8-K
DARLING INGREDIENTS INC. (DAR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
| Date of report (Date of earliest event reported) | August 9, 2022 | | --- | --- || DARLING INGREDIENTS INC. | | --- | | (Exact Name of Registrant as Specified in Charter) | | Delaware | 001-13323 | 36-2495346 | | --- | --- | --- | | (State or Other Jurisdiction<br>of Incorporation) | (Commission<br>File Number) | (IRS Employer<br>Identification No.) |
5601 N. MacArthur Blvd., Irving, Texas 75038
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (972) 717-0300
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | | --- | --- || ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | | --- | --- || ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | | --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |
|---|---|---|---|
| Common stock $0.01 par value per share | DAR | New York Stock Exchange | (“NYSE”) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| ☐ | Emerging growth company |
|---|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On August 9, 2022, Darling Ingredients Inc. (the “Company”) issued a press release announcing financial results for the second quarter ended July 2, 2022. A copy of this press release is attached hereto as Exhibit 99.1.
The Company will hold a conference call and webcast on Wednesday, August 10, 2022 to discuss these financial results. The Company will have a slide presentation available to augment management's formal presentation, which will be accessible via the investor relations section of the Company's website. A copy of this slide presentation is attached hereto as Exhibit 99.2.
The Company is making reference to non-GAAP financial measures in both the press release and the conference call. A reconciliation of these non-GAAP financial measures to the comparable GAAP financial measures is contained in the attached press release.
The information in this Item 2.02, including the exhibits attached hereto, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| 99.1 | Press Release datedAugustexh991-pressreleaseq22022.htm9, 2022 (furnished pursuant to Item 2.02). |
|---|---|
| 99.2 | Slide Presentation for August 10, 2022 Earnings Call (furnished pursuant to Item 2.02). |
| 104 | Cover Page Interactive Data File (embedded within Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DARLING INGREDIENTS INC. | ||
|---|---|---|
| Date: August 9, 2022 | By: | /s/ John F. Sterling |
| John F. Sterling | ||
| Executive Vice President,<br>General Counsel |
3
Document
Exhibit 99.1
Contact: Suann Guthrie
VP, Investor Relations, Sustainability & Communications
(469) 214-8202; Suann.Guthrie@darlingii.com
FOR IMMEDIATE RELEASE
Aug. 9, 2022
Darling Ingredients Inc. Delivers Another Record Quarter
Second Quarter 2022
•Net income of $202 million, or $1.23 per GAAP diluted share
•Net Sales of $1.65 billion
•Combined adjusted EBITDA of $402.6 million
•Repurchased $48.7 million of stock
IRVING, TEXAS - Darling Ingredients Inc. (NYSE: DAR) today reported another record quarter, with net income of $202 million, or $1.23 per diluted share for the second quarter 2022, compared to net income of $196.6 million, or $1.17 per diluted share, for the second quarter 2021. The company also reported net sales of $1.65 billion for the second quarter of 2022, as compared with net sales of $1.2 billion for the same period a year ago.
“Darling Ingredients delivered another record quarter, setting an all-time quarterly high of $402.6 million in combined adjusted EBITDA,” said Randall C. Stuewe, Chairman and Chief Executive Officer of Darling Ingredients Inc. “This quarter’s outstanding performance illustrates our diversified platform of specialty ingredients and decarbonization solutions and our ability to adapt to dynamic market conditions.”
For the six months ended July 2, 2022, Darling Ingredients reported net sales of $3 billion, compared to net sales of $2.2 billion for the same period in 2021. Net income attributed to Darling Ingredients for the first six months of 2022 was $390 million, or $2.37 per diluted share, as compared to net income of $348.3 million, or $2.08 per diluted share, for the first six months of 2021.
Combined adjusted EBITDA was $402.6 million for the second quarter 2022, compared to $353.7 million for the same period in 2021. On a year-to-date basis, combined adjusted EBITDA totaled $733.2 million for 2022, as compared to $638.5 million for the same period in 2021.
Under Darling Ingredients’ share repurchase program, the company repurchased approximately 700,000 shares of common stock during the second quarter for a total of $48.7 million, bringing the total stock repurchased year to date 2022 as of July 2, 2022, to approximately 971,000 shares of common stock for a total of $65.9 million.
As of July 2, 2022, Darling had $146.8 million in cash and cash equivalents, and $1.4 billion available under its committed revolving credit agreement. Total debt outstanding as of July 2, 2022 was $2.9 billion. The leverage ratio as measured by the company’s bank covenant was 2.59 as of July 2, 2022. Second quarter capital expenditures totaled approximately $79.9 million.
On May 2, 2022, Darling Ingredients completed the acquisition of Valley Proteins, one of the largest independent rendering companies in the United States. On Aug. 1, 2022, the company completed its acquisition of FASA Group, the largest independent rendering company in Brazil. The company used cash on hand and borrowings under the company’s amended credit agreement to fund the acquisitions.
Darling Ingredients reaffirms its previously announced forecast for full year 2022 of $1.55-$1.6 billion combined adjusted EBITDA.
