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| 8-K - DARLING INTERNATIONAL 8-K 11-2-2009 - DARLING INGREDIENTS INC. | form8-k.htm |
Investor
Presentation
Investor
Presentation
November
2009
NYSE:
DAR
2
Forward-Looking
Statements
This
presentation contains forward-looking statements regarding the
business
operations of Darling and the industry in which it operates. These statements are
identified by words such as “may,” “will,” “expect,” “believe,” “intend,” “anticipate,”
“should,” “estimate,” “continue,” and other words referring to events to occur in the
future. These statements reflect Darling'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, including business and economic conditions in its existing
markets that could cause actual results to differ materially from those projected in
the forward-looking statements. Other risks and uncertainties regarding Darling,
its business and the industry in which it operates are referenced from time to time
in the Company's filings with the Securities and Exchange Commission. Darling 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.
operations of Darling and the industry in which it operates. These statements are
identified by words such as “may,” “will,” “expect,” “believe,” “intend,” “anticipate,”
“should,” “estimate,” “continue,” and other words referring to events to occur in the
future. These statements reflect Darling'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, including business and economic conditions in its existing
markets that could cause actual results to differ materially from those projected in
the forward-looking statements. Other risks and uncertainties regarding Darling,
its business and the industry in which it operates are referenced from time to time
in the Company's filings with the Securities and Exchange Commission. Darling 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.
3
Over a
century old,
Darling International Inc.
is America’s leading provider
of rendering, recycling and
recovery solutions to the
nation’s food industry.
Darling International Inc.
is America’s leading provider
of rendering, recycling and
recovery solutions to the
nation’s food industry.
Founded in
1882
Headquartered
in Dallas, TX
1900
employees
Public since
1994
NYSE Listed
(DAR)
Largest independent
rendering company with
80 locations, 44 processing plants nationwide
80 locations, 44 processing plants nationwide
Reports under two
segments:
– Rendering
– Restaurant
services
Who
we are:
4
Essential
“Gate Keeper” for People & Planet
5
Composting - Volume would fill
10,000 new
Dallas Cowboy stadiums per year
Dallas Cowboy stadiums per year
Landfill - Volume
would reduce existing
US landfill space by 25% per year and
increase GHG emissions
US landfill space by 25% per year and
increase GHG emissions
Incineration - Cost prohibitive
and has
air quality issues
air quality issues
Digesting- Operationally
challenging
and capital intensive
and capital intensive
Burial - Potential
for ground and
surface water contamination
surface water contamination
Abandonment -Greatest threat
to
environment and human/animal health
environment and human/animal health
Without rendering…. we face critical issues using other methods of disposal:
6
Rendering…
invisible industry with massive scale
Animal and food
by-product recycling industry is “mission critical” in
the food supply chain and is the most efficient and environmentally
sound disposal alternative for a sustainable society.
the food supply chain and is the most efficient and environmentally
sound disposal alternative for a sustainable society.
Over 59 billion
pounds of inedible by-products generated annually
from meat packers, poultry processors and retail food stores.
from meat packers, poultry processors and retail food stores.
Source:
NRA/Harvard Risk Assessment
35 million cattle
(49% of live wt. not used for human food)
100 million hogs
(44% not used for human food)
8 billion chickens
(37% not used for human food)
280 million turkeys
(36% not used for human food)
U.S.
Animal Agriculture Annual Production
7
How
it All Fits Together
RAW
MATERIAL
Tallow
Meat
& Bone
Grease
Hides
Leather
Shoes
Garments
Upholstery
Bio-
Fuels
Fuels
Animal
Feed
Feed
Pet
Food
Food
Poultry
Feed
Feed
Hog
Food
Food
Animal
Feed
Feed
Pet
Food
Food
Bio-
Fuels
Fuels
Soap
Linoleic
Acid
Acid
Oleic
Acid
Acid
Glycerin
Stearic
Acid
Acid
Fertilizer
Lubricants
Textiles
Plastics
Shampoo
Emulsifiers
Cleaners
Creams
Esters
Paints
Plastics
Lubricants
Inks
Glues
Solvents
Antifreeze
Explosives
Rubber
Plastics
Tires
Lubricants
Finished
Products
Products
Component
By-Products
By-Products
Component
By-Products
Applications
By-Products
Applications
8
9
Industry
Leader
Only
recycling/rendering company with a national footprint operating in 42
states
- Network of 44 processing facilities from coast to coast
- Supported by 36 accumulation centers.
- Network of 44 processing facilities from coast to coast
- Supported by 36 accumulation centers.
