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) November 12, 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 |
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of Incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
251 O’CONNOR RIDGE BLVD., SUITE 300, IRVING, TEXAS 75038
(Address of Principal Executive Offices) (Zip Code)
Registrant’s 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 November 12, 2015, Darling
Ingredients Inc. (the “Company”) issued a press release announcing financial results for the quarter ended October 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 Friday, November 13, 2015 to discuss these financial results. The Company will
have a slide presentation available to augment management’s formal presentation, which will be accessible via the investor relations section of the Company’s 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 November 12, 2015 (furnished pursuant to Item 2.02). |
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| 99.2 |
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Slide Presentation for November 13, 2015 Earnings Call (furnished pursuant to Item 2.02). |
2
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: November 12, 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 |
3
EXHIBIT LIST
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| 99.1 |
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Press Release dated November 12, 2015 (furnished pursuant to Item 2.02). |
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| 99.2 |
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Slide Presentation for November 13, 2015 Earnings Call (furnished pursuant to Item 2.02). |
4
Exhibit 99.1
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News Release |
DARLING INGREDIENTS INC. REPORTS THIRD QUARTER 2015 FINANCIAL RESULTS:
SEQUENTIAL ADJUSTED EBITDA GROWTH, CONTINUED DEBT REDUCTION
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Revenue of $853.8 million |
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Adjusted EBITDA of $106.1 million, improved sequentially |
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Net loss of $(9.1) million for third quarter was a result of increased tax expense due to a delay in the passage of anticipated tax legislation |
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Income before taxes of $0.5 million for third quarter |
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EBITDA for 3Q15 over 3Q14 comparable when adjusted for Foreign Exchange (FX) rates |
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Debt reduction continuing with total debt reduced by $75.8 million year to date |
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Operating Initiatives taking hold: |
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Segment margins stable to improving |
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Working capital improving |
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Operating cost and efficiency improvement |
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De-leveraging in line with plan |
November 12 , 2015 – IRVING, TEXAS
– 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 third quarter ended October 3, 2015.
For the third quarter of
2015, the Company reported net sales of $853.8 million, as compared with net sales of $978.7 million for the third quarter of 2014. The $124.9 million decrease in net sales is attributable to lower finished product prices, primarily in the global
competing ingredients prices and the foreign exchange rate impact of a weaker euro and Canadian dollar. Overall, global raw material volumes were stronger year over year.
Net loss attributable to Darling for the three months ended October 3, 2015, was $(9.1) million, or $(0.06) per diluted share, compared to a net income
of $14.3 million, or $0.09 per diluted share, in the three months ended September 27, 2014. This decrease is attributable to the impact of foreign exchange rates as a function of the strengthening U.S. dollar as compared mainly to the euro and
Canadian dollar and the impact of tax expense, which includes discrete items that do not have a direct relationship with pre-tax earnings and a deferred tax asset write-down in a foreign jurisdiction, which were partially offset by improvements in
operations. If extenders legislation is passed this year which is the same or similar to last year’s package including the Biofuel Tax Credit and the Look-Through Rule, we expect the effective tax rate for the year to be about the same as last
year, which was 16%. The results for the three months ended October 3, 2015 and three months ended September 27, 2014, respectively, include the following after-tax costs:
Fiscal 2015
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• |
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$0.4 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 |
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News Release |
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November 12, 2015 |
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2
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Fiscal 2014
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$1.3 million ($0.01 per diluted share) associated with the acquisition and integration of Rothsay and VION Ingredients during the period. |
Comments on Third Quarter 2015
“Despite a
difficult pricing environment, we continued to execute in the third quarter on our long term strategy of building our global platform to create sustainable feed, food and fuel ingredients for a growing world population. Our Feed segment continues to
perform well, with global rendering recording strong volumes and predictable earnings. Scheduled plant turnarounds at 3 gelatin factories during the quarter significantly impacted the Food segment earnings. The Fuel segment delivered as expected but
was down sequentially due to the tough environment in the US bio-diesel industry. We remain confident that the reinstatement of the US Tax Extenders will retroactively deliver the blenders tax credit as expected,” said Randall Stuewe, Darling
Ingredients Inc. Chairman and Chief Executive Officer.
“Operationally, our global team continues to find ways to improve our cost structure and
maintain our margins. Targets for working capital improvement, operating cost reductions and SG&A improvement are all being met. From a balance sheet perspective, we remain focused on delivering and setting the stage for future growth,”
concluded Mr. Stuewe.
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:
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Three Months Ended - Year over Year |
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| Adjusted EBITDA |
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October 3, |
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September 27, |
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| (U.S. dollars in thousands) |
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2015 |
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2014 |
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| Net income/(loss) attributable to Darling |
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$ |
(9,087 |
) |
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$ |
14,318 |
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| Depreciation and amortization |
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67,327 |
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67,311 |
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| Interest expense |
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24,828 |
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25,355 |
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| Income tax expense |
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7,859 |
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11,136 |
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| Foreign currency loss/(gain) |
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2,461 |
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(1,522 |
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| Other expense/(income), net |
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(1,004 |
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(2,053 |
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| Equity in net (income)/loss of unconsolidated subsidiaries |
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12,021 |
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1,055 |
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| Net (loss)/income attributable to noncontrolling interests |
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1,730 |
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1,636 |
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| Adjusted EBITDA |
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$ |
106,135 |
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$ |
117,236 |
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| Acquisition and integration-related expenses |
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1,280 |
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2,191 |
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| Pro forma Adjusted EBITDA (Non-GAAP) |
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$ |
107,415 |
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$ |
119,427 |
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| DGD Joint Venture Adjusted EBITDA (Darling’s share) (1) |
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$ |
(8,309 |
) |
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$ |
2,907 |
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| (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.
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News Release |
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November 12, 2015 |
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Page
3
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For the three months ended October 3, 2015, the Company generated Adjusted EBITDA of $106.1 million, as
compared to $117.2 million in the same period in fiscal 2014. The decrease was primarily attributable to lower finished product prices attributable to lower global competing ingredients 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 $107.4 million in the
three months ended October 3, 2015, as compared to a Pro forma Adjusted EBITDA of $119.4 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, 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 October 3, 2015 would have been
$118.0 million when taking into consideration the change in average foreign exchange (FX) fluctuations of $10.6 million as compared to $119.4 million for the same period in fiscal 2014, a reduction of $1.4 million.
Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA - Third Quarter 2015 to Second Quarter 2015
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Three Months Ended - Sequential |
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| Adjusted EBITDA |
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October 3, |
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July 4, |
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2015 |
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2015 |
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| Net income/(loss) attributable to Darling |
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$ |
(9,087 |
) |
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$ |
3,080 |
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| Depreciation and amortization |
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67,327 |
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66,245 |
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| Interest expense |
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24,828 |
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34,285 |
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| Income tax expense |
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7,859 |
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4,665 |
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| Foreign currency loss/(gain) |
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2,461 |
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(1,622 |
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| Other expense/(income), net |
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(1,004 |
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1,199 |
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| Equity in net (income)/loss of unconsolidated subsidiaries |
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12,021 |
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(4,172 |
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| Net income attributable to noncontrolling interests |
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1,730 |
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1,857 |
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| Adjusted EBITDA |
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$ |
106,135 |
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$ |
105,537 |
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| Acquisition and integration-related expenses |
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1,280 |
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1,208 |
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| Pro forma Adjusted EBITDA (Non-GAAP) |
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$ |
107,415 |
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$ |
106,745 |
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| DGD Joint Venture Adjusted EBITDA (Darling’s share) (1) |
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$ |
(8,309 |
) |
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$ |
7,909 |
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| (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.
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On a sequential basis, for the three months ended October 3, 2015, the Company generated Adjusted EBITDA of $106.1 million, as
compared to $105.5 million for the three months ended July 4, 2015. On a Pro Forma Adjusted EBITDA basis, the Company would have generated $107.4 million in the three months ended October 3, 2015, as compared to a Pro forma Adjusted EBITDA
of $106.7 million in the three months ended July 4, 2015, an increase of approximately $0.7 million.
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News Release |
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November 12, 2015 |
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4
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As a result of the strengthened U.S. dollar, the above Pro forma Adjusted EBITDA results for the three months
ended October 3, 2015 would have been $107.6 million when taking into consideration the change in average foreign currency fluctuations of $0.2 million, as compared to the Pro forma Adjusted EBITDA of $106.7 million for the three months ended
July 4, 2015, an increase of $0.9 million.