| News Release<br><br>Aug. 9, 2022<br><br>Page 2 |
|---|
Segment Financial Tables (in thousands)
(unaudited)
| Three Months Ended July 2, 2022 | Feed Ingredients | Food Ingredients | Fuel Ingredients | Corporate | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 1,170,347 | $ | 369,181 | $ | 110,660 | $ | — | $ | 1,650,188 |
| Cost of sales and operating expenses | 864,306 | 280,964 | 86,237 | — | 1,231,507 | |||||
| Gross margin | 306,041 | 88,217 | 24,423 | — | 418,681 | |||||
| Gain on sale of assets | (964) | (73) | (18) | — | (1,055) | |||||
| Selling, general and administrative expenses | 64,863 | 22,855 | 4,277 | 15,781 | 107,776 | |||||
| Restructuring and asset impairment charges | 8,557 | — | — | — | 8,557 | |||||
| Acquisition and integration costs | — | — | — | 5,358 | 5,358 | |||||
| Depreciation and amortization | 68,938 | 14,449 | 6,936 | 2,790 | 93,113 | |||||
| Equity in net income of Diamond Green Diesel | — | — | 73,680 | — | 73,680 | |||||
| Segment operating income/(loss) | $ | 164,647 | $ | 50,986 | $ | 86,908 | $ | (23,929) | $ | 278,612 |
| Equity in net income of other unconsolidated subsidiaries | 2,272 | — | — | — | 2,272 | |||||
| Segment income/(loss) | $ | 166,919 | $ | 50,986 | $ | 86,908 | $ | (23,929) | $ | 280,884 |
| Segment EBITDA | $ | 242,142 | $ | 65,435 | $ | 20,164 | $ | (15,781) | $ | 311,960 |
| DGD adjusted EBITDA (Darling's Share) | — | — | 90,611 | — | 90,611 | |||||
| Combined adjusted EBITDA | $ | 242,142 | $ | 65,435 | $ | 110,775 | $ | (15,781) | $ | 402,571 |
| Three Months Ended July 3, 2021 | Feed Ingredients | Food Ingredients | Fuel Ingredients | Corporate | Total | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net sales | $ | 771,932 | $ | 317,031 | $ | 109,706 | $ | — | $ | 1,198,669 |
| Cost of sales and operating expenses | 556,424 | 238,539 | 83,110 | — | 878,073 | |||||
| Gross margin | 215,508 | 78,492 | 26,596 | — | 320,596 | |||||
| Gain on sale of assets | (122) | (48) | (58) | — | (228) | |||||
| Selling, general and administrative expenses | 54,977 | 25,542 | 4,474 | 14,139 | 99,132 | |||||
| Depreciation and amortization | 53,971 | 15,850 | 6,698 | 2,703 | 79,222 | |||||
| Equity in net income of Diamond Green Diesel | — | — | 125,788 | — | 125,788 | |||||
| Segment operating income/(loss) | $ | 106,682 | $ | 37,148 | $ | 141,270 | $ | (16,842) | $ | 268,258 |
| Equity in net income of other unconsolidated subsidiaries | 1,940 | — | — | — | 1,940 | |||||
| Segment income/(loss) | $ | 108,622 | $ | 37,148 | $ | 141,270 | $ | (16,842) | $ | 270,198 |
| Segment EBITDA | $ | 160,653 | $ | 52,998 | $ | 22,180 | $ | (14,139) | $ | 221,692 |
| DGD adjusted EBITDA (Darling's Share) | — | — | 132,001 | — | 132,001 | |||||
| Combined adjusted EBITDA | $ | 160,653 | $ | 52,998 | $ | 154,181 | $ | (14,139) | $ | 353,693 |
| News Release<br><br>Aug. 9, 2022<br><br>Page 3 | ||||||||||
| --- |
Segment Financial Tables \(in thousands\) continued
(unaudited)
| Six Months Ended July 2, 2022 | Feed Ingredients | Food Ingredients | Fuel Ingredients | Corporate | Total | |||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net sales | $ | 2,049,785 | $ | 723,995 | $ | 242,742 | $ | — | $ | 3,016,522 |
| Cost of sales and operating expenses | 1,509,829 | 551,276 | 190,979 | — | 2,252,084 | |||||
| Gross margin | 539,956 | 172,719 | 51,763 | — | 764,438 | |||||
| Gain on sale of assets | (1,305) | (82) | (57) | — | (1,444) | |||||
| Selling, general and administrative expenses | 121,072 | 49,699 | 8,197 | 30,840 | 209,808 | |||||
| Restructuring and asset impairment charges | 8,557 | — | — | — | 8,557 | |||||
| Acquisition and integration costs | — | — | — | 9,131 | 9,131 | |||||
| Depreciation and amortization | 123,288 | 29,899 | 13,610 | 5,562 | 172,359 | |||||
| Equity in net income of Diamond Green Diesel | — | — | 145,484 | — | 145,484 | |||||
| Segment operating income/(loss) | $ | 288,344 | $ | 93,203 | $ | 175,497 | $ | (45,533) | $ | 511,511 |
| Equity in net income of other unconsolidated subsidiaries | 3,632 | — | — | — | 3,632 | |||||
| Segment income/(loss) | $ | 291,976 | $ | 93,203 | $ | 175,497 | $ | (45,533) | $ | 515,143 |
| Segment EBITDA | $ | 420,189 | $ | 123,102 | $ | 43,623 | $ | (30,840) | $ | 556,074 |
| DGD adjusted EBITDA (Darling's Share) | — | — | 177,171 | — | 177,171 | |||||
| Combined adjusted EBITDA | $ | 420,189 | $ | 123,102 | $ | 220,794 | $ | (30,840) | $ | 733,245 |
| Six Months Ended July 3, 2021 | Feed Ingredients | Food Ingredients | Fuel Ingredients | Corporate | Total | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Net sales | $ | 1,423,376 | $ | 615,096 | $ | 206,913 | $ | — | $ | 2,245,385 |
| Cost of sales and operating expenses | 1,031,005 | 464,952 | 154,900 | — | 1,650,857 | |||||
| Gross margin | 392,371 | 150,144 | 52,013 | — | 594,528 | |||||
| Loss (gain) on sale of assets | (261) | 7 | (38) | — | (292) | |||||
| Selling, general and administrative expenses | 107,597 | 50,733 | 9,341 | 28,859 | 196,530 | |||||
| Restructuring and asset impairment charges | — | — | 778 | — | 778 | |||||
| Depreciation and amortization | 108,580 | 30,733 | 12,853 | 5,590 | 157,756 | |||||
| Equity in net income of Diamond Green Diesel | — | — | 228,013 | — | 228,013 | |||||
| Segment operating income/(loss) | $ | 176,455 | $ | 68,671 | $ | 257,092 | $ | (34,449) | $ | 467,769 |
| Equity in net income of other unconsolidated subsidiaries | 2,552 | — | — | — | 2,552 | |||||
| Segment income/(loss) | $ | 179,007 | $ | 68,671 | $ | 257,092 | $ | (34,449) | $ | 470,321 |
| Segment EBITDA | $ | 285,035 | $ | 99,404 | $ | 42,710 | $ | (28,859) | $ | 398,290 |
| DGD adjusted EBITDA (Darling's Share) | — | — | 240,201 | — | 240,201 | |||||
| Combined adjusted EBITDA | $ | 285,035 | $ | 99,404 | $ | 282,911 | $ | (28,859) | $ | 638,491 |
| News Release<br><br>Aug. 9, 2022<br><br>Page 4 | ||||||||||
| --- |
Darling Ingredients Inc. and Subsidiaries
Consolidated Balance Sheets
July 2, 2022 and January 1, 2022
(thousands)
| July 2, 2022 | January 1, 2022 | |||
|---|---|---|---|---|
| ASSETS | (unaudited) | |||
| Current assets: | ||||
| $ | 146,730 | $ | 68,906 | |
| 110 | 166 | |||
| 574,727 | 469,092 | |||
| 578,402 | 457,465 | |||
| 77,065 | 53,711 | |||
| 27,330 | 1,075 | |||
| 57,462 | 38,599 | |||
| 1,461,826 | 1,089,014 | |||
| Property, plant and equipment, net | 2,237,199 | 1,840,080 | ||
| Intangible assets, net | 760,079 | 397,801 | ||
| Goodwill | 1,555,814 | 1,219,116 | ||
| Investment in unconsolidated subsidiaries | 1,736,242 | 1,349,247 | ||
| Operating lease right-of-use assets | 177,328 | 155,464 | ||
| Other assets | 81,886 | 66,795 | ||
| Deferred income taxes | 16,312 | 16,211 | ||
| $ | 8,026,686 | $ | 6,133,728 | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| $ | 32,695 | $ | 24,407 | |
| 414,584 | 307,118 | |||
| 28,452 | 32,310 | |||
| 45,498 | 38,168 | |||
| 398,598 | 350,681 | |||
| 919,827 | 752,684 | |||
| Long-term debt, net of current portion | 2,881,134 | 1,438,974 | ||
| Long-term operating lease liabilities | 133,663 | 120,314 | ||
| Other non-current liabilities | 128,399 | 111,029 | ||
| Deferred income taxes | 397,140 | 362,942 | ||
| 4,460,163 | 2,785,943 | |||
| Commitments and contingencies | ||||
| Stockholders' equity: | ||||
| Common stock, 0.01 par value; | 1,735 | 1,717 | ||
| 1,646,468 | 1,627,816 | |||
| Treasury stock, at cost | (491,717) | (374,721) | ||
| (400,907) | (321,690) | |||
| 2,737,887 | 2,347,838 | |||
| 3,493,466 | 3,280,960 | |||
| Noncontrolling interests | 73,057 | 66,825 | ||
| Total Stockholders' equity | 3,566,523 | 3,347,785 | ||
| $ | 8,026,686 | $ | 6,133,728 |
All values are in US Dollars.
