IRVING, Texas, Nov. 6, 2018 /PRNewswire/ -- Darling
Ingredients Inc. (NYSE: DAR), a global developer and producer of
sustainable natural ingredients from edible and inedible
bio-nutrients, creating a wide range of ingredients and customized
specialty solutions for customers in the pharmaceutical, food, pet
food, feed, industrial, fuel, bioenergy, and fertilizer industries,
today announced financial results for the 2018 third quarter ended
September 29, 2018.
Third Quarter 2018 Overview
- Revenue of $812.6
million
- Net loss of $(6.0) million, or
$(0.04) per GAAP diluted
share
- Adjusted EBITDA of $97.0
million
- Debt paydown of $12.0
million
- Diamond Green Diesel (DGD)
extended downtime strongly influenced results with higher costs and
lower volumes
- Record slaughter volumes creating ample supplies of fats and
proteins
- DGD extended downtime pressured fat selling prices
- Trade dispute with China
pressuring global trade flows of animal proteins
- Food segment stabilized, Fuel segment delivered improved
results without Blenders Tax Credit (BTC)
- DGD expansion on line early October and at name plate
capacity of 275 million gallons annually
- DGD JV approved Super Diamond Phase III Expansion to 675
million total gallons annually plus additional renewable Naphtha
gallons
For the third quarter of 2018, the Company reported net sales of
$812.6 million, as compared with net
sales of $936.3 million for the third
quarter of 2017. The $123.7 million
reduction in net sales resulted mainly from lower finished product
pricing and extended DGD downtime, the deconsolidation of the
Company's Best Hides subsidiary in 2018, billed freight recorded in
cost of sales in 2018 as compared to net sales in 2017 and the
divestiture of the Company's industrial residuals business in May
2018. Net loss attributable to Darling for the three
months ended September 29, 2018 was
$(6.0) million, or $(0.04) per diluted share, compared to a net
income of $7.8 million, or
$0.05 per diluted share, for the
third quarter of 2017. The net loss for the third quarter
2018 reflects lower finished product selling prices and an increase
in cost of sales from inventory write downs of approximately
$7.2 million in China relating to lower market values due to
the African Swine Fever (ASF) outbreak.
The Darling Ingredients Board also approved an increase in the
Company's previously announced share repurchase program from
$100 million to $200 million and extended the term of the program
for an additional year to August 13,
2020, to be exercised depending on market conditions. The
repurchases may be made from time to time on the open market at
prevailing market prices or in negotiated transactions off the
market. Repurchases may occur over the authorized period unless
extended or shortened by the Board of Directors.
Comments on the Third Quarter 2018
"We clearly delivered lower than expected results in third
quarter. Extended downtime at DGD largely influenced our financial
results and reshuffling our supply chain for fats and used cooking
oil impacted our feed segment results. Additionally, trade
disputes with China, record global
grain stocks and a stronger U.S. dollar weighed on our finished
product pricing," said Randall C.
Stuewe, Chairman and Chief Executive Officer of Darling
Ingredients Inc. "The silver lining is we had record raw material
volumes globally and now DGD is fully operational, and we expect to
produce 65-70 million gallons of renewable diesel in the
fourth quarter with spot margins in excess of $1.25 per gallon."
"Feed segment results were largely impacted by a lower pricing
environment and the deflationary lag in our U.S. raw material
formulas combined with an inventory write down of Chinese plasma
related to ASF. Food segment results improved sequentially and
delivered consistent year-over-year results with solid performance
from our Rousselot collagen platform and higher sales volumes in
China," stated Mr. Stuewe.
"In the Fuel segment, strong volumes supported improved
performance across Europe and
offset slightly weaker results in North American biodiesel due to
lower RIN pricing and the absence of the Blenders Tax Credit (BTC).
We remain optimistic that the BTC will re-instate late in the
fourth quarter 2018."
"We continue to act on our World of Growth strategy to grow our
core business and closed on the acquisition of Arkansas-based Triple – T Foods in early
October. The acquisition, which includes both cold storage
and a wet pet food operation, further expands our premium protein
business in the growing specialty pet food industry. We are also
excited to announce board approval for the Phase III Super Diamond
expansion to 675 million annual gallons of renewable diesel with
the construction of a second independent parallel plant.
