- Net income for second quarter of $3.1 million; continued FX headwinds, no biofuel
tax credit
- EBITDA of $105.5 million vs.
$98.3 million in Q1
- All segments showed sequential EBITDA margin improvements
despite lower selling prices
- Operating Initiatives being executed:
- Reduced working capital by $33.8
million quarter over quarter
- USA Corporate headcount
10% lower than December 2014
- CAPEX outflows at 35% of annual plan
- Restaurant Services and Bakery Feeds showed
improvements
- Debt repayment of nearly $70
million in the quarter
IRVING, Texas, Aug. 13, 2015 /PRNewswire/ -- Darling Ingredients
Inc. (NYSE: DAR), a global leader in converting edible and inedible
bio-nutrient streams into a wide range of ingredients and specialty
products for customers in the pharmaceutical, food, pet food, feed,
technical, fuel, bioenergy, and fertilizer industries, today
announced financial results for the second quarter ended
July 4, 2015, and that its Board of
Directors approved the repurchase of up to an aggregate of
$100 million of Darling's common
stock, depending on market conditions.
"Our earnings improved sequentially with all segments showing
EBITDA margin improvements. This is the third quarter in a
row that we have been able to improve margins all while working to
offset lower and volatile selling prices. Our focus on
operational efficiencies and SG&A reductions are also beginning
to contribute. Working capital improvements, the
$25 million dividend from
Diamond Green Diesel (DGD) in
April 2015, along with slowing our
capital spending outflows allowed us to repay nearly $70 million in debt during the quarter," said
Randall Stuewe, Darling Ingredients
Inc. Chairman and Chief Executive Officer.
"The Feed Ingredients Segment achieved improved margins while
facing a continuation of declining fat and protein values.
Our European, USA and Canadian
rendering operations performed admirably and continue to make the
necessary adjustments to regain sustainable margins. Our
USA restaurant services and bakery
feeds business improved but we still have work to do. Raw material
volumes moderated over first quarter typical with seasonality,"
continued Mr. Stuewe.
"The Food Ingredients Segment saw a strong performance from the
gelatin business especially in China and improvements sequentially occurred
worldwide. Margin adjustments made in the edible fats business took
hold but the closure of the Russian border continues to pressure
the edible fat values with oversupply of raw material. Our
casings business was challenged with the border closure in
Asia."
"Our Fuel Ingredients Segment continues to deliver predictable
returns with the exception of our Canadian biodiesel asset.
Although the U.S. EPA released in June proposed biomass based
diesel volumes within our expectations, the industry and our
Canadian plant continue to operate in the red before the tax credit
is considered. Rendac, our disposal rendering business, and Ecoson,
our biophosphate operation producing green energy, delivered steady
performances quarter over quarter."
Mr. Stuewe added, "Our Diamond Green Diesel Joint Venture
continued its strong operational performance in the second quarter
of 2015 shipping over 44 million gallons of renewable
diesel. We remain optimistic that the U.S. Biofuels Tax
Extenders package will be reinstated and will retroactively add
approximately $25 million to income
in the second quarter."
"Globally, we remain focused on debt reduction, working capital
improvement and cost reductions to improve shareholder
value. We very much believe in our strategy and the long
term positioning of our global platform of creating sustainable
ingredients for a growing population," concluded Mr. Stuewe.
"Finally, our Board has authorized a share repurchase program
for up to $100 million depending on
market conditions," added Mr. Stuewe. "The repurchases may be made
from time to time on the open market at prevailing market prices or
in negotiated transactions off the market. Repurchases may occur
over the next 24 months, unless extended or shortened by the Board
of Directors."
For the second quarter of 2015, the Company reported net sales
of $859.3 million, as compared with
net sales of $1,031.3 million for the
second quarter of 2014. The $172.0
million decrease in net sales is primarily attributable to
lower finished product prices, primarily in the global fat markets,
and by $113.9 million for the foreign
exchange rate impact of a weak euro and Canadian
dollar. Overall, global raw material volumes were
stronger year over year.
Net income attributable to Darling for the three months ended
July 4, 2015, was $3.1 million, or $0.02 per diluted share, compared to a net income
of $32.8 million, or $0.20 per diluted share, in the three months
ended June 28, 2014. The results for
the three months ended July 4, 2015
and three months ended June 28, 2014,
respectively, include the following after-tax costs:
Fiscal 2015
- $0.7 million ($0.00 per diluted share) associated with the
integration of VION Ingredients and Rothsay and the implementation
of internal controls over financial reporting per the
Sarbanes-Oxley Act of 2002 for VION Ingredients; and
- $5.8 million ($0.04 per diluted share) related to the write-off
of deferred loan costs associated with the retirement of the
Company's European portion of its term loan B note on June 3, 2015.