| News Release<br><br>Aug. 9, 2022<br><br>Page 5 |
|---|
Darling Ingredients Inc. and Subsidiaries
Consolidated Operating Results
For the Three-Month and Six-Month Periods Ended July 2, 2022 and July 3, 2021
(in thousands, except per share data)
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | Change | (unaudited) | Change | |||||||
| July 2, | July 3, | Favorable | July 2, | July 3, | Favorable | |||||
| 2022 | 2021 | (Unfavorable) | 2022 | 2021 | (Unfavorable) | |||||
| Net sales | $ | 1,650,188 | $ | 1,198,669 | $ | 3,016,522 | $ | 2,245,385 | ||
| Costs and expenses: | ||||||||||
| Cost of sales and operating expenses | 1,231,507 | 878,073 | (353,434) | 2,252,084 | 1,650,857 | (601,227) | ||||
| Gain on sale of assets | (1,055) | (228) | 827 | (1,444) | (292) | 1,152 | ||||
| Selling, general and administrative expenses | 107,776 | 99,132 | (8,644) | 209,808 | 196,530 | (13,278) | ||||
| Restructuring and asset impairment charges | 8,557 | — | (8,557) | 8,557 | 778 | (7,779) | ||||
| Acquisition and integration costs | 5,358 | — | (5,358) | 9,131 | — | (9,131) | ||||
| Depreciation and amortization | 93,113 | 79,222 | (13,891) | 172,359 | 157,756 | (14,603) | ||||
| Total costs and expenses | 1,445,256 | 1,056,199 | (389,057) | 2,650,495 | 2,005,629 | (644,866) | ||||
| Equity in net income of Diamond Green Diesel | 73,680 | 125,788 | (52,108) | 145,484 | 228,013 | (82,529) | ||||
| Operating income | 278,612 | 268,258 | 10,354 | 511,511 | 467,769 | 43,742 | ||||
| Other expense: | ||||||||||
| Interest expense | (24,008) | (15,268) | (8,740) | (39,611) | (31,696) | (7,915) | ||||
| Foreign currency loss | (4,412) | (684) | (3,728) | (5,512) | (1,094) | (4,418) | ||||
| Other expense, net | (302) | (1,198) | 896 | (1,044) | (2,357) | 1,313 | ||||
| Total other expense | (28,722) | (17,150) | (11,572) | (46,167) | (35,147) | (11,020) | ||||
| Equity in net income of other unconsolidated subsidiaries | 2,272 | 1,940 | 332 | 3,632 | 2,552 | 1,080 | ||||
| Income from operations before income taxes | 252,162 | 253,048 | (886) | 468,976 | 435,174 | 33,802 | ||||
| Income tax expense | 47,333 | 54,979 | 7,646 | 73,416 | 83,687 | 10,271 | ||||
| Net income | 204,829 | 198,069 | 6,760 | 395,560 | 351,487 | 44,073 | ||||
| Net income attributable to noncontrolling interests | (2,833) | (1,487) | (1,346) | (5,511) | (3,139) | (2,372) | ||||
| Net income attributable to Darling | $ | 201,996 | $ | 196,582 | $ | 390,049 | $ | 348,348 | ||
| Basic income per share: | $ | 1.25 | $ | 1.21 | $ | 2.41 | $ | 2.14 | ||
| Diluted income per share: | $ | 1.23 | $ | 1.17 | $ | 2.37 | $ | 2.08 | ||
| Number of diluted common shares: | 164,745 | 167,597 | 164,673 | 167,673 |
All values are in US Dollars.
