Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - DARLING INGREDIENTS INC. | exh991-pressreleaseq32016.htm |
| 8-K - 8-K - DARLING INGREDIENTS INC. | dar-20161110x8k.htm |
Randall C. Stuewe, Chairman and CEO
John O. Muse, EVP Chief Financial Officer
Melissa A. Gaither, VP IR and Global Communications
Third Quarter 2016
Earnings Conference Call
November 11, 2016
Exhibit 99.2
2
This presentation contains “forward-looking” statements regarding the business operations and prospects of Darling Ingredients Inc. and industry factors affecting
it. These statements are identified by words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “could,” “may,” “will,” “should,” “planned,” “potential,”
“continue,” “momentum,” and other words referring to events that may occur in the future. These statements reflect Darling 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 emissions that adversely affect programs like the
Renewable Fuel Standards Program (RFS2), 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 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 and issues related
to the announced expansion project; 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.
Safe Harbor Statement
3
$50
$60
$70
$80
$90
$100
$110
$120
$130
Quarterly Adjusted EBITDA
3Q15 4Q15 1Q16 2Q16 3Q16
$106.1 $102.7
$98.9
$124.0
$106.2
Gross Profit and Margin
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
22.0%
23.0%
24.0%
$140
$150
$160
$170
$180
$190
$200
$210
3Q15 2Q16 3Q16
Gross Profit Gross Margin
21.40%21.37%
$
2
0
0.
2
$
1
8
2
.7
22.83%
$
1
8
2.
4
Earnings Summary
3Q 2016
$ in millions
$ in millions
$ in millions
Strong Free Cash Flow Generations
EBITDA lower sequentially and equivalent year
over year given volatile commodities
Q3 influenced by inventory write down and
production issues within the gelatin business
DGD had strong quarter offsetting fat price
declines in North America
De-levering continues with YTD debt reduction
of $105.0 million
Total leverage ratio now at 3.97
Adjusted EBITDA is a Non-U.S. GAAP Measure
$106.1
$124.0
$106.2
$63.5 $56.0 $58.8
$42.6
$68.0
$47.4
5.0%
7.7%
5.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
$0
$20
$40
$60
$80
$100
$120
$140
3Q 2015 2Q 2016 3Q 2016
Adjusted EBITDA
Capex
Free Cash Flow (Adjusted EBITDA after Capex)
Free Cash Flow as % of net sales
o Net income - $ 28.7 million
o Net Sales - $853.9 million
o EPS at $0.17 per diluted share
o Adjusted EBITDA - $106.2 million
o DGD joint venture EBITDA - $22.5 million (Darling’s share)
o Global rendering raw material volumes remain strong
o Feed segment adjusting to lower finished product values
o China pork deficit now impacting Food and Feed Segment
o Strong global poultry slaughter creating excess pet grade products
o Gelatin lower in quarter due to unfavorable margin dynamics and turnarounds
o Record North American harvests pressuring competing ingredient values
o Renewable fuel values continue to gain strength in the market
4
2016 Third Quarter Overview
5
(1) Foreign currency exchange rates held constant for comparable quarters (€1.00:USD$1.12877 rate July 2, 2016 quarter; €1.00 : USD$1.11438 rate October 3, 2015 nine months).
Note: See slide 22 for information regarding Darling’s use of Non-GAAP measures.