A
national footprint with scale ……
10
Reporting
Segments
Rendering
Rendering is the
process of recycling animal and food waste products into useful
commercial goods, including tallow, protein meals (meat and bone meal), yellow
grease, and hides.
commercial goods, including tallow, protein meals (meat and bone meal), yellow
grease, and hides.
Restaurant
Services
Darling
is the only US provider of collection, storage, transport, and recycling
of
old grease on a national scale.
old grease on a national scale.
Rendering
Process
Grinding
Cooking
Defatting
Meal
Fat
11
Raw
Materials - turning this …
Offal
Bones and
fat
Blood
Animals dead on
arrival,
in transit or on farms
in transit or on farms
Feathers
12
…
into this
13
14
Rendering
Overview
Darling
operates a fleet of approx 960 trucks to collect raw materials from
approx
116,000 food service establishments, butcher shops, grocery stores, and
independent meat and poultry processors nationwide.
116,000 food service establishments, butcher shops, grocery stores, and
independent meat and poultry processors nationwide.
“Formula”
basis: Applied to approx
58% of Darling’s annual raw material
volume; cost is tied to published finished product commodity prices after
deducting a fixed service charge.
volume; cost is tied to published finished product commodity prices after
deducting a fixed service charge.
“Non-formula”
basis: Applied to remaining
volume; suppliers are either paid a
fixed price, are not paid, or are charged for the expense of collection, depending
on various economic and competitive factors
fixed price, are not paid, or are charged for the expense of collection, depending
on various economic and competitive factors
Darling
markets finished products worldwide.
Primarily BFT and YG, and also MBM, a protein;
Oils used in pet food, animal feed, soaps;
Oleo-chemical producers use oils to produce ingredients for paint,
rubber, paper, concrete, plastics;
MBM is used as high protein additives in pet food and animal feed
Primarily BFT and YG, and also MBM, a protein;
Oils used in pet food, animal feed, soaps;
Oleo-chemical producers use oils to produce ingredients for paint,
rubber, paper, concrete, plastics;
MBM is used as high protein additives in pet food and animal feed
Purchase
&
Collection
Collection
Risk
Management
& Pricing
Management
& Pricing
Marketing,
Sales &
Distribution
Sales &
Distribution
15
Restaurant
Services Overview
Basic cooking oil removal (COR) service
- Collection of used cooking oil from inside systems or
outside corrals
- Collection of used cooking oil from inside systems or
outside corrals
Premium service offered in conjunction with COR
- Self
contained used cooking oil storage system inside or
outside customer’s premises
outside customer’s premises
Grease trap maintenance and cleaning service
- Operates in 20 markets
- Customers represent FSEs, malls and industrial food processors
- Operates in 20 markets
- Customers represent FSEs, malls and industrial food processors
16
Cooking
Oil Removal
Bundled
services - Complete,
individualized used cooking oil collection and
recycling services nationwide through local
providers
individualized used cooking oil collection and
recycling services nationwide through local
providers
Environmental
compliance - Efficient,
reliable
pickup and disposal of non-recyclable waste
pickup and disposal of non-recyclable waste
17
CleanStar
Environmentally
safe and efficient - Used
cooking
oil is pumped directly into sealed, insulated CleanStar
storage tank with press of a button
oil is pumped directly into sealed, insulated CleanStar
storage tank with press of a button
Customer
choice - Option of inside or
outside
storage systems to fit customer needs
storage systems to fit customer needs
18
Torvac
(Trap)
Ongoing
maintenance - Provides
manpower,
equipment and expertise to find and fix grease
trap problems
equipment and expertise to find and fix grease
trap problems
Compliance
-
Removed material is tracked
and handled in a legal and environmentally
sound manner
and handled in a legal and environmentally
sound manner
19
National
Service Center
Darling’s
National Service Center (NSC) offers
complete service management for all cooking oil
removal, grease trap and rendering services.
complete service management for all cooking oil
removal, grease trap and rendering services.
Manages grease and
rendering related service needs.
Ensures compliance
for trap regulations and ordinances.
24 hr/day, 7
day/week high-quality customer service.
Web-based records
management system.
