UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT
REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported) March 4, 2015
DARLING INGREDIENTS INC.
(Exact Name of Registrant as Specified in Charter)
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Delaware |
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001-13323 |
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36-2495346 |
(State or Other Jurisdiction
of Incorporation) |
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(Commission File Number) |
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(IRS Employer
Identification No.) |
251 OCONNOR RIDGE BLVD., SUITE 300, IRVING, TEXAS 75038
(Address of Principal Executive Offices) (Zip Code)
Registrants telephone number, including area code: (972) 717-0300
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any
of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. |
Results of Operations and Financial Condition. |
On March 4, 2015, Darling
Ingredients Inc. (the Company) issued a press release announcing financial results for the quarter and year ended January 3, 2015. A copy of this press release is attached hereto as Exhibit 99.1.
The Company will hold a conference call and webcast on Thursday, March 5, 2015 to discuss these financial results. The Company will have
a slide presentation available to augment managements formal presentation, which will be accessible via the investor relations section of the Companys website. A copy of this slide presentation is attached hereto as Exhibit 99.2.
The Company is making reference to non-GAAP financial measures in both the press release and the conference call. A reconciliation of these
non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.
The information in this
Item 2.02, including the exhibits attached hereto, shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities
Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. |
Financial Statements and Exhibits. |
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99.1 |
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Press Release dated March 4, 2015 (furnished pursuant to Item 2.02). |
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99.2 |
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Slide Presentation for March 5, 2015 Earnings Call (furnished pursuant to Item 2.02). |
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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 hereunto duly authorized.
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DARLING INGREDIENTS INC. |
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Date: March 4, 2015 |
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By: |
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/s/ John F. Sterling |
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John F. Sterling |
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Executive Vice President, |
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General Counsel |
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EXHIBIT LIST
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99.1 |
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Press Release dated March 4, 2015 (furnished pursuant to Item 2.02). |
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99.2 |
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Slide Presentation dated March 5, 2015 (furnished pursuant to Item 2.02). |
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Exhibit 99.1 |
News Release
DARLING INGREDIENTS INC. REPORTS FOURTH
QUARTER AND FISCAL 2014 FINANCIAL RESULTS
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Fourth quarter net income of $69.9 million, or $0.42 per GAAP diluted share |
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Non GAAP Adjusted Diluted Earnings Per Share for FY 2014 of $1.20 per share |
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Fuel Segment performance reflects the benefit from the biodiesel tax credit |
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Diamond Green Diesel (DGD) Joint Venture Adjusted EBITDA $81.6 million for 2014 |
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Foreign exchange stronger U.S. dollar impacted Euro and Canadian dollar translated earnings in fourth quarter |
March 4, 2015 IRVING, TEXAS Darling Ingredients Inc. (NYSE: DAR), a global developer and producer of sustainable natural ingredients
from edible and inedible bio-nutrients, creating a wide range of ingredients and customized specialty solutions for customers in the pharmaceutical, food, pet food, feed, technical, fuel, bioenergy, and fertilizer industries, today reported
financial results for the fourth quarter and fiscal year ended January 3, 2015.
Net sales for the fourth quarter of 2014 increased to $1.0 billion,
compared with $447.9 million in the same period of 2013, attributable to newly acquired operations in first quarter of 2014. Operating income in the fourth quarter of 2014 was $39.7 million, compared with $18.5 million for the same period of 2013.
Comments on the 2014 Fourth Quarter and Fiscal Year End
Our business continued to experience headwinds in fourth quarter 2014 from globally lower prices for our finished products and a stronger U.S. dollar.
The global price resetting appears to have stabilized with raw material values adjusting and prices for most proteins recovering to meet the increased demand in both the feed and pet food sectors. Fat and used cooking oil finished product prices
continued their decline as a result of larger global grain supplies, lower crude oil values, and a non-defined Renewable Fuel Standard for 2014 or 2015. Diamond Green Diesel delivered a tremendous quarter, and as anticipated we benefited from the
reinstatement of the biodiesel blenders tax credit, said Randall Stuewe, Darling Ingredients Inc. Chairman and Chief Executive Officer.
Our gelatin business delivered as expected, with a good performance in Europe and the US. China showing signs of recovery while South America margin
conditions improved. Our global casings business is showing signs of improvement.
In 2014 we aggressively stepped onto the world stage and
launched our new global platform, Mr. Stuewe added. It has been a challenging year in light of the global deflationary pressures we faced, but we successfully executed a significant international integration and are patiently
building our platform as the worlds leader in creating sustainable food, feed and fuel ingredients for a growing population, concluded Mr. Stuewe.
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News Release March 4, 2015
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2
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Reconciliation of Fourth Quarter 2014 Net Income to Adjusted EBITDA
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Three Months Ended |
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Adjusted EBITDA (U.S. dollars in
thousands) |
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January 3, 2015 |
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December 28, 2013 |
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Net income attributable to Darling |
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$ |
69,943 |
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$ |
22,493 |
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Depreciation and amortization |
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69,039 |
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31,713 |
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Interest expense |
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24,633 |
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21,501 |
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Income tax expense |
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4,792 |
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585 |
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Foreign currency loss/(gain) |
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1,267 |
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(28,107 |
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Other expense /(income), net |
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(269 |
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928 |
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Equity in net (income)/loss of unconsolidated subsidiaries |
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(59,547 |
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1,136 |
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Net income/(loss) attributable to noncontrolling interests |
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(1,155 |
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Adjusted EBITDA (Non-GAAP) |
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$ |
108,703 |
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$ |
50,249 |
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Acquisition and integration-related expenses |
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2,362 |
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14,114 |
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Pro Forma Adjusted EBITDA (Non-GAAP) |
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$ |
111,065 |
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$ |
64,363 |
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DGD Joint Venture Adjusted EBITDA (Darlings share) (1) |
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$ |
63,757 |
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$ |
3,295 |
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(1) |
Darlings pro forma adjusted EBITDA (Non-GAAP) in the above table does not include the DGD Joint Venture adjusted EBITDA (Darlings share) if we had consolidated the DGD Joint Venture.
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Fourth quarter 2014 net income attributable to Darling was $69.9 million, or $0.42 per diluted share, compared with net income of $22.5
million, or $0.18 per diluted share, in the fourth quarter of 2013. For the fourth quarter of fiscal 2014, the Company generated Adjusted EBITDA of $108.7 million, as compared to $50.2 million in the same period in 2013. The increase was primarily
attributable to the inclusion of the blenders tax credit from the DGD Joint Venture and our newly acquired operations. On a Pro Forma Adjusted EBITDA basis, the Company would have generated $111.1 million in the fourth quarter 2014, as
compared to a Pro Forma Adjusted EBITDA of $64.4 million in the same period in 2013.
Fourth Quarter Segment Performance
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Feed Ingredients Segment |
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Three Months Ended |
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($ thousands) |
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January 3, 2015 |
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December 28, 2013 |
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Net Sales |
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$ |
605,976 |
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$ |
447,394 |
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Operating Income |
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$ |
33,613 |
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$ |
32,271 |
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News Release March 4, 2015
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Feed Ingredients operating income increased by $1.3 million to $33.6 million when compared to the fourth quarter of fiscal 2013. The increase in operating income is attributable to the newly acquired operations in first
quarter 2014. |
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Europe and Canada performed generally as expected, with the U.S. moderately below expectations with fat markets falling lower sequentially quarter over quarter impacting the non-formula business. |
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Food Ingredients Segment |
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Three Months Ended |
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($ thousands) |
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January 3, 2015 |
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December 28, 2013 |
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Net Sales |
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$ |
322,049 |
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Operating Income |
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$ |
13,655 |
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Food Ingredients operating income was $13.7 million for the fourth quarter of 2014 compared to no prior reporting segment or activity in the Food Ingredients business lines in the fourth quarter of 2013.