Operational Update by Segment
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Feed Ingredients - Solid performance overall, with consistent sequential improvement and stable margins. Global rendering continues to have strong volumes and predictable earnings. Fat prices remain
pressured in the USA, but are stabilizing in Europe. Protein felt some pressure worldwide as large grain supplies and strong slaughter resulted in market surpluses. Restaurant services continued to improve spreads, but pricing pressure continues.
Bakery Feeds and Specialty Proteins continued strong performances. The new bakery feeds plant in Bryan, Texas is in operation. Two new pet food plants are now running and are well positioned for 2016. |
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Food Ingredients - Scheduled extended downtime at three gelatin plants for expansion and modernization accounted for the majority of segment declines. Edible Fats performance improved as margins
stabilized. CTH endured an Asian border closure, resulting in an inventory write down. |
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Fuel Ingredients - Ecoson faced operational challenges during the quarter that have since been resolved. Canadian biofuels continue to operate at a loss without tax credits. Segment margins have normalized
and adjusted. Renewable Volume Obligations (RVO) are expected to be ratified in late November, while we anticipate that the biofuels tax credit will be awarded in December. |
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Diamond Green Diesel Joint Venture - Continued strong operational performance in the third quarter, producing 41.5 million gallons of renewable diesel. The Company remains optimistic that the U.S.
Biofuels Tax Extenders package will be reinstated, retroactively adding approximately $20.0 million to Darling’s share of income in the third quarter. |
Third Quarter 2015 Segment Performance
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| Feed Ingredients |
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Three Months Ended |
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| ($ thousands) |
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October 3, 2015 |
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September 27, 2014 |
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| Net Sales |
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$ |
525,213 |
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$ |
607,271 |
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| Segment operating income |
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$ |
35,619 |
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$ |
46,398 |
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| EBITDA |
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$ |
76,465 |
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$ |
84,118 |
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Feed Ingredients operating income for the three months ended October 3, 2015 was $35.6 million, a decrease of $10.8 million as compared to the three months ended September 27, 2014. Lower earnings for the Feed
Ingredients segment were due to significant decline in proteins, fats and used cooking oil finished product prices as a result of the global record-setting grain production and increased volumes from the slaughter industry which increased supply
above demand levels. In addition, the Company’s Feed Ingredients segment operating cash flow was negatively impacted by foreign exchange translation by approximately $4.4 million when using prior year average exchange rates. |
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Feed Ingredients reported lower earnings and net sales year over year resulting primarily in the United States operations, related to lower finished product prices in proteins, fats and used cooking oil, particularly in
the Company’s non-formula business. The $82.1 million decrease in net sales includes sales of proteins $(39.5) million, fats $(35.7) million, Used Cooking Oil $(0.1) million, Bakery $1.8 million and other sales of $(8.6) million as compared to
three months ended September 27, 2014. Increased sales volumes in Bakery due to the Custom Blenders acquisition in the fourth quarter of fiscal 2014 contributed to Bakery’s increased net sales. |
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News Release |
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November 12, 2015 |
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Page
5
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| Food Ingredients |
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Three Months Ended |
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| ($ thousands) |
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October 3, 2015 |
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September 27, 2014 |
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| Net Sales |
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$ |
269,230 |
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$ |
301,398 |
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| Segment operating income |
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$ |
11,562 |
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$ |
14,046 |
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| EBITDA |
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$ |
28,706 |
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$ |
32,549 |
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Food Ingredients operating income was $11.6 million for the three months ended October 3, 2015, a decrease of $2.4 million as compared to the three months ended September 27, 2014. In addition, the
Company’s Food Ingredients segment operating cash flow was negatively impacted by foreign exchange translation by approximately $5.8 million when using prior year average exchange rates. |
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The gelatin business earnings improved as compared to the prior year due to the China operations profitability. European edible fats performance improved over the prior year due to improved margins. The Company’s
casings business was down compared to the same period in the prior year, due primarily to margin pressure on meat by-product sales to Asian markets. |
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| Fuel Ingredients |
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Three Months Ended |
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| ($ thousands) |
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October 3, 2015 |
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September 27, 2014 |
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| Net Sales |
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$ |
59,319 |
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$ |
69,996 |
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| Segment operating income |
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$ |
246 |
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$ |
2,764 |
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| EBITDA |
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$ |
6,975 |
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$ |
11,544 |
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• |
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Exclusive of the DGD Joint Venture, Fuel Ingredients operating income for the three months ended October 3, 2015 was $0.2 million, a decrease of $2.6 million as compared to the three months ended September 27,
2014. The Fuel Ingredients segment was negatively impacted by foreign exchange translation by approximately $1.8 million when using prior year average exchange rates and lower earnings at the Canadian biodiesel plant due to lower biodiesel margins.
The European Fuel Ingredients segment (Ecoson and Rendac) earnings were comparable to the same period in fiscal 2014. |
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Including the DGD Joint Venture results, the Fuel Ingredients segment loss for the three months ended October 3, 2015 was $12.1 million, as compared to segment income of $1.3 million in the same period of 2014. The
reduction of $13.4 million is primarily related to a decrease in the income of the DGD Joint Venture due to a decrease in petroleum prices, which was not offset by an increase in Renewable Identification Number (“RIN”) values and 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. |
Results of Operations – Nine Months Ended October 3, 2015 Compared to Nine Months Ended September 27, 2014
Net loss attributable to Darling for the first nine months ended October 3, 2015, was $(5.9) million, or $(.04) per diluted share, as compared to a net
loss of $(5.7) million, or $(0.03) per diluted share, in the first nine months of fiscal 2014. 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
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News Release |
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November 12, 2015 |
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Page
6
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dollar, which were partially offset by an increase in raw material volumes. The results for the first nine months of 2015 and 2014, respectively, include the following after-tax costs:
Fiscal 2015
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• |
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$2.7 million ($0.02 per diluted share) associated with the integration of VION Ingredients and Rothsay, staff reduction in Angoulême, 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 |
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$3.6 million ($0.02 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; and
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Fiscal 2014
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$21.1 million ($0.13 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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$13.4 million ($0.08 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;
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$12.1 million ($0.07 per diluted share) associated with the acquisition and integration of Rothsay and VION Ingredients during the period; and |
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$5.3 million ($0.03 per diluted share) related to certain euro forward contracts entered into to hedge against foreign exchange risks related to the closing of the VION Acquisition. |
Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA - Nine Months Ended
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Nine Months Ended |
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| Adjusted EBITDA |
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October 3, |
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September 27, |
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| (U.S. dollars in thousands) |
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2015 |
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2014 |
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| Net loss attributable to Darling |
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$ |
(5,898 |
) |
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$ |
(5,728 |
) |
| Depreciation and amortization |
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199,970 |
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|
200,478 |
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| Interest expense |
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82,222 |
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110,783 |
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| Income tax expense |
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14,639 |
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|
8,349 |
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| Foreign currency loss |
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3,299 |
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|
12,281 |
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| Other expense/(income), net |
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|
704 |
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(28 |
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| Equity in net (income)/loss of unconsolidated subsidiaries |
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|
9,657 |
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(6,062 |
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| Net income attributable to noncontrolling interests |
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|
5,302 |
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|
5,251 |
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| Adjusted EBITDA |
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$ |
309,895 |
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$ |
325,324 |
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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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|
7,807 |
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|
22,304 |
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| Darling Ingredients International - 13th week (1) |
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— |
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4,100 |
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| Pro forma Adjusted EBITDA (Non-GAAP) |
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$ |
317,702 |
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$ |
401,531 |
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| DGD Joint Venture Adjusted EBITDA (Darling’s share) (2) |
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$ |
1,946 |
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|
$ |
17,882 |
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|
|
|
|
|
|
|
|
|
| (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.
|
|
|
|
|
|
|
News Release |
| |
November 12, 2015 |
| |
Page
7
|
For the first nine months of fiscal 2015, the Company generated Adjusted EBITDA of $309.9 million, as
compared to $325.3 million in the same period of 2014. On a Pro forma Adjusted EBITDA basis, the Company would have generated $317.7 million in the first nine months of fiscal 2015, as compared to a Pro forma Adjusted EBITDA of $401.5 million in the
same period in 2014. The decrease in the Pro forma Adjusted EBITDA is attributable to lower finished product prices and the impact of foreign exchange rates as a function of the strengthening U.S. dollar as compared mainly to the euro and Canadian
dollar, which were partially offset by an increase in raw material volumes.