Fiscal 2014
- $3.5 million ($0.02 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; and
- $2.9 million ($0.02 per diluted share) associated with the
acquisition and integration of Rothsay and VION Ingredients during
the period.
Net income and diluted earnings per common share would have been
$9.6 million and $0.06 per diluted share, respectively, for the
three months ended July 4, 2015,
without the integration costs and the write-off of deferred loan
costs associated with the retirement of the Euro Term Loan B, as
compared to $39.2 million and
$0.24 per diluted share,
respectively, for the three months ended June 28, 2014, without the noncash inventory
step-up associated with the VION Acquisition and the acquisition
and integration related costs. When comparing the three months
ended July 4, 2015 to the three
months ended June 28, 2014, this
would have resulted in a $29.6
million decrease in net income. This decrease is
attributable to lower finished product prices and the impact of
foreign exchange rates as a function of the strengthening U.S.
dollar as compared mainly to the euro and Canadian dollar, which
were partially offset by an increase in raw material volumes.
Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA
and (Non-GAAP) Pro forma Adjusted EBITDA
Darling Ingredients Inc. reports Adjusted EBITDA results, which
is a non-GAAP financial measure, as a complement to results
provided in accordance with generally accepted accounting
principles (GAAP). The Company believes that Adjusted EBITDA
provides additional useful information to investors. As the Company
uses the term, Adjusted EBITDA, calculated below:
|
|
Three Months Ended -
Year over Year
|
Adjusted
EBITDA
|
|
July 4,
|
|
June 28,
|
(U.S. dollars in
thousands)
|
2015
|
|
2014
|
|
|
|
|
|
Net income
attributable to Darling
|
$
3,080
|
|
$ 32,757
|
Depreciation and
amortization
|
66,245
|
|
67,498
|
Interest
expense
|
|
34,285
|
|
26,571
|
Income tax
expense
|
|
4,665
|
|
15,503
|
Foreign currency
loss/(gain)
|
|
(1,622)
|
|
(11)
|
Other expense,
net
|
|
1,199
|
|
887
|
Equity in net
(income) of unconsolidated subsidiary
|
(4,172)
|
|
(2,040)
|
Net income
attributable to noncontrolling interests
|
1,857
|
|
1,818
|
|
Adjusted
EBITDA
|
$ 105,537
|
|
$142,983
|
|
|
|
|
|
Non-cash inventory
step-up associated with VION Acquisition
|
−
|
|
4,972
|
Acquisition and
integration-related expenses
|
1,208
|
|
4,165
|
|
Pro forma
Adjusted EBITDA (Non-GAAP)
|
$ 106,745
|
|
$152,120
|
|
|
|
|
|
DGD Joint Venture
Adjusted EBITDA (Darling's share) (1)
|
$
7,909
|
|
$ 5,903
|
|
|
|
|
|
|
|
(1)
|
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.
|
For the three months ended July 4,
2015, the Company generated Adjusted EBITDA of $105.5 million, as compared to $143.0 million in the same period in fiscal 2014.
The decrease was primarily attributable to lower finished product
prices and the impact of foreign exchange rates as a function of
the strengthening U.S. dollar as compared mainly to the euro and
Canadian dollar, which were partially offset by an increase in raw
material volumes. On a Pro forma Adjusted EBITDA basis, the Company
would have generated $106.7 million
in the three months ended July 4,
2015, as compared to a Pro forma Adjusted EBITDA of
$152.1 million in the same period in
2014. The decrease in the Pro forma Adjusted EBITDA is attributable
to lower finished product prices, the impact of foreign exchange
rates as a function of the strengthening U.S. dollar as compared
mainly to the euro and Canadian dollar, lower acquisition and
integration-related expenses and no inventory step-up associated
with the VION Acquisition which were partially offset by an
increase in raw material volumes.
As a result of the strengthened U.S. dollar, the above Pro forma
Adjusted EBITDA results for the three months ended July 4, 2015 would have been $120.9 million when taking into consideration the
change in average foreign exchange (FX) fluctuations of
$14.2 million as compared to the Pro
forma Adjusted EBITDA of $152.1
million for the same period in fiscal 2014, a reduction of
$31.2 million.
Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA
and (Non-GAAP) Pro forma Adjusted EBITDA
|
|
Three Months Ended -
Sequential
|
Adjusted
EBITDA
|
|
July 4,
|
|
April 4,
|
(U.S. dollars in
thousands)
|
2015
|
|
2015
|
|
|
|
|
|
Net income
attributable to Darling
|
$ 3,080
|
|
$ 109
|
Depreciation and
amortization
|
66,245
|
|
66,398
|
Interest
expense
|
|
34,285
|
|
23,109
|
Income tax
expense
|
|
4,665
|
|
2,115
|
Foreign currency
loss/(gain)
|
|
(1,622)
|
|
2,460
|
Other expense,
net
|
|
1,199
|
|
509
|
Equity in net
(income)/loss of unconsolidated subsidiary
|
(4,172)
|
|
1,808
|
Net income
attributable to noncontrolling interests
|
1,857
|
|
1,715
|
|
Adjusted
EBITDA
|
$105,537
|
|
$ 98,223
|
|
|
|
|
|
Acquisition and
integration-related expenses
|
1,208
|
|
5,319
|
|
Pro forma
Adjusted EBITDA (Non-GAAP)
|
$106,745
|
|
$103,542
|
|
|
|
|
|
DGD Joint Venture
Adjusted EBITDA (Darling's share) (1)
|
$ 7,909
|
|
$ 2,346
|
|
|
|
|
|
|
|
(1)
|
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.
|
On a sequential basis, for the three months ended July 4, 2015, the Company generated Adjusted
EBITDA of $105.5 million, as compared
to $98.2 million for the three months
ended April 4, 2015. On a Pro Forma
Adjusted EBITDA basis, the Company would have generated
$106.7 million in the three months
ended July 4, 2015, as compared to a
Pro forma Adjusted EBITDA of $103.5
million in the three months ended April 4, 2015, an increase of approximately
$3.2 million. The increase in the Pro
forma Adjusted EBITDA is attributable to lower raw material prices,
lower acquisition and integration-related expense and cost
reductions.
As a result of the strengthened U.S. dollar, the above Pro forma
Adjusted EBITDA results for the three months ended July 4, 2015 would have been $107.6 million when taking into consideration the
change in average foreign currency fluctuations of $0.9 million, as compared to the Pro forma
Adjusted EBITDA of $103.5 million for
the three months ended April 4, 2015,
an increase of $4.1 million.
Second Quarter 2015 Segment Performance
Feed
Ingredients
|
Three Months
Ended
|
($
thousands)
|
July 4,
2015
|
June 28,
2014
|
Net Sales
|
$ 529,429
|
$
622,110
|
Segment operating
income
|
|
$ 35,389
|
$
74,706
|
|
|
|
|
EBITDA
|
|
$ 75,874
|
$
114,572
|
- Feed Ingredients operating income for the three months ended
July 4, 2015 was $35.4 million, a decrease of $39.3 million as compared to the three months
ended June 28, 2014. Adjusting the
three months ended June 28, 2014 for
the non-cash inventory step-up adjustment of approximately
$1.5 million and comparing to the
three months ended July 4, 2015, the
Feed Ingredients operating income was lower by $40.8 million. In addition, Feed Ingredients
operating cash flow was negatively impacted by foreign exchange
translation by approximately $4.7
million when using prior year average exchange rates.
- Feed Ingredients reported lower earnings and net sales year
over year resulting primarily in the
United States operations, related to lower finished product
prices for protein and fat, particularly in the Company's
non-formula business, as well as bakery. The $92.7 million decrease in net sales includes
sales of fats $(26.0) million, used
cooking oil $(15.2) million, proteins
$(42.0) million, bakery $(5.1) million and other sales of $(4.4) million as compared to three months ended
June 28, 2014.
Food
Ingredients
|
Three Months
Ended
|
($
thousands)
|
July 4,
2015
|
June 28,
2014
|
Net Sales
|
$ 283,354
|
$
331,443
|
Segment operating
income
|
|
$ 15,512
|
$
11,311
|
|
|
|
|
EBITDA
|
|
$ 32,297
|
$
30,939
|
- Food Ingredients operating income was $15.5 million for the three months ended
July 4, 2015, an increase of
$4.2 million as compared to the three
months ended June 28, 2014. Adjusting
the three months ended June 28, 2014
for the non-cash inventory step-up adjustment of approximately
$3.4 million and comparing this to
the three months ended July 4, 2015,
the Food Ingredients operating income is higher by $0.8 million. In addition, Food Ingredients
operating cash flow was negatively impacted by foreign exchange
translation by approximately $8.2
million when using prior year average exchange rates.
- The gelatin business performance improved as compared to the
prior year as a result of increased demand in China and lower raw material prices in
Europe. The European edible fats
operation improved over the prior year due to lower raw material
prices. The Company's casings business was down comparable to the
same period in the prior year, due primarily to decreased exports
into China for specialty
products.