Additionally, the project will include the construction of a new
renewable Naphtha, or green gasoline, plant and improved logistics
capability. The estimated cost for the entire project is
approximately $1.1 billion with
completion expected in the fourth quarter of 2021. This capital
cost is expected to be funded from cash generated by DGD's
operations. Margins remain attractive, and we look forward to
meeting the increased demands for sustainable low carbon fuel and
capturing higher LCFS margins from our increased capacity,"
concluded Mr. Stuewe.
Operational Update by Segment
- Feed Ingredients – Raw material formulas lagged
due to declining fat and protein markets throughout the quarter.
Earnings were further impacted by inventory write-down of Chinese
plasma due to ASF, ample fat supplies with DGD prolonged downtime
and record slaughter pushing tonnage higher by 6.1 percent. Trade
disruptions with China also
impacted global protein values.
- Food Ingredients – Global gelatin demand remains
robust. Earnings stabilized with improvements in Brazil and higher sales volumes in
China. Competing oilseed markets
weighed on our Sonac Edible fats margins. CTH casings business saw
decreased sales volume and lower earnings.
- Fuel Ingredients – Delivered consistent results
with Ecoson improvement supported by strong volumes from new biogas
digester production in Belgium.
North American biodiesel results moderated in Canada due to depressed RIN pricing and the
absence of the BTC. Rendac, our European disposal rendering
business, posted sound returns fueled by solid volumes in
Belgium and the Netherlands.
- Diamond Green Diesel Joint
Venture (DGD) – Entity performance was hindered by
lower volume and higher operating expenses associated with the
extended turnaround downtime as well as hedge losses. DGD posted
$0.04 EBITDA per gallon on 23.1
million gallons of renewable diesel sold during the quarter.
Facility ramped up to 275 million gallon annual run rate in early
October. LCFS global, premium markets spot priced recently at
approximately $1.89 per gallon.
Financial Update by Segment
Feed
Ingredients
|
Three Months
Ended
|
|
Nine Months
Ended
|
($
thousands)
|
September 29,
2018
|
September 30,
2017
|
|
September 29,
2018
|
September 30,
2017
|
Net sales
(1)
|
$
482,744
|
$
575,543
|
|
$
1,467,365
|
$
1,677,286
|
Selling, general and
administrative expenses
|
39,702
|
44,841
|
|
131,914
|
132,553
|
Depreciation and
amortization
|
47,321
|
46,860
|
|
140,933
|
134,933
|
Segment operating
income
|
11,875
|
34,268
|
|
70,796
|
105,448
|
Adjusted EBITDA
(2)
|
$
59,196
|
$
81,128
|
|
$
211,729
|
$
240,381
|
|
(1)
2018 includes revenue recognition reclass
for billed freight moved to cost of sales per new revenue
standard
|
(2)
Adjusted EBITDA calculated by adding
depreciation and amortization to segment operating
income
|
- Feed Ingredients operating income for the three months ended
September 29, 2018 was $11.9 million, a decrease of $22.4 million, or (65.3)%, as compared to the
three months ended September 30,
2017. This was due to lower finished product prices which
compressed margins and an increase in cost of sales from inventory
write downs in China relating to
lower market values due to ASF of approximately $7.2 million. This more than offset a
decrease in selling, general and administrative expense primarily
due to a gain of approximately $4.3
million from an accrued settlement of a lost profits claim
from a previous business interruption event.
- Feed Ingredients operating income during the nine months ended
September 29, 2018 was $70.8 million, a decrease of $34.6 million, or (32.8)%, as compared to the
nine months ended September 30, 2017.
Segment operating income was down in the nine months ended
September 29, 2018 as compared to the
same period in fiscal 2017 due to lower finished fat product prices
and higher depreciation charges from increased capital expenditures
that more than offset increased raw material volumes.