Adjusted EBITDA
Adjusted EBITDA and Pro Forma Adjusted EBITDA
(US$ in thousands) October 1, July 2, October 1, October 3,
2016 2016 2016 2015
Net income/(loss) attributable to Darling $ 28,694 $ 31,999 $ 61,772 $ (5,898)
Depreciation and amortization 70,653 69,531 212,440 199,970
Interest expense 23,867 23,980 71,748 82,222
Income tax expense/(benefit) (744) 7,983 9,102 14,639
Foreign currency (gain)/loss (354) (8) 2,241 3,299
Other expense, net 2,007 2,373 5,685 704
Equity in net (income)/loss of unconsolidated subsidiaries (18,138) (13,852) (37,633) 9,657
Net income attributable to noncontrolling interests 196 1,992 3,772 5,302
Adjusted EBITDA $ 106,181 $ 123,998 $ 329,127 $ 309,895
Acquisition and integration-related expenses - 70 401 7,807
Pro forma Adjusted EBITDA (Non-GAAP) $ 106,181 $ 124,068 $ 329,528 $ 317,702
Foreign currency exchange impact (1) 688 - 1,427 -
Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) $ 106,869 $ 124,068 $ 330,955 $ 317,702
DGD Joint Venture Adjusted EBITDA (Darling's Share) $ 22,543 $ 18,331 $ 50,503 $ 1,946
Three Months Ended - Sequential Nine Months Ended - Year over Year
o Target debt reduction of $150 million in 2016: year-end target total debt leverage
ratio below 3.90
– Paid down debt by $60.0 million in quarter; YTD paid down $105.0 million
– Debt leverage ratio now 3.97
– S&P and Moody’s outlook improved to stable
o Working Capital utilization improved over Q2 by $21.6 million
– $13.0 million improvement YTD
– Year over year improvement target remains at $20.0 million
o CAPEX target of $225 million for 2016; YTD CAPEX spend at $168.2 million
o SG&A targeted at $81.5 million/quarter run rate: Q3 at $76.5 million
o Commissioned 2 new USA Rendering Plants during quarter
o Wet Pet Food plants beginning to contribute
o Broke ground on new blood plant in Germany and new digester facility in Belgium
o DGD diesel expansion engineering complete and is set to come on line in early 2018
6
2016 Strategy – “Delever and Grow”
7
Cash Flow Statement
Cash Flow Statement Nine Months Ended
(US$ in thousands) October 1,
2016
Adjusted EBIDTA $ 329,127
Uses:
Cap-Ex (168,224)
Acquisitions (8,511)
Proceeds from Stock Issuance 143
Stock Repurchase (5,000)
Borrowings, net of repayments (109,627)
Cash Interest (10-Q) (62,395)
Cash Taxes (10-Q) (14,018)
Accounts Receivable (3,058)
Income Tax 1,432
Inventory and Prepaid (11,368)
Accounts Payable and Accrued Expenses 27,438
Decrease in Cash 8,299
Other 15,762
Adjusted EBITDA $ (329,127)
Balance Sheet Highlights
Leverage RatiosNet Debt on Balance Sheet
8
(1) Total Debt now adjusted to reflect deferred loan cost amortization.
(2) Total Debt includes 4.75% euro bond and Canadian debt which is FX
adjusted quarterly.
Balance Sheet Highlights and Debt Summary
(US$, in thousands) October 1, 2016
Cash (includes restricted cash of $294) $ 148,879
Accounts receivable 382,857
Total Inventories 359,095
Net working capital 503,343
Net property, plant and equipment 1,535,185
Total assets $ 4,816,884
Total debt $ 1,845,530
Shareholders' equity $ 2,085,397
(US$, in thousands) Fiscal 2015 3Q 2016
Total Debt (1)(2) $ 1,931,017 $ 1,845,530
Available Cash $ (156,884) $ (148,585)
Year End Net Debt Balance $ 1,774,133 $ 1,696,945
Debt Summary
(US$, in thousands) October 1, 2016
Amended Credit Agreement
Revolving Credit Facility $ -
Term Loan A 186,729
Term Loan B 578,330
5.375% Senior Notes due 2022 492,006
4.750% Euro Senior Notes due 2022 564,893
Other Notes and Obligations 23,572
Total Debt: $ 1,845,530
October 1, 2016 Actual
Credit
Agreement
Total Debt to EBITDA: 3.97 5.50
Secured Debt to EBITDA: 1.64 3.25
Operational Overview – Q3 2016
9
Non-GAAP EBITDA Margin
Feed
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
EBITDA Bridge Q2-2016 to Q3-2016
(millions)
Feed Segment
4
6
8
10
12
14
16
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
14.8%
14.6%
11.5%
12.2%
15.4%
$83.5
$1.1
$4.3 $79.2 $78.9
0
20
40
60
80
100
OtherVolumes Cost of
Sales
FX
Impact
EBITDA
Q3 16
Adjusted
EBITDA
($0.3)
EBITDA
Q2 16
Price /
Yield
($8.9)
($0.8)
US$ and metric tons
(millions)
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Seq. %
Change
Revenue $525.2 $472.2 $2,074.3 $476.2 $543.0 $531.4 -2.1%
Gross Margin 116.2 96.7 460.9 103.5 126.8 117.8 -7.1%
Gross Margin % 22.1% 20.5% 22.2% 21.7% 23.4% 22.2%
Operating Income 35.6 10.1 116.5 13.9 41.4 35.2 -15.0%
EBITDA (1) 76.5 54.4 282.3 58.3 83.5 78.9 -5.5%
Raw Material Processed
(million metric tons)
1.86 1.89 7.45 1.97 1.97 1.97 0.0%
(1) Does not include Unconsolidated Subsidiaries EBITDA.
