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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 28, 2020

OR

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

For the transition period from __________________________ to __________________________

Commission File Number:  1-3390

Seaboard Corporation

(Exact name of registrant as specified in its charter)

Delaware

04-2260388

(State or other jurisdiction of incorporation)

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

9000 West 67th Street, Merriam, Kansas

66202

(Address of principal executive offices)

(Zip Code)

(913) 676-8800

Registrant’s telephone number, including area code

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock :schemaRef xlink:type="simple" xlink:.00 Par Value

SEB

NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No  

There were 1,160,779 shares of common stock, :schemaRef xlink:type="simple" xlink:.00 par value per share, outstanding on April 20, 2020.

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended

March 28,

March 30,

(Millions of dollars except share and per share amounts)

2020

    

2019

 

Net sales:

Products (includes affiliate sales of $259 and $320)

$

1,382

$

1,245

Services (includes affiliate sales of $6 and $4)

 

283

 

269

Other

 

18

 

29

Total net sales

 

1,683

 

1,543

Cost of sales and operating expenses:

Products

 

1,278

 

1,230

Services

 

256

 

240

Other

 

14

 

23

Total cost of sales and operating expenses

 

1,548

 

1,493

Gross income

 

135

 

50

Selling, general and administrative expenses

 

72

 

84

Operating income (loss)

 

63

 

(34)

Other income (expense):

Interest expense

 

(5)

 

(6)

Interest income

 

7

 

7

Loss from affiliates

 

(4)

 

(18)

Other investment income (loss), net

 

(225)

 

113

Foreign currency gains (losses), net

 

(11)

 

3

Miscellaneous, net

 

1

 

Total other income (loss), net

 

(237)

 

99

Earnings (loss) before income taxes

 

(174)

 

65

Income tax benefit (expense)

 

71

 

(8)

Net earnings (loss)

$

(103)

$

57

Less: Net loss (income) attributable to noncontrolling interests

 

 

Net earnings (loss) attributable to Seaboard

$

(103)

$

57

Earnings (loss) per common share

$

(88.43)

$

48.79

Average number of shares outstanding

 

1,163,888

 

1,167,430

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

Foreign currency translation adjustment

 

3

 

(2)

Unrecognized pension cost

 

2

 

3

Other comprehensive income, net of tax

$

5

$

1

Comprehensive income (loss)

 

(98)

 

58

Less: Comprehensive loss (income) attributable to noncontrolling interests

 

 

Comprehensive income (loss) attributable to Seaboard

$

(98)

$

58

See accompanying notes to condensed consolidated financial statements.

2

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

March 28,

December 31,

 

(Millions of dollars except share and per share amounts)

2020

    

2019

 

Assets

Current assets:

Cash and cash equivalents

$

101

$

125

Short-term investments

 

1,125

 

1,434

Receivables, net

 

691

 

646

Inventories

 

1,122

 

1,022

Other current assets

 

115

 

123

Total current assets

 

3,154

 

3,350

Property, plant and equipment, net

 

1,463

 

1,431

Operating lease right of use assets, net

456

446

Investments in and advances to affiliates

 

731

 

735

Goodwill

 

164

 

164

Other non-current assets

 

187

 

159

Total assets

$

6,155

$

6,285

Liabilities and Stockholders’ Equity

Current liabilities:

Lines of credit

$

339

$

246

Current maturities of long-term debt

 

105

 

62

Accounts payable

 

336

 

368

Deferred revenue

57

48

Deferred revenue from affiliates

30

32

Operating lease liabilities

114

104

Other current liabilities

 

293

 

329

Total current liabilities

 

1,274

 

1,189

Long-term debt, less current maturities

 

686

 

730

Deferred income taxes

 

13

 

76

Long-term income tax liability

62

62

Long-term operating lease liabilities

379

379

Other liabilities

 

304

 

295

Total non-current liabilities

 

1,444

 

1,542

Commitments and contingent liabilities

Stockholders’ equity:

Common stock of $1 par value. Authorized 1,250,000 shares; issued and outstanding 1,160,779 shares in 2020 and 1,164,848 shares in 2019

 

1

 

1

Accumulated other comprehensive loss

 

(435)

 

(440)

Retained earnings

 

3,861

 

3,983

Total Seaboard stockholders’ equity

 

3,427

 

3,544

Noncontrolling interests

 

10

 

10

Total equity

 

3,437

 

3,554

Total liabilities and stockholders’ equity

$

6,155

$

6,285

See accompanying notes to condensed consolidated financial statements.