Food
Ingredients
|
Three Months
Ended
|
|
Nine Months
Ended
|
($
thousands)
|
September 29,
2018
|
September 30,
2017
|
|
September 29,
2018
|
September 30,
2017
|
Net sales
(1)
|
$
265,208
|
$
298,863
|
|
$
847,457
|
$
843,498
|
Selling, general and
administrative expenses
|
21,843
|
25,556
|
|
67,894
|
77,236
|
Restructuring and
impairment charges
|
-
|
-
|
|
14,965
|
-
|
Depreciation and
amortization
|
19,697
|
19,506
|
|
60,725
|
55,291
|
Segment operating
income
|
12,971
|
15,107
|
|
19,155
|
40,523
|
Adjusted EBITDA
(2)
|
$
32,668
|
$
34,613
|
|
$
94,845
|
$
95,814
|
|
(1)
2018 includes revenue recognition reclass
for billed freight moved to cost of sales per new revenue
standard
|
(2)
Adjusted EBITDA calculated by adding
depreciation and amortization and restructuring and impairment
charges to segment operating income
|
- Food Ingredients operating income was $13.0 million for the three months ended
September 29, 2018, a decrease of
$2.1 million, or (13.9)%, as compared
to the three months ended September 30,
2017. This decrease was primarily due to lower earnings in
the European gelatin markets, which is more than offset by improved
results in China and South and
North American gelatin markets. The Company's edible fat prices
were lower as a result of lower competing fat markets, and the
casings business delivered slightly lower earnings due to an
increase in raw material prices as compared to the same period in
fiscal 2017.
- Food Ingredients operating income was $19.2 million for the nine months ended
September 29, 2018, a decrease of
$21.3 million, or (52.6)%, as
compared to the nine months ended September
30, 2017. This decrease was primarily due to the
restructuring and impairment charges incurred as a result of the
Hurlingham, Argentina, gelatin
plant shut down and lower earnings in the European gelatin market.
The Company's edible fat prices were lower as a result of lower
competing fat markets compared to the same period in fiscal 2017.
The casings business delivered slightly lower earnings due to an
increase in raw material prices as compared to the same period in
fiscal 2017.
Fuel
Ingredients
|
Three Months
Ended
|
|
Nine Months
Ended
|
($
thousands)
|
September 29,
2018
|
September 30,
2017
|
|
September 29,
2018
|
September 30,
2017
|
Net sales
(1)
|
$
64,624
|
$
61,856
|
|
$
219,774
|
$
188,918
|
Selling, general and
administrative expenses
|
(2,822)
|
(488)
|
|
(4,056)
|
5,648
|
Depreciation and
amortization
|
9,370
|
7,912
|
|
26,378
|
22,472
|
Segment operating
income
|
4,518
|
189
|
|
26,691
|
5,877
|
Adjusted EBITDA
(2)
|
$
13,888
|
$
8,101
|
|
$
53,069
|
$
28,349
|
|
(1) 2018 includes
revenue recognition reclass for billed freight moved to cost of
sales per new revenue standard
|
(2) Adjusted EBITDA
calculated by adding depreciation and amortization to segment
operating income
|
Fuel Ingredients
Segment results shown do not include the Diamond Green Diesel (DGD)
50% Joint Venture
|
- Exclusive of the DGD Joint Venture, the Company's Fuel
Ingredients segment operating income for the three months ended
September 29, 2018 was $4.5 million, an increase of $4.3 million, or 2,150.0%, as compared to the
same period in fiscal 2017. The increase is primarily due to a
business interruption insurance gain recorded at Rendac of
approximately $4.1 million and
overall higher sales volumes at Ecoson.
- Exclusive of the DGD Joint Venture, the Company's Fuel
Ingredients segment income for the nine months ended September 29, 2018 was $26.7 million, an increase of $20.8 million, or 352.5%, as compared to the same
period in fiscal 2017. The increase in earnings is primarily due to
the reinstated fiscal 2017 blenders tax credits in North America of approximately $12.6 million recorded in the first quarter of
fiscal 2018 as compared to the lack of blenders tax credits in the
same period of fiscal 2017 and higher overall sales prices due to
strong demand from the biodiesel industry.