| News Release<br><br>Aug. 9, 2022<br><br>Page 6 |
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Darling Ingredients Inc. and Subsidiaries
Consolidated Statement of Cash Flows
Periods Ended July 2, 2022 and July 3, 2021
(in thousands)
| Six Months Ended | ||||
|---|---|---|---|---|
| (Unaudited) | ||||
| July 2, | July 3, | |||
| Cash flows from operating activities: | 2022 | 2021 | ||
| Net income | $ | 395,560 | $ | 351,487 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 172,359 | 157,756 | ||
| Gain on sale of assets | (1,444) | (292) | ||
| Asset impairment | 8,557 | 138 | ||
| Deferred taxes | 35,674 | 49,572 | ||
| Decrease in long-term pension liability | (547) | (622) | ||
| Stock-based compensation expense | 13,369 | 14,011 | ||
| Write-off deferred loan costs | — | 598 | ||
| Deferred loan cost amortization | 2,207 | 2,047 | ||
| Equity in net income of Diamond Green Diesel and other unconsolidated subsidiaries | (149,116) | (230,565) | ||
| Distribution of earnings from Diamond Green Diesel and other unconsolidated subsidiaries | 1,631 | 2,497 | ||
| Changes in operating assets and liabilities, net of effects from acquisitions: | ||||
| Accounts receivable | (47,046) | (34,911) | ||
| Income taxes refundable/payable | (28,834) | 9,116 | ||
| Inventories and prepaid expenses | (95,199) | (39,992) | ||
| Accounts payable and accrued expenses | 72,351 | 2,770 | ||
| Other | (18,487) | 14,327 | ||
| Net cash provided by operating activities | 361,035 | 297,937 | ||
| Cash flows from investing activities: | ||||
| Capital expenditures | (151,478) | (126,094) | ||
| Acquisition, net of cash acquired | (1,235,537) | (2,059) | ||
| Investment in Diamond Green Diesel | (239,750) | — | ||
| Investment in other unconsolidated subsidiaries | — | (4,449) | ||
| Gross proceeds from disposal of property, plant and equipment and other assets | 2,161 | 3,064 | ||
| Payments related to routes and other intangibles | (179) | (347) | ||
| Net cash used in investing activities | (1,624,783) | (129,885) | ||
| Cash flows from financing activities: | ||||
| Proceeds from long-term debt | 1,663,612 | 20,679 | ||
| Payments on long-term debt | (23,600) | (73,393) | ||
| Borrowings from revolving credit facility | 777,902 | 207,000 | ||
| Payments on revolving credit facility | (937,921) | (220,000) | ||
| Net cash overdraft financing | 12 | 16,487 | ||
| Deferred loan costs | (10,707) | — | ||
| Issuance of common stock | — | 50 | ||
| Repurchase of common stock | (65,887) | (75,663) | ||
| Minimum withholding taxes paid on stock awards | (45,836) | (43,853) | ||
| Distributions to noncontrolling interests | — | (2,164) | ||
| Net cash provided/(used) in financing activities | 1,357,575 | (170,857) | ||
| Effect of exchange rate changes on cash flows | (16,059) | (997) | ||
| Net increase/(decrease) in cash, cash equivalents and restricted cash | 77,768 | (3,802) | ||
| Cash, cash equivalents and restricted cash at beginning of period | 69,072 | 81,720 | ||
| Cash, cash equivalents and restricted cash at end of period | $ | 146,840 | $ | 77,918 |
| News Release<br><br>Aug. 9, 2022<br><br>Page 7 | ||||
| --- |
Diamond Green Diesel Joint Venture
Condensed Consolidated Balance Sheets
June 30, 2022 and December 31, 2021
(in thousands)
| June 30, | December 31, | |||
|---|---|---|---|---|
| 2022 | 2021 | |||
| (unaudited) | ||||
| Assets: | ||||
| Total current assets | $ | 1,065,686 | $ | 686,294 |
| Property, plant and equipment, net | 3,131,430 | 2,710,747 | ||
| Other assets | 52,324 | 51,514 | ||
| Total assets | $ | 4,249,440 | $ | 3,448,555 |
| Liabilities and members' equity: | ||||
| Total current portion of long term debt | $ | 165,439 | $ | 165,092 |
| Total other current liabilities | 333,651 | 295,860 | ||
| Total long term debt | 336,743 | 344,309 | ||
| Total other long term liabilities | 17,148 | 17,531 | ||
| Total members' equity | 3,396,459 | 2,625,763 | ||
| Total liabilities and members' equity | $ | 4,249,440 | $ | 3,448,555 |
Diamond Green Diesel Joint Venture
Operating Financial Results
For the Three-Month and Six-Month Periods Ended June 30, 2022 and June 30, 2021
(in thousands)
| Three Months Ended | Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (unaudited) | Change | (unaudited) | Change | |||||||
| June 30, | June 30, | Favorable | June 30, | June 30, | Favorable | |||||
| 2022 | 2021 | (Unfavorable) | 2022 | 2021 | (Unfavorable) | |||||
| Revenues: | ||||||||||
| Operating revenues | $ | 1,455,886 | $ | 571,859 | $ | 2,436,578 | $ | 1,003,492 | ||
| Expenses: | ||||||||||
| Total costs and expenses less depreciation, amortization and accretion expense | 1,274,665 | 307,857 | (966,808) | 2,082,237 | 523,091 | (1,559,146) | ||||
| Depreciation, amortization and accretion expense | 31,317 | 11,995 | (19,322) | 57,809 | 23,682 | (34,127) | ||||
| Total costs and expenses | 1,305,982 | 319,852 | (986,130) | 2,140,046 | 546,773 | (1,593,273) | ||||
| Operating income | 149,904 | 252,007 | (102,103) | 296,532 | 456,719 | (160,187) | ||||
| Other income | 722 | 353 | 369 | 711 | 411 | 300 | ||||
| Interest and debt expense, net | (3,266) | (784) | (2,482) | (6,275) | (1,104) | (5,171) | ||||
| Net income | $ | 147,360 | $ | 251,576 | $ | 290,968 | $ | 456,026 |
All values are in US Dollars.
| News Release<br><br>Aug. 9, 2022<br><br>Page 8 |
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Darling Ingredients Inc. reports Adjusted EBITDA results, which is a Non-GAAP financial measure, as a complement to results provided in accordance with generally accepted accounting principles (GAAP) (for additional information, see “Use of Non-GAAP Financial Measures” included later in this media release). The Company believes that Adjusted EBITDA provides additional useful information to investors. Adjusted EBITDA, as the Company uses the term, is calculated below:
Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA and (Non-GAAP) Pro forma Adjusted EBITDA
For the Three-Month and Six-Month Periods ended July 2, 2022 and July 3, 2021
| Six Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Adjusted EBITDA | July 3, | July 2, | July 3, | ||||||
| (U.S. dollars in thousands) | 2021 | 2022 | 2021 | ||||||
| Net income attributable to Darling | 201,996 | $ | 196,582 | $ | 390,049 | $ | 348,348 | ||
| Depreciation and amortization | 79,222 | 172,359 | 157,756 | ||||||
| Interest expense | 15,268 | 39,611 | 31,696 | ||||||
| Income tax expense | 54,979 | 73,416 | 83,687 | ||||||
| Restructuring and asset impairment charges | — | 8,557 | 778 | ||||||
| Acquisition and integration costs | — | 9,131 | — | ||||||
| Foreign currency loss | 684 | 5,512 | 1,094 | ||||||
| Other expense, net | 1,198 | 1,044 | 2,357 | ||||||
| Equity in net income of Diamond Green Diesel | (125,788) | (145,484) | (228,013) | ||||||
| Equity in net income of other unconsolidated subsidiaries | (1,940) | (3,632) | (2,552) | ||||||
| Net income attributable to other noncontrolling interests | 1,487 | 5,511 | 3,139 | ||||||
| Adjusted EBITDA (Non-GAAP) | 311,960 | $ | 221,692 | $ | 556,074 | $ | 398,290 | ||
| Foreign currency exchange impact | (1) | — | 23,155 | (2) | — | ||||
| Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) | 327,888 | $ | 221,692 | $ | 579,229 | $ | 398,290 | ||
| DGD Joint Venture Adjusted EBITDA (Darling's Share) | 90,611 | $ | 132,001 | $ | 177,171 | $ | 240,201 | ||
| Darling plus Darling's share of DGD Joint Venture Adjusted EBITDA | 402,571 | $ | 353,693 | $ | 733,245 | $ | 638,491 | ||
| (1) The average rate assumption used in this calculation was the actual fiscal average rate for the three months ended July 2, 2022 of 1.00:1.06 and CAD1.00:0.78 as compared to the average rate for the three months ended July 3, 2021 of 1.00:1.21 and CAD1.00:0.81, respectively. | |||||||||
| (2) The average rate assumption used in this calculation was the actual fiscal average rate for the six months ended July 2, 2022 of 1.00:1.09 and CAD1.00:0.79 as compared to the average rate for the six months ended July 3, 2021 of 1.00:1.20 and CAD1.00:0.80, respectively. |
All values are in US Dollars.
