Attached files
| file | filename |
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| 8-K - 8-K - DARLING INGREDIENTS INC. | dar-20181105x8k.htm |
| EX-99.3 - EXHIBIT 99.3 PRESS RELEASE - DARLING INGREDIENTS INC. | exhibit993pressrelease.htm |
| EX-99.1 - EXHIBIT 99.1 PRESS RELEASE - DARLING INGREDIENTS INC. | exh991-pressreleaseq32018.htm |
Exhibit – 99.2 Randall C. Stuewe, Chairman and CEO Brad Phillips, EVP Chief Financial Officer Melissa A. Gaither, VP IR and Global Communications
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(“GHG”) emissions that adversely affect programs like the U.S. government’s renewable fuel standard, low carbon fuel standards (“LCFS”) and tax credits for biofuels both in the Unites States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations to food or food additives; the occurrence of 2009 H1N1 flu (initially known as “Swine Flu”), Highly pathogenic strains of avian influenza (collectively known as “Bird Flu”), bovine spongiform encephalopathy (or "BSE"), porcine epidemic diarrhea ("PED") or other diseases associated with animal origin in the United States or elsewhere, such as the recent African Swine Fever (“ASF”) outbreak in China; unanticipated costs and/or reductions in raw material volumes related to the Company’s compliance with the existing or unforeseen new U.S. or foreign (including, without limitation, China) regulations (including new or modified animal feed, Bird Flu, PED, BSE or ASF or similar or unanticipated regulations) affecting the industries in which the Company operates or its value added products; risks associated with the DGD Joint Venture, including possible unanticipated operating disruptions and issues relating to the announced expansion project; risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers and other trade protections imposed by foreign countries; difficulties or a significant disruption in our information systems or failure to implement new systems and software successfully, including our ongoing enterprise resource planning project; risks relating to possible third party claims of intellectual property infringement; increased contributions to the Company’s pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawal event; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraine or elsewhere; uncertainty regarding the likely exit of the U.K. from the European Union; and/or unfavorable export or import markets. These factors, coupled with volatile prices for natural gas and diesel fuel, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could negatively impact the Company's results of operations. Among other things, future profitability may be affected by the Company’s ability to grow its business, which faces competition from companies that may have substantially greater resources than the Company. The Company’s announced share repurchase program may be suspended or discontinued at any time and purchases of shares under the program are subject to market conditions and other factors, which are likely to change from time to time. Other risks and uncertainties regarding Darling Ingredients Inc., its business and the industries in which it operates are referenced from time to time in the Company’s filings with the Securities and Exchange Commission. Darling Ingredients Inc. is under no obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise.