Darling
Ingredients Inc. and Subsidiaries
|
Consolidated
Operating Results
|
For the Periods
Ended September 29, 2018 and September 30, 2017
|
(in thousands, except
per share data)
|
(unaudited)
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
|
$ Change
|
|
|
September
29,
|
|
September
30,
|
|
Favorable
|
|
|
September
29,
|
|
September
30,
|
|
Favorable
|
|
2018
|
|
2017
|
|
(Unfavorable)
|
|
|
2018
|
|
2017
|
|
(Unfavorable)
|
Net sales
|
$
812,576
|
|
$
936,262
|
|
$
(123,686)
|
|
|
$
2,534,596
|
|
$
2,709,702
|
|
$
(175,106)
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales and
operating expenses
|
648,101
|
|
742,511
|
|
94,410
|
|
|
1,979,201
|
|
2,129,721
|
|
150,520
|
|
Selling, general and
administrative expenses
|
67,447
|
|
82,153
|
|
14,706
|
|
|
232,907
|
|
253,608
|
|
20,701
|
|
Restructuring and
impairment charges
|
-
|
|
-
|
|
-
|
|
|
14,965
|
|
-
|
|
(14,965)
|
|
Depreciation and
amortization
|
78,842
|
|
77,202
|
|
(1,640)
|
|
|
235,915
|
|
221,306
|
|
(14,609)
|
Total costs and
expenses
|
794,390
|
|
901,866
|
|
107,476
|
|
|
2,462,988
|
|
2,604,635
|
|
141,647
|
Operating
income
|
18,186
|
|
34,396
|
|
(16,210)
|
|
|
71,608
|
|
105,067
|
|
(33,459)
|
Other
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(20,080)
|
|
(22,531)
|
|
2,451
|
|
|
(66,220)
|
|
(66,657)
|
|
437
|
|
Debt extinguishment
costs
|
-
|
|
-
|
|
-
|
|
|
(23,509)
|
|
-
|
|
(23,509)
|
|
Foreign currency
loss
|
(2,106)
|
|
(2,055)
|
|
(51)
|
|
|
(7,082)
|
|
(4,430)
|
|
(2,652)
|
|
Gain/(loss) on
disposal of subsidiaries
|
3,038
|
|
-
|
|
3,038
|
|
|
(12,500)
|
|
-
|
|
(12,500)
|
|
Other expense,
net
|
(2,786)
|
|
(2,533)
|
|
(253)
|
|
|
(4,103)
|
|
(8,383)
|
|
4,280
|
Total other
expense
|
(21,934)
|
|
(27,119)
|
|
5,185
|
|
|
(113,414)
|
|
(79,470)
|
|
(33,944)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in net
income/(loss) of unconsolidated subsidiaries
|
(2,792)
|
|
7,703
|
|
(10,495)
|
|
|
109,598
|
|
16,669
|
|
92,929
|
Income/(loss) before
income taxes
|
(6,540)
|
|
14,980
|
|
(21,520)
|
|
|
67,792
|
|
42,266
|
|
25,526
|
Income tax
expense/(benefit)
|
(1,403)
|
|
6,296
|
|
7,699
|
|
|
3,992
|
|
15,856
|
|
11,864
|
Net
income/(loss)
|
(5,137)
|
|
8,684
|
|
(13,821)
|
|
|
63,800
|
|
26,410
|
|
37,390
|
Net income
attributable to noncontrolling interests
|
(900)
|
|
(923)
|
|
23
|
|
|
(2,952)
|
|
(3,671)
|
|
719
|
Net income/(loss)
attributable to Darling
|
$
(6,037)
|
|
$
7,761
|
|
$
(13,798)
|
|
|
$
60,848
|
|
$
22,739
|
|
$
38,109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income/(loss)
per share:
|
$
(0.04)
|
|
$
0.05
|
|
$
(0.09)
|
|
|
$
0.37
|
|
$
0.14
|
|
$
0.23
|
Diluted income/(loss)
per share:
|
$
(0.04)
|
|
$
0.05
|
|
$
(0.09)
|
|
|
$
0.37
|
|
$
0.14
|
|
$
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of diluted
common shares
|
164,656
|
|
167,181
|
|
|
|
|
165,774
|
|
166,628
|
|
|
Darling
Ingredients Inc. and Subsidiaries
|
Condensed
Consolidated Balance Sheets
|
September 29, 2018
and December 30, 2017
|
(in
thousands)
|
|
|
September
29,
|
|
December
30,
|
|
2018
|
|
2017
|
ASSETS
|
(unaudited)
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
81,470
|
|
$
106,774
|
Restricted
cash
|
103
|
|
142
|
Accounts receivable,
net
|
363,312
|
|
391,847
|
Inventories
|
361,679
|
|
358,183
|
Prepaid
expenses
|
43,305
|
|
38,326
|
Income taxes
refundable
|
8,356
