Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 PRESS RELEASE - DARLING INGREDIENTS INC. | exh991-pressreleaseq32017.htm |
| EX-99.3 - EXHIBIT 99.3 PRESS RELEASE - DARLING INGREDIENTS INC. | exh993-pressrelease.htm |
| 8-K - 8-K - DARLING INGREDIENTS INC. | dar-20171107x8k.htm |
Randall C. Stuewe, Chairman and CEO
Patrick C. Lynch, EVP Chief Financial Officer
Melissa A. Gaither, VP IR and Global Communications
Third Quarter 2017
Earnings Conference Call
November 8, 2017
EXHIBIT 99.2
2
This presentation contains “forward-looking” statements regarding the business operations and prospects of Darling Ingredients Inc., including its Diamond Green
Diesel joint venture, 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,” “assumption,” 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
Quarterly Adjusted EBITDA
3Q16 4Q16 1Q17 2Q17 3Q17
Gross Profit and Margin
$
1
8
2
.7
$
1
9
2
.8
$
1
9
0
.4
$
1
9
5
.6
$
1
9
3
.7
$140
$150
$160
$170
$180
$190
$200
3Q16 4Q16 1Q17 2Q17 3Q17
Gross Profit % Gross Margin
3Q 2017 Overview
$ in millions
$ in millions
$ in millions
Strong Free Cash Flow Generation
Adjusted EBITDA is a Non-U.S. GAAP Measure (See slide 16)
$
1
1
2
.8
$
1
0
2
.5
$
1
1
0
.1
$
1
1
0
.5
$
7
5
.3
$
6
2
.3
$
6
5
.5
$
6
8
.6
$
3
7
.5
$
4
0
.2
$
4
4
.6
$
4
1
.9
$0
$20
$40
$60
$80
$100
$120
4Q 2016 1Q 2017 2Q 2017 3Q 2017
Adjusted EBITDA
Capex
Free Cash Flow (Adjusted EBITDA after Capex)
Third Quarter 2017 Earnings Summary
• Net sales - $937.7 million – up 9.8% from 3Q 2016
• Net income - $7.8 million
• EPS at $0.05 per diluted share
• Adjusted EBITDA - $110.5 million
• DGD joint venture EBITDA - $10.6 million
(Darling’s share)
21.4%
21.7%
21.6%
21.8% 20.7%
$106.2
$112.8
$102.5
$110.1 $110.5
4
Q3 2017 Overview
Year over Year
Consolidated Earnings
• Global volumes up 3.8% over 3Q 2016.
• Gross margin compression driven by Fuel
Segment. Operating challenges at the
company’s Ecoson bioenergy plant, absence
of a blenders tax credit and business
interruption at Rendac-Son facility explain
the variance.
• Global pricing of fats and greases
improved on solid biofuel demand while a
growing global slaughter produced ample
protein and pressured prices.
• The absence of the blenders tax credit
negatively impacted overall profitability by
approximately $21.5 million EBITDA from
DGD, $2.4 million EBITDA in Fuel Segment
or $0.14 EPS.
• Strong free cash flow in the quarter that led
to a $18.5 million debt reduction in the
quarter and $69.5 million year to date.