Consolidated Earnings 3 Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q3 2018 Overview US$ (millions) except per share price 2017 2017 2017 2017 2017 2018 2018 2018 Revenue $ 878.5 $ 894.9 $ 936.3 $ 952.6 $ 3,662.3 $ 875.4 $ 846.6 $ 812.6 • Total global volumes up 5.0% year over year Gross Margin 190.5 195.7 193.8 206.8 786.8 197.3 193.6 164.5 Gross Margin % 21.7% 21.9% 20.7% 21.7% 21.5% 22.5% 22.9% 20.2% • Fat pricing significantly weaker year over year. Ample SG&A 86.9 84.5 82.1 90.0 343.5 86.9 78.6 67.4 supplies globally, DGD off line. Seeing improvement in Q4. SG&A Margin % 9.9% 9.4% 8.8% 9.4% 9.4% 9.9% 9.3% 8.3% • Protein pricing slightly weaker year over year. Trade Restructuring and impairment charges 0.0 0.0 0.0 0.0 0.0 0.0 (15.0) 0.0 disruptions due to China tariffs influencing end markets. Operating Income 32.5 38.2 34.4 36.1 141.2 31.8 22.1 18.2 Seeing improvements coming from non-traditional markets. Adj. EBITDA (2) 103.6 111.2 111.6 116.9 443.3 110.4 115.1 97.0 Adj. EBITDA Margin % 11.8% 12.4% 11.9% 12.3% 12.1% 12.6% 13.6% 11.9% • Collagen/Gelatin sales stable year over year with Interest Expense (21.7) (22.4) (22.5) (22.3) (88.9) (23.1) (23.0) (20.1) improved margins in Brazil and higher demand for Debt Extinguishment costs 0.0 0.0 0.0 0.0 0.0 0.0 (23.5) 0.0 specialty products globally Foreign Currency loss (0.3) (2.1) (2.1) (2.4) (6.9) (1.5) (3.5) (2.1) • Board increases Share Repurchase Program to $200 Gain/(Loss) on Disposal of Subsidiaries 0.0 0.0 0.0 0.0 0.0 0.0 (15.5) 3.0 million of common stock Other Expense (3) (2.0) (4.0) (2.5) (1.3) (9.7) (2.6) 1.2 (2.7) Equity in net income/(loss) of 0.7 8.3 7.7 11.8 28.5 97.2 15.2 (2.8) • Debt paydown of $12 million during the quarter unconsolidated subsidiaries Income Tax (Expense)/Benefit (1.8) (7.7) (6.3) 85.0 69.2 (3.7) 1.7 1.4 • Diamond Green Diesel (DGD) completes expansion Net income attributable to noncontrolling (1.6) (1.2) (0.9) (1.2) (4.9) (0.8) (1.3) (0.9) turnaround and announces phase III growth to 675 million interests annual gallons of renewable diesel plus renewable Naphtha Net income/(loss) attributable to Darling $ 5.8 $ 9.1 $ 7.8 $ 105.7 $ 128.5 $ 97.3 $ (30.0) $ (6.0) gallons Earnings per share (fully diluted) $ 0.04 $ 0.05 $ 0.05 $ 0.63 $ 0.77 $ 0.58 $ (0.18) $ (0.04) (1) Includes $12.6M of 2017 BTC in Q1 2018 and revenue recognition for Q1 and Q2 2018 (2) Does not inlcude Unconsolidated Subsidiaries EBITDA. (3) Rounding captured in Other Expense.
Third Quarter 2018 Financial Summary 4 Q3 2018 Overview $ in millions Gross Profit and Margin • Net sales - $812.6 million • Net income - $(6.0) million • EPS at $(0.04) per diluted share • Adjusted EBITDA - $97.0 million • DGD joint venture Adjusted EBITDA - $0.5 million (Darling’s share) $ in millions $ in millions Strong Free Cash Flow Generation Quarterly Adjusted EBITDA $140 $120 $120 $25 $116.9 $115.1 $100 $115 $111.6 $110.4 $80 $110 $115.1 $116.9 $110.4 $60 $111.6 $105 $40 $82.5 $22.4 $100 $97.0 $77.8 $97.0 $74.6 $68.6 $20 $53.8 $57.6 $56.6 $95 $43.0 $0 $39.1 $90 3Q 2017 4Q 2017 1Q 2018 2Q 2018 3Q 2018 3Q17 4Q17 1Q18 2Q18 3Q18 Adjusted EBITDA is a Non-U.S. GAAP Measure (See slide 17) Adjusted EBITDA Capex Free Cash Flow (Adjusted EBITDA plus DGD cash dividend after Capex) 2Q 2018 DGD cash dividend