3

SEABOARD CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

Three Months Ended

 

March 28,

March 30,

(Millions of dollars)

2020

    

2019

 

Cash flows from operating activities:

Net earnings (loss)

$

(103)

$

57

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

Depreciation and amortization

 

36

 

34

Deferred income taxes

 

(64)

 

7

Loss from affiliates

 

4

 

18

Dividends received from affiliates

 

5

 

2

Other investment loss (income), net

 

225

 

(113)

Other, net

 

5

 

Changes in assets and liabilities:

Receivables, net of allowance for credit losses

 

(48)

 

37

Inventories

 

(102)

 

(170)

Other assets

 

(1)

 

(5)

Other liabilities, exclusive of debt

 

(63)

 

26

Net cash from operating activities

 

(106)

 

(107)

Cash flows from investing activities:

Purchase of short-term investments

 

(200)

 

(577)

Proceeds from the sale of short-term investments

 

284

 

382

Proceeds from the maturity of short-term investments

 

17

 

153

Capital expenditures

 

(55)

 

(83)

Investments in and advances to affiliates, net

 

(5)

 

Purchase of long-term investments

 

(35)

 

(6)

Other, net

 

 

4

Net cash from investing activities

 

6

 

(127)

Cash flows from financing activities:

Lines of credit, net

 

96

 

104

Proceeds from long-term debt

 

4

 

14

Principal payments of long-term debt

 

(6)

 

(2)

Repurchase of common stock

 

(13)

 

(13)

Dividends paid

 

(3)

 

(3)

Other, net

 

(1)

 

(1)

Net cash from financing activities

 

77

 

99

Effect of exchange rate changes on cash and cash equivalents

 

(1)

 

Net change in cash and cash equivalents

 

(24)

 

(135)

Cash and cash equivalents at beginning of year

 

125

 

194

Cash and cash equivalents at end of period

$

101

$

59

See accompanying notes to condensed consolidated financial statements.

4

SEABOARD CORPORATION AND SUBSIDIARIES

Stockholders’ Equity

(Unaudited)

Accumulated

Other

Common

Comprehensive

Retained

Noncontrolling

(Millions of dollars)

Stock

Loss

Earnings

Interests

Total

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

Balances, December 31, 2019

$

1

$

(440)

$

3,983

$

10

$

3,554

Adoption of accounting guidance (see Note 1)

(3)

(3)

Comprehensive loss:

Net loss

(103)

(103)

Other comprehensive income, net of tax

5

5

Repurchase of common stock

(13)

(13)

Dividends on common stock ($2.25/share)

(3)

(3)

Balances, March 28, 2020

$

1

$

(435)

$

3,861

$

10

$

3,437

See accompanying notes to condensed consolidated financial statements.

5

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, 2019 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 credit losses on receivables, valuation of inventories, impairment of long-lived assets, intangibles and goodwill, 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 Cash Flow Information

Non-cash investing activities included purchases of property, plant and equipment in accounts payable of $5 million.

The following table includes supplemental cash and non-cash information related to leases. Seaboard reports the amortization of ROU assets and changes in operating lease liabilities in other liabilities, exclusive of debt in the condensed consolidated statements of cash flows.

Three months ended

March 28,

March 30,

(Millions of dollars)

2020

2019

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

Operating cash flows from operating leases

$

35

$

33

Operating cash flows from finance leases

1

Financing cash flows from finance leases

1

Operating right of use assets obtained in exchange for new operating lease liabilities

$

38

$

30

Finance right of use assets obtained in exchange for new finance lease liabilities

8

6

Leases

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

March 28,

December 31,

(Millions of dollars)

2020

2019

Finance lease right of use assets, net

Property, plant and equipment, net

$

57

$

50

Finance lease liabilities

Other current liabilities

6

5

Non-current finance lease liabilities

Other liabilities

46

40

Goodwill and Other Intangible Assets

The activity in the carrying amount of goodwill included foreign currency exchange differences of $1 million that were offset by an acquisition-related adjustment, all within the Commodity Trading and Milling (“CT&M”) segment. See Note 10 for further information on this acquisition-related adjustment. As of March 28, 2020, intangible assets, included in other non-current assets, were $58 million, net of accumulated amortization of $10 million.

Accounting Standard Adopted During 2020

On January 1, 2020, Seaboard adopted guidance which requires the use of a new current expected credit loss ("CECL") model in order to determine the allowance for credit losses with respect to accounts receivable and notes receivable, among other financial instruments. The CECL model estimates the lifetime of expected credit loss based on historical experience, current conditions and reasonable supportable forecasts and replaces the existing incurred loss model. As a result of this adoption, Seaboard recorded a cumulative-effect adjustment of $3 million on January 1, 2020 that decreased retained earnings and increased the allowance for credit losses.