• Raw material volumes strong globally
• Rendering performances off slightly, formula
working
• Fat prices down sharply qtr. over qtr.
• Hot summer hurt USA fat quality
• Global grain glut weighing on protein pricing
• Strong poultry slaughter saturating USA and
Europe pet food markets with excess protein
– (Pet vs. Feed Grade Poultry Meals)
• Biofuels demand holding fat prices
• Bakery business margined
• Wet pet food making progress
Fat Pricing
o Drop in pricing follows a lower corn market
o Biofuel demand remains strong with LCFS
markets
Protein Pricing
o Protein prices globally under pressure due to
large crops and move to “Vegetable or Animal
free diets”
o Poultry proteins, while higher in quarter, saw
the spread between Feed Grade and Pet
Grade Poultry Meals narrow
o Big drop off in October for MBM and Feed
Grade Poultry Meal
10
2016 Finished Product Pricing
Feed Segment Ingredients July August Sept. Q3 Avg. Oct.
Bleachable Fancy Tallow - Chicago Renderer / cwt $29.95 $28.00 $28.00 $28.59 $28.43
Yellow Grease - Illinois / cwt $24.54 $23.86 $23.71 $24.01 $23.31
Meat and Bone Meal - Ruminant - Illinois / ton $378.75 $325.98 $272.02 $325.56 $230.00
Poultry By-Product Meal - Feed Grade - Mid South/ton $380.88 $392.83 $313.33 $364.37 $277.50
Poultry By-Product Meal - Pet Food - Mid South/ton $649.38 $596.30 $534.17 $593.47 $533.33
Feathermeal - Mid South / ton $476.88 $452.61 $362.98 $432.57 $325.00
2016 Cash Corn Pricing
Competing Ingredient for Bakery Feeds and Fats July August Sept. Q3 Avg. Oct.