Sales
Recap
20
320,229
21
Operating
Cash Flows
(in
millions)
Key
Financials
22
Capital
Expenditures
23
Millions
$13.3
Balance
Sheet
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July
4, 2009
|
|
June
28, 2008
|
|
|
|
|
|
|
|
|
|
CASH
|
|
$ 57,786
|
|
$ 44,596
|
|
|
ACCOUNTS
RECEIVABLE
|
|
46,404
|
|
65,078
|
|
|
INVENTORIES
|
|
20,073
|
|
30,300
|
|
|
INCOME
TAXES REFUNDABLE
|
|
5,170
|
|
-
|
|
|
OTHER
CURRENT ASSETS
|
|
15,539
|
|
12,018
|
|
|
TOTAL
CURRENT ASSETS
|
|
144,972
|
|
151,992
|
|
|
|
|
|
|
|
|
|
PROPERTY,
PLANT & EQUIP
|
|
146,477
|
|
132,698
|
|
|
GOODWILL
|
|
66,958
|
|
71,856
|
|
|
OTHER
|
|
47,604
|
|
32,716
|
|
|
TOTAL
ASSETS
|
|
$ 406,011
|
|
$ 389,262
|
|
|
|
|
|
|
|
|
|
CURRENT
PORTION - DEBT
|
|
$ 5,000
|
|
$ 5,000
|
|
|
A/P
AND ACCRUED EXPENSES
|
|
61,290
|
|
70,139
|
|
|
TOTAL
CURRENT LIABILITIES
|
|
66,290
|
|
75,139
|
|
|
|
|
|
|
|
|
|
LONG-TERM
DEBT, LESS CURRENT
|
|
30,000
|
|
36,250
|
|
|
OTHER
LIABILITIES
|
|
54,117
|
|
28,361
|
|
|
TOTAL
LIABILITIES
|
|
150,407
|
|
139,750
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY
|
|
255,604
|
|
249,512
|
|
|
TOTAL
LIABILITIES AND EQUITY
|
|
$ 406,011
|
|
$ 389,262
|
|
Core
Business Growth through Acquisition
25
March
03
03
Dec
04
04
May
06
06
July
07
07
Dec
08
08
Feb
09
09
Aug
08
08
Oct
05
05
Enviro
Vac,
Inc.
Inc.
FL,
GA
KC
metro
NYC
metro
GA
GA
So
CA
TX
Burrows
Industries, Inc.
dba Minuteman Pumping
dba Minuteman Pumping
Ace
Grease
Service
Service
J&R
Rendering, Inc.
Rendering, Inc.
Southeastern
Maintenance &
Construction Inc.
Maintenance &
Construction Inc.
National
By-Products, LLC
By-Products, LLC
API
Recycling,
div of American
Proteins Inc.
div of American
Proteins Inc.
Boca
Transport, Inc.
Transport, Inc.
Midwest
US
US
Darling
International Inc. - Triangle of Value
26
Darling
Captures and Recycles Carbon
(Emissions
per 1000 lb raw material)
Rendering
Facility
573
kg
CO2 eq
avoided by recycling
avoided by recycling
64
kg CO2
Industrial
uses
and biofuels
and biofuels
Feed
|
Material
Darling recycles in a year:
|
|
|
Carbon Darling
captures, lb/year
|
1.23
billion
|
|
CO2 Darling avoids,
metric ton/year
|
2.1
million
|
|
CO2 emitted per metric
ton avoided
|
0.14 metric
ton
|
|
GHG avoided
,metric ton/year*
|
4
million
|
Atmospheric
CO2
*Avoided
when materials are rendered rather than composted, based on a study by Xu et
al., 2008
Animal
Byproducts
&
Mortalities
Byproducts
&
Mortalities
27
28
29
Darling
is uniquely positioned
A top producer of
animal fats and greases
“Similar to owning
the oil field”
Not a food oil (Food
vs. Fuel)
Mandates, subsidies,
and carbon credits
Source:
National Biodiesel Board.
Bio-diesel
has not been the solution so far for animal fats
Animal fat based bio-diesel (TME)
has not been embraced because of
cold flow properties… hard to handle in the
distribution system and variable quality.
|
|
Petro-Diesel
|
Biodiesel
(FAME)
|
Green
Diesel
|
|
NOx
Emission
|
Baseline
|
+
10
|
-10 to
0
|
|
Cetane
|
40-55
|
50-65
|
75-90
|
|
Cold flow
properties
|
Baseline
|
Poor
|
Excellent
|
|
Oxidative
stability
|
Baseline
|
Poor
|
Excellent
|
|
Energy
content
|
Baseline
|
Lower
|
Similar
|
30
Green
diesel may be a better solution?