US$ (millions) except per share price
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
Revenue 853.9$ 887.3$ 3,398.1$ 880.1$ 896.3$ 937.7$
Gross Margin 182.7 192.8 756.4 190.4 195.6 193.7
Gross Margin % 21.4% 21.7% 22.3% 21.6% 21.8% 20.7%
SG&A 76.5 79.9 314.0 87.9 85.5 83.1
SG&A Margin % 9.0% 9.0% 9.2% 10.0% 9.5% 8.9%
Operating Income 35.5 35.4 152.1 31.4 37.1 33.3
EBITDA (1) 106.2 112.8 441.9 102.5 110.1 110.5
EBITDA Margin % 12.4% 12.7% 13.0% 11.6% 12.3% 11.8%
Interest Expense (23.9) (22.4) (94.2) (21.7) (22.4) (22.5)
Foreign Currency gain/(loss) 0.4 0.4 (1.9) (0.3) (2.1) (2.1)
Other Expense (2) (1.9) 1.7 (3.9) (0.9) (2.9) (1.4)
Equity in net income of unconsolidated
subsidiaries
18.1 32.7 70.4 0.7 8.3 7.7
Income Tax (Expense)/Benefit 0.7 (6.2) (15.3) (1.8) (7.7) (6.3)
Net income attributable to
noncontrolling interests
(0.2) (1.1) (4.9) (1.6) (1.2) (0.9)
Net income attributable to Darling 28.7$ 40.5$ 102.3$ 5.8$ 9.1$ 7.8$
Earnings per share (fully diluted) 0.17$ 0.25$ 0.62$ 0.04$ 0.05$ 0.05$
(1) Does not inlcude Unconsolidated Subsidiaries EBITDA.
(2) Rounding captured in Other Expense.
5
Non-GAAP EBITDA Margin
Feed
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
EBITDA Bridge Q3-2016 to Q3-2017
(millions)
Feed Segment
$1.3
$14.9
$79.2$20.3 $78.9
0
20
40
60
80
100
120
FX
Impact
($6.0)
EBITDA
Q3 16
Volumes EBITDA
Q3 17
OtherPrice /
Yield
Cost of
Sales
Adjusted
EBITDA
($28.9)
Key Drivers – Q3 2017
10
11
12
13
14
15
16
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
US$ and metric tons
(millions)
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
Revenue $531.4 $538.5 $2,089.1 $552.6 $549.1 $575.5
Gross Margin 117.8 116.2 464.3 120.0 126.9 125.9
Gross Margin % 22.2% 21.6% 22.2% 21.7% 23.1% 21.9%
SG&A 38.9 42.1 169.6 45.5 43.5 45.5
SG&A Margin % 7.3% 7.8% 8.1% 8.2% 7.9% 7.9%
Operati g Income 35.2 25.3 115.8 30.8 39.0 33.6
EBITDA (1) $78.9 $73.9 $294.6 $74.5 $83.4 $80.5
Raw Material Processed
(million metric tons)
1.97 2.06 7.97 2.05 2.02 2.04
(1) Does not include Unconsolidated Subsidiaries EBITDA.
• Global volumes remain strong. Improving
North American slaughter.
• Fat pricing held firm during the quarter but
trended lower during the back end due to
uncertainty regarding biofuel mandates and
typical seasonality.
• Protein pricing remained mixed with
lackluster demand for meat and bone meal
but stable to higher demand and pricing for
the poultry protein meals.
14.8%
13.7% 13.5%
15.2%
14.0%
$80.5
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
Non-GAAP EBITDA Margin
Food
Key Drivers– Q3 2017
• Rousselot gelatin business delivered stabilized
results due to strong sales volumes and improving
conditions in South America.
• Sonac edible fats delivered increased performance
with a stabilized palm oil market.
• CTH casings business produced solid earnings due
to the strong global demand driven by a contraction
in Chinese hog supplies.