Corn - Track Central IL #2 Yellow / bushel $3.28 $3.09 $3.10 $3.16 $3.28
European Benchmark Pricing
2016 July August Sept. Q3 Avg. Oct.
Palm oil - CIF Rotterdam / metric ton $648 $719 $749 $705 $718
Soy meal - CIF Rotterdam / metric ton $439 $399 $372 $403 $363
2016 Average Jacobsen Prices (USD)
QTR. Over QTR. Year Over Year
Comparison Q2-2016 Q3-2016 % Q3-2015 Q3-2016 %
Average Jacobsen Prices (USD) Avg. Avg. Change Avg. Avg. Change
Bleachable Fancy Tallow - Chicago Renderer / cwt $32.57 $28.59 -12.2% $29.42 $28.59 -2.8%
Yellow Grease - Ill ois / cwt $26.77 $24.01 -10.3% $21.48 $24.01 11.8%
Meat and Bone M al - Ruminant - Illinois / ton $328.26 $325 56 -0.8% $354.91 $325.56 -8.3%
Poultry By-Product Meal - Feed Grade - Mid South/ton $3 5.5 $364. 7 19.2% $391.55 $364.37 -6.9%
Poultry By-Product Meal - Pet Food - Mid South/ton $557.81 $593.47 6.4% $532.45 $593.47 11.5%
Feathermeal - Mid South / ton $ 58.91 $432.57 20.5% $499.12 $432.57 -13.3%
Average Wall Street Journal Prices (USD)
Corn - Track Central IL #2 Yellow / bushel $3.75 .16 -15.8% $3.62 $3.16 -12.7%
Average Thoms n Reuters Prices (USD)
Palm oil - IF Rotter am / metric ton $702 $705 0.4% $558 $705 26.3%
Soy meal - CIF Rotterdam / metric ton $409 $403 -1.5% $380 $403 6.1%
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
Non-GAAP EBITDA Margin
Food
Operational Overview – Q3 2016
11
EBITDA Bridge Q2-2016 to Q3-2016
(millions)
Food Segment
4
6
8
10
12
14
16
18
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
10.7%
14.4%
15.6%
13.7%
9.7%
$37.4
$7.1
$0.6
$25.6 $25.3
0
10
20
30
40
50
EBITDA
Q2 16
($14.3)
Price /
Yield
Volumes
($5.2)
Cost of
Sales
($0.3)
Other EBITDA
Q3 16
FX
Impact
Adjusted
EBITDA
• Rousselot driven with significantly lower results in
China and reduced results in South America vs. Q2
• Limited availability of pigskins in China resulted in
higher raw material prices, reduced margins and
production slowdowns in the gelatin business
• Reduced low bloom gelatin demand in Chinese food
market drove inventory write down
• USA and China took annual turnarounds in gelatin
• Sonac edible fat impacted by strong Chinese
demand for edible parts- driving higher raw
material prices in Europe
US$ and metric tons
(millions)
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Seq. %
Change
Revenue $269.2 $272.1 $1,094.9 $247.9 $272.1 $262.0 -3.7%
Gross Margin 54.8 62.9 231.4 62.3 57.8 50.7 -12.3%
Gross Margin % 20.4% 23.1% 21.1% 25.1% 21.3% 19.3%
Operating Income 11.6 23.3 61.2 21.9 19.7 7.9 -59.9%
EBITDA 28.7 39.1 128.1 38.6 37.4 25.3 -32.4%
Raw Material Processed
(million metric tons)
0.26 0.26 1.07 0.27 0.27 0.26 -3.7%
Operational Overview – Q3 2016
Non-GAAP EBITDA Margin
Fuel
12
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
EBITDA Bridge Q2-2016 to Q3-2016
(millions)
Adjusted EBITDA Margins for normalized blenders tax credit
in Pro forma EBITDA and in Revenues for 2015 would represent:
14.8%
Q3 15
23.3%
Q4 15
Fuel Segment
0
5
10
15
20
25
30
35
Q3
2015
Q4
2015
Q1
2016
Q2
2016
Q3
2016
29.4%
23.4%
22.2% 21.4%
11.8%$13.8
$1.9
$0.0 $0.0 $14.3
$12.9
0
2
4
6
8
10
12
14
16
Adjusted
EBITDA
($1.4)
FX Impact EBITDA
Q3 16
OtherCost of
Sales
Volumes
($1.4)
Price /
Yield
EBITDA
Q2 16
• Slightly lower earnings in Rendac and
Ecoson
• Seasonally driven
• Canadian biodiesel continues to perform
but earnings modestly lower quarter
over quarter
• Strong demand for biofuel feedstock in
Europe
US$ and metric tons
(millions)
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Seq. %
Change
Revenue $59.3 $65.4 $228.2 $55.6 $62.3 $60.4 -3.0%
Gross Margin 11.4 20.2 51.1 14.9 15.6 14.2 -9.0%
Gross Margin % 19.2% 30.9% 22.4% 26.8% 25.0% 23.5%
Operating Income 0.2 12.5 17.2 6.1 6.6 6.0 -9.1%
EBITDA (1) 7.0 19.2 43.9 13.0 13.8 12.9 -6.5%
Raw Material Process d *
(million metric tons)
0.27 0.31 1.17 0.28 0.30 0.29 -3.3%
(1) Does not include DGD EBITDA.
