
701

$
1,676

$
1,428

Operating income (loss) as reported

$
(2)

$
1

$
9

$
18

Mark-to-market losses (gains)

18

—

12

(4)

Operating income excluding mark-to-market adjustments

$
16

$
1

$
21

$
14

Income (loss) from affiliates

$
(4)

$
2

$
(6)

$
6

~~Net~~certain commodities for third-party customers, including sales for ~~the CT&M~~a business acquired in January 2018 with certain entities on a three-month lag, partially offset by lower affiliate sales volumes.

Operating income for this segment increased ~~$189~~$31 million and ~~$248~~$27 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017.~~2018. The increase for the three and six ~~month periods~~months primarily reflected ~~higher volume of third-party and affiliate sales, including sales for Mimran, acquired in January 2018, partially offset by lower third-party sales prices.~~

Operating income for this segment decreased $3 million and $9 million for the three and six month periods of 2018, respectively, compared to the same periods in 2017. The decreases primarily reflected lossesgains on mark-to-market derivative contracts and higher margins on third-party sales related to the business acquired for the six month period, partially offset by higher selling, general and administrative costs ~~primarily~~ related to the ~~Mimran acquisition, partially offset by higher margins on third-party sales, primarily related to~~business acquired for the ~~Mimran acquisition.~~six month period.

Due to worldwide commodity price fluctuations, the uncertain political and economic conditions in the countries in which this segment operates, and the volatility in the commodity markets, management is unable to predict future sales and operating results for this segment. However, management anticipates positive operating income for this segment for the remainder of ~~2018,~~2019, excluding the effects of marking to market derivative contracts.

Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this segment would have been lower by $7 million and $4 million for the three and six month periods of 2019, respectively. Operating income for this segment would have been higher by $18 million and $12 million for the three and six month periods of 2018, respectively. ~~Operating income for this segment would not have changed for the three month period of 2017, but operating income for this segment would have been $4 million lower for the six month period of 2017.~~

While management believes its commodity futures, options and foreign exchange contracts are primarily economic hedges of its firm purchase and sales contracts and anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these transactions as hedges for accounting purposes. Accordingly, while the changes in value of the derivative instruments were marked-to-market, the changes in value of the firm purchase or sales contracts were not. As products are delivered to customers, these existing mark-to-market adjustments should be primarily offset by realized margins or losses as revenue is recognized over time, and these mark-to-market adjustments could reverse in ~~2018.~~2019. Management believes eliminating these mark-to-market adjustments provides a more reasonable presentation to compare and evaluate period-to-period financial results for this segment.

Marine Segment



	Three Months Ended				Six Months Ended
	June 30,		July 1,		June 30,		July 1,


									Three Months Ended				Six Months Ended
									June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2018		2017		2018		2017		2019		2018		2019		2018
Net sales	$	263	$	232	$	512	$	466	$	259	$	263	$	513	$	512
Operating income	$	4	$	1	$	—	$	4	$	4	$	4	$	4	$	—
Income (loss) from affiliates	$	1	$	—	$	1	$	(6)
Income from affiliates									$	—	$	1	$	1	$	1

Net sales for the Marine segment ~~increased $31~~decreased $4 million and ~~$46~~increased $1 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017.~~2018. The ~~increases were primarily the result of higher volumes and rates in certain markets during 2018 compared to 2017.~~

~~Operating income increased $3 million for the three month period of 2018 and decreased $4 million for the six month period of 2018 compared to the same periods in 2017. The increase~~decrease for the three month period was primarily the result of ~~higher rates,~~decreased cargo volumes, partially offset by higher ~~voyage costs related~~cargo rates during 2019 compared to ~~fuel price increases and other expenses.~~2018. The ~~decrease~~slight increase for the six month period was primarily the result of higher ~~voyage~~cargo rates despite decreased cargo volumes.