Feed Segment 5 US$ and metric tons Q3 Q4 Total Q1 Q2 Q3 (millions) 2017 2017 2017 2018 2018 2018 Adj. EBITDA Bridge Q3-2017 to Q3-2018 (millions) Revenue $575.5 $562.3 $2,239.5 $485.8 (1) $498.8 (1) $482.7 (1) 100 Gross Margin 126.0 122.0 494.9 116.7 128.0 98.9 $81.1 ($89.7) 80 Gross Margin % 21.9% 21.7% 22.1% 24.0% 25.7% 20.5% $59.8 $59.2 60 SG&A 44.8 45.8 178.3 48.3 43.9 39.7 $5.0 ($0.6) 40 SG&A Margin % 7.8% 8.1% 8.0% 9.9% 8.8% 8.2% $33.1 20 $30.3 Operating Income 34.2 26.9 132.3 21.7 37.3 11.9 0 Adj. EBITDA (2) $81.1 $76.2 $316.5 $68.5 $84.1 $59.2 -20 Raw Material Processed EBITDA Price / Volumes Cost of Other Adjusted FX EBITDA 2.04 2.13 8.24 2.12 2.13 2.17 Q3 17 Yield Sales EBITDA Impact Q3 18 (million metric tons) (1) Reflects freight revenue reclass and deconsolidation of BestHides Note: Cost of Sales includes raw material costs, collection costs and factory costs. (2) Does not include Unconsolidated Subsidiaries EBITDA Key Drivers: Non-GAAP Adj. EBITDA Margin Feed • Slaughter volumes remain at record levels with global raw material volumes 16.9% up 6.1% over Q3 2017. 16% 14.1% 14.1% 14% 13.6% • Raw material formulas lagging due to lower fat and protein markets throughout 12.3% 12% the quarter. 10% • DGD extended downtime affecting N. American fat pricing. Summer quality 8% ultimately lowered sales premiums. 6% 4% • African Swine Fever (AFS) in China forced $7.2 million inventory devaluation in 2% our 5 blood factories. 0% Q3 Q4 Q1 Q2 Q3 • Trade disruptions and large slaughter affecting protein pricing. 2017 2017 2018 2018 2018
Food Segment 6 US$ and metric tons Q3 Q4 Total Q1 Q2 Q3 (millions) 2017 2017 2017 2018 2018 2018 Adj. EBITDA Bridge Q3-2017 to Q3-2018 (millions) Revenue (1) $298.9 $313.5 $1,157.0 $305.5 (2) $276.7 (2) $265.2 (2) 40 $34.6 ($26.2) $33.0 ($0.3) $32.7 Gross Margin 60.2 63.6 236.6 56.3 51.9 54.5 30 $20.4 Gross Margin % 20.1% 20.3% 20.4% 18.4% 18.8% 20.6% $3.5 SG&A 25.5 27.4 104.6 23.9 22.2 21.8 20 SG&A Margin % 8.5% 8.7% 9.0% 7.8% 8.0% 8.2% 10 $0.7 Operating Income 15.1 16.4 56.9 11.8 9.3 (3) 13.0 Adj. EBITDA $34.6 $36.1 $131.9 $32.4 $29.7 (3) $32.7 0 Raw Material Processed EBITDA Price / Volumes Cost of Other Adjusted FX EBITDA 0.29 0.28 1.12 0.28 0.28 0.29 Q3 17 Yield Sales EBITDA Impact Q3 18 (million metric tons) (1) Revenue adjusted for Brazil VAT reclass (2) Reflects freight revenue reclass Note: Cost of Sales includes raw material costs, collection costs and factory costs. (3) Adjusted for restructuring charges of $15.0 million for closure of Argentina gelatin plant Key Drivers: Non-GAAP Adj. EBITDA Margin Food • Global collagen business showed stable earnings over Q3 16% 2017 with improved margins in Brazil and higher sales volumes 14% 12.3% 11.6% 11.5% in China 12% 10.6% 10.7% 10% • CTH, our natural casings business, reported lower earnings 8% mainly due to decreased sales volumes 6% 4% • Edible fats show continued margin pressure due to competing 2% weaker palm oil and soybean oil markets 0% Q3 Q4 Q1 Q2 Q3 2017 2017 2018 2018 2018
7 Fuel Segment (Does not include Diamond Green Diesel JV) US$ and metric tons Q3 Q4 Total Q1 Q2 Q3 Adj. EBITDA Bridge Q3-2017 to Q3-2018 (millions) 2017 2017 2017 2018 2018 2018 (millions) Revenue $61.9 $76.8 $265.8 $84.1 (1) $71.1 (1) $64.6 (1) Gross Margin 7.6 21.4 55.4 24.2 13.7 11.1 $14.0 $13.9 15 $4.8 Gross Margin % 12.3% 27.9% 20.8% 28.8% 19.3% 17.1% ($0.1) $1.2 ($2.5) $2.4 SG&A (0.5) 4.7 10.4 (1.4) 0.2 (2.8) 10 $8.1 SG&A Margin % -0.8% 6.1% 3.9% -1.7% 0.2% -4.3% Operating Income 0.2 8.1 14.0 17.2 5.0 4.5 5 Adj. EBITDA (2) $8.1 $16.6 $57.6 (3) $13.0 (3) $13.6 $13.9 Raw Material Processed * 0 0.28 0.32 1.19 0.30 0.27 0.29 EBITDA Price / Volumes Cost of Other Adjusted FX EBITDA (million metric tons) Q3 17 Yield Sales EBITDA Impact Q3 18 (1) Reflects freight revenue reclass (2) Does not include DGD EBITDA (3) Reflects move of $12.6 million 2017 retrospective blenders tax credit from Q1 2018 approved in February 2018 to total 2017 EBITDA Note: Cost of Sales includes raw material