Attached files
| file | filename |
|---|---|
| 8-K - 8-K - DARLING INGREDIENTS INC. | d73887d8k.htm |
| EX-99.1 - EX-99.1 - DARLING INGREDIENTS INC. | d73887dex991.htm |
 Second Quarter 2015
Earnings Conference Call
August 14, 2015 Creating sustainable food, feed and fuel ingredients for a growing population Randall C. Stuewe, Chairman and CEO John O. Muse, EVP Chief Financial Officer
Exhibit 99.2 |
 Safe Harbor Statement
2 Creating sustainable food, feed and fuel ingredients for a growing population
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. |
 2015 Second Quarter Overview
3 • Announced a stock repurchase program for up to $100 million of common stock
• EBITDA sequentially improved, adjustments taking hold, even with continued deflationary commodities
• Reported $105,537 million EBITDA • Strong performance by global gelatin business • Adjustments made to Food Segment taking hold • Global rendering turned in solid performance • Significant working capital improvement • SG&A reductions continue • CAPEX spending controlled and lowered for the year • Debt reduced by $70.0 million during quarter (includes $25 million dividend from DGD)
• Foreign currency impact of $(1.0) million vs. Q1-2015 • Continuing integration costs for systems and compliance amounted to $(1.2) million
• Versus Q2-2014--- FX Adjusted EBITDA $120.9 million vs. $152.1 million • Foreign currency impact of $(14.2) million vs. Q2-2014 • Canada Biodiesel impacted by lower RIN values and lower diesel prices • Global businesses continue to perform nicely in light of price volatility
• Diamond Green Diesel (DGD) shipped over 44.6 million gallons of renewable diesel…
$.13 EPS if tax credit retroactive
• Issued dividend of $25 million out of DGD in April; debt reduced in JV by $43 million
• Anticipate second dividend in Q4 • On plan to produce 160 million gallons for the year • Announced a stock repurchase program for up to $100 million of common stock
• EBITDA sequentially improved, adjustments taking hold, even with continued deflationary commodities
• Reported $105,537 million EBITDA • Strong performance by global gelatin business • Adjustments made to Food Segment taking hold • Global rendering turned in solid performance • Significant working capital improvement • SG&A reductions continue • CAPEX spending controlled and lowered for the year • Debt reduced by $70.0 million during quarter (includes $25 million dividend from DGD)
• Foreign currency impact of $(1.0) million vs. Q1-2015 • Continuing integration costs for systems and compliance amounted to $(1.2) million
• Versus Q2-2014--- FX Adjusted EBITDA $120.9 million vs. $152.1 million • Foreign currency impact of $(14.2) million vs. Q2-2014 • Canada Biodiesel impacted by lower RIN values and lower diesel prices • Global businesses continue to perform nicely in light of price volatility
• Diamond Green Diesel (DGD) shipped over 44.6 million gallons of renewable diesel…
$.13 EPS if tax credit retroactive
• Issued dividend of $25 million out of DGD in April; debt reduced in JV by $43 million
• Anticipate second dividend in Q4 • On plan to produce 160 million gallons for the year Diamond Green Diesel facility in Norco, LA Creating sustainable food, feed and fuel ingredients for a growing population |
 Earnings Summary
4 Note: (1) The three months ended July 4, 2015 includes approximately $10.6 million write-off of deferred loan costs related to the retirement
of the Euro Term Loan B borrowings under the term B
facility. Creating sustainable food, feed and fuel ingredients
for a growing population July 4,