Fuel
Ingredients
|
Three Months
Ended
|
($
thousands)
|
July 4,
2015
|
June 28,
2014
|
Net Sales
|
$ 46,532
|
$
77,730
|
Segment operating
income
|
|
$ 2,038
|
$
5,243
|
|
|
|
|
EBITDA
|
$ 8,637
|
$
11,061
|
- Exclusive of the DGD Joint Venture, Fuel Ingredients operating
income for the three months ended July 4,
2015 was $2.0 million, a
decrease of $3.2 million as compared
to the three months ended June 28,
2014. Adjusting the three months ended June 28, 2014 for the non-cash inventory step-up
adjustment of $0.1 million and
comparing this to the three months ended July 4, 2015, the operating income is lower by
$3.3 million. The Fuel Ingredients
segment was negatively impacted by foreign exchange translation by
$2.3 million when using prior year
average exchange rates, lower production volumes and lower margins
at the Canadian biodiesel plant.
- Including the DGD Joint Venture earnings, the Fuel Ingredients
segment income for the three months ended July 4, 2015 was $5.8
million, as compared to $6.7
million in the same period of 2014. The reduction of
$0.9 million is primarily related to
a decrease in the income of the DGD Joint Venture due to the
uncertain regulatory environment with respect to the U.S. mandated
Renewable Volume Obligation ("RVO") requirements within the
Renewable Fuel Standard Program ("RFS2") for 2015 and the decrease
in petroleum prices.
Results of Operations – Six Months Ended July 4, 2015 Compared to Six Months Ended
June 28, 2014
Net Income attributable to Darling for the six months ended
July 4, 2015, was $3.2 million, or $0.02 per diluted share, as compared to a net
loss of $20.0 million, or
$(0.12) per diluted share, in the six
months ended June 28, 2014. The
results for the first six months of 2015 and 2014, respectively,
include the following after-tax costs:
Fiscal 2015
- $3.5 million ($0.02 per diluted share) associated with the
integration of VION Ingredients and Rothsay, staff reduction in
Angouleme, France and the
implementation of internal controls over financial reporting per
the Sarbanes-Oxley Act of 2002 during the first three months of
fiscal 2015 for VION Ingredients; and
- $5.8 million ($0.04 per diluted share) related to the write-off
of deferred loan costs associated with the retirement of the
Company's European portion of its term loan B note on June 3, 2015.
Fiscal 2014
- $32.7 million ($0.20 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;
- $20.8 million ($0.13 per diluted share) related to the
redemption premium and write-off of deferred loan costs associated
with the retirement of the Company's 8.5% Senior Notes on
February 7, 2014;
- $15.9 million ($0.10 per diluted share) associated with the
acquisition and integration of Rothsay and VION Ingredients during
the period; and
- $8.3 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.
Net income and diluted earnings per common share would have been
$12.5 million and $0.08 per diluted share, respectively, for the
six months ended July 4, 2015, as
compared to $57.7 million and
$0.35 per share, respectively, for
the six months ended June 28, 2014
without the above listed after-tax costs. When comparing the first
six months of fiscal 2015 to the first six months of fiscal 2014
this would have resulted in a $45.2
million decrease in net income. The decrease is attributable
to lower finished product prices, lower equity income in
unconsolidated subsidiaries and the impact of foreign exchange
rates as a function of the strengthening U.S. dollar as compared
mainly to the euro and Canadian dollar, which were partially offset
by an increase in raw material volumes.
Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA
and (Non-GAAP) Pro forma Adjusted EBITDA
|
|
Six Months
Ended
|
Adjusted
EBITDA
|
|
July 4,
|
|
June 28,
|
(U.S. dollars in
thousands)
|
2015
|
|
2014
|
|
|
|
|
|
Net income
attributable to Darling
|
$
3,189
|
|
$ (20,046)
|
Depreciation and
amortization
|
132,643
|
|
133,167
|
Interest
expense
|
|
57,394
|
|
85,428
|
Income tax
expense/(benefit)
|
|
6,780
|
|
(2,787)
|
Foreign currency
loss
|
|
838
|
|
13,803
|
Other expense,
net
|
|
1,708
|
|
2,025
|
Equity in net
(income) of unconsolidated subsidiary
|
(2,364)
|
|
(7,117)
|
Net income
attributable to noncontrolling interests
|
3,572
|
|
3,615
|
|
Adjusted
EBITDA
|
$
203,760
|
|
$ 208,088
|
|
|
|
|
|
Non-cash inventory
step-up associated with VION Acquisition
|
−
|
|
49,803
|
Acquisition and
integration-related expenses
|
6,527
|
|
20,113
|
Darling Ingredients
International - 13th week (1)
|
−
|
|
4,100
|
|
Pro forma
Adjusted EBITDA (Non-GAAP)
|
$
210,287
|
|
$ 282,104
|
|
|
|
|
|
DGD Joint Venture
Adjusted EBITDA (Darling's share) (2)
|
$
10,255
|
|
$ 14,975
|
|
|
|
|
|
|
|
(1)
|
January 7, 2014
closed on VION Ingredients, thus the 13th week would be EBITDA
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.