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About Darling
Darling Ingredients Inc. (NYSE: DAR) is the largest publicly traded company turning edible by-products and food waste into sustainable products and a leading producer of renewable energy. Recognized as a sustainability leader, the company operates more than 250 plants in 17 countries and repurposes approximately 15% of the world's meat industry waste streams into value-added products, such as green energy, renewable diesel, collagen, fertilizer, animal proteins and meals and pet food ingredients. To learn more, visit darlingii.com and follow us on LinkedIn.
Darling Ingredients Inc. will host a conference call to discuss the Company’s second quarter 2022 financial results at 9 am Eastern Time (8 am Central Time) on Wednesday, Aug. 10, 2022.
Due to historically high call volume, the company is offering participants the opportunity to register in advance for the conference through the following link: https://dpregister.com/sreg/10169154/f3a6e5cbb6.
Registered participants will receive an email with a calendar reminder and a dial-in number and PIN that will allow them immediate access to the call on Aug. 10, 2022.
To listen to the conference call, participants calling from within North America should dial 1-844-868-8847; international participants should dial 1-412-317-6593. Please asked to be joined to the Darling Ingredients call. Please call approximately ten minutes before the start of the call to ensure that you are connected.
The call will also be available as a live audio webcast that can be accessed on the Company website at
http://ir.darlingii.com. Beginning one hour after its completion, a replay of the call can be accessed through Aug. 17, 2022, by dialing 1-877-344-7529 (U.S. callers), 1-855-669-9658 (Canada) and 1-412-317-0088 (international callers). The access code for the replay is 8664057. The conference call will also be archived on the Company’s website.
Use of Non-GAAP Financial Measures:
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 expense, 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.
Pro forma Adjusted EBITDA to Foreign Currency is not a recognized accounting measurement under GAAP. The Company evaluates the impact of foreign currency on its adjusted EBITDA. DGD Joint Venture Adjusted EBITDA (Darling's share) is not reflected in the Adjusted EBITDA or the Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP).
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, 6% Notes, 5.25% Notes and 3.625% Notes that were outstanding at July 2, 2022. 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, 6% Notes, 5.25% 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.
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Information reconciling forward-looking combined adjusted EBITDA to net income is unavailable to the Company without unreasonable effort. The Company is not able to provide reconciliations of combined adjusted EBITDA to net income because certain items required for such reconciliations are outside of the Company’s control and/or cannot be reasonably predicted, such as the impact of volatile commodity prices on the Company’s operations, impact of foreign currency exchange fluctuations, depreciation and amortization and the provision for income taxes. Preparation of such reconciliations for Darling Ingredients Inc. and the Company’s joint venture, Diamond Green Diesel, would require a forward-looking balance sheet, statement of income and statement of cash flow, prepared in accordance with GAAP for each entity, and such forward-looking financial statements are unavailable to the Company without unreasonable effort. The Company provides a range for its combined adjusted EBITDA outlook that it believes will be achieved; however, it cannot accurately predict all the components of the combined adjusted EBITDA calculation.
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Cautionary Statements Regarding Forward-Looking Information:
{This media release 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,” “combined adjusted EBITDA guidance” 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 United States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations to food or food additives; the occurrence of 2009 H1N1 flu (initially known as “Swine Flu”), Highly pathogenic strains of avian influenza (collectively known as “Bird Flu”), severe acute respiratory syndrome (“SARS”), 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 outbreak of African Swine Fever (“ASF”) in China and elsewhere; the occurrence of pandemics, epidemics or disease outbreaks, such as the current COVID-19 outbreak; 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, SARS, PED, BSE, 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, 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, including the Russia-Ukraine war; uncertainty regarding the 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 cause actual results to vary materially from the forward looking statements included in this release or 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.}
darlingingredientsq22022
1 21 EARNINGS REPORT Q 2 | A U G U S T 2 0 2 2 Exhibit 99.2