6
EBITDA Bridge Q3-2016 to Q3-2017
(millions)
Food Segment
$34.5 $32.7
$25.5
$25.3
$1.8
$1.0
0
10
20
30
40
50
Price /
Yield
EBITDA
Q3 16
FX
Impact
($2.0)
EBITDA
Q3 17
OtherCost of
Sales
($17.1)
Adjusted
EBITDA
Volumes
0
2
4
6
8
10
12
14
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
9.7%
10.7%
11.8%
10.4%
11.5%
US$ and metric tons
(millions)
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
Revenue $262.0 $279.9 $1,061.9 $267.8 $279.8 $300.3
Gross Margin 50.7 56.7 227.5 56.8 56.0 60.1
Gross Margin % 19.3% 20.3% 21.4% 21.2% 20.0% 20.0%
SG&A 25.4 26.5 96.2 25.1 26.8 25.6
SG&A Margin % 9.7% 9.5% 9.1% 9.4% 9.6% 8.5%
Operating Income 7.9 11.7 61.2 14.1 11.0 15.0
EBITDA $25.3 $30.0 $131.3 $31.7 $29.2 $34.5
Raw Material Processed
(million metric tons)
0.26 0.28 1.08 0.27 0.28 0.29
Non-GAAP EBITDA Margin Fuel
7
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
EBITDA Bridge Q3-2016 to Q3-2017
(millions)
Fuel Segment
$8.1 $7.6
$12.9
$0.5
$1.7
0
2
4
6
8
10
12
14
Cost of
Sales
Adjusted
EBITDA
FX Impact
($1.2)
Price /
Yield
Volumes
($0.2)
OtherEBITDA
Q3 16
EBITDA
Q3 17
($5.6)
Key Drivers – Q3 2017
0
5
10
15
20
25
30
Q3
2016
Q4
2016
Q1
2017
Q2
2017
Q3
2017
21.4%
26.2%
17.4%
14.5%
13.1%
• Ecoson, bioenergy business, was curtailed during
the quarter to address current regulatory
requirements. Capital improvements underway to
regain needed efficiencies.
• Rendac, disposal rendering business, received
business interruption insurance advance during
quarter to help offset losses from fire.
• North American biodiesel operating at a loss with
the absence of the blenders tax credit in 2017 vs.
2016.
US$ and metric tons
(millions)
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
Revenue $60.4 $68.8 $247.1 $59.7 $67.4 $61.9
Gross Margin 14.2 19.9 64.6 13.6 12.7 7.6
Gross Margin % 23.5% 28.9% 26.1% 22.9% 18.8% 12.3%
SG&A 1.3 1.9 6.9 3.3 2.9 (0.5)
SG&A Margin % 2.2% 2.8% 2.8% 5.5% 4.3% -8.1%
Operating Income 6.0 10.5 29.2 3.5 2.1 0.1
EBITDA (1) $12.9 $18.0 $57.7 $10.4 $9.8 $8.1
Raw Material Process d *
(million metric tons)
0.29 0.31 1.18 0.30 0.29 0.28
(1) Does not include DGD EBITDA.
* Excludes raw materi l processed at the DGD joint venture.
• DGD delivered $0.49 cents per gallon EBITDA
• Month end volatility in RIN’s market drove inventory market adjustment
• Absence of the blenders tax credit affecting year-over-year comparison
• Q3 2017 EBITDA: $21.1 million entity level or $10.6 million Darling’s share
• Current total debt in JV stands at $58.0 million. Total cash of $148.4 million at
the end of September 2017
• Major expansion from 160 million gallons annually of renewable diesel to 275 million gallons still on
schedule for construction and commissioning expected to be completed in late Q2 2018.