Third Quarter 2015 Segment Performance – Nine Months Ended
|
|
|
|
|
|
|
|
|
| Feed Ingredients |
|
Nine Months Ended |
|
| ($ thousands) |
|
October 3, 2015 |
|
|
September 27, 2014 |
|
| Net Sales |
|
$ |
1,602,141 |
|
|
$ |
1,815,487 |
|
| Segment operating income |
|
$ |
106,422 |
|
|
$ |
158,636 |
|
| EBITDA |
|
$ |
227,808 |
|
|
$ |
274,781 |
|
| |
• |
|
Adjusting the first nine months of 2014 for the non-cash inventory step-up of approximately $14.2 million as compared to the first nine months of 2015, the segment operating income would be lower by $66.4 million.
|
| |
• |
|
Cash flow was negatively impacted by foreign exchange translation by approximately $13.7 million when using prior year average exchange rates. The $213.4 million decrease in net sales includes sales in proteins of
$(94.7) million, fats $(72.0) million, used cooking oil $(24.0) million, other $(19.0) million and bakery $(3.7) million when compared to nine months ended September 27, 2104. |
|
|
|
|
|
|
|
|
|
| Food Ingredients |
|
Nine Months Ended |
|
| ($ thousands) |
|
October 3, 2015 |
|
|
September 27, 2014 |
|
| Net Sales |
|
$ |
822,741 |
|
|
$ |
926,304 |
|
| Segment operating income |
|
$ |
37,921 |
|
|
$ |
13,217 |
|
| EBITDA |
|
$ |
89,047 |
|
|
$ |
68,789 |
|
| |
• |
|
Adjusting the first nine months of 2014 for the non-cash inventory step-up of approximately $35.3 million as compared to the first nine months of 2015, the segment operating income would be lower by $10.6 million.
|
| |
• |
|
Cash flow was negatively impacted by foreign exchange translation by approximately $20.9 million when using prior year average exchange rates. |
|
|
|
|
|
|
|
|
|
| Fuel Ingredients |
|
Nine Months Ended |
|
| ($ thousands) |
|
October 3, 2015 |
|
|
September 27, 2014 |
|
| Net Sales |
|
$ |
162,889 |
|
|
$ |
214,449 |
|
| Segment operating income |
|
$ |
4,777 |
|
|
$ |
10,351 |
|
| EBITDA |
|
$ |
24,736 |
|
|
$ |
32,327 |
|
| |
• |
|
Exclusive of the DGD Joint Venture and adjusting the first nine months of 2014 for the non-cash inventory step-up of approximately $0.3 million as compared to the first nine months of 2015, the segment operating income
would be lower by $5.9 million. |
|
|
|
|
|
|
News Release |
| |
November 12, 2015 |
| |
Page
8
|
| |
• |
|
Cash flow was negatively impacted by foreign exchange translation by approximately $6.6 million when using prior year average exchange rates and including lower production and earnings 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 third quarter 2015 financial results at 8:30 am Eastern Time (7:30 am Central Time) on Friday, November 13, 2015. To listen to the conference call, participants
calling from within North America should dial 1-866-777-2509; international participants should dial 1-412-317-5413. Please refer to access code 10072790. 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 November 19, 2015, by dialing 1-877-344-7529 (U.S. callers), 1-855-669-9658 (Canada) and 1-412-317-0088 (international
callers). The access code for the replay is 10072790. 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 October 3, 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 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.
|
|
|
|
|
|
News Release |
| |
November 12, 2015 |
| |
Page
9
|
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 251
O’Connor Ridge Blvd., Suite 300 Irving, Texas 75038 |
|
Email: mgaither@darlingii.com Phone:
972-717-0300 |
|
|
|
|
|
|
News Release |
| |
November 12, 2015 |
| |
Page
10
|
Darling Ingredients Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
October 3, 2015 and January 3, 2015
(Dollars in thousands, except share data)
|
|
|
|
|
|
|
|
|
| |
|
October 3, |
|
|
January 3, |
|
| |
|
2015 |
|
|
2015 |
|
| |
|
(unaudited) |
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
| Cash and cash equivalents |
|
$ |
148,886 |
|
|
$ |
108,784 |
|
| Restricted cash |
|
|
334 |
|
|
|
343 |
|
| Accounts receivable, net |
|
|
379,093 |
|
|
|
409,779 |
|
| Inventories |
|
|
366,775 |
|
|
|
401,613 |
|
| Prepaid expenses |
|
|
47,086 |
|
|
|
44,629 |
|
| Income taxes refundable |
|
|
24,936 |
|
|
|
22,140 |
|
| Other current assets |
|
|
8,718 |
|
|
|
21,324 |
|
| Deferred income taxes |
|
|
29,795 |
|
|
|
45,001 |
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
1,005,623 |
|
|
|
1,053,613 |
|
|
|
|
|
|
|
|
|
|
| Property, plant and equipment,
less accumulated depreciation, net |
|
|
1,516,598 |
|
|
|
1,574,116 |
|
| Intangible assets,
less accumulated amortization, net |
|
|
815,729 |
|
|
|
932,413 |
|
| Other assets: |
|
|
|
|
| Goodwill |
|
|
1,253,693 |
|
|
|
1,320,419 |
|
| Investment in unconsolidated subsidiaries |
|
|
165,137 |
|
|
|
202,712 |
|
| Other assets |
|
|
75,523 |
|
|
|
71,009 |
|
| Deferred income taxes |
|
|
16,073 |
|
|
|
16,431 |
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
4,848,376 |
|
|
$ |
5,170,713 |
|
|
|
|
|
|
|
|
|
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| Current liabilities: |
|
|
|
|
| Current portion of long-term debt |
|
$ |
47,966 |
|
|
$ |
54,401 |
|
| Accounts payable, principally trade |
|
|
155,549 |
|
|
|
168,518 |
|
| Income taxes payable |
|
|
11,241 |
|
|
|
4,363 |
|
| Accrued expenses |
|
|
238,734 |
|
|
|
256,119 |
|
| Deferred income taxes |
|
|
1,864 |
|
|
|
642 |
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
455,354 |
|
|
|
484,043 |
|
|
|
|
|
|
|
|
|
|
| Long-term debt, net of current portion |
|
|
1,976,412 |
|
|
|
2,098,039 |
|
| Other non-current liabilities |
|
|
105,783 |
|
|
|
114,700 |
|
| Deferred income taxes |
|
|
393,954 |
|
|
|
422,797 |
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
2,931,503 |
|
|
|
3,119,579 |
|
|
|
|
|
|
|
|
|
|
| Commitments and contingencies |
|
|
|
|
| Total Darling’s stockholders’ equity |
|
|
1,814,237 |
|
|
|
1,952,990 |
|
| Noncontrolling interests |
|
|
102,636 |
|
|
|
98,144 |
|
|
|
|
|
|
|
|
|
|
| Total stockholders’ equity |
|
$ |
1,916,873 |
|
|
$ |
2,051,134 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,848,376 |
|
|
$ |
5,170,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
News Release |
| |
November 12, 2015 |
| |
Page
11
|
Darling Ingredients Inc. and Subsidiaries
Consolidated Operating Results
For the Periods Ended October 3, 2015 and September 27, 2014
(Dollars in thousands, except per share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Nine Months Ended |
|
| |
|
|
|
|
|
|
|
$ Change |
|
|
|
|
|
|
|
|
$ Change |
|
| |
|
October 3, |
|
|
September 27, |
|
|
Favorable |
|
|
October 3, |
|
|
September 27, |
|
|
Favorable |
|
| |
|
2015 |
|
|
2014 |
|
|
(Unfavorable) |
|
|
2015 |
|
|
2014 |
|
|
(Unfavorable) |
|
| Net sales |
|
$ |
853,762 |
|
|
$ |
978,665 |
|
|
$ |
(124,903 |
) |
|
$ |
2,587,771 |
|
|
$ |
2,956,240 |
|
|
$ |
(368,469 |
) |
| Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales and operating expenses |
|
$ |
671,321 |
|
|
$ |
764,161 |
|
|
|