2 21 SAFE HARBOR STATEMENT This presentation contains “forward-looking” statements that are subject to risks and uncertainties that could cause the actual results of Darling Ingredients Inc. (the “Company”) to differ materially from those expressed or implied in the statements. Statements that are not statements of historical facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “planned,” “contemplate,” “potential,” “possible,” “proposed,” “intend,” “believe,” “anticipate,” “expect,” “may,” “will,” “would,” “should,” “could” “combined adjusted EBITDA guidance” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. The Company cautions readers that any such forward-looking statements it makes are not guarantees of future performance and that actual results may differ materially from anticipated results or expectations expressed in its forward-looking statements as a result of a variety of factors, including many that are beyond the Company’s control. 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 United States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations to food or food additives; the occurrence of 2009 H1N1 flu (initially known as “Swine Flu”), Highly pathogenic strains of avian influenza (collectively known as “Bird Flu”), severe acute respiratory syndrome (“SARS”), 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 outbreak of African Swine Fever (“ASF”) in China and elsewhere; the occurrence of pandemics, epidemics or disease outbreaks, such as the current COVID-19 outbreak; 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, SARS, PED, BSE, 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, 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, including the Russia-Ukraine war; uncertainty regarding the 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 cause actual results to vary materially from the forward looking statements included in this release or 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. Q2 - 22 EARNINGS
3 21 Solid Financial Performance SUMMARY HIGHLIGHTS Q2 - 22 EARNINGS Q2-2022 Combined Adjusted EBITDA – Record Quarter $402.6 million Global Ingredients EBITDA - Record Quarter $312 million Feed Ingredients EBITDA - Record Quarter $242.1 million Food Ingredients EBITDA - Record Quarter $65.4 million Fuel Ingredients EBITDA $110.8 million EPS Diluted $1.23 Net Sales – Record Quarter $1.65 billion Shares Repurchased $48.7 million Growing Shareholder Value Valley Proteins Acquisition Completed – May 2, 2022 FASA Group Acquisition Completed – Aug. 1, 2022 DGD 3 Start-up – Q4 2022
4 21 Strong 2Q and YTD Earnings In millions, except per share Q2-2022 Q2-2021 % variance YTD 2022 YTD 2021 % variance Net Sales $1,650.2 $1,198.7 37.7% $3,016.5 $2,245.4 34.3% Gross Margin $418.7 $320.6 30.6% $764.4 $594.5 28.6% Gross Margin % 25.4% 26.7% (4.9)% 25.3% 26.5% (4.5)% Net Income $202.0 $196.6 2.7% $390.0 $348.3 12.0% EPS Diluted $1.23 $1.17 5.1% $2.37 $2.08 13.9% In millions Q2-2022 Q2-2021 % variance YTD 2022 YTD 2021 % variance Feed $242.1 $160.6 50.7% $420.2 $285.0 47.4% Food $65.4 $53.0 23.4% $123.1 $99.4 23.8% Fuel (1) $110.8 $154.2 (28.1)% $220.8 $282.9 (22.0%) Corporate ($15.7) ($14.1) 12% ($30.8) ($28.8) 6.9% Total combined adjusted EBITDA $402.6 $353.7 13.8% $733.2 $638.5 14.8% (1) Includes Fuel Segment EBITDA and Darling's share of DGD EBITDA Darling 26.7% 27.5% 24.5% 25.3% 25.4% 18% 23% 28% Q2-21 Q3-21 Q4-21 Q1-22 Q2-22 Balance Sheet In millions, except per ratio data As of 7/2/2022 As of 1/1/2022 Cash (including restricted) $146.8 $69.1 Revolver availability $1,446 $1,285.9 Net working capital $427.9 $291.7 Total debt $2,913 $1,463.4 Leverage ratio (2) 2.59 1.57 Darling Ingredients Quarterly Gross Margin % (2) Per bank covenant
5 21 Food 16%Feed 58% Fuel 26% Food Feed Fuel Combined Adjusted EBITDA Q2 2022 % of Total EBITDA by Segment $177 $222 $230 $224 $244 $312 $108 $132 $60 $83 $87 $91 $0 $150 $300 $450 Global Ingredients DGD $284.8 $353.7 $289.6 (In millions) $306.8 $330.7 $402.6 Q1 21 Q2 22Q1 22Q4 21Q3 21Q2 21 (1) Includes Fuel Segment EBITDA and Darling's share of DGD EBITDA Record Quarter EBITDA
6 21 Key Drivers • Raw materials volumes up 23% quarter over quarter, 13% year to date • Net sales growth up 51.6% quarter over quarter, driven by Valley Proteins acquisition • Waste fat strength illustrates growing demand for decarbonization solutions • Used cooking oil growth attributed to Valley Proteins acquisition and increased travel and trading down for value-driven food options • Procurement formulas lagging behind rising energy prices • Valley Proteins integration on target, margin improvement is laser focus Feed Segment Record Growth, Advantaged Feedstocks US $ (in millions) Q2-2022 Q2-2021 YTD-2022 YTD-2021 Net Sales $ 1,170,347 $ 771,932 $ 2,049,785 $ 1,423,376 Cost of sales & operating expenses 864,306 556,424 1,509,829 1,031,005 Gross Margin $ 306,041 $ 215,508 $ 539,956 $ 392,371 Gain on sale of assets (964) (122) (1,305) (261) Selling, general & administrative expenses 64,863 54,977 121,072 107,597 Restructuring and asset impairment charges 8,557 - 8,557 - Depreciation & amortization 68,938 53,971 123,288 108,580 Segment operating income $ 164,647 $ 106,682 $ 288,344 $ 176,455 Equity in net income of other unconsolidated subsidiaries $ 2,272 $ 1,940 $ 3,632 $ 2,552 Segment Income $ 166,919 $ 108,622 $ 291,976 $ 179,007 Segment EBITDA $ 242,142 $ 160,653 $ 420,189 $ 285,035 Raw material processed (mmts)* 2.70 2.19 5.0 4.43
7 21 Feed Segment Strong Sales Volumes Fats Proteins Other Rendering Total Rendering Used Cooking Oil Bakery Other Total Net sales three months ended July 3, 2021 292.5$ 258.4$ 45.4$ $ 596.3 86.4$ 79.3$ 9.9$ $ 771.9 Increase in sales volumes 52.1 60.9 - 113.0 11.7 2.6 - 127.3 Increase in finished product prices 161.7 45.5 - 207.2 55.2 7.8 - 270.2 Decrease due to currency exchange rates (7.5) (13.7) (1.6) (22.8) (0.7) - - (23.5) Other change - - 20.4 20.4 - - 4.0 24.4 Total change 206.3 92.7 18.8 317.8 66.2 10.4 4.0 398.4 Net sales three months ended July 2, 2022 498.8$ 351.1$ 64.2$ 914.1$ 152.6$ 89.7$ 13.9$ 1,170.3$