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Rousselot preformed consistently. Our global volumes improved, with Europe leading the way and China showing signs of improved demand while adjustments were made to ease South America margin compression. The
Companys casings business showed signs of improved margins. |
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Fuel Ingredients Segment |
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Three Months Ended |
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($ thousands) |
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January 3, 2015 |
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December 28, 2013 |
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Net Sales |
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$ |
72,179 |
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$ |
7,910 |
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Operating Income |
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$ |
10,935 |
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$ |
714 |
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Exclusive of the DGD Joint Venture, Fuel Ingredients operating income for the fourth quarter of fiscal 2014 was $10.9 million, an increase of $10.2 million as compared to fourth quarter of fiscal 2013. Including the DGD
Joint Venture, the Fuel Ingredients Segment income was $70.0 million in fourth quarter 2014, as compared to $(0.4) million in the same period of 2013. The increase of $70.4 million is primarily related to the passage of the $1.00 per gallon
blenders tax credit in the fourth quarter of fiscal 2014. The DGD Joint Venture has not yet distributed any earnings to its venture partners. |
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The new bio-phosphate facility in Son, Netherlands was in full production during fourth quarter of fiscal 2014, and our disposal rendering operations experienced increased demand. |
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News Release March 4, 2015
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Fiscal Year Ended January 3, 2015 Performance
For the fiscal year ended January 3, 2015, the Company reported net sales of $4.0 billion, as compared to $1.8 billion for the 2013 fiscal year. The $2.2
billion increase in sales resulted primarily from the inclusion of the newly acquired businesses.
As a result of the VION Acquisition and the Rothsay
Acquisition, the Companys results for the twelve months of fiscal 2014 include 52 weeks of operations from the VION Acquisition and 53 weeks from the Rothsay Acquisition, as compared to no operations from the VION Acquisition and 9 weeks from
the Rothsay Acquisition in the twelve months of fiscal 2013. Net income attributable to Darling for the fiscal year ended January 3, 2015, was $64.2 million, or $0.39 per diluted share, as compared to net income of $109.0 million, or $0.91 per
diluted share, for the fiscal year ended December 28, 2013. The results for the twelve months of fiscal 2014 and 2013 respectively, include the following after-tax costs:
Fiscal 2014
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$31.3 million ($0.19 per diluted share) related to a non-cash inventory step-up associated with the required purchase accounting for the VION Acquisition related to the portion of acquired inventory sold during the
period; |
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$19.9 million ($0.12 per diluted share) related to the redemption premium and write-off of deferred loan cost associated with the retirement of the Companys 8.5% Senior Notes on January 7, 2014;
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$21.0 million ($0.13 per diluted share) associated with the acquisition and integration costs related to Rothsay and VION Ingredients during the period; and |
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$7.9 million ($0.05 per diluted share) related to certain euro forward contracts entered into to hedge against foreign exchange risks related to the closing of the VION Acquisition. |
Fiscal 2013
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$15.3 million ($0.13 per diluted share) associated with the acquisition costs of the Rothsay Acquisition, the acquisition costs related to the acquired shares of Terra Holding Company, a Delaware corporation, and its
wholly owned subsidiaries, Terra Renewal Services, Inc., an Arkansas corporation (TRS), and EV Acquisition, Inc., an Arkansas corporation (the Terra Transaction) and the incurred costs related to the VION Acquisition during
the period; |
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$8.0 million ($0.07 per diluted share) related to an unused bridge financing facility commitment associated with the VION Acquisition; and |
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$(16.9) million ($0.14 per diluted share) related to an unrealized gain on certain euro forward contracts entered into to hedge against foreign exchange risks related to the closing of the VION Acquisition.
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News Release March 4, 2015
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Net income and diluted earnings per common share, adjusted to eliminate the one-time costs listed above,
would have been $144.3 million and $0.88 per diluted share, respectively for the fiscal year ended January 3, 2105, as compared to $115.4 million and $0.97 per share, respectively, for the fiscal year ended December 28, 2013.
Operating income for the fiscal year ended January 3, 2015, was $164.5 million, which reflects a decline of $5.1 million, or 3.0%, as compared to the
fiscal year ended December 28, 2013. The results for fiscal year 2014 include an increase to cost of sales of $49.8 million related to the inventory step-up associated with the required purchase accounting for the VION Acquisition. Without
these costs, segment operating income for fiscal year 2014 would have been $214.3 million, or 26.4% higher than the same period in 2013. Including the Companys share of net income of unconsolidated subsidiaries, primarily the DGD Joint
Venture, operating income for the fiscal year ended January 3, 2015, would have been $279.9 million, or $102.6 million (57.9%) higher than the same period in 2013. The DGD Joint Venture has not yet distributed any earnings to its venture
partners.
Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA and (Non-GAAP) Pro forma Adjusted EBITDA
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Fiscal Year Ended |
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Adjusted EBITDA (U.S. dollars
in thousands) |
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January 3, 2015 |
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December 28, 2013 |
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Net income attributable to Darling |
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$ |
64,215 |
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$ |
108,967 |
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Depreciation and amortization |
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269,517 |
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98,787 |
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Interest expense |
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135,416 |
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38,108 |
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Income tax expense/(benefit) |
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13,141 |
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54,711 |
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Foreign currency loss/(gain) |
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13,548 |
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(28,107 |
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Other expense/(income), net |
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(299 |
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3,547 |
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Equity in net (income)/loss of unconsolidated subsidiaries |
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(65,609 |
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(7,660 |
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Net income/(loss) attributable to noncontrolling interests |
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4,096 |
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Adjusted EBITDA (Non-GAAP) |
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$ |
434,025 |
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$ |
268,353 |
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Non-cash inventory step-up associated with VION Acquisition |
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49,803 |
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Acquisition and integration-related expenses |
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24,667 |
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23,271 |
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Darling Ingredients International - 13th week (1) |
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4,100 |
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Pro Forma Adjusted EBITDA (Non-GAAP) |
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$ |
512,595 |
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$ |
291,624 |
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DGD Joint Venture Adjusted EBITDA (Darlings share) (2) |
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$ |
81,639 |
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$ |
16,490 |
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(1) |
January 7, 2014 closed on VION Ingredients, thus the 13th week would be revenue adjusted for January 1, 2014 through January 7, 2014. |
(2) |
Darlings pro forma adjusted EBITDA (Non-GAAP) in the above table does not include the DGD Joint Venture adjusted EBITDA (Darlings share) if we had consolidated the DGD Joint Venture.
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News Release March 4, 2015
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For the year ended January 3, 2015, the Company generated Adjusted EBITDA of $434.0 million, as compared
to $268.4 million in the same period in 2013. The increase was primarily attributable to the newly acquired Rothsay and VION Ingredients businesses. On a Pro forma Adjusted EBITDA basis, the Company would have generated $512.6 million in fiscal
2014, as compared to a Pro forma Adjusted EBITDA of $291.6 million in the same period in 2013. The increase in Pro forma Adjusted EBITDA is attributable to the inclusion of the newly acquired Rothsay and VION Ingredients businesses.