Green diesel is a
bio fuel indistinguishable from petroleum diesel; it can be
blended to any proportion
blended to any proportion
Green diesel can be
used in any proportion within today’s infrastructure,
from pipelines and storage to gas pumps and automobiles
from pipelines and storage to gas pumps and automobiles
Green diesel has
excellent stability and is not oxygenated
Green diesel offers
superior cold flow properties making it more suitable for
very cold climate conditions
very cold climate conditions
Green diesel has
higher energy content per volume compared to biodiesel
The renewable diesel
process is feedstock flexible and will
produce green diesel with the same superior quality from a
wide variety of feedstock's, such as vegetable oils, tallow,
animal fats, greases & algae oils
produce green diesel with the same superior quality from a
wide variety of feedstock's, such as vegetable oils, tallow,
animal fats, greases & algae oils
Green diesel offers
lower fossil energy requirements and
reduction of green house gases and NOX emissions
reduction of green house gases and NOX emissions
31
Animal fat price is
determined by its value relative to corn!
Not a FOOD vs. FUEL
issue
Developing a new
customer alternative for DAR products
is essential to creating shareholder value.
is essential to creating shareholder value.
Mandated consumption
and blending requirement for
greenhouses gases
may alter the supply & demand enough
to
narrow the discount our products have enjoyed versus
soybean
oil.
Highlights
to consider:
Bio-fuels
may be a game changer for DAR!
|
|
2006
|
2007
|
2008
|
3-Yr
Average
|
|
Per # price of
diesel fuel
|
.27
|
.30
|
.45
|
.34
|
|
Per # price of
animal fat/used grease
|
.16
|
.26
|
.31
|
.24
|
|
Price premium
as fuel before tax credit
|
.11
|
.04
|
.14
|
.10
|
|
Per # value of
tax credit
|
.14
|
.14
|
.14
|
.14
|
|
Price premium
as fuel after tax credit
|
.25
|
.18
|
.28
|
.24
|
Alters supply/demand
dynamic of animal fats/used grease
Darling fat is more
valuable as fuel than animal feed
|
|
Billions
of
Annual Lbs |
|
Demand as
animal feed
|
7.5
|
|
Demand as
industrial feedstock
|
2.1
|
|
Demand as food
ingredient
|
.4
|
|
U.S.
supply/demand fat’s and greases
|
10.0
|
32
33
Bleachable
Fancy Tallow
Fancy Tallow
|
|
MMs
Annual |
|
Revenue renewable
diesel
|
$526
|
|
Other
products
|
30
|
|
Total
revenue
|
556
|
|
Input
cost
|
375
|
|
Plant
operating cost
|
39
|
|
Total
expenses
|
414
|
|
|
|
|
EBITDA
|
$142**
|
What
did Green Diesel economics in 2008 look like?
10,000
barrel/day plant
Earnings
Snapshot
34
**Assumes 2008
average market prices for the
respective products and inputs as published by
trade journals and may not be indicative of future
performance.
respective products and inputs as published by
trade journals and may not be indicative of future
performance.
Green
Diesel and the Carbon World
THE
CARBON FACTS
-
Each gallon of diesel fuel results in 22.2 #’s of carbon emissions
- Carbon reduction associated with animal fat/used cooking oil
green diesel between 70%-90%
10,000
BPD PLANT
U.S.
ANIMAL FAT
&
USED
GREASE
SUPPLY
Gallons
green diesel 125,000,000
X
#’s/gallon carbon reduction 18
=
Total #’s of carbon reduction 2,250,000,000
or
Metric
tonnes carbon credit 1,020,593
X
Assumed per tonne credit $35
=
Available income carbon credits $35,720,755
Gallons
green diesel 1,250,000,000
X
#’s/gallon carbon reduction 8
= Total #’s of carbon
reduction
22,500,000,000
or
Metric
tonnes carbon credit 10,205,933
X
Assumed per tonne credit 35
= Available income
carbon credits $357,207,655
Value
will most likely be created by
RIN’S
which will be indexed with
fuels having greater carbon reductions
receiving
premium pricing in market
Assumes
80%
35
DAR
& VLO have applied for DOE Loan Guarantee
Joint venture to
construct 10,000 barrel/ day “Green
Diesel Refinery”
Facility to have
pre-treatment capability for multi-feedstock flexibility,
but animal fats and used cooking oil are primary
but animal fats and used cooking oil are primary
St. Charles Site
Provides:
– Located on major
waterway for feedstock flexibility
– Located on petroleum
pipeline distribution system
– Located on hydrogen
supply pipeline system
Deal points we are
looking for:
– 50/50 equity
participation
– Supply at market of
fats and oils
– Finished products
(Diesel, Naphtha, and Propane) off take agreement
– RIN and
Carbon Credit stay with facility
36
37
The
RECYCLING COMPANY of YESTERDAY…
The
CARBON FRIENDLY
FUEL COMPANY
of TOMMORROW
CARBON FRIENDLY
FUEL COMPANY
of TOMMORROW