Operating income remained the same for the three month period and increased $4 million for the six month period of 2019 compared to the same periods in 2018. The change was primarily the result of lower terminal, stevedoring and intermodal trucking costs, ~~related to fuel price increases and other expenses,~~ partially offset by higher fuel costs and charter hire rates. Management cannot predict changes in future cargo volumes, cargo rates and fuel costs, or to what extent changes in economic conditions in markets served will affect net sales or operating income during the remainder of ~~2018.~~2019. However, management anticipates this segment will have positive operating income for the remainder of ~~2018.~~2019.

Sugar and Alcohol Segment



	Three Months Ended				Six Months Ended
	June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2019		2018		2019		2018
Net sales	$	30	$	61	$	55	$	112
Operating income (loss)	$	(4)	$	10	$	(8)	$	12
Income from affiliates	$	1	$	—	$	1	$	—

~~Income from affiliates increased $1~~Net sales for the Sugar and Alcohol segment decreased $31 million and $7$57 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in 2017. For the six month period, the change was primarily due to an other-than-temporary impairment charge of $6 million incurred in the first quarter of 2017 related to Seaboard’s equity-method investment in a holding company that owns a start-up terminal operation. See Note 10 to the condensed consolidated financial statements for further information on this affiliate.

~~Sugar Segment~~

Three Months Ended

Six Months Ended

June 30,

July 1,

June 30,

July 1,

(Millions of dollars)

2018

2017

2018

2017

Net sales

$
61

$
48

$
112

$
88

Operating income

$
10

$
3

$
12

$
6

Income from affiliates

$
—

$
—

$
—

$
—

~~Net sales for the Sugar segment increased $13 million and $24 million~~2018. The decrease for the three and six ~~month periods of 2018, respectively, compared to the same periods in 2017. The increases for the three and six month periods~~months primarily reflected ~~higher~~lower volumes ~~of alcohol~~ and ~~sugar, partially offset by lower~~ prices of sugar and alcohol sold. Sugar and alcohol sales are denominated in Argentine ~~pesos. Any~~pesos, and an increase in local ~~sale~~sales prices was ~~partially~~ offset by exchange rate changes as the Argentine peso continued to weaken against the U.S. dollar. Management cannot predict local sugar and alcohol prices or the volatility in the currency exchange rate.

Operating income for the Sugar and Alcohol segment decreased $14 million and $20 million for the three and six month periods of 2019, respectively, compared to the same periods in 2018. The decrease for the three and six months primarily reflected lower margins on alcohol and sugar, partially offset by lower selling, general and administrative expenses related to salaries and benefits. Argentina was determined by management to be a highly inflationary economy in the second quarter of 2018, and as a result, ~~the Sugar~~this segment’s functional currency ~~will be~~is the U.S. ~~dollars~~dollar effective in the third quarter of 2018 until the economic environment stabilizes.

Operating income for the Sugar segment increased $7 million and $6 million for the three and six month periods of 2018, respectively, compared to the same periods in 2017. The increases primarily reflected higher sales volumes of alcohol and sugar and lower production costs. Sugar costs for the six months of 2018 included a total of $5 million in severance costs related to a restructuring of its workforce. Based on market conditions, management currently cannot predict if this segment will be profitable for the remainder of ~~2018.~~2019.

Power Segment



	Three Months Ended				Six Months Ended
	June 30,		July 1,		June 30,		July 1,


									Three Months Ended				Six Months Ended
									June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2018		2017		2018		2017		2019		2018		2019		2018
Net sales	$	31	$	23	$	54	$	47	$	33	$	31	$	62	$	54
Operating income	$	6	$	2	$	6	$	4	$	8	$	6	$	12	$	6
Income from affiliates	$	1	$	1	$	3	$	1	$	2	$	1	$	2	$	3

Net sales for the Power segment increased $8$2 million and $7$8 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017.~~2018. The increases primarily reflected higher spot market rates, partially offset by a change in sales presentation from gross to net for a certain service with the adoption of the new revenue guidance further discussed in Note 2 to the condensed consolidated financial statements.rates.