• DGD JV exploring phase three expansion to 550 million gallons
8
Diamond Green Diesel (DGD) – 50/50 JV with Valero
US$ (millions)
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
EBITDA (Darling's share) $22.5 $36.7 $87.2 $5.0 $12.4 $10.6
Gallons Produced 43.8 42.0 158.1 32.6 43.7 41.7
Gallons Sold/Shipped 42.5 46.6 160.9 32.7 40.5 43.0
Diamond Green Diesel (50% Joint Venture)
Balance Sheet Highlights
Leverage Ratios
9
Debt Summary
Balance Sheet Highlights and Debt Summary
(US$, in thousands) September 30, 2017
Cash (includes restricted cash of $282) 110,428$
Accounts receivable 414,947
Total Inventories 375,098
Net working capital 415,952
Net property, plant and equipment 1,621,867
Total assets 4,934,522
Total debt 1,752,391
Shareholders' equity 2,204,687$
(US$, in thousands) September 30, 2017
Amended Credit Agr ement
Revolving Credit Facility
Term Loan A 107,239
Term Loan B 532,626
5.375% Senior Notes due 2022 493,345
4.750% Euro Senior Notes due 022 599,549
Other Notes and Obligations 19,632
Total Debt: 1,752,391$
September 30, 2017 Actual
Credit
Agreement
Total Debt to EBITDA: 3.56x 5.50x
Appendix – Additional Information
11Feed Segment - Historical
US$ and metric tons
(millions)
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
Revenue $547.5 $529.4 $525.2 $472.2 $2,074.3 $476.2 $543.0 $531.4 $538.5 $2,089.1 $552.6 $549.1 $575.5
Gross Margin 123.5 124.5 116.2 96.7 460.9 103.5 126.8 117.8 116.2 464.3 120.0 126.9 125.9
Gross Margin % 22.6% 23.5% 22.1% 20.5% 22.2% 21.7% 23.4% 22.2% 21.6% 22.2% 21.7% 23.1% 21.9%
SG&A 48.0 48.7 39.7 42.2 178.6 45.3 43.3 38.9 42.1 169.6 45.5 43.5 45.5
SG&A Margin % 8.8% 9.2% 7.6% 8.9% 8.6% 9.5% 8.0% 7.3% 7.8% 8.1% 8.2% 7.9% 7.9%
Operating Income 35.4 35.4 35.6 10.1 116.5 13.9 41.4 35.2 25.3 115.8 30.8 39.0 33.6
EBITDA $75.5 $75.9 $76.5 $54.4 $282.3 $58.3 $83.5 $78.9 $73.9 $294.6 $74.5 $83.4 $80.5
EBITDA Margin % 13.8% 14.3% 14.6% 11.5% 13.6% 12.2% 15.4% 14.8% 13.7% 14.1% 13.5% 15.2% 14.0%
Raw Material Processed
(millions of metric tons)
1.87 1.83 1.86 1.89 7.45 1.97 1.97 1.97 2.06 7.97 2.05 2.02 2.04
12
Change in Net Sales - Three Months Ended October 1, 2016 over September 30, 2017
(1) Rendering Net Sales- Other category includes hides, pet food, and service charges
(2) Other Net Sales category includes trap services, industrial residual services and organic fertilizer
Feed Ingredients Segment
Change in Net Sales – Nine Months Ended October 1, 2016 over September 30, 2017
Fats Proteins Other (1)
Total
Rendering
Used
Cooking Oil Bakery Other (2) Total
Net Sales Three Months Ended October 1, 2016 145.3$ 205.4$ 63.0$ 413.7$ 41.4$ 53.8$ 22.5$ 531.4$
Changes:
Increase/(Decrease) in sales volumes 8.1 7.5 - 15.6 0.5 (2.7) - 13.4
I crease/(Decrease) in finished product prices 10.6 1.3 - 11.9 4.6 0.8 - 17.3
Inc ase/(Decrease) due to currency exchange rates 2.0 4.6 2.2 8.8 0.1 - - 8.9
Other change - - 3.5 3.5 - - 1.0 4.5
Total Change: 20.7 13.4 5.7 39.8 5.2 (1.9) 1.0 44.1
Net Sales Three Months Ended September 30, 2017 166.0$ 218.8$ 68.7$ 453.5$ 46.6$ 51.9$ 23.5$ 575.5$
Rendering Sales
Change in Net Sales - 3Q16 to 3Q17
Change in Net Sales - 3Q16 to 3Q17
Fats Proteins Other (1)
Total
Rendering
Used
Cooking Oil Bakery Other (2) Total
N t Sal s Nine Months Ended October 1, 2016 423.5$ 57 .5$ 200.0$ 1,200.0$ 117.4$ 164.7$ 68.4$ 1,550.5$
Changes:
Increase/(Decrease) in sales volumes 28.1 26.0 - 54.1 (0.3) (4.2) - 49.6
Increase/(Decrease) in finished product prices 32.7 9.8 - 42.5 18.9 (1.0) - 60.4
Increase/(Decrease) due to currency exchange rates 0.1 0.4 (0.7) (0.2) 0.1 - - (0.1)
Other change - - 16.5 16.5 - - 0.4 16.9
Total Change: 60.9 36.2 15.8 112.9 18.7 (5.2) 0.4 126.8
et Sales Nine Months Ended September 30, 2017 484.4$ 612.7$ 215.8$ 1,312.9$ 136.1$ 159.5$ 68.8$ 1,677.3$
Rendering Sales
13Jacobsen, 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. Nov. Dec. Q4 Avg. Year Avg.