Management believes that Seaboard’s receivables have low risk due to credit granting policies, relationships established with its customers and quick billing and collection cycles. The other receivables are primarily statutory with the U.S. government or other governments and management believes that these bear little to no risk. Management monitors the credit quality of these different receivable types by frequent customer discussions, following economic and industry trends and specific customer data.

Seaboard used the loss-rate method in developing its allowance for credit losses, which involved identifying pools of assets with similar risk characteristics, reviewing historical losses within the last five years and consideration for any reasonable supportable forecasts of economic indicators. Changes in estimates, developing trends and other new information can have a material effect on future evaluations. The activity within the allowance for credit losses on receivables was immaterial for the three months ended March 28, 2020.

Recently Issued Accounting Standard Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued guidance which simplifies the accounting for income taxes by removing certain exceptions to the general principles and improves consistent application of GAAP for other areas by clarifying and amending existing guidance. This guidance is effective for Seaboard on January 1, 2021. Seaboard is evaluating the effect of adopting this new accounting guidance but does not expect adoption will have a material impact on its financial statements and disclosures.

Note 2 – Investments

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

March 28,

December 31,

(Millions of dollars)

 

2020

2019

Domestic equity securities

$

473

$

706

Domestic debt securities

360

409

Foreign equity securities

147

189

Foreign debt securities

54

43

High yield securities

51

56

Money market funds held in trading accounts

 

23

 

12

Collateralized loan obligations

13

15

Other trading securities

4

4

Total trading short-term investments

$

1,125

$

1,434

7

The change in unrealized gains (losses) related to trading securities still held at the end of the respective reporting period was $(236) million and $104 million for the three months ended March 28, 2020 and March 30, 2019, respectively.

Seaboard had $47 million of equity securities denominated in foreign currencies as of March 28, 2020, with $23 million in euros, $10 million in Japanese yen, $5 million in British pounds and the remaining $9 million in various other currencies. As of December 31, 2019, Seaboard had $62 million of equity securities denominated in foreign currencies, with $32 million in euros, $12 million in Japanese yen, $8 million in British pound and the remaining $10 million in various other currencies. Seaboard had $13 million of debt securities denominated in euros as of March 28, 2020 and December 31, 2019, respectively.

Note 3 – Inventories

The following is a summary of inventories:

March 28,

December 31,

 

(Millions of dollars)

    

2020

    

2019

At lower of LIFO cost or market:

Hogs and materials

$

394

$

387

Fresh pork and materials

 

48

 

46

LIFO adjustment

 

(63)

 

(64)

Total inventories at lower of LIFO cost or market

 

379

 

369

At lower of FIFO cost and net realizable value:

Grains, oilseeds and other commodities

 

425

 

353

Sugar produced and in process

 

26

 

17

Other

 

117

 

109

Total inventories at lower of FIFO cost and net realizable value

 

568

 

479

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

 

175

 

174

 Total inventories

$

1,122

$

1,022

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

Lines of Credit

The outstanding balance under uncommitted and committed lines of credit was $269 million and $70 million, respectively, as of March 28, 2020. Of the outstanding balance, $89 million was denominated in foreign currencies with $54 million denominated in the South African rand, $23 million denominated in the Canadian dollar, $6 million denominated in the Argentine peso and $6 million denominated in the Brazilian real. The outstanding balance under uncommitted and committed lines of credit was $246 million and $0 million, respectively, as of December 31, 2019.

The weighted average interest rate for outstanding lines of credit was 3.22% and 5.79% as of March 28, 2020 and December 31, 2019, respectively. The uncommitted lines of credit are unsecured and do not require compensating balances, but the $100 million committed credit line is secured by short-term investments.

Long-term Debt

Long-term debt includes borrowings under term loans and other contractual obligations for payment, including notes payable. The following is a summary of long-term debt:

March 28,

December 31,

(Millions of dollars)

2020

2019

Term Loan due 2028

$

691

$

691

Foreign subsidiary obligations

101

102

Total long-term debt at face value

792

793

Current maturities of long-term debt and unamortized discount and costs

(106)

(63)

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

$

686

$

730

The interest rate on the Term Loan due 2028 was 3.23% and 3.42% as of March 28, 2020 and December 31, 2019, respectively. The weighted average interest rate on Seaboard’s foreign subsidiary obligations was 3.47% and 3.50% as of March 28, 2020 and December 31, 2018, respectively. Seaboard was in compliance with all restrictive debt covenants

8

relating to these agreements as of March 28, 2020. The increase in current maturities of long-term debt is due to the 2018 acquisition seller-financed note payable with a balance of $44 million as of March 28, 2020 maturing on January 5, 2021.