April 4, June 28, July 4, June 28, 2015 2015 2014 2015 2014 Revenues 859,315 $ 874,694 $ 1,031,283 $ 1,734,009 $ 1,977,575 $ Gross profit 191,039 190,173 241,778 381,212 412,864 Selling, general and administrative expenses 84,294 86,631 94,630 170,925 184,663 Depreciation and amortization 66,245 66,398 67,498 132,643 133,167 Acquisition and integration costs 1,208 5,319 4,165 6,527 20,113 Interest expense (1) 34,285 23,109 26,571 57,394 85,428 Foreign currency gain/(loss) 1,622 (2,460) 11 (838) (13,803) Other income/(expense), net (1,199) (509) (887) (1,708) (2,025) Equity in net income/(loss) of unconsolidated subsidiary 4,172 (1,808) 2,040 2,364 7,117 Income before taxes 9,602 3,939 50,078 13,541 (19,218) Income tax expense/(benefit) 4,665 2,115 15,503 6,780 (2,787) Net income/(loss) 4,937 1,824 34,575 6,761 (16,431) Net (income)/loss attributable in minority interests (1,857) (1,715) (1,818) (3,572) (3,615) Net income/(loss) attributable to Darling 3,080 $ 109 $
32,757 $ 3,189 $ (20,046) $ Earnings/(loss) per share (fully diluted) 0.02 $
- $
0.20 $
0.02 $
(0.12) $
Three Months Ended – Sequential and Year over Year
Six Months Ended - Year over Year |
 Adjusted EBITDA
5 (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 (USD/Euro 1.1267 rate April 4, 2015 quarter and USD/Euro 1.3744 June
28, 2014 quarter (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 Creating sustainable food, feed and fuel ingredients for a growing population
Adjusted EBITDA and Pro Forma Adjusted EBITDA
(US$ in thousands) July 4, April 4, July 4, June 28, 2015 2015 2015 2014 Net income/(loss) attributable to Darling $ 3,080
$ $ $ (20,046)
Depreciation and amortization
66,245 66,398 132,643 133,167 Interest expense 34,285 23,109 57,394 85,428 Income tax expense/(benefit) 4,665 2,115 6,780 (2,787) Foreign currency (gain)/loss (1,622) 2,460 838 13,803 Other expense/(income), net 1,199 509 1,708 2,025 Equity in net (income)/loss of unconsolidated subsidiaries (4,172) 1,808 (2,364) (7,117) Net income attributable to noncontrolling interests 1,857 1,715 3,572 3,615 Adjusted EBITDA $ 105,537 $ 98,223
$ 203,760
$
208,088 Non-cash inventory step-up associated with VION
Acquisition 49,803
Acquisition and integration-related expenses
1,208 5,319 6,527 20,113 Darling Ingredients International - 13th week (1) 4,100 Pro Forma Adjusted EBITDA (Non-GAAP) $ 106,745 $ 103,542 $ 210,287 $ 282,104 Foreign currency exchange impact $ 924
$ 27,137
– Pro Forma Adjusted EBITDA to Foreign Currency (Non-GAAP) (2) $ 107,669 $ 103,542 $ 237,424 $ 282,104 DGD Joint Venture Adjusted EBITDA (Darling's Share) (3) $ 7,909
$
2,346
$ 10,255
$ 14,975
Six Months Ended -
Year over Year Three Months Ended - Sequential – – – – – – – 3,189 109 |
  Balance Sheet Highlights and Debt Summary
6 Debt Summary Balance Sheet Highlights (US$, in thousands) July 4, 2015 Amended Credit Agreement Revolving Credit Facility 57,552 $
Term Loan A 295,370 Term Loan B 592,500 5.375% Senior Notes due 2022
500,000 4.750% Euro Senior Notes due 2022
571,521 Other Notes and Obligations
28,358 Total Debt:
2,045,301 $
(US$, in thousands) July 4, 2015 Cash 126,360 $ Accounts receivable 368,434 Total Inventories
396,423 Net working capital
445,127 Net property, plant and equipment
1,515,573 Total assets 4,938,800 $ Total debt 2,045,301 $ Shareholders' equity 1,969,111 $ Creating sustainable food, feed and fuel ingredients for a growing population |
 11 12 13 14 15 Q3 2014 Q4 2014 Q1 2015 Q2 2015 LTM EBITDA Margin Feed Segment Operational Highlights 7 • Global rendering making necessary adjustments • Volumes seasonally declined • Europe and Canada both steady • USA formulas lagging somewhat due to declining fat and compressing feed grade/pet food premiums • UCO business made adjustments and showing signs of improvement • Bakery showed small improvement, with more expected • TRS, Nature Safe and our Premium Proteins businesses