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 $32.00 $32.00 $30.77 $29.75
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 $22.76 $22.96 $23.05 $23.77
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 $219.88 $217.26 $223.24 $274.51
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 $277.50 $288.21 $281.43 $300.12
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 $551.25 $628.45 $571.09 $557.17
Feathermeal - Mid South / ton $255.39 $244.88 $325.45 $277.21 $409.88 $319.05 $342.73 $358.91 $476.88 $452.61 $362.98 $432.57 $325.00 $344.25 $400.95 $356.91 $356.40
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. Nov. Dec. Q4 Avg. Year Avg.
Corn - 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 $3.29 $3.32 $3.30 $3.44
European Benchmark Pricing
2016 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 $565 $646 $686 $632 $720 $702 $684 $702 $648 $719 $749 $705 $718 $748 $789 $752 $697.75
Soy meal - CIF Rotterdam / metric ton $339 $326 $320 $328 $341 $420 $465 $409 $439 $399 $372 $403 $363 $358 $360 $360 $375.08
2016 Average Jacobsen Prices (USD)
2016 Average Wall Street Journal Prices (USD)
2016 Average Thomson Reuters Prices (USD)
QTR. Over QTR. Year Over Year
Comparison Q2-2017 Q3-2017 % Q3-2016 Q3-2017 %
Average Jacobsen Prices (USD) Avg. Avg. Change Avg. Avg. Change
Bleachable Fancy Tallow - Chicago Renderer / cwt $33.61 $35.36 5.2% $28.59 $35.36 23.7%
Yellow Grease - Illinois / cwt $25.64 $27.20 6.1% $24.01 $27.20 13.3%
Meat and Bone Meal - Ruminant - Illinois / ton $251.91 $292.83 16.2% $325.56 $292.83 -10.1%
Poultry By-Product Meal - Feed Grade - Mid South / ton $284.90 $285.14 0.1% $364.37 $285.14 -21.7%
Poultry By-Product Meal - Pet Food - Mid South / ton $688.91 $577.02 -16.2% $593.47 $577.02 -2.8%
Feathermeal - Mid South / ton $390.14 $408.82 4.8% $432.57 $408.82 -5.5%
Average Wall Street Journal Prices (USD)
Corn - Track Central IL #2 Yellow / bushel $3.46 $3.31 -4.3% $3.16 $3.31 4.7%
Average Thomson Reuters Prices (USD)
Palm oil - CIF Rotterdam / metric ton $690 $687 -0.4% $705 $687 -2.6%
Soy meal - CIF Rotterdam / metric ton $341 $337 -1.5% $403 $337 -16.4%
2017 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 $32.00 $31.68 $30.50 $31.35 $30.74 $33.75 $35.89 $33.61 $36.00 $35.95 $34.38 $35.36 $28.36
Yellow Grease - Illinois / cwt $23.42 $23.70 $24.16 $23.78 $24.61 $25.21 $26.93 $25.64 $27.14 $26.96 $27.48 $27.20 $24.05
Meat and Bone Meal - Ruminant - Illinois / ton $258.03 $289.74 $273.91 $270.69 $268.82 $243.86 $245.80 $251.91 $282.00 $314.24 $278.50 $292.83 $228.30
Poultry By-Product Meal - Feed Grade - Mid South/ton $290.00 $293.68 $280.00 $287.42 $284.74 $285.00 $285.00 $284.90 $285.00 $285.00 $285.50 $285.14 $275.91
Poultry By-Product Meal - Pet Food - Mid South/ton $648.68 $6 5.13 $644.02 $635.89 $699.34 $706.82 $660.80 $688.91 $603.13 $572.50 $557.50 $577.02 $599.55
Feathermeal - Mid South / ton $455 00 $431.84 $386.74 $422.94 $383.95 $394.32 $392.05 $390.14 $397.50 $425.43 $401.00 $408.82 $357.50
2017 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.