Reconciliation (Non-GAAP) Adjusted Diluted Earnings Per Share
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Fiscal Year Ended |
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ADJUSTED (Non-GAAP) DILUTED EARNINGS PER SHARE |
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January 3, 2015 |
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December 28, 2013 |
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December 29, 2012 |
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Weighted average shares of common stock outstanding (millions) |
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165,059 |
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119,924 |
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118,089 |
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Reported Earnings Per Share (fully diluted) |
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$ |
0.39 |
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$ |
0.91 |
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$ |
1.11 |
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Non-cash inventory step-up associated with the VION Acquisition |
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0.19 |
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Acquisition and integration costs |
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0.13 |
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0.13 |
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Amortization of intangibles |
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0.32 |
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0.16 |
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0.15 |
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Bridge financing |
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0.07 |
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Redemption premium on 8.5% Senior Notes and write off deferred loan costs |
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0.12 |
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Foreign currency price risk VION Acquisition |
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0.05 |
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(0.14 |
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Adjusted diluted earnings per share attributable to Darling (Non-GAAP) (1) |
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$ |
1.20 |
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$ |
1.13 |
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$ |
1.26 |
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(1) |
Adjustments to diluted earnings per share of acquisition related items are net of tax. Calculations of all adjustment tax amounts were at the applicable effective tax rate for the period, except for fiscal 2014 and
fiscal 2013, which were impacted by biofuel tax incentives and nonrecurring acquisition and integration costs. The effective tax rate used for calculating Non-GAAP Adjusted EPS in the above table for the years ended January 3,
2015, December 28, 2013 and December 29, 2012 was 37.1%, 38.5% and 36.8%, respectively. |
About Darling
Darling Ingredients Inc. is the worlds largest publicly-traded developer and producer of sustainable natural ingredients from edible and inedible
bio-nutrients, creating a wide range of ingredients and customized specialty solutions for customers in the pharmaceutical, food, pet food, feed, technical, fuel, bioenergy and fertilizer industries. With operations on five continents, the Company
collects and transforms all aspects of animal by-product streams into useable and specialty ingredients, such as gelatin, edible fats, feed-grade fats, animal proteins and meals, plasma, pet food ingredients, organic fertilizers, yellow grease, fuel
feedstocks, green energy, natural casings and hides. The Company also recovers and converts used cooking oil and commercial bakery residuals into valuable feed and fuel ingredients. In addition, the Company provides grease trap services to food
service establishments, environmental services to food processors and sells restaurant cooking oil delivery and collection equipment. For additional information, visit the Companys website at http://ir.darlingii.com.
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News Release March 4, 2015
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Conference Call
Darling Ingredients Inc. will host a conference call to discuss the Companys fourth quarter and fiscal year 2014 financial results at 8:30 am Eastern
Time (7:30 am Central Time) on Thursday, March 5, 2015. To listen to the conference call, participants calling from within North America should dial 1- 877-270-2148; international participants should dial 1-412-902-6510. Please refer to access
code 10061490. Please call approximately ten minutes before the start of the call to ensure that you are connected. A slide presentation to augment managements formal presentation will be posted within the presentations section of our Investor
Relations website at http://ir.darlingii.com.
The call will also be available as a live audio webcast that can be accessed on the Company website
at http://ir.darlingii.com beginning two hours after its completion, a replay of the call can be accessed through March 12, 2015, by dialing 1-877-344-7529 (domestically), 1-855-669-9658 (Canada) or 1-412-317-0088 (international). The
access code for the replay is 10061490. The conference call will also be archived on the Companys website.
Use of Non-GAAP Financial Measures:
Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the Companys operating performance and is not
intended to be a presentation in accordance with GAAP. Since EBITDA (generally, net income plus interest expenses, taxes, depreciation and amortization) is not calculated identically by all companies, this presentation may not be comparable to
EBITDA or adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated in this presentation and represents, for any relevant period, net income/(loss) plus depreciation and amortization, goodwill and long-lived asset
impairment, interest expense, (income)/loss from discontinued operations, net of tax, income tax provision, other income/(expense) and equity in net loss of unconsolidated subsidiary. Management believes that Adjusted EBITDA is useful in evaluating
the Companys operating performance compared to that of other companies in its industry because the calculation of Adjusted EBITDA generally eliminates the effects of financing income taxes and certain non-cash and other items that may vary for
different companies for reasons unrelated to overall operating performance.
As a result, the Companys management used Adjusted EBITDA as a measure
to evaluate performance and for other discretionary purposes. However, Adjusted EBITDA is not a recognized measurement under GAAP, should not be considered as an alternative to net income as a measure of operating results or to cash flow as a
measure of liquidity, and is not intended to be a presentation in accordance with GAAP. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance with certain financial covenants under the Companys
Senior Secured Credit Facilities and 5.375% Notes that were outstanding at January 3, 2015. However, the amounts shown in this presentation for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the
Companys Senior Secured Credit Facilities and 5.375% Notes, as those definitions permit further adjustments to reflect certain other non-recurring costs and non-cash charges.
In addition, the Companys management used adjusted diluted earnings per share as a measure of earnings due to the significant merger and acquisition
activity of the Company. However, an adjusted earnings per share is not a recognized measurement under GAAP and should not be considered as an alternative to diluted earnings per share presented in accordance with GAAP. Adjusted diluted earnings per
share is defined as adjusted net income attributable to Darling divided by the weighted average shares of diluted common stock. Adjusted net income attributable to Darling is defined as a reconciliation of net income attributable to Darling, net of
tax (i) adjusted for net of tax acquisition and integration costs related to merger and acquisitions, (ii) net of tax amortization of acquisition related intangibles and (iii) net of tax certain non-recurring items that are not part
of normal operations. This measure is solely for the purpose of calculating adjusted diluted earnings per share and is not intended to be a substitute of presentation in accordance with GAAP.
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News Release March 4, 2015
Page
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Cautionary Statements Regarding Forward-Looking Information:
{This media release contains forward-looking statements regarding the business operations and prospects of Darling Ingredients Inc. and industry
factors affecting it. These statements are identified by words such as believe, anticipate, expect, estimate, intend, could, may, will,
should, planned, potential, continue, momentum, and other words referring to events that may occur in the future. These statements reflect Darling Ingredients current view of future
events and are based on its assessment of, and are subject to, a variety of risks and uncertainties beyond its control, each of which could cause actual results to differ materially from those indicated in the forward-looking statements. These
factors include, among others, existing and unknown future limitations on the ability of the Companys direct and indirect subsidiaries to upstream their profits to the Company for payments on the Companys indebtedness or other purposes;
unanticipated costs or operating problems related to the acquisition and integration of Rothsay and Darling Ingredients International (including transactional costs and integration of the new enterprise resource planning (ERP) system); global
demands for bio-fuels and grain and oilseed commodities, which have exhibited volatility, and can impact the cost of feed for cattle, hogs and poultry, thus affecting available rendering feedstock and selling prices for the Companys products;
reductions in raw material volumes available to the Company due to weak margins in the meat production industry as a result of higher feed costs, reduced consumer demand or other factors, reduced volume from food service establishments, reduced
demand for animal feed, or otherwise; reduced finished product prices; continued decline in fat and used cooking oil finished product prices; changes to worldwide government policies relating to renewable fuels and greenhouse gas emissions that
adversely affect programs like the Renewable Fuel Standards Program (RFS2) and tax credits for biofuels both in the Unites States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations
to food or food additives; the occurrence of Bird Flu including, but not limited to H1N1 flu, bovine spongiform encephalopathy (or BSE), porcine epidemic diarrhea (PED) or other diseases associated with animal origin in the
United States or elsewhere; unanticipated costs and/or reductions in raw material volumes related to the Companys compliance with the existing or unforeseen new U.S. or foreign regulations (including, without limitation, China) affecting the
industries in which the Company operates or its value added products (including new or modified animal feed, Bird Flu, PED or BSE or similar or unanticipated regulations); risks associated with the renewable diesel plant in Norco, Louisiana owned
and operated by a joint venture between Darling Ingredients and Valero Energy Corporation, including possible unanticipated operating disruptions; risks relating to possible third party claims of intellectual property infringement; increased
contributions to the Companys pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass
withdrawal event; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraine or elsewhere; and/or unfavorable export or import markets. These
factors, coupled with volatile prices for natural gas and diesel fuel, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets,
and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could negatively impact the Companys
results of operations. Among other things, future profitability may be affected by the Companys ability to grow its business, which faces competition from companies that may have substantially greater resources than the Company. Other risks
and uncertainties regarding Darling Ingredients Inc., its business and the industries in which it operates are referenced from time to time in the Companys filings with the Securities and Exchange Commission. Darling Ingredients Inc. is under
no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.}
For More Information, contact:
|
|
|
Melissa A. Gaither, Director of Investor Relations
251 OConnor Ridge Blvd., Suite 300 Irving, Texas
75038 |
|
Email: mgaither@darlingii.com Phone:
972-717-0300 |
Financial Tables Follow
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News Release March 4, 2015
Page
9
|
|
|
Darling Ingredients Inc.