* Excludes raw material processed at the DGD joint venture.
DGD reports strong earnings for Q3 2016
Q3 2016 EBITDA: $45.1 million entity level or $22.5 million Darling’s share
Lower fat prices, stable heating oil and rising RIN pricing support earnings
Vessel shipment at end of quarter will shift RIN revenue to Q4
Current total debt in JV stands at $75.0 million. Total cash of $121.1 million at
the end of September 2016.
Final engineering phase progressing on major expansion announced in April
increasing output from 160 million gallons annually to 275 million gallons. Total
cost estimated at $190.0 million with construction and commissioning expected
to be completed in early Q2-2018
13
Diamond Green Diesel (DGD)
US$ (millions)
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
EBITDA (Darling's share) (8.3) 86.6 $88.5 9.6 18.3 22.5
Gallons Produced 41.5 37.9 158.8 28.5 43.8 43.8
Gallons Shipped 39.9 37.5 156.6 29.1 42.7 42.5
Diamond Green Diesel (50% Joint Venture)
Appendix – Additional Information
15
Change in Net Sales - Year over Year (3Q 2015 over 3Q 2016)
Change in Net Sales – Three Months Ended (Sequential 2Q16 over 3Q16)
Feed Ingredients Segment
(1) Rendering Net Sales- Other category includes hides, pet food, and service charges
(2) Other Net Sales category includes trap services, industrial residual services and organic fertilizer
Change in Net Sales - 2Q16 to 3Q16
Fats Proteins Other (1)
Total
Rendering
Used
Cooking Oil Bakery Other (2) Total
Net Sales Three Months Ended July 2, 2016 152.9$ 199.1$ 70.4$ 422.4$ 41.7$ 56.4$ 22.5$ 543.0$
Changes:
Increase/(Decrease) in sales volumes 3.1 5.8 - 8.9 (1.2) 2.2 - 9.9
I crease/(Decrease) in finished good prices (10.3) 1.3 - (9.0) 1.0 (4.8) - (12.8)
D crease due to currency exchange rates (0.4) (0.8) (0.6) (1.8) (0.1) - - (1.9)
Other change - - (6.8) (6.8) - - - (6.8)
Total Change: (7.6) 6.3 (7.4) (8.7) (0.3) (2.6) - (11.6)
Net Sales Three Months Ended October 1, 2016 145.3$ 205.4$ 63.0$ 413.7$ 41.4$ 53.8$ 22.5$ 531.4$
Rendering Sales
Fats Proteins Other (1)
Total
Rendering
Used
Cooking Oil Bakery Other (2) Total
N Sales Thr e Months E ded Octob r 3, 2015 136.1$ 210.1$ 60.3$ 406.5$ 39.7$ 56.0$ 23.0$ 525.2$
Changes:
Increase/(Decrease) in sales volumes 10.8 26.1 - 36.9 (0.9) 3.8 - 39.8
Incr ase/(D crease) in finished go d prices (1.7) (31.2) - (32.9) 2.6 (6.0) - (36.3)
Decrease due to currency exchange rates 0.1 0.4 0.2 0.7 - - - 0.7
Other change - - 2.5 2.5 - - (0.5) 2.0
Total Change: 9.2$ (4.7)$ 2.7$ 7.2$ 1.7$ (2.2)$ (0.5)$ 6.2$
Net Sales Three Months Ended October 1, 2016 145.3$ 205.4$ 63.0$ 413.7$ 41.4$ 53.8$ 22.5$ 531.4$
Rendering Sales