92,840 |
|
|
$ |
2,024,118 |
|
|
$ |
2,328,872 |
|
|
|
304,754 |
|
|
|
|
|
|
|
|
| Selling, general and administrative expenses |
|
|
75,026 |
|
|
|
95,077 |
|
|
|
20,051 |
|
|
|
245,951 |
|
|
|
279,740 |
|
|
|
33,789 |
|
| Depreciation and amortization |
|
|
67,327 |
|
|
|
67,311 |
|
|
|
(16 |
) |
|
|
199,970 |
|
|
|
200,478 |
|
|
|
508 |
|
| Acquisition and Integration costs |
|
|
1,280 |
|
|
|
2,191 |
|
|
|
911 |
|
|
|
7,807 |
|
|
|
22,304 |
|
|
|
14,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total costs and expenses |
|
|
814,954 |
|
|
|
928,740 |
|
|
|
113,786 |
|
|
|
2,477,846 |
|
|
|
2,831,394 |
|
|
|
353,548 |
|
| Operating income |
|
|
38,808 |
|
|
|
49,925 |
|
|
|
(11,117 |
) |
|
|
109,925 |
|
|
|
124,846 |
|
|
|
(14,921 |
) |
| Other expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
|
(24,828 |
) |
|
|
(25,355 |
) |
|
|
527 |
|
|
|
(82,222 |
) |
|
|
(110,783 |
) |
|
|
28,561 |
|
| Foreign currency gain/(loss) |
|
|
(2,461 |
) |
|
|
1,522 |
|
|
|
(3,983 |
) |
|
|
(3,299 |
) |
|
|
(12,281 |
) |
|
|
8,982 |
|
| Other income/(expense), net |
|
|
1,004 |
|
|
|
2,053 |
|
|
|
(1,049 |
) |
|
|
(704 |
) |
|
|
28 |
|
|
|
(732 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total other expense |
|
|
(26,285 |
) |
|
|
(21,780 |
) |
|
|
(4,505 |
) |
|
|
(86,225 |
) |
|
|
(123,036 |
) |
|
|
36,811 |
|
|
|
|
|
|
|
|
| Equity in net income/(loss) of unconsolidated subsidiaries |
|
|
(12,021 |
) |
|
|
(1,055 |
) |
|
|
(10,966 |
) |
|
|
(9,657 |
) |
|
|
6,062 |
|
|
|
(15,719 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income/(loss) before income taxes |
|
|
502 |
|
|
|
27,090 |
|
|
|
(26,588 |
) |
|
|
14,043 |
|
|
|
7,872 |
|
|
|
6,171 |
|
|
|
|
|
|
|
|
| Income taxes expense/(benefit) |
|
|
7,859 |
|
|
|
11,136 |
|
|
|
3,277 |
|
|
|
14,639 |
|
|
|
8,349 |
|
|
|
(6,290 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income/(loss) |
|
$ |
(7,357 |
) |
|
$ |
15,954 |
|
|
$ |
(23,311 |
) |
|
$ |
(596 |
) |
|
$ |
(477 |
) |
|
$ |
(119 |
) |
|
|
|
|
|
|
|
| Net (income)/loss attributable to noncontrolling interests |
|
$ |
(1,730 |
) |
|
$ |
(1,636 |
) |
|
$ |
(94 |
) |
|
$ |
(5,302 |
) |
|
$ |
(5,251 |
) |
|
$ |
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income/(loss) attributable to Darling |
|
$ |
(9,087 |
) |
|
$ |
14,318 |
|
|
$ |
(23,405 |
) |
|
$ |
(5,898 |
) |
|
$ |
(5,728 |
) |
|
$ |
(170 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic income/(loss) per share: |
|
$ |
(0.06 |
) |
|
$ |
0.09 |
|
|
$ |
(0.15 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted income/(loss) per share: |
|
$ |
(0.06 |
) |
|
$ |
0.09 |
|
|
$ |
(0.15 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
News Release |
| |
November 12, 2015 |
| |
Page
12
|
Darling Ingredients Inc. and Subsidiaries
Consolidated Statement of Cash Flows
Nine Months Ended October 3, 2015 and September 27, 2014
(Dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
| |
|
October 3, |
|
|
September 27, |
|
| |
|
2015 |
|
|
2014 |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
| Net income/(loss) |
|
$ |
(596 |
) |
|
$ |
(477 |
) |
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
| Depreciation and amortization |
|
|
199,970 |
|
|
|
200,478 |
|
| Loss/(gain) on disposal of property, plant, equipment and other assets |
|
|
627 |
|
|
|
(976 |
) |
| Gain on insurance proceeds from insurance settlements |
|
|
(561 |
) |
|
|
(1,550 |
) |
| Deferred taxes |
|
|
8,640 |
|
|
|
(13,492 |
) |
| Increase/(decrease) in long-term pension liability |
|
|
678 |
|
|
|
297 |
|
| Stock-based compensation expense |
|
|
6,468 |
|
|
|
16,629 |
|
| Write-off deferred loan costs |
|
|
10,633 |
|
|
|
4,330 |
|
| Deferred loan cost amortization |
|
|
7,380 |
|
|
|
7,394 |
|
| Equity in net (income)/loss of unconsolidated subsidiaries |
|
|
9,657 |
|
|
|
(6,062 |
) |
| Distributions of earnings from unconsolidated subsidiaries |
|
|
26,155 |
|
|
|
— |
|
| Changes in operating assets and liabilities, net of effects from acquisitions: |
|
|
|
|
|
|
|
|
| Accounts receivable |
|
|
7,658 |
|
|
|
(40,646 |
) |
| Income taxes refundable/payable |
|
|
3,955 |
|
|
|
(13,695 |
) |
| Inventories and prepaid expenses |
|
|
7,667 |
|
|
|
(13,113 |
) |
| Accounts payable and accrued expenses |
|
|
(10,318 |
) |
|
|
7,859 |
|
| Other |
|
|
18,641 |
|
|
|
32,321 |
|
|
|
|
|
|
|
|
|
|
| Net cash provided/(used) by operating activities |
|
|
296,654 |
|
|
|
179,297 |
|
|
|
|
|
|
|
|
|
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
| Capital expenditures |
|
|
(162,264 |
) |
|
|
(153,984 |
) |
| Acquisitions, net of cash acquired |
|
|
— |
|
|
|
(2,075,651 |
) |
| Gross proceeds from disposal of property, plant and equipment and other assets |
|
|
2,473 |
|
|
|
2,810 |
|
| Proceeds from insurance settlement |
|
|
561 |
|
|
|
1,550 |
|
| Payments related to routes and other intangibles |
|
|
(2,939 |
) |
|
|
(8,210 |
) |
|
|
|
|
|
|
|
|
|
| Net cash used by investing activities |
|
|
(162,169 |
) |
|
|
(2,233,485 |
) |
|
|
|
|
|
|
|
|
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
| Proceeds from long-term debt |
|
|
586,199 |
|
|
|
1,836,917 |
|
| Payments on long-term debt |
|
|
(595,872 |
) |
|
|
(310,773 |
) |
| Borrowings from revolving credit facility |
|
|
78,244 |
|
|
|
170,143 |
|
| Payments on revolving credit facility |
|
|
(130,876 |
) |
|
|
(277,254 |
) |
| Net cash overdraft financing |
|
|
(1,261 |
) |
|
|
933 |
|
| Deferred loan costs |
|
|
(17,119 |
) |
|
|
(45,223 |
) |
| Issuance of commons stock |
|
|
171 |
|
|
|
417 |
|
| Repurchase of treasury stock |
|
|
(5,912 |
) |
|
|
— |
|
| Minimum withholding taxes paid on stock awards |
|
|
(4,838 |
) |
|
|
(6,814 |
) |
| Excess tax benefits from stock-based compensation |
|
|
— |
|
|
|
1,451 |
|
| Distributions to noncontrolling interests |
|
|
(2,820 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
| Net cash provided by financing activities |
|
|
(94,084 |
) |
|
|
1,369,797 |
|
| Effect of exchange rate changes on cash |
|
|
(299 |
) |
|
|
6,961 |
|
|
|
|
|
|
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents |
|
|
40,102 |
|
|
|
(677,430 |
) |
| Cash and cash equivalents at beginning of period |
|
|
108,784 |
|
|
|
870,857 |
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at end of period |
|
$ |
148,886 |
|
|
$ |
193,427 |
|
|
|
|
|
|
|
|
|
|
| Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
| Accrued capital expenditures |
|
$ |
940 |
|
|
$ |
(1,436 |
) |
|
|
|
|
|
|
|
|
|
| Cash paid during the period for: |
|
|
|
|
|
|
|
|
| Interest, net of capitalized interest |
|
$ |
57,764 |
|
|
$ |
75,185 |
|
|
|
|
|
|
|
|
|
|
| Income taxes, net of refunds |
|
$ |
4,005 |
|
|
$ |
15,206 |
|
| Non-cash financing activities |
|
|
|
|
|
|
|
|
| Debt issued for service contract assets |
|
$ |
2,521 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
News Release |
| |
November 12, 2015 |
| |
Page
13
|
Darling Ingredients Inc.