Operating income for the Power segment increased $4$2 million and $2$6 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017.~~2018. The increases primarily reflected higher spot market rates, partially offset by higher fuel and maintenance costs. Management cannot predict future fuel costs or the extent that spot market rates will fluctuate compared to fuel costs. However, management anticipates positive operating income for this segment for the remainder of ~~2018.~~2019.

Turkey Segment



	Three Months Ended				Six Months Ended
	June 30,		July 1,		June 30,		July 1,


									Three Months Ended				Six Months Ended
									June 29,		June 30,		June 29,		June 30,
(Millions of dollars)	2018		2017		2018		2017		2019		2018		2019		2018
Loss from affiliates	$	(8)	$	(14)	$	(7)	$	(11)	$	(8)	$	(8)	$	(19)	$	(7)

The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball, ~~LLC (“Butterball”).~~LLC. The ~~decreases~~increase in loss from affiliates for the ~~three and~~ six month ~~periods~~period of ~~2018~~2019 compared to the same ~~periods~~period in ~~2017 were~~2018 was primarily the result of ~~Seaboard’s $11 million proportionate share~~higher production costs and lower volumes of ~~the Montgomery, Illinois~~ ~~plant closure~~ ~~impairment charge during the three and six month periods of 2017~~,turkey products sold, partially offset by ~~lower~~higher prices ~~and volumes of~~

for turkey products ~~sold in 2018.~~sold. Management is unable to predict future market prices for turkey products or the cost of feed. Based on market conditions, management currently cannot predict if this segment will be profitable for the remainder of ~~2018.~~2019.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses ~~increased $10~~decreased $1 million and ~~$15~~increased $8 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017.~~2018. The ~~increases were~~decrease for the three month period was primarily due to lower bad debt expense and other administrative costs, partially offset by higher personnel costs. The increase for the ~~January~~six month period was primarily due to costs related to Seaboard’s deferred compensation program, which are offset by the effect of the mark-to-market on investments recorded in other investment income and to a lesser extent, due to the 2018 acquisition of ~~Mimran and increased personnel-related costs.~~Mimran. As a percentage of total net sales, SG&A was 5% for the ~~first half~~three and six month periods of ~~2018~~2019 and ~~2017.~~2018.

Interest Expense

Interest expense increased $4$1 million and decreased $1 million for the three and six month periods of 2019, respectively, compared to the same periods in 2018. The increase for the three month period was primarily due to overall more debt outstanding, partially offset by capitalized interest. The six month period decrease was primarily due to lower interest rates on less debt outstanding in the Sugar and Alcohol segment and more capitalized interest, partially offset by more debt outstanding. On September 25, 2018, Seaboard refinanced its $500 million unsecured term loan with a $700 million unsecured term loan.

Interest Income

Interest income increased $5 million and $9 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017. The increases were~~2018 primarily due to ~~an increase~~increased investments of debt securities and higher interest recognized on customer receivables in ~~interest rates, less capitalized interest and more debt outstanding.~~the Power segment.

~~Interest~~Other Investment Income ~~from Affiliates~~(Loss), Net

~~Interest~~Other investment income, ~~from affiliates decreased $5~~net increased $25 million and ~~$10~~$175 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017~~2018 primarily due to ~~a note receivable with Butterball that was repaid in December 2017.~~unrealized gains on short-term investments due to mark-to-market fluctuations.