costs, collection costs and factory costs. * Excludes raw material processed at the DGD joint venture. Key Drivers: Non-GAAP Adj. EBITDA Margin Fuel 25% 21.6% 21.5% • Ecoson, European bioenergy business, delivered improved 19.1% 20% performance over Q3 2017 with strong volumes from new 15.5% operation in Belgium 15% 13.1% 10% • N. American biodiesel reports slightly weaker results in Canada due to lower RIN pricing and no BTC 5% 0% • Rendac, European disposal rendering business, reports Q3 Q4 Q1 Q2 Q3 stable earnings with strong volumes in the Netherlands 2017 2017 2018 2018 2018 and Belgium Note: Moved $12.6 million of 2017 retrospective blenders tax credit from Q1 2018 approved in February 2018 to total 2017 EBITDA
8 DGD – ENTITY LEVEL Super Diamond phase three expansion ➢ Super Diamond expansion project approved to 675 approved million total annual gallons of renewable diesel plus parallel independent plant additional renewable Naphtha gallons for the green to bring total annual gasoline markets production to 675 million gallons of renewable diesel ➢ Super Diamond estimated expansion costs of $1.1 billion plus additional renewable for entire project includes: Naphtha gallons - expansion - improved logistics capability - renewable Naphtha plant ➢ Expansion to 275 million gallons completed and running at capacity since early October. ➢ Q3 2018 Entity EBITDA of $1.0 million or $.04 per gallon on 23.1 million gallons of sales ➢ Lower volumes, higher operating costs, and hedge losses Diamond Green Diesel (50% Joint Venture) reflected in lower operating margin Q1 Q2 Q3 ➢ US$ (millions) 2014 2015 2016 2017 LCFS premium around $189/metric ton or $1.89/gallon 2018 2018 2018 (per Jacobsen 10-19-18) EBITDA (Entity) $163.3 $177.0 $174.4 *$246.8 $39.7 $36.3 $1.0 ➢ No Blenders Tax Credit in results EBITDA (Darling's share) 81.6 88.5 87.2 * 123.4 19.9 18.2 0.5 Gallons Produced 127.3 158.8 158.1 161.3 37.1 33.2 17.2 ➢ Spot margins $1.35 per gallon EBITDA Gallons Sold 126.2 156.6 161.0 160.4 33.4 34.8 23.1 *Includes 2017 retroactive blenders tax credit of $160.4 million that was approved in February 2018 and ➢ Expect to produce/sell 65-70 million gallons in Q4 recorded in Q1 2018 Source: Company Financials
Balance Sheet Highlights and Debt Summary 9 (US$,Balance in thousands) Sheet HighlightsJune 30, 2018 Debt Summary Cash(US$, in thousands)(includes restricted cashSeptember of $142) 29, 2018 (US$, in thousands) September 29, 2018 $104,262 Cash (includes restricted cash of $103) $ 81,573 Amended Credit Agreement Accounts receivable 371,291 Accounts receivable 363,312 Revolving Credit Facility $ 23,000 Total Inventories 370,555 Total Inventories 361,679 Term Loan A 78,586 Net working capital 338,672 Net working capital 322,174 Term Loan B 485,636 Net property,Net property, plant and plant equipment and equipment 1,631,036 1,624,354 5.375% Senior Notes due 2022 494,760 Total assets 4,805,211 Total assets 4,856,916 3.625% Senior Notes due 2026 588,013 Total debt Total debt 1,695,289 1,679,229 Other Notes and Obligations 9,234 Shareholders'Shareholders' equity equity $$2,238,031 2,315,303 Total Debt: $ 1,679,229 Historical Leverage Ratios 2014 - 2018 Leverage Ratio September 29, 2018 Actual Credit Agreement Total Debt to EBITDA: 3.37 5.50x
10 Appendix – Additional Information