Adjusted (Non-GAAP) Diluted Earnings per Share
Three Months Ended October 3, 2015 and September 27, 2014
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
| |
|
October 3, |
|
|
September 27, |
|
| |
|
2015 |
|
|
2014 |
|
| Weighted average shares of common stock outstanding (millions) |
|
|
165,195 |
|
|
|
164,957 |
|
|
|
|
| Reported Earnings Per Share (fully diluted) |
|
$ |
(0.06 |
) |
|
$ |
0.09 |
|
| Acquisition and integration costs |
|
|
— |
|
|
|
0.01 |
|
| Amortization of intangibles |
|
|
0.04 |
|
|
|
0.07 |
|
|
|
|
|
|
|
|
|
|
| Adjusted diluted earnings per share attributable to Darling (Non-GAAP) (1) |
|
$ |
(0.02 |
) |
|
$ |
0.17 |
|
|
|
|
|
|
|
|
|
|
| (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 October 3, 2015 and September 27, 2014 was 65.7% and 42.0%, respectively. |
Darling Ingredients Inc.
Adjusted (Non-GAAP) Diluted Earnings per Share
Nine Months Ended October 3, 2015 and September 27, 2014
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
| |
|
October 3, |
|
|
September 27, |
|
| |
|
2015 |
|
|
2014 |
|
| Weighted average shares of common stock outstanding (millions) |
|
|
165,086 |
|
|
|
164,551 |
|
|
|
|
| Reported Earnings Per Share (fully diluted) |
|
$ |
(0.04 |
) |
|
$ |
(0.03 |
) |
| Non-cash inventory step-up associated with the VION Acquisition |
|
|
— |
|
|
|
0.13 |
|
| Acquisition and integration costs |
|
|
0.02 |
|
|
|
0.07 |
|
| Amortization of intangibles |
|
|
0.13 |
|
|
|
0.16 |
|
| Redemption premium on 8.5% Senior Notes and write off deferred loan costs |
|
|
— |
|
|
|
0.08 |
|
| Write-off deferred loan costs euro term loan B |
|
|
0.02 |
|
|
|
— |
|
| Foreign currency hedge of VION purchase price |
|
|
— |
|
|
|
0.03 |
|
|
|
|
|
|
|
|
|
|
| Adjusted diluted earnings per share attributable to Darling (Non-GAAP) (1) |
|
$ |
0.13 |
|
|
$ |
0.44 |
|
|
|
|
|
|
|
|
|
|
| (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 nine months ended October 3, 2015 and September 27, 2014 was 65.7% and 57.7%, respectively. |
Exhibit 99.2
Third Quarter 2015
Earnings Conference Call
November 13, 2015
Randall C. Stuewe,
Chairman and CEO
John O. Muse, EVP Chief Financial Officer
Creating sustainable food, feed and fuel ingredients for a growing population
2
Safe Harbor Statement
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
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 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 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.
Creating sustainable food, feed and fuel ingredients for a growing population
3
2015 Third Quarter Overview
EBITDA improved sequentially
Adjustments taking hold in light of continued deflationary finished product prices
Global Rendering volumes strong with stable earnings
European acquisitions deliver solid Q3 performance with steady earnings
Rousselot performance solid with 3 plants under scheduled expansion and modernization turnarounds
Bakery Feeds and Specialty Proteins continued improved performance
Bio Fuels awaiting Government Blenders Tax Credit and EPA final RVO approval
Canada Biodiesel facility sequentially impacted by $1.9 million loss
Versus Q3-2014—- FX Adjusted EBITDA $118.0 million vs. $119.4 million
Foreign currency exchange EBITDA impact of $(10.6) million vs. Q3-2014
Foreign currency exchange EBITDA impact of $(37.7) million vs. year-to-date 2014
Diamond Green Diesel (DGD) shipped 39.9 million gallons
Weak petroleum prices and subdued RIN values, resulted in declining financial performance
Length of supply chain distorts operating performance
Accretive 12 cents per share with Blenders Tax Credit
Creating sustainable food, feed and fuel ingredients for a growing population
4
Continuing Long Term
Strategy—“Delever and Grow”
Q3 2015 paid down debt by $16.3 million; $75.8 million paid down
YTD
On track for debt pay down of $100 million in 2015, targeting $125 million in 2016
Repurchased $5.9 million of the Company’s Common Stock during the quarter
International operations continue to provide a long term growth platform
3 new plants in commissioning stages (2 wet Pet Food and 1 bakery)
On schedule with two new U.S. rendering plants during 3Q – 4Q 2016
Tax position distorting EPS, due to a delay in the passage of anticipated tax legislation
Continue to focus on improving margins and lowering operating costs
Creating sustainable food, feed and fuel ingredients for a growing population
5
Earnings Summary
Three Months Ended—Sequential Three Months Ended—Year over Year
October 3, July 4, October 3, September 27, 2015 2015 2015 2014
Revenues $ 853,762 $ 859,315 $ 853,762 $ 978,665
Gross profit 182,441 191,039 182,441 214,504
Selling, general and administrative expenses (1)
75,026 84,294 75,026 95,077
Depreciation and
amortization 67,327 66,245 67,327 67,311 Acquisition and integration costs 1,280 1,208 1,280 2,191
Interest
expense 24,828 34,285 24,828 25,355
Foreign currency gain/(loss) (2,461) 1,622 (2,461) 1,522 Other
income/(expense), net 1,004 (1,199) 1,004 2,053 Equity in net income/(loss) of unconsolidated subsidiary (12,021) 4,172 (12,021) (1,055) Income before taxes 502 9,602 502 27,090
Income tax expense 7,859 4,665 7,859 11,136 Net income/(loss) (7,357) 4,937 (7,357) 15,954
Net (income)/loss attributable in minority interests (1,730) (1,857) (1,730) (1,636)
Net income/(loss) attributable to Darling $ (9,087) $ 3,080 $ (9,087) $ 14,318 Earnings/(loss) per share (fully
diluted) $ (0.06) $ 0.02 $ (0.06) $ 0.09
Note: (1) The decrease in the three months ending
October 3, 2015 is primarily due to a decrease in corporate payroll and rel ated benefits.
Creating
sustainable food, feed and fuel ingredients for a growing population
Adjusted EBITDA
Adjusted EBITDA and Pro Forma
Adjusted EBITDA Three Months Ended - Sequential Nine Months Ended - Year over Year
(US$ in thousands) October
3, July 4, October 3, September 27,
2015 2015 2015 2014
Net income/(loss) attributable to Darling $ (9,087) $ 3,080 $ (5,898) $ (5,728)
Depreciation and amortization 67,327 66,245 199,970 200,478
Interest expense 24,828 34,285 82,222 110,783
Income tax expense/(benefit) 7,859 4,665 14,639 8,349
Foreign currency (gain)/loss 2,461 (1,622) 3,299 12,281
Other expense/(income), net (1,004) 1,199 704 (28)
Equity in net (income)/loss of unconsolidated subsidiaries 12,021 (4,172) 9,657 (6,062)
Net income attributable to noncontrolling interests 1,730 1,857 5,302 5,251
Adjusted EBITDA $ 106,135 $ 105,537 $ 309,895 $ 325,324
Non-cash inventory step-up associated with VION Acquisition - - - 49,803
Acquisition and integration-related expenses 1,280 1,208 7,807 22,304
Darling Ingredients International - 13th week (1) - - - 4,100
Pro Forma Adjusted EBITDA (Non-GAAP) $ 107,415 $ 106,745 $ 317,702 $ 401,531
Foreign currency exchange impact $ 210 - $ 37,733 -
Pro Forma Adjusted EBITDA to Foreign Currency (Non-GAAP) (2) $ 107,625 $ 106,745 $ 355,435 $ 401,531
DGD Joint Venture Adjusted EBITDA (Darling’s Share) (3) $ (8,309) $ 7,909 $ 1,946 $ 17,882
Creating sustainable food, feed and fuel ingredients for a growing population
(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) Foreign currency exchange rates held constant for comparable quarters (Euro/USD 1.105606
rate July 4, 2015 quarter and Euro/USD 1.3266 September 27, 2014 nine months
(3) 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.