Consolidated Operating Results
For the Periods Ended January 3, 2015 and December 28, 2013
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Fourth Quarter Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Fiscal Year Ended |
|
|
|
Jan. 3, 2015 |
|
|
Dec. 28, 2013 |
|
|
$ Change Favorable (Unfavorable) |
|
|
Jan. 3, 2015 |
|
|
Dec. 28, 2013 |
|
|
$ Change Favorable (Unfavorable) |
|
Net sales |
|
$ |
1,000,203 |
|
|
$ |
447,939 |
|
|
$ |
552,264 |
|
|
$ |
3,956,443 |
|
|
$ |
1,802,268 |
|
|
$ |
2,154,175 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and operating expenses |
|
$ |
794,298 |
|
|
$ |
337,594 |
|
|
$ |
(456,704 |
) |
|
$ |
3,123,171 |
|
|
$ |
1,339,819 |
|
|
$ |
(1,783,352 |
) |
Selling, general and administrative expenses |
|
|
94,841 |
|
|
|
45,982 |
|
|
|
(48,859 |
) |
|
|
374,580 |
|
|
|
170,825 |
|
|
|
(203,755 |
) |
Depreciation and amortization |
|
|
69,039 |
|
|
|
31,713 |
|
|
|
(37,326 |
) |
|
|
269,517 |
|
|
|
98,787 |
|
|
|
(170,730 |
) |
Acquisition and Integration costs |
|
|
2,363 |
|
|
|
14,114 |
|
|
|
11,751 |
|
|
|
24,667 |
|
|
|
23,271 |
|
|
|
(1,396 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and expenses |
|
|
960,541 |
|
|
|
429,403 |
|
|
|
(531,138 |
) |
|
|
3,791,935 |
|
|
|
1,632,702 |
|
|
|
(2,159,233 |
) |
|
|
|
|
|
|
|
Operating income |
|
|
39,662 |
|
|
|
18,536 |
|
|
|
21,126 |
|
|
|
164,508 |
|
|
|
169,566 |
|
|
|
(5,058 |
) |
Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
(24,633 |
) |
|
|
(21,501 |
) |
|
|
(3,132 |
) |
|
|
(135,416 |
) |
|
|
(38,108 |
) |
|
|
(97,308 |
) |
Foreign currency gains/(losses) |
|
|
(1,267 |
) |
|
|
28,107 |
|
|
|
(29,374 |
) |
|
|
(13,548 |
) |
|
|
28,107 |
|
|
|
(41,655 |
) |
Other income/(expense), net |
|
|
271 |
|
|
|
(928 |
) |
|
|
1,199 |
|
|
|
299 |
|
|
|
(3,547 |
) |
|
|
3,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(25,629 |
) |
|
|
5,678 |
|
|
|
(31,307 |
) |
|
|
(148,665 |
) |
|
|
(13,548 |
) |
|
|
(135,117 |
) |
|
|
|
|
|
|
|
Equity in net income/(loss) of unconsolidated subsidiaries |
|
|
59,547 |
|
|
|
(1,136 |
) |
|
|
60,683 |
|
|
|
65,609 |
|
|
|
7,660 |
|
|
|
57,949 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
73,580 |
|
|
|
23,078 |
|
|
|
50,502 |
|
|
|
81,452 |
|
|
|
163,678 |
|
|
|
(82,226 |
) |
Income taxes expense |
|
|
4,792 |
|
|
|
585 |
|
|
|
(4,207 |
) |
|
|
13,141 |
|
|
|
54,711 |
|
|
|
41,570 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) |
|
$ |
68,788 |
|
|
$ |
22,493 |
|
|
$ |
46,295 |
|
|
$ |
68,311 |
|
|
$ |
108,967 |
|
|
$ |
(40,656 |
) |
|
|
|
|
|
|
|
Net (income)/loss attributable to noncontrolling interests |
|
$ |
1,155 |
|
|
|
|
|
|
$ |
1,155 |
|
|
$ |
(4,096 |
) |
|
|
|
|
|
$ |
(4,096 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to Darling |
|
$ |
69,943 |
|
|
$ |
22,493 |
|
|
$ |
47,450 |
|
|
$ |
64,215 |
|
|
$ |
108,967 |
|
|
$ |
(44,752 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income/(loss) per share: |
|
$ |
0.42 |
|
|
$ |
0.18 |
|
|
$ |
0.24 |
|
|
$ |
0.39 |
|
|
$ |
0.91 |
|
|
$ |
(0.52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income/(loss) per share: |
|
$ |
0.42 |
|
|
$ |
0.18 |
|
|
$ |
0.24 |
|
|
$ |
0.39 |
|
|
$ |
0.91 |
|
|
$ |
(0.52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
News Release March 4, 2015
Page
10
|
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|
Darling Ingredients Inc.
Condensed Consolidated Balance Sheets - Assets
For the Periods Ended January 3, 2015 and December 28, 2013
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 28, |
|
|
|
2015 |
|
|
2013 |
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
108,784 |
|
|
$ |
870,857 |
|
Restricted cash |
|
|
343 |
|
|
|
354 |
|
Accounts Receivable, net |
|
|
409,779 |
|
|
|
112,844 |
|
Inventories |
|
|
401,613 |
|
|
|
65,133 |
|
Prepaid expenses |
|
|
44,629 |
|
|
|
14,223 |
|
Income taxes refundable |
|
|
22,140 |
|
|
|
14,512 |
|
Other current assets |
|
|
21,324 |
|
|
|
32,290 |
|
Deferred income taxes |
|
|
45,001 |
|
|
|
17,289 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,053,613 |
|
|
|
1,127,502 |
|
Property, plant and equipment |
|
|
|
|
|
|
|
|
less accumulated depreciation, net |
|
|
1,574,116 |
|
|
|
666,573 |
|
Intangible assets |
|
|
|
|
|
|
|
|
less accumulated amortization, net |
|
|
932,413 |
|
|
|
588,664 |
|
Other assets: |
|
|
|
|
|
|
|
|
Goodwill |
|
|
1,320,419 |
|
|
|
701,637 |
|
Investment in unconsolidated subsidiaries |
|
|
202,712 |
|
|
|
115,114 |
|
Other |
|
|
71,009 |
|
|
|
44,643 |
|
Deferred income taxes |
|
|
16,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,170,713 |
|
|
$ |
3,244,133 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
News Release March 4, 2015
Page
11
|
|
|
Darling Ingredients Inc.