|
For the first six months of fiscal 2015, the Company generated
Adjusted EBITDA of $203.8 million, as
compared to $208.1 million in the
same period of 2014. On a Pro forma Adjusted EBITDA basis, the
Company would have generated $210.3
million in the first six months of fiscal 2015, as compared
to a Pro forma Adjusted EBITDA of $282.1
million in the same period in 2014. The decrease in the Pro
forma Adjusted EBITDA is attributable to lower finished product
prices and the impact of foreign exchange rates as a function of
the strengthening U.S. dollar as compared mainly to the euro and
Canadian dollar, which were partially offset by an increase in raw
material volumes.
Second Quarter 2015 Segment Performance – Six Months
Ended
Feed
Ingredients
|
Six Months
Ended
|
($
thousands)
|
July 4,
2015
|
June 28,
2014
|
Net Sales
|
$ 1,076,927
|
$ 1,208,217
|
Segment operating
income
|
$ 70,804
|
$
112,237
|
EBITDA
|
$ 151,343
|
$
190,662
|
- Adjusting the first six months of 2014 for the non-cash
inventory step-up of approximately $14.2
million as compared to the first six months of 2015, the
segment operating income would be lower by $55.6 million.
- Cash flow was negatively impacted by foreign exchange
translation by approximately $9.3
million when using prior year average exchange rates. The
$131.3 million decrease in net sales
includes sales in fats of $(36.3)
million, used cooking oil $(23.9)
million, proteins $(55.2)
million, bakery $(5.5) million
and other $(10.4) million when
compared to six months ended June 28,
2014.
Food
Ingredients
|
Six Months
Ended
|
($
thousands)
|
July 4,
2015
|
June 28,
2014
|
Net Sales
|
$ 553,511
|
$
624,905
|
Segment operating
income
|
|
$ 26,360
|
$
(831)
|
EBITDA
|
$ 60,342
|
$
36,238
|
|
|
|
|
- Adjusting the first six months of 2014 for the non-cash
inventory step-up of approximately $35.3
million as compared to the first six months of 2015, the
segment operating income would be lower by $8.1 million.
- Cash flow was negatively impacted by foreign exchange
translation by approximately $15.1
million when using prior year average exchange rates.
Fuel
Ingredients
|
Six Months
Ended
|
($
thousands)
|
July 4,
2015
|
June 28,
2014
|
Net Sales
|
$ 103,571
|
$
144,453
|
Segment operating
income
|
|
$ 4,531
|
$
7,587
|
EBITDA
|
$ 17,761
|
$
20,783
|
|
|
|
|
- Exclusive of the DGD Joint Venture and adjusting the first six
months of 2014 for the non-cash inventory step-up of approximately
$0.3 million as compared to the first
six months of 2015, the segment operating income would be lower by
$3.4 million.
- Cash flow was negatively impacted by foreign exchange
translation by approximately $4.8
million when using prior year average exchange rates and
including lower production and margins at the Canadian biodiesel
plant.
About Darling
Darling Ingredients Inc. is the world's largest publicly-traded
developer and producer of sustainable natural ingredients from
edible and inedible bio-nutrients, creating a wide range of
ingredients and specialty products 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 broadly used 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 Company's website at http://ir.darlingii.com.
Darling Ingredients Inc. will host a conference call to discuss
the Company's second quarter 2015 financial results at 8:30
am Eastern Time (7:30 am Central
Time) on Friday, August 14,
2015. To listen to the conference call, participants calling
from within North America should
dial 866-777-2509; international participants should dial
412-317-5413. Please refer to access code
10069349. Please call approximately ten minutes before
the start of the call to ensure that you are connected.
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 one hour after its completion, a replay of the call can
be accessed through August 20, 2015,
by dialing 877-344-7529 (U.S. callers), 855-669-9658 (Canada) and 412-317-0088 (international
callers). The access code for the replay is
10069349. The conference call will also be archived on
the Company's 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 Company's 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 Company's 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 Company's management uses 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 Company's Senior Secured Credit
Facilities and 5.375% Notes and 4.75% Notes that were outstanding
at July 4, 2015. However, the amounts
shown in this presentation for Adjusted EBITDA differ from the
amounts calculated under similarly titled definitions in the
Company's Senior Secured Credit Facilities and 5.375% Notes and
4.75% Notes, as those definitions permit further adjustments to
reflect certain other non-recurring costs and non-cash charges.