all had improved performances
Note: Cost of Sales includes raw material costs, collection costs and factory
costs. EBITDA Bridge Q1 2015 to Q2 2015
(millions) $75.5 ($4.7) ($11.7) $17.7 ($0.8) ($0.1) $76.0 $75.9 $40 $50 $60 $70 $80 EBITDA Q1 2015 Price/ Yield Volumes Cost of Sales Other Adjusted EBITDA Q2 2015 FX Impact EBITDA Q2 2015 US$ and metric tons (millions) Q1 2015 Q2 2015 Delta % Q1 to Q2 Revenue $547.5 $529.4 -3.3% Gross Margin 123.5 124.5 0.8% Gross Margin % 22.6% 23.5% Operating Income 35.4 35.4 0.0% EBITDA 75.5 75.9 0.5% EBITDA/Revenue 13.8% 14.3% Raw Material Processed (million metric tons) 1.87 1.83 -1.95% 13.9% 12.6% 13.8% 14.3% Creating sustainable food, feed and fuel ingredients for a growing population |
 8 Nearby Malaysia Palm Oil Futures ($/MT) Nearby CBOT Soybean Oil Futures (cents/lb.) Nearby CBOT Corn Futures (cents/bu.) Nearby CBOT Soybean Meal Futures ($/ton) Source: Chicago Board of Trade (CBOT) Creating sustainable food, feed and fuel ingredients for a growing population |
 Jacobsen, Wall Street Journal and Thomson Reuters Historical
Pricing 9 2015 Average Jacobsen Prices (USD) January February March Q1 Avg. April May June Q2 Avg. BFT - Chicago Renderer / cwt $29.16 $29.14 $30.53 $29.66 $28.69 $28.95 $29.91 $29.18 YG - IL / cwt $24.54 $24.34 $24.81 $24.58 $22.36 $22.84 $24.50 $23.24 MBM - IL / ton $402.13 $375.53 $377.95 $385.12 $387.02 $359.75 $304.20 $348.88 Feed Grade PM - Mid South / ton $466.00 $460.26 $468.18 $465.00 $487.14 $427.25 $370.91 $426.94 Pet Food PM - Mid South / ton $712.50 $629.61 $625.00 $655.12 $607.74 $520.00 $446.59 $521.50 Feathermeal - Mid South / ton $538.63 $460.39 $565.00 $523.77 $579.17 $491.75 $430.57 $499.13 2015 Average Wall Street Journal Prices (USD) January February March Q1 Avg. April May June Q2 Avg. Corn - Track Cental IL #2 Yellow / bushel $3.65 $3.68 $3.66 $3.66 $3.55 $3.48 $3.49 $3.51 2015 Average Thomson Reuters Prices (USD) January February March Q1 Avg. April May June Q2 Avg. Palm oil - CIF Rotterdam / metric ton $619 $698 $652 $656 $645 $653 $651 $650 Soy meal - CIF Rotterdam / metric ton $456 $442 $410 $436 $403 $392 $393 $396 Creating sustainable food, feed and fuel ingredients for a growing population
QTR. Over QTR.
Year Over Year
Comparison Q1-2015 Q2-2015 % Q2-2014 Q2-2015 % Average Jacobsen Prices (USD) Avg. Avg. Change Avg. Avg. Change BFT - Chicago Renderer / cwt $29.66 $29.18 -1.6% $42.49 $29.18 -31.3% YG - IL / cwt $24.58 $23.24 -5.5% $33.68 $23.24 -31.0% MBM - IL / ton $385.12 $348.88 -9.4% $530.63 $348.88 -34.3% Feed Grade PM - Mid South / ton $465.00 $426.94 -8.2% $603.68 $426.94 -29.3% Pet Food PM - Mid South / ton $655.12 $521.50 -20.4% $818.34 $521.50 -36.3% Feathermeal - Mid South / ton $523.77 $499.13 -4.7% $702.98 $499.13 -29.0% Average Wall Street Journal Prices (USD) Corn - Track Cental IL #2 Yellow / bushel $3.66 $3.51 -4.1% $4.66 $3.51 -24.7% Average Thomson Reuters Prices (USD) Palm oil - CIF Rotterdam / metric ton $656 $650 -0.9% $872 $650 -25.5% Soy meal - CIF Rotterdam / metric ton $436 $396 -9.2% $566 $396 -30.0% |
 Operational Highlights Food Segment 10 • Rousselot performance strong globally especially in China • Inventories and working capital improved • Adjustments made in Edible fat refining business • CTH struggled with border closure in Asia Note: Cost of Sales includes raw material costs, collection costs and factory costs.