Condensed Consolidated Balance Sheets
Liabilities and Stockholders Equity
For the Periods Ended January 3, 2015 and December 28, 2013
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
January 3, |
|
|
December 28, |
|
|
|
2015 |
|
|
2013 |
|
Current liabilities: |
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
54,401 |
|
|
$ |
19,888 |
|
Accounts payable, principally trade |
|
|
168,518 |
|
|
|
43,742 |
|
Income taxes payable |
|
|
4,363 |
|
|
|
|
|
Accrued expenses |
|
|
256,119 |
|
|
|
113,174 |
|
Deferred income taxes |
|
|
642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
484,043 |
|
|
|
176,804 |
|
Long-term debt, net of current portion |
|
|
2,098,039 |
|
|
|
866,947 |
|
Other non-current liabilities |
|
|
114,700 |
|
|
|
40,671 |
|
Deferred income taxes |
|
|
422,797 |
|
|
|
138,759 |
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,119,579 |
|
|
|
1,223,181 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Total Darlings Stockholders equity: |
|
|
1,952,990 |
|
|
|
2,020,952 |
|
Noncontrolling interests |
|
|
98,144 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
$ |
2,051,134 |
|
|
$ |
2,020,952 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,170,713 |
|
|
$ |
3,244,133 |
|
|
|
|
|
|
|
|
|
|
|
Earnings
Conference Call March 5, 2015
Creating sustainable food, feed and fuel
ingredients for a growing population
Exhibit 99.2
Fourth Quarter & Fiscal Year End 2014
Randall
C.
Stuewe,
Chairman
and
CEO
John O. Muse,
EVP Chief Financial Officer |
|
Creating
sustainable food, feed and fuel ingredients for a growing population Safe Harbor
Statement 2
This presentation contains forward-looking statements regarding the business
operations and prospects of Darling Ingredients Inc. and industry factors affecting it.
These statements are identified by words such as believe, anticipate, expect, estimate, intend, could, may, will, should,
planned, potential, continue, momentum, and
other words referring to events that may occur in the future. These statements reflect Darling Ingredients current
view of future events and are based on its assessment of, and are subject to, a variety of risks and
uncertainties beyond its control, each of which could cause actual results to differ materially
from those indicated in the forward-looking statements. These factors include, among others, existing and unknown future
limitations on the ability of the Company's direct and indirect subsidiaries to upstream their profits
to the Company for payments on the Company's indebtedness or other purposes; unanticipated
costs or operating problems related to the acquisition and integration of Rothsay and Darling Ingredients
International (including transactional costs and integration of the new enterprise resource planning
(ERP) system); global demands for bio-fuels and grain and oilseed commodities, which have
exhibited volatility, and can impact the cost of feed for cattle, hogs and poultry, thus affecting available rendering feedstock
and selling prices for the Companys products; reductions in raw material volumes available to
the Company due to weak margins in the meat production industry as a result of higher feed
costs, reduced consumer demand or other factors, reduced volume from food service establishments, reduced demand for
animal feed, or otherwise; reduced finished product prices; continued decline in fat and used cooking
oil finished product prices; changes to worldwide government policies relating to renewable
fuels and greenhouse gas emissions that adversely affect programs like the Renewable Fuel Standards Program (RFS2)
and tax credits for biofuels both in the United States and abroad; possible product recall resulting
from developments relating to the discovery of unauthorized adulterations to food or food
additives; the occurrence of Bird Flu including, but not limited to H1N1 flu, bovine spongiform encephalopathy (or "BSE"), porcine
epidemic diarrhea ("PED") or other diseases associated with animal origin in the United States
or elsewhere; unanticipated costs and/or reductions in raw material volumes related to the
Companys compliance with the existing or unforeseen new U.S. or foreign regulations (including, without limitation, China)
affecting the industries in which the Company operates or its value added products (including new or
modified animal feed, Bird Flu, PED or BSE or similar or unanticipated regulations); risks
associated with the renewable diesel plant in Norco, Louisiana owned and operated by a joint venture between Darling
Ingredients and Valero Energy Corporation, including possible unanticipated operating disruptions;
risks relating to possible third party claims of intellectual property infringement; increased
contributions to the Companys pension and benefit plans, including multiemployer and employer-sponsored defined benefit
pension plans as required by legislation, regulation or other applicable U.S. or foreign law or
resulting from a U.S. mass withdrawal event; bad debt write-offs; loss of or failure to
obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraine or elsewhere; and/or
unfavorable export or import markets. These factors, coupled with volatile prices for natural gas and
diesel fuel, climate conditions, currency exchange fluctuations, general performance of the
U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in
consumer confidence and discretionary spending, including the inability of consumers and companies to
obtain credit due to lack of liquidity in the financial markets, among others, could negatively
impact the Company's results of operations. Among other things, future profitability may be affected by the Companys
ability to grow its business, which faces competition from companies that may have substantially
greater resources than the Company. Other risks and uncertainties regarding Darling Ingredients
Inc., its business and the industries in which it operates are referenced from time to time in the Companys filings
with the Securities and Exchange Commission. Darling Ingredients Inc. is under no obligation to
(and expressly disclaims any such obligation to) update or alter its forward-looking
statements whether as a result of new information, future events or otherwise.
|
|
Fourth Quarter
2014 Highlights 3
Delivering used cooking oil
to one of our plants for processing
Food segment earnings steady
Global gelatin business continues to perform nicely
Edible fats supply in Europe strong, due to Russian border closure
Casings business showing signs of life as hog casings margins improve
Feed segment earnings pressured by lower finished product prices
Global fat prices declined in concert with increasing global
grain supplies, ample palm oil supplies and lower crude oil prices
Global protein demand remained strong, especially for
chicken-derived materials for pet food and aquaculture
Raw material procurement formulas being adjusted to improve margins
Strong input volumes globally
Fuel segment delivers record earnings
Diamond Green Diesel delivers record production and benefits
from reinstatement of blenders tax credit
New biogas plant begins to contribute
Rendac earnings adjusting to lower energy prices
Creating sustainable food, feed and fuel ingredients for a growing population
|
|
Creating
sustainable food, feed and fuel ingredients for a growing population 2014
Highlights 4
Adjusted (Non-GAAP) fully diluted EPS of $0.51 for the quarter
and $1.20 for the full year
Global revenue nearing $4 billion
Pro-forma adjusted EBITDA (Non-GAAP) $512,595 for full year
Debt reduced by $122.3 million in 2014
CAPEX of $228.9 million in 2014
Total debt at $2.125 billion
Weakening Euro/CAD affecting translated earnings
Darling Ingredients
chemist at
one of our corporate labs |
|
Earnings
Summary 5
January 3,
December 28,
January 3,
December 28,
$ Change
2015
2013
2015
2013
Favorable
(Unfavorable)
Revenues
1,000,203
$
447,939
$
3,956,443
$
1,802,268
$
2,154,175
$
Gross profit
205,905
110,345
833,272
462,449
370,823
Selling, general, and administrative expenses
94,841
45,982
374,580
170,825
(203,755)
Depreciation and amortizaton
69,039
31,713
269,517
98,787
(170,730)
Acquisition and integration costs
2,363
14,114
24,667
23,271
(1,396)
Interest expense
24,633
21,501
135,416
38,108
(97,308)
Foreign currency gain/(loss)
(1,267)
28,107
(13,548)
28,107
(41,655)
Other income/(expense), net
271
(928)
299
(3,547)
3,846
Equity in net income of unconsolidated subsidary
59,547
(1,136)
65,609
7,660
57,949
Income before taxes
73,580
23,078
81,452
163,678
(82,226)
Income tax expense
4,792
585
13,141
54,711
41,570
Net income
68,788
22,493
68,311
108,967
(40,656)
Net (income)/loss attributable in minority interests
1,155
-
(4,096)
-
(4,096)
Net income attributable to Darling
69,943
$
22,493
$
64,215
$
108,967
$
(44,752)
$
Earnings per share (fully diluted)
0.42
$
0.18
$
0.39
$
0.91
$
(0.52)
$
Three Months Ended
Fiscal Year Ended
Creating sustainable food, feed and fuel ingredients for a growing population
|
|
6
Note: Adjustments to diluted earnings per share of acquisition related items are net of tax.