6
7
Balance Sheet Highlights and Debt Summary
Balance Sheet Highlights Debt Summary
(US$, in thousands) October 3, 2015 (US$, in thousands) October 3, 2015
Cash $ 148,886 Amended Credit Agreement
Accounts
receivable 379,093 Revolving Credit Facility $ 45,860
Total Inventories 366,775 Term Loan A 285,874 Net
working capital 550,269 Term Loan B 591,000 Net property, plant and equipment 1,516,598
5.375% Senior Notes
due 2022 500,000 Total assets $ 4,848,376 4.750% Euro Senior Notes due 2022 574,714 Total debt $ 2,024,378 Other Notes and Obligations 26,930
Shareholders’ equity $ 1,916,873 Total Debt: $ 2,024,378
Debt Pay Down Leverage Ratios
(US$, in thousands)
October 3, 2015 Credit
October 3, 2015 Actual
Agreement
Third Quarter 2015 $ 16,295
Total Debt to EBITDA:
4.36 5.50
Year-to-Date $ 75,808
Secured Debt to EBITDA: 1.99 3.75
Creating
sustainable food, feed and fuel ingredients for a growing population
8
Feed Segment Operational Highlights
US$ and metric tons Q1 Q2 Q3 Delta %
Global rendering delivered a solid performance with
(millions) 2015 2015 2015 Q2 to Q3 strong volumes and stable earnings
Revenue $547.5 $529.4 $525.2 -0.8%
USA fat prices remain under corn value while
Gross Margin 123.5 124.5 116.2 -6.7% stabilizing in Europe Gross Margin % 22.6% 23.5% 22.1%
Protein prices being impacted by strong slaughter Operating Income 35.4 35.4 35.6 0.6% and record grain and oilseed
production
EBITDA 75.5 75.9 76.5 0.8%
Restaurant Services (UCO business) continues to
EBITDA/Revenue 13.8% 14.3% 14.6% improve spreads
Raw Material Processed
1.87 1.83 1.86 1.6%
(million metric tons) • Bakery Feeds showing solid earnings with steady corn pricing
EBITDA Bridge Q2 2015 to Q3 2015
(millions)
LTM EBITDA Margin
$80 $8.8 $77.1 ($0.6) Feed $75.9 ($11.7) $76.5
$75 $8.7 ($4.6) 15
14.6%
$70 14.5 14.3%
$65 13.8%
$60 14
13.5 12.6% $55
13
$50 12.5 $45
$40 12
EBITDA Price/ Volumes Cost of Other Adjusted FX EBITDA 11.5
Q2 2015 Yield Sales EBITDA… Impact Q3 2015 Q4 Q1 Q2 Q3
Note: Cost of Sales includes raw material costs, collection costs and factory costs. 2014 2015 2015 2015
Creating sustainable food, feed and fuel ingredients for a growing population
9
Jacobsen, Wall Street Journal and Thomson
Reuters Historical Pricing
2015 Average Jacobsen Prices (USD) Finished Product Pricing
Feed Segment Ingredients January February March Q1 Avg. April May June Q2 Avg. July August September Q3 Avg. October
BFT—Chicago Renderer / cwt $29.16 $29.14 $30.53 $29.66 $28.69 $28.95 $29.91 $29.18 $29.00 $29.64 $29.62 $29.42 $22.91 YG—IL / cwt $24.54 $24.34 $24.81 $24.58 $22.36 $22.84 $24.50 $23.24 $23.80 $21.19 $19.55 $21.48 $18.02 MBM—IL / ton
$402.13 $375.53 $377.95 $385.12 $387.02 $359.75 $304.20 $348.88 $338.18 $385.00 $343.10 $354.91 $280.68 Feed Grade PM—Mid South / ton $466.00 $460.26 $468.18 $465.00 $487.14 $427.25 $370.91 $426.94 $376.70 $399.64 $402.50 $391.55 $376.93 Pet
Food PM—Mid South / ton $712.50 $629.61 $625.00 $655.12 $607.74 $520.00 $446.59 $521.50 $478.18 $568.21 $557.14 $532.45 $477.27 Feathermeal—Mid South / ton $538.63 $460.39 $565.00 $523.77 $579.17 $491.75 $430.57 $499.13 $467.95 $555.00
$476.67 $499.12 $404.20
2015 Average Wall Street Journal Prices (USD) Cash Corn Pricing
Competing Ingredient for Bakery Feeds and Fats January February March Q1 Avg. April May June Q2 Avg. July August September
Q3 Avg. October
Corn—Track Cental IL #2 Yellow / bushel $3.65 $3.68 $3.66 $3.66 $3.55 $3.48 $3.49 $3.51
$3.81 $3.49 $3.56 $3.62 $3.65
European Benchmark Pricing 2015 Average Thomson Reuters Prices (USD)
January February March Q1 Avg. April May June Q2 Avg. July August September Q3 Avg. October Palm oil—CIF Rotterdam /
metric ton $619 $698 $652 $656 $645 $653 $651 $650 $603 $505 $565 $558 $565 Soy meal—CIF Rotterdam / metric ton $456 $442 $410 $436 $403 $392 $393 $396 $394 $381 $365 $380 $367
QTR. Over QTR. Year Over Year
Comparison Q2-2015 Q3-2015 % Q3-2014 Q3-2015 % Average Jacobsen Prices (USD) Avg. Avg. Change Avg. Avg. Change
BFT—Chicago Renderer / cwt $29.18 $29.42 0.8% $38.48 $29.42 -23.5% YG—IL / cwt $23.24 $21.48 -7.6% $29.01 $21.48
-26.0% MBM—IL / ton $348.88 $354.91 1.7% $473.87 $354.91 -25.1% Feed Grade PM—Mid South / ton $426.94 $391.55 -8.3% $605.05 $391.55 -35.3% Pet Food PM—Mid South / ton $521.50 $532.45 2.1% $802.98 $532.45 -33.7% Feathermeal—Mid
South / ton $499.13 $499.12 0.0% $703.91 $499.12 -29.1%
Average Wall Street Journal Prices (USD)
Corn—Track Cental IL #2 Yellow / bushel $3.51 $3.62 3.1% $3.48 $3.62 3.9%
Average Thomson Reuters Prices (USD)
Palm oil—CIF Rotterdam / metric ton $650 $558 -14.2% $737 $558 -24.3% Soy meal—CIF Rotterdam / metric ton $396 $380 -4.0% $479 $380 -20.7%
Creating sustainable food, feed and fuel ingredients for a growing population
10
Commodity Futures Pricing Trends
Significant weakness across commodities
Nearby CBOT Soybean Oil Futures (cents/lb.) Nearby Malaysia Palm Oil Futures ($/MT)
Nearby CBOT Corn Futures (cents/bu.) Nearby CBOT Soybean Meal Futures ($/ton)
Creating sustainable food, feed and fuel ingredients for a growing population
Source: Chicago Board of Trade (CBOT)
11
Food Segment Operational Highlights
US$ and metric tons Q1 Q2 Q3 Delta %
Scheduled expansion and modernization of
(millions) 2015 2015 2015 Q2 to Q3
3 gelatin plants; temporarily reduced
Revenue
270.2 283.4 269.2 -5.0% production and impacted Rousselot’s
EBITDA in 3rd quarter
Gross Margin 53.5 60.2 54.8 -9.0%
Gross Margin % 19.8% 21.2% 20.4% • Edible Fats margins improving in Europe
Operating Income 10.8 15.5 11.6 -25.2%
Casings
business enduring a border closure EBITDA 28.0 32.3 28.7 -11.1% in Asia causing inventory write down
EBITDA/Revenue 10.4% 11.4% 10.7%
Pharma gelatin market continues to lag in
Raw
Material Processed 0.27 0.28 0.26 -7.1% USA
(million metric tons)
Dubuque expansion in commissioning stage
EBITDA Bridge Q2 2015 to Q3 2015
(millions)
$50 LTM EBITDA Margin
$45 Food $10.0 ($26.0)
12
$40 11.4%
$35 11 10.7% $32.3 10.4%
$30 $1.9 $28.5 $0.2
$28.7 9.7%
$25 $10.3 10
$20 9 $15
$10 8
Q4 Q1 Q2 Q3
EBITDA Price/ Volumes Cost of Other Adjusted FX EBITDA
Q2 2015 Yield Sales EBITDA Impact Q3 2015 2014 2015 2015 2015 Q3 2015
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
Creating sustainable food, feed and fuel ingredients for a growing population
12
Fuel Segment Operational Highlights
Consistent performance at Rendac in Europe
US$ and metric tons Q1 Q2 Q3 Delta %
Ecoson experienced operational challenges that
(millions) 2015 2015 2015 Q2 to Q3 have been resolved
Revenue 57.0 46.5 59.3 27.5% • Canada biodiesel lost $1.9 mm EBITDA without Blenders Tax Credit during the 3rd
quarter of fiscal
Gross Margin 13.2 6.3 11.4 81.0%
2015
Gross Margin % 23.1% 13.5% 19.2%
Operating Income
2.5 2.0 0.2 -90.0% Diamond Green Diesel (50% Joint Venture)
EBITDA 9.1 8.6 7.0 -18.6% Q1 Q2 Q3 Delta %
US$ (millions)
2015 2015 2015 Q2 to Q3
EBITDA/Revenue 16.0%
18.5% 11.8%
EBITDA (Darling’s share) 2.3 7.9 (8.3) -205.1%
Raw Material Processed *
(million metric tons) 0.30 0.29 0.27 -6.9% Gallons Produced 37.5 41.9 41.5
Diamond Green Diesel operated at a loss
*Excludes
raw material processed at the DGD joint venture. Note:
Assuming the $1.00/gallon biodiesel tax credit is
reinstated for 2015 the Q3 EBITDA for Darling’s share of DGD would have been approximately $11.7 EBITDA Bridge Q2 2015 to Q3 2015 million. This includes a $1.00/gallon per 39.9 million gallons shipped of renewable diesel in 3Q 2015.