8 21 Key Drivers • Continued uplift in food segment from movement from gelatin to higher-margin collagen peptides • Hydrolyzed collagen demand is escalating rapidly as demand for collagen peptides for joint, ligament, hair and skin health grows worldwide • North America accounts for 32.2% of the hydrolyzed collagen market, illustrating worldwide growth opportunities for collagen peptides • Edible fats market strong Food Segment Continued Record Growth US $ (in millions) Q2-2022 Q2-2021 YTD-2022 YTD-2021 Net Sales $ 369,181 $ 317,031 $ 723,995 $ 615,096 Cost of sales & operating expenses 280,964 238,539 551,276 464,952 Gross Margin $ 88,217 $ 78,492 $ 172,719 $ 150,144 Loss/(gain) on sale of assets (73) (48) (82) 7 Selling, general & administrative expenses 22,855 25,542 49,669 50,733 Depreciation & amortization 14,449 15,850 29,899 30,733 Segment Income $ 50,986 $ 37,148 $ 93,203 $ 68,671 Segment EBITDA $ 65,435 $ 52,998 $ 123,102 $ 99,404 Raw material processed (mt)* 272,000 274,000 550,000 548,000
9 21 Food Segment High-Margin Col lagen Peptides Drive Growth 76% 14% 10% Q2 - 2022 % of Sales Breakdown Collagen Edible fats Other products $100 $120 $140 $160 $180 $200 $220 Food Segment Trailing 4Q adjusted EBITDA Trailing 4 Q's
10 21 Fuel Segment Feedstock outpaced hedging US $ (in millions) Q2-2022 Q2-2021 YTD-2022 YTD-2021 Net Sales $ 110,660 $ 109,706 $ 242,742 $ 206,913 Cost of sales & operating expenses 86,237 83,110 190,979 154,900 Gross Margin 24,423 26,596 51,763 52,013 Gain on sale of assets (18) (58) (57) (38) Selling, general & administrative expenses 4,277 4,474 8,197 9,341 Restructuring and asset impairment charges - - - 778 Depreciation & amortization 6,936 6,698 13,610 12,853 Equity in net income of Diamond Green Diesel 73,680 125,788 145,484 228,013 Segment Income $ 86,908 $ 141,270 $ 175,497 $ 257,092 Segment EBITDA $20,164 $22,180 $43,623 $42,710 DGD adjusted EBITDA (Darling's Share) $90,611 $ 132,001 $177,171 $240,201 Segment EBITDA (1) $110,775 $ 154,181 $220,794 $282,911 Raw material processed (mt)*` 351,000 315,000 692,000 642,000 Key Drivers • Green energy investments in Europe delivering as planned • Diamond Green Diesel 2H margins expected to improve • Diamond Green Diesel 3 on schedule to be operational in Q4 • Growing public policy support low-carbon energy solutions • Canada Clean Fuels Standard • Inflation Reduction Act of 2022 • Washington, Oregon • Waste fats and oils feedstocks continue to be advantaged over food-based feedstocks
11 21 Fuel Segment High Feedstock Prices, Lower California LCFS, Volati le RINs US$ and gallons (in millions) Q2 2022 Q2 2021 YTD 2022 YTD 2021 EBITDA (Entity) - recorded w/no BTC (17.2)$ 180.0$ 0.1$ 317.4$ EBITDA (Entity) - recorded including BTC 181.2$ 264.0$ 354.3$ 480.4$ Pro forma Adjusted EBITDA (Darling's share) 90.6$ 132.0$ 177.2$ 240.2$ Total gallons produced 208.6 79.2 375.0 157.8 Total gallons sold/shipped 198.6 84.0 355.0 162.0 EBITDA per gallon sold /shipped 0.91$ 3.14$ 1.00$ $2.97 Diamond Green Diesel $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 Quarterly Avg. Prices D4 RINs (1.7 Multiple) & Yellow Grease - IL D4 RINs (x 1.7) (Right Axis) Yello Grease - Illinois (Left Axis) $/lb
12 21 APPENDIX ADDITIONAL INFORMATION Q2-22 EARNINGS
13 21 Q2-22 EARNINGS Cal i fornia LCFS RIN Value History $0 $50 $100 $150 $200 $250 1 /1 /2 0 1 6 4 /1 /2 0 1 6 7 /1 /2 0 1 6 1 0 /1 /2 0 1 6 1 /1 /2 0 1 7 4 /1 /2 0 1 7 7 /1 /2 0 1 7 1 0 /1 /2 0 1 7 1 /1 /2 0 1 8 4 /1 /2 0 1 8 7 /1 /2 0 1 8 1 0 /1 /2 0 1 8 1 /1 /2 0 1 9 4 /1 /2 0 1 9 7 /1 /2 0 1 9 1 0 /1 /2 0 1 9 1 /1 /2 0 2 0 4 /1 /2 0 2 0 7 /1 /2 0 2 0 1 0 /1 /2 0 2 0 1 /1 /2 0 2 1 4 /1 /2 0 2 1 7 /1 /2 0 2 1 1 0 /1 /2 0 2 1 1 /1 /2 0 2 2 4 /1 /2 0 2 2 7 /1 /2 0 2 2 Monthly Average LCFS Carbon Credit Price (USD/MT)
14 21 Q2-22 EARNINGS Feed Segment – Historical US$ (in millions) Q1-2021 Q2-2021 Q3-2021 Q4-2021 Total 2021 Q1-2022 Q2-2022 Net Sales $ 651.4 $ 771.9 $ 769.6 $ 846.5 $ 3,039.5 $ 879.4 1,170.3 Gross Margin 176.9 215.5 216.0 224.9 833.3 233.9 306.0 Gross Margin % 27.1% 27.9% 28.1% 26.6% 27.4% 26.6% 26.1% Gain on sale of assets (0.1) (0.1) (0.2) (0.1) (0.6) (0.3) (1.0) SG&A 52.6 55.0 55.0 57.5 220.1 56.2 64.9 SG&A Margin % 8.1% 7.1% 7.1% 6.8% 7.2% 6.4% 5.5% Operating Income 69.8 106.7 107.4 111.0 394.8 123.7 164.6 Adj. EBITDA (1) $ 124.4 $ 160.7 $ 161.2 $ 167.5 $ 613.7 $ 178.0 $ 242.1 Adj. EBITDA Margin % 19.1% 20.8% 20.9% 19.8% 20.2% 20.2% 20.7% Raw Material Processed (mmts)* 2.23 2.19 2.22 2.27 8.92 2.31 2.70
15 21 Q2-22 EARNINGS Food Segment – Historical US$ (in millions).1 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Total 2021 Q1 -2022 Q2-2022 Net Sales $ 298.1 $ 317.0 $ 311.9 $ 344.7 $ 1,271.6 $ 354.8 $ 369.2 Gross Margin 71.7 78.5 70.5 71.7 292.4 84.5 88.2 Gross Margin % 24.0% 24.8% 22.6% 20.8% 23.0% 23.8% 23.9% Loss/(gain) on sale of assets 0.1 (0.0) (0.0) (0.1) (0.1) (0.1) (0.1) SG&A 25.2 25.5 24.4 22.4 97.6 26.8 22.9 SG&A Margin % 8.5% 8.1% 7.8% 6.5% 7.7% 7.6% 6.2% Operating Income 31.5 37.1 31.2 34.1 134.0 42.2 51.0 Adj. EBITDA $ 46.4 $ 53.0 $ 46.1 $ 49.4 $ 194.9 $ 57.7 $ 65.4 Adj. EBITDA Margin % 15.6% 16.7% 14.8% 14.3% 15.3% 16.2% 17.7% Raw Material Processed (mmts)* 0.26 0.27 0.28 0.29 1.11 0.28 0.27
16 21 Q2-22 EARNINGS F u e l S e g m e n t – H i s t o r i c a l US$ (in millions) Q1-2021 Q2-2021 Q3-2021 Q4-2021 Total 2021 Q1-2022 Q2-2022 Net Sales $ 97.2 $ 109.7 $ 104.4 $ 118.9 $ 430.2 $ 132.0 $ 110.7 Gross Margin 25.4 26.6 39.8 24.5 116.3 27.3 24.4 Gross Margin % 26.1% 24.2% 38.1% 20.6% 27.0% 20.7% 22.1% Gain on sale of assets 0.0 (0.1) (0.3) (0.0) (0.3) (0.0) (0.0) SG&A 4.9 4.5 4.5 3.2 17.0 3.9 4.3 Restructuring and asset impairment charges 0.8 - - - 0.8 - - Depreciation and amortization 6.2 6.7 6.4 6.2 25.4 6.6 6.9 Equity in net income of DGD 102.2 125.8 54.0 69.7 351.7 71.8 73.7 Operating Income 95.8 141.3 83.2 84.8 405.1 88.6 86.9 Base adjusted EBITDA 0.5 22.2 35.6 21.4 79.7 23.4 20.2 DGD adjusted EBITDA (Darling's Share) 108.2 132.0 60.0 83.2 383.4 86.6 90.6 Combined adjusted EBITDA (1) $ 108.8 $ 154.2 $ 95.6 $ 104.6 $ 483.1 $110.0 $110.8 Raw Material Processed (mmts) (2) 0.33 0.31 0.30 0.33 1.28 0.34 0.35 (1) Includes Fuel Segment base EBITDA and Darling's share of DGD EBITDA. (2) Excludes feed stock (raw material) processed at the DGD joint venture.