Legal Proceedings

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 (the “District Court”) against several pork processors, including Seaboard Foods LLC and Agri Stats, Inc., a company described in the complaint as a data sharing service. 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 District Court. The complaints were amended and consolidated for pre-trial purposes, 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 defendant. The consolidated actions are styled In re Pork Antitrust Litigation. Subsequent to the original filings, two additional actions making similar claims, including one by the Commonwealth of Puerto Rico, were brought in or transferred to the District Court. The complaints alleged, 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 included 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 alleged 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. On August 8, 2019, the District Court granted defendants’ motion to dismiss the class action cases while giving the plaintiffs leave to amend. The classes and the other two plaintiffs filed amended complaints in November and December 2019. In addition to amending the original claims, the consumer indirect purchasers have asserted a new claim alleging that the exchange of information by defendants through Agri Stats Inc. unreasonably restrained trade. On January 15, 2020, the defendants, including Seaboard, moved to dismiss the amended complaints. 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 reasonably estimate the amount of potential loss or range 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 of 2018 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 of 2018 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.

9

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.

A creditor of Cereoil which has a claim in the bankruptcy proceeding pending in Uruguay of approximately $10 million, plus accrued interest, has threatened to bring legal action in the U.S. against Seaboard alleging on various legal theories that Seaboard is responsible for this same indebtedness. Seaboard will vigorously defend this action should it be brought.

On May 15, 2018, the Trustee for Nolston S.A. (“Nolston”) filed a suit in the Bankruptcy Court of First Instance in Uruguay that was served during the second quarter of 2018 naming as parties Seaboard and the other Cereoil Defendants. Seaboard has a 45% indirect ownership of Nolston. The Trustee contends that the Cereoil Defendants acted with willful misconduct to cause Nolston’s insolvency, and thus should be ordered to pay all liabilities of Nolston, net of assets. The bankruptcy filing 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.

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 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 March 28, 2020, 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.

Note 5 – Employee Benefits

Seaboard has a defined benefit pension plan for certain of its domestic salaried and clerical employees. At this time, no contributions are expected to be made to the plan in 2020. Seaboard also sponsors non-qualified, unfunded supplemental executive plans, and has certain 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

March 28,

March 30,

 

(Millions of dollars)

    

2020

    

2019

 

Components of net periodic benefit cost:

Service cost

$

3

$

2

Interest cost

 

3

 

3

Expected return on plan assets

 

(3)

 

(2)

Amortization and other

 

3

 

1

Net periodic benefit cost

$

6

$

4

10

Note 6 – Derivatives and Fair Value of Financial Instruments

The following tables shows assets and liabilities measured at fair value on a recurring basis as of March 28, 2020 and December 31, 2019, and also the level within the fair value hierarchy used to measure each category of assets and liabilities. The trading securities classified as other current assets below are assets held for Seaboard’s deferred compensation plans.

    

Balance

    

    

    

 

March 28,

 

(Millions of dollars)

2020

Level 1

Level 2

Level 3

 

Assets:

Trading securities – short-term investments:

Domestic equity securities

$

473

$

473

$

$

Domestic debt securities

360

117

243

Foreign equity securities

 

147

 

147

 

 

Foreign debt securities

 

54

 

 

54

 

High yield securities

51

9

42

Money market funds held in trading accounts

23

23

Collateralized loan obligations

13

13

Other trading securities

 

6

 

6

 

 

Trading securities – other current assets:

Domestic equity securities

 

33

 

33

 

 

Money market fund held in trading accounts

5

5

Foreign equity securities

 

2

 

2

 

 

Fixed income securities

 

3

 

2

 

1

 

Long-term equity investment

29

29

Derivatives:

Commodities

 

14

 

14

 

 

Foreign currencies

 

5

 

 

5

 

Total assets

$

1,218

$

831

$

358

$

29

Liabilities:

Trading securities – short-term investments:

Other trading securities

$

2

$

$

2

$

Contingent consideration

14

14

Derivatives:

Commodities

5

5

Foreign currencies

 

1

 

 

1

 

Total liabilities

$

22

$

5

$

3

$

14

11

    

Balance

    

    

    

 

December 31,

 

(Millions of dollars)

2019

Level 1

Level 2

Level 3

 

Assets:

Trading securities – short-term investments:

Domestic equity securities

$

706

$

706

$

$

Domestic debt securities

409

117

292

Foreign equity securities

189

189

High yield securities

56

10

46

Foreign debt securities

43

43

Collateralized loan obligations

15

15

Money market funds held in trading accounts

 

12

 

12

 

 

Other trading securities

 

4

 

4

 

 

Trading securities – other current assets:

Domestic equity securities