~~Other Investment Income~~Foreign Currency Gains (Loss), Net

~~Other investment income, net~~Foreign currency losses decreased ~~$16~~$5 million and ~~$90~~$4 million for the three and six month periods of ~~2018,~~2019, respectively, compared to the same periods in ~~2017~~2018 primarily due to ~~unrealized losses on short-term investments due to mark-to-market fluctuations, partially offset by realized gains.~~

~~Foreign Currency Gains (Losses), Net~~

~~Foreign currency~~ gains ~~net decreased $12 million and $11 million for the three and six month periods of 2018, respectively, compared to the same periods in 2017. The decreases primarily reflects losses~~ in the South African rand ~~euro, and British pound,~~ among fluctuations of other currency exchange rates in several foreign countries. The political and economic conditions of the countries in which Seaboard operates and does business, along with fluctuations in the value of the U.S. dollar, cause volatility in currency exchange rates, which exposes Seaboard to fluctuating foreign currency gains and losses that cannot be predicted by Seaboard. Although Seaboard does not utilize hedge accounting, Seaboard does utilize foreign currency exchange agreements to manage its risks and exposure to foreign currency fluctuations. Management believes gains and losses on commodity transactions, including the mark-to-market effects, of such foreign currency exchange agreements relate to the underlying commodity transactions and classifies such gains and losses in cost of sales. All other gains and losses on foreign currency exchange agreements are included in foreign currency gains (losses), net.

Income Tax Expense

The effective tax rate for the three and six month periods of ~~2018~~2019 was ~~higher~~lower than that for the three and six month periods of ~~2017~~2018 primarily due to the change in tax classification of a wholly-owned subsidiary from a partnership to a corporation ~~and a change~~ in ~~mix~~the first quarter of ~~domestic and foreign earnings from the prior year,~~2018 that was partially offset by tax exempt income from the retroactive extension of the 2017 ~~Federal~~federal blender’s ~~credits during the first quarter of 2018 and the lower statutory U.S. Federal income tax rate.~~credits.

Other Financial Information

See Note 1 to the condensed consolidated financial statements for a discussion of recently issued accounting standards.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Seaboard is exposed to various types of market risks in its day-to-day operations. Primary market risk exposures result from changing commodity prices, foreign currency exchange rates, interest rates and equity prices. Occasionally, Seaboard utilizes derivative instruments to manage these overall market risks. The nature of Seaboard’s market risk exposure related to these items has not changed materially since December 31, ~~2017.~~2018. See Note 67 to the condensed consolidated financial statements for further discussion.

2524

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures — Seaboard’s management evaluated, under the direction of the Chief Executive and Chief Financial Officers, the effectiveness of Seaboard’s disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e) as of June ~~30, 2018.~~29, 2019. 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, assurance that the objectives of the system are met. In addition, the design of any system of disclosure controls and procedures is based in part upon assumptions about the likelihood of future events. Due to these and other inherent limitations of any such system, there can be no assurance that any design will always succeed in achieving its stated goals under all potential future conditions.

Change in Internal Controls —On January 5, 2018, Seaboard acquired five entities operating as Groupe Mimran (“Mimran”) as further disclosed in Note 10 to the condensed consolidated financial statements. Management is reviewing and evaluating its internal control procedures and the design of those procedures related to these Mimran entities and assessing when it will complete an evaluation and review of Mimran’s internal controls over financial reporting. Under guidelines established by the Securities and Exchange Commission, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company. Except as set forth above, there have There has been no ~~changes~~change in Seaboard’s internal control over financial reporting required by Exchange Act Rule 13a-15(f) that occurred during the fiscal quarter ended June ~~30, 2018~~29, 2019 that has materially affected, or is reasonably likely to materially affect, Seaboard’s internal control over financial reporting. Seaboard implemented new internal controls to ensure it adequately adopted the new lease accounting standard on January 1, 2019.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

For information related to Seaboard’s legal proceedings, see Note 85 to the condensed consolidated financial statements.

Item 1A. Risk Factors

There have been no material changes in the risk factors as previously disclosed in Seaboard’s annual report on Form ~~10‑K~~10-K for the year ended December 31, ~~2017.~~2018.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

AsThe following table sets forth information concerning any purchases made by or on behalf of Seaboard or any “affiliated purchaser” (as defined by applicable rules of the ~~date~~Securities and Exchange Commission) of ~~this report, Seaboard may repurchase up to $100 million market value~~shares of ~~its~~Seaboard’s common stock ~~from time~~during the quarter of the fiscal year covered by this report.