EBITDA Bridge Q1 2015 to Q2 2015
(millions) $28.0 $10.2 $10.0 ($12.0) $33.1 $32.3 ($3.1) ($0.8) $10 $15 $20 $25 $30 $35 $40 $45 $50 EBITDA Q1 2015 Price/ Yield Volumes Cost of Sales Other Adjusted EBITDA Q2 2015 FX Impact EBITDA Q2 2015 10.8% 9.7% 10.4% 11.4% US$ and metric tons (millions) Q1 2015 Q2 2015 Delta % Q1 to Q2 Revenue 270.2 283.4 4.9% Gross Margin 53.5 60.2 12.5% Gross Margin % 19.8% 21.2% Operating Income 10.8 15.5 43.5% EBITDA 28.0 32.3 15.4% EBITDA/Revenue 10.4% 11.4% Raw Material Processed (million metric tons) 0.27 0.28 6.95% 8 9 10 11 12 Q3 2014 Q4 2014 Q1 2015 Q2 2015 LTM EBITDA Margin Creating sustainable food, feed and fuel ingredients for a growing population |
 11 Operational Highlights Fuel Segment • Canada biodiesel continues to struggle losing $1.6 mm EBITDA during the 2 nd quarter of fiscal 2015 • Rendac and Ecoson steady Note: Cost of Sales includes raw material costs, collection costs and factory costs.
Note: Assuming the $1.00/gallon biodiesel tax credit is reinstated for 2015 the Q2 EBITDA for Darling’s share of DGD would have been approximately $30.2 million.
This includes a $1.00/gallon per 44.6 million gallons shipped of renewable diesel in 2Q 2015. Although the Company remains optimistic, there can be no assurance the tax credit will be reinstated. Diamond Green Diesel (50% Joint Venture) US$ (millions) Q1 2015 Q2 2015 Delta % Q1 to Q2 EBITDA (Darling's share) 2.3 7.9 243.5% Gallons Produced 37.5 41.9 11.7% • DGD performed as anticipated $9.1 ($8.8) ($1.9) $3.3 $7.0 ($0.1) $8.7 $8.6 -$2 $2 $6 $10 EBITDA Q1 2015 Price/ Yield Volumes Cost of Sales Other Adjusted EBITDA Q2 2015 FX Impact EBITDA Q2 2015 EBITDA Bridge Q1 2015 to Q2 2015 (millions) *Excludes raw material processed at the DGD joint venture. US$ and metric tons (millions) Q1 2015 Q2 2015 Delta % Q1 to Q2 Revenue 57.0 46.5 -18.4% Gross Margin 13.2 6.3 -52.3% Gross Margin % 23.1% 13.5% Operating Income 2.5 2.0 -20.0% EBITDA 9.1 8.6 -5.5% EBITDA/Revenue 16.0% 18.5% Raw Material Processed * (million metric tons) 0.30 0.29 -4.72% 16.4% 23.4% 16.0% 18.5% 0 5 10 15 20 25 Q3 2014 Q4 2014 Q1 2015 Q2 2015 LTM EBITDA Margin Creating sustainable food, feed and fuel ingredients for a growing population |
 Foreign Currency Impact
o The U.S. dollar has strengthened against most of the functional currencies used by the
Company’s non-domestic operations.
o Using actual results for fiscal year 2014 and comparing the yearly average rates to the
average rates for the first six months of 2015, the impact of the strengthened
dollar would result in an annual decrease in net sales and
operating cash flow of approximately $355 million and approximately $37 million, respectively if the same
amount of non-domestic operations were attained in fiscal
2015. o
The U.S. dollar continues to strengthen at the timing of this filing. The
impact is mainly affected by the drop in the Euro in comparison
to the U.S. dollar. o
The U.S. dollar has strengthened against most of the functional currencies
used by the Company’s non-domestic operations.