Calculations of all adjustment tax amounts were at the applicable effective tax rate for the
period, except for fiscal 2014 and fiscal 2013, which were impacted by biofuel tax incentives and nonrecurring acquistion and integration costs. The
effective tax rate used for calculating Non-GAAP Adjusted EPS in the above table for the years
ended January 3, 2105, December 28, 2013 and December 29, 2012 was 37.1%, 38.5% and 36.8%,
respectively. The applicable effective tax rate for the fourth quarter of fiscal 2014 and 2013 were impacted by biofuel tax incentives and
nonrecurring acquisition and integration costs. The efective tax rate used for calculaing Non-GAAP
adjusted EPS for three months ended January 3, 2015 and December 28, 2013 was 37.2% and 38.7%,
respectively. January 3,
December 28,
January 3,
December 28,
December 29,
2015
2013
2015
2013
2012
Reported Earnings Per Share (fully diluted)
$ 0.42
$ 0.18
$ 0.39
$ 0.91
$ 1.11
Adjustments:
Non-cash inventory step-up associated with VION Acquisition
-
-
0.19
-
-
Acquisition and integration costs
0.01
0.08
0.13
0.13
-
Amortization of intangibles
0.08
0.05
0.32
0.16
0.15
Bridge financing
-
0.06
-
0.07
-
Redemption premium on 8.5% Senior Notes and write off deferred loan costs
-
-
0.12
-
-
Foreign currency price risk VION Acquisition
(0.14)
0.05
(0.14)
-
Adjusted diluted earnings per share attributable to Darling (Non-GAAP)
$ 0.51
$ 0.23
$ 1.20
$ 1.13
$ 1.26
Weighted average shares of common stock outstanding (in millions)
165,224
124,202
165,059
119,924
118,089
Three Months Ended
Fiscal Year Ended
Creating sustainable food, feed and fuel ingredients for a growing population
Adjusted (Non-GAAP) Diluted EPS |
|
Adjusted
EBITDA 7
_
_
_
_
_
_
_
Adjusted EBITDA and Pro Forma Adjusted EBITDA
January 3,
December 28,
January 3,
December 28,
(US$ in thousands)
2015
2013
2015
2013
Net income attributable to Darling
$ 69,943
$
22,493
$ 64,215
$ 108,967
Depreciation and amortization
69,039
31,713
269,517
98,787
Interest expense
24,633
21,501
135,416
38,108
Income tax expense
4,792
585
13,141
54,711
Foreign currency (gain)/loss
1,267
(28,107)
13,548
(28,107)
Other expense/(income), net
(269)
928
(299)
3,547
Equity in net (income)/loss of unconsolidated subsidiaries
(59,547)
1,136
(65,609)
(7,660)
Net income attributable to noncontrolling interests
-1,155
4,096
Adjusted EBITDA (Non-GAAP)
$ 108,703
$ 50,249
$ 434,025
$ 268,353
Non-cash inventory step-up associated with VION Acquisition
_
49,803
Acquisition and integration-related expenses
2,362
14,114
24,667
23,271
Darling
Ingredients
International
-
13th
week
(1)
4,100
Pro Forma Adjusted EBITDA (Non-GAAP)
$ 111,065
$ 64,363
$ 512,595
$ 291,624
DGD Joint Venture Adjusted EBITDA (Darling's Share)
(2)
$ 63,757
$
3,295
$ 81,639
$
16,490 Three Months Ended
Fiscal Year Ended
(1)
January 7, 2014 closed on VION Ingredients, thus the 13th week would be revenue
adjusted for January 1, 2014 through January 7, 2014 (2)
Darling's
pro
forma
adjusted
EBITDA
(Non-GAAP)
in
the
above
table
does
not
include
the
DGD
Joint
Venture
adjusted
EBITDA
(Darling's
share)
if we had consolidated the DGD Joint Venture
Creating sustainable food, feed and fuel ingredients for a growing population
|
|
Balance Sheet
Highlights and Debt Summary 8
(US$, in thousands)
January 3, 2015
Cash
108,784
$
Accounts receivable
409,779
Total inventories
401,613
Net working capital
569,570
Net property, plant and equipment
1,574,116
Total assets
5,170,713
Total debt
2,152,440
Shareholders' equity
2,051,134
(US$, in thousands)
January 3, 2015
Credit Agreement
Revolving Credit Facility
101,863
$
Term Loan A
312,161
Term Loan B
1,205,669
5.375% Senior Notes due 2022
500,000
Other Notes and Obligations
32,747
Total Debt:
2,152,440
$
Debt Summary
Balance Sheet Highlights
Creating sustainable food, feed and fuel ingredients for a growing population
|
|
Creating sustainable food, feed and fuel ingredients for a growing
population Operational Highlights
Food Segment
$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
Delta %
Q3 to Q4
Revenue
293.5
331.4
301.4
322.0
1,248.3
6.8%
Gross Margin
62.3
65.3
64.2
63.4
255.2
-1.3%
Gross Margin %
21.2%
19.7%
21.3%
19.7%
20.4%
Operating Income/(Loss)
(12.1)
11.3
14.0
13.7
26.9
-2.1%
Adjusted Operating Income
30.8
14.7
14.0
13.7
73.2
-2.1%
EBITDA
5.3
30.9
32.6
31.4
100.2
-3.7%
Adjusted EBITDA
38.3
34.3
32.6
31.4
136.6
-3.7%
Adjusted EBITDA/Revenue
13.0%
10.4%
10.8%
9.7%
10.9%
Raw Material Processed
(millions of metric tons)
0.25
0.27
0.26
0.28
1.06
7.7%
(3)
9
(A)
(1)
(1)
(2)
(1)
(2)
(1)
Gelatin business performed
nicely; China normalizing and
South American margins
adjusting to supply and currency
European edible fats business
volumes remained strong
CTH showed improved margins
on hog casings
(1)
Has
impact
of
inventory
step-up
in
1
st
and
2
nd
quarter.
(2)
Exclusive
of
non-cash
inventory
step-up
and
Darling
Ingredients
International
13
th
week.
(3)
Raw material process volumes for the first quarter have been adjusted to be
consistent with the presentation of the second quarter figures.
(A) Quarters 1, 2 and 3 revenues have been adjusted for reclass between
sales and cost of sales. |
|
Creating sustainable food, feed and fuel ingredients for a growing
population Feed Segment
Operational Highlights
Lower finished product pricing in
4
th
quarter, primarily in fats
Protein prices eased, but demand
remained strong
Strong raw material volumes
Raw material procurement
formulas being adjusted globally
US$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
Delta %
Q3 to Q4
Revenue
$586.1
$622.1
$607.3
$606.0
$2,421.5
0.2%
Gross Margin (1)
142.5
165.4
132.5
132.5
572.9
0.0%
Gross Margin % (1)
24.3%
26.6%
21.8%
21.9%
23.7%
Operating Income (2)
37.5
74.7
46.4
33.6
192.2
-27.6%
Adjusted Operating Income (1)
52.4
76.2
46.4
33.6
208.6
-27.6%
EBITDA (2)
76.1
114.6
84.2
76.4
351.3
-9.3%
Adjusted EBITDA (1)
90.9
116.1
84.2
76.4
367.6
-9.3%
Adjusted EBITDA/Revenue
15.5%
18.7%
13.9%
12.6%
15.2%
Raw Material Processed
(millions of metric tons)
1.67
1.67
1.66
1.85
6.85
11.4%
(3)
10
(A) Quarters 1, 2 and 3 revenues have been adjusted for reclass between
sales and cost of sales. (A)
(1)
Has
impact
of
inventory
step-up
in
1
st
and
2
nd
quarter.
(2)
Exclusive
of
non-cash
inventory
step-up
and
Darling
Ingredients
International
13
th
week.