Issuer Purchases of Equity Securities

(Millions of dollars except number of shares

and per share amounts)

Approximate

Dollar Value

Of Shares

Total Number

that May

Of Shares

Yet Be

Purchased as Part

Purchased

Total Number

Of Publicly

Under the

of Shares

Average Price

Announced Plans

Plans or

Period

Purchased

Paid per Share

Or Programs

Programs

March 31, 2019 to April 30, 2019

—

May 1, 2019 to May 31, 2019

—

June 1, 2019 to June 29, 2019

414

3,983.24

414

Total

414

All purchases during the quarter were made pursuant to ~~time~~Seaboard’s share repurchase program, which was initially established by Seaboard’s Board of Directors in November 2009 and has been extended through October 31, 2019. All purchases were made through open market or privately negotiated purchases ~~under its share repurchase program.~~and all the repurchased shares have been retired. See Note 98 to the condensed consolidated financial statements for further ~~discussion. There were no purchases made pursuant to Seaboard’s share repurchase program during~~discussion of the ~~second quarter of 2018.~~program.


Item 6.		Exhibits
~~Item 6.~~		~~Exhibits~~

Exhibit No.		Description

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

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

Forward-looking Statements

This Form 10-Q contains 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, including the impact of mark-to-market accounting on operating income; statements regarding the plans and objectives of management for future operations; statements of future economic performance; statements regarding the intent, belief or current expectations of Seaboard and its management with respect to: (i) Seaboard’s ability to obtain adequate financing and liquidity; (ii) the price of feed stocks and other materials used by Seaboard; (iii) the sales price or market conditions for pork, agricultural commodities, sugar, alcohol, turkey and other products and services; (iv) the recorded tax effects under certain circumstances and changes in tax laws; (v) the volume of business and working capital requirements associated with the competitive trading environment for the CT&M segment; (vi) the charter hire rates and fuel prices for vessels; (vii) the fuel costs and related spot market prices for electricity in the Dominican Republic; (viii) the effect of the fluctuation in foreign currency exchange rates, including the impact in Argentina; (ix) the profitability or sales volume of any of Seaboard’s segments; (x) the anticipated costs and completion timetables for Seaboard’s scheduled capital improvements, acquisitions and dispositions; (xi) the productive capacity of facilities that are planned or under construction, and the timing of the commencement of operations at such facilities; or (xii) other trends affecting Seaboard’s financial condition or results of operations, and statements of the assumptions underlying or relating to any of the foregoing statements.

This list of forward-looking statements is not exclusive. Seaboard undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise. 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 report, including without limitation the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” identifies important factors that could cause such differences.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	SEABOARD CORPORATION
		(Registrant)

	by:	/s/ Robert L. Steer
		Robert L. Steer, Executive Vice President,
		Chief Financial Officer
		(principal financial officer)

	Date: ~~August 7, 2018~~July 31, 2019


	by:	/s/ Michael D. Trollinger
		Michael D. Trollinger, Vice President, Corporate Controller
		and Chief Accounting Officer
		(principal accounting officer)