Change in Net Sales - 3Q15 to 3Q16
16
YTD Change in Net Sales – Nine Months Ended October 3, 2015 over October 1, 2016
Feed Ingredients Segment
(1) Rendering Net Sales- Other category includes hides, pet food, and service charges
(2) Other Net Sales category includes trap services, industrial residual services and organic fertilizer
Fats Proteins Other (1)
Total
Rendering
Used
Cooking Oil Bakery Other (2) Total
Net Sales First Nine Months Ended October 3, 2015 422.7$ 640.0$ 188.1$ 1,250.8$ 118.9$ 164.1$ 68.3$ 1,602.1$
Changes:
Increase/(Decrease) in sales volumes 23.3 60.7 - 84.0 0.5 6.5 - 91.0
I crease/(Decrease) in finished good prices (21.0) (122.7) - (143.7) (1.8) (5.9) - (151.4)
D cr ase due to currency exchange rates (1.5) (1.5) (0.1) (3.1) (0.2) - - (3.3)
Other change - - 12.0 12.0 - - 0.1 12.1
Total Change: 0.8 (63.5) 11.9 (50.8) (1.5) 0.6 0.1 (51.6)
Net Sales First Nine Months Ended October 1, 2016 423.5$ 576.5$ 200.0$ 1,200.0$ 117.4$ 164.7$ 68.4$ 1,550.5$
Rendering Sales
Change in YTD Net Sales
3Q15 to 3Q16
(1) Has impact of inventory step-up in 1st and 2nd quarter of 2014.
(2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week during 2014.
(3) Raw material process volumes in 2014 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 in 2014.
17Feed Segment - Historical
US$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Revenue (A) $586.1 $622.1 $607.3 $606.0 $2,421.5 $547.5 $529.4 $525.2 $472.2 $2,074.3 $476.2 $543.0 $531.4
Gross Margin (1) 142.5 165.4 132.5 132.5 572.9 123.5 124.5 116.2 96.7 460.9 103.5 126.8 117.8
Gross Margin % (1) 24.3% 26.6% 21.8% 21.9% 23.7% 22.6% 23.5% 22.1% 20.5% 22.2% 21.7% 23.4% 22.2%
Operating Income (2) 37.5 74.7 46.4 33.6 192.2 35.4 35.4 35.6 10.1 116.5 13.9 41.4 35.2
Adjusted Operating Income (1) 52.3 76.2 46.4 33.6 208.5 35.4 35.4 35.6 10.1 116.5 13.9 41.4 35.2
EBITDA (2) 76.1 114.6 84.2 76.4 351.3 75.5 75.9 76.5 54.4 282.3 58.3 83.5 78.9
Adjusted EBITDA (1) 90.9 116.1 84.2 76.4 367.6 75.5 75.9 76.5 54.4 282.3 58.3 83.5 78.9
Adjusted EBITDA/Revenue 15.5% 18.7% 13.9% 12.6% 15.2% 13.8% 14.3% 14.6% 11.5% 13.6% 12.2% 15.4% 14.8%
Raw Material Processed (3)
(millions of metric tons) 1.73 1.73 1.73 1.92 7.11 1.87 1.83 1.86 1.89 7.45 1.97 1.97 1.97
(1) Has impact of inventory step-up in 1st and 2nd quarter in 2014.
(2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week during 2014.
(3) Raw material process volumes for the first quarter 2014 have been adjusted to be consistent with the
presentation of the second quarter figures in 2014.
(A) Quarters 1, 2 and 3 revenues have been adjusted for re-class between sales and cost of sales in 2014.