(3)
Raw material process volumes for the first quarter have been adjusted to be
consistent with the presentation of the second quarter figures.
|
|
Creating sustainable food, feed and fuel ingredients for a growing
population
Diamond Green Diesel, as well as our
biodiesel operations in Canada and
US, received the Tax Credit Benefit
for 2014
DGD running in excess of
11,000 barrels per day of input
feedstock
New Ecoson biogas plant in Son,
Netherlands is on line
Fuel Segment
11
$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
Delta %
Q3 to Q4
Revenue
$66.7
77.7
70.0
72.2
286.6
3.1%
Gross Margin
15.3
15.9
17.8
10.0
59.0
-43.8%
Gross Margin %
21.1%
20.5%
25.4%
13.9%
20.6%
Operating Income (2)
2.3
5.2
2.8
10.9
21.2
289.3%
Adjusted Operating Income (1)
3.5
5.2
2.8
10.9
22.4
289.3%
EBITDA (2)
9.7
11.1
11.5
16.9
49.2
47.0%
Adjusted EBITDA (1)
10.9
11.1
11.5
16.9
50.4
47.0%
Adjusted EBITDA/Revenue
16.3%
14.3%
16.4%
23.4%
17.6%
Raw Material Processed *
(millions of metric tons)
0.23
(3)
0.24
0.26
0.33
1.07
26.9%
*Excludes raw material processed at the DGD joint venture.
Diamond Green Diesel (50% Joint Venture)
US$ (millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
Delta %
Q3 to Q4
EBITDA (Darling's share)
$9.1
5.9
2.9
63.7
$81.6
2096.6%
(1)
Has impact of inventory step-up in 1st quarter.
(2)
Exclusive of non-cash inventory step-up and Darling Ingredients Int'l 13th
week. (3)
Raw material process volumes for the first quarter have been adjusted to be
consistent with the presentation of the second quarter figures.
(A)
(A)
Quarters
1,
2
and
3
revenues
have
been
adjusted
for
reclass
between
sales
and
cost
of
sales.
Operational Highlights |
|
Creating
sustainable food, feed and fuel ingredients for a growing population Non-U.S. GAAP
Measures 12
Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the
Companys operating performance and is not intended to be a presentation in accordance
with GAAP. Since EBITDA (generally, net income plus interest expenses, taxes, depreciation and
amortization) is not calculated identically by all companies, this presentation may not be
comparable to EBITDA or adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is
calculated in this presentation and represents, for any relevant period, net income/(loss) plus
depreciation and amortization, goodwill and long-lived asset impairment, interest expense,
(income)/loss from discontinued operations, net of tax, income tax provision, other
income/(expense) and equity in net loss of unconsolidated subsidiary. Management believes that Adjusted
EBITDA is useful in evaluating the Companys operating performance compared to that of other
companies in its industry because the calculation of Adjusted EBITDA generally eliminates the
effects of financing income taxes and certain non-cash and other items that may vary for
different companies for reasons unrelated to overall operating performance.
As a result, the Companys management used Adjusted EBITDA as a measure to evaluate performance
and for other discretionary purposes. However, Adjusted EBITDA is not a recognized measurement
under GAAP, should not be considered as an alternative to net income as a measure of operating
results or to cash flow as a measure of liquidity, and is not intended to be a presentation in
accordance with GAAP. In addition to the foregoing, management also uses or will use Adjusted
EBITDA to measure compliance with certain financial covenants under the Companys Senior Secured
Credit Facilities and 5.375% Notes that were outstanding at January 3, 2015. However, the
amounts shown in this presentation for Adjusted EBITDA differ from the amounts calculated under
similarly titled definitions in the Companys Senior Secured Credit Facilities and 5.375%
Notes, as those definitions permit further adjustments to reflect certain other non-recurring costs and non-cash
charges.
In addition, the Companys management used adjusted diluted earnings per share as a measure of
earnings due to the significant merger and acquisition activity of the Company. However,
adjusted earnings per share is not a recognized measurement under GAAP and should not be
considered as an alternative to diluted earnings per share presented in accordance with GAAP.
Adjusted diluted earnings per share is defined as adjusted net income attributable to Darling divided
by the weighted average shares of diluted common stock. Adjusted net income attributable to Darling is
defined as a reconciliation of net income attributable to Darling, net of tax (i) adjusted for
net of tax acquisition and integration costs related to merger and acquisitions, (ii) net of
tax amortization of acquisition related intangibles and (iii) net of tax certain non-recurring
items that are not part of normal operations. This measure is solely for the purpose of calculating
adjusted diluted earnings per share and is not intended to be a substitute of presentation in
accordance with GAAP. |
|
Creating
sustainable food, feed and fuel ingredients for a growing population Pro Forma Operating
Performance 2013
13
Exchange
Rates:
2013
USD/EURO
1.3279
USD/CA
0.9706 Feed Segment
Q1
Q2
Q3
Q4
Total
Revenue
672.0
689.6
662.2
631.9
2,655.7
EBITDA
121.2
118.8
101.3
97.1
438.4
Food Segment
Q1
Q2
Q3
Q4
Total
Revenue
309.7
303.7
303.4
301.2
1,218.0
EBITDA
42.4
38.3
47.3
5.4
133.3
Fuel Segment
Q1
Q2
Q3
Q4
Total
Revenue
73.7
78.4
80.1
74.5
306.8
EBITDA
12.9
11.5
16.1
13.0
53.6
Diamond Green Diesel
(50% Joint Venture)
Q1
Q2
Q3
Q4
Total
EBITDA (Darling's Share
-1.2
-2.0
16.4
3.3
16.5
US $ (millions)
* Excludes corporate expense
(1) Impacted by year end audit adjustments prior to VION acquisition.
(1)
See Cautionary Statement at end of this presentation.
|
|
Creating
sustainable food, feed and fuel ingredients for a growing population 14
Pro Forma Operating Performance
US $ (millions)
$4,068
$4,180
$3,956
$594
$653
$610
Exchange
Rates:
2012
2013
2014
USD/EURO 1.2845
1.3279 1.32704
USD/CA
1.0005 0.9706 0.90446
See Cautionary Statement at end of this presentation.
Net Sales
Adjusted EBITDA
2012
2014
2013
$(42)
$(32)
$(28)
Note: 2013 and 2014 include Adjusted EBITDA
from Diamond Green Diesel JV.
$2,661
$2,655
$2,421
$1,124
$1,218
$1,248
$283
$307
$287
-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2012
2013
2014
$461
$438
$367
$167
$133
$137
$53
$71
$132
$
$100
$200
$300
$400
$500
$600
$700
$800
Creating sustainable food, feed and fuel ingredients for a growing population
Food
Feed Fuel Corp. Unallocated |
|
Creating
sustainable food, feed and fuel ingredients for a growing population Feed Segment
Reduction Explained- 2013 vs. 2014
15
Feed Segment
Lower N.A. domestic fats
Lower USA export fat values
Lower Bakery Feeds earnings
FX translation impact
2013
2014
YG $762/mt $638/mt
16% decline
2013
2014
Corn $6.22/bu
$4.23/bu 32% decline
2013
2014
USD/EURO
1.3279 1.32704
USD/CA
0.9706 0.90446
2013
2014
East coast $876/mt $718/mt
18% decline
Lower fat prices drove majority of
earnings decline
Lag affect when adjusting raw
material costs
USA reduced export premiums
to Europe
UCO collection business which is
non-formula
Fallen stock collection business
Ambiguous renewable fuel
policies in USA and Europe
affected fat prices.
Bakery Feeds earnings reduced
significantly with declining corn
price
FX impact in Canada and
significantly weaker Euro in Q4
of 2014.
Note: 2013 Pro Forma
Rail and truck loading at Jacksonville, MS facility.