	Date: ~~August 7, 2018~~July 31, 2019

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	June 30,		December 31,
(Millions of dollars except share and per share amounts)	2018		2017
Assets
Current assets:
Cash and cash equivalents	$	79	$	116
Short-term investments		1,264		1,576
Receivables, net		521		482
Inventories		874		780
Other current assets		128		174
Total current assets		2,866		3,128
Net property, plant and equipment		1,104		1,077
Investments in and advances to affiliates		849		851
Other non-current assets		357		105
Total assets	$	5,176	$	5,161
Liabilities and Stockholders’ Equity
Current liabilities:
Notes payable to banks	$	141	$	162
Current maturities of long-term debt		24		53
Accounts payable		238		272
Deferred revenue		56		81
Other current liabilities		283		250
Total current liabilities		742		818
Long-term debt, less current maturities		508		482
Deferred income taxes		146		112
Long-term income tax liability		102		111
Other liabilities		260		230
Total non-current liabilities		1,016		935
Commitments and contingent liabilities
Stockholders’ equity:
Common stock of $1 par value. Authorized 1,250,000 shares; issued and outstanding 1,170,550 shares		1		1
Accumulated other comprehensive loss		(390)		(354)
Retained earnings		3,792		3,750
Total Seaboard stockholders’ equity		3,403		3,397
Noncontrolling interests		15		11
Total equity		3,418		3,408
Total liabilities and stockholders’ equity	$	5,176	$	5,161



Consolidated Balance Sheet		June 30, 2018
		Balances Without				As
(Millions of dollars)		Adoption of Topic 606		Adjustments		Reported
Receivables, net	$	501	$	20	$	521
Inventories	$	916	$	(42)	$	874
Other current assets	$	127	$	1	$	128
Deferred revenue	$	79	$	(23)	$	56
Other current liabilities	$	282	$	1	$	283
Total Seaboard stockholders’ equity	$	3,402	$	1	$	3,403



Consolidated Statement of Cash Flows		Six Months Ended June 30, 2018
		Balances Without				As
(Millions of dollars)		Adoption of Topic 606		Adjustments		Reported
Net earnings	$	38	$	1	$	39
Changes in assets and liabilities, net of acquisitions:
Receivables, net of allowance	$	10	$	(20)	$	(10)
Inventories	$	(131)	$	42	$	(89)
Other current assets	$	49	$	(1)	$	48
Current liabilities, exclusive of debt	$	(35)	$	(22)	$	(57)



(Millions of dollars)		Fair Value
Cash payment, net of $64 million of cash acquired	$	270
Euro-denominated note payable due 2021, 3.25% interest		46
Contingent consideration		14
Total fair value of consideration at acquisition date	$	330



(Millions of dollars)		Fair Value
Current assets	$	84
Property, plant and equipment		57
Intangible assets		100
Goodwill		161
Other long-term assets		4
Total fair value of assets acquired		406
Current liabilities		(38)
Other long-term liabilities		(34)
Total fair value of liabilities assumed		(72)
Less: Noncontrolling interest		(4)
Net fair value of assets acquired	$	330



Operating Income (Loss):	Three Months Ended				Six Months Ended
	June 30,		July 1,		June 30,		July 1,
(Millions of dollars)	2018		2017		2018		2017
Pork	$	17	$	52	$	109	$	102
Commodity Trading and Milling		(2)		1		9		18
Marine		4		1		—		4
Sugar		10		3		12		6
Power		6		2		6		4
All Other		1		1		1		1
Segment Totals		36		60		137		135
Corporate		(4)		(5)		(8)		(12)
Consolidated Totals	$	32	$	55	$	129	$	123



Income (Loss) from Affiliates:	Three Months Ended				Six Months Ended
	June 30,		July 1,		June 30,		July 1,
(Millions of dollars)	2018		2017		2018		2017
Pork	$	(6)	$	3	$	(13)	$	3
Commodity Trading and Milling		(4)		2		(6)		6
Marine		1		—		1		(6)
Sugar		—		—		—		—
Power		1		1		3		1
Turkey		(8)		(14)		(7)		(11)
Segment/Consolidated Totals	$	(16)	$	(8)	$	(22)	$	(7)



Total Assets:	June 30,		December 31,
(Millions of dollars)	2018		2017
Pork	$	1,313	$	1,309
Commodity Trading and Milling		1,482		964
Marine		338		376
Sugar		144		197
Power		186		188
Turkey		303		315
All Other		7		4
Segment Totals		3,773		3,353
Corporate		1,403		1,808
Consolidated Totals	$	5,176	$	5,161