o
Using actual results for fiscal year 2014 and comparing the yearly average
rates to the average rates for the first six months of 2015, the
impact of the strengthened dollar would result in an annual
decrease in net sales and operating cash flow of approximately $355 million and approximately $37 million, respectively if the same
amount of non-domestic operations were attained in fiscal
2015. o
The U.S. dollar continues to strengthen at the timing of this filing. The
impact is mainly affected by the drop in the Euro in comparison
to the U.S. dollar. Assumptions:
12 Exchange Rate: Avg. 2014 Avg. Q1 2015 Avg. Q2 2015 Avg. YTD 2015 Euro/USD 1.32704 1.126696 1.105606 1.115042 CAD/USD 0.90446 0.803378 0.813084 0.808476 Creating sustainable food, feed and fuel ingredients for a growing population |
 13 Appendix – Additional Information |
 Adjusted (Non-GAAP) Diluted EPS
14 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 discrete
items in fiscal 2015, fiscal 2014 and fiscal 2013. The effective tax rate used for calculating Non-GAAP Adjusted EPS in the above table for the years ended January 3, 2015, December 28, 2013 and December 29, 2012
was 37.1%, 38.5% and 36.8%, respectively. The effective tax rate
used for calculating Non-GAAP adjusted EPS for three months ended July
4, 2015 and June 28, 2014 was 45.4% and 28.7%, respectively.
Creating sustainable food, feed and fuel ingredients for a growing
population July 4,
June 28, January 3, December 28, December 29, 2015 2014 2015 2013 2012 Reported Earnings Per Share (fully diluted) 0.02 $ $ 0.20 $ 0.39 $ 0.91
$ 1.11
Adjustments:
Non-cash inventory step-up associated with VION Acquisition
0.02 0.19 Acquisition and integration costs 0.02 0.13 0.13 Amortization of intangibles 0.07 0.09 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 0.04 Foreign currency price risk VION Acquisition 0.05 (0.14) Adjusted diluted earnings per share attributable to Darling (Non-GAAP) $ 0.13 $ 0.33 $ 1.20 $ 1.13 $ 1.26 Weighted average shares of common stock outstanding (in millions) 165,298 165,097 165,059 119,924 118,089 Three Months Ended Fiscal Year Ended – – – – – – – – – – – – – – – – – – – – |
 Feed Ingredients Segment
15 Fats Used 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 rate (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 $ Fats Used 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 rate (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
Change in Net Sales –
1Q14 to 1Q15 Change in Net Sales – 2Q14 to 2Q15 Change in Net Sales - Three Months Ended |
 Feed Ingredients Segment
16 Fats Proteins Bakery Other Total Net Sales YTD Second Quarter 2014 322.9 $ 103.1 $ 485.1 $ 113.6 $ 183.5 $ 1,208.2 $ Changes: Increase in sales volumes 22.4 2.3 19.0 23.8 - 67.5 Decrease in finished good prices (45.9) (25.5) (37.5) (29.3) - (138.2) Decrease due to currency exchange rates (12.8) (0.7) (36.7) - (20.3) (70.5) Other change - - - - 9.9 9.9 Total Change: (36.3) $ (23.9) $ (55.2) $ (5.5) $ (10.4) $ (131.3) $ Net Sales YTD Second Quarter 2015 286.6 $ 79.2 $ 429.9 $ 108.1 $ 173.1 $ 1,076.9 $ Creating sustainable food, feed and fuel ingredients for a growing population
Change in YTD Net Sales
2Q14 to 2Q15 Change in Net Sales – Six Months Ended
Used
Cooking Oil |
 (1) Has impact of inventory step-up in 1 and 2 quarter. (2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13 week. (3) Raw material process volumes have been adjusted to include additional blending materials.
17 (A) Quarters 1, 2 and 3 revenues have been adjusted for re-class between sales and cost of sales.