See Cautionary Statement at end of this presentation.
|
|
Creating sustainable food, feed and fuel ingredients for a growing
population Foreign Currency Impact
The U.S. dollar has strengthened against most of the functional currencies used by the
Companys non-domestic operations. Using actual results for fiscal year 2014 and
comparing the
yearly
average
rates
to
the
spot
rates
at
the
end
of
January
2015,
the
impact
of
the
strengthened dollar would result in an annual decrease in net sales and operating income of
approximately $290 million
and approximately $31 million, respectively if the same amount of
non-domestic operations were attained in fiscal 2015. The U.S. dollar continues to
strengthen at the timing of this filing. The impact is mainly affected by the drop in
the Euro in comparison to the U.S. dollar.
Exchange Rate:
Avg. 2014
Spot Jan. 2015
USD/Euro
1.32704
1.13355
USD/CA
.90446
.78974
Assumptions:
16 |
|
Creating
sustainable food, feed and fuel ingredients for a growing population Upcoming Conference
Appearances 17
o
27
th
Annual ROTH Conference
o
BMO
Farm
to
Market
Conference
o
Avondale Partners Conference
March 10, 2015
The
Ritz-Carlton
Dana
Point,
CA
Creating sustainable food, feed and fuel ingredients for a growing population
May 21, 2015
Grand
Hyatt
New
York
City
June 3, 2015
Millennium
Broadway
Hotel
New
York
City |
|
Creating
sustainable food, feed and fuel ingredients for a growing population 18
The unaudited pro forma financial information (Unaudited Pro Forma Financial
Information) presented in the Financial Section pages of this presentation was prepared by Darling management and is based upon (i)
Darling audited financial statements for the fiscal years ended December 29, 2012 and December
28, 2013, respectively, (ii) VION Ingredients audited financial statements for the year ended December 31, 2012 as
prepared under Dutch GAAP, but including a US GAAP reconciliation footnote, (iii) VION
Ingredients unaudited condensed consolidated and combined interim financial statements for the twelve months ended
December 31, 2012 and twelve months ended December 31, 2013, respectively as prepared under
Dutch GAAP, but including a US GAAP reconciliation footnote; (iv) the Rothsay audited statement of assets acquired
and liabilities assumed and the related statement of net revenues and direct costs and
operating expenses for the fiscal year ended December 29, 2012 and (v) Rothsay unaudited statement of assets acquired and
liabilities assumed and the related statement of net revenues and direct costs and operating
expenses for the fiscal year ended December 28, 2013.
Darling is presenting the Unaudited Pro Forma Financial Information for informational purposes
only. Darling believes that the Unaudited Pro Forma Financial Information was prepared in good faith and on a
reasonable basis based on the best information available at the time of its preparation. The
Unaudited Pro Forma Financial Information, however, is not fact. The Unaudited Pro Forma Financial Information was not
intended to be used as predictive of future performance. It was not prepared in
compliance with the requirements of GAAP, the published guidelines of the SEC regarding pro forma information, or the guidelines
established by the American Institute of Certified Public Accountants for preparation and
presentation of pro forma financial information. Darlings independent public auditor has not audited or reviewed the
Unaudited Pro Forma Financial Information. The inclusion of the Unaudited Pro Forma Financial
Information in this presentation should not be regarded as a representation that Darling or any of its officers, affiliates,
advisors, or representatives consider the Unaudited Pro Forma Financial Information to be a
reliable prediction of future events or results, or a representation that actual results would have been comparable had the
Transactions occurred on the dates indicated, and the information should not be relied upon as
such.
Darling acquired Rothsay on October 28, 2013 and VION Ingredients on January 7, 2014
(collectively, the Transactions). Neither Rothsay nor VION Ingredients had been operated as a stand-alone business prior to the
respective acquisitions, but rather as divisions of their respective parent entities.
Management does not believe that the Unaudited Pro Forma Financial Information is necessarily indicative of future performance of
Darling, and in fact, actual performance may differ significantly (either better or worse) from
the performance indicated in the Unaudited Pro Forma Financial Information due to (i) the challenges inherent in integrating
the businesses of Darling, Rothsay and VION Ingredients, (ii) changes to Darlings
operations and strategy that may have been implemented or may be implemented in the future as a result of the Transactions or
otherwise, and (iii) numerous other potential risks and uncertainties, including, but not
limited to, those set forth under Risk Factors in Darlings Form 10-K filings with the SEC. Investors are cautioned not to rely on
the Unaudited Pro Forma Financial Information as a measure of future performance. There can be
no assurance that the results indicated in Unaudited Pro Forma Financial Information would have been realized had
the Transactions taken place on the dates assumed in the Unaudited Pro Forma Financial
Information or that actual results for the combined entity will not be materially different. Pro forma information is inherently
reliable and should not be used as the basis for an investment decision. Darling does not
undertake to revise or update the Unaudited Pro Forma Financial Information, even if some or all of the assumptions utilized in
preparing the information proves to be wrong.
ASSUMPTIONS
The key assumptions that were used to prepare the Unaudited Pro Forma Financial Information
includes, but is not limited to the following: 1.
The Unaudited Pro Forma Financial Information is not intended to and in fact does not comply
with Regulation S-X Article 3;
2.
The Unaudited Pro Forma Financial Information assumes that the acquisitions of Darling
Ingredients International and Rothsay occurred on January 1, 2012, and have been presented herein on a combined
basis. Thus, the presentation effectively combines the historic financial information
(unless as otherwise noted below) of the respective businesses and does not eliminate any net sales and the profit related
thereto for any transactions between Darling Ingredients Inc. and Darling Ingredients
International (formerly known as VION Ingredients), or Darling Ingredients Inc. and Rothsay for periods prior to the
respective acquisition dates; 3.
For periods prior to January 7, 2014, the Unaudited Pro Forma Financial
Information for Darling Ingredients International is based on the companys underlying Dutch GAAP financial statements, which have
been converted to US GAAP taking into account all known and material Dutch US GAAP
adjustments;
4.
For periods prior to January 7, 2014, the Unaudited Pro Forma Financial Information for
Darling Ingredients International does not reflect the application of purchase accounting in accordance with ASC 805
and hence, the recognition of Darling Ingredients Internationals assets and liabilities
assumed at their respective fair values. Thus, there is no non-cash inventory step-up adjustment for any financial period
presented that excludes the twelve months ended January 3, 2015; 5.
For periods prior to October 28, 2013, the Unaudited Pro Forma Financial
Information for Rothsay is based on the Rothsay statement of assets acquired and liabilities assumed and the related statement of
net revenues and direct costs and operating expenses, which were prepared under US
GAAP; 6. For periods prior to October 28, 2013, the Unaudited Pro Forma
Financial Information for Rothsay does not reflect the application of purchase accounting in accordance with ASC 805 and hence, the
recognition of Rothsays assets and liabilities assumed at their respective fair
values. Thus, there is no non-cash inventory step-up adjustment for any financial period presented that excludes the three
months ended December 28, 2013; 7.
No procedures were performed by management to ensure that the Unaudited Pro
Forma Financial Information for Darling Ingredients International or Rothsay for the Fourth Quarter 2013 reflects an
appropriate cut-off with respect to sales transactions, expense accruals, payroll, or
other similar income statement items that could have an impact on the net sales and Pro Forma Adjusted EBITDA presented
herein;
8.
Prior to the acquisition by Darling Ingredients Inc. neither Darling Ingredients International
Inc. nor Rothsay prepared segment financial information in accordance with segments reflected in the Unaudited
Pro Forma Financial Information reflected herein; therefore, the allocation of SG&A costs
to the respective segments for periods prior to the respective acquisition were based upon the allocation
methodology utilized for Q4 2014; 9.
The foreign currency translation rate for net sales and Pro Forma Adjusted
EBITDA was based on the average rate for each of the respective periods presented.
Cautionary Statement Regarding Unaudited Pro Forma Financial Information
|
Darling Ingredients (NYSE:DAR)
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