|
|
4,509
|
Other current
assets
|
20,253
|
|
56,664
|
Total current assets
|
878,478
|
|
956,445
|
Property, plant and
equipment, less accumulated depreciation, net
|
1,631,036
|
|
1,645,822
|
Intangible
assets, less accumulated amortization, net
|
593,234
|
|
676,500
|
Goodwill
|
1,233,545
|
|
1,301,093
|
Investment in
unconsolidated subsidiaries
|
398,794
|
|
302,038
|
Other
assets
|
54,574
|
|
62,284
|
Deferred income
taxes
|
15,550
|
|
14,043
|
Total assets
|
$
4,805,211
|
|
$
4,958,225
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt
|
$
11,100
|
|
$
16,143
|
Accounts payable,
principally trade
|
177,769
|
|
217,417
|
Income taxes
payable
|
5,906
|
|
12,300
|
Accrued
expenses
|
291,056
|
|
313,623
|
Total current liabilities
|
485,831
|
|
559,483
|
Long-term debt, net
of current portion
|
1,668,129
|
|
1,698,050
|
Other non-current
liabilities
|
101,878
|
|
106,287
|
Deferred income
taxes
|
234,070
|
|
266,708
|
Total liabilities
|
2,489,908
|
|
2,630,528
|
Commitments and
contingencies
|
|
|
|
Total Darling's
stockholders' equity
|
2,254,442
|
|
2,244,933
|
Noncontrolling
interests
|
60,861
|
|
82,764
|
Total stockholders' equity
|
$
2,315,303
|
|
$
2,327,697
|
|
$
4,805,211
|
|
$
4,958,225
|
Darling
Ingredients Inc. and Subsidiaries
|
Consolidated
Statement of Cash Flows
|
Nine Months Ended
September 29, 2018 and September 30, 2017
|
(in
thousands)
|
(unaudited)
|
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
Cash flows from
operating activities:
|
2018
|
|
2017
|
|
Net income
|
|
$
63,800
|
|
$
26,410
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
Depreciation and
amortization
|
235,915
|
|
221,306
|
|
|
Loss/(gain) on
disposal of property, plant, equipment and other assets
|
472
|
|
(537)
|
|
|
Loss on disposal of
subsidiary
|
12,500
|
|
-
|
|
|
Asset
impairment
|
2,907
|
|
-
|
|
|
Gain on insurance
proceeds from insurance settlements
|
(1,253)
|
|
-
|
|
|
Deferred
taxes
|
(15,708)
|
|
(14,242)
|
|
|
Increase/(decrease)
in long-term pension liability
|
(375)
|
|
1,574
|
|
|
Stock-based
compensation expense
|
13,606
|
|
14,710
|
|
|
Write-off deferred
loan costs
|
8,163
|
|
443
|
|
|
Deferred loan cost
amortization
|
6,265
|
|
6,581
|
|
|
Equity in net income
of unconsolidated subsidiaries
|
(109,598)
|
|
(16,669)
|
|
|
Distribution of
earnings from unconsolidated subsidiaries
|
27,418
|
|
26,600
|
|
|
Changes in operating
assets and liabilities, net of effects from
acquisitions:
|
|
|
|
|
|
Accounts
receivable
|
9,657
|
|
(5,311)
|
|
|
Income taxes
refundable/payable
|
(9,838)
|
|
18,332
|
|
|
Inventories
and prepaid expenses
|
(25,960)
|
|
(31,058)
|
|
|
Accounts
payable and accrued expenses
|
(23,004)
|
|
39,937
|
|
|
Other
|
|
4,731
|
|
(19,305)
|
|
|
|
Net cash provided by
operating activities
|
199,698
|
|
268,771
|
Cash flows from
investing activities:
|
|
|
|
|
Capital
expenditures
|
(213,726)
|
|
(196,446)
|
|
Acquisitions, net of
cash acquired
|
(51,301)
|
|
(12,144)
|
|
Investment of
unconsolidated subsidiaries
|
(10,000)
|
|
(4,750)
|
|
Proceeds from sale of
investment in subsidiaries
|
82,805
|
|
-
|
|
Gross proceeds from
disposal of property, plant and equipment and other
assets
|
3,361
|
|
4,953
|
|
Proceeds from
insurance settlement
|
1,253
|
|
3,301
|
|
Payments related to
routes and other intangibles
|
(1,253)
|
|
(5,635)
|
|
|
|
Net cash used by