In addition, the Company's management uses 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.
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 Ingredient's 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 make their cash flow available 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 Company's 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 H5N1 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
Company's 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 Company's 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 Company's
ability to grow its business, which faces competition from
companies that may have substantially greater resources than the
Company. The Company's announced share repurchase program may be
suspended or discontinued at any time and purchases of shares under
the program are subject to market conditions and other factors,
which are likely to change from time to time. 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 Company's 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
|
Email:
mgaither@darlingii.com
|
251 O'Connor Ridge
Blvd., Suite 300
|
Phone:
+1-972-717-0300
|
Irving, Texas
75038
|
|
Darling
Ingredients Inc. and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
July 4, 2015 and
January 3, 2015
|
(Dollars in
thousands, except share data)
|
|
|
|
July 4,
|
|
January 3,
|
|
|
2015
|
|
2015
|
|
(unaudited)
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
$ 126,020
|
|
$ 108,784
|
|
Restricted
cash
|
340
|
|
343
|
|
Accounts receivable,
net
|
368,434
|
|
409,779
|
|
Inventories
|
396,423
|
|
401,613
|
|
Prepaid
expenses
|
53,218
|
|
44,629
|
|
Income taxes
refundable
|
24,855
|
|
22,140
|
|
Other current
assets
|
24,102
|
|
21,324
|
|
Deferred income
taxes
|
43,114
|
|
45,001
|
|
Total current assets
|
1,036,506
|
|
1,053,613
|
Property, plant and
equipment, less accumulated depreciation, net
|
1,515,573
|
|
1,574,116
|
Intangible assets,
less accumulated amortization, net
|
852,490
|
|
932,413
|
|
|
|
|
|
Other
assets:
|
|
|
|
|
Goodwill
|
1,261,610
|
|
1,320,419
|
|
Investment in
unconsolidated subsidiaries
|
177,036
|
|
202,712
|
|
Other
assets
|
79,833
|
|
71,009
|
|
Deferred income
taxes
|
15,752
|
|
16,431
|
|
Total assets
|
$ 4,938,800
|
|
$ 5,170,713
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Current portion of
long-term debt
|
$ 50,884
|
|
$ 54,401
|
|
Accounts payable,
principally trade
|
164,424
|
|
168,518
|
|
Income taxes
payable
|
6,015
|
|
4,363
|
|
Accrued
expenses
|
242,358
|
|
256,119
|
|
Deferred income
taxes
|
1,338
|
|
642
|
|
Total current liabilities
|
465,019
|
|
484,043
|
|
|
|
|
|
Long-term debt, net
of current portion
|
1,994,417
|
|
2,098,039
|
Other non-current
liabilities
|
110,918
|
|
114,700
|
Deferred income
taxes
|
399,335
|
|
422,797
|
|
Total liabilities
|
2,969,689
|
|
3,119,579
|
|
|
|
|
|
Commitments and
contingencies
|
|
|
|
Total Darling's
stockholders' equity
|
1,866,514
|
|
1,952,990
|
|
Noncontrolling
interests
|
102,597
|
|
98,144
|
|
Total stockholders' equity
|
$1,969,111
|
|
$2,051,134
|
|
|
$4,938,800
|
|
$5,170,713
|
Darling
Ingredients Inc. and Subsidiaries
|
Consolidated
Operating Results
|
For the Periods
Ended July 4, 2015 and June 28, 2014
|
(Dollars in
thousands, except per share data)
|
(unaudited)
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
$ Change
|
|
|
July 4,
|
|
June 28,
|
|
Favorable
|
|
July 4,
|
|
June 28,
|
|
Favorable
|
|
2015
|
|
2014
|
|
(Unfavorable)
|
|
2015
|
|
2014
|
|
(Unfavorable)
|
Net sales
|
$859,315
|
|
$1,031,283
|
|
$ (171,968)
|
|
$1,734,009
|
|
$1,977,575
|
|
$ (243,566)
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and
operating expenses
|
$668,276
|
|
$ 789,505
|
|