17 21 Historical Pricing 2022 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 $67.00 $72.03 $74.70 $71.39 $75.60 $81.00 $81.76 $79.51 Yellow Grease - Illinois / cwt $45.38 $55.50 $60.02 $53.91 $58.00 $60.50 $61.74 $60.11 Used Cooking Oil (UCO) - Illinois / cwt $59.20 $63.47 $68.02 $63.89 $69.00 $69.00 $69.00 $68.89 Meat and Bone Meal - Ruminant - IL/ ton $275.50 $291.84 $374.50 $317.22 $360.00 $360.00 $379.52 $366.62 Poultry By-Product Meal - Feed Grade - Mid South/ton $358.38 $362.50 $380.00 $367.03 $380.00 $381.91 $393.93 $385.83 Poultry By-Product Meal - Pet Food - Mid South/ton $759.38 $764.50 $764.41 $761.70 $800.00 $826.20 $779.05 $801.36 2022 Vegetable Oils Pricing Competing Ingredient for Feed Segment fats & biofuel feedstock January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. Nov. Dec. Q4 Avg. Year Avg. Soybean Oil (crude/de-gummed) - Central Illinois / cwt $64.42 $69.42 $78.75 $71.30 $84.32 $85.79 $80.45 $83.48 Soybean Oil (RBD) - Central Illinois / cwt $75.57 $79.66 $91.29 $82.65 $96.50 $102.81 $98.78 $99.83 Distiller's Corn Oil - IL/WI cwt $64.76 $79.00 $76.00 $73.25 $78.73 $80.11 $74.28 $77.63 2022 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 $6.22 $6.70 $7.70 $6.90 $8.10 $8.23 $8.30 $8.20 2022 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. Nov. Dec. Q4 Avg. Year Avg. Palm oil - CIF Rotterdam / metric ton $1,342 $1,502 $1,820 $1,555 $1,700 $1,698 $1,588 $1,662 Soy meal - CIF Rotterdam / metric ton $535 $576 $617 $576 $583 $531 $535 $550 QTR. over QTR. (Sequential) Year over Year (Q1) Comparison Q1-2022 Q2-2022 % Q2-2021 Q2-2022 % Average Jacobsen Prices (USD) Avg. Avg. Change Avg. Avg. Change Bleachable Fancy Tallow - Chicago Renderer / cwt $71.39 $79.51 11.4% $56.60 $79.51 40.5% Yellow Grease - Illinois / cwt $53.91 $60.11 11.5% $42.47 $60.11 41.5% Used Cooking Oil (UCO) - Illinois / cwt $63.89 $68.89 7.8% $47.18 $68.89 46.0% Meat and Bone Meal - Ruminant - Illinois / ton $317.20 $366.62 15.6% $408.63 $366.62 -10.3% Poultry By-Product Meal - Feed Grade - Mid South / ton $367.03 $385.83 5.1% $339.31 $385.83 13.7% Poultry By-Product Meal - Pet Food - Mid South / ton $761.69 $801.36 5.2% $823.18 $801.36 -2.7% Soybean Oil (crude/de-gummed) - Central Illinois / cwt $71.30 $83.48 17.1% $73.11 $83.48 14.2% Soybean Oil (RBD) - Central Illinois / cwt $82.65 $99.83 20.8% $87.31 $99.83 14.3% Distiller's Corn Oil - IL/WI per cwt $73.25 $77.63 6.0% $52.01 $77.63 49.3% Average Wall Street Journal Prices (USD) Corn - Track Central IL #2 Yellow / bushel $6.90 $8.20 18.8% $6.58 $8.20 24.6% Average Thomson Reuters Prices (USD) Palm oil - CIF Rotterdam / metric ton $1,555 $1,662 6.9% $1,168 $1,662 42.3% Soy meal - CIF Rotterdam / metric ton $576 $550 -4.5% $473 $550 16.3% 2022 Average Jacobsen Prices (USD) 2022 Average Jacobsen Prices (USD) Average Wall Street Journal Prices (USD) Average Thomson Reuters Prices (USD)
18 21 Adjusted EBITDA Three Months Ended Six Months Ended Adjusted EBITDA July 2, July 3, July 2, July 3, (U.S. dollars in thousands) 2022 2021 2022 2021 Net income attributable to Darling $201,996 $196,582 # $390,049 $348,348 Depreciation and amortization 93,113 79,222 172,359 157,756 Interest expense 24,008 15,268 39,611 31,696 Income tax expense 47,333 54,979 73,416 83,687 Restructuring and asset impairment charges 8,557 - 8,557 778 Acquisition and integration costs 5,358 - 9,131 - Foreign currency loss 4,412 684 5,512 1,094 Other expense, net 302 1,198 1,044 2,357 Equity in net income of Diamond Green Diesel (73,680) (125,788) (145,484) (228,013) Equity in net income of other unconsolidated subsidiaries (2,272) (1,940) (3,632) (2,552) Net income attributable to noncontrolling interests 2,833 1,487 5,511 3,139 Adjusted EBITDA (Non-GAAP) $311,960 $221,692 $556,074 $398,290 Foreign currency exchange impact 15,928 (1) 23,155 (2) Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) $327,888 $221,692 $579,229 $398,290 DGD Joint Venture Adjusted EBITDA (Darling's Share) $90,611 $132,001 $177,171 $240,201 Darling plus Darling's share of DGD Joint Venture Adjusted EBITDA $402,571 $353,693 $733,245 $638,491 (1) The average rate assumption used in this calculation was the actual fiscal average rate for the three months ended July 2, 2022 of €1.00:USD$1.06 and CAD$1.00:USD$0.78, as compared to the average rate for the three months ended July 3, 2021 of €1.00:USD$1.21 and CAD$1.00:USD$0.81, respectively. (2) The average rate assumption used in this calculation was the actual fiscal average rate for the six months ended July 2, 2022 of €1.00:USD$1.09 and CAD$1.00:USD$0.79, as compared to the average rate for the six months ended July 3, 2021 of €1.00:USD$1.20 and CAD$1.00:USD$0.80, respectively.
19 21 EVENT CALENDAR Q2 – 22 Earnings Piper Sandler Energy Transition Leader’s Summit August 16-18 - Aspen AllianceBerstein, Columbia Threadneedle Buy-Side Small & Mid-Cap Investor Summit September 20 – New York Raymond James Sustainability Symposium | Low-Carbon Technology: Empowering Companies to Their Own Sustainability Goals August 15 - Virtual
20 21 Non-U.S. GAAP Measures 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, restructuring, acquisition and integration costs, 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 6% Notes, 5.25% Notes and 3.625% Notes that were outstanding on July 2, 2022. 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, 6% Notes, 5.25% 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. Q2 – 22 EARNINGS
21 21 Q 2 | A U G U S T 2 0 2 2 EARNINGS REPORT