investing activities
|
(188,861)
|
|
(210,721)
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
long-term debt
|
623,698
|
|
24,069
|
|
Payments on long-term
debt
|
(661,268)
|
|
(94,250)
|
|
Borrowings from
revolving credit facility
|
386,436
|
|
142,000
|
|
Payments on revolving
credit facility
|
(362,463)
|
|
(147,327)
|
|
Net cash overdraft
financing
|
3,361
|
|
2,590
|
|
Deferred loan
costs
|
(9,668)
|
|
(1,177)
|
|
Issuance of common
stock
|
182
|
|
22
|
|
Minimum withholding
taxes paid on stock awards
|
(2,215)
|
|
(2,140)
|
|
Acquisition of
noncontrolling interest
|
-
|
|
(429)
|
|
Distributions to
noncontrolling interests
|
(8,005)
|
|
(2,513)
|
|
|
|
Net cash used by
financing activities
|
(29,942)
|
|
(79,155)
|
Effect of exchange
rate changes on cash
|
(6,238)
|
|
16,676
|
Net
increase/(decrease) in cash, cash equivalents and restricted
cash
|
(25,343)
|
|
(4,429)
|
Cash, cash
equivalents and restricted cash at beginning of period
|
106,916
|
|
114,857
|
Cash, cash
equivalents and restricted cash at end of period
|
$
81,573
|
|
$
110,428
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Accrued capital
expenditures
|
$
(5,295)
|
|
$
(3,532)
|
|
Cash paid during the
period for:
|
|
|
|
|
|
Interest, net of
capitalized interest
|
$
58,731
|
|
$
(58,219)
|
|
|
Income taxes, net of
refunds
|
$
28,682
|
|
$
13,719
|
|
Non-cash financing
activities:
|
|
|
|
|
|
Debt issued for
assets
|
$
24
|
|
$
3
|
Selected financial information for the Company's Diamond Green Diesel Joint Venture is as
follows:
Diamond Green
Diesel Joint Venture
|
Condensed
Consolidated Balance Sheets
|
September 30, 2018
and December 31, 2017
|
(in
thousands)
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
2018
|
|
2017
|
Assets:
|
|
(unaudited)
|
|
|
|
Total current
assets
|
|
$
178,875
|
|
$
202,778
|
|
Property, plant and
equipment, net
|
|
567,092
|
|
435,328
|
|
Other
assets
|
|
26,949
|
|
4,655
|
|
|
Total
assets
|
|
$
772,916
|
|
$
642,761
|
|
|
|
|
|
|
|
Liabilities and
members' equity:
|
|
|
|
|
|
Total current portion
of long term debt
|
|
$
182
|
|
$
17,023
|
|
Total other current
liabilities
|
|
46,502
|
|
40,705
|
|
Total long term
debt
|
|
8,535
|
|
36,730
|
|
Total other long term
liabilities
|
|
533
|
|
450
|
|
Total members'
equity
|
|
717,164
|
|
547,853
|
|
|
Total liabilities and
members' equity
|
|
$
772,916
|
|
$
642,761
|
Diamond Green
Diesel Joint Venture
|
Operating
Financial Results
|
Three Months and
Nine Months Ended September 30, 2018 and September 30,
2017
|
(in
thousands)
|
(unaudited)
|
|
|
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
|
|
|
|
$ Change
|
|
|
|
|
|
|
$ Change
|
|
|
|
September
30,
|
|
September
30,
|
|
Favorable
|
|
|
September
30,
|
|
September
30,
|
|
Favorable
|
Revenues:
|
2018
|
|
2017
|
|
(Unfavorable)
|
|
|
2018
|
|
2017
|
|
(Unfavorable)
|
|
Operating
revenues
|
$
104,811
|
|
$
175,585
|
|
$
(70,774)
|
|
|
$
407,121
|
|
$
451,768
|
|
$
(44,647)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and
expenses less depreciation,
amortization and accretion expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103,794
|
|
154,446
|
|
50,652
|
|
|
169,632
|
|
395,743
|
|
226,111
|
|
Depreciation,
amortization and accretion expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,516
|
|
6,733
|
|
217
|
|
|
18,890
|
|
22,867
|
|
3,977
|
Total costs and
expenses