121,229
|
|
$1,352,797
|
|
$1,564,711
|
|
211,914
|
|
Selling, general and
administrative expenses
|
84,294
|
|
94,630
|
|
10,336
|
|
170,925
|
|
184,663
|
|
13,738
|
|
Depreciation and
amortization
|
66,245
|
|
67,498
|
|
1,253
|
|
132,643
|
|
133,167
|
|
524
|
|
Acquisition and
Integration costs
|
1,208
|
|
4,165
|
|
2,957
|
|
6,527
|
|
20,113
|
|
13,586
|
Total costs and
expenses
|
820,023
|
|
955,798
|
|
135,775
|
|
1,662,892
|
|
1,902,654
|
|
239,762
|
Operating
income
|
39,292
|
|
75,485
|
|
(36,193)
|
|
71,117
|
|
74,921
|
|
(3,804)
|
Other
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(34,285)
|
|
(26,571)
|
|
(7,714)
|
|
(57,394)
|
|
(85,428)
|
|
28,034
|
|
Foreign currency
gain/(loss)
|
1,622
|
|
11
|
|
1,611
|
|
(838)
|
|
(13,803)
|
|
12,965
|
|
Other
income/(expense), net
|
(1,199)
|
|
(887)
|
|
(312)
|
|
(1,708)
|
|
(2,025)
|
|
317
|
Total other
expense
|
(33,862)
|
|
(27,447)
|
|
(6,415)
|
|
(59,940)
|
|
(101,256)
|
|
41,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net
income/(loss) of unconsolidated subsidiaries
|
4,172
|
|
2,040
|
|
2,132
|
|
2,364
|
|
7,117
|
|
(4,753)
|
Income/(loss) before
income taxes
|
9,602
|
|
50,078
|
|
(40,476)
|
|
13,541
|
|
(19,218)
|
|
32,759
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes
expense/(benefit)
|
4,665
|
|
15,503
|
|
10,838
|
|
6,780
|
|
(2,787)
|
|
(9,567)
|
Net
income/(loss)
|
$ 4,937
|
|
$ 34,575
|
|
$ (29,638)
|
|
$ 6,761
|
|
$ (16,431)
|
|
$ 23,192
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income)/loss
attributable to noncontrolling interests
|
$ (1,857)
|
|
$ (1,818)
|
|
$
(39)
|
|
$ (3,572)
|
|
$ (3,615)
|
|
$
43
|
Net income/(loss)
attributable to Darling
|
$ 3,080
|
|
$ 32,757
|
|
$ (29,677)
|
|
$ 3,189
|
|
$ (20,046)
|
|
$ 23,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income/(loss)
per share:
|
$ 0.02
|
|
$ 0.20
|
|
$
(0.18)
|
|
$ 0.02
|
|
$ (0.12)
|
|
$
0.14
|
Diluted income/(loss)
per share:
|
$ 0.02
|
|
$ 0.20
|
|
$
(0.18)
|
|
$ 0.02
|
|
$ (0.12)
|
|
$
0.14
|
Darling
Ingredients Inc. and Subsidiaries
|
Consolidated
Statement of Cash Flows
|
Six Months Ended
July 4, 2015 and June 28, 2014
|
(Dollars in
thousands)
|
(unaudited)
|
|
|
|
|
|
Six Months
Ended
|
|
|
|
|
July 4,
|
|
June 28,
|
Cash flows from
operating activities:
|
2015
|
|
2014
|
|
Net
income/(loss)
|
|
$ 6,761
|
|
$
(16,431)
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
132,643
|
|
133,167
|
|
|
Loss/(gain) on
disposal of property, plant, equipment and other assets
|
233
|
|
(839)
|
|
|
Gain on insurance
proceeds from insurance settlements
|
(341)
|
|
−
|
|
|
Deferred
taxes
|
(3,225)
|
|
(12,882)
|
|
|
Increase/(decrease)
in long-term pension liability
|
350
|
|
(6,519)
|
|
|
Stock-based
compensation expense
|
4,642
|
|
14,583
|
|
|
Write-off deferred
loan costs
|
10,633
|
|
4,330
|
|
|
Deferred loan cost
amortization
|
4,868
|
|
4,911
|
|
|
Equity in net
(income)/loss of unconsolidated subsidiaries
|
(2,364)
|
|
(7,117)
|
|
|
Distributions of
earnings from unconsolidated subsidiaries
|
26,155
|
|
−
|
|
|
Changes in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
Accounts
receivable
|
22,582
|
|
(36,920)
|
|
|
Income taxes
refundable/payable
|
(1,368)
|
|
(3,181)
|
|
|
Inventories
and prepaid expenses
|
(21,451)
|
|
(2,806)
|
|
|
Accounts
payable and accrued expenses
|
(1,505)
|
|
(25,218)
|
|
|
Other
|
|
8,937
|
|
(4,054)
|
|
|
|
Net cash provided by
operating activities
|
187,550
|
|
41,024
|
Cash flows from
investing activities:
|
|
|
|
|
Capital
expenditures
|
(98,722)
|
|
(103,531)
|
|
Acquisitions, net of
cash acquired
|
−
|
|
(2,075,651)
|
|
Gross proceeds from
disposal of property, plant and equipment and other
assets
|
1,484
|
|
2,308
|
|
Proceeds from