Corn - Track Central IL #2 Yellow / bushel $3.46 $3.49 $3.41 $3.45 $3.38 $3.48 $3.52 $3.46 $3.49 $3.28 $3.16 $3.31 $3.13
2017 European Benchmark Pricing
Palm Oil - Competing ingredient for edible fats in Food Segment
Soy meal - Competing ingredient for protein meals in Feed Segment January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct.
Palm oil - CIF Rotterdam / metric ton 804 $772 $719 $7 5 $672 $732 $666 $690 $665 $673 $723 $687 $716
Soy meal - CIF Rotterdam / metric ton $371 $374 $359 $368 $347 $344 $331 $341 $341 $331 $340 $337 $354
2017 Average Jacobsen Prices (USD)
2017 Average Wall Street Journal Prices (USD)
2017 Average Thomson Reuters Prices (USD)
14Food Segment - Historical
US$ and metric tons
(millions)
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
Revenue $270.2 $283.4 $269.2 $272.1 $1,094.9 $247.9 $272.1 $262.0 $279.9 $1,061.9 $267.8 $279.8 $300.3
Gross Margin 53.5 60.2 54.8 62.9 231.4 62.3 57.8 50.7 56.7 227.5 56.8 56.0 60.1
Gross Margin % 19.8% 21.2% 20.4% 23.1% 21.1% 25.1% 21.3% 19.3% 20.3% 21.4% 21.2% 20.0% 20.0%
SG&A 25.5 27.9 26.1 23.8 103.3 23.8 20.5 25.4 26.5 96.2 25.1 26.8 25.6
SG&A Margin % 9.4% 9.8% 9.7% 8.7% 9.4% 9.6% 7.5% 9.7% 9.5% 9.1% 9.4% 9.6% 8.5%
Operating Income 10.8 15.5 11.6 23.3 61.2 21.9 19.7 7.9 11.7 61.2 14.1 11.0 15.0
EBITDA $28.0 $32.3 $28.7 $39.1 $128.1 $38.6 $37.4 $25.3 $30.0 $131.3 $31.7 $29.2 $34.5
EBITDA Margin % 10.4% 11.4% 10.7% 14.4% 11.7% 15.6% 13.7% 9.7% 10.7% 12.4% 11.8% 10.4% 11.5%
Raw Material Processed
(millions of metric tons)
0.27 0.28 0.26 0.26 1.07 0.27 0.27 0.26 0.28 1.08 0.27 0.28 0.29
15
(1) Pro forma Adjusted EBITDA assumes blenders tax credit was received during quarters earned in 2015 and Q1 and Q2 2017 for comparison to 2016 when the blenders tax credit was prospective.