18Food Segment - Historical
US$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Revenue (A) 293.5 331.4 301.4 322.0 1,248.3 270.2 283.4 269.2 272.1 1,094.9 247.9 272.1 262.0
Gross Margin (1) 62.3 65.3 64.2 63.4 255.2 53.5 60.2 54.8 62.9 231.4 62.3 57.8 50.7
Gross Margin % (1) 21.2% 19.7% 21.3% 19.7% 20.4% 19.8% 21.2% 20.4% 23.1% 21.1% 25.1% 21.3% 19.3%
Operating Income/(Loss) (2) (12.1) 11.3 14.0 13.7 26.9 10.8 15.5 11.6 23.3 61.2 21.9 19.7 7.9
Adjusted Operating Income (1) 20.9 14.7 14.0 13.7 63.3 10.8 15.5 11.6 23.3 61.2 21.9 19.7 7.9
EBITDA (2) 5.3 30.9 32.6 31.4 100.2 28.0 32.3 28.7 39.1 128.1 38.6 37.4 25.3
Adjusted EBITDA (1) 38.3 34.3 32.6 31.4 136.6 28.0 32.3 28.7 39.1 128.1 38.6 37.4 25.3
Adjusted EBITDA/Revenue 13.0% 10.4% 10.8% 9.7% 10.9% 10.4% 11.4% 10.7% 14.4% 11.7% 15.6% 13.7% 9.7%
Raw Material Processed
(millions of metric tons) 0.25 (3) 0.27 0.26 0.28 1.06 0.27 0.28 0.26 0.26 1.07 0.27 0.27 0.26
(A) Quarters 1, 2 and 3 revenues in 2014 have been adjusted for
re-class between sales and cost of sales.
19
(1) Exclusive of non-cash inventory step-up and Darling Ingredients International’s 13th week in 2014.
(2) Has impact of inventory step-up in 1st quarter and Darling Ingredients Int'l 13th week in 2014.
(3) Raw material process volumes for the first quarter 2014 have been adjusted to be consistent
with the presentation of the second quarter figures 2014.
(4) Pro forma Adjusted EBITDA includes blenders’ tax credit throughout full years in 2014 and 2015.
Fuel Segment - Historical
US$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Revenue $66.7 $77.7 $70.0 $72.2 $286.6 $57.0 $46.5 $59.3 $65.4 $228.2 $55.6 $62.3 $60.4
Gross Margin 15.3 15.9 17.8 10.0 59.0 13.2 6.3 11.4 20.2 51.1 14.9 15.6 14.2
Gross Margin % 21.1% 20.5% 25.4% 13.9% 20.6% 23.1% 13.5% 19.2% 30.9% 22.4% 26.8% 25.0% 23.5%
Operating Income (1) 2.3 5.2 2.8 10.9 21.2 2.5 2.0 0.2 12.5 17.2 6.1 6.6 6.0
Adjusted Operating Income (2) 3.5 5.2 2.8 10.9 22.4 2.5 2.0 0.2 12.5 17.2 6.1 6.6 6.0
EBITDA (2) 9.7 11.1 11.5 16.9 49.2 9.1 8.6 7.0 19.2 43.9 13.0 13.8 12.9
Adjusted EBITDA (1) 10.9 11.1 11.5 16.9 50.4 9.1 8.6 7.0 19.2 43.9 13.0 13.8 12.9
Pro forma Adjusted EBITDA (4) 12.2 12.3 13.0 12.8 50.4 10.2 10.6 9.1 14.0 43.9 13.0 13.8 12.9
Adjusted EBITDA/Revenue 16.3% 14.3% 16.4% 23.4% 17.6% 16.0% 18.5% 11.8% 29.4% 19.2% 23.4% 22.2% 21.4%
Raw Material Processed *
(millions of metric tons) 0.23 (3) 0.24 0.26 0.33 1.07 0.30 0.29 0.27 0.31 1.17 0.28 0.30 0.29
*Excludes raw material processed at the DGD joint venture.
Diamond Green Diesel (50% Joint Venture)
US$ (millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
EBITDA (Darling's share) $9.1 5.9 2.9 63.7 $81.6 2.3 7.9 (8.3) 86.6 $88.5 $9.6 $18.3 $22.5
Pro forma Adjusted EBITDA (4) $22.9 24.3 12.5 21.8 $81.6 19.6 30.2 11.7 27.0 $88.5 $9.6 $18.3 $22.5
20
2015 Finished Product Pricing
Feed Segment Ingredients January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. Nov. Dec. Q4 Avg. Year Avg.