|
110,310
|
|
161,179
|
|
50,869
|
|
|
188,522
|
|
418,610
|
|
230,088
|
|
Operating income
/(loss)
|
(5,499)
|
|
14,406
|
|
(19,905)
|
|
|
218,599
|
|
33,158
|
|
185,441
|
Other
income
|
556
|
|
408
|
|
148
|
|
|
1,348
|
|
959
|
|
389
|
|
|
Interest and debt
expense, net
|
(318)
|
|
(455)
|
|
137
|
|
|
(637)
|
|
(2,306)
|
|
1,669
|
|
|
Net
income/(loss)
|
$
(5,261)
|
|
$
14,359
|
|
$
(19,620)
|
|
|
$
219,310
|
|
$
31,811
|
|
$
187,499
|
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) (for additional information, see "Use of Non-GAAP
Financial Measures" included later in this media release). The
Company believes that Adjusted EBITDA provides additional useful
information to investors. Adjusted EBITDA, as the Company uses the
term, is calculated below:
Reconciliation of
Net Income to (Non-GAAP) Adjusted EBITDA and (Non-GAAP) Pro forma
Adjusted EBITDA
|
Three and nine months
ended September 29, 2018 and September 30, 2017
|
|
|
|
Three Months Ended -
Year over Year
|
|
Nine Months Ended -
Year over Year
|
Adjusted
EBITDA
|
September
29,
2018
|
|
September
30,
2017
|
|
September
29,
2018
|
|
September
30,
2017
|
(U.S. dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
attributable to Darling
|
$
(6,037)
|
|
$
7,761
|
|
$
60,848
|
|
$
22,739
|
Depreciation and
amortization
|
78,842
|
|
77,202
|
|
235,915
|
|
221,306
|
Interest
expense
|
20,080
|
|
22,531
|
|
66,220
|
|
66,657
|
Income tax
expense/(benefit)
|
(1,403)
|
|
6,296
|
|
3,992
|
|
15,856
|
Restructuring and
impairment charges
|
-
|
|
-
|
|
14,965
|
|
-
|
Foreign currency
loss
|
2,106
|
|
2,055
|
|
7,082
|
|
4,430
|
Other expense,
net
|
2,786
|
|
2,533
|
|
4,103
|
|
8,383
|
Debt extinguishment
costs
|
-
|
|
-
|
|
23,509
|
|
-
|
Loss/(Gain) on
disposal of subsidiary
|
(3,038)
|
|
-
|
|
12,500
|
|
-
|
Equity in net
(income)/loss of unconsolidated subsidiaries
|
2,792
|
|
(7,703)
|
|
(109,598)
|
|
(16,669)
|
Net income
attributable to noncontrolling interests
|
900
|
|
923
|
|
2,952
|
|
3,671
|
|
Adjusted
EBITDA
|
$
97,028
|
|
$
111,598
|
|
$
322,488
|
|
$
326,373
|
|
|
|
|
|
|
|
|
|
Foreign currency
exchange impact (1)
|
1,055
|
|
-
|
|
(10,844)
|
|
-
|
Pro forma Adjusted
EBITDA to Foreign Currency (Non-GAAP)
|
$
98,083
|
|
$
111,598
|
|
$
311,644
|
|
$
326,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DGD Joint Venture
Adjusted EBITDA (Darling's share)
|
$
509
|
|
$
10,570
|
|
$
118,745
|
|
$
28,013
|
|
|
(1)
|
The average rates
assumption used in the calculation was the actual fiscal average
rate for the three months ended September 29, 2018 of
€1.00:USD$1.16 and CAD$1.00:USD$0.76 as compared to the
average rate for the three months ended September 30, 2017 of
€1.00:USD$1.18 and CAD$1.00:USD$0.80, respectively. The
average rates assumption used in the calculation was the actual
fiscal average rate for the nine months ended September 29, 2018 of
€1.00:USD$1.20 and CAD$1.00:USD$0.78 as compared to the
average rate for the nine months ended September 30, 2017 of
€1.00:USD$1.11 and CAD$1.00:USD$0.77, respectively.
|
About Darling
Darling Ingredients Inc. is a global developer and producer of
sustainable natural ingredients from edible and inedible
bio-nutrients, creating a wide range of ingredients and specialty
solutions for customers in the pharmaceutical, food, pet food,
feed, technical, fuel, bioenergy, and fertilizer industries.