• Rendering weekly raw material volumes up globally; extra processing week in Q4 2014 • Rendering margins improved in light of continued price erosion in fats • Bakery Feeds business challenged by lower corn markets and expansion demands from acquisition • USA Restaurant Services business showed strong volume with additional adjustments forthcoming Q1 Operational Highlights Feed Segment US$ and metric tons (millions) Q1 2014 Q2 2014 Q3 2014 Q4 2014 Total 2014 Q1 2015 Revenue (A) $586.1 $622.1 $607.3 $606.0 $2,421.5 $547.5 Gross Margin (1) 142.5 165.4 132.5 132.5 572.9 123.5 Gross Margin % (1) 24.3% 26.6% 21.8% 21.9% 23.7% 22.6% Operating Income (2) 37.5 74.7 46.4 33.6 192.2 35.4 Adjusted Operating Income (1)
52.4 76.2 46.4 33.6 208.6 35.4 EBITDA (2) 76.1 114.6 84.2 76.4 351.3 75.5 Adjusted EBITDA (1) 90.9 116.1 84.2 76.4 367.6 75.5 Adjusted EBITDA/Revenue 15.5% 18.7% 13.9% 12.6% 15.2% 13.8% Raw Material Processed (3) (millions of metric tons) 1.73 1.73 1.73 1.92 7.11 1.87 Creating sustainable food, feed and fuel ingredients for a growing population st nd th |
 Food Segment 18 (1) Has impact of inventory step-up in 1 and 2 quarter. (2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13 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. $ and metric tons
(millions) Q1 2014 Q2 2014 Q3 2014 Q4 2014 Total 2014 Q1 2015 Revenue (A) 293.5 $ 331.4 $ 301.4 $ 322.0 $ 1,248.3 $ 270.2 $ Gross Margin (1)
62.3 65.3 64.2 63.4 255.2 53.5 Gross Margin % (1) 21.2% 19.7% 21.3% 19.7% 20.4% 19.8% Operating Income/(Loss) (2) (12.1) 11.3 14.0 13.7 26.9 10.8 Adjusted Operating Income (1) 19.8 14.7 14.0 13.7 62.2 10.8 EBITDA (2) 5.3 30.9 32.6 31.4 100.2 28.0 Adjusted EBITDA (1) 38.3 34.3 32.6 31.4 136.6 28.0 Adjusted EBITDA/Revenue 13.0% 10.4% 10.8% 9.7% 10.9% 10.4% Raw Material Processed (millions of metric tons) 0.25 (3) 0.27 0.26 0.28 1.06 0.27 • Rousselot performance steady • Weekly raw material volumes up; extra processing week in Q4 2014 • Edible fat melting margins under pressure. Russian border closure putting additional supplies to market. • CTH improving • Operating delta is FX impact 1Q Operational Highlights Creating sustainable food, feed and fuel ingredients for a growing population
st nd th |
 19 (1) Has impact of inventory step-up in 1st quarter. (2) Exclusive of non-cash inventory step-up and Darling Ingredients Int'l 13th week.
(3) Raw material process volumes for the first quarter have been adjusted to be consistent
with the presentation of the second quarter figures.
(A) Quarters 1, 2 and 3 revenues have been adjusted for re-class between
sales and cost of sales. $ and metric tons
(millions) Q1 2014 Q2 2014 Q3 2014 Q4 2014 Total 2014 Q1 2015 Revenue $66.7 $77.7 $70.0 $72.2 $286.6 $57.0 Gross Margin 15.3 15.9 17.8 10.0 59.0 13.2 Gross Margin % 21.1% 20.5% 25.4% 13.9% 20.6% 23.1% Operating Income (2) 2.3 5.2 2.8 10.9 21.2 2.5 Adjusted Operating Income (1) 3.5 5.2 2.8 10.9 22.4 2.5 EBITDA (2) 9.7 11.1 11.5 16.9 49.2 9.1 Adjusted EBITDA (1) 10.9 11.1 11.5 16.9 50.4 9.1 Adjusted EBITDA/Revenue 16.3% 14.3% 16.4% 23.4% 17.6% 16.0% Raw Material Processed * (millions of metric tons) 0.23 (3) 0.24 0.26 0.33 1.07 0.30 *Excludes raw material processed at the DGD joint venture. Diamond Green Diesel (50% Joint Venture) US$ (millions) Q1 2014 Q2 2014 Q3 2014 Q4 2014 Total 2014 Q1 2015 EBITDA (Darling's share) $9.1 $5.9 $2.9 $63.7 $81.6 $2.3 • Ecoson delivering solid results, improving margins • Rendac volumes moderated compared to Q4 some margin compression with lower crude oil • Weekly raw material volumes up, extra processing week in Q4 2014 • Variance is energy credits received in Q4 1Q Operational Highlights Note: Assuming the $1.00/gallon biodiesel tax credit is reinstated for 2015 the Q1 EBITDA for Darling’s share of DGD would have been approximately $17.3 million. This includes a $1.00/gallon per 34.6 million gallons shipped of renewable diesel in 1Q 2015. Note: Assuming the $1.00/gallon biodiesel tax credit is reinstated for 2015 the Q1 EBITDA for Darling’s share of DGD would have been approximately $17.3 million. This includes a $1.00/gallon per 34.6 million gallons shipped of renewable diesel in 1Q 2015. Fuel Segment Creating sustainable food, feed and fuel ingredients for a growing population |
 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 Petfood 1 1 2 Hides 3 3 6 126 6 49 10 3 1 195 Under Construction: Rendering 2 Pet Food 2 Bakery 1 Locations by Continent and Process European categories for rendering of animal by-products: • C3 – food-grade material, for food and feed products • C2 – unfit for food or animal feed, can be used as fertilizer • C1 – must be destroyed; used to generate green energy * Note: List excludes administrative and dedicated sales offices. 20 *Includes transfer stations and blending Creating sustainable food, feed and fuel ingredients for a growing population |