Fuel Segment - Historical
US$ and metric tons
(millions)
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
Revenue $57.0 $46.5 $59.3 $65.4 $228.2 $55.6 $62.3 $60.4 $68.8 $247.1 $59.7 $67.4 $61.9
Gross Margin 13.2 6.3 11.4 20.2 51.1 14.9 15.6 14.2 19.9 64.6 13.6 12.7 7.6
Gross Margin % 23.1% 13.5% 19.2% 30.9% 22.4% 26.8% 25.0% 23.5% 28.9% 26.1% 22.9% 18.8% 12.3%
SG&A 4.0 (2.3) 4.5 1.1 7.3 1.9 1.8 1.3 1.9 6.9 3.3 2.9 (0.5)
SG&A Margin % 7.0% -4.9% 7.6% 1.7% 3.2% 3.4% 2.9% 2.2% 2.8% 2.8% 5.5% 4.3% -8.1%
Operating Income 2.5 2.0 0.2 12.5 17.2 6.1 6.6 6.0 10.5 29.2 3.5 2.1 0.1
EBITDA 9.1 8.6 7.0 19.2 43.9 13.0 13.8 12.9 18.0 57.7 10.4 $9.8 $8.1
Pro forma Adjusted EBITDA (1) $10.2 $10.6 $9.1 $14.0 $43.9 $13.0 $13.8 $12.9 $18.0 $57.7 $12.2 $11.9 $10.5
EBITDA Margin % 16.0% 18.5% 11.8% 29.4% 19.2% 23.4% 22.2% 21.4% 26.2% 23.4% 17.4% 14.5% 13.1%
Raw Material Processed *
(millions of metric tons)
0.30 0.29 0.27 0.31 1.17 0.28 0.30 0.29 0.31 1.18 0.30 0.29 0.28
*Excludes raw material processed at the DGD joint venture.
Diamond Green Diesel (50% Joint Venture)
US$ (millions)
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Q1
2017
Q2
2017
Q3
2017
EBITDA (Darling's share) $2.3 $7.9 ($8.3) $86.6 $88.5 $9.6 $18.3 $22.5 $36.7 $87.2 $5.0 $12.4 $10.6
Pro forma Adjusted EBITDA (1) $19.6 $30.2 $11.7 $27.0 $88.5 $9.6 $18.3 $22.5 $36.7 $87.2 $21.4 $32.7 $32.1
Total Gallons Produced 37.5 41.9 39.9 37.5 156.6 28.5 43.8 43.8 42.0 158.1 32.0 43.7 41.7
Total Gallons Sold/Shipped 34.6 44.6 39.9 37.5 156.6 29.1 42.7 42.5 46.6 161.0 32.7 40.5 43.0
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 September 30, 2017. 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.
16
Non-U.S. GAAP Measures
17
Note: See slide 16 for information regarding Darling’s use of Non-GAAP measures.
Adjusted EBITDA
(1) The average rates assumption used in this calculation was the actual fiscal average rate for the three months ended October 1, 2016 of €1.00:USD$1.12 and CAD$1.00:USD$0.77 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.
(2) The average rates assumption used in this calculation was the actual fiscal average rate for the nine months ended October 1, 2016 of €1.00:USD$1.12 and CAD$1.00:USD$0.76 as compared to the average rate the
nine months ended September 30, 2017 of €1.00:USD$1.11 and CAD$1.00:USD$0.77, respectively.
Adjusted EBITDA and Pro Forma Adjusted EBITDA
(US$ in thousands) September 30, October 1, September 30, October 1,
2017 2016 2017 2016
Net income attributable to Darling $ 7,761 $ 28,694 $ 22,739 $ 61,772
Depreciation and amortization 77,202 70,653 221,306 212,440
Interest expense 22,531 23,867 66,657 71,748
Income tax expense/(benefit) 6,296 (744) 15,856 9,102
Foreign currency loss/(gain) 2,055 (354) 4,430 2,241
Other expense, net 1,447 2,007 5,103 5,685
Equity in net (income) of unconsolidated subsidiaries (7,703) (18,138) (16,669) (37,633)
Net income attributable to noncontrolling interests 923 196 3,671 3,772
Adjusted EBITDA $ 110,512 $ 106,181 $ 323,093 $ 329,127
Acquisition and integration-related expenses - - - 401
Pro forma Adjusted EBITDA (Non-GAAP) $ 110,512 $ 106,181 $ 323,093 $ 329,528
Foreign currency exchange impact (3,574) (1) - 231 (2) -
Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) $ 106,938 $ 106,181 $ 323,324 $ 329,528
DGD Joint Venture Adjusted EBITDA (Darling's Share) $ 10,570 $ 22,543 $ 28,013 $ 50,503
Three Months Ended - Year over Year Nine Months Ended - Year over Year