With operations on five continents, the Company collects and
transforms all aspects of animal by-product streams into useable
and specialty ingredients, such as gelatin, edible fats, feed-grade
fats, animal proteins and meals, plasma, pet food ingredients,
organic fertilizers, yellow grease, fuel feedstocks, green energy,
natural casings and hides. The Company also recovers and
converts recycled oils (used cooking oil and animal fats) into
valuable feed and fuel ingredients, and collects and processes
residual bakery products into feed ingredients. In addition, the
Company provides environmental services, such as grease trap
collection and disposal services to food service establishments.
The Company sells its products domestically and internationally and
operates within three industry segments: Feed Ingredients, Food
Ingredients and Fuel Ingredients. For additional information, visit
the Company's website at http://www.darlingii.com.
Darling Ingredients Inc. will host a conference call to discuss
the Company's third quarter 2018 financial results at 8:30
am Eastern Time (7:30 am Central
Time) on Wednesday, November
7, 2018. To listen to the conference call,
participants calling from within North
America should dial 1-844-868-8847; international
participants should dial 1-412-317-6593. Please refer
to access code 10125255. 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 15,
2018, by dialing 1-877-344-7529 (U.S. callers), 855-669-9658
(Canada) and 1-412-317-0088
(international callers). The access code for the replay is
10125255. The conference call will also be archived on
the Company's website.
Use of Non-GAAP Financial Measures:
Adjusted EBITDA is not a recognized accounting measurement under
GAAP; it should not be considered as an alternative to net income,
as a measure of operating results, or as an alternative to cash
flow as a measure of liquidity, and is not intended to be a
presentation in accordance with GAAP. Adjusted EBITDA is
presented here not as an alternative to net income, but rather as a
measure of the Company's operating performance. 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. 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 3.625% Notes that were outstanding
at September 29, 2018. 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
3.625% Notes, as those definitions permit further adjustments to
reflect certain other non-recurring costs, non-cash charges and
cash dividends from the DGD Joint Venture. Additionally, the
Company evaluates the impact of foreign exchange impact on
operating cash flow, which is defined as segment operating income
(loss) plus depreciation and amortization.
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; 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, or otherwise; reduced demand for animal feed;
reduced finished product prices, including a decline in fat and
used cooking oil finished product prices; changes to worldwide
government policies relating to renewable fuels and greenhouse
gas("GHG") emissions that adversely affect programs like the U.S.
government's renewable fuel standard, low carbon fuel standards
("LCFS") 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 2009 H1N1 flu (initially known as
"Swine Flu"), Highly pathogenic strains of avian influenza
(collectively known as "Bird Flu"), bovine spongiform
encephalopathy (or "BSE"), porcine epidemic diarrhea ("PED") or
other diseases associated with animal origin in the United States or elsewhere, such as the
recent African Swine Fever ("ASF") outbreak in China; 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 (including, without
limitation, China) regulations
(including new or modified animal feed, Bird Flu, PED, BSE, ASF or
similar or unanticipated regulations) affecting the industries in
which the Company operates or its value added products; risks
associated with the DGD Joint Venture, including possible
unanticipated operating disruptions and issues relating to the
announced expansion project; risks and uncertainties relating to
international sales and operations, including imposition of
tariffs, quotas, trade barriers and other trade protections imposed
by foreign countries; difficulties or a significant disruption in
our information systems or failure to implement new systems and
software successfully, including our ongoing enterprise
resource planning project; 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; uncertainty regarding the likely exit of the U.K. from
the European Union; 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,
VP IR and Global Communications
|
Email :
mgaither@darlingii.com
|
251 O'Connor Ridge
Blvd., Suite 300, Irving, Texas 75038
|
Phone :
972-717-0300
|
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SOURCE Darling Ingredients Inc.