Although the Company remains optimistic, there (millions) can be no assurance the tax credit will be reinstated.
$25 $15.4 ($2.4)
($8.1) LTM EBITDA Margin
$20 Fuel
25 23.4%
$15 ($6.7) 18.5%
20 16.0%
$10 $8.6 11.8% $6.8 $0.2 $7.0 15
$5 10
$0 5
EBITDA Price/ Volumes Cost of Other Adjusted FX EBITDA
0
Q2 2015 Yield Sales EBITDA… Impact Q3 2015
Q4 Q1 Q2 Q3
Note: Cost of Sales includes raw material costs, collection costs and factory costs. 2014 2015 2015 2015
Creating sustainable food, feed and fuel ingredients for a growing population
Appendix – Additional Information
13
14
Adjusted (Non-GAAP) Diluted EPS
Three Months Ended Fiscal Year Ended
October 3, September 27, January 3, December 28, December 29, 2015 2014 2015 2013 2012
Reported Earnings Per Share (fully diluted) $ (0.06) $ 0.09 $ 0.39 $ 0.91 $ 1.11
Adjustments:
Non-cash inventory step-up associated with VION Acquisition — 0.19 —
Acquisition and integration costs— 0.01 0.13 0.13 -Amortization of intangibles 0.04 0.07 0.32 0.16 0.15
Bridge financing —— 0.07 -Redemption premium on 8.5% Senior Notes and write off deferred loan costs — 0.12 —Write-off deferred loan costs euro term loan B — —
-Foreign currency price risk VION Acquisition — 0.05 (0.14) -
Adjusted diluted earnings per share
attributable to Darling (Non-GAAP) $ (0.02) $ 0.17 $ 1.20 $ 1.13 $ 1.26
Weighted average shares of common
stock outstanding (in millions) 165,195 164,957 165,059 119,924 118,089
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 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, 2105, December 28, 2013 and December 29, 2012 was 37.1%, 38.5%
and 36.8%, respectively. The effective tax rate used for calculating Non-GAAP adjusted EPS for three months ended October 3, 2015 and September 27, 2014 was 65.7% and 42.0%, respectively.
Creating sustainable food, feed and fuel ingredients for a growing population
15
Feed Ingredients Segment
Change in Net Sales —Three Months Ended (Sequential Quarter over Quarter)
Change in Net Sales—2Q15 to 3Q15 Used
Fats Proteins Cooking Oil Bakery Other Total
Net
Sales Second Quarter 2015 $ 139.9 $ 209.9 $ 43.1 $ 54.3 $ 82.2 $ 529.4
Changes:
Increase/(Decrease) in sales volumes 1.1 5.0 (0.2) (0.5) — 5.4 Increase/(Decrease) in finished good prices
(3.9) (2.6) (3.2) 2.2 — (7.4) Decrease due to currency exchange rates (1.0) (2.2) (0.2) — — (3.4) Other change 1.3 1.3
Total Change: $ (3.8) $ 0.2 $ (3.6) $ 1.7 $ 1.3 $ (4.1)
Net SalesThird Quarter 2015 $ 136.1 $ 210.1 $ 39.6 $ 55.9 $ 83.5 $ 525.2
Change in Net Sales—1Q15 to 2Q15 Used
Fats
Proteins Cooking Oil Bakery Other Total
Net Sales First Quarter 2015 $ 146.7 $ 220.0 $ 36.1 $ 53.8 $ 90.9 $
547.5
Changes:
Increase/(Decrease) in sales volumes (5.8) (4.8) 2.5 1.3 — (6.8) Increase/(Decrease) in finished good prices (0.7) (4.3) 4.5 (0.8) — (1.3) Decrease due
to currency exchange rates (0.3) (1.0) — — — (1.3) Other change — — — — (8.7) (8.7)
Total Change: $ (6.8) $ (10.1) $ 7.0 $ 0.5 $ (8.7) $ (18.1)
Net Sales Second Quarter 2015 $ 139.9 $ 209.9 $ 43.1 $ 54.3 $ 82.2 $ 529.4
Creating sustainable food, feed and fuel ingredients for a growing population
16
Feed Ingredients Segment
Change in Net Sales —Three Months Ended (Year over Year)
Change in Net Sales—3Q14 to 3Q15 Used
Fats Proteins Cooking Oil Bakery Other Total
Net
Sales Third Quarter 2014 $ 171.8 $ 249.6 $ 39.7 $ 54.1 $ 92.1 $ 607.3
Changes:
Increase in sales volumes 11.7 14.7 3.0 7.4 — 36.8 Decrease in finished good prices
(41.2) (36.6) (2.5) (5.6) — (85.9) Decrease due to currency exchange rates (6.2) (17.6) (0.6) — (8.4) (32.8) Other change — — — — (0.2) (0.2)
Total Change: $ (35.7) $ (39.5) $ (0.1) $ 1.8 $ (8.6) $ (82.1)
Net SalesThird Quarter 2015 $ 136.1 $ 210.1 $ 39.6 $ 55.9 $ 83.5 $ 525.2
Creating sustainable food, feed and fuel ingredients for a growing population
17
Feed Ingredients Segment
Change in Net Sales –Nine Months Ended (Year over Year)
Change in YTD Net Sales Used
3Q14 to 3Q15 Fats Proteins Cooking Oil Bakery Other Total
Net Sales YTD Third Quarter 2014 $ 494.7 $ 734.7 $ 142.8 $ 167.7 $ 275.6 $ 1,815.5
Changes:
Increase in sales volumes 34.1 33.7 5.3
31.2— 104.3 Decrease in finished good prices (87.1) (74.1) (28.0) (34.9)— (224.1) Decrease due to currency exchange rates (19.0) (54.3) (1.3)— (28.7) (103.3) Other change — — 9.7 9.7
Total Change: $ (72.0) $ (94.7) $ (24.0) $ (3.7) $ (19.0) $ (213.4)
Net Sales YTD Third Quarter 2015 $ 422.7 $ 640.0 $ 118.8 $ 164.0 $ 256.6 $ 1,602.1
Creating sustainable food, feed and fuel ingredients for a growing population
18
Feed Ingredients Segment
Change in Net Sales —Three Months Ended (Year over Year)
Used
Change in Net Sales – 2Q14 to 2Q15 Fats Cooking Oil Proteins Bakery Other Total
Net Sales Second Quarter 2014 $ 165.9 $ 58.3 $ 251.9 $ 59.4 $ 86.6 $ 622.1
Changes:
Increase in sales volumes 12.3 1.4 12.0
12.9 — 38.6 Decrease in finished good prices (32.1) (16.3) (34.4) (18.0) — (100.8) Decrease due to currency exchange rates (6.2) (0.3) (19.6) — (9.9) (36.0) Other change — —
— — 5.5 5.5
Total Change: $ (26.0) $ (15.2) $ (42.0) $ (5.1) $ (4.4) $
(92.7) Net Sales Second Quarter 2015 $ 139.9 $ 43.1 $ 209.9 $ 54.3 $ 82.2 $ 529.4
Change in Net Sales
– 1Q14 to 1Q15 Used
Fats Cooking Oil Proteins Bakery Other Total
Net Sales First Quarter 2014 $ 157.0 $ 44.8 $ 233.2 $ 54.2 $ 96.9 $ 586.1
Changes:
Increase in sales volumes 10.1 0.9 7.0 10.9 — 28.9 Decrease in finished good prices (13.8) (9.2) (3.1) (11.3) — (37.4) Decrease due to currency exchange
rates (6.6) (0.4) (17.1) — (10.4) (34.5) Other change — — — — 4.4 4.4
Total Change: $ (10.3) $ (8.7) $ (13.2) $ (0.4) $ (6.0) $ (38.6)
Net Sales First Quarter 2015 $ 146.7 $ 36.1 $ 220.0 $ 53.8 $ 90.9 $ 547.5
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
Company’s non-domestic operations.