Bleachable Fancy Tallow - 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 $20.00 $20.00 $21.18 $27.36
Yellow Grease - Illinois / 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 $17.51 $18.00 $17.86 $21.79
Meat and Bone Meal - Ruminant - Illinois / 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 $251.58 $217.27 $249.29 $334.55
Poultry By-Product Meal - Feed Grade - 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 $334.74 $293.41 $334.67 $404.54
Poultry By-Product Meal - Pet Food - 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 $463.95 $467.61 $469.49 $544.64
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 $369.47 $329.43 $367.06 $472.27
2015 Cash Corn Pricing
Competing Ingredient for Bakery Feeds and Fats January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. Nov. Dec. Q4 Avg. Year Avg.
Corn - Track Central 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 $3.60 $3.68 $3.64 $3.61
European Benchmark Pricing
2015 January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. Nov. Dec. Q4 Avg. Year Avg.
Palm oil - CIF Rotterdam / metric ton $619 $698 $652 $656 $645 $653 $651 $650 $603 $505 $565 $558 $565 $555 $569 $563 $607
Soy meal - CIF Rotterdam / metric ton $456 $442 $410 $436 $403 $392 $393 $396 $394 $381 $365 $380 $367 $353 $336 $352 $391
2015 Average Thomson Reuters Prices (USD)
2015 Average Jacobsen Prices (USD)
2015 Average Wall Street Journal Prices (USD)
Jacobsen, Wall Street Journal and Thomson Reuters
Historical Pricing
2016 Finished Product Pricing
Feed Segment Ingredients January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct.
Bleachable Fancy Tallow - Chicago Renderer / cwt $23.53 $27.10 $30.09 $27.07 $32.93 $32.81 $31.64 $32.57 $29.95 $28.00 $28.00 $28.59 $28.43
Yellow Grease - Illinois / cwt $19.03 $20.89 $23.51 $21.25 $26.40 $27.56 $25.95 $26.77 $24.54 $23.86 $23.71 $24.01 $23.31
Meat and Bone Meal - Ruminant - Illinois / ton $184.74 $198.38 $272.84 $220.98 $314.17 $305.00 $356.59 $328.26 $378.75 $325.98 $272.02 $325.56 $230.00
Poultry By-Product Meal - Feed Grade - Mid South/ton $247.11 $235.00 $263.64 $249.10 $308.10 $296.79 $307.73 $305.58 $380.88 $392.83 $313.33 $364.37 $277.50
Poultry By-Product Meal - Pet Food - Mid South/ton $498.03 $497.50 $521.48 $506.31 $573.81 $505.83 $588.64 $557.81 $649.38 $596.30 $534.17 $593.47 $533.33
Feathermeal - Mid Sout / ton $255.39 $244.88 $325.45 $277.21 $4 9.88 $319.05 $342.73 $358.91 $476.88 $452.61 $362.98 $432.57 $325.00
2016 Cash Corn Pricing
Competing Ingredient for Bakery Feeds and Fats January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct.
C rn - Track Central IL #2 Yellow / bushel $3.58 $3.54 $3.52 $3.55 $3.63 $3.77 $3.85 $3.75 $3.28 $3.09 $3.10 $3.16 $3.28
European Benchmark Pricing
2016 January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct.
Palm oil - CIF Rotterdam / metric ton $565 $646 $686 $632 $720 $702 $684 $702 $648 $719 $749 $705 $718
Soy meal - CIF Rotterdam / metric ton $339 $326 $320 $328 $341 $420 $465 $409 $439 $399 $372 $403 $363
2016 Average Jacobsen Prices (USD)
2016 Average Wall Street Journal Prices (USD)
2016 Average Thomson Reuters Prices (USD)
Process USA Canada Europe China S. America Australia Total:
Rendering - (C3 By-products & UCO) 92 5 18 115
Bakery 10 10
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 3 1 4
Hides 3 3 6
126 6 49 10 3 1 195
Under Construction:
Rendering 2
21
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.
*Includes transfer stations and blending
Locations by Continent and Process
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 4.75% Notes that were outstanding at October 1, 2016. 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, 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.
22
Non-U.S. GAAP Measures