11 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 (millions) 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 2018 2018 Revenue $476.2 $543.0 $531.4 $538.5 $2,089.1 $552.6 $549.1 $575.5 $562.3 $2,239.5 $485.8 (1) $498.8 (1) $482.7 (1) Gross Margin 103.5 126.8 117.8 116.2 464.3 120.0 126.9 126.0 122.0 494.9 116.7 128.0 98.9 Gross Margin % 21.7% 23.4% 22.2% 21.6% 22.2% 21.7% 23.1% 21.9% 21.7% 22.1% 24.0% 25.7% 20.5% SG&A 44.7 42.7 38.4 41.5 167.3 44.8 42.9 44.8 45.8 178.3 48.3 43.9 39.7 SG&A Margin % 9.4% 7.9% 7.2% 7.7% 8.0% 8.1% 7.8% 7.8% 8.1% 8.0% 9.9% 8.8% 8.2% Operating Income 14.5 42.0 35.8 25.9 118.2 31.5 39.7 34.2 26.9 132.3 21.7 37.3 11.9 Adj. EBITDA (2) $58.9 $84.1 $79.5 $74.6 $297.1 $75.2 $84.0 $81.1 $76.2 $316.5 $68.5 $84.1 $59.2 Adj. EBITDA Margin % 12.4% 15.5% 15.0% 13.9% 14.2% 13.6% 15.3% 14.1% 13.6% 14.1% 14.1% 16.9% 12.3% Raw Material 1.97 1.97 1.97 2.06 7.97 2.05 2.02 2.04 2.13 8.24 2.12 2.13 2.17 Processed (1) Reflects freight revenue reclass and deconsolidation of BestHides (2) Does not include Unconsolidated Subsidiaries EBITDA
Feed Ingredients Segment – Net Sales 12 Change in Net Sales – Year over Year Three Months Ended September 30, 2017 over September 29, 2018 Rendering Sales Change in Net Sales - 3Q17 to 3Q18 Total Used Fats Proteins Other (1) Rendering Cooking Oil Bakery Other (2) Total Net Sales Three Months Ended September 30, 2017 $ 166.0 $ 218.8 $ 68.7 $ 453.5 $ 46.6 $ 51.9 $ 23.5 $ 575.5 Changes: Increase/(Decrease) in sales volumes 14.3 20.6 - 34.9 2.1 (2.4) - 34.6 Increase/(Decrease) in finished product prices (28.2) (6.3) - (34.5) (6.9) 0.3 - (41.1) Increase/(Decrease) due to currency exchange rates (0.8) (1.5) (0.1) (2.4) (0.1) - - (2.5) Freight Revenue (revenue recognition) (8.9) (15.3) (1.3) (25.5) (2.8) (5.1) - (33.4) Other change - - (39.8) (39.8) - - (10.6) (50.4) Total Change: (23.6) (2.5) (41.2) (67.3) (7.7) (7.2) (10.6) (92.8) Net Sales Three Months Ended September 29, 2018 $ 142.4 $ 216.3 $ 27.5 $ 386.2 $ 38.9 $ 44.7 $ 12.9 $ 482.7 Change in Net Sales – Year over Year Nine Months Ended September 30, 2017 over September 29, 2018 Rendering Sales Change in Nine Months End Net Sales Total Used Q3 2017 to Q3 2018 Fats Proteins Other (1) Rendering Cooking Oil Bakery Other (2) Total Net 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 Changes: Increase/(Decrease) in sales volumes 31.8 41.9 - 73.7 4.7 (11.1) - 67.3 Increase/(Decrease) in finished product prices (71.8) 13.7 - (58.1) (9.1) 3.1 - (641.0) Increase/(Decrease) due to currency exchange rates 5.9 15.1 0.6 21.6 0.1 - 0.1 21.8 Freight Revenue (revenue recognition) (27.2) (42.2) (3.7) (73.1) (8.2) (15.6) - (96.9) Other change - - (124.9) (124.9) - - (13.1) (138.0) Total Change: (61.3) 28.5 (128.0) (160.8) (12.5) (23.6) (13.0) (209.9) Net Sales Nine Months Ended September 29, 2018 $ 423.1 $ 641.2 $ 87.8 $ 1,152.1 $ 123.6 $ 135.9 $ 55.8 $ 1,467.4 (1) Rendering Net Sales- Other category includes hides, pet food, and service charges (2) Other Net Sales category includes trap services and industrial residual services through May 21, 2018 (Sale of TRS)
Jacobsen, Wall Street Journal and Thomson Reuters 13 Historical Pricing 2018 Finished Product Pricing 2018 Average Jacobsen Prices (USD) QTR. Over QTR. Year Over Year Feed Segment Ingredients January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Comparison Q2-2018 Q3-2018 % Q3-2017 Q3-2018 % Bleachable Fancy Tallow - Chicago Renderer / cwt $26.60 $25.57 $26.20 $26.14 $25.31 $24.80 $27.11 $25.72 $28.64 $28.39 $25.82 $27.70 Average Jacobsen Prices (USD) Avg. Avg. Change Avg. Avg. Change Yellow Grease - Illinois / cwt $20.25 $19.58 $19.00 $19.61 $19.00 $20.94 $22.05 $20.69 $22.38 $22.52 $21.53 $22.19 Meat and Bone Meal - Ruminant - Illinois / ton $222.50 $235.26 $292.62 $250.61 $312.02 $297.16 $291.67 $301.43 $280.00 $263.26 $250.00 $264.77 Bleachable Fancy Tallow - Chicago Renderer / cwt $25.72 $27.70 7.7% $35.36 $27.70 -21.7% Poultry By-Product Meal - Feed Grade - Mid South/ton $235.00 $240.92 $273.69 $250.16 $295.00 $286.02 $273.10 $285.56 $262.86 $271.74 $269.61 $268.13 Yellow Grease - Illinois / cwt $20.69 $22.19 7.2% $27.20 $22.19 -18.4% Poultry By-Product Meal - Pet Food - Mid South/ton $700.24 $793.42 $851.31 $781.27 $860.95 $747.73 $597.62 $734.53 $557.14 $557.61 $557.89 $556.48 Meat and Bone Meal - Ruminant - Illinois / ton $301.43 $264.77 -12.2% $292.83 $264.77 -9.6% Feathermeal - Mid South / ton $362.86 $389.87 $473.21 $409.26 $536.19 $542.95 $532.86 $540.50 $520.00 $453.59 $380.53 $453.58 Poultry By-Product Meal - Feed Grade - Mid South / ton $285.56 $268.13 -6.1% $285.14 $268.13 -6.0% 2018 Cash Corn Pricing 2018 Average Wall Street Journal Prices (USD) Poultry By-Product Meal - Pet Food - Mid South / ton $734.53 $556.48 -24.2% $577.02 $556.48 -3.6% Competing Ingredient for Bakery Feeds and Fats January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Feathermeal - Mid South / ton $540.50 $453.58 -16.1% $408.82 $453.58 10.9% Corn - Track Central IL #2 Yellow / bushel $3.28 $3.42 $3.53 $3.41 $3.54 $3.74 $3.39 $3.56 $3.23 $3.25 $3.11 $3.20 Average Wall Street Journal Prices (USD) Corn - Track Central IL #2 Yellow / bushel $3.56 $3.20 -10.1% $3.31 $3.20 -3.3% 2018 European Benchmark Pricing 2018 Average Thomson Reuters Prices (USD) Palm Oil - Competing ingredient for edible fats in Food Segment Average Thomson Reuters Prices (USD) 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. Palm oil - CIF Rotterdam / metric ton $676 $668 $681 $675 $664 $656 $632 $651 $589 $560 $549 $566 Palm oil - CIF Rotterdam / metric ton $651 $566 -13.1% $687 $566 -17.6% Soy meal - CIF Rotterdam / metric ton $375 $417 $445 $412 $460 $461 $423 $448 $407 $390 $377 $391 Soy meal - CIF Rotterdam / metric ton $448 $391 -12.7% $337 $391 16.0% 2017 Finished Product Pricing 2017 Average Jacobsen Prices (USD) 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 $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 $26.80 $27.00 $27.40 $31.93 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 $23.44 $21.86 $23.18 $24.95 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 $217.50 $220.63 $222.73 $259.54 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 $242.50 $235.00 $252.22 $277.42 Poultry By-Product Meal - Pet Food - Mid South/ton $648.68 $615.13 $644.02 $635.89 $699.34 $706.82 $660.80 $688.91 $603.13 $572.50 $557.50 $577.02 $599.55 $565.63 $614.50 $593.74 $623.89 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 $364.00 $362.13 $361.46 $395.84 2017 Cash Corn Pricing 2017 Average Wall Street Journal Prices (USD) 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 $3.46 $3.49 $3.41 $3.45 $3.38 $3.48 $3.52 $3.46 $3.49 $3.28 $3.16 $3.31 $3.13 $3.14 $3.21 $3.16 $3.35 2017 European Benchmark Pricing 2017 Average Thomson Reuters Prices (USD) 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. Nov. Dec. Q4 Avg. Year Avg. Palm oil - CIF Rotterdam / metric ton $804 $772 $719 $765 $672 $732 $666 $690 $665 $673 $723 $687 $716 $719 $670 $702 $711.00 Soy meal - CIF Rotterdam / metric ton $371 $374 $359 $368 $347 $344 $331 $341 $341 $331 $340 $337 $354 $350 $364 $356 $351.00