Using actual results for fiscal year 2014 and comparing the yearly average rates to the average rates for the
first nine months of 2015, the impact of the strengthened dollar would result in an annual decrease in net sales and operating cash flow of approximately $315.8 million and approximately $37.7 million, respectively if the same amount of non-domestic
operations were attained in fiscal 2015.
The U.S. dollar continues to strengthen at the time of this filing.
The impact is mainly affected by the drop in the Euro in comparison to the U.S. dollar.
Assumptions:
Exchange Rate: Avg. 2014 Avg. Q1 2015 Avg. Q2 2015 Avg. Q3 2015 Avg. YTD 2015
Euro/USD 1.32704 1.126696 1.105606 1.113029 1.114375
CAD/USD 0.90446 0.803378 0.813084 0.763154 0.794677
Creating sustainable food, feed and fuel ingredients for a growing population
19
Feed Segment—Historical
US$ and metric tons
Q1 Q2 Q3 Q4 Total Q1 Q2 (millions) 2014 2014 2014 2014 2014 2015 2015
Revenue (A) $586.1 $622.1 $607.3
$606.0 $2,421.5 $547.5 $529.4 Gross Margin (1) 142.5 165.4 132.5 132.5 572.9 123.5 124.5 Gross Margin % (1) 24.3% 26.6% 21.8% 21.9% 23.7% 22.6% 23.5% Operating Income (2) 37.5 74.7 46.4 33.6 192.2 35.4 35.4 Adjusted Operating Income
(1) 52.4 76.2 46.4 33.6 208.6 35.4 35.4 EBITDA (2) 76.1 114.6 84.2 76.4 351.3 75.5 75.9 Adjusted EBITDA (1) 90.9 116.1 84.2 76.4 367.6 75.5 75.9 Adjusted EBITDA/Revenue 15.5% 18.7% 13.9% 12.6% 15.2% 13.8% 14.3%
Raw Material Processed (3)
(millions of metric tons) 1.73 1.73 1.73 1.92 7.11 1.87 1.83
(1) Has impact of inventory step-up in 1st and 2nd quarter.
(2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week. (3) Raw material process volumes have been adjusted to include additional blending
materials. (A) Quarters 1, 2 and 3 revenues have been adjusted for re-class between sales and cost of sales.
Creating sustainable food, feed and fuel ingredients for a growing population
20
21
Food Segment—Historical
$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 (millions) 2014 2014 2014 2014 2014 2015 2015
Revenue (A) 293.5 331.4 301.4 322.0 1,248.3 270.2 283.4 Gross Margin (1) 62.3 65.3 64.2 63.4 255.2 53.5 60.2
Gross Margin % (1) 21.2% 19.7% 21.3% 19.7% 20.4% 19.8% 21.2%
Operating Income/(Loss)
(2) (12.1) 11.3 14.0 13.7 26.9 10.8 15.5 Adjusted Operating Income 19.8 14.7 14.0 13.7 62.2 10.8 15.5
(1)
EBITDA (2) 5.3 30.9 32.6 31.4 100.2 28.0 32.3
Adjusted EBITDA (1) 38.3 34.3 32.6 31.4 136.6 28.0 32.3
Adjusted EBITDA/Revenue 13.0% 10.4% 10.8% 9.7% 10.9% 10.4% 11.4%
Raw Material Processed
(millions of metric tons) 0.25 (3) 0.27 0.26 0.28 1.06 0.27 0.28
(1) Has impact of inventory step-up in 1st and 2nd quarter.
(2) Exclusive of non-cash inventory step-up and Darling Ingredients International 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) Quarters 1, 2 and 3 revenues have been adjusted for re-class between sales and cost of sales.
Creating sustainable food, feed and fuel ingredients for a growing population
22
Fuel Segment—Historical
$ and metric tons Q1 Q2 Q3 Q4 Q1 Q2 Total (millions) 2014 2014 2014 2014 2015 2015 Revenue $66.7 77.7 70.0 72.2 286.6 57.0
46.5 Gross Margin 15.3 15.9 17.8 10.0 59.0 13.2 6.3 Gross Margin % 21.1% 20.5% 25.4% 13.9% 20.6% 23.1% 13.5% Operating Income (2) 2.3 5.2 2.8 10.9 21.2 2.5 2.0
Adjusted Operating Income (1) 3.5 5.2 2.8 10.9 22.4 2.5 2.0
EBITDA (2) 9.7 11.1 11.5 16.9 49.2 9.1 8.6 Adjusted EBITDA (1) 10.9 11.1 11.5 16.9 50.4 9.1 8.6 Adjusted EBITDA/Revenue 16.3% 14.3% 16.4% 23.4% 17.6% 16.0% 18.5%
Raw Material Processed *
(millions of metric tons) 0.23 (3) 0.24 0.26 0.33 1.07 0.30 0.29
*Excludes raw material processed at the DGD joint venture.
Diamond Green Diesel (50% Joint Venture)
Q1 Q2 Q3
Q4 Q1 Q2 Note:
Assuming the $1.00/gallon biodiesel tax
US$ (millions) Total
2014 2014 2014 2014 2015 2015 credit is reinstated for 2015 the Q2
EBITDA for Darling’s share of DGD
EBITDA
(Darling’s share) $9.1 5.9 2.9 63.7 $81.6 2.3 7.9 would have been approximately $30.2 million. This includes a $1.00/gallon per 44.6 million gallons shipped of
(1) Has impact of inventory step-up in 1st quarter. renewable diesel in 2Q 2015.
(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) Quarters 1, 2 and 3 revenues have been adjusted for re-class between sales and cost of sales.
Creating sustainable food, feed and fuel ingredients for a growing population
23
Locations by Continent and Process
Process USA Canada Europe China S. America Australia Total:
Rendering—(C3 By-products & UCO) 93 * 5 18 116
Bakery 11 11 Used Cooking Oil processing only 8 1 9 Disposal Rendering—(C1 & C2) 6 6 Food Grade Fat
Processing 5 5 Blood Processing 1 4 5 1 11 Bone Processing 2 2 Bio Diesel 1 1 2 Renewable Diesel 1 1 Gelatin 2 4 4 3 13 Casings 4 1 5 Environmental Services 4 1 5 Fertilizer 1 1 Pet Food 2 1 3 Hides 3 3 6 127 6 49 10 3 1 196
Under Construction:
Rendering 2
European categories for rendering of
animal by-products:
*Includes transfer stations and blending
C3 – food-grade material, for food and feed products
Note: List excludes administrative and dedicated sales offices. • C2 – unfit for food or animal feed, can be
used as fertilizer
C1 – must be destroyed; used to generate green energy
Creating sustainable food, feed and fuel ingredients for a growing population
24
Non-U.S. GAAP 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 October 3, 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 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.
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food, feed and fuel ingredients for a growing population
Darling Ingredients (NYSE:DAR)
과거 데이터 주식 차트
부터 6월(6) 2024 으로 7월(7) 2024
Darling Ingredients (NYSE:DAR)
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부터 7월(7) 2023 으로 7월(7) 2024