insurance settlement
|
341
|
|
−
|
|
Payments related to
routes and other intangibles
|
(2,242)
|
|
(7,312)
|
|
|
|
Net cash used by
investing activities
|
(99,139)
|
|
(2,184,186)
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
long-term debt
|
579,974
|
|
1,821,196
|
|
Payments on long-term
debt
|
(583,736)
|
|
(287,066)
|
|
Borrowings from
revolving credit facility
|
41,244
|
|
170,143
|
|
Payments on revolving
credit facility
|
(83,506)
|
|
(257,254)
|
|
Net cash overdraft
financing
|
(880)
|
|
9,529
|
|
Deferred loan
costs
|
(11,629)
|
|
(44,865)
|
|
Issuance of commons
stock
|
171
|
|
417
|
|
Minimum withholding
taxes paid on stock awards
|
(4,775)
|
|
(5,495)
|
|
Excess tax benefits
from stock-based compensation
|
(12)
|
|
1,329
|
|
Distributions to
noncontrolling interests
|
(1,866)
|
|
−
|
|
|
|
Net cash provided by
financing activities
|
(65,015)
|
|
1,407,934
|
Effect of exchange
rate changes on cash
|
(6,160)
|
|
8,156
|
Net
increase/(decrease) in cash and cash equivalents
|
17,236
|
|
(727,072)
|
Cash and cash
equivalents at beginning of period
|
108,784
|
|
870,857
|
Cash and cash
equivalents at end of period
|
$ 126,020
|
|
$
143,785
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Accrued capital
expenditures
|
$ 274
|
|
$
(2,300)
|
|
Cash paid during the
period for:
|
|
|
|
|
|
Interest, net of
capitalized interest
|
$ 37,524
|
|
$
47,851
|
|
|
Income taxes, net of
refunds
|
$ 11,436
|
|
$
11,301
|
|
Non-cash financing
activities
|
|
|
|
|
|
Debt issued for
service contract assets
|
$ 2,521
|
|
$
-
|
Darling
Ingredients Inc.
|
Adjusted
(Non-GAAP) Diluted Earnings Per Share
|
Three Months Ended
July 4, 2015 and June 28, 2014
|
|
|
Three Months
Ended
|
|
July 4,
|
|
June 28,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
Weighted average
shares of common stock outstanding (millions)
|
165,298
|
|
165,097
|
|
|
|
|
|
Reported Earnings Per
Share (fully diluted)
|
$ 0.02
|
|
$ 0.20
|
|
Non-cash inventory
step-up associated with the VION Acquisition
|
-
|
|
0.02
|
|
Acquisition and
integration costs
|
-
|
|
0.02
|
|
Amortization of
intangibles
|
0.07
|
|
0.09
|
|
Write-off deferred
loan costs euro term loan B
|
0.04
|
|
-
|
Adjusted diluted
earnings per share attributable to Darling (Non-GAAP)
(1)
|
$ 0.13
|
|
$ 0.33
|
|
(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 discrete
items in fiscal 2015 and fiscal 2014. The effective tax rate used
for calculating Non-GAAP Adjusted EPS in the above table for the
three months ended July 4, 2015 and June 28, 2014 was 45.8% and
28.7%, respectively.
|
Darling
Ingredients Inc.
|
Adjusted
(Non-GAAP) Diluted Earnings Per Share
|
Six Months Ended
July 4, 2015 and June 28, 2014
|
|
|
Six Months
Ended
|
|
July 4,
|
|
June 28,
|
|
|
2015
|
|
2014
|
|
|
|
|
|
Weighted average
shares of common stock outstanding (millions)
|
165,244
|
|
164,469
|
|
|
|
|
|
Reported Earnings Per
Share (fully diluted)
|
$ 0.02
|
|
$ (0.12)
|
|
Non-cash inventory
step-up associated with the VION Acquisition
|
-
|
|
0.20
|
|
Acquisition and
integration costs
|
0.02
|
|
0.10
|
|
Amortization of
intangibles
|
0.13
|
|
0.17
|
|
Redemption premium on
8.5% Senior Notes and write off deferred loan costs
|
-
|
|
0.13
|
|
Write-off deferred
loan costs euro term loan B
|
0.04
|
|
-
|
|
Foreign currency
hedge of VION purchase price
|
-
|
|
0.05
|
Adjusted diluted
earnings per share attributable to Darling (Non-GAAP)
(1)
|
$ 0.21
|
|
$ 0.53
|
|
(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 discrete
items in fiscal 2015 and fiscal 2014. The effective tax rate used
for calculating Non-GAAP Adjusted EPS in the above table for the
six months ended July 4, 2015 and June 28, 2014 was 45.8% and
34.3%, respectively.
|