Food Segment - Historical 14 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 (millions) 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 2018 2018 Revenue (1) $246.6 $270.5 $260.2 $278.4 $1,055.7 $266.2 $278.4 $298.9 $313.5 $1,157.0 $305.5 (2) $276.7 (2) $265.2 (2) Gross Margin 62.4 57.9 50.7 56.6 227.6 56.8 56.0 60.2 63.6 236.6 56.3 51.9 54.5 Gross Margin % 25.3% 21.4% 19.5% 20.3% 21.6% 21.3% 20.1% 20.1% 20.3% 20.4% 18.4% 18.8% 20.6% SG&A 24.9 20.4 25.3 26.6 97.2 25.0 26.7 25.5 27.4 104.6 23.9 22.2 21.8 SG&A Margin % 10.1% 7.5% 9.7% 9.6% 9.2% 9.4% 9.6% 8.5% 8.7% 9.0% 7.8% 8.0% 8.2% Operating Income 20.8 19.7 8.0 11.8 60.3 14.3 11.1 15.1 16.4 56.9 11.8 9.3 (3) 13.0 Adj. EBITDA $37.5 $37.4 $25.4 $30.1 $130.4 $31.9 $29.3 $34.6 $36.1 $131.9 $32.4 $29.7 (3) $32.7 Adj. EBITDA Margin % 15.2% 13.8% 9.8% 10.8% 12.4% 12.0% 10.5% 11.6% 11.5% 11.4% 10.5% 10.7% 12.3% Raw Material Processed 0.27 0.27 0.26 0.28 1.08 0.27 0.28 0.29 0.28 1.12 0.28 0.28 0.29 (millions of metric tons) (1) Revenue adjusted for Brazil VAT reclass (2) Reflects freight revenue reclass (3) Adjusted for restructuring and impairment charges of $15.0 million for closure of Argentina gelatin plant
Fuel Segment - Historical 15 US$ and metric tons Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 (millions) 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 2018 2018 Revenue $55.6 $62.3 $60.4 $68.8 $247.1 $59.7 $67.4 $61.9 $76.8 $265.8 $84.1 (1) $71.1 (1) $64.6 (1) Gross Margin 14.9 15.6 14.2 19.9 64.6 13.7 12.7 7.6 21.4 55.4 24.2 13.7 11.1 Gross Margin % 26.8% 25.0% 23.5% 28.9% 26.1% 22.9% 18.8% 12.3% 27.9% 20.8% 28.8% 19.3% 17.1% SG&A 1.8 1.8 1.3 1.9 6.8 3.3 2.9 (0.5) 4.7 10.4 (1.4) 0.2 (2.8) SG&A Margin % 3.2% 2.9% 2.2% 2.8% 2.8% 5.5% 4.3% -0.8% 6.1% 3.9% -1.7% 0.2% -4.3% Operating Income 6.2 6.6 6.0 10.5 29.3 3.6 2.1 0.2 8.1 14.0 17.2 5.0 4.5 Adj. EBITDA $13.1 $13.8 $12.9 $18.0 $57.8 $10.4 $9.9 $8.1 $16.6 $45.0 $25.6 (2) $13.6 $13.9 Adj. EBITDA Margin % 23.6% 22.2% 21.4% 26.2% 23.4% 17.4% 14.7% 13.1% 21.6% 16.9% 30.4% 19.1% 21.5% Pro forma Adjusted EBITDA (3) $13.1 $13.8 $12.9 $18.0 $57.8 $13.2 $13.1 $11.2 $20.1 $57.6 $14.6 $15.7 $15.8 Raw Material Processed * (millions of metric tons) 0.28 0.30 0.29 0.31 1.18 0.30 0.29 0.28 0.32 1.19 0.30 0.27 0.29 *Excludes raw material processed at the DGD joint venture. Diamond Green Diesel (50% Joint Venture) Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 US$ (millions) 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2018 2018 2018 EBITDA (Darling's share) $9.6 $18.3 $22.5 $36.7 $87.2 $5.0 $12.4 $10.6 $15.2 $43.2 $100.1 $18.2 $0.5 Pro forma Adjusted EBITDA (3) $9.6 $18.3 $22.5 $36.7 $87.2 $21.4 $32.7 $32.1 $37.3 $123.5 $36.6 $35.6 $12.0 Total Gallons Produced 28.5 43.8 43.8 42.0 158.1 32.6 43.7 41.7 43.3 161.3 37.1 33.2 17.2 Total Gallons Sold/Shipped 29.1 42.7 42.5 46.6 161.0 32.7 40.5 43.0 44.3 160.4 33.4 34.8 23.1 (1) Reflects freight revenue reclass (2) Q1 2018 Adj. EBITDA contains $12.6 M retroactive 2017 blenders tax credit approved in February 2018 (3) Pro forma Adjusted EBITDA assumes blenders tax credit was received during quarters earned in 2017 and 2018 for comparison to 2016 when the blenders tax credit was prospective
16 Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity, and is not intended to be a presentation in accordance with GAAP. Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance. Since EBITDA (generally, net income plus interest expenses, taxes, depreciation and amortization) is not calculated identically by all companies, this presentation may not be comparable to EBITDA or Adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated in this presentation and represents, for any relevant period, net income/(loss) plus depreciation and amortization, goodwill and long-lived asset impairment, interest expense, (income)/loss from discontinued operations, net of tax, income tax provision, other income/(expense) and equity in net loss of unconsolidated subsidiary. Management believes that Adjusted EBITDA is useful in evaluating the Company’s operating performance compared to that of other companies in its industry because the calculation of Adjusted EBITDA generally eliminates the effects of financing, income taxes and certain non-cash and other items that may vary for different companies for reasons unrelated to overall operating performance. As a result, the Company’s management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary purposes. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance with certain financial covenants under the Company’s Senior Secured Credit Facilities and 5.375% Notes and 3.625% Notes that were outstanding at September 29, 2018. However, the amounts shown in this presentation for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities and 5.375% Notes and 3.625% Notes, as those definitions permit further adjustments to reflect certain other non-recurring costs, non-cash charges and cash dividends from the DGD Joint Venture. Additionally, the Company evaluates the impact of foreign exchange impact on operating cash flow, which is defined as segment operating income (loss) plus depreciation and amortization.
Adjusted EBITDA 17 Adjusted EBITDA and Pro Forma Adjusted EBITDA Three Months Ended - Year over Year Nine Months Ended - Year over Year (US$ in thousands) September 29, September 30, September 29, September 30, 2018 2017 2018 2017 Net income/(loss) attributable to Darling $ (6,037) $ 7,761 $ 60,848 $ 22,739 Depreciation and amortization 78,842 77,202 235,915 221,306 Interest expense 20,080 22,531 66,220 66,657 Income tax expense/(benefit) (1,403) 6,296 3,992 15,856 Restructuring and impairment charges - - 14,965 - Foreign currency loss 2,106 2,055 7,082 4,430 Other expense, net 2,786 2,533 4,103 8,383 Debt extinguishment costs - - 23,509 - Loss/(gain) on disposal of subsidiaries (3,038) - 12,500 - Equity in net (income)/loss of unconsolidated subsidiaries 2,792 (7,703) (109,598) (16,669) Net income attributable to noncontrolling interests 900 923 2,952 3,671 Adjusted EBITDA $ 97,028 $ 111,598 $ 322,488 $ 326,373 Foreign currency exchange impact 1,055 (1) - (10,844) (2) - Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) $ 98,083 $ 111,598 $ 311,644 $ 326,373 DGD Joint Venture Adjusted EBITDA (Darling's Share) $ 509 $ 10,570 $ 118,745 $ 28,013 (1) The average rates assumption used in this calculation was the actual fiscal average rate for the three months ended September 29, 2018 of €1.00:USD$1.16 and CAD$1.00:USD$0.76 as compared to the average rate for the three months ended September 30, 2017 of €1.00:USD $1.18 and CAD$1.00:USD$0.80, respectively. (2) The average rates assumption used in this calculation was the actual fiscal average rate for the nine months ended September 29, 2018 of €1.00:USD$1.20 and CAD$1.00:USD$0.78 as compared to the average rate for the nine months ended September 30, 2017 of €1.00:USD $1.11 and CAD$1.00:USD$0.77, respectively. Note: See slide 16 for information regarding Darling’s use of Non-GAAP measures.
18 Bank of America Merrill Lynch – 2018 Leveraged Finance Conference December 4, 2018 Boca Raton Resort and Club – Boca Raton, FL BNP Paribas 15th Annual High Yield and Leveraged Finance Conference January 19, 2019 Landmark Hotel - London, UK BMO Farm to Market Conference May 15-16, 2019 Grand Hyatt – New York, NY