 Creating sustainable food, feed and fuel ingredients for a growing
population Adjusted EBITDA is presented here not as an alternative to net
income, but rather as a measure of the Company’s operating
performance and is not intended to be a presentation in accordance with GAAP. Since
EBITDA (generally, net income plus interest expenses, taxes, depreciation
and amortization) is not calculated identically by all companies, this presentation may not be comparable to EBITDA or adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated in this
presentation and represents, for any relevant period, net income/(loss) plus
depreciation and amortization, goodwill and long-lived asset
impairment, interest expense, (income)/loss from discontinued operations, net of tax, income tax provision, other income/(expense) and equity in net loss of unconsolidated subsidiary. Management believes that Adjusted EBITDA is useful in
evaluating the Company’s operating performance compared to that of other companies
in its industry because the calculation of Adjusted EBITDA generally
eliminates the effects of financing income taxes and certain non-cash and other items that may vary for different companies for reasons unrelated to overall operating performance. As a result, the Company’s management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary
purposes. However, Adjusted EBITDA is not a recognized measurement under GAAP, should
not be considered as an alternative to net
income as a measure of operating results or to cash flow as a measure of liquidity, and is not intended to be a presentation in accordance with GAAP. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance
with certain financial covenants under the Company’s Senior Secured Credit
Facilities and 5.375% Notes and 4.75% Notes that were outstanding at July
4, 2015. However, the amounts shown in this presentation for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities and 5.375% Notes and 4.75% Notes,
as those definitions permit further adjustments to reflect certain other
non-recurring costs and non-cash charges. In addition, the
Company’s management 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. Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the Company’s operating
performance and is not intended to be a presentation in accordance with GAAP. Since
EBITDA (generally, net income plus interest expenses, taxes, depreciation
and amortization) is not calculated identically by all companies, this presentation may not be comparable to EBITDA or adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated in this
presentation and represents, for any relevant period, net income/(loss) plus
depreciation and amortization, goodwill and long-lived asset
impairment, interest expense, (income)/loss from discontinued operations, net of tax, income tax provision, other income/(expense) and equity in net loss of unconsolidated subsidiary. Management believes that Adjusted EBITDA is useful in
evaluating the Company’s operating performance compared to that of other companies
in its industry because the calculation of Adjusted EBITDA generally
eliminates the effects of financing income taxes and certain non-cash and other items that may vary for different companies for reasons unrelated to overall operating performance. As a result, the Company’s management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary
purposes. However, Adjusted EBITDA is not a recognized measurement under GAAP, should
not be considered as an alternative to net
income as a measure of operating results or to cash flow as a measure of liquidity, and is not intended to be a presentation in accordance with GAAP. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance
with certain financial covenants under the Company’s Senior Secured Credit
Facilities and 5.375% Notes and 4.75% Notes that were outstanding at July
4, 2015. However, the amounts shown in this presentation for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities and 5.375% Notes and 4.75% Notes,
as those definitions permit further adjustments to reflect certain other
non-recurring costs and non-cash charges. In addition, the
Company’s management 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. Non-U.S. GAAP Measures 21 |